[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2001 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

                    12


          Part 600 to End

                         Revised as of January 1, 2001

Banks and Banking





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2001
          With Ancillaries
          Published by
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register



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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2001



  For sale by the Superintendent of Documents, U.S. Government Printing 
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 Internet: bookstore.gpo.gov    Phone: (202) 512-1800    Fax: (202) 512-
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                Mail: Stop SSOP, Washington, DC 20402-0001



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                            Table of Contents



                                                                    Page
  Explanation.................................................      vi

  Title 12:
          Chapter VI--Farm Credit Administration                     3
          Chapter VII--National Credit Union Administration        289
          Chapter VIII--Federal Financing Bank                     627
          Chapter IX--Federal Housing Finance Board                635
          Chapter XI--Federal Financial Institutions 
          Examination Council                                      813
          Chapter XIV--Farm Credit System Insurance 
          Corporation                                              849
          Chapter XV--Department of the Treasury                   881
          Chapter XVII--Office of Federal Housing Enterprise 
          Oversight, Department of Housing and Urban 
          Development                                              899
          Chapter XVIII--Community Development Financial 
          Institutions Fund, Department of the Treasury            977
  Finding Aids:
      Material Approved for Incorporation by Reference........    1017
      Table of CFR Titles and Chapters........................    1019
      Alphabetical List of Agencies Appearing in the CFR......    1037
      Redesignation Table.....................................    1047

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      List of CFR Sections Affected--Transferred Regulations 
        Formerly Appearing in Title 12 CFR, Chapter V.........    1049
      List of CFR Sections Affected...........................    1051



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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  12 CFR 600.1 refers 
                       to title 12, part 600, 
                       section 1.

                     ----------------------------

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
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    To determine whether a Code volume has been amended since its 
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Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
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instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

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Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
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if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
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Register, National Archives and Records Administration, Washington DC 
20408, or call (202) 523-4534.

CFR INDEXES AND TABULAR GUIDES

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separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

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REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
[email protected].

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ELECTRONIC SERVICES

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CFR Sections Affected), The United States Government Manual, the Federal 
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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2001.



[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of six volumes. The parts in 
these volumes are arranged in the following order: parts 1-199, 200-219, 
220-299, 300-499, 500-599, and part 600-end. The first volume containing 
parts 1-199 is comprised of chapter I--Comptroller of the Currency, 
Department of the Treasury. The second and third volumes containing 
parts 200-299 are comprised of chapter II--Federal Reserve System. The 
fourth volume containing parts 300-499 is comprised of chapter III--
Federal Deposit Insurance Corporation and chapter IV--Export-Import Bank 
of the United States. The fifth volume containing parts 500-599 is 
comprised of chapter V--Office of Thrift Supervision, Department of the 
Treasury. The sixth volume containing part 600-end is comprised of 
chapter VI--Farm Credit Administration, chapter VII--National Credit 
Union Administration, chapter VIII--Federal Financing Bank, chapter IX--
Federal Housing Finance Board, chapter XI--Federal Financial 
Institutions Examination Council, chapter XIV--Farm Credit System 
Insurance Corporation, chapter XV--Department of the Treasury, chapter 
XVII--Office of Federal Housing Enterprise Oversight, Department of 
Housing and Urban Development and chapter XVIII--Community Development 
Financial Institutions Fund, Department of the Treasury. The contents of 
these volumes represent all of the current regulations codified under 
this title of the CFR as of January 1, 2001.

    Redesignation tables appear in the volumes containing parts 1-199, 
parts 300-499, parts 500-599, and part 600-end.

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

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                       TITLE 12--BANKS AND BANKING




                  (This book contains part 600 to end)

  --------------------------------------------------------------------
                                                                    Part

chapter vi--Farm Credit Administration......................         600

chapter vii--National Credit Union Administration...........         700

chapter viii--Federal Financing Bank........................         810

chapter ix--Federal Housing Finance Board...................         900

chapter xi--Federal Financial Institutions Examination 
  Council...................................................        1101

chapter xiv--Farm Credit System Insurance Corporation.......        1400

chapter xv--Department of the Treasury......................        1510

chapter xvii--Office of Federal Housing Enterprise 
  Oversight, Department of Housing and Urban Development....        1700

chapter xviii--Community Development Financial Institutions 
  Fund, Department of the Treasury..........................        1805

[[Page 3]]



                 CHAPTER VI--FARM CREDIT ADMINISTRATION




  --------------------------------------------------------------------

                 SUBCHAPTER A--ADMINISTRATIVE PROVISIONS
Part                                                                Page
600             Organization and functions..................           5
601             Employee responsibilities and conduct.......           8
602             Releasing information.......................           8
603             Privacy Act regulations.....................          15
604             Farm Credit Administration Board meetings...          19
605             Information.................................          22
606             Enforcement of nondiscrimination on the 
                    basis of handicap in programs or 
                    activities conducted by the Farm Credit 
                    Administration..........................          24
607             Assessment and apportionment of 
                    administrative expenses.................          30
608             Collection of claims owed the United States.          35
                    SUBCHAPTER B--FARM CREDIT SYSTEM
611             Organization................................          48
612             Standards of conduct........................          79
613             Eligibility and scope of financing..........          87
614             Loan policies and operations................          93
615             Funding and fiscal affairs, loan policies 
                    and operations, and funding operations..         146
616             Leasing.....................................         190
617             Referral of known or suspected criminal 
                    violations..............................         192
618             General provisions..........................         194
619             Definitions.................................         203
620             Disclosure to shareholders..................         205
621             Accounting and reporting requirements.......         223
622             Rules of practice and procedure.............         230
623             Practice before the Farm Credit 
                    Administration..........................         244
624             Regulatory accounting practices.............         248
625             Application for award of fees and other 
                    expenses under the Equal Access to 
                    Justice Act.............................         249
626             Nondiscrimination in lending................         255
627             Title IV conservators, receivers, and 
                    voluntary liquidations..................         258

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630             Disclosure to investors in systemwide and 
                    consolidated bank debt obligations of 
                    the Farm Credit System..................         267
650             Federal Agricultural Mortgage Corporation...         281

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                 SUBCHAPTER A--ADMINISTRATIVE PROVISIONS



PART 600--ORGANIZATION AND FUNCTIONS--Table of Contents




                  Subpart A--Farm Credit Administration

Sec.
600.1  The Farm Credit Act.
600.2  Farm Credit Administration.
600.3  Farm Credit Administration Board.
600.4  Chairman of the Farm Credit Administration Board.
600.5  Organization of the Farm Credit Administration.

    Subpart B--Rules and Procedures for Service Upon the Farm Credit 
                             Administration

600.10  Service of Process.

    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).

    Source: 53 FR 16693, May 11, 1988, unless otherwise noted.



                  Subpart A--Farm Credit Administration



Sec. 600.1  The Farm Credit Act.

    The Farm Credit Act of 1971, Pub. L. 92-181 recodified and replaced 
the prior laws under which the Farm Credit Administration and the 
institutions of the Farm Credit System were organized and operated. The 
prior laws, which were repealed and superseded by the Act, are 
identified in section 5.40(a) of the Act. Subsequent amendments to the 
Act and enactment dates are as follows: Pub. L. 94-184, December 31, 
1975; Pub. L. 95-443, October 10, 1978; Pub. L. 96-592, December 24, 
1980; Pub. L. 99-190, December 19, 1985; Pub. L. 99-198, December 23, 
1985; Pub. L. 99-205, December 23, 1985; Pub. L. 99-509, October 21, 
1986; Pub. L. 100-233, January 6, 1988; Pub. L. 100-399, August 17, 
1988; Pub. L. 100-460, October 1, 1988; Pub. L. 101-73, August 9, 1989; 
Pub. L. 101-220, December 12, 1989; Pub. L. 101-624, November 28, 1990; 
Pub. L. 102-237, December 13, 1991; Pub. L. 102-552, October 28, 1992. 
The law is codified at 12 U.S.C. 2000, et. seq.

[53 FR 16693, May 11, 1988, as amended at 56 FR 2672, Jan. 24, 1991; 59 
FR 21641, Apr. 26, 1994]



Sec. 600.2  Farm Credit Administration.

    The Farm Credit Administration is an independent, non-appropriated 
fund agency in the executive branch of the Federal Government. It is 
composed of the Farm Credit Administration Board and such other 
personnel as are employed in carrying out the functions, powers, and 
duties vested in the Farm Credit Administration. The mailing address of 
the central offices of the Farm Credit Administration is McLean, 
Virginia 22102-5090. The hours of business in the central offices are 
8:30 a.m.-5:00 p.m. (eastern time), Monday through Friday, excluding 
Federal holidays.



Sec. 600.3  Farm Credit Administration Board.

    (a) Organization. The Farm Credit Administration Board (Board) is a 
full-time, three-member board entrusted with the responsibility to 
manage the Farm Credit Administration. The Board consists of three 
members appointed by the President with the advice and consent of the 
Senate. The Board may not contain more than two members of the same 
political party. One member is designated by the President as Chairman 
of the Board for the duration of such member's term. Each member of the 
Board shall serve a single 6-year term and cannot be reappointed except 
in the case of such members who are initially appointed for less than a 
6-year term on initial formation of the Board or any member who is 
appointed to fill an unexpired term of less than 3 years. A member of 
the Board shall continue to serve subsequent to the expiration of that 
member's term until the point in time at which an eligible successor has 
taken his or her oath of office. A person appointed to the Board shall 
subscribe to the oath of office within 15 days after having received 
notice of appointment. Each Board member is assisted by a staff.
    (b) Functions and responsibilities. The Board manages, administers, 
and establishes policies for the Farm Credit Administration. 
Specifically, the

[[Page 6]]

Board prescribes the rules and regulations necessary for the 
implementation of the Farm Credit Act of 1971, as amended, and provides 
for the examination of Farm Credit System institutions and for the 
performance of all the powers and duties vested in the Farm Credit 
Administration.



Sec. 600.4  Chairman of the Farm Credit Administration Board.

    (a) The Chairman of the Board is the Chief Executive Officer of the 
Farm Credit Administration. The Chairman is responsible for directing 
the implementation of the policies and regulations adopted by the Board 
and, after consultation with the Board, the execution of the 
administrative functions and duties of the Farm Credit Administration. 
In carrying out policies as directed by the Board, the Chairman acts as 
the spokesperson for the Board and represents the Board and the Farm 
Credit Administration in their official relations within the Federal 
Government. Under policies adopted by the Board, the Chairman consults 
with the Secretary of Treasury, Board of Governors of the Federal 
Reserve System, and the Secretary of Agriculture on specific matters.
    (b) The Chairman has the authority to appoint such personnel as may 
be necessary to carry out the functions of the Farm Credit 
Administration, including the appointment of a Secretary to the Board 
and noncareer Office Directors. The Board has the authority to approve 
the appointment by the Chairman of a Chief Operating Officer and career 
Office Directors. Each Board member has the authority to appoint 
personnel employed regularly and full-time in his or her immediate 
office. The Chairman may not delegate powers specifically reserved to 
the Chairman by the Act without the approval of the Board. In carrying 
out authorities and responsibilities, the Chairman is governed by 
general policies adopted by the Board and by such regulatory decisions, 
findings, and determinations as the Board may by law be authorized to 
make.
    (c) The Chairman as Chief Executive Officer is responsible for 
overseeing the agency's equal employment opportunity programs. An Equal 
Employment Opportunity Manager reports directly to the Chairman as Chief 
Executive Officer.
    (d) The Chairman, as head of the agency, has general supervisory 
authority over the Inspector General. The Inspector General has the 
authority to select, appoint, and employ such officers and employees as 
may be necessary to carry out the functions, powers, and duties of the 
Office of Inspector General. The Inspector General is also authorized to 
enter into contracts and other arrangements for audits, studies, 
analyses, and other services with public agencies and private persons, 
and to obtain the temporary or intermittent services of experts or 
consultants or an organization of any such professionals. In exercising 
these authorities, the Inspector General is subject to applicable 
statutory and regulatory constraints, as well as agency and 
governmentwide administrative and budgetary limitations.

[53 FR 16693, May 11, 1988, as amended at 59 FR 21641, Apr. 26, 1994]



Sec. 600.5  Organization of the Farm Credit Administration.

    (a) Chief Operating Officer. The Chief Operating Officer (COO) 
reports to and is subject to the direction of the Chief Executive 
Officer (CEO) concerning administrative matters and to the Board 
regarding general planning and policy matters, budgetary issues, 
rulemaking issues, and other matters for which the Board is responsible. 
Within this context, the COO has responsibility for planning, 
organizing, directing, coordinating, and controlling agency operations.
    (b) Office Directors. Each Office of the Farm Credit Administration 
is headed by a Director. The Director of the Office of Congressional and 
Public Affairs reports to the CEO. The Director of the Office of 
Secondary Market Oversight reports to the CEO on administrative matters 
and to the Board concerning general policy and rulemaking issues. The 
Directors of the Offices of Examination, Policy Development and Risk 
Control, and Resources Management

[[Page 7]]

report to the COO. The General Counsel reports to the COO on 
administrative matters and to the Board on matters of agency policy. 
Each Office Director may, with the approval of the CEO or COO, as 
appropriate, establish and fix the responsibilities of the divisions and 
such other units as the Director deems necessary for the efficient 
functioning of the Office.
    (c) Inspector General. The Inspector General reports directly to the 
Chairman.
    (d) Offices and functions--(1) Office of Examination. The Office of 
Examination plans and conducts examinations of System institutions and 
other institutions as required by law; prepares and issues reports of 
examination summarizing examination findings; recommends corrective 
action as appropriate; and oversees compliance with the borrower rights 
provisions of the Act and agency regulations. The Office of Examination 
recommends formal administrative action to correct deficiencies when 
System institutions are found to be operating in an unsafe or unsound 
manner or are in violation of law or regulation. The Office Director 
prepares examination schedules for approval by the Board and advises the 
Board on matters affecting policy, regulation, and legislation relating 
to examination activities. The Director, Office of Examination, is the 
Chief Examiner of the Farm Credit Administration.
    (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.
    (3) Office of Resources Management. The Office of Resources 
Management provides agency administrative management for the agency 
budget, accounting, human resources, training, procurement, electronic 
data processing, document processing, property, supply, facilities, 
records and other administrative services. The Chairman and the Board 
members have delegated to the Chief of the Human Resources Division the 
authority to serve as appointing officer, including the authority to 
classify or place positions in the appropriate pay plan and pay ranges.
    (4) Office of General Counsel. The Office of General Counsel 
provides legal advice and services to the Board, the Chairman, and the 
agency staff. The Office interprets the Farm Credit Act of 1971, as 
amended, and other applicable laws; participates in the preparation of 
agency rules and regulations; and represents the agency in litigation, 
in enforcement proceedings brought by the agency, and in proceedings 
before other administrative bodies. The Office of General Counsel also 
has the responsibility to ensure that the agency meets all statutory and 
regulatory ethics requirements. The Director, Office of General Counsel, 
is the General Counsel of the Farm Credit Administration.
    (5) Office of Congressional and Public Affairs. The Office of 
Congressional and Public Affairs coordinates and disseminates all 
communication by the agency with the Congress and plans and implements 
all public communications. The Office is the first source of information 
to the Farm Credit System and borrowers concerning the Farm Credit 
Administration and provides other representational services for the 
Board and the agency to the public.
    (6) Office of Inspector General. The Office of Inspector General is 
an independent office established by the Inspector General Act 
Amendments of 1988 to:
    (i) Conduct and supervise audits and investigations relating to the 
programs

[[Page 8]]

and operations of the Farm Credit Administration;
    (ii) Provide leadership and coordination and recommend policies for 
activities designed to promote economy, efficiency, and effectiveness in 
the administration of the Farm Credit Administration's programs and 
operations;
    (iii) Prevent and detect fraud and abuse in the Farm Credit 
Administration's programs and operations; and
    (iv) Provide a means to keep the Chairman and Congress fully and 
currently informed about problems and deficiencies relating to the Farm 
Credit Administration's programs and operations and the necessity for, 
and progress of, corrective actions.
    (7) Office of Secondary Market Oversight. The Office of Secondary 
Market Oversight, a separate office within the Farm Credit 
Administration pursuant to section 8.11 of the Act, provides for:
    (i) The examination of the Federal Agricultural Mortgage Corporation 
and its affiliates; and
    (ii) The general supervision of the safe and sound performance of 
the powers, functions, and duties vested in the Federal Agricultural 
Mortgage Corporation and its affiliates.
    (e) Additional Information. Current information on the organization 
of the Farm Credit Administration may be obtained from the Office of 
Congressional and Public Affairs, Farm Credit Administration, McLean, 
Virginia 22102-5090.

[53 FR 16693, May 11, 1988, as amended at 59 FR 21641, Apr. 26, 1994; 61 
FR 67185, Dec. 20, 1996]



    Subpart B--Rules and Procedures for Service Upon the Farm Credit 
                             Administration



Sec. 600.10  Service of Process.

    (a) Except as otherwise provided in the Farm Credit Administration 
regulations, the Federal Rules of Civil Procedure or by order of a court 
with jurisdiction over the Farm Credit Administration, any legal process 
upon the Farm Credit Administration shall be duly issued and served upon 
the Secretary to the Farm Credit Administration Board, 1501 Farm Credit 
Drive, McLean, Virginia 22102-5090.
    (b) Service of process upon the Secretary to the Farm Credit 
Administration Board may be effected by personally delivering a copy of 
the documents to the Secretary or by sending a copy of the documents to 
the Secretary by registered or certified mail.
    (c) The Secretary shall promptly forward a copy of all documents to 
the General Counsel and to any Farm Credit Administration personnel 
named in the caption of the documents.

[54 FR 50736, Dec. 11, 1989, as amended at 59 FR 21642, Apr. 26, 1994]



PART 601--EMPLOYEE RESPONSIBILITIES AND CONDUCT--Table of Contents




    Authority: 5 U.S.C. 7301; 12 U.S.C. 2243, 2252.



Sec. 601.100  Cross-references to employee ethical conduct standards and financial disclosure regulations.

    Board members, officers, and other employees of the Farm Credit 
Administration are subject to the Standards of Ethical Conduct for 
Employees of the Executive Branch at 5 CFR part 2635, the Farm Credit 
Administration regulation at 5 CFR part 4101, which supplements the 
Executive Branch-wide Standards, and the executive branch-wide financial 
disclosure regulations at 5 CFR part 2634.

[60 FR 30782, June 12, 1995]



PART 602--RELEASING INFORMATION--Table of Contents




              Subpart A--Information and Records Generally

Sec.
602.1  Purpose and scope.
602.2  Disclosing reports of examination.

  Subpart B--Availability of Records of the Farm Credit Administration

602.3  Definitions.
602.4  How to make a request.
602.5  FCA response to requests for records.
602.6  FOIA exemptions.
602.7  Confidential business information.
602.8  Appeals.
602.9  Current FOIA index.

[[Page 9]]

                          Subpart C--FOIA Fees

602.10  Definitions.
602.11  Fees by type of requester.
602.12  Fees.
602.13  Fee waiver.
602.14  Advance payments--notice.
602.15  Interest on unpaid fees.
602.16  Combining requests.

Subpart D--Testimony and Production of Documents in Legal Proceedings in 
                     Which FCA is Not a Named Party

602.17  Policy.
602.18  Definitions.
602.19  Request for testimony or production of documents.
602.20  Testimony of FCA employees.
602.21  Production of FCA documents.
602.22  Fees.
602.23  Responses to demands served on FCA employees.
602.24  Responses to demands served on non-FCA employees or entities.

        Subpart E--Release of Records in Public Rulemaking Files

602.25  General.

    Authority: Secs. 5.9, 5.17; 12 U.S.C. 2243, 2252; 5 U.S.C. 301, 552; 
52 FR 10012; E.O. 12600, 52 FR 23781, 3 CFR 1987, p. 235.

    Source: 64 FR 41770, Aug. 2, 1999, unless otherwise noted.



              Subpart A--Information and Records Generally



Sec. 602.1  Purpose and scope.

    This part contains FCA's rules for disclosing our records or 
information; processing requests for records under the Freedom of 
Information Act (5 U.S.C. 552, as amended)(FOIA); FOIA fees; disclosing 
otherwise exempt information in litigation when FCA is not a party; and 
getting documents in public rulemaking files. Part 603 of this chapter 
tells you how to get records about yourself under the Privacy Act of 
1974, 5 U.S.C. 552a.



Sec. 602.2  Disclosing reports of examination.

    (a) Disclosure by FCA. Reports of examination are FCA property. We 
prepare them for our confidential use and the use of the institution 
examined. We do not give reports of examination to the public. Except as 
provided in this section, only the Chairman or the Chairman's designee 
may consent to disclosing reports of examination of Farm Credit System 
institutions and other institutions subject to our examination. You may 
send a written request to our General Counsel that explains why we 
should give permission.
    (b) Disclosure by Farm Credit System institutions. An institution 
that we have examined may disclose its report of examination to its 
officers, directors, and agents, such as its attorney or accountant, if 
they agree to keep the report confidential. In addition, banks may 
disclose their reports of examination to their affiliated associations, 
associations may disclose their reports to their supervisory bank, and 
service corporations may disclose their reports of examination to the 
institutions that own them. An institution may not disclose these 
institutions' reports of examination to any other person without our 
written permission.
    (c) Disclosure to governmental entities. Without waiving any 
privilege, we will disclose reports of examination to other Federal 
government entities:
    (1) In response to a Federal court order;
    (2) In response to a request of either House or a Committee or 
Subcommittee of Congress; or
    (3) When requested for confidential use in an official investigation 
by authorized representatives of other Federal agencies.



  Subpart B--Availability of Records of the Farm Credit Administration



Sec. 602.3  Definitions.

    Appeal means a request under the FOIA asking for the reversal of a 
decision.
    Business information means trade secrets or other commercial or 
financial information that is privileged or confidential.
    Business submitter means any person or entity that gives business 
information to the Government.
    FOIA request means a written request for FCA records, made by any 
person or entity that either directly or indirectly invokes the FOIA or 
this part.

[[Page 10]]

    Record means all documentary materials, such as books, papers, maps, 
photographs, and machine-readable materials, regardless of physical form 
or characteristics (for example, electronic format) in our possession 
and control when we receive your FOIA request.



Sec. 602.4  How to make a request.

    (a) How to make and address a request. Your request for records must 
be in writing and addressed to the FOIA Officer, Farm Credit 
Administration. You may send it:
    (1) By mail to 1501 Farm Credit Drive, McLean, Virginia 22102-5090;
    (2) By facsimile to (703) 790-0052; or
    (3) By E-mail to ``[email protected].''
    (b) Description of requested records. You must describe the 
requested records in enough detail to let us find them with a reasonable 
effort. If the description is inadequate, we will ask you to provide 
more information and the 20-day response period under Sec. 602.5(a) will 
not begin until we receive your reply.
    (c) Faster response. You may ask for a faster response to your FOIA 
request by giving us a statement, certified to be true, that you have a 
``compelling need.'' The FOIA Officer will tell you within 10 calendar 
days after receiving the request whether we will respond to it faster. 
If so, we will respond to your request as soon as we can. A compelling 
need means:
    (1) Someone's life or physical safety may be in danger if we do not 
respond to the request faster; or
    (2) You urgently need to tell the public about Federal government 
activity as a representative of the news media.
    (d) Request for personal information. If you or your representative 
requests your personal information, we may require you to give us a 
notarized request, identify yourself under penalty of perjury, or 
provide other proof of your identity.
    (e) Fees. When making a request, you must tell us the most you are 
willing to pay. Our charges are in the fee tables in Secs. 602.11 and 
602.12. You may also want to tell us the purpose of your request so we 
can classify your request for fee purposes.
    (f) Other requests. To ensure the public has timely information 
about our activities, the Office of Congressional and Public Affairs 
will make available copies of public documents, such as the FCA annual 
report and media advisories.



Sec. 602.5  FCA response to requests for records.

    (a) Response time. Within 20 business days of receiving your 
request, the FOIA Officer will tell you whether we have granted or 
denied it. If you send your request to the wrong address, the 20-day 
response time will not begin until the FOIA Officer receives your 
request.
    (b) Extension of response time. In ``unusual circumstances,'' the 
FOIA Officer may extend the 20-day response time for up to 10 more 
business days by telling you in writing why we need more time and the 
date we will mail you our response. As used in this subpart, ``unusual 
circumstances'' means our need to:
    (1) Search for and get the requested records from field offices or 
other locations;
    (2) Search for, get, and review many records identified in a single 
request;
    (3) Consult with another Federal agency having a substantial 
interest in the request; or
    (4) Consult with two or more FCA offices having a substantial 
interest in the request.
    (c) Referrals. If you ask for records we have that another Federal 
agency originated, we will refer the request to the originating agency 
and tell you about the referral. If you should have sent your request to 
another Federal agency, we will refer the request to that agency and so 
advise you.



Sec. 602.6  FOIA exemptions.

    The FOIA allows agencies to withhold documents in certain 
categories. For instance, we do not have to give you documents that 
relate to our examination of institutions or that would violate the 
personal privacy of an individual. If we do not give you a document 
because the FOIA does not require us to, we will tell you which FOIA 
exemption applies to our decision.

[[Page 11]]



Sec. 602.7  Confidential business information.

    (a) FCA disclosure. FCA may disclose business information from a 
business submitter only under this section. This section will not apply 
if:
    (1) We decide the business submitter has no valid basis to object to 
disclosure;
    (2) The information has been published lawfully or made available to 
the public; or
    (3) Law (other than the FOIA) requires disclosure of the 
information.
    (b) Notice by FCA. When we receive a request for confidential 
business information, the FOIA Officer will promptly tell the requester 
and the business submitter in writing that the responsive records may be 
free from disclosure under the FOIA. We will give the business submitter 
a reasonable time to object to the proposed disclosure of the responsive 
records and tell the requester whenever:
    (1) The business submitter has in good faith labeled the information 
a trade secret or commercial or financial information that is privileged 
or confidential. We will provide such notice for 10 years after 
receiving the information unless the business submitter justifies the 
need for a longer period; or
    (2) We believe that disclosing the information may result in 
commercial or financial injury to the business submitter.
    (c) Objection to release. A business submitter who objects to our 
releasing the requested information should tell us in writing why the 
information is a trade secret or commercial or financial information 
that is privileged or confidential.
    (d) FCA response. (1) We will consider carefully a business 
submitter's objections. If we decide to disclose business information 
over the submitter's objection, the FOIA Officer will explain to the 
submitter in writing why we disagreed with the submitter's objection and 
describe the business information to be disclosed.
    (2) We will tell the requester and the submitter the proposed 
disclosure date at the same time.
    (3) If a submitter sues to prevent release, we will promptly tell 
the requester and will not disclose the business information until after 
the court's decision.
    (4) If a requester sues to compel disclosure, we will promptly tell 
the business submitter.



Sec. 602.8  Appeals.

    (a) How to appeal. You may appeal a total or partial denial of your 
FOIA request within 30 calendar days of the date of the denial letter. 
Your appeal must be in writing and addressed to the Director, Office of 
Resources Management (ORM), Farm Credit Administration. You may send it:
    (1) By mail to 1501 Farm Credit Drive, McLean, Virginia 22102-5090;
    (2) By facsimile to (703) 893-2608; or
    (3) By E-mail to [email protected].
    (b) FCA action on appeal. Within 20 business days of receiving your 
appeal, the ORM Director will tell you, in writing, whether we have 
granted or denied it. If you send your appeal to the wrong address, the 
20-day response time will not begin until the ORM Director receives your 
appeal.
    (c) Unusual circumstances. In unusual circumstances, the ORM 
Director may extend the 20-day response time by telling you in writing 
why we need more time and the date we will mail you our response. All 
extensions, including any extension of the response time for the first 
request, may not total more than 10 business days.



Sec. 602.9  Current FOIA index.

    FCA will make a current index available for public inspection and 
copying, as required by the FOIA. We will give you an index for the cost 
of copying it. Because we rarely receive requests for an index, we have 
not published one in the Federal Register.



                          Subpart C--FOIA Fees



Sec. 602.10  Definitions.

    Commercial use request means an information request by an individual 
or entity seeking information for a use or purpose that furthers the 
commercial, trade, or profit interests of that individual or entity.
    Direct costs means the costs FCA incurs in searching for and 
reproducing documents to respond to a FOIA request. For a commercial use 
request, it

[[Page 12]]

also means the costs we incur in reviewing documents to respond to the 
request. Direct costs include the pro rated cost of the salary of the 
employee performing the work (based on the basic rate of pay plus 16 
percent to cover benefits) and the cost of operating reproduction 
equipment. They do not include overhead expenses.
    Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate or 
graduate higher education, an institution of professional education, or 
an institution of vocational education that runs a program of scholarly 
research.
    Noncommercial scientific institution means a nonprofit institution 
that conducts scientific research that is not intended to promote any 
particular product or industry.
    Pages mean 8-1/2  x  11 inch or 11  x  14 inch paper copies.
    Representative of the news media means any person actively gathering 
news for an entity that publishes or broadcasts news to the public. News 
means information about current events or of current interest to the 
public.
    Reproduce (or reproduction) means copying a record.
    Review means looking at documents found in response to a FOIA 
request to decide whether any portion should be withheld. It does not 
include the time spent resolving legal or policy issues.
    Search means all time spent looking for material responsive to a 
FOIA request, including page-by-page or line-by-line identification of 
material within documents.



Sec. 602.11  Fees by type of requester.

    Depending on your identity and the purpose of your request, the FCA 
may charge you the direct costs of searching for responsive records, 
reviewing the records, and reproducing them. If necessary, we will seek 
clarification before classifying the request.
    (a) Educational institutions and noncommercial scientific 
institutions. We charge fees for reproduction costs only. The first 100 
pages are free. You must show that the request is sanctioned by an 
educational or noncommercial scientific institution and that you seek 
the records for scholarly or scientific research, not for a commercial 
use.
    (b) Representatives of the news media. We charge fees for 
reproduction costs only. The first 100 pages are free. You must be a 
representative of the news media, and the request must not be made for a 
commercial use. A request for records supporting news distribution is 
not a request for a commercial use.
    (c) Commercial use. We charge the direct cost for search, review, 
and reproduction. Commercial use requesters are not entitled to free 
search time or free reproduction. We will charge you even if we do not 
disclose any records.
    (d) All others. The first 2 hours of search time and the first 100 
pages of reproduction are free. After that, we will charge you for 
search and reproduction costs. We will charge you for a search even if 
we do not disclose any records.
    (e) Fee table. The fee information in paragraphs (a) through (d) of 
this section is presented in the table to this paragraph. You may apply 
for a waiver if your request is not mostly in your commercial interest 
and the disclosure is in the public interest. See Sec. 602.13.

                                                    Fee Table
----------------------------------------------------------------------------------------------------------------
                                                         Charges for
          Type of requester          ---------------------------------------------------       Reproduction
                                             Search time              Review time
----------------------------------------------------------------------------------------------------------------
Educational.................  No Charge...............  No charge..............  First 100 pages free, $
Noncommercial scientific                                                          0.15 a page after
 users.                                                                                   that.
News media..................
Commercial Users \1\................  All direct costs........  All direct costs.......  $0.15 a page.
All others \1\......................  First 2 hours free, all   No charge..............  First 100 pages free,
                                       direct costs after that.                           $0.15 a page after
                                                                                          that.
----------------------------------------------------------------------------------------------------------------
\1\ You are responsible for fees even if we do not disclose any records.

[64 FR 41770, Aug. 2, 1999; 64 FR 45589, Aug. 20, 1999]

[[Page 13]]



Sec. 602.12  Fees.

    (a) FCA may charge:
    (1) For manual searches for records and for review, the pro rated 
cost of the salary of the employee doing the work.
    (2) For computer searches for records, the direct costs of computer 
search time and supply or material costs.
    (3) For each page made by photocopy or similar method, fifteen cents 
a page, and for other forms of copying, the direct costs.
    (4) The direct costs of elective services, such as certifying 
records as true copies or sending records by special methods.
    (b) We will not charge fees when total assessed fees are less than 
$15.00.
    (c) You must pay by personal check, bank draft drawn on a United 
States bank, or postal money order made payable to the Treasury of the 
United States.
    (d) We treat a request about yourself under Privacy Act fee rules.
    (e) The information in paragraphs (a) and (b) of this section is 
presented in the table to this paragraph. Direct costs means the costs 
FCA incurs in searching for, reviewing, and reproducing documents to 
respond to a request. Direct costs include pro rated salary and 
reproduction costs. We will not charge fees when they total less than 
$15.00.

                            Fee Amounts Table
------------------------------------------------------------------------
               Type of fee                         Amount of fee
------------------------------------------------------------------------
Manual Search and Review.................  Pro rated Salary Costs.
Computer Search..........................  Direct Costs.
Photocopy................................  $0.15 a page.
Other Reproduction Costs.................  Direct Costs.
Elective Services........................  Direct Costs.
------------------------------------------------------------------------



Sec. 602.13  Fee waiver.

    We may waive or reduce fees if disclosure is not mostly in your 
commercial interest but, instead, is in the public interest because it 
will advance public understanding of the Federal government's operations 
or activities.



Sec. 602.14  Advance payments--notice.

    (a) If fees will be more than $25.00 and you have not told us in 
advance that you will pay estimated fees, we will tell you the estimated 
amount and ask that you agree to pay it. Except as noted in this 
section, we will begin processing the FOIA request when we receive your 
agreement to pay.
    (b) If estimated fees exceed $250.00 and you have a history of 
promptly paying fees charged for information requests, we may respond to 
your request based on your agreement to pay.
    (c) If estimated fees exceed $250.00 and you have no history of 
paying fees, we may require you to pay in advance.
    (d) If you have previously failed to pay fees for information 
requests or paid them late, you must pay any fees still owed, plus 
interest calculated under Sec. 602.15, and the estimated fees before we 
will respond to a new or a pending request.
    (e) If we require advance payment or an advance agreement to pay, we 
will not consider your request to be received and will not respond to it 
until you meet the requirement.



Sec. 602.15  Interest on unpaid fees.

    If you fail to pay fees on time, FCA may charge you interest 
starting on the 31st calendar day following the date we bill you. We 
will charge you interest at the rate allowed by law (31 U.S.C. 3717) on 
the billing date.



Sec. 602.16  Combining requests.

    You may not avoid paying fees by filing multiple requests at the 
same time. When FCA reasonably believes that you, alone or with others, 
are breaking down a request into a series of requests to avoid fees, we 
will combine the requests and charge accordingly. We will assume that 
multiple requests within a 30-day period have been made to avoid fees.



Subpart D--Testimony and Production of Documents in Legal Proceedings in 
                     Which FCA is Not a Named Party



Sec. 602.17  Policy.

    (a) The rules in this subpart preserve the confidentiality of FCA's 
documents and information, conserve employees' time for official duties, 
uphold fairness in litigation, and help the Chairman

[[Page 14]]

decide when to allow testimony and to produce documents. This subpart 
does not affect access to documents under the FOIA or the Privacy Act. 
See subpart B of this part and part 603 of this chapter.
    (b) Generally, we will not produce documents voluntarily and 
employees will not appear as witnesses voluntarily in any legal 
proceeding. However, in limited circumstances, the Chairman may allow 
the production of documents or testimony when the Chairman decides it 
would be in the best interest of FCA or the public. All privileged 
documents produced under this subpart remain our property. Any employee 
having information or privileged documents may disclose them only as 
allowed by the Chairman.



Sec. 602.18  Definitions.

    Court means any entity conducting a legal proceeding.
    Demand means any order, subpoena, or other legal process for 
testimony or documents.
    Direct costs means FCA's costs to search for, review, and reproduce 
documents to respond to a request. Direct costs include the pro rated 
cost of the salary of the employee performing the work (based on the 
basic rate of pay plus 16 percent to cover benefits) and the cost of 
operating reproduction equipment.
    Document means any record or other documentary materials, such as 
books, papers, maps, photographs, and machine-readable materials, 
regardless of physical form or characteristics (for example, electronic 
format) in our possession and control when we receive the request.
    Employee means any present or former FCA employee, any present or 
former FCA Board member, any former Federal Farm Credit Board member, 
any present or former FCA-appointed receiver or conservator, and any 
present or former agent or contractor.
    FCA Counsel means the General Counsel, a Department of Justice 
attorney, or counsel authorized by FCA to act for the FCA or an 
employee.
    General Counsel means the FCA's General Counsel or designee.
    Legal proceeding means any administrative, civil, or criminal 
proceeding, including a discovery proceeding, before a court when FCA is 
not a named party and has not instituted the legal proceeding.



Sec. 602.19  Request for testimony or production of documents.

    (a) How to make and address a request. Your request for an 
employee's testimony about official matters or the production of 
documents must be in writing and addressed to the General Counsel, 1501 
Farm Credit Drive, McLean, Virginia 22102-5090.
    (b) Your request must contain the following:
    (1) Title of the case;
    (2) Forum;
    (3) Your interest in the case;
    (4) Summary of the litigation issues;
    (5) Reasons for the request;
    (6) Why the confidential information is important; and
    (7) An explanation of why the testimony or document you want is not 
reasonably available from another source. If you want testimony, you 
must also state how you intend to use the testimony, provide a subject 
matter summary of the requested testimony, and explain why a document 
could not be used instead.
    (c) The General Counsel may ask you to limit your request to make it 
less burdensome or to give us information to help us decide if providing 
documents or testimony is in the public interest.



Sec. 602.20  Testimony of FCA employees.

    (a) An employee may testify only as the Chairman approves in 
writing. Generally, an employee may testify only by deposition or 
written interrogatory. An employee may give only factual testimony and 
may not give opinion testimony.
    (b) If, in response to your request, the Chairman decides that an 
employee may testify, you must serve the employee with a subpoena under 
applicable Federal or State rules of procedure and at the same time send 
a copy of the subpoena by registered mail to the General Counsel.
    (c) Normally, depositions will be taken at the employee's office, at 
a time convenient to the employee and

[[Page 15]]

the FCA. FCA counsel may represent FCA's interests at the deposition.
    (d) If you request the deposition, you must give the General Counsel 
a copy of the deposition transcript at no charge.



Sec. 602.21  Production of FCA documents.

    (a) An FCA employee may produce documents only as the Chairman 
allows.
    (b) Before we will release any documents, the requesting party must 
get an acceptable protective order from the court before which the 
action is pending that will preserve the confidentiality of the 
documents to be released.
    (c) On request, we may provide certified or authenticated copies of 
documents.



Sec. 602.22  Fees.

    (a) For documents released under this subpart, FCA will charge:
    (1) The direct costs of searching for responsive records, including 
the use of a computer, reviewing the records, and reproducing them. We 
also will charge for the direct costs of any other services and 
materials that we provide at your request.
    (2) Fifteen cents a copy for each page made by photocopy or similar 
process.
    (3) The direct costs for each certification or authentication of 
documents.
    (b) You must pay by personal check, bank draft drawn on a United 
States bank, or postal money order made payable to FCA. We will waive 
fees of $15.00 or less. We will send the documents after we receive your 
payment.



Sec. 602.23  Responses to demands served on FCA employees.

    (a) An employee served with a demand or a subpoena in a legal 
proceeding must immediately tell the General Counsel of such service, 
the testimony or documents described in the demand, and all relevant 
facts.
    (b) When the Chairman does not allow testimony or production of 
documents, FCA Counsel will provide the regulations in this subpart to 
the party or court issuing the demand and explain that the employee may 
not testify or produce documents without the Chairman's prior approval.
    (c) If the court rules the employee must comply with the demand 
regardless of the Chairman's instructions not to do so, the employee 
must respectfully refuse to comply.
    (d) FCA's decision under this subpart to comply or not to comply 
with any demand is not a waiver, an assertion of privilege, or an 
objection based on relevance, technical deficiency, or any other ground. 
We may oppose any demand on any legal ground.



Sec. 602.24  Responses to demands served on non-FCA employees or entities.

    If you are not an employee and are served with a demand or a 
subpoena in a legal proceeding directing you to produce or testify about 
an FCA report of examination, other document created or adopted by FCA, 
or any related document, you must object and immediately tell the 
General Counsel of such service, the testimony or documents described in 
the demand, and all relevant facts. You also must object to the 
production of any documents on the basis that they are FCA's property 
and cannot be released without FCA's consent. You should tell the 
requester the production of documents or testimony must follow the 
procedures in this part.



        Subpart E--Release of Records in Public Rulemaking Files



Sec. 602.25  General.

    FCA has a public rulemaking file for each regulation. You may get 
copies of documents in the public rulemaking file by sending a written 
request to the Director, Regulation and Policy Division, Office of 
Policy and Analysis, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, Virginia 22102-5090. We will charge fifteen cents a copy for 
each page. We will waive fees of $15.00 or less.



PART 603--PRIVACY ACT REGULATIONS--Table of Contents




Sec.
603.300  Purpose and scope.
603.305  Definitions.
603.310  Procedures for requests pertaining to individual records in a 
          record system.

[[Page 16]]

603.315  Times, places, and requirements for identification of 
          individuals making requests.
603.320  Disclosure of requested information to individuals.
603.325  Special procedures for medical records.
603.330  Request for amendment to record.
603.335  Agency review of request for amendment of record.
603.340  Appeal of an initial adverse determination of a request to 
          amend a record.
603.345  Fees for providing copies of records.
603.350  Criminal penalties.
603.355  Exemptions.

    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).

    Source: 40 FR 40454, Sept. 2, 1975, unless otherwise noted.



Sec. 603.300  Purpose and scope.

    (a) This part is published by the Farm Credit Administration 
pursuant to the Privacy Act of 1974 (Pub. L. 93-579, 5 U.S.C. 552a) 
which requires each Federal agency to promulgate rules to establish 
procedures for notification and disclosure to an individual of agency 
records pertaining to that person, and for review of such records.
    (b) The records covered by this part include:
    (1) Personnel and employment records maintained by the Farm Credit 
Administration which are not covered by Secs. 293.101 through 293.108 of 
the regulations of the Office of Personnel Management (5 CFR 293.101 
through 293.108), and
    (2) Other records contained in record systems maintained by the Farm 
Credit Administration.

[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41941, Nov. 20, 1986]



Sec. 603.305  Definitions.

    For the purposes of this part:
    (a) Agency means the Farm Credit Administration.
    (b) Individual means a citizen of the United States or an alien 
lawfully admitted for permanent residence;
    (c) Maintain includes maintain, collect, use, or disseminate;
    (d) Record means any item, collection, or grouping of information 
about an individual that is maintained by an agency including, but not 
limited to, that person's education, financial transactions, medical 
history, and criminal or employment history, and that contains that 
person's name, or the identifying number, symbol, or other identifying 
particular assigned to the individual, such as a finger or voice print 
or photograph;
    (e) Routine use means, with respect to the disclosure of a record, 
the use of such record for a purpose that is compatible with the purpose 
for which it was collected;
    (f) Statistical record means a record in a system of records 
maintained for statistical research or reporting purposes only and not 
used in whole or in part in making any determination about an 
identifiable individual, except as provided by 13 U.S.C. 8;
    (g) System of records means a group of any records under the control 
of any agency from which information is retrieved by the name of an 
individual or by some identifying number, symbol, or other identifying 
particular assigned to the individual.

[51 FR 41941, Nov. 20, 1986]



Sec. 603.310  Procedures for requests pertaining to individual records in a record system.

    (a) Any present or former employee of the Farm Credit Administration 
seeking access to that person's official civil service records 
maintained by the Farm Credit Administration shall submit a request in 
such manner as is prescribed by the Office of Personnel Management.
    (b) Individuals shall submit their requests in writing to the 
Privacy Act Officer, Office of General Counsel, Farm Credit 
Administration, McLean, Virginia 22102-5090, when seeking to obtain from 
the Farm Credit Administration:
    (1) Notification of whether the agency maintains a record pertaining 
to that person in a system of records;
    (2) Notification of whether the agency has disclosed a record for 
which an accounting of disclosure is required to be maintained and made 
available to that person;
    (3) A copy of a record pertaining to that person or the accounting 
of its disclosure;
    (4) The review of a record pertaining to that person or the 
accounting of its

[[Page 17]]

disclosure. The request shall state the full name and address of the 
individual, and identify the system or systems of records believed to 
contain the information or record sought.

[51 FR 41941, Nov. 20, 1986, as amended at 61 FR 67185, Dec. 20, 1996]



Sec. 603.315  Times, places, and requirements for identification of individuals making requests.

    The individual making written requests for information or records 
ordinarily will not be required to verify that person's identity. The 
signature upon such requests shall be deemed to be a certification by 
the requester that he or she is the individual to whom the record 
pertains, or the parent of a minor, or the duly appointed legal guardian 
of the individual to whom the record pertains. The Privacy Act Officer, 
however, may require such additional verification of identity in any 
instance in which the Privacy Act Officer deems it advisable.

[51 FR 41941, Nov. 20, 1986]



Sec. 603.320  Disclosure of requested information to individuals.

    (a) The Privacy Act Officer shall, within a reasonable period of 
time after the date of receipt of a request for information of records:
    (1) Determine whether or not such request shall be granted,
    (2) Notify the requester of the determination and, if the request is 
denied, of the reasons therefor, and
    (3) Notify the requester that fees for reproducing copies of records 
may be charged as provided in Sec. 603.345 of this part.
    (b) If access to a record is denied because the information therein 
has been compiled by the Farm Credit Administration in reasonable 
anticipation of a civil or criminal action proceeding, the Privacy Act 
Officer shall notify the requester of that person's right to judicial 
appeal under 5 U.S.C. 552a(g).
    (c)(1) If access to a record is granted, the requester shall notify 
the Officer whether the requested record is to be copied and mailed to 
the requester or whether the record is to be made available for personal 
inspection.
    (2) A requester who is an individual may be accompanied by an 
individual selected by the requester when the record is disclosed, in 
which case the requester may be required to furnish a written statement 
authorizing the discussion of the record in the presence of the 
accompanying person.
    (d) If the record is to be made available for personal inspection, 
the requester shall arrange with the Privacy Act Officer a mutually 
agreeable time in the offices of the Farm Credit Administration for 
inspection of the record.

[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41941, Nov. 20, 1986]



Sec. 603.325  Special procedures for medical records.

    Medical records in the custody of the Farm Credit Administration 
which are not subject to Office of Personnel Management regulations 
shall be disclosed either to the individual to whom they pertain or that 
person's authorized or legal representative or to a licensed physician 
named by the individual.

[51 FR 41942, Nov. 20, 1986]



Sec. 603.330  Request for amendment to record.

    (a) If, after disclosure of the requested information, an individual 
believes that the record is not accurate, relevant, timely, or complete, 
that person may request in writing that the record be amended. Such a 
request shall be submitted to the Privacy Act Officer and shall contain 
identification of the system of records and the record or information 
therein, a brief description of the material requested to be changed, 
the requested change or changes, and the reason for such change or 
changes.
    (b) The Privacy Act Officer shall acknowledge receipt of the request 
within 10 days (excluding Saturdays, Sundays, and legal holidays) and, 
if a determination has not been made, advise the individual when that 
person may expect to be advised of action taken on the request. The 
acknowledgment may contain a request for additional information needed 
to make a determination.

[51 FR 41942, Nov. 20, 1986]

[[Page 18]]



Sec. 603.335  Agency review of request for amendment of record.

    Upon receipt of a request for amendment of a record, the Privacy Act 
Officer shall:
    (a) Correct any portion of a record which the individual making the 
request believes is not accurate, relevant, timely, or complete and 
thereafter inform the individual in writing of such correction, or
    (b) Inform the individual in writing of refusal to amend the record 
and of the reasons therefor, and advise that the individual may appeal 
such determination as provided in Sec. 603.340 of this part.

[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41942, Nov. 20, 1986]



Sec. 603.340  Appeal of an initial adverse determination of a request to amend a record.

    (a) Not more than 10 days (excluding Saturdays, Sundays, and legal 
holidays) after receipt by an individual of an adverse determination on 
the individual's request to amend a record or otherwise, the individual 
may appeal to the Director, Office of Resources Management.
    (b) The appeal shall be by letter, mailed or delivered to the 
Director, Office of Resources Management, Farm Credit Administration, 
McLean, Virginia 22102-5090. The letter shall identify the records 
involved in the same manner they were identified to the Privacy Act 
Officer, shall specify the dates of the request and adverse 
determination, and shall indicate the expressed basis for that 
determination. Also, the letter shall state briefly and succinctly the 
reasons why the adverse determination should be reversed.
    (c) The review shall be completed and a final determination made by 
the Director not later than 30 days (excluding Saturdays, Sundays, and 
legal holidays) from receipt of the request for such review, unless the 
Director extends such 30-day period for good cause. If the 30-day period 
is extended, the individual shall be notified of the reasons therefor.
    (d) If the Director refuses to amend the record in accordance with 
the request, the individual shall be notified of the right to file a 
concise statement setting forth that person's disagreement with the 
final determination and that person's right under 5 U.S.C. 552a(g)(1)(A) 
to a judicial review of the final determination.
    (e) If an amendment of a record as requested upon review is refused, 
there shall be included in the disputed portion of the record a copy of 
the concise statement filed by the individual together with a concise 
statement of the reasons for not amending the record as requested. Such 
statements will be included when disclosure of the disputed record is 
made to persons and agencies as authorized under 5 U.S.C. 552a.

[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41942, Nov. 20, 1986; 
56 FR 2673, Jan. 24, 1991]



Sec. 603.345  Fees for providing copies of records.

    Fees for providing copies of records shall be charged in accordance 
with Secs. 602.267 and 602.269 of this chapter.

[40 FR 40454, Sept. 2, 1975, as amended at 56 FR 28479, June 21, 1991]



Sec. 603.350  Criminal penalties.

    Section 552a (l) (3) of the Privacy Act (5 U.S.C. 552a (i) (3)) 
makes it a misdemeanor, subject to a maximum fine of $5,000, to 
knowingly and willfully request or obtain any record concerning any 
individual from an agency under false pretenses. Sections 552a (i) (1) 
and (2) of the Act (5 U.S.C. 552a (i) (1), (2)) provide penalties for 
violation by agency employees of the Act or regulations established 
thereunder.



Sec. 603.355  Exemptions.

    (a) Specific. Pursuant to 5 U.S.C. 552a(k)(2), the investigatory 
material compiled for law enforcement purposes in the following systems 
of records is exempt from subsections (c)(3), (d), (e)(1), (e)(4) (G), 
(H), and (I) and (f) of 5 U.S.C. 552a and from the provisions of this 
part:

Farm Credit Bank loans--FCA.
Production Credit Association loans--FCA.
Agricultural Credit Association loans--FCA.
Federal Land Credit Association loans--FCA.
Agricultural Credit Bank loans--FCA.
Office of Inspector General Investigative Files--FCA.


[[Page 19]]


    (b) General. (1) In addition, pursuant to 5 U.S.C. 552a (j)(2), 
investigatory materials compiled for criminal law enforcement in the 
system of records described in (b)(2) are exempt from all subsections of 
5 U.S.C. 552a, except (b), (c) (1) and (2), (e)(4) (A) through (F), (e) 
(6), (7), (9), (10), and (11), and (i). Exemptions from the particular 
subsections are justified for the following reasons:
    (i) From subsection (c)(3) because making available to a record 
subject the accounting of disclosures from records concerning him/her 
would reveal investigative interest on the part of the OIG. This would 
enable record subjects to impede the investigation by, for example, 
destroying evidence, intimidating potential witnesses, or fleeing the 
area to avoid inquiries or apprehension by law enforcement personnel.
    (ii) From subsection (c)(4) because this system is exempt from the 
access provisions of subsection (d) pursuant to subsection (j)(2) of the 
Privacy Act.
    (iii) From subsection (d) because the records contained in this 
system relate to official Federal investigations. Individual access to 
those records might compromise ongoing investigations, reveal 
confidential informants or constitute unwarranted invasions of the 
personal privacy of third parties who are involved in a certain 
investigation. Amendment of the records would interfere with ongoing 
criminal law enforcement proceedings and impose an impossible 
administrative burden by requiring criminal investigations to be 
continuously reinvestigated.
    (iv) From subsections (e) (1) and (5) because in the course of law 
enforcement investigations, information may occasionally be obtained or 
introduced the accuracy of which is unclear or which is not strictly 
relevant or necessary to a specific investigation. In the interests of 
effective law enforcement, it is appropriate to retain all information 
that may aid in establishing patterns of criminal activity. Moreover, it 
would impede the specific investigative process if it were necessary to 
assure the relevance, accuracy, timeliness and completeness of all 
information obtained.
    (v) From subsection (e)(2) because in a law enforcement 
investigation the requirement that information be collected to the 
greatest extent possible from the subject individual would present a 
serious impediment to law enforcement in that the subject of the 
investigation would be informed of the existence of the investigation 
and would therefore be able to avoid detection, apprehension, or legal 
obligations or duties.
    (vi) From subsection (e)(3) because to comply with the requirements 
of this subsection during the course of an investigation could impede 
the information gathering process, thus hampering the investigation.
    (vii) From subsections (e)(4) (G), and (H), and (I), (e)(8), (f), 
(g) and (h) because this system is exempt from the access provisions of 
subsection (d) pursuant to subsection (j) of the Privacy Act.
    (2) Office of Inspector General Investigative Files--FCA.

[56 FR 2673, Jan. 24, 1991, as amended at 57 FR 32421, July 22, 1992]



PART 604--FARM CREDIT ADMINISTRATION BOARD MEETINGS--Table of Contents




Sec.
604.400  Definitions.
604.405  Notice of public observation.
604.410  Scope of application.
604.415  Open meetings.
604.420  Exemptive provisions.
604.425  Announcement of meetings.
604.430  Closure of meetings.
604.435  Record of closed meetings or closed portion of a meeting.
604.440  Requests for information.

    Authority: Secs. 5.9, 5.17 of the Farm Credit Act; 12 U.S.C. 2243, 
2252.



Sec. 604.400  Definitions.

    For purposes of this part:
    (a) Agency means the Farm Credit Administration.
    (b) Board means the Farm Credit Administration Board.
    (c) Exempt meeting and exempt portion of a meeting mean, 
respectively, a meeting or that part of a meeting designated as provided 
in Sec. 604.430 of this part as closed to the public by reason of one or 
more of the exemptive provisions listed in Sec. 604.420 of this part.

[[Page 20]]

    (d) Meeting means the deliberations of at least two (quorum) members 
of the Board where such deliberations determine or result in joint 
conduct or disposition of official Farm Credit Administration business.
    (e) Member means any one of the members of the Board.
    (f) Open meeting means a meeting or portion of a meeting which is 
not an exempt meeting or an exempt portion of a meeting.
    (g) Public observation means the right of any member of the public 
to attend and observe, but not participate or interfere in any way in, 
an open meeting of the Board, within the limits of reasonable and 
comfortable accommodations made available for such purpose by the Farm 
Credit Administration.

[51 FR 41942, Nov. 20, 1986]



Sec. 604.405  Notice of public observation.

    (a) A member of the public is not required to give advance notice to 
the Farm Credit Administration of an intention to exercise the right of 
public observation of an open meeting of the Board. However, in order to 
permit the Farm Credit Administration to determine the amount of space 
and number of seats which must be made available to accommodate 
individuals who desire to exercise the right of public observation, such 
individuals are requested to give notice to the Farm Credit 
Administration at least two business days before the start of the open 
meeting of the intention to exercise such right.
    (b) Notice of intention to exercise the right of public observation 
may be given in writing, in person, or by telephone to the official 
designated in Sec. 604.440 of this part.
    (c) Individuals who have not given advance notice of intention to 
exercise the right of public observation will not be permitted to attend 
and observe the open meeting of the Board if the available space and 
seating are necessary to accommodate individuals who gave advance notice 
of such intention to the Farm Credit Administration.

[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41942, 
Nov. 20, 1986]



Sec. 604.410  Scope of application.

    The provisions of this part apply to meetings of the Board, and do 
not apply to conferences or other gatherings of employees of the Farm 
Credit Administration who meet or join with others, except at meetings 
of the Board, to deliberate official agency business.

[51 FR 41942, Nov. 20, 1986]



Sec. 604.415  Open meetings.

    Every meeting and portion of a meeting of the Board shall be open to 
public observation unless the Board determines that such meeting or 
portion of a meeting will involve the discussion of matters which are 
within one or more of the exemptive provisions listed in Sec. 604.420 of 
this part, and that the public interest is not served by the discussion 
of such matters in an open meeting.

[51 FR 41943, Nov. 20, 1986]



Sec. 604.420  Exemptive provisions.

    Except in a case where the Board determines that the public interest 
requires otherwise, a meeting or portion of a meeting may be closed to 
public observation where the Board determines that the meeting or 
portion of the meeting is likely to:
    (a) Disclose matters that are:
    (1) Specifically authorized under criteria established by an 
Executive order to be kept secret in the interests of national defense 
or foreign policy, and
    (2) In fact properly classified pursuant to such Executive order;
    (b) Relate solely to the internal personnel rules and practices of 
the Farm Credit Administration;
    (c) Disclose matters specifically exempted from disclosure by 
statute (other than 5 U.S.C. 552): Provided, That such statute:
    (1) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue, or
    (2) Establishes particular types of matters to be withheld;
    (d) Disclose trade secrets and privileged or confidential commercial 
or financial information obtained from a person;

[[Page 21]]

    (e) Involve accusing any person of a crime, or formally censuring 
any person;
    (f) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (g) Disclose investigator records compiled for law enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would:
    (1) Interfere with enforcement proceedings;
    (2) Deprive a person of a right to a fair trial or an impartial 
adjudication;
    (3) Constitute an unwarranted invasion of personal privacy;
    (4) Disclose the identity of a confidential source and, in the case 
of a record compiled by a criminal law enforcement authority in the 
course of a criminal investigation, or by an agency conducting a lawful 
national security intelligence investigation, confidential information 
furnished only by the confidential source;
    (5) Disclose investigative techniques and procedures; or
    (6) Endanger the life or physical safety of law enforcement 
personnel;
    (h) Disclose information contained in or related to examination, 
supervision, operating, or condition reports prepared by, on behalf of, 
or for the use of the Farm Credit Administration;
    (i) Disclose information the premature disclosure of which would:
    (1) Significantly endanger the stability of any Farm Credit System 
institution, including banks, associations, service organizations, the 
Funding Corporation, the Farm Credit System Assistance Board, or the 
Farm Credit System Financial Assistance Corporation; or
    (2) Be likely to significantly frustrate implementation of a 
proposed action of the Farm Credit Administration: Provided, said 
Administration has not already disclosed to the public the content or 
nature of its proposed action, or is not required by law to make such 
disclosure on its own initiative prior to taking final action on such 
proposal; or
    (j) Specifically concern participation by the Farm Credit 
Administration in a civil action or proceeding otherwise involving a 
determination on the record before an opportunity for a hearing.

[51 FR 41943, Nov. 20, 1986, as amended at 56 FR 2673, Jan. 24, 1991]



Sec. 604.425  Announcement of meetings.

    (a) The Board meets in the offices of the Farm Credit 
Administration, McLean, Virginia 22102-5090, on the second Thursday of 
each month.
    (b) At any duly called meeting held previous to any meeting 
scheduled as provided in paragraph (a) of this section, the Board may 
fix a different time and place for a subsequent meeting.
    (c) At the earliest practicable time, which is estimated to be not 
later than 8 days before the beginning of a meeting of the Board, the 
Farm Credit Administration shall make available for public inspection by 
posting notice on its public notice board in its offices, or pursuant to 
telephonic or written requests, the time, place, and subject matter of 
the meeting except to the extent that such information is exempt from 
disclosure under the provisions of Sec. 604.420 of this part.

[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41943, 
Nov. 20, 1986; 56 FR 9611, Mar. 7, 1991]



Sec. 604.430  Closure of meetings.

    (a) A majority of the meetings or portions of a majority of the 
meetings of the board are exempt by reason of Sec. 604.420 (d), (h), 
(i)(1), or (j) of this part. An exempt meeting or an exempt portion of a 
meeting shall be closed to the public when at least two members of the 
Board vote by a recorded vote of the Board at the beginning of the 
exempt meeting or exempt portion of a meeting to close such meeting or 
such exempt portion, and the General Counsel, Farm Credit 
Administration, publicly certifies that, in his or her opinion, the 
meeting or portion of the meeting may be closed to the public stating 
each relevant exemptive provision listed in Sec. 604.420 of this part.
    (b) A copy of the vote of the Board to close a meeting or an exempt 
portion thereof reflecting the vote of each member on the question, and 
a copy of

[[Page 22]]

the certification of General Counsel, shall be made available for public 
inspection in the offices of the Farm Credit Administration, or pursuant 
to telephonic or written requests.
    (c) A copy of the certification of the General Counsel, together 
with a statement from the presiding officer of the meeting setting forth 
the time and place of an exempt meeting or an exempt portion of a 
meeting which was closed and the persons present, shall be retained by 
the Farm Credit Administration for a period of at least 2 years after 
the date of such closed meeting or closed portion of a meeting.

[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41943, 
Nov. 20, 1986]



Sec. 604.435  Record of closed meetings or closed portion of a meeting.

    (a) The Farm Credit Administration shall maintain a complete 
transcript or electronic recording adequate to record fully the 
proceedings of each closed meeting or closed portion of a meeting, 
except that in the case of a meeting or portion of a meeting closed to 
the public pursuant to Sec. 604.420 (d), (h), (i)(1), or (j) of this 
part, the Farm Credit Administration shall maintain either such 
transcript, recording, or a set of minutes.
    (b) Any minutes so maintained shall fully and clearly describe all 
matters discussed and shall provide a full and accurate summary of any 
actions taken, and the reasons therefor, including a description of each 
of the views expressed on any item and the record of any roll call vote. 
All documents considered in connection with any action shall be 
identified in the minutes.
    (c) The Farm Credit Administration shall promptly make available to 
the public, in its offices, the transcript, electronic recording, or 
minutes, of the discussion of any item on the agenda of a closed 
meeting, or closed portion of a meeting, except for such item or items 
of discussion which the Farm Credit Administration determines to contain 
information which may be withheld under Sec. 604.420 of this part. 
Copies of such transcript or minutes, or a transcription of such 
recording disclosing the identity of each speaker, shall be furnished to 
any person at the actual cost of duplication or transcription.
    (d) The Farm Credit Administration shall maintain a complete 
verbatim copy of the transcript, a complete copy of the minutes, or a 
complete electronic recording of each closed meeting or closed portion 
of a meeting for a period of 2 years after the date of such closed 
meeting or closed portion of a meeting.
    (e) All actions required or permitted by this section to be 
undertaken by the Farm Credit Administration shall be by or under the 
authority of the Director, Office of Resources Management.

[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41943, 
Nov. 20, 1986; 56 FR 2673, Jan. 24, 1991]



Sec. 604.440  Requests for information.

    Requests to the Farm Credit Administration for information about the 
time, place, and subject matter of a meeting, whether it or any portion 
thereof is closed to the public, and any requests for copies of the 
transcript or minutes, or of a transcript of an electronic recording of 
a closed meeting, or closed portion of a meeting, to the extent not 
exempt from disclosure by the provisions of Sec. 604.420 of this part, 
shall be addressed to the Secretary to the Board, Farm Credit 
Administration, McLean, Virginia 22102-5090.

[51 FR 41944, Nov. 20, 1986, as amended at 59 FR 21642, Apr. 26, 1994]



PART 605--INFORMATION--Table of Contents




Sec.
605.500  Policy.
605.501  Information Security Officer.
605.502  Program and procedures.

    Authority: Secs. 5.9, 5.12, 5.17 of the Farm Credit Act; 12 U.S.C. 
2243, 2246, 2252.



Sec. 605.500  Policy.

    It is the policy of the Farm Credit Administration to act in matters 
relating to national security information in accordance with Executive 
Order 12356 and directives issued thereunder by the Information Security 
Oversight Office (ISOO).

[49 FR 9859, Mar. 16, 1984]



Sec. 605.501  Information Security Officer.

    (a) The Information Security Officer of the Farm Credit 
Administration

[[Page 23]]

shall be responsible for implementation and oversight of the information 
security program and procedures adopted by the Agency pursuant to the 
Executive order. This officer shall be the recipient of questions, 
suggestions, and complaints regarding all elements of this program and 
shall be solely responsible for changes to it and for the assurance that 
it is at all times consistent with the Executive order and ISOO 
directive.
    (b) The Information Security Officer shall be the Farm Credit 
Administration's official contact for requests for declassification of 
materials submitted under the Executive order, regardless of the point 
of origin of such requests, and shall assure that such requests for 
records in the Farm Credit Administration's possession that were 
originated by another agency shall be forwarded to the originating 
agency. The Farm Credit Administration shall include a copy of the 
records requested together with its recommendation for action. Upon 
receipt, the originating agency shall process the request in accordance 
with 32 CFR 2001.32(a)(2)(i). Upon request, the originating agency shall 
communicate its declassification determination to the Farm Credit 
Administration. The Farm Credit Administration shall inform the 
requester of the determination within 1 year from the date of receipt, 
except in unusual circumstances. If an appeal is made on a denial of a 
mandatory declassification review request, the originating agency's 
appellate authority shall normally make a determination within 30 
working days following the receipt of an appeal. If additional time is 
required to make a determination, the originating appellate authority 
shall notify the requester of the additional time needed and provide the 
requester with the reason for extension. The originating agency's 
appellate authority shall notify the requester in writing of the final 
determination and of the reasons for any denial. Such officer shall also 
assure that requests for declassification submitted under the Freedom of 
Information Act are handled in accordance with that Act.

[49 FR 9859, Mar. 16, 1984]



Sec. 605.502  Program and procedures.

    (a) The Farm Credit Administration has no authority for the original 
classification of information for national security purposes. Only those 
agencies described in the Executive order may so classify information.
    (b) Derivative classification. ``Derivative Classification'' means a 
determination that information is in substance the same information that 
is currently classified under a designated level of classification. 
Derivative application of classification markings shall be the 
responsibility of the Information Security Officer who shall assure that 
the use of this authority is in accordance with ISOO directives.
    (c) Mandatory review. All requests for review under the mandatory 
review provisions of the Executive order shall be handled by the 
Information Security Officer or his/her designee. Under no circumstances 
shall such official refuse to confirm the existence or nonexistence of a 
document requested under the Executive order or the Freedom of 
Information Act unless the fact of its existence or nonexistence would 
itself be classified under the Executive order.
    (d) Handling of classified documents. All documents bearing the 
terms ``Top Secret,'' ``Secret,'' and ``Confidential'' shall be 
delivered to the Information Security Officer or his/her designee 
immediately upon receipt. All potential recipients of such documents 
shall be advised of the names of such designees. In the event that the 
Information Security Officer or his/her designee is not available to 
receive such documents, they shall be sent to the FCA mailroom and 
stored in the combination safe located in the Agency Services Branch and 
secured unopened until the Information Security Officer is available. 
Under no cirumstances shall classified materials that cannot be 
delivered be stored other than in the designated safe. All materials not 
immediately deliverable or able to be secured in the designated safe 
shall be returned to the sender, under appropriate cover, for redelivery 
to the FCA at the next earliest opportunity.
    (e) Reproduction. Reproduction of classified materials shall take 
place only in accordance with section 4.1(b)

[[Page 24]]

of the Executive order and any limitations imposed by the originator. 
Should copies be made, they shall be subject to the same controls as the 
original document. Records showing the number and distribution of copies 
shall be maintained by the Information Security Officer or his/her 
designee, and the log stored with the original documents. These measures 
shall not restrict reproduction for the purposes of Mandatory Review.
    (f) Storage. In accordance with 32 CFR 2001.43, all classified 
documents shall be stored in combination safes located at the primary 
headquarters and/or a Field Office, Office of Examination, Farm Credit 
Administration. The combinations shall be changed as required by 
directives issued by ISOO. The combinations shall be known only to the 
Information Security Officer and his/her designees who have appropriate 
security clearances.
    (g) Employee education. All employees who have been granted a 
security clearance and who have occasion to handle classified materials 
shall be advised of handling, reproduction, and storage procedures and 
shall be required to review the Executive order and appropriate ISOO 
directives.
    (h) Agency terminology. No official of the Farm Credit 
Administration shall use the terms ``Top Secret'', ``Secret'', or 
``Confidential'' except in relation to materials classified for national 
security purposes. As a Federal regulatory agency, the Farm Credit 
Administration maintains certain internal documents that relate to its 
examination and supervision of the institutions of the Farm Credit 
System. Such documents are limited in use and distribution. Material 
that is of a sensitive nature to the Farm Credit Administration may be 
designated ``Executive Document.''
    (i) Nondisclosure agreement. In accordance with 32 CFR 2003.20, the 
Farm Credit Administration requires that any person whose position 
requires access to classified information must execute a nondisclosure 
agreement on Standard Form 189--Classified Information Nondisclosure 
Agreement. Persons not executing such nondisclosure agreements are 
subject to sanctions of Executive Order 12356. It is the policy of the 
Farm Credit Administration that any employee authorized access to 
classified information holds a personal responsibility for safeguarding 
against unlawful disclosures, and such employees are prohibited from 
disclosure without consent of the FCA Information Security Officer. Any 
such unauthorized disclosure will be reported to the Information 
Security Oversight Office, the Department of Justice, the Department of 
State, the Federal Emergency Management Agency, and to any other Federal 
agency for which the Farm Credit Administration has access to classified 
information, as such reportings are subject to interpretation as 
required by statute and Executive order. Any employee who knowingly 
disclosed classified information or who refuses to cooperate with an 
investigation may be subject to mandatory administrative sanctions, 
including as a minimum, denial of further access to classified 
information. Further sanctions could include demotion or dismissal 
depending on the circumstances of a particular case.
    (j) Freedom of Information request. All inquiries regarding requests 
for classified information under the Freedom of Information Act (5 
U.S.C. 552), including those from the news media, shall be referred to 
the FCA FOI Officer, Office of Congressional and Public Affairs, Farm 
Credit Administration, and shall be handled in accordance with 
provisions of that statute and applicable regulations.

[49 FR 9859, Mar. 16, 1984, as amended at 52 FR 18200, May 14, 1987; 59 
FR 21643, Apr. 26, 1994]



PART 606--ENFORCEMENT OF NONDISCRIMINATION ON THE BASIS OF HANDICAP IN PROGRAMS OR ACTIVITIES CONDUCTED BY THE FARM CREDIT ADMINISTRATION--Table of Contents




Sec.
606.601  Purpose.
606.602  Application.
606.603  Definitions.
606.604-606.609  [Reserved]
606.610  Self-evaluation.
606.611  Notice.
606.612-606.629  [Reserved]

[[Page 25]]

606.630  General prohibitions against discrimination.
606.631-606.639  [Reserved]
606.640  Employment.
606.641-606.648  [Reserved]
606.649  Program accessibility: Discrimination prohibited.
606.650  Program accessibility: Existing facilities.
606.651  Program accessibility: New construction and alterations.
606.652-606.659  [Reserved]
606.660  Communications.
606.661-606.669  [Reserved]
606.670  Compliance procedures.
606.671-606.999  [Reserved]

    Authority: 29 U.S.C. 794.

    Source: 53 FR 19889, June 1, 1988, unless otherwise noted.



Sec. 606.601  Purpose.

    The purpose of this part is to effectuate section 119 of the 
Rehabilitation Comprehensive Services, and Developmental Disabilities 
Amendments of 1978, which amended section 504 of the Rehabilitation Act 
of 1973 to prohibit discrimination on the basis of handicap in programs 
or activities conducted by Executive agencies or the United States 
Postal Service.



Sec. 606.602  Application.

    (a) This part applies to all programs or activities conducted by the 
agency. For example, members of the public may participate in the 
following ``programs and activities'' of the FCA:
    (1) Attending open meetings of the Farm Credit Board.
    (2) Making inquiries or filing complaints.
    (3) Using the FCA library in McLean, Virginia.
    (4) Seeking employment with FCA.
    (5) Attending any meeting, conference, seminar, or other program 
open to the public.

This list is illustrative only and failure to include an activity does 
not necessarily mean that it is not covered by this regulation.
    (b) This regulation does not apply to the institutions that are 
regulated or examined by the FCA. However, this regulation governs the 
conduct of FCA personnel, in their interaction with employees of such 
institutions and employees of other Federal agencies, while discharging 
their official FCA duties.



Sec. 606.603  Definitions.

    For purposes of this part, the term:
    (a) Agency means the Farm Credit Administration.
    (b) Assistant Attorney General means the Assistant Attorney General, 
Civil Rights Division, United States Department of Justice.
    (c) Auxiliary aids means services or devices that enable persons 
with impaired sensory, manual, or speaking skills to have an equal 
opportunity to participate in, and enjoy the benefits of, programs or 
activities conducted by the agency. For example, auxiliary aids useful 
for persons with impaired vision include readers, Brailled materials, 
audio recordings, and other similar services and devices. Auxiliary aids 
useful for persons with impaired hearing include telephone handset 
amplifiers, telephones compatible with hearing aids, telecommunication 
devices for deaf persons (TDDs), interpreters, note-takers, written 
materials, and other similar services and devices.
    (d) Complete complaint means a written statement that contains the 
complainant's name and address and describes the agency's alleged 
discriminatory action in sufficient detail to inform the agency of the 
nature and date of the alleged violation of section 504. It shall be 
signed by the complainant or by someone authorized to do so on his or 
her behalf. Complaints filed on behalf of classes or third parties shall 
describe or identify (by name, if possible) the alleged victims of 
discrimination.
    (e) Facility means all or any portion of buildings, structures, 
equipment, roads, walks, parking lots, rolling stock or other 
conveyances, or other real or personal property.
    (f) Individual with handicaps means any person who has a physical or 
mental impairment that substantially limits one or more major life 
activities, has a record of such an impairment, or is regarded as having 
such an impairment. As used in this definition, the phrase:
    (1) Physical or mental impairment includes:

[[Page 26]]

    (i) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more of the following body systems: 
Neurological; musculoskeletal; special sense organs; respiratory, 
including speech organs; cardiovascular; reproductive; digestive; 
genitourinary; hemic and lymphatic; skin; and endocrine; or
    (ii) Any mental or psychological disorder, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities. The term physical or mental impairment 
includes, but is not limited to, such diseases and conditions as 
orthopedic, visual, speech, and hearing impairments, cerebral palsy, 
epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, 
diabetes, mental retardation, emotional illness, and drug addiction and 
alcoholism.
    (2) Major life activities includes functions such as caring for 
oneself, performing manual tasks, walking, seeing, hearing, speaking, 
breathing, learning, and working.
    (3) Has a record of such an impairment means has a history of, or 
has been misclassified as having, a mental or physical impairment that 
substantially limits one more major life activities.
    (4) Is regarded as having an impairment means:
    (i) Has a physical or mental impairment that does not substantially 
limit major life activities but is treated by the agency as constituting 
such a limitation;
    (ii) Has a physical or mental impairment that substantially limits 
major life activities only as a result of the attitudes of others toward 
such impairment; or
    (iii) Has none of the impairments defined in paragraph (f)(1) of 
this definition but is treated by the agency as having such an 
impairment.
    (g) Qualified individual with handicaps means an individual with 
handicaps who meets the essential eligibility requirements for 
participation in the program or activity conducted by the agency. With 
respect to employment, a qualified individual with handicaps is one who 
meets the definition of qualified handicapped person set forth in 29 CFR 
1613.702(f), which is made applicable to this part by Sec. 606.640 of 
this rule.
    (h) Section 504 means section 504 of the Rehabilitation Act of 1973 
(Pub. L. 93-112, 87 Stat. 394 (29 U.S.C. 794)), as amended by the 
Rehabilitation Act Amendments of 1974 (Pub. L. 93-516, 88 Stat. 1617); 
the Rehabilitation, Comprehensive Services, and Developmental 
Disabilities Amendments of 1978 (Pub. L. 95-602, 92 Stat. 2955); and the 
Rehabilitation Act Amendments of 1986 (Pub. L. 99-506, 100 Stat. 1810).



Secs. 606.604-606.609  [Reserved]



Sec. 606.610  Self-evaluation.

    (a) The agency shall, within one year of the effective date of this 
part, evaluate its current policies and practices, and the effects 
thereof, that do not or may not meet the requirements of this part, and, 
to the extent modification of any such policies and practices is 
required, the agency shall proceed to make the necessary modifications.
    (b) The agency shall provide an opportunity to interested persons, 
including individuals with handicaps or organizations representing 
individuals with handicaps, to participate in the self-evaluation 
process by submitting comments (both oral and written).
    (c) The agency shall, for at least three years following completion 
of the evaluation required under paragraph (a) of this section, maintain 
on file and make available for public inspection:
    (1) A list of the interested persons who commented, with copies of 
comments received;
    (2) A description of areas examined and any problems identified; and
    (3) A description of any modifications made.



Sec. 606.611  Notice.

    The agency shall make available to employees, applicants, 
participants, beneficiaries, and other interested persons such 
information regarding the provisions of this part and its applicability 
to the programs or activities conducted by the agency, and make such 
information available to them in such manner as the agency head finds 
necessary to apprise such persons of the protections against 
discrimination assured them by section 504 and this regulation.

[[Page 27]]



Secs. 606.612-606.629  [Reserved]



Sec. 606.630  General prohibitions against discrimination.

    (a) No qualified individual with handicaps, on the basis of 
handicap, shall be excluded from participation in, be denied the 
benefits of, or otherwise be subjected to discrimination under any 
program or activity of the agency.
    (b)(1) The agency, in providing any aid, benefit, or service, may 
not, directly or through contractual or other arrangements, on the basis 
of handicap:
    (i) Deny a qualified individual with handicaps the oportunity to 
participate in or benefit from the activity, aid, benefit, or service;
    (ii) Afford a qualified individual with handicaps an opportunity to 
participate in or benefit from the aid, benefit, or service that is not 
equal to that afforded others;
    (iii) Provide a qualified individual with handicaps with an aid, 
benefit, or service that is not as effective in affording equal 
opportunity to obtain the same result, to gain the same benefit, or to 
reach the same level of achievement as that provided to others;
    (iv) Provide different or separate aid, benefits, or services to 
individuals with handicaps or to any class of individuals with handicaps 
than is provided to others unless such action is necessary to provide 
qualified individuals with handicaps with aid, benefits, or services 
that are as effective as those provided to others;
    (v) Deny a qualified individual with handicaps the opportunity to 
participate as a member of planning or advisory boards;
    (vi) Otherwise limit a qualified individual with handicaps in the 
enjoyment of any right, privilege, advantage, or opportunity enjoyed by 
others receiving the aid, benefit, or service.
    (2) The agency may not deny a qualified individual with handicaps 
the opportunity to participate in programs or activities that are not 
separate or different, despite the existence of permissibly separate or 
different programs or activities.
    (3) The agency may not, directly or through contractual or other 
arrangements, utilize criteria or methods of administration the purpose 
or effect of which would:
    (i) Subject qualified individuals with handicaps to discrimination 
on the basis of handicap; or
    (ii) Defeat or substantially impair accomplishment of the objectives 
of a program or activity with respect to individuals with handicaps.
    (4) The agency may not, in determining the site or location of a 
facility, make selections the purpose or effect of which would:
    (i) Exclude individuals with handicaps from, deny them the benefits 
of, or otherwise subject them to discrimination under any program or 
activity conducted by the agency; or
    (ii) Defeat or substantially impair the accomplishment of the 
objectives of a program or activity with respect to individuals with 
handicaps.
    (5) The agency, in the selection of procurement contractors, may not 
use criteria that subject qualified individuals with handicaps to 
discrimination on the basis of handicap.
    (c) The exclusion of nonhandicapped persons from the benefits of a 
program limited by Federal statute or Executive order to individuals 
with handicaps or the exclusion of a specific class of individuals with 
handicaps from a program limited by Federal statute or Executive order 
to a different class of individuals with handicaps is not prohibited by 
this part.
    (d) The agency shall administer programs and activities in the most 
integrated setting appropriate to the needs of qualified individuals 
with handicaps.



Secs. 606.631-606.639  [Reserved]



Sec. 606.640  Employment.

    No qualified individual with handicaps shall, on the basis of 
handicap, be subjected to discrimination in employment under any program 
or activity conducted by the agency. The definitions, requirements, and 
procedures of section 501 of the Rehabilitation Act of 1973 (29 U.S.C. 
791), as established by the Equal Employment Opportunity Commission in 
29 CFR part 1613, shall apply to employment in the agency.

[[Page 28]]



Secs. 606.641-606.648  [Reserved]



Sec. 606.649  Program accessibility: Discrimination prohibited.

    Except as otherwise provided in Sec. 606.650, no qualified 
individual with handicaps shall, because the agency's facilities are 
inaccessible to or unusable by individuals with handicaps, be denied the 
benefits of, be excluded from participation in, or otherwise be 
subjected to discrimination under any program or activity conducted by 
the agency.



Sec. 606.650  Program accessibility: Existing facilities.

    (a) General. The agency shall operate each program or activity so 
that the program or activity, when viewed in its entirety, is readily 
accessible to and usable by individuals with handicaps. This paragraph 
does not:
    (1) Necessarily require the agency to make each of its existing 
facilities accessible to and usable by individuals with handicaps;
    (2) Require the agency to take any action that it can demonstrate 
would result in a fundamental alteration in the nature of a program or 
activity or in undue financial and administrative burdens. In those 
circumstances where agency personnel believe that the proposed action 
would fundamentally alter the program or activity or would result in 
undue financial and administrative burdens, the agency has the burden of 
proving that compliance with paragraph (a) of this section would result 
in such alteration or burdens. The decision that compliance would result 
in such alteration or burdens must be made by the agency head or his or 
her designee after considering all agency resources available for use in 
the funding and operation of the conducted program or activity, and must 
be accompanied by a written statement of the reasons for reaching that 
conclusion. In preparing the report, the agency shall make reasonable 
efforts to ensure that the person(s) to be accommodated has an 
opportunity to provide relevant information. If an action would result 
in such an alteration or such burdens, the agency shall take any other 
action that would not result in such an alteration or such burdens but 
would nevertheless ensure that individuals with handicaps receive the 
benefits and services of the program or activity.
    (b) Methods. The agency may comply with the requirements of this 
section through such means as redesign of equipment, reassignment of 
services to accessible buildings, assignment of aides to beneficiaries, 
home visits, delivery of services at alternate accessible sites, 
alteration of existing facilities and construction of new facilities, or 
any other methods that result in making its programs or activities 
readily accessible to and usable by individuals with handicaps. The 
agency is not required to make structural changes in existing facilities 
where other methods are effective in achieving compliance with this 
section. The agency, in making alterations to existing buildings, shall 
meet accessibility requirements to the extent compelled by the 
Architectural Barriers Act of 1968, as amended (42 U.S.C. 4151 through 
4157), and any regulations implementing it. In choosing among available 
methods for meeting the requirements of this section, the agency shall 
give priority to those methods that offer programs and activities to 
qualified individuals with handicaps in the most integrated setting 
appropriate.
    (c) Time period for compliance. The agency shall comply with the 
obligations established under this section within sixty days of the 
effective date of this part except that where structural changes in 
facilities are undertaken, such changes shall be made within three years 
of the effective date of this part, but in any event as expeditiously as 
possible.
    (d) Transition plan. In the event that structural changes to 
facilities will be undertaken to achieve accessibility, the agency shall 
develop, within six months of the effective date of this part, a 
transition plan setting forth the steps necessary to complete such 
changes. The agency shall provide an opportunity to interested persons, 
including individuals with handicaps or organizations representing 
individuals with handicaps, to participate in the development of the 
transition plan by submitting comments (both oral and written). A copy 
of the transition plan

[[Page 29]]

shall be made available for public inspection. The plan shall, at a 
minimum:
    (1) Identify physical obstacles in the agency's facilities that 
limit the accessibility of its programs or activities to individuals 
with handicaps;
    (2) Describe in detail the methods that will be used to make the 
facilities accessible;
    (3) Specify the schedule for taking the steps necessary to achieve 
compliance with this section, and if the time period of the transition 
plan is longer than one year, identify steps that will be taken during 
each year of the transition period;
    (4) Indicate the official responsible for implementation of the 
plan; and
    (5) Identify the persons or groups who commented on the plan.



Sec. 606.651  Program accessibility: New construction and alterations.

    Each building or part of a building that is constructed or altered 
by, on behalf of, or for the use of the agency shall be designed, 
constructed, or altered so as to be readily accessible to and usable by 
individuals with handicaps. The definitions, requirements, and standards 
of the Architectural Barriers Act (42 U.S.C. 4151 through 4157), as 
established in 41 CFR 101-19.600 to 101-19.607, apply to buildings 
covered by this section.



Secs. 606.652-606.659  [Reserved]



Sec. 606.660  Communications.

    (a) The agency shall take appropriate steps to ensure effective 
communication with applicants, participants, personnel of other Federal 
entities, and members of the public.
    (1) The agency shall furnish appropriate auxiliary aids where 
necessary to afford an individual with handicaps an equal opportunity to 
participate in and enjoy the benefits of a program or activity conducted 
by the agency.
    (i) In determining what type of auxiliary aid is necessary, the 
agency shall give primary consideration to the requests of the 
individual with handicaps.
    (ii) The agency need not provide individually prescribed devices, 
readers for personal use or study, or other devices of a personal 
nature.
    (2) Where the agency communicates with applicants and beneficiaries 
by telephone, telecommunication devices for deaf persons (TDDs) or 
equally effective telecommunication systems shall be used.
    (b) The agency shall ensure that interested persons, including 
persons with impaired vision or hearing, can obtain information as to 
the existence and location of accessible services, activities, and 
facilities.
    (c) The agency shall provide signage at a primary entrance to each 
of its inaccessible facilities directing users to a location at which 
they can obtain information about accessible facilities. The 
international symbol for accessibility shall be used at each primary 
entrance of an accessible facility.
    (d) This section does not require the agency to take any action that 
it can demonstrate would result in a fundamental alteration in the 
nature of a program or activity or in undue financial and administrative 
burdens. In those circumstances where agency personnel believe that the 
proposed action would fundamentally alter the program or activity or 
would result in undue financial and administrative burdens, the agency 
has the burden of proving that compliance with this section would result 
in such alteration or burdens. The decision that compliance would result 
in such alteration or burdens must be made by the agency head or his or 
her designee after considering all agency resources available for use in 
the funding and operation of the conducted program or activity, and must 
be accompanied by a written statement of the reasons for reaching that 
conclusion. In preparing the report, the agency shall make reasonable 
efforts to ensure that the person(s) to be accommodated has an 
opportunity to provide relevant information. If an action required to 
comply with this section would result in such an alteration or such 
burdens, the agency shall take any other action that would not result in 
such an alteration or such burdens but would nevertheless ensure that, 
to the maximum extent possible, individuals with handicaps receive the

[[Page 30]]

benefits and services of the program or activity.



Secs. 606.661-606.669  [Reserved]



Sec. 606.670  Compliance procedures.

    (a) Except as provided in paragraph (b) of this section, this 
section applies to all allegations of discrimination on the basis of 
handicap in programs and activities conducted by the agency.
    (b) The agency shall process complaints alleging violations of 
section 504 with respect to employment according to the procedures 
established by the Equal Employment Opportunity Commission in 29 CFR 
part 1613 pursuant to section 501 of the Rehabilitation Act of 1973 (29 
U.S.C. 791).
    (c) Responsibility for implementation and operation of this section 
shall be vested in the Director, Office of Resources Management, Farm 
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
    (d) The agency shall accept and investigate all complete complaints 
for which it has jurisdiction. All complete complaints must be filed 
within 180 days of the alleged act of discrimination. The agency may 
extend this time period for good cause.
    (e) If the agency receives a complaint over which it does not have 
jurisdiction, it shall promptly notify the complainant and shall make 
reasonable efforts to refer the complaint to the appropriate Government 
entity.
    (f) The agency shall notify the Architectural and Transportation 
Barriers Compliance Board upon receipt of any complaint alleging that a 
building or facility that is subject to the Architectural Barriers Act 
of 1968, as amended (42 U.S.C. 4151 through 4157), is not readily 
accessible to and usable by individuals with handicaps.
    (g) Within 180 days of the receipt of a complete complaint for which 
it has jurisdiction, the agency shall notify the complainant of the 
results of the investigation in a letter containing:
    (1) Findings of fact and conclusions of law;
    (2) A description of a remedy for each violation found; and
    (3) A notice of the right to appeal.
    (h) Appeals of the findings of fact and conclusions of law or 
remedies must be filed by the complainant within 90 days of receipt from 
the agency of the letter required by this paragraph. The agency may 
extend this time for good cause.
    (i) Timely appeals shall be accepted and processed by the Equal 
Employment Opportunity Manager, or his/her designee, Farm Credit 
Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
    (j) The head of the agency shall notify the complainant of the 
results of the appeal within 60 days of the receipt of the request. If 
the head of the agency determines that additional information is needed 
from the complainant, he or she shall have 60 days from the date of 
receipt of the additional information to make his or her determination 
on the appeal.
    (k) The time limits cited in paragraphs (g) and (j) of this section 
may be extended with the permission of the Assistant Attorney General.
    (l) The agency may delegate its authority for conducting complaint 
investigations to other Federal agencies, except that the authority for 
making the final determination may not be delegated to another agency.

[53 FR 19889, June 1, 1988, as amended at 56 FR 2674, Jan. 24, 1991]



Secs. 606.671-606.999  [Reserved]



PART 607--ASSESSMENT AND APPORTIONMENT OF ADMINISTRATIVE EXPENSES--Table of Contents




Sec.
607.1  Purpose and scope.
607.2  Definitions.
607.3  Assessment of banks, associations, and designated other System 
          entities.
607.4  Assessment of other System entities.
607.5  Notice of assessment.
607.6  Payment of assessment.
607.7  Late-payment charges on assessments.
607.8  Reimbursements for services to non-System entities.
607.9  Reimbursable billings.
607.10  Adjustments for overpayment or underpayment of assessments.
607.11  Report of assessments and expenses.

    Authority: Secs. 5.15, 5.17 of the Farm Credit Act (12 U.S.C. 2250, 
2252) and 12 U.S.C. 3025.

    Source: 58 FR 10942, Feb. 23, 1993, unless otherwise noted.

[[Page 31]]



Sec. 607.1  Purpose and scope.

    The regulations in part 607 implement the provisions of section 5.15 
of the Farm Credit Act of 1971, 12 U.S.C. 2001 et seq. (Act) relating to 
Farm Credit Administration (FCA) assessments. The regulations prescribe 
the procedures for the equitable apportionment of FCA annual 
administrative expenses and necessary reserves among Farm Credit System 
(System) institutions. Pursuant to section 5.15(a) of the Act, the 
regulations also provide for the separate assessment of the FCA's costs 
of supervising and examining the Federal Agricultural Mortgage 
Corporation (FAMC). The regulations further provide for the 
reimbursement of expenses incurred in performing statutorily required 
examinations of non-System entities.



Sec. 607.2  Definitions.

    For the purpose of this part, the following definitions shall apply:
    (a) Assessment means the annual amount to be paid by each System 
institution to the Farm Credit Administration in accordance with section 
5.15 of the Act.
    (b) Average risk-adjusted asset base means the average of the risk-
adjusted asset base (as determined in accordance with Sec. 615.5210(f) 
of this chapter) of banks, associations, and designated other System 
entities, calculated as follows:
    (1) For banks, associations, and designated other System entities 
with four quarters of risk-adjusted assets as of June 30 of each year, 
the sum of the average daily risk-adjusted assets as of the last day of 
the quarter as reported on each quarterly Call Report Schedule RC-G to 
the FCA for the most recent four quarters immediately preceding each 
September 15, divided by four;
    (2) Except as provided in paragraphs (b)(3) and (b)(4) of this 
section, for banks, associations, and designated other System entities 
with less than four quarters of risk-adjusted assets as of June 30 of 
each year, the sum of the average daily risk-adjusted assets as of the 
last day of the quarter reported on each quarterly Call Report Schedule 
RC-G to the FCA for the quarters in which it was in existence 
immediately preceding September 15, divided by the number of quarters 
for which the Call Report Schedule RC-G was received;
    (3) For banks, associations, and designated other System entities 
that were formed through mergers, consolidations, or transfers of direct 
lending authority, and have less than four quarters of risk-adjusted 
assets as of June 30, the sum of the average daily risk-adjusted assets 
as of the last day of the quarter for the most recent four quarters 
immediately preceding September 15 as reported on each quarterly Call 
Report Schedule RC-G filed by the newly chartered institution and the 
institutions that were merged or consolidated or that received direct 
lending authority, divided by four;
    (4) For banks, associations, and designated other System entities 
chartered during the period July 1 through September 30 of each year 
that were not formed by the merger or consolidation of existing System 
institutions or the transfer of direct lending authority from another 
System institution, the total of the average daily risk-adjusted assets 
as of the last day of the quarter as reported on Call Report Schedule 
RC-G for the quarter ending September 30.
    (c) Composite Financial Institution Rating System (FIRS) rating 
means the composite numerical assessment of the financial condition of 
an institution assigned to the institution by the FCA based on its most 
recent examination of the institution. The FIRS factors are generally 
considered to be important indicators of an institution's financial 
health. Institutions are rated on each of the factors during an 
examination. The composite FIRS rating ranges from 1 to 5, with a lower 
number indicating a better financial condition than a higher number.
    (d) Delinquent amount means an amount owed to the FCA that has not 
been paid by the date specified in the FCA's Notice of Assessment or 
billing.
    (e) Designated other System entities means other System entities 
designated by the FCA in Sec. 607.3(c) to be assessed on the same basis 
as banks and associations under Sec. 607.3.
    (f) Direct expenses means the expenses of the FCA attributable to 
the performance of examinations.

[[Page 32]]

    (g) Indirect expenses means all FCA expenses that are not 
attributable to the performance of examinations.
    (h) Non-System entities means the National Consumer Cooperative 
Bank, the National Cooperative Bank Development Corporation, and any 
other entity that is required to be examined, supervised, or otherwise 
regulated by the FCA that is not a System institution.
    (i) Notice of Assessment means a written notice to each System 
institution showing the total amount assessed and owing, the fiscal year 
covered by the assessment, the amounts of installment payments, and the 
due dates for such payments. For banks, associations, and designated 
other System entities, the Notice of Assessment shall also include an 
individualized assessment table showing the assessment under 
Sec. 607.3(b)(2), where applicable.
    (j) Other System entities means any service corporation chartered 
under section 4.25 of the Act, the Farm Credit System Financial 
Assistance Corporation, FAMC, the Federal Farm Credit Banks Funding 
Corporation, the Farm Credit Finance Corporation of Puerto Rico, and any 
other entity statutorily designated as a System institution that is not 
a bank or association.
    (k) System institutions means banks, associations, and other System 
entities.

[58 FR 10942, Feb. 23, 1993, as amended at 59 FR 37403, July 22, 1994; 
63 FR 34268, June 24, 1998]



Sec. 607.3  Assessment of banks, associations, and designated other System entities.

    (a) Banks, associations, and other System entities designated in 
paragraph (c) of this section will be assessed annually pursuant to this 
section for funds to cover a portion of the FCA's administrative 
expenses and for such funds as may be required to maintain a necessary 
reserve. The total amount of the annual assessment of banks, 
associations, and designated other System entities shall be based on the 
FCA budget for each fiscal year plus such amount as may be required to 
maintain a necessary reserve, excluding amounts to be assessed against 
other System entities and reimbursements received from non-System 
entities.
    (b) The assessment shall be apportioned among the banks, 
associations, and designated other System entities as follows:
    (1) Thirty (30) percent of the assessment under this section shall 
be apportioned to each bank, association, and designated other System 
entity on the basis of each institution's pro rata share of the total 
average risk-adjusted asset base.
    (2) Seventy (70) percent of the assessment under this section shall 
be apportioned to each bank, association, and designated other System 
entity based upon the amounts of the institution's average risk-adjusted 
assets that fall within the graduated risk-adjusted asset tiers 
contained in the following table. An institution's total assessment 
under this paragraph is the sum of the amounts assessed for risk-
adjusted assets falling into each applicable tier, subject to adjustment 
for its FIRS rating as required in paragraphs (b)(2)(i) and (b)(2)(ii) 
of this section. The same assessment rate (designated as X1 
or a declining percentage of X1 in the following table) will 
be applied to each dollar value of risk-adjusted assets falling within 
each tier, increased where applicable, by the amounts prescribed in 
paragraphs (b)(2)(i) and (b)(2)(ii) of this section. The actual 
assessment rate under this paragraph shall be determined annually based 
on relative average risk-adjusted asset bases, the FIRS ratings of 
individual institutions, and the FCA budget as adjusted pursuant to 
paragraph (a) of this section, but the relationship between the rates 
applied to each tier shall remain constant as set forth in the following 
table.

------------------------------------------------------------------------
    Average risk-adjusted asset size range (in
                    millions)
--------------------------------------------------    Assessment rate
                Over                       To
------------------------------------------------------------------------
$0..................................          $25  X1
25..................................           50  .85X1
50..................................          100  .75X1
100.................................          500  .60X1
500.................................        1,000  .50X1
1,000...............................        7,000  .35X1
7,000...............................       10,000  .20X1
10,000..............................  ...........  .10X1
------------------------------------------------------------------------

    Example: XYZ association has a FIRS rating of 2 and average risk-
adjusted assets of

[[Page 33]]

$500.4 million. The value of X1 has been determined to be 
.000917, based on an FCA budget of $40.29 million.

X1=.000917 therefore $25,000,000 x .0917%.................   =   $22,925
.85X1=.000780 therefore $25,000,000 x .0780%..............   =    19,500
.75X1=.000688 therefore $50,000,000 x .0688%..............   =    34,400
.60X1=.000550 therefore $400,000,000 x .0550%.............   =   220,000
.50X1=.000458 therefore $400,000 x .0458%.................   =       183
                                                               ---------
    Total Assessment under Sec.  607.3(b)(2)..............   =   297,008
 

    (i) If the FCA assigns a bank, association, or designated other 
System entity a composite FIRS rating of 3 following its most recent 
examination of the institution prior to the date of assessment, the 
assessment provided for in paragraph (b)(2) of this section shall be 
increased by 20 percent.
    (ii) If the FCA assigns a bank, association, or designated other 
System entity a composite FIRS rating of 4 or 5 following its most 
recent examination of the institution prior to the date of assessment, 
the assessment provided for in paragraph (b)(2) of this section shall be 
increased by 40 percent.
    (iii) Banks, associations, and designated other System entities that 
were formed through mergers or consolidations and have not been examined 
before their initial assessment under this section shall be deemed to 
have a composite FIRS rating equivalent to the best composite FIRS 
rating assigned to the merged or consolidated institutions in the FCA's 
most recent examination of the individual institutions prior to the date 
of merger or consolidation. Newly chartered institutions not formed 
through mergers or consolidations that have not been examined before 
their initial assessment under this section shall be deemed to have a 
composite FIRS rating of 2.
    (3) Each bank, association, and designated other System entity shall 
pay a minimum assessment of $20,000 regardless of the result of the 
application of the assessment formula established by paragraphs (b)(1) 
and (b)(2) of this section. If such a minimum assessment is apportioned 
to an institution, that institution's average risk-adjusted asset base 
shall be deducted from the total average risk-adjusted asset base, and 
$20,000 shall be deducted from the total assessment amount for purposes 
of determining the assessments of banks, associations, and designated 
other System entities paying more than the $20,000 minimum assessment.
    (c) Other System entities designated to be assessed in accordance 
with this section are:
    The Farm Credit Services Leasing Corporation.
    (d) Assessments may be adjusted periodically to reflect:
    (1) Changes in the FCA budget and necessary reserve; and
    (2) Any overpayment or underpayment by a bank, association, or 
designated other System entity in the prior fiscal year.

[58 FR 10942, Feb. 23, 1993, as amended at 63 FR 34268, June 24, 1998]



Sec. 607.4  Assessment of other System entities.

    (a)(1) Unless otherwise designated to be assessed under Sec. 607.3, 
and with the exception of FAMC as provided in paragraph (b) of this 
section, other System entities will be assessed for estimated direct 
expenses plus an allocated portion of FCA indirect expenses and such 
amount as may be required to maintain a necessary reserve. The estimate 
for direct expenses shall take into account the direct expenses incurred 
in the most recent examination of the entity preceding each September 15 
and expected increases or decreases in examination work for the next 
fiscal year. A proportional amount of FCA indirect expenses will be 
allocated to each entity based on the estimated direct expenses related 
to the particular entity as a percentage of the total budgeted direct 
expenses of the agency (excluding direct expenses under paragraph (b) of 
this section) for the fiscal year covered by the assessment.
    (2) Assessments of other System entities under paragraph (a)(1) of 
this section may be adjusted periodically to reflect:
    (i) Changes in the FCA budget and necessary reserve; and
    (ii) Any overpayment or underpayment by such other System entity in 
the prior fiscal year.

[[Page 34]]

    (b) Assessment of Federal Agricultural Mortgage Corporation. The FCA 
shall assess FAMC for the estimated cost of FCA's regulation, 
supervision, and examination of FAMC, including reasonably related 
administrative and overhead expenses. FAMC's assessment may be adjusted 
periodically to reflect changes in the FCA budget and to reconcile 
differences between FAMC's assessment and FCA's actual expenditures for 
regulation of FAMC in the prior fiscal year.



Sec. 607.5  Notice of assessment.

    (a) Except as provided in paragraph (b) of this section, prior to 
September 15 of each year, the FCA shall determine the amount of 
assessment to be collected from each System institution for the next 
fiscal year under Secs. 607.3 and 607.4 and shall provide each System 
institution with a Notice of Assessment. The total amount assessed each 
System institution in the Notice of Assessment shall be an obligation of 
each institution on October 1 of each fiscal year. The total amount 
assessed each System institution shall be payable not less often than 
quarterly in equal installments during each fiscal year, subject to 
adjustment pursuant to Secs. 607.3(d), 607.4(a)(2), 607.4(b), and 
607.10.
    (b) For banks, associations and designated other System entities 
chartered during the period July 1 through September 30 of each year, 
the FCA shall, prior to December 15, determine the amount of assessment 
to be collected from each such institution for the remainder of the 
fiscal year and provide the institution with a Notice of Assessment. The 
total amount of the assessment becomes an obligation of the institution 
on January 1 and shall be payable in equal installments, subject to 
adjustment pursuant to Secs. 607.3(d) and 607.10, not less often than 
quarterly for the remainder of the fiscal year. The first installment 
shall be due on January 1. This paragraph shall not apply to banks, 
associations, and designated other System entities formed by merger, 
consolidation, or transfer of direct lending authority.
    (c) In the event of the proposed cancellation of the charter of a 
System institution, the unpaid installments of the total amount of the 
institution's assessment shall be provided for prior to the cancellation 
of the charter.



Sec. 607.6  Payment of assessment.

    (a) System institutions shall pay the amounts due as scheduled in 
the FCA Notice of Assessment. Payment shall be made by electronic funds 
transfer (EFT) for credit to the FCA's account in the Department of the 
Treasury, by check to the FCA for deposit, or by such other means as the 
FCA may authorize.
    (b) Payments made by EFT that are not received by the close of 
business on the due date shall be considered delinquent in accordance 
with Sec. 607.7.
    (c) Payments made by check that are not received by the FCA before 
the close of business on the third workday preceding the due date shall 
be considered delinquent in accordance with Sec. 607.7.



Sec. 607.7  Late-payment charges on assessments.

    (a) If any portion of a scheduled installment of a System 
institution's total assessment or the reimbursement billed to a non-
System entity is not paid by the due date, the overdue amount shall be 
considered delinquent.
    (b) Delinquent amounts shall be charged late-payment interest at the 
United States Treasury Department's current value of funds rate 
published in the Federal Register. Late payment interest shall be 
expressed as an annual rate of interest and shall accrue on a daily 
basis starting on the due date of the delinquent amount and continuing 
through the date payment is received by the FCA.
    (c) The FCA shall waive the collection of interest on the delinquent 
amounts if such amounts are paid within 30 days of the date interest 
begins to accrue. The FCA may waive interest due on delinquent amounts 
upon finding no fault with the performance of the remitter.
    (d) The FCA shall charge an amount necessary to cover the 
administrative costs incurred as a result of collection of any 
delinquent amount.
    (e) The FCA shall charge a penalty of 6 percent per annum on any 
portion of a delinquent amount that is more than

[[Page 35]]

90 days past due. Such penalty shall accrue from the date the amount 
became delinquent.



Sec. 607.8  Reimbursements for services to non-System entities.

    Non-System entities shall be assessed for direct expenses plus an 
amount for FCA indirect expenses reasonably related to the services 
rendered to the non-System entity. Such related indirect expenses shall 
be calculated as a percentage of the FCA's overall indirect expenses 
based on the extent of FCA activities with respect to the non-System 
entity during the period since the entity's most recent assessment.



Sec. 607.9  Reimbursable billings.

    The FCA shall bill the amounts due for services to non-System 
entities each year subsequent to the issuance of their respective 
Reports of Examination. Amounts billed are due in full within 30 days 
from the date billed. If the billed amount or any portion thereof 
remains unpaid at close of business on the due date, such amount or 
portion shall be considered delinquent in accordance with Sec. 607.7.



Sec. 607.10  Adjustments for overpayment or underpayment of assessments.

    Where adjustments for overpayment or underpayment of assessments are 
made pursuant to Secs. 607.3(d), 607.4(a)(2), and 607.4(b), credits for 
overpayments or charges for underpayments shall be based on FCA 
administrative operating expenses incurred in the applicable fiscal year 
and on funds required to be maintained pursuant to section 5.15 of the 
Act. Such credits or charges shall be applied to the next applicable 
assessment payment due during the current or subsequent fiscal year. 
Where such adjustments are made, the FCA shall provide the institution 
with a statement of adjustment at least 15 days prior to the date when 
the institution's next assessment payment is due. Adjustments in 
assessments shall be made in principal amount only. Overdue amounts 
under Sec. 607.7 are not underpayments for assessment adjustment 
purposes.



Sec. 607.11  Report of assessments and expenses.

    By January 15 of each calendar year, the FCA shall provide each 
assessed System institution with a report of assessments and expenses 
for the preceding fiscal year showing total assessments and other income 
received as applied to expenses incurred by major budget category and 
amounts set aside for a necessary reserve.



PART 608--COLLECTION OF CLAIMS OWED THE UNITED STATES--Table of Contents




             Subpart A--Administrative Collection of Claims

Sec.
608.801  Authority.
608.802  Applicability.
608.803  Definitions.
608.804  Delegation of authority.
608.805  Responsibility for collection.
608.806  Demand for payment.
608.807  Right to inspect and copy records.
608.808  Right to offer to repay claim.
608.809  Right to agency review.
608.810  Review procedures.
608.811  Special review.
608.812  Charges for interest, administrative costs, and penalties.
608.813  Contracting for collection services.
608.814  Reporting of credit information.
608.815  Credit report.

                    Subpart B--Administrative Offset

608.820  Applicability.
608.821  Collection by offset.
608.822  Notice requirements before offset.
608.823  Right to review of claim.
608.824  Waiver of procedural requirements.
608.825  Coordinating offset with other Federal agencies.
608.826  Stay of offset.
608.827  Offset against amounts payable from Civil Service Retirement 
          and Disability Fund.

                    Subpart C--Offset Against Salary

608.835  Purpose.
608.836  Applicability of regulations.
608.837  Definitions.
608.838  Waiver requests and claims to the General Accounting Office.
608.839  Procedures for salary offset.
608.840  Refunds.
608.841  Requesting current paying agency to offset salary.
608.842  Responsibility of the FCA as the paying agency.
608.843  Nonwaiver of rights by payments.


[[Page 36]]


    Authority: Sec. 5.17 of the Farm Credit Act; 12 U.S.C. 2252; 31 
U.S.C. 3701-3719; 5 U.S.C. 5514; 4 CFR parts 101-105; 5 CFR part 550.

    Source: 59 FR 13187, Mar. 21, 1994, unless otherwise noted.



             Subpart A--Administrative Collection of Claims



Sec. 608.801  Authority.

    The regulations of this part are issued under the Federal Claims 
Collection Act of 1966, as amended by the Debt Collection Act of 1982, 
31 U.S.C. 3701-3719 and 5 U.S.C. 5514, and in conformity with the joint 
regulations issued under that Act by the General Accounting Office and 
the Department of Justice (joint regulations) prescribing standards for 
administrative collection, compromise, suspension, and termination of 
agency collection actions, and referral to the General Accounting Office 
and to the Department of Justice for litigation of civil claims for 
money or property owed to the United States (4 CFR parts 101-105).



Sec. 608.802  Applicability.

    This part applies to all claims of indebtedness due and owing to the 
United States and collectible under procedures authorized by the Federal 
Claims Collection Act of 1966, as amended by the Debt Collection Act of 
1982. The joint regulations and this part do not apply to conduct in 
violation of antitrust laws, tax claims, claims between Federal 
agencies, or to any claim which appears to involve fraud, presentation 
of a false claim, or misrepresentation on the part of the debtor or any 
other party having an interest in the claim, unless the Justice 
Department authorizes the Farm Credit Administration, pursuant to 4 CFR 
101.3, to handle the claim in accordance with the provisions of 4 CFR 
parts 101-105. Additionally, this part does not apply to Farm Credit 
Administration assessments under part 607 of this chapter.



Sec. 608.803  Definitions.

    In this part (except where the term is defined elsewhere in this 
part), the following definitions shall apply:
    (a) Administrative offset or offset, as defined in 31 U.S.C. 
3701(a)(1), means withholding money payable by the United States 
Government to, or held by the Government for, a person to satisfy a debt 
the person owes the Government.
    (b) Agency means a department, agency, or instrumentality in the 
executive or legislative branch of the Government.
    (c) Claim or debt means money or property owed by a person or entity 
to an agency of the Federal Government. A ``claim'' or ``debt'' includes 
amounts due the Government from loans insured by or guaranteed by the 
United States and all other amounts due from fees, leases, rents, 
royalties, services, sales of real or personal property, overpayment, 
penalties, damages, interest, and fines.
    (d) Claim certification means a creditor agency's written request to 
a paying agency to effect an administrative offset.
    (e) Creditor agency means an agency to which a claim or debt is 
owed.
    (f) Debtor means the person or entity owing money to the Federal 
Government.
    (g) FCA means the Farm Credit Administration.
    (h) Hearing official means an individual who is responsible for 
reviewing a claim under Sec. 608.810 of this part.
    (i) Paying agency means an agency of the Federal Government owing 
money to a debtor against which an administrative or salary offset can 
be effected.
    (j) Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deductions at one or more officially established 
pay intervals from the current pay account of a debtor.



Sec. 608.804  Delegation of authority.

    The FCA official(s) designated by the Chairman of the Farm Credit 
Administration are authorized to perform all duties which the Chairman 
is authorized to perform under these regulations, the Federal Claims 
Collection Act of 1966, as amended, and the joint regulations issued 
under that Act.



Sec. 608.805  Responsibility for collection.

    (a) The collection of claims shall be aggressively pursued in 
accordance with the provisions of the Federal

[[Page 37]]

Claims Collection Act of 1966, as amended, the joint regulations issued 
under that Act, and these regulations. Debts owed to the United States, 
together with charges for interest, penalties, and administrative costs, 
should be collected in one lump sum unless otherwise provided by law. If 
a debtor requests installment payments, the debtor, as requested by the 
FCA, shall provide sufficient information to demonstrate that the debtor 
is unable to pay the debt in one lump sum. When appropriate, the FCA 
shall arrange an installment payment schedule. Claims which cannot be 
collected directly or by administrative offset shall be either written 
off as administratively uncollectible or referred to the General Counsel 
for further consideration.
    (b) The Chairman, or designee of the Chairman, may compromise claims 
for money or property arising out of the activities of the FCA, where 
the claim (exclusive of charges for interest, penalties, and 
administrative costs) does not exceed $100,000. When the claim exceeds 
$100,000 (exclusive of charges for interest, penalties, and 
administrative costs), the authority to accept a compromise rests solely 
with the Department of Justice. The standards governing the compromise 
of claims are set forth in 4 CFR part 103.
    (c) The Chairman, or designee of the Chairman, may suspend or 
terminate the collection of claims which do not exceed $100,000 
(exclusive of charges for interest, penalties, and administrative costs) 
after deducting the amount of any partial payments or collections. If, 
after deducting the amount of any partial payments or collections, a 
claim exceeds $100,000 (exclusive of charges for interest, penalties, 
and administrative costs), the authority to suspend or terminate rests 
solely with the Department of Justice. The standards governing the 
suspension or termination of claim collections are set forth in 4 CFR 
part 104.
    (d) The FCA shall refer claims to the Department of Justice for 
litigation or to the General Accounting Office (GAO) for claims arising 
from audit exceptions taken by the GAO to payments made by the FCA in 
accordance with 4 CFR part 105.



Sec. 608.806  Demand for payment.

    (a) A total of three progressively stronger written demands at not 
more than 30-day intervals should normally be made upon a debtor, unless 
a response or other information indicates that additional written 
demands would either be unnecessary or futile. When necessary to protect 
the Government's interest, written demands may be preceded by other 
appropriate actions under Federal law, including immediate referral for 
litigation and/or administrative offset.
    (b) The initial demand for payment shall be in writing and shall 
inform the debtor of the following:
    (1) The amount of the debt, the date it was incurred, and the facts 
upon which the determination of indebtedness was made;
    (2) The payment due date, which shall be 30 calendar days from the 
date of mailing or hand delivery of the initial demand for payment;
    (3) The right of the debtor to inspect and copy the records of the 
agency related to the claim or to receive copies if personal inspection 
is impractical. The debtor shall be informed that the debtor may be 
assessed for the cost of copying the documents in accordance with 
Sec. 608.807;
    (4) The right of the debtor to obtain a review of the FCA's 
determination of indebtedness;
    (5) The right of the debtor to offer to enter into a written 
agreement with the agency to repay the amount of the claim. The debtor 
shall be informed that the acceptance of such an agreement is 
discretionary with the agency;
    (6) That charges for interest, penalties, and administrative costs 
will be assessed against the debtor, in accordance with 31 U.S.C. 3717, 
if payment is not received by the payment due date;
    (7) That if the debtor has not entered into an agreement with the 
FCA to pay the debt, has not requested the FCA to review the debt, or 
has not paid the debt by the payment due date, the FCA intends to 
collect the debt by all legally available means, which may include 
initiating legal action against the debtor, referring the debt to a 
collection agency for collection, collecting the debt by offset, or 
asking

[[Page 38]]

other Federal agencies for assistance in collecting the debt by offset;
    (8) The name and address of the FCA official to whom the debtor 
shall send all correspondence relating to the debt; and
    (9) Other information, as may be appropriate.
    (c) If, prior to, during, or after completion of the demand cycle, 
the FCA determines to collect the debt by either administrative or 
salary offset, the FCA shall follow, as applicable, the requirements for 
a Notice of Intent to Collect by Administrative Offset or a Notice of 
Intent to Collect by Salary Offset set forth in Sec. 608.822.
    (d) If no response to the initial demand for payment is received by 
the payment due date, the FCA shall take further action under this part, 
under the Federal Claims Collection Act of 1966, as amended, under the 
joint regulations (4 CFR parts 101-105), or under any other applicable 
State or Federal law. These actions may include reports to credit 
bureaus, referrals to collection agencies, termination of contracts, 
debarment, and salary or administrative offset.



Sec. 608.807  Right to inspect and copy records.

    The debtor may inspect and copy the FCA records related to the 
claim. The debtor shall give the FCA reasonable advance notice that it 
intends to inspect and copy the records involved. The debtor shall pay 
copying costs unless they are waived by the FCA. Copying costs shall be 
assessed pursuant to Sec. 602.267 of this chapter.



Sec. 608.808  Right to offer to repay claim.

    (a) The debtor may offer to enter into a written agreement with the 
FCA to repay the amount of the claim. The acceptance of such an offer 
and the decision to enter into such a written agreement is at the 
discretion of the FCA.
    (b) If the debtor requests a repayment arrangement because payment 
of the amount due would create a financial hardship, the FCA shall 
analyze the debtor's financial condition. The FCA may enter into a 
written agreement with the debtor permitting the debtor to repay the 
debt in installments if the FCA determines, in its sole discretion, that 
payment of the amount due would create an undue financial hardship for 
the debtor. The written agreement shall set forth the amount and 
frequency of installment payments and shall, in accordance with 
Sec. 608.812, provide for the imposition of charges for interest, 
penalties, and administrative costs unless waived by the FCA.
    (c) The written agreement may require the debtor to execute a 
confess-judgment note when the total amount of the deferred installments 
will exceed $750. The FCA shall provide the debtor with a written 
explanation of the consequences of signing a confess-judgment note. The 
debtor shall sign a statement acknowledging receipt of the written 
explanation. The statement shall recite that the written explanation was 
read and understood before execution of the note and that the debtor 
signed the note knowingly and voluntarily. Documentation of these 
procedures will be maintained in the FCA's file on the debtor.



Sec. 608.809  Right to agency review.

    (a) If the debtor disputes the claim, the debtor may request a 
review of the FCA's determination of the existence of the debt or of the 
amount of the debt. If only part of the claim is disputed, the 
undisputed portion should be paid by the payment due date.
    (b) To obtain a review, the debtor shall submit a written request 
for review to the FCA official named in the initial demand letter, 
within 15 calendar days after receipt of the letter. The debtor's 
request for review shall state the basis on which the claim is disputed.
    (c) The FCA shall promptly notify the debtor, in writing, that the 
FCA has received the request for review. The FCA shall conduct its 
review of the claim in accordance with Sec. 608.810.
    (d) Upon completion of its review of the claim, the FCA shall notify 
the debtor whether the FCA's determination of the existence or amount of 
the debt has been sustained, amended, or canceled. The notification 
shall include a copy of the written decision issued by the hearing 
official pursuant to Sec. 608.810(e). If the FCA's determination is 
sustained, this notification shall

[[Page 39]]

contain a provision which states that the FCA intends to collect the 
debt by all legally available means, which may include initiating legal 
action against the debtor, referring the debt to a collection agency for 
collection, collecting the debt by offset, or asking other Federal 
agencies for assistance in collecting the debt by offset.



Sec. 608.810  Review procedures.

    (a) Unless an oral hearing is required by Sec. 608.823(d), the FCA's 
review shall be a review of the written record of the claim.
    (b) If an oral hearing is required under Sec. 608.823(d), the FCA 
shall provide the debtor with a reasonable opportunity for such a 
hearing. The oral hearing, however, shall not be an adversarial 
adjudication and need not take the form of a formal evidentiary hearing. 
All significant matters discussed at the hearing, however, will be 
carefully documented.
    (c) Any review required by this part, whether a review of the 
written record or an oral hearing, shall be conducted by a hearing 
official. In the case of a salary offset, the hearing official shall not 
be under the supervision or control of the Chairman of the Farm Credit 
Administration.
    (d) The FCA may be represented by legal counsel. The debtor may 
represent himself or herself or may be represented by an individual of 
the debtor's choice and at the debtor's expense.
    (e) The hearing official shall issue a final written decision based 
on documentary evidence and, if applicable, information developed at an 
oral hearing. The written decision shall be issued as soon as 
practicable after the review but not later than 60 days after the date 
on which the request for review was received by the FCA, unless the 
debtor requests a delay in the proceedings. A delay in the proceedings 
shall be granted if the hearing official determines, in his or her sole 
discretion, that there is good cause to grant the delay. If a delay is 
granted, the 60-day decision period shall be extended by the number of 
days by which the review was postponed.
    (f) Upon issuance of the written opinion, the FCA shall promptly 
notify the debtor of the hearing official's decision. Said notification 
shall include a copy of the written decision issued by the hearing 
official pursuant to paragraph (e) of this section.



Sec. 608.811  Special review.

    (a) An employee subject to salary offset, under subpart C of this 
part, or a voluntary repayment agreement, may, at any time, request a 
special review by the FCA of the amount of the salary offset or 
voluntary repayment, based on materially changed circumstances such as, 
but not limited to, catastrophic illness, divorce, death, or disability.
    (b) To determine whether an offset would prevent the employee from 
meeting essential subsistence expenses (costs incurred for food, 
housing, clothing, transportation, and medical care), the employee shall 
submit a detailed statement and supporting documents for the employee, 
his or her spouse, and dependents indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Expenses for food, housing, clothing, and transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) If the employee requests a special review under this section, 
the employee shall file an alternative proposed offset or payment 
schedule and a statement, with supporting documents, showing why the 
current salary offset or payments result in an extreme financial 
hardship to the employee.
    (d) The FCA shall evaluate the statement and supporting documents, 
and determine whether the original offset or repayment schedule imposes 
an undue financial hardship on the employee. The FCA shall notify the 
employee in writing of such determination, including, if appropriate, a 
revised offset or payment schedule.



Sec. 608.812  Charges for interest, administrative costs, and penalties.

    (a) Except as provided in paragraph (d) of this section, the FCA 
shall:
    (1) Assess interest on unpaid claims;
    (2) Assess administrative costs incurred in processing and handling 
overdue claims; and

[[Page 40]]

    (3) Assess penalty charges not to exceed 6 percent a year on any 
part of a debt more than 90 days past due. The imposition of charges for 
interest, administrative costs, and penalties shall be made in 
accordance with 31 U.S.C. 3717.
    (b)(1) Interest shall accrue from the date of mailing or hand 
delivery of the initial demand for payment or the Notice of Intent to 
Collect by either Administrative or Salary Offset if the amount of the 
claim is not paid within 30 days from the date of mailing or hand 
delivery of the initial demand or notice.
    (2) The 30-day period may be extended on a case-by-case basis if the 
FCA reasonably determines that such action is appropriate. Interest 
shall only accrue on the principal of the claim and the interest rate 
shall remain fixed for the duration of the indebtedness, except, as 
provided in paragraph (c) of this section, in cases where a debtor has 
defaulted on a repayment agreement and seeks to enter into a new 
agreement, or if the FCA reasonably determines that a higher rate is 
necessary to protect the interests of the United States.
    (c) If a debtor defaults on a repayment agreement and seeks to enter 
into a new agreement, the FCA may assess a new interest rate on the 
unpaid claim. In addition, charges for interest, administrative costs, 
and penalties which accrued but were not collected under the original 
repayment agreement shall be added to the principal of the claim to be 
paid under the new repayment agreement. Interest shall accrue on the 
entire principal balance of the claim, as adjusted to reflect any 
increase resulting from the addition of these charges.
    (d) The FCA may waive charges for interest, administrative costs, 
and/or penalties if it determines that:
    (1) The debtor is unable to pay any significant sum toward the claim 
within a reasonable period of time;
    (2) Collection of charges for interest, administrative costs, and/or 
penalties would jeopardize collection of the principal of the claim;
    (3) Collection of charges for interest, administrative costs, or 
penalties would be against equity and good conscience; or
    (4) It is otherwise in the best interest of the United States, 
including the situation where an installment payment agreement or offset 
is in effect.



Sec. 608.813  Contracting for collection services.

    The Chairman, or designee of the Chairman, may contract for 
collection services in accordance with 31 U.S.C. 3718 and 4 CFR 102.6 to 
recover debts.



Sec. 608.814  Reporting of credit information.

    The Chairman, or designee of the Chairman, may disclose to a 
consumer reporting agency information that an individual is responsible 
for a debt owed to the United States. Information will be disclosed to 
reporting agencies in accordance with the terms and conditions of 
agreements entered into between the FCA and the reporting agencies. The 
terms and conditions of such agreements shall specify that all of the 
rights and protection afforded to the debtor under 31 U.S.C. 3711(f) 
have been fulfilled. The FCA shall notify each consumer reporting 
agency, to which a claim was disclosed, when the debt has been 
satisfied.



Sec. 608.815  Credit report.

    In order to aid the FCA in making appropriate determinations 
regarding the collection and compromise of claims; the collection of 
charges for interest, administrative costs, and penalties; the use of 
administrative offset; the use of other collection methods; and the 
likelihood of collecting the claim, the FCA may institute, consistent 
with the provisions of the Fair Credit Reporting Act (15 U.S.C. 1681, et 
seq.), a credit investigation of the debtor immediately following a 
determination that the claim exists.



                    Subpart B--Administrative Offset



Sec. 608.820  Applicability.

    (a) The provisions of this subpart shall apply to the collection of 
debts by administrative [or salary] offset under 31 U.S.C. 3716, 5 
U.S.C. 5514, or other statutory or common law.

[[Page 41]]

    (b) Offset shall not be used to collect a debt more than 10 years 
after the Government's right to collect the debt first accrued, unless 
facts material to the Government's right to collect the debt were not 
known and could not reasonably have been known by the official or 
officials of the Government who were charged with the responsibility of 
discovering and collecting such debt.
    (c) Offset shall not be used with respect to:
    (1) Debts owed by other agencies of the United States or by any 
State or local government;
    (2) Debts arising under or payments made under the Social Security 
Act, the Internal Revenue Code of 1986, as amended, or tariff laws of 
the United States; or
    (3) Any case in which collection by offset of the type of debt 
involved is explicitly provided for or prohibited by another statute.
    (d) Unless otherwise provided by contract or law, debts or payments 
which are not subject to offset under 31 U.S.C. 3716 or 5 U.S.C. 5514 
may be collected by offset if such collection is authorized under common 
law or other applicable statutory authority.



Sec. 608.821  Collection by offset.

    (a) Collection of a debt by administrative [or salary] offset shall 
be accomplished in accordance with the provisions of these regulations, 
of 4 CFR 102.3, and 5 CFR part 550, subpart K. It is not necessary for 
the debt to be reduced to judgment or to be undisputed for offset to be 
used.
    (b) The Chairman, or designee of the Chairman, may determine that it 
is feasible to collect a debt to the United States by offset against 
funds payable to the debtor.
    (c) The feasibility of collecting a debt by offset will be 
determined on a case-by-case basis. This determination shall be made by 
considering all relevant factors, including the following:
    (1) The degree to which the offset can be accomplished in accordance 
with law. This determination should take into consideration relevant 
statutory, regulatory, and contractual requirements;
    (2) The degree to which the FCA is certain that its determination of 
the existence and amount of the debt is correct;
    (3) The practicality of collecting the debt by offset. The cost, in 
time and money, of collecting the debt by offset and the amount of money 
which can reasonably be expected to be recovered through offset will be 
relevant to this determination; and
    (4) Whether the use of offset will substantially interfere with or 
defeat the purpose of a program authorizing payments against which the 
offset is contemplated. For example, under a grant program in which 
payments are made in advance of the grantee's performance, the 
imposition of offset against such a payment may be inappropriate.
    (d) The collection of a debt by offset may not be feasible when 
there are circumstances which would indicate that the likelihood of 
collection by offset is less than probable.
    (e) The offset will be effected 31 days after the debtor receives a 
Notice of Intent to Collect by Administrative Offset (or Notice of 
Intent to Collect by Salary Offset if the offset is a salary offset), or 
upon the expiration of a stay of offset, unless the FCA determines under 
Sec. 608.824 that immediate action is necessary.
    (f) If the debtor owes more than one debt, amounts recovered through 
offset may be applied to them in any order. Applicable statutes of 
limitation would be considered before applying the amounts recovered to 
any debts owed.



Sec. 608.822  Notice requirements before offset.

    (a) Except as provided in Sec. 608.824, the FCA will provide the 
debtor with 30 calendar days' written notice that unpaid debt amounts 
shall be collected by administrative [or salary] offset (Notice of 
Intent to Collect by Administrative [or Salary] Offset) before the FCA 
imposes offset against any money that is to be paid to the debtor.
    (b) The Notice of Intent to Collect by Administrative [or Salary] 
Offset shall be delivered to the debtor by hand or by mail and shall 
provide the following information:
    (1) The amount of the debt, the date it was incurred, and the facts 
upon which the determination of indebtedness was made;

[[Page 42]]

    (2) In the case of an administrative offset, the payment due date, 
which shall be 30 calendar days from the date of mailing or hand 
delivery of the Notice;
    (3) In the case of a salary offset: (i) The FCA's intention to 
collect the debt by means of deduction from the employee's current 
disposable pay account until the debt and all accumulated interest is 
paid in full; and
    (ii) The amount, frequency, proposed beginning date, and duration of 
the intended deductions;
    (4) The right of the debtor to inspect and copy the records of the 
FCA related to the claim or to receive copies if personal inspection is 
impractical. The debtor shall be informed that the debtor shall be 
assessed for the cost of copying the documents in accordance with 
Sec. 608.807;
    (5) The right of the debtor to obtain a review of, and to request a 
hearing, on the FCA's determination of indebtedness, the propriety of 
collecting the debt by offset, and, in the case of salary offset, the 
propriety of the proposed repayment schedule (i.e., the percentage of 
disposable pay to be deducted each pay period). The debtor shall be 
informed that to obtain a review, the debtor shall deliver a written 
request for a review to the FCA official named in the Notice, within 15 
calendar days after the debtor's receipt of the Notice. In the case of a 
salary offset, the debtor shall also be informed that the review shall 
be conducted by an official arranged for by the FCA who shall be a 
hearing official not under the control of the Chairman of the Farm 
Credit Administration, or an administrative law judge;
    (6) That the filing of a petition for hearing within 15 calendar 
days after receipt of the Notice will stay the commencement of 
collection proceedings;
    (7) That a final decision on the hearing (if one is requested) will 
be issued at the earliest practical date, but not later than 60 days 
after the filing of the written request for review unless the employee 
requests, and the hearing official grants, a delay in the proceedings;
    (8) The right of the debtor to offer to enter into a written 
agreement with the FCA to repay the amount of the claim. The debtor 
shall be informed that the acceptance of such an agreement is 
discretionary with the FCA;
    (9) That charges for interest, penalties, and administrative costs 
shall be assessed against the debtor, in accordance with 31 U.S.C. 3717, 
if payment is not received by the payment due date. The debtor shall be 
informed that such assessments must be made unless excused in accordance 
with the Federal Claims Collection Standards (4 CFR parts 103 and 104);
    (10) The amount of accrued interest and the amount of any other 
penalties or administrative costs which may have been added to the 
principal debt;
    (11) That if the debtor has not entered into an agreement with the 
FCA to pay the debt, has not requested the FCA to review the debt, or 
has not paid the debt prior to the date on which the offset is to be 
imposed, the FCA intends to collect the debt by administrative [or 
salary] offset or by requesting other Federal agencies for assistance in 
collecting the debt by offset. The debtor shall be informed that the 
offset shall be imposed against any funds that might become available to 
the debtor, until the principal debt and all accumulated interest and 
other charges are paid in full;
    (12) The date on which the offset will be imposed, which shall be 31 
calendar days from the date of mailing or hand delivery of the Notice. 
The debtor shall be informed that the FCA reserves the right to impose 
an offset prior to this date if the FCA determines that immediate action 
is necessary;
    (13) That any knowingly false or frivolous statements, 
representations, or evidence may subject the debtor to:
    (i) Penalties under the False Claims Act, sections 3729 through 3731 
of title 31, United States Code, or any other applicable statutory 
authority;
    (ii) Criminal penalties under sections 286, 287, 1001, and 1002 of 
title 18, United States Code, or any other applicable statutory 
authority; and, with regard to employees,
    (iii) Disciplinary procedures appropriate under chapter 75 of title 
5, United States Code; part 752 of title 5, Code of Federal Regulations, 
or any other applicable statute or regulation;

[[Page 43]]

    (14) The name and address of the FCA official to whom the debtor 
shall send all correspondence relating to the debt or the offset;
    (15) Any other rights and remedies available to the debtor under 
statutes or regulations governing the program for which the collection 
is being made;
    (16) That unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted for the debt, 
which are later waived or found not owed to the United States, will be 
promptly refunded to the employee; and
    (17) Other information, as may be appropriate.
    (c) When the procedural requirements of this section have been 
provided to the debtor in connection with the same debt or under some 
other statutory or regulatory authority, the FCA is not required to 
duplicate those requirements before effecting offset.



Sec. 608.823  Right to review of claim.

    (a) If the debtor disputes the claim, the debtor may request a 
review of the FCA's determination of the existence of the debt, the 
amount of the debt, the propriety of collecting the debt by offset, and 
in the case of salary offset, the propriety of the proposed repayment 
schedule. If only part of the claim is disputed, the undisputed portion 
should be paid by the payment due date.
    (b) To obtain a review, the debtor shall submit a written request 
for review to the FCA official named in the Notice of Intent to Collect 
by Administrative [or Salary] Offset within 15 calendar days after 
receipt of the notice. The debtor's written request for review shall 
state the basis on which the claim is disputed and shall specify whether 
the debtor requests an oral hearing or a review of the written record of 
the claim. If an oral hearing is requested, the debtor shall explain in 
the request why the matter cannot be resolved by a review of the 
documentary evidence alone.
    (c) The FCA shall promptly notify the debtor, in writing, that the 
FCA has received the request for review. The FCA shall conduct its 
review of the claim in accordance with Sec. 608.810.
    (d) The FCA's review of the claim, under this section, shall include 
providing the debtor with a reasonable opportunity for an oral hearing 
if:
    (1) An applicable statute authorizes or requires the FCA to consider 
waiver of the indebtedness, the debtor requests waiver of the 
indebtedness, and the waiver determination turns on an issue of 
credibility or veracity; or
    (2) The debtor requests reconsideration of the debt and the FCA 
determines that the question of the indebtedness cannot be resolved by 
reviewing the documentary evidence; for example, when the validity of 
the debt turns on an issue of credibility or veracity.
    (e) A debtor waives the right to a hearing and will have his or her 
debt offset in accordance with the proposed offset schedule if the 
debtor:
    (1) Fails to file a written request for review within the timeframe 
set forth in paragraph (b) of this section, unless the FCA determines 
that the delay was the result of circumstances beyond his or her 
control; or
    (2) Fails to appear at an oral hearing of which he or she was 
notified unless the hearing official determines that the failure to 
appear was due to circumstances beyond the employee's control.
    (f) Upon completion of its review of the claim, the FCA shall notify 
the debtor whether the FCA's determination of the existence or amount of 
the debt has been sustained, amended, or canceled. The notification 
shall include a copy of the written decision issued by the hearing 
official, pursuant to Sec. 608.810(e). If the FCA's determination is 
sustained, this notification shall contain a provision which states that 
the FCA intends to collect the debt by offset or by requesting other 
Federal agencies for assistance in collecting the debt.
    (g) When the procedural requirements of this section have been 
provided to the debtor in connection with the same debt or under some 
other statutory or regulatory authority, the FCA is not required to 
duplicate those requirements before effecting offset.

[[Page 44]]



Sec. 608.824  Waiver of procedural requirements.

    (a) The FCA may impose offset against a payment to be made to a 
debtor prior to the completion of the procedures required by this part, 
if:
    (1) Failure to impose the offset would substantially prejudice the 
Government's ability to collect the debt; and
    (2) The timing of the payment against which the offset will be 
imposed does not reasonably permit the completion of those procedures.
    (b) The procedures required by this part shall be complied with 
promptly after the offset is imposed. Amounts recovered by offset, which 
are later found not to be owed to the Government, shall be promptly 
refunded to the debtor.



Sec. 608.825  Coordinating offset with other Federal agencies.

    (a)(1) Any creditor agency which requests the FCA to impose an 
offset against amounts owed to the debtor shall submit to the FCA a 
claim certification which meets the requirements of this paragraph. The 
FCA shall submit the same certification to any agency that the FCA 
requests to effect an offset.
    (2) The claim certification shall be in writing. It shall certify 
the debtor owes the debt and that all of the applicable requirements of 
31 U.S.C. 3716 and 4 CFR part 102 have been met. If the intended offset 
is to be a salary offset, a claim certification shall instead certify 
that the debtor owes the debt and that the applicable requirements of 5 
U.S.C. 5514 and 5 CFR part 550, subpart K, have been met.
    (3) A certification that the debtor owes the debt shall state the 
amount of the debt, the factual basis supporting the determination of 
indebtedness, and the date on which payment of the debt was due. A 
certification that the requirements of 31 U.S.C. 3716 and 4 CFR part 102 
have been met shall include a statement that the debtor has been sent a 
notice of Intent to Collect by Administrative Offset at least 31 
calendar days prior to the date of the intended offset or a statement 
that pursuant to 4 CFR 102.3(b)(5) said Notice was not required to be 
sent. A certification that the requirements of 5 U.S.C. 5514 and 5 CFR 
part 550, subpart K, have been met shall include a statement that the 
debtor has been sent a Notice of Intent to Collect by Salary Offset at 
least 31 calendar days prior to the date of the intended offset or a 
statement that pursuant to 4 CFR 102.3(b)(5) said Notice was not 
required to be sent.
    (b)(1) The FCA shall not effect an offset requested by another 
Federal agency without first obtaining the claim certification required 
by paragraph (a) of this section. If the FCA receives an incomplete 
claim certification, the FCA shall return the claim certification with 
notice that a claim certification which complies with the requirements 
of paragraph (a) of this section must be submitted to the FCA before the 
FCA will consider effecting an offset.
    (2) The FCA may rely on the information contained in the claim 
certification provided by a requesting creditor agency. The FCA is not 
authorized to review a creditor agency's determination of indebtedness.
    (c) Only the creditor agency may agree to enter into an agreement 
with the debtor for the repayment of the claim. Only the creditor agency 
may agree to compromise, suspend, or terminate collection of the claim.
    (d) The FCA may decline, for good cause, a request by another agency 
to effect an offset. Good cause includes that the offset might disrupt, 
directly or indirectly, essential FCA operations. The refusal and the 
reasons shall be sent in writing to the creditor agency.



Sec. 608.826  Stay of offset.

    (a)(1) When a creditor agency receives a debtor's request for 
inspection of agency records, the offset is stayed for 10 calendar days 
beyond the date set for the record inspection.
    (2) When a creditor agency receives a debtor's offer to enter into a 
repayment agreement, the offset is stayed until the debtor is notified 
as to whether the proposed agreement is acceptable.
    (3) When a review is conducted, the offset is stayed until the 
creditor agency issues a final written decision.

[[Page 45]]

    (b) When offset is stayed, the amount of the debt and the amount of 
any accrued interest or other charges will be withheld from payments to 
the debtor. The withheld amounts shall not be applied against the debt 
until the stay expires. If withheld funds are later determined not to be 
subject to offset, they will be promptly refunded to the debtor.
    (c) If the FCA is the creditor agency and the offset is stayed, the 
FCA will immediately notify an offsetting agency to withhold the payment 
pending termination of the stay.



Sec. 608.827  Offset against amounts payable from Civil Service Retirement and Disability Fund.

    The FCA may request that monies payable to a debtor from the Civil 
Service Retirement and Disability Fund be administratively offset to 
collect debts owed to the FCA by the debtor. The FCA must certify that 
the debtor owes the debt, the amount of the debt, and that the FCA has 
complied with the requirements set forth in this part, 4 CFR 102.3, and 
the Office of Personnel Management regulations. The request shall be 
submitted to the official designated in the Office of Personnel 
Management regulations to receive the request.



                    Subpart C--Offset Against Salary



Sec. 608.835  Purpose.

    The purpose of this subpart is to implement section 5 of the Debt 
Collection Act of 1982 (Pub. L. 97-365)(5 U.S.C. 5514), which authorizes 
the collection of debts owed by Federal employees to the Federal 
Government by means of salary offsets. These regulations provide 
procedures for the collection of a debt owed to the Government by the 
imposition of a salary offset against amounts payable to a Federal 
employee as salary. These regulations are consistent with the 
regulations on salary offset published by the Office of Personnel 
Management, codified in 5 CFR part 550, subpart K. Since salary offset 
is a type of administrative offset, this subpart supplements subpart B.



Sec. 608.836  Applicability of regulations.

    (a) These regulations apply to the following cases:
    (1) Where the FCA is owed a debt by an individual currently employed 
by another agency;
    (2) Where the FCA is owed a debt by an individual who is currently 
employed by the FCA; or
    (3) Where the FCA currently employs an individual who owes a debt to 
another Federal agency. Upon receipt of proper certification from the 
creditor agency, the FCA will offset the debtor-employee's salary in 
accordance with these regulations.
    (b) These regulations do not apply to the following:
    (1) Debts or claims rising under the Internal Revenue Code of 1986, 
as amended (26 U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301 
et seq.); the tariff laws of the United States; or to any case where 
collection of a debt by salary offset is explicitly provided for or 
prohibited by another statute (e.g., travel advances in 5 U.S.C. 5705 
and employee training expenses in 5 U.S.C. 4108).
    (2) Any adjustment to pay arising from an employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay if the amount to be recovered was 
accumulated over four pay periods or less.
    (3) A claim which has been outstanding for more than 10 years after 
the creditor agency's right to collect the debt first accrued, unless 
facts material to the Government's right to collect were not known and 
could not reasonably have been known by the official or officials 
charged with the responsibility for discovery and collection of such 
debts.



Sec. 608.837  Definitions.

    In this subpart, the following definitions shall apply:
    (a) Agency means:
    (1) An executive agency as defined by 5 U.S.C. 105, including the 
United States Postal Service and the United States Postal Rate 
Commission;
    (2) A military department as defined in 5 U.S.C. 102;
    (3) An agency or court of the judicial branch, including a court as 
defined in

[[Page 46]]

28 U.S.C. 610, the District Court for the Northern Mariana Islands, and 
the Judicial Panel on Multi-district Litigation;
    (4) An agency of the legislative branch, including the United States 
Senate and the United States House of Representatives; or
    (5) Other independent establishments that are entities of the 
Federal Government.
    (b) Disposable pay means, for an officially established pay 
interval, that part of current basic pay, special pay, incentive pay, 
retired pay, retainer pay, or, in the case of an employee not entitled 
to basic pay, other authorized pay, remaining after the deduction of any 
amount required by law to be withheld. The FCA shall allow the 
deductions described in 5 CFR 581.105 (b) through (f).
    (c) Employee means a current employee of the FCA or other agency, 
including a current member of the Armed Forces or Reserve of the Armed 
Forces of the United States.
    (d) Waiver means the cancellation, remission, forgiveness, or 
nonrecovery of a debt allegedly owed by an employee to the FCA or 
another agency as permitted or required by 5 U.S.C. 5584 or 8346(b), 10 
U.S.C. 2774, 32 U.S.C. 716, or any other law.



Sec. 608.838  Waiver requests and claims to the General Accounting Office.

    (a) The regulations contained in this subpart do not preclude an 
employee from requesting a waiver of an overpayment under 5 U.S.C. 5584 
or 8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or in any way questioning the 
amount or validity of a debt by submitting a subsequent claim to the 
General Accounting Office in accordance with the procedures prescribed 
by the General Accounting Office.
    (b) These regulations also do not preclude an employee from 
requesting a waiver pursuant to other statutory provisions pertaining to 
the particular debts being collected.



Sec. 608.839  Procedures for salary offset.

    (a) The Chairman, or designee of the Chairman, shall determine the 
amount of an employee's disposable pay and the amount to be deducted 
from the employee's disposable pay at regular pay intervals.
    (b) Deductions shall begin within three official pay periods 
following the date of mailing or delivery of the Notice of Intent to 
Collect by Salary Offset.
    (c)(1) If the amount of the debt is equal to or is less than 15 
percent of the employee's disposable pay, such debt should be collected 
in one lump-sum deduction.
    (2) If the amount of the debt is not collected in one lump-sum 
deduction, the debt shall be collected in installment deductions over a 
period of time not greater than the anticipated period of employment. 
The size and frequency of installment deductions will bear a reasonable 
relation to the size of the debt and the employee's ability to pay. 
However, the amount deducted from any pay period will not exceed 15 
percent of the employee's disposable pay for that period, unless the 
employee has agreed in writing to the deduction of a greater amount.
    (3) A deduction exceeding the 15-percent disposable pay limitation 
may be made from any final salary payment pursuant to 31 U.S.C. 3716 in 
order to liquidate the debt, whether the employee is being separated 
voluntarily or involuntarily.
    (4) Whenever an employee subject to salary offset is separated from 
the FCA and the balance of the debt cannot be liquidated by offset of 
the final salary check pursuant to 31 U.S.C. 3716, the FCA may offset 
any later payments of any kind against the balance of the debt.
    (d) In instances where two or more creditor agencies are seeking 
salary offsets against current employees of the FCA or where two or more 
debts are owed to a single creditor agency, the FCA, at its discretion, 
may determine whether one or more debts should be offset simultaneously 
within the 15-percent limitation. Debts owed to the FCA should generally 
take precedence over debts owed to other agencies.



Sec. 608.840  Refunds.

    (a) In instances where the FCA is the creditor agency, it shall 
promptly refund any amounts deducted under the authority of 5 U.S.C. 
5514 when:

[[Page 47]]

    (1) The debt is waived or otherwise found not to be owed to the 
United States (unless expressly prohibited by statute or regulations); 
or
    (2) An administrative or judicial order directs the FCA to make a 
refund.
    (b) Unless required or permitted by law or contract, refunds under 
this section shall not bear interest.



Sec. 608.841  Requesting current paying agency to offset salary.

    (a) To request a paying agency to impose a salary offset against 
amounts owed to the debtor, the FCA shall provide the paying agency with 
a claim certification which meets the requirements set forth in 
Sec. 608.825(a). The FCA shall also provide the paying agency with a 
repayment schedule determined under the provisions of Sec. 608.839 or in 
accordance with a repayment agreement entered into with the debtor.
    (b) If the employee separates from the paying agency before the debt 
is paid in full, the paying agency shall certify the total amount 
collected on the debt. A copy of this certification shall be sent to the 
employee and a copy shall be sent to the FCA. If the paying agency is 
aware that the employee is entitled to payments from the Civil Service 
Retirement and Disability Fund, or other similar payments, it must 
provide written notification to the agency responsible for making such 
payments that the debtor owes a debt (including the amount) and that the 
provisions of this section have been fully complied with. However, the 
FCA must submit a properly certified claim to the agency responsible for 
making such payments before the collection can be made.
    (c) When an employee transfers to another paying agency, the FCA is 
not required to repeat the due process procedures set forth in 5 U.S.C. 
5514 and this part to resume the collection. The FCA shall, however, 
review the debt upon receiving the former paying agency's notice of the 
employee's transfer to make sure the collection is resumed by the new 
paying agency.
    (d) If a special review is conducted pursuant to Sec. 608.811 and 
results in a revised offset or repayment schedule, the FCA shall provide 
a new claim certification to the paying agency.



Sec. 608.842  Responsibility of the FCA as the paying agency.

    (a) When the FCA receives a claim certification from a creditor 
agency, deductions should be scheduled to begin at the next officially 
established pay interval. The FCA shall send the debtor written notice 
which provides:
    (1) That the FCA has received a valid claim certification from the 
creditor agency;
    (2) The date on which salary offset will begin;
    (3) The amount of the debt; and
    (4) The amount of such deductions.
    (b) If, after the creditor agency has submitted the claim 
certification to the FCA, the employee transfers to a different agency 
before the debt is collected in full, the FCA must certify the total 
amount collected on the debt. The FCA shall send a copy of this 
certification to the creditor agency and a copy to the employee. If the 
FCA is aware that the employee is entitled to payments from the Civil 
Service Retirement Fund and Disability Fund, or other similar payments, 
it shall provide written notification to the agency responsible for 
making such payments that the debtor owes a debt (including the amount).



Sec. 608.843  Nonwaiver of rights by payments.

    An employee's involuntary payment of all or any portion of a debt 
being collected under this subpart shall not be construed as a waiver of 
any rights the employee may have under 5 U.S.C. 5514 or any other 
provisions of a written contract or law unless there are statutory or 
contractual provisions to the contrary.

[[Page 48]]





                    SUBCHAPTER B--FARM CREDIT SYSTEM



PART 611--ORGANIZATION--Table of Contents




Subparts A-B [Reserved]

      Subpart C--Election of Directors and Other Voting Procedures

Sec.
611.310  Eligibility for membership on bank and association boards and 
          subsequent employment.
611.320  Impartiality in the election of directors.
611.330  Confidentiality in voting.
611.340  Security in voting.
611.350  Application of cooperative principles to the election of 
          directors.

           Subpart D--Rules for Compensation of Board Members

611.400  Compensation of bank board members.

                   Subpart E--Transfer of Authorities

611.500  General.
611.501  Procedures.
611.505  Farm Credit Administration review.
611.510  Approval procedures.
611.515  Information statement.
611.520  Plan of transfer.
611.525  Stockholder reconsideration.

     Subpart F--Bank Mergers, Consolidations and Charter Amendments

611.1000  General authority.
611.1010  Bank charter amendment procedures.
611.1020  Requirements for mergers or consolidations of banks.
611.1030  Board of directors of an agricultural credit bank.
611.1040  Creation of new associations.

     Subpart G--Mergers, Consolidations, and Charter Amendments of 
                              Associations

611.1120  General authority.
611.1121  Charter amendment procedures.
611.1122  Requirements for mergers or consolidations.
611.1123  Merger or consolidation agreements.
611.1124  Territorial adjustments.
611.1125  Treatment of associations not approving districtwide mergers.

            Subpart H--Rules for Inter-System Fund Transfers

611.1130  Inter-System transfer of funds and equities.

                    Subpart I--Service Organizations

611.1135  Incorporation of service organizations.
611.1136  Incorporated and unincorporated service organization--
          regulation and examination.
611.1137  Title VIII service corporations.

Subpart J-O [Reserved]

       Subpart P--Termination of Farm Credit Status--Associations

611.1200  General--Applicability.
611.1205  Definitions.
611.1210  Advance notification.
611.1211  Filing of termination application.
611.1212  Filing date of termination application.
611.1215  Farm Credit Administration review and approval.
611.1220  Voting record date and stockholder approval.
611.1225  Requirements for information statement.
611.1226  Prohibited acts.
611.1230  Plan of termination.
611.1235  Stockholder reconsideration.
611.1240  Exit fee.
611.1250  Repayment of debts.
611.1255  Retirement of equities owned.
611.1260  Dissenters' rights.
611.1266  Loan refinancing by borrowers.
611.1270  Continuation of borrower rights.

    Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15, 4.20, 
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, 2208, 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.

    Source: 37 FR 11415, June 7, 1972, unless otherwise noted.

Subparts A-B [Reserved]



      Subpart C--Election of Directors and Other Voting Procedures

    Source: 53 FR 50392, Dec. 15, 1988, unless otherwise noted.

[[Page 49]]



Sec. 611.310  Eligibility for membership on bank and association boards and subsequent employment.

    (a) No person shall be eligible for membership on a bank or 
association board who is or has been, within 1 year preceding the date 
the term of office begins, a salaried officer or employee of any bank or 
association in the System.
    (b) No bank or association director shall be eligible to continue to 
serve in that capacity and his or her office shall become vacant if 
after election as a member of the board, he or she becomes legally 
incompetent or is convicted of a felony or held liable in damages for 
fraud.
    (c) No bank director shall, within 1 year after the date when he or 
she ceases to be a member of the board, serve as a salaried officer or 
employee of such bank, or any association with which the bank has a 
discount or agent relationship.
    (d) No director of an association shall, within 1 year after he or 
she ceases to be a member of the board, serve as a salaried officer or 
employee of such association.

[53 FR 50392, Dec. 15, 1988, as amended at 54 FR 37095, Sept. 7, 1989]



Sec. 611.320  Impartiality in the election of directors.

    (a) Each System institution shall adopt policies and procedures that 
are designed to assure that the elections of board members are conducted 
in an impartial manner.
    (b) No employee or agent of a System institution shall take any 
part, directly or indirectly, in the nomination or election of members 
to the board of directors of a System institution, or make any 
statement, either orally or in writing, which may be construed as 
intended to influence any vote in such nominations, or elections. This 
paragraph shall not prohibit employees or agents from providing 
biographical and other similar information or engaging in other 
activities pursuant to policies and procedures for nominations and 
elections. This paragraph does not affect the right of an employee or 
agent to nominate or vote for directors of an institution in which the 
employee or agent is a voting member.
    (c) No property, facilities, or resources of any System institution 
shall be used by any candidate for nomination or election or by any 
other person for the benefit of any candidate for nomination or 
election, unless the same property, facilities, or resources are 
simultaneously available and made known to be available for use by all 
declared candidates.
    (d) No director, employee, or agent of a System institution shall, 
for the purpose of furthering the interests of any candidates for 
nomination or election, furnish or make use of records that are not made 
available for use by all declared candidates.
    (e) No System institution shall distribute or mail either directly 
or at the expense of the institution, any campaign materials for 
director candidates. Institutions shall request biographical information 
from all declared candidates who certify that they are eligible, restate 
such information in a standard format, and distribute or mail it with 
ballots or proxy ballots.



Sec. 611.330  Confidentiality in voting.

    (a) No bank or association may use signed ballots in stockholder 
votes. Each bank and association must adopt policies and procedures to 
ensure that all information and materials regarding how or whether an 
individual stockholder has voted remain confidential, including with 
respect to the institution, its directors, stockholders, or employees, 
or any other person except:
    (1) An independent third party tabulating the vote; or
    (2) The Farm Credit Administration.
    (b) A bank or association may use balloting procedures, such as an 
identity code on the ballot, that can be used to identify how or whether 
an individual stockholder has voted only if the votes are tabulated by 
an independent third party. In weighted voting, the votes must be 
tabulated by an independent third party. An independent third party that 
tabulates the votes must certify in writing that such party will not 
disclose to any person (including the institution, its directors, 
stockholders, or employees) any information about how or whether an

[[Page 50]]

individual stockholder has voted, except that the information must be 
disclosed to the Farm Credit Administration if requested.
    (c) Once a bank or association receives a ballot, the vote of that 
stockholder is final, except that a stockholder may withdraw a proxy 
ballot before balloting begins at a stockholders' meeting.
    (d) A bank or association may give a stockholder voting by proxy an 
opportunity to give voting discretion to the proxy of the stockholder's 
choice, provided that the proxy is also a stockholder eligible to vote.

[63 FR 64843, Nov. 24, 1998]



Sec. 611.340  Security in voting.

    (a) Each bank and association must adopt policies and procedures 
that assure the security of all records and materials related to a 
stockholder vote including, but not limited to, ballots, proxy ballots, 
and other related materials.
    (b) Bank and association procedures must assure that ballots and 
proxy ballots are provided only to stockholders who are eligible to 
vote.
    (c) Ballots and proxy ballots must be safeguarded before the time of 
distribution or mailing to voting stockholders and after the time of 
receipt by the bank or association until disposal. In an election of 
directors, ballots, proxy ballots and election records must be retained 
at least until the end of the term of office of the director. In other 
stockholder votes, ballots, proxy ballots, and records must be retained 
for at least 3 years after the vote.
    (d) The voting procedures of each institution must provide for the 
establishment of a tellers committee or other designated group of 
persons which must be responsible for validating ballots and proxies and 
tabulating voting results. An institution and its officers, directors, 
and employees may not make any public announcement of the results of a 
stockholder vote before the tellers committee or other designated 
persons have validated the results of the vote.

[53 FR 50392, Dec. 15, 1988, as amended at 63 FR 64843, Nov. 24, 1998]



Sec. 611.350  Application of cooperative principles to the election of directors.

    In the election of directors, each System institution shall comply 
with the applicable cooperative principles set forth in Sec. 615.5230 of 
this chapter.

[63 FR 39225, July 22, 1998]



           Subpart D--Rules for Compensation of Board Members



Sec. 611.400  Compensation of bank board members.

    (a) Farm Credit System banks are authorized to pay fair and 
reasonable compensation to directors for services performed in an 
official capacity at a rate not to exceed the level established in 
section 4.21 of the Farm Credit Act of 1971, as amended, unless the FCA 
determines that such a level adversely affects the safety and soundness 
of the institution.
    (b) The bank director compensation level established in section 4.21 
of the Act shall be adjusted to reflect changes in the Consumer Price 
Index (CPI) for all urban consumers, as published by the Bureau of Labor 
Statistics, in the following manner: Current year's maximum compensation 
= Prior year's maximum compensation adjusted by the prior year's annual 
average percent change in the CPI for all urban consumers. Adjustments 
will be made to the bank director statutory compensation limit beginning 
from October 28, 1992 (the date of enactment of the Farm Credit Banks 
and Associations Safety and Soundness Act of 1992). Additionally, each 
year the FCA will distribute a bookletter to all FCS banks that 
communicates the CPI adjusted bank director statutory compensation 
limit.
    (c)(1) A Farm Credit bank is authorized to pay a director up to 30 
percent more than the statutory compensation limit in exceptional 
circumstances where the director contributes extraordinary time and 
effort in the service of the bank and its shareholders.
    (2) Banks must document the exceptional circumstances justifying 
additional director compensation. The documentation must describe:

[[Page 51]]

    (i) The exceptional circumstances justifying the additional director 
compensation, including the extraordinary time and effort the director 
devoted to bank business; and
    (ii) The amount and the terms and conditions of the additional 
director compensation.
    (d) Each bank board shall adopt a written policy regarding 
compensation of bank directors. The policy shall address, at a minimum, 
the following areas:
    (1) The activities or functions for which attendance is necessary 
and appropriate and may be compensated, except that a Farm Credit System 
bank shall not compensate any director for rendering services on behalf 
of any other Farm Credit System institution or a cooperative of which 
the director is a member, or for performing other assignments of a non-
official nature;
    (2) The methodology for determining each director's rate of 
compensation; and
    (3) The exceptional circumstances under which the board would pay 
additional compensation for any of its directors as authorized by 
paragraph (c) of this section.
    (e) Directors may also be reimbursed for reasonable travel, 
subsistence, and other related expenses in accordance with the bank's 
policy.

[59 FR 37411, July 22, 1994, as amended at 64 FR 16618, Apr. 6, 1999; 65 
FR 8023, Feb. 17, 2000]



                   Subpart E--Transfer of Authorities

    Source: 53 FR 50393, Dec. 15, 1988, unless otherwise noted.



Sec. 611.500  General.

    Each Farm Credit Bank or Agricultural Credit Bank is authorized, in 
accordance with section 7.6 of the Act, to transfer certain authorities 
to Federal land bank associations. The regulations in this subpart set 
forth the procedures and voting and approval requirements applicable to 
such transfers.



Sec. 611.501  Procedures.

    (a) The boards of directors of a bank and an association which seek 
to transfer authorities may adopt appropriate resolutions approving such 
transfer and providing for the submission of such a proposal to their 
respective stockholders for a vote.
    (b) The resolutions accompanied by the following information shall 
be submitted to the Farm Credit Administration for review and approval:
    (1) Any proposed amendments to the charters of the institutions;
    (2) A copy of the transfer plan as required under Sec. 611.520 of 
this part;
    (3) An information statement that complies with the requirements of 
Sec. 611.515;
    (4) The proposed bylaws of the bank and the association, as 
applicable; and
    (5) Any additional information the boards of directors wish to 
submit in support of the request or that the Farm Credit Administration 
requests.



Sec. 611.505  Farm Credit Administration review.

    (a) Upon receipt of the board of directors resolution and the 
accompanying documents, the Farm Credit Administration shall review the 
request and either deny or give its preliminary approval to the request.
    (b) If the request is denied, written notice stating the reasons for 
the denial shall be transmitted to the chief executive officer of the 
bank and the association who shall promptly notify their respective 
boards of directors.
    (c) Upon approval of the proposed transfer of authorities by the 
stockholders as provided in Sec. 611.510, the secretary of the bank and 
the secretary of the association shall forward to the Farm Credit 
Administration a certified record of the results of the stockholder 
votes.
    (d) Each institution shall notify its stockholders not later than 30 
days after the stockholder vote of the final results of the vote. If no 
petition for reconsideration is filed with the Farm Credit 
Administration in accordance with Sec. 611.525, the transfer shall be 
effective on the date specified in the transfer plan, or at such later 
date as may be required by the Farm Credit Administration to grant final 
approval. Notice of final approval shall be transmitted to the 
institutions involved.

[[Page 52]]

    (e) The effective date of a transfer may not be less than 35 days 
after mailing of the notification to stockholders of the results of the 
stockholder vote, or 15 days after the date of submission to the Farm 
Credit Administration of all required documents for the Agency's 
consideration of final approval, whichever occurs later. If a petition 
for reconsideration is filed within 35 days after the date of mailing of 
the notification of stockholder vote, the constituent institutions must 
agree on a second effective date to be used in the event the transfer is 
approved on reconsideration. The second effective date may not be less 
than 60 days after stockholder notification of the results of the first 
vote, or 15 days after the date of the reconsideration vote, whichever 
occurs later.

[53 FR 50393, Dec. 15, 1988, as amended at 63 FR 64844, Nov. 24, 1998]



Sec. 611.510  Approval procedures.

    (a) Upon receipt of approval of a resolution by the Farm Credit 
Administration, the bank and the association shall call a meeting of 
their voting stockholders. Each institution shall notify each 
stockholder that the resolution has been filed and that a meeting will 
be held in accordance with the institution's bylaws. The stockholders 
meeting of the bank and the association shall be held within 60 days of 
receipt of the approval from the Farm Credit Administration.
    (b) The notice of meeting to consider and act upon the directors' 
resolution shall be accompanied by an information statement that 
complies with the requirements of Sec. 611.515.
    (c) The proposal shall be approved if agreed to by:
    (1) A majority of the stockholders of the bank voting in person or 
by proxy, with each association entitled to cast a number of votes equal 
to the number of its voting stockholders;
    (2) A majority of the stockholders of the association voting, in 
person or by proxy;
    (3) The Farm Credit Administration.



Sec. 611.515  Information statement.

    (a) The bank and association shall prepare an information statement 
which will inform stockholders about the provisions of the proposed 
transfer of authorities and the effect of the proposal on the bank and 
the association.
    (b) The information statement for each institution involved shall 
contain the following materials as applicable to the institution:
    (1) A statement either on the first page of the materials or on the 
notice of the stockholders meeting, in capital letters and boldface 
type, that:

   THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON 
 THE ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF 
    MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE 
                 CONTRARY SHALL BE MADE OR RELIED UPON.

    (2) A description of the material provisions of the plan under 
Sec. 611.520 and the effect of the transaction on the institution, its 
stockholders, and the territory to be served.
    (3) A statement enumerating the potential advantages and 
disadvantages of the proposed transfer including, but not limited to, 
changes in operating efficiencies, one-stop service, branch offices, 
local control, and financial condition.
    (4) A summary of the provisions of the charter and bylaws following 
the transfer that differ materially from the charter or bylaws currently 
existing.
    (5) A brief statement by the board of directors of the institution 
setting forth the board's opinion on the advisability of the transfer.
    (6) A presentation of the following financial data:
    (i) An audited balance sheet and income statement and notes thereto 
of the bank or the association, as applicable, for the preceding 2 
fiscal years.
    (ii) If the transfer of authority includes any material transfer of 
assets, a balance sheet and income statement of the bank and the 
association showing its financial condition before the transfer of 
authority and a pro forma balance sheet and income statement for the 
bank or association, as applicable, showing its financial condition 
after the transfer. The statements shall meet the following conditions:

[[Page 53]]

    (A) Such financial statements shall be presented in columnar form, 
showing the financial condition as of the end of the most recent quarter 
of the institution, and operating results since the end of the last 
fiscal year through the end of the most recent quarter of the 
institution.
    (B) If the request is made within 90 days after the end of the 
fiscal year, the institution's financial statements shall be as of the 
most recent fiscal yearend.
    (C) If the request is made within 45 days after the end of the most 
recent quarter, the institution's financial statements shall be as of 
the end of the quarter preceding the quarter just ended.
    (D) If the request is made more than 45 days after the end of the 
most recent quarter, the institution's financial statements shall be as 
of the end of that quarter.
    (E) The financial statements must be accompanied by appropriate 
notes, describing any assets being transferred and including data 
relating to high-risk assets and other property owned, allowance for 
loan losses, and current year-to-date chargeoffs.
    (F) The amount and nature of start-up costs estimated to be 
associated with the transfer.
    (7) A description of the type and dollar amount of any financial 
assistance that has been provided to the bank or the association, as 
applicable, during the past year; the conditions on which the financial 
assistance was extended, the terms of repayment or retirement, if any; 
and, the liability for repayment of this assistance by the bank or the 
association if the transfer were approved.
    (8) A statement as to whether the bank or the association, as 
applicable, would require financial assistance during the first 3 years 
of operation, the estimated type and dollar amount of the assistance, 
and terms of repayment or retirement, if known.
    (9) A statement indicating the possible tax consequences to 
stockholders and whether any legal opinion, ruling or external auditor's 
opinion has been obtained on the matter.
    (10) A presentation of the association's interest rate and fee 
programs, interest collection policy, capitalization plan and other 
factors that would affect a borrower's cost of doing business with the 
association.
    (11) A description of any event subsequent to the date of the last 
quarterly report, but prior to the stockholder vote, that would have a 
material impact on the financial condition of the bank or the 
association.
    (12) A statement of any other material fact or circumstances that a 
stockholder would need in order to make an informed and responsible 
decision, or that would be necessary in order to provide a disclosure 
that is not misleading.
    (13) A form of written proxy, together with instructions on its 
purpose, use and authorization by the stockholder. The proxy 
instructions must ensure the secrecy of the stockholder's ballot if the 
stockholder votes by proxy.
    (14) A copy of the plan of transfer provided for in Sec. 611.520 of 
this part.
    (c) No bank or association director, officer, or employee shall make 
any untrue or misleading statement of a material fact, or fail to 
disclose any material fact necessary under the circumstances to make 
statements made not misleading, to a stockholder of the association in 
connection with a transfer under this subpart.

[53 FR 50393, Dec. 15, 1988, as amended at 58 FR 48790, Sept. 20, 1993]



Sec. 611.520  Plan of transfer.

    The transfer of authorities and assets, as appropriate, shall occur 
pursuant to a written plan which shall be agreed to by the bank and the 
association involved. The written plan shall include the following:
    (a) An explanation of the value of the equity ownership as of the 
last monthend held by stockholders of the bank and the association and 
the impact, if any, of the transfer on the value of that equity.
    (b) If the plan provides for a transfer of assets, a description of 
the terms and conditions upon which such transfer will occur, including, 
but not limited to, any warranties or representations regarding the 
value of such assets.

[[Page 54]]

    (c) A description of how the association would obtain loan funds 
after the transfer.
    (d) A statement on how the expenses connected with the transfer are 
to be borne by the affected parties.
    (e) A statement of any conditions which must be satisfied prior to 
the effective date of the transfer, including but not limited to 
approval by stockholders and approval by the Farm Credit Administration.
    (f) A statement that prior to the effective date of the transfer the 
board of directors of the bank or the association may rescind its 
resolution and void the transfer, with the concurrence of the Farm 
Credit Administration, on the basis that:
    (1) The information disclosed to stockholders contained material 
errors or omissions;
    (2) Material misrepresentations were made to stockholders regarding 
the impact of the transfer;
    (3) Fraudulent activities were used to obtain the stockholders' 
approval; or,
    (4) An event occurred between the time of the vote and the transfer 
that would have a significant adverse impact on the future viability of 
the association.
    (g) A designation of those persons who have authority to carry out 
the plan of transfer, including the authority to execute any documents 
necessary to perfect title, on behalf of the bank and the association.



Sec. 611.525  Stockholder reconsideration.

    (a) Stockholders have the right to reconsider the approval of the 
transfer provided that a petition signed by 15 percent of the 
stockholders of either institution involved in the transfer is filed 
with the Farm Credit Administration within 35 days after the date of 
mailing of the notification of the final results of the stockholder vote 
required under Sec. 611.505(d) and such petition is approved by the Farm 
Credit Administration.
    (b) A special stockholders meeting shall be called by the 
institution to vote on the reconsideration following the Farm Credit 
Administration's approval of a stockholder petition to reconsider the 
transfer. If a majority of stockholders of any institution involved in 
the transfer votes against the transfer, the transfer is not approved.



     Subpart F--Bank Mergers, Consolidations and Charter Amendments

    Source: 53 FR 50393, Dec. 15, 1988, unless otherwise noted.



Sec. 611.1000  General authority.

    (a) An amendment to a bank charter may relate to any provision that 
is properly the subject of a charter, including, but not limited to, the 
name of the bank, the location of its offices, or the territory served.
    (b) The Farm Credit Administration may make changes in the charter 
of a bank as may be requested by that bank and approved by the Farm 
Credit Administration pursuant to Sec. 611.1010 of this part.
    (c) The Farm Credit Administration may, in accordance with the 
provisions of the Act, make changes in the charter of a bank as may be 
necessary or expedient to implement the provisions of the Act.



Sec. 611.1010  Bank charter amendment procedures.

    (a) A bank may recommend a charter amendment to accomplish any of 
the following actions:
    (1) A merger or consolidation with any other bank or banks operating 
under title I or III of the Act;
    (2) A transfer of territory with any other bank operating under the 
same title of the Act;
    (3) A change to its name or location;
    (4) Any other change that is properly the subject of a bank charter;
    (b) Upon approval of an appropriate resolution by the bank board, 
the certified resolution, together with supporting documentation, shall 
be submitted to the Farm Credit Administration for preliminary or final 
approval, as the case may be.
    (c) The Farm Credit Administration shall review the material 
submitted and either approve or disapprove the request. The Farm Credit 
Administration may require submission of any supplemental materials it 
deems appropriate. If the request is for merger, consolidation, or 
transfer of territory,

[[Page 55]]

the approval of Farm Credit Administration will be preliminary only, 
with final approval subject to a vote of the bank's stockholders.
    (d) Following receipt of the Farm Credit Administration's written 
preliminary approval, the proposal shall be submitted for approval to 
the voting stockholders of the bank. A proposal shall be approved if 
agreed to by a majority of the stockholders of each bank voting, in 
person or by proxy, at a duly authorized stockholder meeting with each 
association entitled to cast a number of votes equal to the number of 
the association's voting shareholders.
    (e) Upon approval by the stockholders of the bank, the request for 
final approval and issuance of the appropriate charter or amendments to 
charter for the banks involved shall be submitted to the Farm Credit 
Administration.



Sec. 611.1020  Requirements for mergers or consolidations of banks.

    (a) As authorized under sections 7.0 and 7.12 of the Act, a bank may 
merge or consolidate with one or more banks operating under the same or 
different titles of the Act.
    (b) Where two or more banks plan to merge or consolidate, the banks 
shall jointly submit to the Farm Credit Administration the documents 
itemized in Secs. 611.1122(a)(1) through (4), (6), (7), 611.1122(e), and 
611.1123. In interpreting those sections, the word ``bank'' shall be 
read for the word ``association.''
    (c) No bank director, officer, or employee shall make any untrue or 
misleading statement of a material fact, or fail to disclose any 
material fact necessary under the circumstances to make statements made 
not misleading, to any stockholder of the bank in connection with a bank 
merger or consolidation.
    (d) Upon approval of a proposed bank merger or consolidation by the 
stockholders of each constituent bank, the following documents shall be 
submitted from the constituent banks to the Farm Credit Administration 
for final approval and issuance of the appropriate charters or 
amendments to charter:
    (1) A certified copy of the stockholders' resolution, on which the 
stockholders cast their votes, from each constituent bank;
    (2) A certification of the stockholder vote from the corporate 
secretary of each bank or from an independent third party;
    (3) An Agreement of Merger or Consolidation duly executed by those 
authorized to sign on behalf of each constituent bank.



Sec. 611.1030  Board of directors of an agricultural credit bank.

    Each agricultural credit bank formed by the consolidation of a Farm 
Credit Bank and a bank for cooperatives shall elect a board of directors 
of such number, for such term, in such manner, and with such 
qualifications, as may be required in its bylaws, except that at least 
one member shall be elected by the other directors, which member shall 
not be a director, officer, employee, or stockholder of a System 
institution. In electing such directors each association shall be 
entitled to cast a number of votes equal to the number of its voting 
stockholders.

[53 FR 50393, Dec. 15, 1988, as amended at 61 FR 67185, Dec. 20, 1996]



Sec. 611.1040  Creation of new associations.

    Any application for the issuance of a charter to a new production 
credit association or Federal land bank association shall meet the 
requirements of sections 2.0 or 2.10, respectively, of the Act. Any 
application for the issuance of a charter for an agricultural credit 
association shall meet the requirements of section 2.0 of the Act.



     Subpart G--Mergers, Consolidations, and Charter Amendments of 
                              Associations



Sec. 611.1120  General authority.

    (a) An amendment to an association charter may relate to any 
provision that is properly the subject of a charter, including, but not 
limited to, the name of the association, the location of its offices, or 
the territory served.
    (b) The Farm Credit Administration may make changes in the charter 
of an association as may be requested by that association and approved 
by the

[[Page 56]]

Farm Credit Administration pursuant to Sec. 611.1121 of this part.
    (c) The Farm Credit Administration may, by order of the Chairman and 
on its own initiative, make changes in the charter of a Federal land 
bank association or a production credit association where the Chairman 
determines that the change is necessary for the accomplishment of the 
purposes of the Act.

[50 FR 20400, May 16, 1985, as amended at 51 FR 41945, Nov. 20, 1986]



Sec. 611.1121  Charter amendment procedures.

    This section shall apply to any request by an association to amend 
its charter.
    (a) An association which proposes to amend its charter shall submit 
a request to its supervising bank containing the following information:
    (1) A statement of the provision(s) of the charter that the 
association proposes to amend and the proposed amendment(s);
    (2) A statement of the reasons for the proposed amendment(s), the 
impact of the amendment(s) on the association and its stockholders, and 
the requested effective date of the amendment(s);
    (3) A certified copy of the resolution of the board of directors of 
the association approving the amendment(s);
    (4) Any additional information or documents that the association 
wishes to submit in support of the request or that may be requested by 
the supervising bank.
    (b) Upon receipt of a proposed amendment from an association, the 
district bank shall review the materials submitted and provide the 
association with its analysis of the proposal within a reasonable period 
of time. Concurrently, the bank shall communicate its recommendation on 
the proposal to the Farm Credit Administration, including the reasons 
for the recommendation, and any analysis the bank believes appropriate. 
Following review by the bank, the association shall transmit the 
proposed amendment with attachments to the Farm Credit Administration.
    (c) Upon receipt of an association's request for a charter 
amendment, the Farm Credit Administration shall review the materials 
submitted and either approve or disapprove the request. The Farm Credit 
Administration may require submission of any supplemental materials it 
deems appropriate.
    (d) The Farm Credit Administration shall notify the association of 
its approval or disapproval of the amendment request, and provide a copy 
of such communication to the bank. A notification of approval shall be 
accompanied by a copy of the charter, as amended.

[50 FR 20400, May 16, 1985, as amended at 51 FR 32441, Sept. 12, 1986]



Sec. 611.1122  Requirements for mergers or consolidations.

    This section shall apply to any request for approval of a proposed 
merger or consolidation of associations. A merger involves the 
combination of one or more associations into a continuing constituent 
association, which retains its charter and bylaws (except as amended to 
effect the merger proposal). A consolidation involves the combination of 
two or more associations into a newly organized association having a new 
charter and bylaws.
    (a) Where two or more associations plan to merge or consolidate, or 
where the district board has adopted a reorganization plan for the 
associations in the district, the associations involved shall jointly 
submit a request to the district bank containing the following:
    (1) In the case of a merger, a copy of the charter of the continuing 
association reflecting any proposed amendments. In the case of 
consolidation, a copy of the proposed charter of the new association;
    (2) A statement of the reasons for the proposed merger or 
consolidation, the impact of the proposed transaction on the 
associations and their stockholders, and the planned effective date of 
the merger or consolidation;
    (3)(i) A certified copy of the resolution of the board of directors 
of each association recommending approval of the merger or 
consolidation; or
    (ii) In the case of a district reorganization plan, a certified copy 
of the resolution of the board of directors of each association 
recommending either approval or disapproval of the proposal.
    (4) A copy of the agreement of merger or consolidation;

[[Page 57]]

    (5) Two signed copies of the continuing or proposed Articles of 
Association;
    (6) All of the information specified in paragraph (e) of this 
section; and
    (7) Any additional information or documents each association wishes 
to submit in support of the request or that the supervising bank or the 
Farm Credit Administration requests.
    (b) Upon receipt of a request for approval of an association merger 
or consolidation, the district bank shall review the materials submitted 
to determine whether they comply with the requirements of these 
regulations and shall communicate with the associations concerning any 
deficiency. When the bank approves the request to merge or consolidate 
it shall notify the associations and the Farm Credit Administration of 
its approval together with the reasons for its approval and any 
supporting analysis the bank deems appropriate. The associations shall 
jointly submit the proposal together with required documentation to the 
Farm Credit Administration for preliminary approval.
    (c) Upon receipt of an association merger or consolidation request, 
the Farm Credit Administration shall review the request and either deny 
or give its preliminary approval to the request. When a request is 
denied, written notice stating the reasons for the denial shall be 
transmitted to the associations and a copy provided to the bank. When a 
request is preliminarily approved, written notice of the preliminary 
approval shall be given to the associations and a copy provided to the 
bank. Preliminary approval by the Farm Credit Administration shall not 
constitute approval of the merger or consolidation. Approval of a merger 
or consolidation shall be only pursuant to paragraph (g) of this 
section.
    (d) Upon receipt of preliminary approval by the Farm Credit 
Administration of a merger or consolidation request, each constituent 
association shall call a meeting of its voting stockholders. The meeting 
shall be called on written notice to each stockholder entitled to vote 
on the transaction, and held in accordance with the terms of each 
association's bylaws. The affirmative vote of a majority of the voting 
stockholders of each association present and voting or voting by written 
proxy at a meeting at which a quorum is present shall be required for 
stockholder approval of a merger or consolidation proposal.
    (e) Notice of the meeting to consider and act upon a proposed merger 
or consolidation of associations shall be accompanied by the following 
information covering each constituent association.
    (1) A statement either on the first page of the materials or on the 
notice of the stockholders' meeting, in capital letters and bold face 
type, that:

THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON THE 
   ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF 
    MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE 
                 CONTRARY SHALL BE MADE OR RELIED UPON.

    (2) A description of the material provisions of the agreement of 
merger or consolidation and the effect of the proposed merger or 
consolidation on the associations, their stockholders, the new or 
continuing board of directors, and the territory to be served. In 
addition, a copy of the agreement must be furnished with the notice to 
stockholders.
    (3) A summary of the provisions of the charter and bylaws of the 
continuing or new association that differ materially from the existing 
charter or bylaw provisions of the constituent associations.
    (4) A brief statement by the boards of directors of the constituent 
associations setting forth the basis for the boards' recommendation on 
the merger or consolidation.
    (5) A description of any agreement or arrangement between a 
constituent association and any of its officers relating to employment 
or termination of employment and arising from the merger or 
consolidation.
    (6) A presentation of the following financial data:
    (i) A balance sheet and income statement for each constituent 
association for each of the 2 preceding fiscal years.

[[Page 58]]

    (ii) A balance sheet for each constituent association as of a date 
within 90 days of the date the request for preliminary approval is 
forwarded to the Farm Credit Administration presented on a comparative 
basis with the corresponding period of the prior fiscal year.
    (iii) An income statement for the interim period between the end of 
the last fiscal year and the date of the required balance sheet 
presented on a comparative basis with the corresponding period of the 
preceding fiscal year. The balance sheet and income statement format 
shall be that contained in the association's annual report to 
stockholders; shall contain any significant changes in accounting 
policies that differ from those in the latest association annual report 
to stockholders; and shall contain appropriate footnote disclosures, 
including data relating to high-risk assets and other property owned, 
and allowance for loan losses, including net chargeoffs as required in 
paragraph (e)(10) of this section.
    (7) The financial statements (balance sheet and income statement) 
shall be in sufficient detail to show separately all significant 
categories of interest-earning assets and interest-bearing liabilities 
and the income or expense accrued thereon.
    (8) Attached to the financial statements for each constituent 
association, either:
    (i) A statement signed by the chief executive officer and each 
member of the board of directors of the association that the various 
financial statements are unaudited, but have been prepared in all 
material respects in accordance with generally accepted accounting 
principles (except as otherwise disclosed therein) and are, to the best 
of the knowledge of the board, a fair and accurate presentation of the 
financial condition of the association; or
    (ii) A signed opinion by an independent certified public accountant 
that the various financial statements have been examined in accordance 
with generally accepted auditing standards and, accordingly, included 
such tests of the accounting records and such other auditing procedures 
as were considered necessary in the circumstances, and, as of the date 
of the statements, present fairly the financial position of the 
association in conformity with generally accepted accounting principles 
applied on a consistent basis, except as otherwise noted thereon.
    (9) A presentation for each constituent association regarding its 
policy on accounting for loan performance, together with the number and 
dollar amount of loans in all performance categories, including those 
categorized as high-risk assets.
    (10) Information of each constituent association concerning the 
amount of loans charged off in each of the 2 fiscal years preceding the 
date of the balance sheet, the current year-to-date net chargeoff 
amount, and the balance in the allowance for loan losses account and a 
statement regarding whether, in the opinion of management, the allowance 
for loan losses is adequate to absorb the risk currently existing in the 
loan portfolio. This information may be appropriately included in the 
footnotes to the financial statements.
    (11) A management discussion and analysis of the financial condition 
and results of operation for the past 2 fiscal years for each 
constituent institution. This requirement can be satisfied by including 
the materials contained in the management discussion and analysis of 
each institution's most recent annual report.
    (12) A discussion of any material changes in financial condition of 
each constituent institution from the end of the last fiscal year to the 
date of the interim balance sheet provided.
    (13) A discussion of any material changes in the results of 
operations of each constituent institution with respect to the most 
recent fiscal-year-to-date period for which an income statement is 
provided.
    (14) A discussion of any change in the tax status of the new 
institution from those of the constituent institutions as a result of 
merger or consolidation. A statement on any adverse tax consequences to 
the stockholders of the institution as a result of the change in tax 
status.
    (15) A statement on the proposed institution's relationship with an 
independent public accountant, including

[[Page 59]]

any change that may occur as a result of the merger or consolidation.
    (16) A pro forma balance sheet of the continuing or consolidated 
association presented as if the merger or consolidation had occurred as 
of the date on the balance sheets required in paragraph (e)(6) of this 
section, as recommended to the stockholders. A pro forma summary of 
earnings for the continuing or consolidated association presented as if 
the merger or consolidation had been effective at the beginning of the 
interim period between the end of the last fiscal year and the date of 
the balance sheets.
    (17) A description of the type and dollar amount of any financial 
assistance that has been provided during the past year or will be 
provided by the supervising bank or other party to assist the 
constituent or the continuing or new association(s), the conditions on 
which financial assistance has been or will be extended, the terms of 
repayment or retirement, if any, and the impact of the assistance on the 
subject association(s) or the stockholders.
    (18) A presentation for each constituent association of interest 
rate comparisons for the last 2 fiscal years preceding the date of the 
balance sheet, together with a statement of the continuing or new 
association's proposed interest rate and fee programs, interest 
collection policies, capitalization rates, dividends or patronage 
refunds, and other factors that would affect a borrower's cost of doing 
business with the continuing or new association. Where agreement has not 
been reached on such matters, current related information shall be 
presented for each constituent association.
    (19) A description for each constituent association of any event 
subsequent to the date of the financial statements, but prior to the 
merger or consolidation vote, that would have a material impact on the 
financial condition of the constituent or continuing or new 
association(s).
    (20) A statement of any other material fact or circumstance that a 
stockholder would need in order to make an informed decision on the 
merger or consolidation proposal, or that is necessary to make the 
required disclosures not misleading.
    (21) Where proxies are to be solicited, a form of written proxy, 
together with instructions on the purpose and authority for its use, and 
the proper method for signature by the stockholder.
    (f) No bank or association, or director, officer, or employee 
thereof, shall make any untrue or misleading statement of a material 
fact, or fail to disclose any material fact necessary under the 
circumstances to make statements made not misleading, to a stockholder 
of any association in connection with an association merger or 
consolidation.
    (g) Upon approval of a proposed merger or consolidation by the 
stockholders of the constituent associations, a certified copy of the 
stockholders' resolution shall be forwarded to the Farm Credit 
Administration. Each constituent association shall notify its 
stockholders not later than 30 days after the stockholder vote of the 
final results of the vote. If no petition is filed with the Farm Credit 
Administration to reconsider the vote, upon final approval by the FCA, 
the merger or consolidation shall be effective on the date specified in 
the merger agreement or at such later date as may be required by the 
Farm Credit Administration to grant final approval. Notice of final 
approval shall be transmitted to the associations and a copy provided to 
the affiliated bank.
    (h) No director, officer, or employee of a bank or an association 
shall make an oral or written representation to any person that a 
preliminary or final approval by the Farm Credit Administration of an 
association merger or consolidation constitutes, directly or indirectly, 
either a recommendation on the merits of the transaction or an assurance 
concerning the adequacy or accuracy of any information provided to any 
association's stockholders in connection therewith.
    (i) The notice and accompanying information required under paragraph 
(e) of this section shall not be sent to stockholders until preliminary 
approval of the merger or consolidation has been given by the Farm 
Credit Administration.
    (j) Where a proposed merger or consolidation will involve more than 
three

[[Page 60]]

associations, the Farm Credit Administration may require the 
supplementation, or allow the condensation or omission of any 
information required under paragraph (e) of this section in furtherance 
of meaningful disclosure to stockholders. Any waiver sought under this 
paragraph shall be obtained before preparation of the financial 
statements and accompanying schedules required under paragraph (e) of 
this section.
    (k) The effective date of a merger or consolidation may not be less 
than 35 days after the date of mailing of the notification to 
stockholders of the results of the stockholder vote, or 15 days after 
the date of submission to the Farm Credit Administration of all required 
documents for the Agency's consideration of final approval, whichever 
occurs later. If a petition for reconsideration is filed within 35 days 
after mailing of the notification to stockholders of the results of the 
stockholder vote, the constituent institutions must agree on a second 
effective date to be used in the event the merger or consolidation is 
approved on reconsideration. The second effective date may not be less 
than 60 days after stockholder notification of the results of the first 
vote, or 15 days after the date of the reconsideration vote, whichever 
occurs later.

[50 FR 20400, May 16, 1985; 50 FR 32165, Aug. 9, 1985, as amended at 51 
FR 32441, Sept. 12, 1986; 53 FR 50396, Dec. 15, 1988; 56 FR 2674, Jan. 
24, 1991; 58 FR 48790, Sept. 20, 1993; 63 FR 64844, Nov. 24, 1998]



Sec. 611.1123  Merger or consolidation agreements.

    (a) Associations operating under the same title of the Act may merge 
or consolidate voluntarily only pursuant to a written agreement. The 
agreement shall set forth all of the terms of the transaction, 
including, but not limited to, the following:
    (1) The proposed effective date of the merger or consolidation.
    (2) The proposed name and headquarters location of the continuing or 
consolidated association.
    (3) The names of the persons nominated to serve as directors until 
the first regular annual meeting of the continuing or consolidated 
association to be held after the effective date of the merger or 
consolidation. Any director of a constituent association may be 
designated in the agreement to serve as a director of the continuing or 
consolidated association for a period not to exceed his or her current 
term, after which he or she must stand for reelection. However, the 
terms of the agreement must provide for the election of at least one 
director at each annual meeting subsequent to the effective date of the 
merger or consolidation. The bylaws of the continuing or consolidated 
association shall reflect the provisions of the merger or consolidation 
agreement regarding director terms.
    (4) A statement of the formula to be used to exchange the stock of 
the constituent associations for the stock of the continuing or 
consolidated association. No fractional shares of stock shall be issued.
    (5) A statement of any conditions which must be satisfied prior to 
the effective date of the proposed transaction, including but not 
limited to approval by stockholders, the supervising bank, and the Farm 
Credit Administration.
    (6) A statement of the representations or warranties, if any, made 
or to be made by any association, or its officers, directors, or 
employees that is a party to the proposed transactions.
    (7) A statement that the board of directors of each constituent 
association can terminate the agreement before the effective date upon a 
determination by an association, with the concurrence of the Farm Credit 
Administration, that:
    (i) The information disclosed to stockholders contained material 
errors or omissions;
    (ii) Material misrepresentations were made to stockholders regarding 
the impact of the merger or consolidation;
    (iii) Fraudulent activities were used to obtain stockholders' 
approval; or
    (iv) An event occurred between the time of the vote and the merger 
that would have a significant adverse impact on the future viability of 
the continuing institution.
    (8) A description of the legal opinions or rulings (including those 
related to tax matters), if any, that have been obtained or furnished by 
any party in

[[Page 61]]

connection with the proposed transaction. Also, refer to paragraph 
(a)(5) of this section.
    (9) The capitalization plan and capital structure for the new 
institution and a statement that the capitalization plan shall comply 
with applicable FCA regulations.
    (10) Provision for the employee benefits plan, its subsequent 
continuation or adaptation by the board of directors of the proposed 
institution following the merger or consolidation.
    (11) A statement of the authority of those persons designated to 
carry out the terms of the agreement, including the authority to waive 
provisions of the agreement and to execute any documents necessary to 
perfect title, on behalf of the constituent associations.
    (b) As an attachment to the agreement, set forth those provisions of 
the charter and bylaws of the continuing or consolidated association 
which differ from the existing charter or bylaw provisions of the 
constituent associations.
    (c) Stockholders have the right to reconsider the approval of the 
merger provided that a petition signed by 15 percent of the stockholders 
eligible to vote of one or more of the constituent institutions is filed 
with the Farm Credit Administration within 35 days after the date of 
mailing the notification of the final results of the stockholder vote 
required under Sec. 611.1122(g). The Farm Credit Administration will 
review the petition to determine whether it complies with the 
requirements of section 7.9 of the Act. Following a determination that 
the petition complies with the applicable requirements, a special 
stockholders meeting shall be called by the institution to reconsider 
the vote. If a majority of the stockholders voting, in person or by 
proxy, of any one of the constituent institutions that is a party to the 
merger vote against the merger, the merger shall not take place.

[50 FR 20400, May 16, 1985, as amended at 51 FR 32442, Sept. 12, 1986; 
53 FR 50396, Dec. 15, 1988]



Sec. 611.1124  Territorial adjustments.

    This section shall apply to any request submitted to the Farm Credit 
Administration to modify association charters for the purpose of 
transferring territory from one association to another.
    (a) Territorial adjustments, except as specified in paragraph (m) of 
this section, require approval of a majority of the voting stockholders 
of each association present and voting or voting by written proxy at a 
duly authorized meeting at which a quorum is present.
    (b) When two or more associations agree to transfer territory, each 
association shall submit a proposal to the district bank containing the 
following:
    (1) A statement of the reasons for the proposed transfer and the 
impact the transfer will have on its stockholders and holders of 
participation certificates;
    (2) A certified copy of the resolution of the board of directors of 
each association approving the proposed territory transfer;
    (3) A copy of the agreement to transfer territory that contains the 
following information:
    (i) A description of the territory to be transferred.
    (ii) Transferor association's plan to transfer loans and the types 
of loans to be transferred.
    (iii) Transferor association's plan to retire and transferee 
association's plan to issue equities held by holders of stock, 
participation certificates, and allocated equities, if any, and a 
statement by each association that the book value of its equities is at 
least equal to par.
    (iv) An inventory of the assets to be sold by the transferor 
association and purchased by the transferee association.
    (v) An inventory of the liabilities to be assumed from the 
transferor association by the transferee association.
    (vi) A statement that the holders of stock and participation 
certificates whose loans are subject to transfer have 60 days from the 
effective date of the territory transfer to inform the transferor 
association of their decision to remain with the transferor association 
for normal servicing until the current loan is paid.
    (vii) A statement that the transfer is conditioned upon the approval 
of the stockholders of each constituent association.

[[Page 62]]

    (viii) The effective date of the proposed territory transfer.
    (4) A copy of the stockholder disclosure statement provided for in 
paragraph (f) of this section; and
    (5) Any additional relevant information or documents that the 
association wishes to submit in support of its request or that may be 
required by the Farm Credit Administration.
    (c) Upon receipt of documents supporting a proposed territory 
transfer, the district bank shall review the materials submitted and 
provide the associations with its analysis of the proposal within a 
reasonable period of time. The bank shall concurrently advise the Farm 
Credit Administration of its recommendation regarding the proposed 
territory transfer. Following review by the bank, the associations shall 
transmit the proposal to the Farm Credit Administration together with 
all required documents.
    (d) Upon receipt of an association's request to transfer territory, 
the Farm Credit Administration shall review the request and either deny 
or give preliminary approval to the request. When a request is denied, 
written notice stating the reasons for the denial shall be transmitted 
to the associations, and a copy provided to the bank. When a request is 
preliminarily approved, written notice of the preliminary approval shall 
be transmitted to the associations, and a copy provided to the bank. 
Preliminary approval by the Farm Credit Administration shall not 
constitute approval of the territory transfer. Final approval shall be 
granted only in accordance with paragraph (h) of this section.
    (e) Upon receipt of preliminary approval by the Farm Credit 
Administration, each constituent association shall, by written notice, 
and in accordance with its bylaws, call a meeting of its voting 
stockholders. The affirmative vote of a majority of the voting 
stockholders of each association present and voting or voting by written 
proxy at a meeting at which a quorum is present shall be required for 
stockholder approval of a territory transfer.
    (f) Notice of the meeting to consider and act upon a proposed 
territory transfer shall be accompanied by the following information 
covering each constituent association:
    (1) A statement either on the first page of the materials or on the 
notice of the stockholders' meeting, in capital letters and bold face 
type, that:

THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON THE 
   ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF 
    MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE 
                 CONTRARY SHALL BE MADE OR RELIED UPON.

    (2) A copy of the Agreement to Transfer Territory and a summary of 
the major provisions of the Agreement.
    (3) The reason the territory transfer is proposed.
    (4) A map of the association's territory as it would look after the 
transfer.
    (5) A summary of the differences, if any, between the transferor and 
transferee associations' interest rates, interest rate policies, 
collection policies, service fees, bylaws, and any other items of 
interest that would impact a borrower's lending relationship with the 
institution.
    (6) A statement that all loans of the transferor association that 
finance operations located in the transferred territory shall be 
transferred to the transferee association except as otherwise provided 
for in this section or in accordance with agreements between the 
associations as provided for in Sec. 614.4070 of this chapter.
    (7) Where proxies are to be solicited, a form of written proxy, 
together with instructions on the purpose and authority for its use, and 
the proper method for signature by the stockholders.
    (8) A statement that the associations' bylaws, financial statements 
for the previous 3 years, and any financial information prepared by the 
associations concerning the proposed transfer of territory are available 
on request to the stockholders of any association involved in the 
transaction.
    (g) No bank or association, or director, officer, or employee 
thereof, shall make any untrue or misleading statement of a material 
fact, or fail to disclose any material fact necessary under the 
circumstances to make statements made not misleading, to a

[[Page 63]]

stockholder of any association in connection with a territory transfer.
    (h) Upon approval of a proposed territory transfer by the 
stockholders of the constituent associations, a certified copy of the 
stockholders' resolution for each constituent association and one 
executed Agreement to Transfer Territory shall be forwarded to the Farm 
Credit Administration. The territory transfer shall be effective when 
thereafter finally approved and on the date as specified by the Farm 
Credit Administration. Notice of final approval shall be transmitted to 
the associations and a copy provided to the bank.
    (i) No director, officer, or employee of a bank or an association 
shall make an oral or written representation to any person that a 
Preliminary or final approval by the Farm Credit Administration of a 
territory transfer constitutes, directly or indirectly, a recommendation 
on the merits of the transaction or an assurance concerning the adequacy 
or accuracy of any information provided to any association's 
stockholders in connection therewith.
    (j) The notice and accompanying information required under paragraph 
(f) of this section shall not be sent to stockholders until preliminary 
approval of the territory transfer has been granted by the Farm Credit 
Administration.
    (k) Where a territory transfer is proposed simultaneously with a 
merger or consolidation, both transactions may be voted on by 
stockholders at the same meeting. Only stockholders of a transferee or 
transferor association shall vote on a territory transfer.
    (l) Each borrower whose real estate or operations is located in a 
territory that will be transferred shall be provided with a written 
Notice of Territory Transfer immediately after the Farm Credit 
Administration has given final approval of the territory transfer. The 
Notice shall inform the borrower of the transfer of the borrower's loan 
to the transferee association and the exchange of related equities for 
equities of like kinds and amounts in the transferee association. If a 
like kind of equity is not available in the transferee association, 
similar equities shall be offered that will not adversely affect the 
interest of the owner. The Notice shall give the borrower 60 days from 
the effective date of the territory transfer to notify the transferor 
association in writing if the borrower decides to stay with the 
transferor association for normal servicing until the current loan is 
paid. Any application by the borrower for renewal or for additional 
credit shall be made to the transferee association, except as otherwise 
provided for by an agreement between associations in accordance with 
Sec. 614.4070 of this chapter.
    (m) This section shall not apply to territory transfers initiated by 
order of the Chairman of the Farm Credit Administration or to territory 
transfers due to the liquidation of the transferor association.
    (n) Where a proposed action involves the transfer of a portion of an 
association's territory to an association operating in a different 
district, such proposal must comply with the provisions of this section 
and Sec. 611.1090 of this part.

[51 FR 32442, Sept. 12, 1986]



Sec. 611.1125  Treatment of associations not approving districtwide mergers.

    (a) Issuance of charters. When issuing charters or certificates of 
territory for districtwide mergers or consolidations of associations, 
the Farm Credit Administration will not issue any charters or 
certificates of territory that include the territory of one or more 
associations whose stockholders voted to disapprove the merger or 
consolidation.
    (b) A district bank shall not take any of the following actions with 
respect to an association that has determined to not participate in a 
districtwide merger or consolidation:
    (1) Discriminate in the provision of any financial service and 
assistance, including, but not limited to, access to loan funds and 
rates of interest on loans and discounts offered by the district bank to 
associations and their member/borrowers;
    (2) Discriminate in the provision of any related services that are 
offered by the district bank to associations and their member/borrowers;
    (3) Discriminate in the provision of any professional assistance 
that may

[[Page 64]]

be normally provided by the district bank to associations; or
    (4) Discriminate in the provision of any technical assistance that 
may be normally provided by the district bank to associations.
    (c) This regulation does not prohibit a district bank from taking 
any action with respect to an association, including, but not limited 
to, charging different rates of interest or different prices for 
services, or declining to provide financial assistance; provided that 
any such action is fully documented and based on an objective analysis 
of applicable criteria that are uniformly and consistently applied by 
the district bank to all associations in the district.

[51 FR 32443, Sept. 12, 1986, as amended at 60 FR 34099, June 30, 1995]



            Subpart H--Rules for Inter-System Fund Transfers



Sec. 611.1130  Inter-System transfer of funds and equities.

    (a) Section 5.17(a)(6) of the Act authorizes the FCA to regulate the 
borrowing, repayment, and transfer of funds and equities between 
institutions of the System, including banks, associations, and service 
organizations organized under the Act. This section sets forth the 
circumstances and procedures under which the FCA may direct such a 
transfer of funds and equities based on its determination with respect 
to the financial condition of one or more institutions of the System. 
For purposes of this section, the term ``bond'' refers to long-term 
notes, bonds, debentures, or other similar obligations, or short-term 
discount notes issued by one or more banks pursuant to section 4.2 of 
the Act.
    (b) The FCA may direct a transfer of funds or equities by one or 
more banks of the System to another bank of the System where it 
determines that:
    (1) The receiving institution will not be able to make payments of 
principal or interest on bonds for which it is primarily liable within 
the meaning of section 4.4(a) of the Act; or
    (2) The common or preferred stock, participation certificates, or 
allocated equities of the receiving institution have a book value less 
than their par or stated values; or
    (3) The total bonds outstanding for which the receiving institution 
is primarily liable exceed 20 times the combined capital and surplus 
accounts of the bank; or
    (4) Based on application to it of one or more of the following 
ratios, the receiving institution is not financially viable in that it 
will not be able to continue to extend new or additional credit or 
financial assistance to its eligible borrowers:
    (i) The ratio of stock to earned net worth (including legal reserve, 
unallocated and reserved surplus, undistributed earnings, and allowance 
for losses) exceeds 2 to 1;
    (ii) The ratio of the outstanding bonds to capital and surplus 
exceeds 15 to 1;
    (iii) Nonearning assets (any noninterest-bearing assets, including 
but not limited to cash, noninterest-earning loans, net fixed assets, 
other property owned, accrued interest receivable, and accounts 
receivable) exceed 15 percent of total assets;
    (iv) Lendable net worth (interest-earning assets less interest-
bearing liabilities) is zero or less.
    (c) The FCA may direct a transfer of funds or equities between two 
or more Federal land bank associations or two or more production credit 
associations in district where it determines that such transfer:
    (1) Is necessary to provide financial support to the district bank 
in which those associations are stockholders based on application of the 
criteria to the bank as set forth in paragraph (b) of this section; or
    (2) Is necessary to provide financial support to one or more other 
like associations in the district based on application of the criteria 
set forth in paragraph (b)(2) or (b)(4) of this section to the 
associations, provided that in applying paragraph (b)(4)(ii) of this 
section the ratio of outstanding indebtedness to capital and surplus of 
the receiving association(s) shall not exceed 9 to 1; or
    (3) Is an integral part of a plan that has been adopted by other 
institutions of the System, and approved by the FCA, under which those 
institutions will extend financial assistance to the

[[Page 65]]

district bank in which those associations are stockholders.
    (d) A direction by the FCA for a transfer of funds or equities 
pursuant to this section shall be signed by the Chairman and shall 
establish the amount, timing, duration, repayment, and other terms of 
assessments necessary to accomplish such transfer, taking into 
consideration the financial condition of each institution to be 
assessed. Where the FCA directs a transfer of funds or equities between 
associations under paragraph (c) (1) or (2) of this section, it may 
authorize the district bank in which such associations are stockholders 
to accomplish the necessary assessments through debits and credits to 
the accounts of the bank.

[50 FR 36986, Sept. 11, 1985. Redesignated at 51 FR 8666, Mar. 13, 1986, 
as amended at 51 FR 41945, Nov. 20, 1986; 58 FR 48790, Sept. 20, 1993; 
59 FR 21643, Apr. 26, 1994]



                    Subpart I--Service Organizations



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) Application. The application for a corporate charter shall 
include:
    (1) The certified resolution of the board of each organizing bank or 
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) The proposed articles of incorporation addressing, at a minimum, 
the following:
    (i) The name of the corporation;
    (ii) The city and State in which the principal offices of the 
corporation are to be located;
    (iii) The general purposes for which the corporation is formed;
    (iv) The general powers of the corporation;
    (v) The procedures under which a bank or association may become a 
stockholder;
    (vi) The procedures by which bylaws may be adopted and amended;
    (vii) The title, par value, voting and other rights, and authorized 
amount of each class of stock to be issued by the corporation, and the 
procedures by which each class may be retired;
    (viii) The notice and quorum requirement for a meeting of 
shareholders, and the vote required for shareholder action on various 
matters;
    (ix) The procedures and shareholder voting requirements for the 
merger, voluntary liquidation, or dissolution of the corporation or the 
distribution of corporate assets;
    (x) The standards and procedures for the application and 
distribution of corporate earnings;
    (xi) The duration of the corporation.
    (4) The proposed bylaws, which shall include the provisions required 
by Sec. 615.5220(b) of this chapter.
    (5) A statement as to the proposed amounts and sources of 
capitalization and operating funds.
    (6) Any agreements between the organizing banks or associations 
relating to the organization or the operation of the corporation.

[[Page 66]]

    (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, including imposing minimum capital requirements, 
as it deems appropriate. For good cause, the Farm Credit Administration 
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) Amendment of articles of incorporation. The articles of 
incorporation of a service corporation may be amended in either of two 
ways:
    (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:
    (i) The section(s) to be amended;
    (ii) The reason(s) for the amendment;
    (iii) The language of the articles of incorporation provision, as 
amended; and
    (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.

[47 FR 27061, June 23, 1982, as amended at 50 FR 46418, Nov. 8, 1985. 
Redesignated at 51 FR 8666, Mar. 13, 1986, as amended at 51 FR 41945, 
Nov. 20, 1986; 56 FR 2674, Jan. 24, 1991; 61 FR 67185, Dec. 20, 1996; 62 
FR 13213, Mar. 19, 1997; 63 FR 39225, July 22, 1998]



Sec. 611.1136  Incorporated and unincorporated service organization--regulation and examination.

    Incorporated and unincorporated service organizations shall be 
subject to regulations for the banks and associations of the Farm Credit 
System, and shall be subject to examination by the Farm Credit 
Administration.

[53 FR 27155, July 19, 1988]



Sec. 611.1137  Title VIII service corporations.

    (a) Service corporations may be organized by any Farm Credit 
institution(s) other than the Federal Agricultural Mortgage Corporation 
or its affiliates for the purpose of exercising the authorities granted 
under title VIII of the Act to act as agricultural mortgage marketing 
facilities. The requirements of Secs. 611.1135 and 611.1136 apply as if 
such organizing institutions were banks, except for good cause as 
determined by the Farm Credit Administration. Such service corporations 
may issue stock to Farm Credit institutions other than the Federal 
Agricultural Mortgage Corporation or its affiliates and to persons that 
are not Farm Credit System institutions, provided at least 80 percent of 
the voting stock is at all times held by Farm Credit institutions other 
than the Federal Agricultural Mortgage Corporation or its affiliates.
    (b) For the purposes of this regulation, person means an individual 
or a legal entity organized under the laws of the United States or any 
State or territory thereof.

[57 FR 26992, June 17, 1992]

Subpart J-O [Reserved]



       Subpart P--Termination of Farm Credit Status--Associations

    Source: 56 FR 3407, Jan. 30, 1991, unless otherwise noted.



Sec. 611.1200  General--Applicability.

    (a) Each association is authorized, in accordance with sections 7.10 
and 7.11 of the Act, to terminate the status of the association as a 
Farm Credit institution. The regulations in this subpart set forth the 
procedural, disclosure, voting and approval requirements applicable to 
such termination. The Farm Credit Administration may in its sole 
discretion grant a waiver in writing from any requirement of this 
subpart for good cause shown.

[[Page 67]]

    (b) Except as provided in paragraph (c) of this section, these 
regulations are applicable to an association that seeks to terminate its 
status as a Farm Credit institution and to charter the institution as a 
bank, savings and loan association, or other type of financial 
institution. In the event that a receiver or conservator is appointed by 
the Farm Credit Administration in the case of a voluntary or involuntary 
liquidation of the association, the provisions of subpart L of part 611 
apply, and the provisions of this subpart shall not apply.
    (c) These regulations are not applicable to the termination of an 
association whose investment in the Farm Credit Bank or agricultural 
credit bank of which it is a member is in excess of 25 percent of the 
bank's capital as computed according to GAAP, or whose indebtedness to 
the Farm Credit Bank or agricultural credit bank of which it is a member 
is in excess of 25 percent of the total loans of the bank as of the 
quarter end preceding the adoption of the commencement resolution.

[56 FR 3407, Jan. 30, 1991, as amended at 61 FR 67186, Dec. 20, 1996]



Sec. 611.1205  Definitions.

    For the purposes of this subpart, the following definitions apply:
    (a) Commencement resolution means the resolution adopted pursuant to 
Sec. 611.1210(a) to indicate the commencement of the termination 
process.
    (b) GAAP means generally accepted accounting principles, which is 
that body of conventions, rules and procedures necessary to define 
accepted accounting practice at a particular time, as promulgated by the 
Financial Accounting Standards Board and other authoritative sources 
recognized assetting standards for the accounting profession in the 
United States. GAAP shall include not only broad guidelines of general 
application but also detailed practices and procedures that constitute 
standards against which financial presentations are evaluated. When the 
Farm Credit Administration's interpretation of how GAAP should be 
applied to a specific event or transaction differs from an association's 
interpretation, the interpretation of the Farm Credit Administration 
shall prevail.
    (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.
    (d) Reconsideration vote means the vote at which the voting 
stockholders reconsider whether to terminate the terminating 
association's Farm Credit status.
    (e) Successor institution means the institution to which the 
terminating association will convert when its Farm Credit charter is 
revoked.
    (f) Terminating association means an association seeking to 
terminate its status as a Farm Credit institution and to charter the 
institution as a bank, savings and loan association, or other type of 
financial institution.
    (g) Termination resolution means the resolution adopted pursuant to 
Sec. 611.1211(a) approving the applications for termination and a new 
charter and providing for submission of the termination proposal to a 
stockholder vote.
    (h) Termination vote means the stockholder vote at which the 
termination proposal is first submitted to the voting stockholders for 
their approval or disapproval.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991; 63 FR 36547, 
July 7, 1998]



Sec. 611.1210  Advance notification.

    (a) An association's board of directors shall commence the process 
of termination by adopting a commencement resolution indicating the 
association's intention to terminate its Farm Credit status.
    (b) Within 5 days of the adoption of the commencement resolution by 
the board of directors, the terminating association shall:
    (1) Submit a certified copy of the commencement resolution to the 
Farm Credit Administration; and
    (2) Mail a brief announcement to all holders of equity in the 
association which states that the board is taking steps to terminate its 
Farm Credit status and which describes the process of termination, the 
anticipated effect of

[[Page 68]]

termination on current holders of equity, and the type of institution 
the successor institution will be. If bylaws are adopted in accordance 
with paragraph (e) of this section, the announcement shall also state 
that, during the time period from the passage of the commencement 
resolution until the effective date of termination, new common stock and 
participation certificates either purchased from the association in 
connection with a loan or sold to the association prior to the 
termination will not entitle the holder to receive a share in the 
adjusted book value in excess of par of the association.
    (c)(1) Within 15 days after submission of the commencement 
resolution pursuant to paragraph (b)(1) of this section, the terminating 
association shall submit to the Farm Credit Administration a statement 
of its estimation of the exit fee together with an explanation of the 
computation of the exit fee pursuant to the requirements of 
Sec. 611.1240. For purposes of this estimate of the exit fee, the 
computation date set forth in Sec. 611.1240(c) shall be the quarter end 
preceding the date of the commencement resolution.
    (2) Within 45 days of its receipt of the terminating association's 
estimated exit fee, the Farm Credit Administration shall either confirm 
the association's estimation of the exit fee or notify the association 
of any required revisions to the computation.
    (3) In the event that the Farm Credit Administration requires 
adjustments to the estimated exit fee pursuant to paragraph (c)(2) of 
this section, the terminating association may request reconsideration of 
any revisions. Such request shall be in writing and shall set forth 
specific reasons why the revisions should not be made. The Farm Credit 
Administration shall reconsider the revisions and shall inform the 
terminating association of its determination within 15 days of the 
receipt of the reconsideration request.
    (d) During the time period after the board of directors' adoption of 
the commencement resolution pursuant to paragraph (a) of this section 
and prior to the effective date of termination, the following conditions 
shall apply to the terminating association's conduct of business:
    (1) Each prospective new borrower shall be informed of the effect of 
the proposed termination upon the borrower's loan and shall be 
specifically informed whether the borrower will continue to have any of 
the borrower rights provided under the Act and regulations promulgated 
thereunder;
    (2) Any common stockholders or participation certificate holders who 
seek to have such equity interest retired before termination shall be 
informed that the retirement would extinguish the holder's right to an 
interest in the successor institution if the termination is completed or 
to dissent from the termination and receive an amount equal to the 
adjusted book value of the holder's equity in the terminating 
association.
    (e) Notwithstanding any provisions of Sec. 615.5230(b) to the 
contrary, an association may adopt bylaws which provide for the issuance 
of a special class of common stock and participation certificates in 
connection with loans granted during the time period subsequent to the 
adoption of the commencement resolution and prior to the termination. 
Such common stock or participation certificates, which shall be issued 
in accordance with section 4.3A of the Act, shall have characteristics 
identical to shares of the existing classes of common stock or 
participation certificates issued as a condition of the extension of a 
loan, except for the following:
    (1) In the event of termination, the holder shall be entitled to 
receive the following:
    (i) If the holder is eligible to vote and does not vote against the 
termination, an interest in the successor institution in an amount equal 
to the adjusted book value or the purchase price of the stock, whichever 
is less;
    (ii) If the holder is not eligible to vote or is eligible to vote 
and votes against the termination, either an interest in the successor 
institution as set forth in paragraph (e)(1)(i) of this section, or, if 
such holder dissents pursuant to Sec. 611.1260, cash in the amount of 
the purchase price or the adjusted book value of the stock or 
participation certificate, whichever is less.

[[Page 69]]

    (2) In the event that the termination does not occur, the special 
classes of stock or participation certificates shall automatically 
convert into shares of the otherwise identical classes of stock or 
participation certificates issued prior to the adoption of the 
commencement resolution.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991]



Sec. 611.1211  Filing of termination application.

    (a) The board of directors of an association that seeks to terminate 
its status shall adopt an appropriate termination resolution approving 
an application for such termination, approving an application for a new 
charter for the successor institution, and providing for the submission 
of such termination proposal to its stockholders for a vote.
    (b) An original and three copies of a termination application 
consisting of the following materials shall be submitted by the 
terminating association to the Farm Credit Administration for review and 
preliminary approval:
    (1) A certified copy of the termination resolution adopted pursuant 
to paragraph (a) of this section;
    (2) A copy of the plan of termination as required under 
Sec. 611.1230;
    (3) An information statement that complies with the requirements of 
Sec. 611.1225;
    (4) All other information that is to be submitted to the 
stockholders and other equity holders in connection with the 
contemplated action; and
    (5) Any additional information the board of directors wishes to 
submit to the Farm Credit Administration in support of the request or 
that the Farm Credit Administration requests.
    (c) The terminating association shall provide the Farm Credit 
Administration with any material revisions to information in the plan of 
termination, including updated financial information, that becomes 
available during the pendency of the termination application and prior 
to termination.



Sec. 611.1212  Filing date of termination application.

    (a) Except as provided in paragraph (c) of this section, the 
termination application will be given a filing date which shall be the 
date on which it is determined to be technically complete. Within 10 
business days after the Farm Credit Administration receives the 
termination application, the Farm Credit Administration shall determine 
that the application is technically complete and give it a filing date, 
or return the application to the terminating association if it is 
incomplete. If the Farm Credit Administration fails to make a 
determination or to return the application before the end of the 10-day 
review period, the application shall be deemed to be technically 
complete and shall receive a filing date which is the last day of the 
10-day review period.
    (b) A termination application is considered to be technically 
complete when it is determined upon preliminary review to contain 
responses to all items required to be submitted to the Farm Credit 
Administration under Sec. 611.1211.
    (c) In the event the advance notification required in Sec. 611.1210 
is not received by the Farm Credit Administration at least 60 days prior 
to the filing date which would otherwise be assigned to the termination 
application in accordance with paragraph (a) of this section, the filing 
date shall be the date that is 60 days following the date on which the 
terminating association first informs the Farm Credit Administration of 
the association's intention to terminate its Farm Credit status. During 
this 60-day period, the Farm Credit Administration shall contact other 
associations to determine their willingness to provide service to the 
territory of the terminating association or to determine if there are 
persons who wish to charter a new association to serve the territory. An 
inability of the Farm Credit Administration to arrange for a new service 
provider for the territory shall not be grounds for an extension of the 
60-day period. However, the Farm Credit Administration may in its sole 
discretion reduce the required 60-day period in the event that a new 
service provider to serve the territory is determined. This paragraph 
shall not apply if the entire chartered territory of the terminating 
association is already included in the charter of one or more 
associations that are chartered to offer

[[Page 70]]

credit services of the same type as the terminating association.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991]



Sec. 611.1215  Farm Credit Administration review and approval.

    (a) When the termination application has received a filing date, the 
Farm Credit Administration shall review the application and either 
disapprove or give its preliminary approval pursuant to section 
7.11(a)(2) of the Act.
    (b) The Farm Credit Administration Board shall have 30 days from the 
filing date, as defined in Sec. 611.1212, to approve or disapprove the 
termination application. If the Farm Credit Administration Board does 
not act within such 30-day period, the plan of termination may be 
submitted to the stockholders pursuant to section 7.11(a)(2) of the Act.
    (c) If the application is disapproved, written notice specifying the 
reasons for disapproval shall be transmitted to the chief executive 
officer of the association, who shall promptly notify the association's 
board of directors. If the application is disapproved, it shall not be 
submitted to the stockholders for a vote.
    (d) Upon stockholder approval of the proposed termination as 
provided in Sec. 611.1220, the secretary of the terminating association 
shall forward to the Farm Credit Administration a certified record of 
the results of the stockholder vote and shall notify its stockholders 
and other equity holders of the results of the vote as provided in 
Sec. 611.1220(e).
    (e) Final approval by the Farm Credit Administration Board pursuant 
to section 7.10(a)(2) shall be conditioned upon the following:
    (1) A termination vote in favor of termination and, if a 
reconsideration vote is held, a reconsideration vote in favor of 
termination;
    (2) Receipt by the Farm Credit Administration of conformed executed 
copies of all contracts and agreements submitted pursuant to 
Sec. 611.1230;
    (3) Satisfactory evidence of the terminating association's adequate 
provision for payment of debts and retirement of equities;
    (4) Evidence of the grant of a new charter for the successor 
institution by the appropriate Federal or State chartering authority;
    (5) Payment of the exit fee by certified check of other means agreed 
upon by the Farm Credit Administration and the terminating association; 
and
    (6) The fulfillment of any other condition of termination imposed by 
the Farm Credit Administration Board which is necessary and appropriate 
to provide for the equitable treatment of the parties affected by the 
termination.
    (f) If the Farm Credit Administration grants final approval, the 
terminating association's charter shall be revoked, and the termination 
shall be effective on the last to occur of--
    (1) The proposed termination date of the terminating association;
    (2) Ninety (90) days after receipt by the Farm Credit Administration 
of the notice required to be submitted pursuant to paragraph (d) of this 
section; and
    (3) Receipt of final payment of the exit fee.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991]



Sec. 611.1220  Voting record date and stockholder approval.

    (a) Upon receipt of preliminary approval of the termination 
application by the Farm Credit Administration Board, or if the Board 
takes no action prior to the end of the 30-day review period, the 
association shall call a meeting of its voting stockholders. The 
stockholders meeting shall be held within 60 days of the last day of the 
30-day review period. All holders of equity in the terminating 
association shall be permitted to attend the meeting. The stockholders 
eligible to vote shall be the stockholders who are eligible to vote on 
the voting record date as determined by the association's bylaws if such 
date is not more than 70 days prior to the stockholder vote, or on a 
date fixed by the board of directors which shall be not more than 70 
days prior to the date of the stockholder vote. The association shall 
notify each stockholder that the resolution has been filed and that a 
meeting will be held in accordance with the association's bylaws.

[[Page 71]]

    (b) The notice of meeting to consider and act upon the board of 
directors' resolutions shall be accompanied by an information statement 
that complies with the requirements of Sec. 611.1225.
    (c)(1) The terminating association shall establish voting security 
procedures that comply with the procedures for the election of directors 
in Sec. 611.330, as applicable. Specifically, the terminating 
association shall ensure that all information regarding how or whether 
individual stockholders have voted and all materials such as ballots, 
proxy ballots, election records, and other relevant documentation 
related to the votes of stockholders is held in strict confidence.
    (2) The terminating association may adopt procedures that require 
the stockholders to sign or otherwise verify their eligibility to vote 
on an envelope which contains a marked ballot in a sealed envelope. The 
terminating association may also use signed proxies or eligibility 
certificates that will accompany a ballot or instructions on how to vote 
the proxy in a separate sealed envelope.
    (3) The terminating association shall use a form of identity code on 
the ballot enabling it to determine which stockholders are eligible to 
exercise dissenters' rights and shall require that the votes be 
tabulated by an independent party who is not a stockholder, director, or 
officer of the terminating association or the successor institution. 
When the terminating association receives notification pursuant to 
Sec. 611.1260 that a stockholder intends to exercise dissenters' rights, 
the association will verify with the independent party that the 
stockholder voted against the termination. The terminating association 
shall be informed of the vote of a stockholder only in the event that 
stockholder exercises the right to retire stock in the association in 
accordance with Sec. 611.1260.
    (d) The proposal shall be approved by the stockholders if agreed to 
by a majority of the eligible voting stockholders of the association 
voting in person or by proxy at the stockholders' meeting.
    (e) Upon approval of a proposed termination by the stockholders of 
the terminating association, a certified statement showing the results 
of the stockholder vote shall be forwarded to the Farm Credit 
Administration within 10 days following the stockholders' meeting. The 
terminating association shall notify its stockholders and other holders 
of equity interests of the results of the vote not later than 30 days 
after the final vote. If the stockholder vote is in favor of 
termination, stockholders who voted against the termination and other 
equity holders shall be informed of their right to dissent as provided 
in Sec. 611.1260(f). In addition, the terminating association shall 
further notify stockholders of their right to file a petition for 
reconsideration in accordance with Sec. 611.1235 and that any petition 
for reconsideration must be filed on or before a date certain, which 
shall be 35 days after the date the terminating association mails notice 
to the stockholders of the results of the stockholder vote.



Sec. 611.1225  Requirements for information statement.

    Notice of the meeting to consider and act upon a proposed 
termination shall be sent to all stockholders and other holders of 
equity interests and shall be accompanied by an information statement 
that contains the information and materials set forth in this regulation 
as follows:
    (a) A statement on either the first page of the material or the 
notice of the stockholders' meeting, in capital letters and boldface 
type that:

THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON THE 
   ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF 
    MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE 
                 CONTRARY SHALL BE MADE OR RELIED UPON.

    (b) A statement on the first page of the material entitled 
``Executive Summary'' and consisting of a concise description of the 
material changes in rights of the borrowers, stockholders, and holders 
of other equity interests to occur as a result of the termination,

[[Page 72]]

the effect of such changes, and the potential benefits and disadvantages 
to them of the termination.
    (c) A description of the plan of termination as required in 
Sec. 611.1230.
    (d) A statement by the board of directors of the terminating 
association enumerating the potential benefits and disadvantages of the 
termination together with the basis for the board's recommendation for 
termination.
    (e) A list of the initial board of directors and senior officers of 
the successor institution, together with a brief description of the 
business experience of each such person, including principal occupation 
and employment, during the past 5 years.
    (f) A summary of the provisions of the organizational documents of 
the successor institution, including the articles of incorporation and 
bylaws, that differ materially from the charter and bylaws of the 
terminating association. The summary shall indicate both whether the 
maintenance of a borrowing relationship with the successor institution 
will be required as a condition for maintaining a stockholder's 
interest, and whether the maintenance of a stockholder's interest will 
be required as a condition for maintaining a borrowing relationship.
    (g) An explanation of any changes in the nature of the stockholders' 
and other equity holders' investment in the association, including but 
not limited to any changes in dividends, patronage refunds, voting 
rights, preferences, retirement of equities, and priority upon 
liquidation. If any eligible borrower stock is outstanding, such 
explanation shall include a statement that the guaranty afforded to 
eligible borrower stock by section 4.9A of the Act shall be extinguished 
at termination and that any stock of the successor institution received 
in exchange for eligible borrower stock shall not be protected under 
section 4.9A of the Act.
    (h) An explanation of the effect of termination on the rights that 
borrowers are afforded under the Act; the expiration date of those 
rights, if applicable, under the provisions of the plan of termination; 
a statement that borrowers may seek to have their loans sold to or 
refinanced with another lending institution, including the 
association(s) that will be chartered to serve the terminating 
association's territory or any other associations that already serve the 
territory, provided that any such Farm Credit institution is authorized 
to make such a loan in accordance with part 614 of this chapter; and an 
explanation of the procedure for a borrower to apply for the sale or 
refinancing of his loan to the association(s) that will be chartered to 
serve the terminating association's territory, if such designations have 
been made. The disclosure shall include the name, address and telephone 
number of such association(s), together with a statement that any such 
association is not obligated to accept any loans of the terminating 
association.
    (i) An explanation of the formula and process by which equity of the 
terminating association will be exchanged for equity in the successor 
institution or other consideration.
    (j) A description of any agreement or arrangement with any person, 
including any officers or directors of the terminating association, 
relating to employment or termination of employment with the terminating 
association or employment with the successor institution.
    (k) An explanation of the computation of the exit fee and the 
estimated amount of the exit fee.
    (l) A statement detailing the nature and type of financial 
institution that the successor institution will become after termination 
and the conditions of approval, if any, placed on the successor 
institution by the State or Federal financial regulator that will 
charter the successor institution.
    (m) A summary of the differences, if any, between the terminating 
association and the successor institution with respect to interest 
rates, interest rate policies, collection policies, services provided, 
service fees, and any other item of interest that would affect a 
borrower's lending relationship with the successor institution including 
whether stockholders will be restricted in any way in their ability to 
borrow from the successor institution.
    (n) A discussion of the expected capital requirements of the 
successor institution, and the amount and method

[[Page 73]]

of capitalization for the successor institution.
    (o) An explanation of the sources and manner of funding the 
operations of the successor institution.
    (p) An explanation of the existence of any continuing contingent 
liability that will not be paid immediately upon termination and the 
manner in which this liability will be addressed by the successor 
institution.
    (q) A summary of the differences in tax status of the terminating 
association and the successor institution, and an explanation of the 
effect of such changes on both the successor institution and the 
stockholders.
    (r) A brief description of the regulatory environment for the 
successor institution and a summary of the differences from the current 
regulatory environment that affect the cost of doing business of the 
value of equity and that are not addressed elsewhere in the information 
statement.
    (s) A statement describing those stockholders and other holders of 
equity that are entitled to dissenters' rights and an explanation of 
those rights as set forth in Sec. 611.1260, including the estimated 
value of the stock upon distribution, procedures for the exercise of 
dissenters' rights, and the time period during which such rights may be 
exercised, and a statement that eligible voting stockholders who do not 
vote against the termination will not receive dissenters' rights.
    (t)(1) A presentation of the following financial data:
    (i) A balance sheet and income statement for the terminating 
institution for each of the 2 preceding fiscal years;
    (ii) A balance sheet for the terminating institution as of a date 
within 90 days of the date the termination application is forwarded to 
the Farm Credit Administration, presented on a comparative basis with 
the corresponding period of the prior fiscal year;
    (iii) An income statement for the interim period between the end of 
the last fiscal year and the date of the required balance sheet 
presented on a comparative basis with the corresponding period of the 
prior fiscal year;
    (iv) A pro forma balance sheet of the successor institution 
presented as if termination had occurred as of the date of the most 
current balance sheet presented in the statement; and
    (v) A pro forma summary of earnings for the successor institution 
presented as if the termination has been effective at the beginning of 
the interim period between the end of the last fiscal year and the date 
of the balance sheet presented pursuant to paragraph (t)(1)(iv) of this 
section.
    (2) The format for the balance sheet and income statement shall be 
the same as is contained in the institution's annual report to 
stockholders and shall contain appropriate footnote disclosures, 
including data relating to high-risk assets and other property owned, 
and allowance for losses.
    (3) The financial statements shall include either of the following:
    (i) A statement signed by the chief executive officer and each 
member of the board of directors of the terminating association that the 
various financial statements are unaudited, but have been prepared in 
all material respects in accordance with GAAP (except as otherwise 
disclosed therein) and are, to the best of each signer's knowledge, a 
fair and accurate presentation of the financial condition of the 
association; or
    (ii) A signed opinion by an independent certified public accountant 
that the various financial statements have been examined in accordance 
with generally accepted auditing standards and, accordingly, included 
such tests of the accounting records and other such auditing procedures 
as were considered necessary in the circumstances, and, as of the date 
of the statements, present fairly the financial position of the 
terminating association in accordance with GAAP applied on a consistent 
basis, except as otherwise disclosed therein.
    (u) A description of any event subsequent to the date of the 
financial statements, but prior to the date upon which the termination 
application is submitted to the Farm Credit Administration, that would 
have a material impact on the financial condition of the terminating 
association or the successor institution.

[[Page 74]]

    (v) A description of any event subsequent to the submission of the 
termination application to the Farm Credit Administration that would 
have a material impact on any information in the termination 
application.
    (w) A statement of any other material fact or circumstance that a 
stockholder would need to know in order to make an informed decision on 
the proposed plan of termination, or that is necessary to make the 
required disclosures not misleading.
    (x) A proxy, together with instructions on the purpose and authority 
for its use, and the proper method for signature by the stockholder.
    (y) A certification signed by the entire board of directors of the 
terminating association as to the truth, accuracy, and completeness of 
the information contained in the information statement. If any director 
refuses to sign the certification, the director shall inform the Farm 
Credit Administration of the reasons for such refusal.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991; 58 FR 48790, 
Sept. 20, 1993]



Sec. 611.1226  Prohibited acts.

    (a) No terminating association or director, officer, employee or 
agent thereof, shall make any untrue or misleading statement of a 
material fact, or fail to disclose any material fact concerning the 
proposed plan of termination to a stockholder of the association.
    (b) No director, officer, employee, or agent of a terminating 
association shall make an oral or written representation to any person 
that a preliminary or final approval by the Farm Credit Administration 
of an association's plan of termination constitutes, directly or 
indirectly, either a recommendation on the merits of the proposal or an 
assurance concerning the adequacy or accuracy of any information 
provided to the association's stockholders and other equity holders in 
connection therewith.



Sec. 611.1230  Plan of termination.

    The plan of termination shall include the following information:
    (a) Copies of all contracts, agreements and other documents 
pertaining to the proposed termination and organization of the successor 
institution.
    (b) A statement of the means by which the assets of the terminating 
association will be transferred to, and its liabilities assumed by, the 
successor institution.
    (c) The terminating association's plan to retire, and the successor 
institution's plan to issue, equities held by holders of stock, 
participation certificates, and allocated equities, if any.
    (d) A copy of the charter application filed with the appropriate 
Federal or State chartering authority, together with any exhibits or 
other supporting information that is submitted to such authority.
    (e) A statement whether the successor institution will continue to 
have a credit relationship with the Farm Credit bank and the effect such 
status will have on the provision for payment of the terminating 
association's debts. The plan of termination shall include evidence of 
the agreement and plan for satisfaction of outstanding debts, whether 
contained in a general financing agreement or otherwise.
    (f) The proposed effective date of the termination.



Sec. 611.1235  Stockholder reconsideration.

    (a) Eligible voting stockholders have the right to reconsider the 
approval of the termination provided that--
    (1) A petition signed by 15 percent of the eligible voting 
stockholders of the association is filed with the association, and a 
copy of such petition is filed with the Farm Credit Administration, 
within 35 days after the date of mailing of the notification to 
stockholders of the final results of the stockholder vote required under 
Sec. 611.1215; and
    (2) Such petition is certified by the terminating association as 
provided in paragraph (b) of this section.
    (b) Each petition shall include the signature, printed name and full 
address of each voting stockholer signing the petition. Within 5 days of 
its receipt of a timely filed stockholder petition, the association 
shall certify whether the signatures on the petition are the signatures 
of persons who were

[[Page 75]]

eligible voting stockholders of the terminating association on the 
voting record date, and the association shall notify the Farm Credit 
Administration of such certification.
    (c) The petition shall include the name and address of a person who 
shall serve as petitioners' representative and who shall represent the 
interests of the petitioners in the reconsideration vote process.
    (d) If the terminating association certifies that at least 15 
percent of eligible voting stockholders have signed the petition, a 
special stockholders' meeting shall be called by the association to vote 
on the reconsideration. Such meeting shall be held within 60 days after 
the date on which the stockholders were notified of the final result of 
the termination vote. If a majority of stockholders of the association 
voting in person or by written proxy vote against the termination, the 
termination is not approved. If a majority of stockholders of the 
association voting in person or by written proxy do not vote against the 
termination, the termination shall be effective pursuant to the 
provisions of Sec. 611.1215(f), but not less than 15 days after the 
reconsideration vote.
    (e) The petitioners, through the petitioners' representative, and 
board of directors of the terminating association shall each have the 
opportunity to present to the stockholders and other equity holders a 
written statement of their views regarding the reasons for calling a 
reconsideration vote. Such statements shall be reasonable in length and 
shall be mailed to stockholders and other equity holders along with the 
notice of stockholders' meeting for the reconsideration vote.
    (f) The terminating association shall, at its expense, immediately 
provide the stockholders initiating the petition with a list of the 
names and addresses of all of the eligible voting stockholders of the 
association. All other expenses for the petition shall be borne by the 
petitioners. Reasonable expenses for the reconsideration vote shall be 
borne by the terminating association.



Sec. 611.1240  Exit fee.

    (a) For the purposes of this section, the following definitions 
apply:
    (1) Assets means all assets less appropriate valuation reserves as 
determined in accordance with GAAP except where otherwise noted in this 
section.
    (2) Contingent liabilities means those liabilities that, in 
accordance with GAAP, will materialize if certain events occur.
    (3) Total capital means all capital stock, surplus and undivided 
profits accounts as determined in accordance with GAAP, except where 
otherwise noted in this section, and as adjusted pursuant to the 
requirements of Sec. 611.1240.
    (b) A terminating association shall pay an exit fee equal to the 
amount by which the total capital of the association exceeds 6 percent 
of its assets. The exit fee shall be paid to the Farm Credit Assistance 
Fund if the effective date of termination is prior to January 1, 1992 or 
to the Farm Credit Insurance Fund if the effective date is after that 
date.
    (c) The computation date for the exit fee shall be the quarter end 
preceding the filing date. A certified audit of the terminating 
association shall be performed by a qualified public accountant, as 
defined in Sec. 621.2(i), as of the computation date. The Farm Credit 
Administration may, in its complete discretion, waive this requirement 
if such an audit was performed as of a date within the 6 months 
preceding the computation date.
    (d) The method of computation shall be as follows:
    (1) The average daily balance of assets and total capital for the 
past 12 months preceding the computation date will be computed as a 
basis for determining the exit fee; and
    (2) Account balances shall be computed in accordance with GAAP and 
adjusted in accordance with paragraphs (e), (f), (g), and (h) of this 
section.
    (e) For purposes of determining the amount of the exit fee, the Farm 
Credit Administration will review the terminating association's 
transactions over a 3-year period prior to the date of the adoption of 
the termination resolution.

[[Page 76]]

If this review determines that the terminating association's account 
balances do not accurately reflect the value of its assets and 
liabilities, or that the association has retired capital outside the 
ordinary course of business, or that the association has taken any other 
actions unrelated to its core business that have the effect of 
increasing or decreasing the amount of the exit fee, the Farm Credit 
Administration may make adjustments to the association's assets, 
liabilities, or capital and recompute the exit fee based on these 
adjustments. The review by the Farm Credit Administration shall include, 
but not be limited to:
    (1) Additions to or subtractions from the allowance for loan losses;
    (2) Additions to assets from transactions that are outside the 
terminating association's ordinary course of business;
    (3) Dividends or patronage refunds exceeding the terminating 
association's usual practices;
    (4) Changes in the terminating association's capitalization plan or 
implementation of that plan that increased or decreased the level of 
borrower investment;
    (5) Contingent liabilities, such as loss-sharing obligations, that 
can be reasonably quantified; and
    (6) Assets that may be overvalued, undervalued or not recorded on 
the books of the association.
    (f) Capital of the terminating association owned by another Farm 
Credit institution or by the Financial Assistance Corporation shall not 
be included in capital for the purpose of determining the exit fee.
    (g) In the event that GAAP requires that a liability be recorded on 
the balance sheet that will be offset by an unrecorded asset, the 
transaction recording the liability shall be reversed.
    (h) In the event the terminating association has recorded expenses 
that would not have been recorded but for the termination, such 
transactions shall be reversed.
    (i) The exit fee shall be paid by certified check, or other means 
agreed upon by the Farm Credit Administration and the terminating 
association.

[56 FR 3407, Jan. 30, 1991, as amended at 58 FR 48790, Sept. 20, 1993]



Sec. 611.1250  Repayment of debts.

    (a) The terminating association shall provide for the payment or 
assumption by the successor institution of all outstanding debt 
obligations.
    (b) The terminating association may establish and maintain an OFI 
relationship with the Farm Credit Bank or agricultural credit bank, 
subject to all applicable requirements of part 614, subpart P, of this 
chapter. The general financing agreement establishing the OFI 
relationship shall provide for the assumption by the successor 
institution of any direct loan or other obligation that a production 
credit association is authorized to incur and that is not repaid at the 
time of termination. Any part of the direct loan or other obligation 
that is not linked to a loan covered by the general financing agreement 
shall be repaid as provided in paragraph (c) of this section.
    (c) A terminating association that will not become an OFI shall 
either repay its direct loan and any other obligations to the Farm 
Credit Bank or agricultural credit bank upon termination or shall 
arrange with the appropriate bank to repay the loan or obligation. The 
terminating association may, with the concurrence of the Farm Credit 
Bank or agricultural credit bank, repay the loan or obligation over a 
period that shall not exceed 3 years following termination.
    (d) The terminating association shall pay or make provision for 
payment of obligations to any other Farm Credit institutions under any 
loss-sharing agreement or other agreement.

[56 FR 3407, Jan. 30, 1991, as amended at 61 FR 67186, Dec. 20, 1996]



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

[[Page 77]]

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.

[61 FR 67186, Dec. 20, 1996]



Sec. 611.1260  Dissenters' rights.

    (a) Dissenting stockholders, at their discretion, may, but are not 
required to, have their stock or participation certificates in the 
terminating association retired as provided in paragraph (b) of this 
section. To be eligible to be a dissenting stockholder a person must be 
the owner, other than a Farm Credit institution, of voting or non-voting 
stock or other equities of the terminating association who was either-
    (1) Not eligible to vote on the termination resolution; or
    (2) Eligible to vote on the termination resolution and voted, in 
person or by proxy, against such resolution.
    (b) The terminating association shall pay dissenting stockholders in 
accordance with the priorities in liquidation set forth in the bylaws of 
the terminating association. Notwithstanding any provision of paragraph 
(c) to the contrary, dissenting stockholders who hold eligible borrower 
stock shall receive not less than par value for their stock.
    (c)(1) Except as provided in paragraph (d) of this section, the 
price paid to dissenting stockholders who own common stock or 
participation certificates shall be the adjusted book value, which is 
the book value on the computation date adjusted to reflect--
    (i) Any increase or decrease in asset value resulting from the 
appraisals required in Sec. 611.1240; and
    (ii) Deduction of the amount of the exit fee.
    (2) Payments made to dissenting stockholders who own common stock or 
participation certificates referred to in paragraph (c)(1) of this 
section shall be made on the following basis. If the adjusted book value 
of the common stock is less than or equal to the par or stated value of 
the stock, the full amount of the payment shall be in cash. If the 
adjusted book value of the common stock is greater than its par or 
stated value, the association:
    (i) Shall pay in cash an amount equal to the par or stated value of 
the stock or participation certificate; and
    (ii) Shall cause or otherwise provide for the successor institution 
to issue on the date of termination subordinated debt to the stockholder 
in an amount equal to the amount by which the book value exceeds the par 
or stated value of the stock or participation certificate. Such 
subordinated notes shall have a maturity date not in excess of 7 years 
after the date of issuance, shall have a priority on liquidation ahead 
of all equity shares but shall be subordinated to the claims of

[[Page 78]]

all other creditors, and shall carry a rate of interest that shall be 
not less than the rate for debt of comparable maturity issued by the 
Treasury of the United States plus 1 percent.
    (d) If the association has adopted bylaws in accordance with 
Sec. 611.1210(e), dissenting stockholders who own common stock or 
participation certificates issued in accordance with such bylaws shall 
be paid in cash an amount equal to the lesser of the par or adjusted 
book value of such stock or certificates.
    (e) For the purposes of this section, common stock consists of 
voting stock, non-voting stock that was formerly voting stock, and stock 
that has no priority of payment over any other class upon liquidation.
    (f) The notice to stockholders and other holders of equity interests 
required in Sec. 611.1220(e) shall include the following information:
    (1) A statement of the rights of dissenting stockholders as 
specified in paragraph (a) of this section;
    (2) The current book and par value per share, and the expected book 
and market value of the stockholder's pro rata interest in the successor 
institution; and
    (3) An explanation of the procedure by which stockholders may 
exercise dissenters' rights and the form they shall return to the 
terminating association informing it of their intent to exercise such 
rights. The notification form by which stockholders may exercise 
dissenters' rights shall include the date by which the form must be 
returned to the terminating association, as specified in paragraph (b) 
of this section, and a place for stockholders to mark or indicate that 
they intend to exercise dissenters' rights. The notification form shall 
be a convenient method for the stockholders to notify the association 
and may consist of, but is not limited to, a postcard or pre- printed 
return envelope.
    (g) An explanation that dissenting stockholders shall have until 30 
days following notification of their dissenters' rights to request 
retirement of their stock or participation certificates. The 
stockholders' election to retire stock shall be rescinded in a petition 
for reconsideration is successful.
    (h) An explanation that maintenance of a borrowing relationship with 
the successor institution shall not be required as a condition for 
owning stock in the successor institution, unless otherwise directed by 
the bylaws of the successor institution.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991]



Sec. 611.1266  Loan refinancing by borrowers.

    (a) All loans and loan assets of the terminating association shall 
become assets of the successor institution unless they have been sold by 
the terminating association to another lending institution or refinanced 
by the borrower.
    (b) If an association has been designated to serve the territory of 
the terminating association prior to the mailing of the information 
statement, or if an association that offers credit services of the same 
type as the terminating association is already chartered to serve the 
territory, such association shall be identified in the information 
statement. In addition, such association shall provide the terminating 
association with the following information:
    (1) The name and address of the association office that the borrower 
may contact;
    (2) An explanation of the procedures to apply for financing with the 
association and the procedures by which the loan may be transferred to 
the association;
    (3) An explanation of the stock purchase requirements of the new 
association; and
    (4) Any other information the association wishes to include or 
routinely provides to new borrowers.
    (c) If the terminating association receives the information required 
in paragraph (b) of this section prior to the mailing of the information 
statement to borrowers, the terminating association shall include such 
information in the information statement. If an association has not been 
designated to serve the territory or if the terminating association does 
not receive the information required in paragraph (b) of this section 
prior to the mailing of

[[Page 79]]

the information statement, the terminating association shall furnish 
each borrower with the address and telephone number of the funding bank 
with instructions that the bank may be contacted in the future to 
determine the name and address of the association(s) that will serve the 
territory in the future.
    (d) The terminating association shall provide credit and loan 
information to the association designated to serve the territory upon 
the borrower's request, in accordance with Secs. 618.8300 through 
618.8325, and take such other steps as are necessary to facilitate the 
transfer of the loan to the association.

[56 FR 3407, Jan. 30, 1991, as amended at 61 FR 67186, Dec. 20, 1996]



Sec. 611.1270  Continuation of borrower rights.

    Terminating associations which maintain an OFI relationship with the 
Farm Credit bank shall comply with borrower rights provisions contained 
in part 614, subparts K, L, M and N of this chapter. The terminating 
association may not require a waiver of applicable borrower rights 
provisions as a condition of ownership interest in and continued 
financing by the successor institution.

[56 FR 3407, Jan. 30, 1991; 56 FR 11589, Mar. 19, 1991]



PART 612--STANDARDS OF CONDUCT--Table of Contents




Sec.
612.2130  Definitions.
612.2135  Director and employee responsibilities and conduct--generally.
612.2140  Directors--prohibited conduct.
612.2145  Director reporting.
612.2150  Employees--prohibited conduct.
612.2155  Employee reporting.
612.2157  Joint employees.
612.2160  Institution responsibilities.
612.2165  Policies and procedures.
612.2170  Standards of Conduct Official.
612.2260  Standards of conduct for agents.
612.2270  Purchase of System obligations.

    Authority: Secs. 5.9, 5.17, 5.19 of the Farm Credit Act (12 U.S.C. 
2243, 2252, 2254).

    Source: 59 FR 24894, May 13, 1994, unless otherwise noted.



Sec. 612.2130  Definitions.

    For purposes of this part, the following terms are defined:
    (a) Agent means any person, other than a director or employee, who 
represents a System institution in contacts with third parties or who 
provides professional services to a System institution, such as legal, 
accounting, appraisal, and other similar services.
    (b) A conflict of interest or the appearance thereof exists when a 
person has a financial interest in a transaction, relationship, or 
activity that actually affects or has the appearance of affecting the 
person's ability to perform official duties and responsibilities in a 
totally impartial manner and in the best interest of the employing 
institution when viewed from the perspective of a reasonable person with 
knowledge of the relevant facts.
    (c) Controlled entity and entity controlled by mean an entity in 
which the individual, directly or indirectly, or acting through or in 
concert with one or more persons:
    (1) Owns 5 percent or more of the equity;
    (2) Owns, controls, or has the power to vote 5 percent or more of 
any class of voting securities; or
    (3) Has the power to exercise a controlling influence over the 
management of policies of such entity.
    (d) Director means a member of a board of directors.
    (e) Employee means any salaried officer or part-time, full-time, or 
temporary salaried employee.
    (f) Entity means a corporation, company, association, firm, joint 
venture, partnership (general or limited), society, joint stock company, 
trust (business or otherwise), fund, or other organization or 
institution, except System institutions.
    (g) Family means an individual and spouse and anyone having the 
following relationship to either: parents, spouse, son, daughter, 
sibling, stepparent, stepson, stepdaughter, stepbrother, stepsister, 
half brother, half sister, uncle, aunt, nephew, niece, grandparent, 
grandson, granddaughter, and the spouses of the foregoing.
    (h) Financial interest means an interest in an activity, 
transaction, property, or relationship with a person or

[[Page 80]]

an entity that involves receiving or providing something of monetary 
value or other present or deferred compensation.
    (i) Financially obligated with means having a joint legally 
enforceable obligation with, being financially obligated on behalf of 
(contingently or otherwise), having an enforceable legal obligation 
secured by property owned by another, or owning property that secures an 
enforceable legal obligation of another.
    (j) Material, when applied to a financial interest or transaction or 
series of transactions, means that the interest or transaction or series 
of transactions is of such magnitude that a reasonable person with 
knowledge of the relevant facts would question the ability of the person 
who has the interest or is party to such transaction(s) to perform his 
or her official duties objectively and impartially and in the best 
interest of the institution and its statutory purpose.
    (k) Mineral interest means any interest in minerals, oil, or gas, 
including, but not limited to, any right derived directly or indirectly 
from a mineral, oil, or gas lease, deed, or royalty conveyance.
    (l) OFI means other financing institutions that have established an 
access relationship with a Farm Credit Bank or an agricultural credit 
bank under section 1.7(b)(1)(B) of the Act.
    (m) Officer means the chief executive officer, president, chief 
operating officer, vice president, secretary, treasurer, general 
counsel, chief financial officer, and chief credit officer of each 
System institution, and any person not so designated who holds a similar 
position of authority.
    (n) Ordinary course of business, when applied to a transaction, 
means: (1) A transaction that is usual and customary between two persons 
who are in business together; or
    (2) A transaction with a person who is in the business of offering 
the goods or services that are the subject of the transaction on terms 
that are not preferential. Preferential means that the transaction is 
not on the same terms as those prevailing at the same time for 
comparable transactions for other persons who are not directors or 
employees of a System institution.
    (o) Person means individual or entity.
    (p) Relative means any member of the family as defined in paragraph 
(g) of this section.
    (q) Service organization means each service organization authorized 
by section 4.25 of the Act, and each unincorporated service organization 
formed by one or more System institutions.
    (r) Standards of Conduct Official means the official designated 
under Sec. 612.2170 of these regulations.
    (s) Supervised institution is a term which only applies within the 
context of a System bank or an employee of a System bank and refers to 
each association supervised by that bank.
    (t) Supervising institution is a term that only applies within the 
context of an association or an employee of an association and refers to 
the bank that supervises that association.
    (u) System institution and institution mean any bank, association, 
or service organization in the Farm Credit System, including the Farm 
Credit Banks, banks for cooperatives, agricultural credit banks, Federal 
land bank associations, agricultural credit associations, Federal land 
credit associations, production credit associations, the Federal Farm 
Credit Banks Funding Corporation, and service organizations.



Sec. 612.2135  Director and employee responsibilities and conduct--generally.

    (a) Directors and employees of all System institutions shall 
maintain high standards of industry, honesty, integrity, impartiality, 
and conduct in order to ensure the proper performance of System business 
and continued public confidence in the System and each of its 
institutions. The avoidance of misconduct and conflicts of interest is 
indispensable to the maintenance of these standards.
    (b) To achieve these high standards of conduct, directors and 
employees shall observe, to the best of their abilities, the letter and 
intent of all applicable local, state, and Federal laws and regulations 
and policy statements, instructions, and procedures of the Farm Credit 
Administration and System institutions and shall exercise diligence and 
good judgment in carrying out

[[Page 81]]

their duties, obligations, and responsibilities.



Sec. 612.2140  Directors--prohibited conduct.

    A director of a System institution shall not:
    (a) Participate, directly or indirectly, in deliberations on, or the 
determination of, any matter affecting, directly or indirectly, the 
financial interest of the director, any relative of the director, any 
person residing in the director's household, any business partner of the 
director, or any entity controlled by the director or such persons 
(alone or in concert), except those matters of general applicability 
that affect all shareholders/borrowers in a nondiscriminatory way, e.g., 
a determination of interest rates.
    (b) Divulge or make use of, except in the performance of official 
duties, any fact, information, or document not generally available to 
the public that is acquired by virtue of serving on the board of a 
System institution.
    (c) Use the director's position to obtain or attempt to obtain 
special advantage or favoritism for the director, any relative of the 
director, any person residing in the director's household, any business 
partner of the director, any entity controlled by the director or such 
persons (alone or in concert), any other System institution, or any 
person transacting business with the institution, including borrowers 
and loan applicants.
    (d) Use the director's position or information acquired in 
connection with the director's position to solicit or obtain, directly 
or indirectly, any gift, fee, or other present or deferred compensation 
or for any other personal benefit on behalf of the director, any 
relative of the director, any person residing in the director's 
household, any business partner of the director, any entity controlled 
by the director or such persons (alone or in concert), any other System 
institution, or any person transacting business with the institution, 
including borrowers and loan applicants.
    (e) Accept, directly or indirectly, any gift, fee, or other present 
or deferred compensation that is offered or could reasonably be viewed 
as being offered to influence official action or to obtain information 
that the director has access to by reason of serving on the board of a 
System institution.
    (f) Knowingly acquire, directly or indirectly, except by inheritance 
or through public auction or open competitive bidding available to the 
general public, any interest in any real or personal property, including 
mineral interests, that was owned by the employing, supervising, or any 
supervised institution within the preceding 12 months and that had been 
acquired by any such institution as a result of foreclosure or similar 
action; provided, however, a director shall not acquire any such 
interest in real or personal property if he or she participated in the 
deliberations or decision to foreclose or to dispose of the property or 
in establishing the terms of the sale.
    (g) Directly or indirectly borrow from, lend to, or become 
financially obligated with or on behalf of a director, employee, or 
agent of the employing, supervising, or a supervised institution or a 
borrower or loan applicant of the employing institution, unless:
    (1) The transaction is with a relative or any person residing in the 
director's household;
    (2) The transaction is undertaken in an official capacity in 
connection with the institution's discounting, lending, or participation 
relationships with OFIs and other lenders; or
    (3) The Standards of Conduct Official determines, pursuant to 
policies and procedures adopted by the board, that the potential for 
conflict is insignificant because the transaction is in the ordinary 
course of business or is not material in amount and the director does 
not participate in the determination of any matter affecting the 
financial interests of the other party to the transaction except those 
matters affecting all shareholders/borrowers in a nondiscriminatory way.
    (h) Violate an institution's policies and procedures governing 
standards of conduct.



Sec. 612.2145  Director reporting.

    (a) Annually, as of the institution's fiscal year end, and at such 
other times as may be required to comply with

[[Page 82]]

paragraph (c) of this section, each director shall file a written and 
signed statement with the Standards of Conduct Official that fully 
discloses:
    (1) The names of any immediate family members as defined in 
Sec. 620.1(e) of this chapter, or affiliated organizations, as defined 
in Sec. 620.1(a) of this chapter, who had transactions with the 
institution at any time during the year;
    (2) Any matter required to be disclosed by Sec. 620.5(k) of this 
chapter; and
    (3) Any additional information the institution may require to make 
the disclosures required by part 620 of this chapter.
    (b) Each director shall, at such intervals as the institution's 
board shall determine is necessary to effectively enforce this 
regulation and the institution's standards-of-conduct policy adopted 
pursuant to Sec. 612.2165, file a written and signed statement with the 
Standards of Conduct Official that contains those disclosures required 
by the regulations and such policy. At a minimum, these requirements 
shall include:
    (1) The name of any relative or any person residing in the 
director's household, business partner, or any entity controlled by the 
director or such persons (alone or in concert) if the director knows or 
has reason to know that such individual or entity transacts business 
with the institution or any institution supervised by the director's 
institution; and
    (2) The name and the nature of the business of any entity in which 
the director has a material financial interest or on whose board the 
director sits if the director knows or has reason to know that such 
entity transacts business with:
    (i) The director's institution or any institution supervised by the 
director's institution; or
    (ii) A borrower of the director's institution or any institution 
supervised by the director's institution.
    (c) Any director who becomes or plans to become involved in any 
relationship, transaction, or activity that is required to be reported 
under this section or could constitute a conflict of interest shall 
promptly report such involvement in writing to the Standards of Conduct 
Official for a determination of whether the relationship, transaction, 
or activity is, in fact, a conflict of interest.
    (d) Unless a disclosure as a director candidate under part 620 of 
this chapter has been made within the preceding 180 days, a newly 
elected or appointed director shall report matters required to be 
reported in paragraphs (a), (b), and (c) of this section to the 
Standards of Conduct Official within 30 days after the election or 
appointment and thereafter shall comply with the requirements of this 
section.



Sec. 612.2150  Employees--prohibited conduct.

    An employee of a System institution shall not:
    (a) Participate, directly or indirectly, in deliberations on, or the 
determination of, any matter affecting, directly or indirectly, the 
financial interest of the employee, any relative of the employee, any 
person residing in the employee's household, any business partner of the 
employee, or any entity controlled by the employee or such persons 
(alone or in concert), except those matters of general applicability 
that affect all shareholders/borrowers in a nondiscriminating way, e.g. 
a determination of interest rates.
    (b) Divulge or make use of, except in the performance of official 
duties, any fact, information, or document not generally available to 
the public that is acquired by virtue of employment with a System 
institution.
    (c) Use the employee's position to obtain or attempt to obtain 
special advantage or favoritism for the employee, any relative of the 
employee, any person residing in the employee's household, any business 
partner of the employee, any entity controlled by the employee or such 
persons (alone or in concert), any other System institution, or any 
person transacting business with the institution, including borrowers 
and loan applicants.
    (d) Serve as an officer or director of an entity that transacts 
business with a System institution in the district or of any commercial 
bank, savings and loan, or other non-System financial institution, 
except employee credit

[[Page 83]]

unions. For the purposes of this paragraph, ``transacts business'' does 
not include loans by a System institution to a family-owned entity, 
service on the board of directors of the Federal Agricultural Mortgage 
Corporation, or transactions with nonprofit entities or entities in 
which the System institution has an ownership interest. With the prior 
approval of the board of the employing institution, an employee of a 
Farm Credit Bank or association may serve as a director of a cooperative 
that borrows from a bank for cooperatives. Prior to approving an 
employee request, the board shall determine whether the employee's 
proposed service as a director is likely to cause the employee to 
violate any regulations in this part or the institution's policies, 
e.g., the requirements relating to devotion of time to official duties.
    (e) Use the employee's position or information acquired in 
connection with the employee's position to solicit or obtain any gift, 
fee, or other present or deferred compensation or for any other personal 
benefit for the employee, any relative of the employee, any person 
residing in the employee's household, any business partner of the 
employee, any entity controlled by the employee or such persons (alone 
or in concert), any other System institution, or any person transacting 
business with the institution, including borrowers and loan applicants.
    (f) Accept, directly or indirectly, any gift, fee, or other present 
or deferred compensation that is offered or could reasonably be viewed 
as being offered to influence official action or to obtain information 
the employee has access to by reason of employment with a System 
institution.
    (g) Knowingly acquire, directly or indirectly, except by 
inheritance, any interest in any real or personal property, including 
mineral interests, that was owned by the employing, supervising, or any 
supervised institution within the preceding 12 months and that had been 
acquired by any such institution as a result of foreclosure or similar 
action.
    (h) Directly or indirectly borrow from, lend to, or become 
financially obligated with or on behalf of a director, employee, or 
agent of the employing, supervising, or a supervised institution or a 
borrower or loan applicant of the employing institution, unless:
    (1) The transaction is with a relative or any person residing in the 
employee's household;
    (2) The transaction is undertaken in an official capacity in 
connection with the institution's discounting, lending, or participation 
relationships with OFIs and other lenders; or
    (3) The Standards of Conduct Official determines, pursuant to 
policies and procedures adopted by the board, that the potential for 
conflict is insignificant because the transaction is in the ordinary 
course of business or is not material in amount and the employee does 
not participate in the determination of any matter affecting the 
financial interests of the other party to the transaction except those 
matters affecting all shareholders/borrowers in a nondiscriminatory way.
    (i) Violate an institution's policies and procedures governing 
standards of conduct.
    (j) Act as a real estate agent or broker; provided that this 
paragraph shall not apply to transactions involving the purchase or sale 
of real estate intended for the use of the employee, a member of the 
employee's family, or a person residing in the employee's household.
    (k) Act as an agent or broker in connection with the sale and 
placement of insurance; provided that this paragraph shall not apply to 
the sale or placement of insurance authorized by section 4.29 of the 
Act.



Sec. 612.2155  Employee reporting.

    (a) Annually, as of the institution's fiscal yearend, and at such 
other times as may be required to comply with paragraph (c) of this 
section, each senior officer, as defined in Sec. 620.1(o) of this 
chapter, shall file a written and signed statement with the Standards of 
Conduct Official that fully discloses:
    (1) The names of any immediate family members, as defined in 
Sec. 620.1(e) of this chapter, or affiliated organizations, as defined 
in Sec. 620.1(a) of this chapter, who had transactions with the 
institution at any time during the year;

[[Page 84]]

    (2) Any matter required to be disclosed by Sec. 620.5(k) of this 
chapter; and
    (3) Any additional information the institution may require to make 
the disclosures required by part 620 of this chapter.
    (b) Each employee shall, at such intervals as the Board shall 
determine necessary to effectively enforce this regulation and the 
institution's standards-of-conduct policy adopted pursuant to 
Sec. 612.2165, file a written and signed statement with the Standards of 
Conduct Official that contains those disclosures required by the 
regulation and such policy. At a minimum, these requirements shall 
include:
    (1) The name of any relative or any person residing in the 
employee's household, any business partner, or any entity controlled by 
the employee or such persons (alone or in concert) if the employee knows 
or has reason to know that such individual or entity transacts business 
with the employing institution or any institution supervised by the 
employing institution; and
    (2) The name and the nature of the business of any entity in which 
the employee has a material financial interest or on whose board the 
employee sits if the employee knows or has reason to know that such 
entity transacts business with:
    (i) The employing institution or any institution supervised by the 
employing institution; or
    (ii) A borrower of the employing institution or any institution 
supervised by the employing institution.
    (c) Any employee who becomes or plans to become involved in any 
relationship, transaction, or activity that is required to be reported 
under this section or could constitute a conflict of interest shall 
promptly report such involvement in writing to the Standards of Conduct 
Official for a determination of whether the relationship, transaction, 
or activity is, in fact, a conflict of interest.
    (d) A newly hired employee shall report matters required to be 
reported in paragraphs (a), (b), and (c) of this section to the 
Standards of Conduct Official within 30 days after accepting an offer 
for employment and thereafter shall comply with the requirements of this 
section.



Sec. 612.2157  Joint employees.

    No officer of a Farm Credit Bank or an agricultural credit bank may 
serve as an employee of an association in its district and no employee 
of a Farm Credit Bank or an agricultural credit bank may serve as an 
officer of an association in its district. Farm Credit Bank or 
agricultural credit bank employees other than officers may serve as 
employees other than officers of an association in its district provided 
each institution appropriately reflects the expense of such employees in 
its financial statements.



Sec. 612.2160  Institution responsibilities.

    Each institution shall: (a) Ensure compliance with this part by its 
directors and employees and act promptly to preserve the integrity of 
and public confidence in the institution in any matter involving a 
conflict of interest, whether or not specifically addressed by this part 
or the policies and procedures adopted pursuant to Sec. 612.2165;
    (b) Take appropriate measures to ensure that all directors and 
employees are informed of the requirements of this regulation and 
policies and procedures adopted pursuant to Sec. 612.2165;
    (c) Adopt and implement policies and procedures that will preserve 
the integrity of and public confidence in the institution and the System 
pursuant to Sec. 612.2165;
    (d) Designate a Standards of Conduct Official pursuant to 
Sec. 612.2170; and
    (e) Maintain all standards-of-conduct policies and procedures, 
reports, investigations, determinations, and evidence of compliance with 
this part for a minimum of 6 years.



Sec. 612.2165  Policies and procedures.

    (a) Each institution's board of directors shall issue, consistent 
with this part, policies and procedures governing standards of conduct 
for directors and employees.
    (b) Board policies and procedures issued pursuant to paragraph (a) 
of this section shall reflect due consideration of the potential adverse 
impact of any activities permitted under the policies and shall at a 
minimum:

[[Page 85]]

    (1) Establish such requirements and prohibitions as are necessary to 
promote public confidence in the institution and the System, preserve 
the integrity and independence of the supervisory process, and prevent 
the improper use of official property, position, or information. In 
developing such requirements and prohibitions, the institution shall 
address such issues as the hiring of relatives, political activity, 
devotion of time to duty, the exchange of gifts and favors among 
directors and employees of the employing, supervising, and supervised 
institution, and the circumstances under which gifts may be accepted by 
directors and employees from outside sources, in light of the foregoing 
objectives;
    (2) Outline authorities and responsibilities of the Standards of 
Conduct Official;
    (3) Establish criteria for business relationships and transactions 
not specifically prohibited by this part between employees or directors 
and borrowers, loan applicants, directors, or employees of the 
employing, supervised, or supervising institutions, or persons 
transacting business with such institutions, including OFIs or other 
lenders having an access or participation relationship;
    (4) Establish criteria under which employees may accept outside 
employment or compensation;
    (5) Establish conditions under which employees may receive loans 
from System institutions;
    (6) Establish conditions under which employees may acquire an 
interest in real or personal property that was mortgaged to a System 
institution at any time within the preceding 12 months;
    (7) Establish conditions under which employees may purchase any real 
or personal property of a System institution acquired by such 
institution for its operations. Farm Credit institutions must use open 
competitive bidding whenever they sell surplus property above a stated 
value (as established by the board) to their employees.
    (8) Provide for a reasonable period of time for directors and 
employees to terminate transactions, relationships, or activities that 
are subject to prohibitions that arise at the time of adoption or 
amendment of the policies.
    (9) Require new directors and new employees involved at the time of 
election or hiring in transactions, relationships, and activities 
prohibited by these regulations or internal policies to terminate such 
transactions within the same time period established for existing 
directors or employees pursuant to paragraph (b)(8) of this section, 
beginning with the commencement of official duties, or such shorter time 
period as the institution may establish.
    (10) Establish procedures providing for a director's or employee's 
recusal from official action on any matter in which he or she is 
prohibited from participating under these regulations or the 
institution's policies.
    (11) Establish documentation requirements demonstrating compliance 
with standards-of-conduct decisions and board policy;
    (12) Establish reporting requirements, consistent with this part, to 
enable the institution to comply with Sec. 620.5 of this chapter, 
monitor conflicts of interest, and monitor recusal compliance; and
    (13) Establish appeal procedures available to any employee to whom 
any required approval has been denied.

[59 FR 24894, May 13, 1994, as amended at 64 FR 43048, Aug. 9, 1999]



Sec. 612.2170  Standards of Conduct Official.

    (a) Each institution's board shall designate a Standards of Conduct 
Official who shall:
    (1) Advise directors, director candidates, and employees concerning 
the provisions of this part;
    (2) Receive reports required by this part;
    (3) Make such determinations as are required by this part;
    (4) Maintain records of actions taken to resolve and/or make 
determinations upon each case reported relative to provisions of this 
part;
    (5) Make appropriate investigations, as directed by the 
institution's board; and
    (6) Report promptly, pursuant to part 617 of this chapter, to the 
institution's

[[Page 86]]

board and the Office of General Counsel, Farm Credit Administration, all 
cases where:
    (i) A preliminary investigation indicates that a Federal criminal 
statute may have been violated;
    (ii) An investigation results in the removal of a director or 
discharge of an employee; or
    (iii) A violation may have an adverse impact on continued public 
confidence in the System or any of its institutions.
    (b) The Standards of Conduct Official shall investigate or cause to 
be investigated all cases involving:
    (1) Possible violations of criminal statutes;
    (2) Possible violations of Secs. 612.2140 and 612.2150, and 
applicable policies and procedures approved under Sec. 612.2165;
    (3) Complaints received against the directors and employees of such 
institution; and
    (4) Possible violations of other provisions of this part or when the 
activities or suspected activities are of a sensitive nature and could 
affect continued public confidence in the Farm Credit System.
    (c) An association board may comply with this section by contracting 
with the Farm Credit Bank or agricultural credit bank in its district to 
provide a Standards of Conduct Official.



Sec. 612.2260  Standards of conduct for agents.

    (a) Agents of System institutions shall maintain high standards of 
honesty, integrity, and impartiality in order to ensure the proper 
performance of System business and continued public confidence in the 
System and all its institutions. The avoidance of misconduct and 
conflicts of interest is indispensable to the maintenance of these 
standards.
    (b) System institutions shall utilize safe and sound business 
practices in the engagement, utilization, and retention of agents. These 
practices shall provide for the selection of qualified and reputable 
agents. Employing System institutions shall be responsible for the 
administration of relationships with their agents, and shall take 
appropriate investigative and corrective action in the case of a breach 
of fiduciary duties by the agent or failure of the agent to carry out 
other agent duties as required by contract, FCA regulations, or law.
    (c) System institutions shall be responsible for exercising 
corresponding special diligence and control, through good business 
practices, to avoid or control situations that have inherent potential 
for sensitivity, either real or perceived. These areas include the 
employment of agents who are related to directors or employees of the 
institutions; the solicitation and acceptance of gifts, contributions, 
or special considerations by agents; and the use of System and borrower 
information obtained in the course of the agent's association with 
System institutions.



Sec. 612.2270  Purchase of System obligations.

    (a) Employees and directors of System institutions, other than the 
Federal Farm Credit Banks Funding Corporation, may only purchase joint, 
consolidated, or Systemwide obligations that are:
    (1) Part of an offering available to the general public; and
    (2) Purchased through a dealer or dealer bank affiliated with a 
member of the selling group designated by the Federal Farm Credit Banks 
Funding Corporation or purchased in the secondary market.
    (b) No director or employee of the Federal Farm Credit Banks Funding 
Corporation may purchase or otherwise acquire, directly or indirectly, 
except by inheritance, any joint, consolidated, or Systemwide 
obligation.

[[Page 87]]



PART 613--ELIGIBILITY AND SCOPE OF FINANCING--Table of Contents




    Subpart A--Financing Under Titles I and II of the Farm Credit Act

Sec.
613.3000  Financing for farmers, ranchers, and aquatic producers or 
          harvesters.
613.3005  Lending objective.
613.3010  Financing for processing or marketing operations.
613.3020  Financing for farm-related service businesses.
613.3030  Rural home financing.

  Subpart B--Financing for Banks Operating Under Title III of the Farm 
                               Credit Act

613.3100  Domestic lending.
613.3200  International lending.

Subpart C--Similar Entity Authority Under Sections 3.1(11)(B) and 4.18A 
                               of the Act

613.3300  Participations and other interests in loans to similar 
          entities.

    Authority: Secs. 1.5, 1.7, 1.9, 1.10, 1.11, 2.2, 2.4, 2.12, 3.1, 
3.7, 3.8, 3.22, 4.18A, 4.25, 4.26, 4.27, 5.9, 5.17 of the Farm Credit 
Act (12 U.S.C. 2013, 2015, 2017, 2018, 2019, 2073, 2075, 2093, 2122, 
2128, 2129, 2143, 2206a, 2211, 2212, 2213, 2243, 2252).



    Subpart A--Financing Under Titles I and II of the Farm Credit Act

    Source: 62 FR 4441, Jan. 30, 1997, unless otherwise noted.



Sec. 613.3000   Financing for farmers, ranchers, and aquatic producers or harvesters.

    (a) Definitions. For purposes of this subpart, the following 
definitions apply:
    (1) Bona fide farmer or rancher means a person owning agricultural 
land or engaged in the production of agricultural products, including 
aquatic products under controlled conditions.
    (2) Legal entity means any partnership, corporation, estate, trust, 
or other legal entity that is established pursuant to the laws of the 
United States, any State thereof, the Commonwealth of Puerto Rico, the 
District of Columbia, or any tribal authority and is legally authorized 
to conduct a business.
    (3) Person means an individual who is a citizen of the United States 
or a foreign national who has been lawfully admitted into the United 
States either for permanent residency pursuant to 8 U.S.C. 1101(a)(20) 
or on a visa pursuant to a provision in 8 U.S.C. 1101(a)(15) that 
authorizes such individual to own property or operate or manage a 
business or a legal entity.
    (4) Producer or harvester of aquatic products means a person engaged 
in producing or harvesting aquatic products for economic gain in open 
waters under uncontrolled conditions.
    (b) Eligible borrower. Farm Credit institutions that operate under 
titles I or II of the Act may provide financing to a bona fide farmer or 
rancher, or producer or harvester of aquatic products for any 
agricultural or aquatic purpose and for other credit needs.



Sec. 613.3005  Lending objective.

    It is the objective of each bank and association, except for banks 
for cooperatives, to provide full credit, to the extent of 
creditworthiness, to the full-time bona fide farmer (one whose primary 
business and vocation is farming, ranching, or producing or harvesting 
aquatic products); and conservative credit to less than full-time 
farmers for agricultural enterprises, and more restricted credit for 
other credit requirements as needed to ensure a sound credit package or 
to accommodate a borrower's needs as long as the total credit results in 
being primarily an agricultural loan. However, the part-time farmer who 
needs to seek off-farm employment to supplement farm income or who 
desires to supplement off-farm income by living in a rural area and is 
carrying on a valid agricultural operation, shall have availability of 
credit for mortgages, other agricultural purposes, and family needs in 
the preferred position along with full-time farmers. Loans to farmers 
shall be on an increasingly conservative basis as the emphasis moves 
away from the full-time bona fide farmer to the point where agricultural 
needs only will be financed for the applicant whose business is 
essentially other than farming. Credit shall not be extended where 
investment in agricultural assets for speculative appreciation is a 
primary factor.

[[Page 88]]



Sec. 613.3010  Financing for processing or marketing operations.

    (a) Eligible borrowers. A borrower is eligible for financing for a 
processing or marketing operation under titles I and II of the Act, only 
if the borrower meets the following requirements:
    (1) The borrower is either a bona fide farmer, rancher, or producer 
or harvester of aquatic products, or is a legal entity in which eligible 
borrowers under Sec. 613.3000(b) own more than 50 percent of the voting 
stock or equity; and
    (2) The borrower or an owner of the borrowing legal entity regularly 
produces some portion of the throughput used in the processing or 
marketing operation.
    (b) Portfolio restrictions for certain processing and marketing 
loans. Processing or marketing loans to eligible borrowers who regularly 
supply less than 20 percent of the throughput are subject to the 
following restrictions:
    (1) Bank limitation. The aggregate of such processing and marketing 
loans made by a Farm Credit bank shall not exceed 15 percent of all its 
outstanding retail loans at the end of the preceding fiscal year.
    (2) Association limitation. The aggregate of such processing and 
marketing loans made by all direct lender associations affiliated with 
the same Farm Credit bank shall not exceed 15 percent of the aggregate 
of their outstanding retail loans at the end of the preceding fiscal 
year. Each Farm Credit bank, in conjunction with all its affiliated 
direct lender associations, shall ensure that such processing or 
marketing loans are equitably allocated among its affiliated direct 
lender associations.
    (3) Calculation of outstanding retail loans. For the purposes of 
this paragraph, ``outstanding retail loans'' includes loans, loan 
participations, and other interests in loans that are either bought 
without recourse or sold with recourse.



Sec. 613.3020  Financing for farm-related service businesses.

    (a) Eligibility. An individual or legal entity that furnishes farm-
related services to farmers and ranchers that are directly related to 
their agricultural production is eligible to borrow from a Farm Credit 
bank or association that operates under titles I or II of the Act.
    (b) Purposes of financing. A Farm Credit Bank, agricultural credit 
bank, or direct lender association may finance:
    (1) All of the farm-related business activities of an eligible 
borrower who derives more than 50 percent of its annual income (as 
consistently measured on either a gross sales or net sales basis) from 
furnishing farm-related services that are directly related to the 
agricultural production of farmers and ranchers; or
    (2) Only the farm-related services activities of an eligible 
borrower who derives 50 percent or less of its annual income (as 
consistently measured on either a gross sales or net sales basis) from 
furnishing farm-related services that are directly related to the 
agricultural production of farmers and ranchers.



Sec. 613.3030  Rural home financing.

    (a) Definitions.
    (1) Rural homeowner means an individual who is not a bona fide 
farmer, rancher, or producer or harvester of aquatic products.
    (2) Rural home means a single-family moderately priced dwelling 
located in a rural area that will be the occupant's principal residence.
    (3) Rural area means open country within a State or the Commonwealth 
of Puerto Rico, which may include a town or village that has a 
population of not more than 2,500 persons.
    (4) Moderately priced means the price of any rural home that either:
    (i) Satisfies the criteria in section 8.0 of the Act pertaining to 
rural home loans that collateralize securities that are guaranteed by 
the Federal Agricultural Mortgage Corporation; or
    (ii) Is otherwise determined to be moderately priced for housing 
values for the rural area where it is located, as documented by data 
from a credible, independent, and recognized national or regional 
source, such as a Federal, State, or local government agency, or an 
industry source. Housing values at or below the 75th percentile of 
values reflected in such data will be deemed moderately priced.

[[Page 89]]

    (b) Eligibility. Any rural homeowner is eligible to obtain financing 
on a rural home. No borrower shall have a loan from the Farm Credit 
System on more than one rural home at any one time.
    (c) Purposes of financing. Loans may be made to rural homeowners for 
the purpose of buying, building, remodeling, improving, repairing rural 
homes, and refinancing existing indebtedness thereon.
    (d) Portfolio limitations. (1) The aggregate of retail rural home 
loans by any Farm Credit Bank or agricultural credit bank shall not 
exceed 15 percent of the total of all of its outstanding loans at any 
one time.
    (2) The aggregate of rural home loans made by each direct lender 
association shall not exceed 15 percent of the total of its outstanding 
loans at the end of its preceding fiscal year, except with the prior 
approval of its funding bank.
    (3) The aggregate of rural home loans made by all direct lender 
associations that are funded by the same Farm Credit bank shall not 
exceed 15 percent of the total outstanding loans of all such 
associations at the end of the funding bank's preceding fiscal year.



  Subpart B--Financing for Banks Operating Under Title III of the Farm 
                               Credit Act

    Source: 62 FR 4442, Jan. 30, 1997, unless otherwise noted.



Sec. 613.3100  Domestic lending.

    (a) Definitions. For purposes of this subpart, the following 
definitions apply:
    (1) Cooperative means any association of farmers, ranchers, 
producers or harvesters of aquatic products, or any federation of such 
associations, or a combination of such associations and farmers, 
ranchers, or producers or harvesters of aquatic products that conducts 
business for the mutual benefit of its members and has the power to:
    (i) Process, prepare for market, handle, or market farm or aquatic 
products;
    (ii) Purchase, test, grade, process, distribute, or furnish farm or 
aquatic supplies; or
    (iii) Furnish business and financially related services to its 
members.
    (2) Farm or aquatic supplies and farm or aquatic business services 
are any goods or services normally used by farmers, ranchers, or 
producers and harvesters of aquatic products in their business 
operations, or to improve the welfare or livelihood of such persons.
    (3) Public utility means a cooperative or other entity that is 
licensed under Federal, State, or local law to provide electric, 
telecommunication, cable television, water, or waste treatment services.
    (4) Rural area means all territory of a State that is not within the 
outer boundary of any city or town having a population of more than 
20,000 inhabitants based on the latest decennial census of the United 
States.
    (5) Service cooperative means a cooperative that is involved in 
providing business and financially related services (other than public 
utility services) to farmers, ranchers, aquatic producers or harvesters, 
or their cooperatives.
    (b) Cooperatives and other entities that serve agricultural or 
aquatic producers. (1) Eligibility of cooperatives. A bank for 
cooperatives or an agricultural credit bank may lend to a cooperative 
that satisfies the following requirements:
    (i) Unless the bank's board of directors establishes by resolution a 
higher voting control threshold for any type of cooperative, the 
percentage of voting control of the cooperative held by farmers, 
ranchers, producers or harvesters of aquatic products, or cooperatives 
shall be 80 percent except:
    (A) Sixty (60) percent for a service cooperative;
    (B) Sixty (60) percent for local farm supply cooperatives that have 
historically served the needs of a community that would not be 
adequately served by other suppliers and have experienced a reduction in 
the percentage of membership by agricultural or aquatic producers due to 
changed circumstances beyond their control; and
    (C) Sixty (60) percent for local farm supply cooperatives that 
provide or will provide needed services to a community, and are or will 
be in competition with a cooperative specified in 
Sec. 613.3100(b)(1)(i)(B);

[[Page 90]]

    (ii) The cooperative deals in farm or aquatic products, or products 
processed therefrom, farm or aquatic supplies, farm or aquatic business 
services, or financially related services with or for members in an 
amount at least equal in value to the total amount of such business it 
transacts with or for non-members, excluding from the total of member 
and non-member business, transactions with the United States, or any 
agencies or instrumentalities thereof, or services or supplies furnished 
by a public utility; and
    (iii) The cooperative complies with one of the following two 
conditions:
    (A) No member of the cooperative shall have more than one vote 
because of the amount of stock or membership capital owned therein; or
    (B) The cooperative restricts dividends on stock or membership 
capital to 10 percent per year or the maximum percentage per year 
permitted by applicable State law, whichever is less.
    (iv) Any cooperative that has received a loan from a bank for 
cooperatives or an agricultural credit bank shall, without regard to the 
requirements in paragraph (b)(1) of this section, continue to be 
eligible for as long as more than 50 percent (or such higher percentage 
as is established by the bank board) of the voting control of the 
cooperative is held by farmers, ranchers, producers or harvesters of 
aquatic products, or other eligible cooperatives.
    (2) Other eligible entities. The following entities are eligible to 
borrow from banks for cooperatives and agricultural credit banks:
    (i) Any legal entity that holds more than 50 percent of the voting 
control of a cooperative that is an eligible borrower under paragraph 
(b)(1) of this section and uses the proceeds of the loan to fund the 
activities of its cooperative subsidiary on the terms and conditions 
specified by the bank;
    (ii) Any legal entity in which an eligible cooperative has an 
ownership interest, provided that if such interest is less than 50 
percent, financing shall not exceed the percentage that the eligible 
cooperative owns in such entity multiplied by the value of the total 
assets of such entity; or
    (iii) Any creditworthy private entity operated on a non-profit basis 
that satisfies the requirements for a service cooperative and complies 
with the requirements of either paragraphs (b)(1)(i)(A) and (b)(1)(iii) 
of this section, or paragraph (b)(1)(iv) of this section, and any 
subsidiary of such entity. An entity that is eligible to borrow under 
this paragraph shall be organized to benefit agriculture in furtherance 
of the welfare of the farmers, ranchers, and aquatic producers or 
harvesters who are its members.
    (c) Electric and telecommunication utilities. (1) Eligibility. A 
bank for cooperatives or an agricultural credit bank may lend to:
    (i) Electric and telephone cooperatives as defined by section 
3.8(a)(4)(A) of the Act that satisfy the eligibility criteria in 
paragraph (b)(1) of this section;
    (ii) Cooperatives and other entities that:
    (A) Have received a loan, loan commitment, insured loan, or loan 
guarantee from the Rural Utilities Service of the United States 
Department of Agriculture to finance rural electric and 
telecommunication services;
    (B) Have received a loan or a loan commitment from the Rural 
Telephone Bank of the United States Department of Agriculture; or
    (C) Are eligible under the Rural Electrification Act of 1936, as 
amended, for a loan, loan commitment, or loan guarantee from the Rural 
Utilities Service or the Rural Telephone Bank.
    (iii) The subsidiaries of cooperatives or other entities that are 
eligible under paragraph (c)(1)(ii) of this section.
    (iv) Any legal entity that holds more than 50 percent of the voting 
control of any public utility that is an eligible borrower under 
paragraph (c)(1)(ii) of this section, and uses the proceeds of the loan 
to fund the activities of the eligible subsidiary on the terms and 
conditions specified by the bank.
    (v) Any legal entity in which an eligible utility under paragraph 
(c)(1)(ii) of this section has an ownership interest, provided that if 
such interest is less than 50 percent, financing shall not exceed the 
percentage that the eligible utility owns in such entity multiplied

[[Page 91]]

by the value of the total assets of such entity.
    (2) Purposes for financing. A bank for cooperatives or agricultural 
credit bank may extend credit to entities that are eligible to borrow 
under paragraph (c)(1) of this section in order to provide electric or 
telecommunication services in a rural area. A subsidiary that is 
eligible to borrow under paragraph (c)(1)(iii) of this section may also 
obtain financing from a bank for cooperatives or agricultural credit 
bank to operate a licensed cable television utility.
    (d) Water and waste disposal facilities. (1) Eligibility. A 
cooperative or a public agency, quasi-public agency, body, or other 
public or private entity that, under the authority of State or local 
law, establishes and operates water and waste disposal facilities in a 
rural area, as that term is defined by paragraph (a)(5) of this section, 
is eligible to borrow from a bank for cooperatives or an agricultural 
credit bank.
    (2) Purposes for financing. A bank for cooperatives or agricultural 
credit bank may extend credit to entities that are eligible under 
paragraph (d)(1) of this section solely for installing, maintaining, 
expanding, improving, or operating water and waste disposal facilities 
in rural areas.
    (e) Domestic lessors. A bank for cooperatives or agricultural credit 
bank may lend to domestic parties to finance the acquisition of 
facilities or equipment that will be leased to shareholders of the bank 
for use in their operations located inside of the United States.

[62 FR 4442, Jan. 30, 1997; 62 FR 33746, June 23, 1997]



Sec. 613.3200  International lending.

    (a) Definition. For the purpose of this section only, the term 
``farm supplies'' refers to inputs that are used in a farming or 
ranching operation, but excludes agricultural processing equipment, 
machinery used in food manufacturing or other capital goods which are 
not used in a farming or ranching operation.
    (b) Import transactions. The following parties are eligible to 
borrow from a bank for cooperatives or an agricultural credit bank 
pursuant to section 3.7(b) of the Act for the purpose of financing the 
import of agricultural commodities or products therefrom, aquatic 
products, and farm supplies into the United States:
    (1) An eligible cooperative as defined by Sec. 613.3100(b);
    (2) A counterparty with respect to a specific import transaction 
with a voting stockholder of the bank for the substantial benefit of the 
shareholder; and
    (3) Any foreign or domestic legal entity in which eligible 
cooperatives hold an ownership interest.
    (c) Export transactions. Pursuant to section 3.7(b)(2) of the Act, a 
bank for cooperatives or an agricultural credit bank is authorized to 
finance the export (including the cost of freight) of agricultural 
commodities or products therefrom, aquatic products, or farm supplies 
from the United States to any foreign country. The board of directors of 
each bank for cooperatives and agricultural credit bank shall adopt 
policies that ensure that exports of agricultural products and 
commodities, aquatic products, and farm supplies which originate from 
eligible cooperatives are financed on a priority basis. The total amount 
of balances outstanding on loans made under this paragraph shall not, at 
any time, exceed 50 percent of the capital of any bank for cooperatives 
or agricultural credit bank for loans that:
    (1) Finance the export of agricultural commodities and products 
therefrom, aquatic products, or farm supplies that are not originally 
sourced from an eligible cooperative; and
    (2) At least 95 percent of the loan amount is not guaranteed by a 
department, agency, bureau, board, or commission of the United States or 
a corporation that is wholly owned directly or indirectly by the United 
States.
    (d) International business operations. A bank for cooperatives or an 
agricultural credit bank may finance a domestic or foreign entity which 
is at least partially owned by eligible cooperatives described in 
Sec. 613.3100(b), and facilitates the international business operations 
of such cooperatives.
    (e) Restrictions. (1) When eligible cooperatives own less than 50 
percent of a foreign or domestic legal entity, the

[[Page 92]]

amount of financing that a bank for cooperatives or agricultural credit 
bank may provide to the entity for imports, exports, or international 
business operations shall not exceed the percentage of ownership that 
eligible cooperatives hold in such entity multiplied by the value of the 
total assets of such entity; and
    (2) A bank for cooperatives or agricultural credit bank shall not 
finance the relocation of any plant or facility from the United States 
to a foreign country.



Subpart C--Similar Entity Authority Under Sections 3.1(11)(B) and 4.18A 
                               of the Act



Sec. 613.3300  Participations and other interests in loans to similar entities.

    (a) Definitions. (1) Participate and participation, for the purpose 
of this section, refer to multi-lender transactions, including 
syndications, assignments, loan participations, subparticipations, other 
forms of the purchase, sale, or transfer of interests in loans, or other 
extensions of credit, or other technical and financial assistance.
    (2) Similar entity means a party that is ineligible for a loan from 
a Farm Credit bank or association, but has operations that are 
functionally similar to the activities of eligible borrowers in that a 
majority of its income is derived from, or a majority of its assets are 
invested in, the conduct of activities that are performed by eligible 
borrowers.
    (b) Similar entity transactions. A Farm Credit bank or a direct 
lender association may participate with a lender that is not a Farm 
Credit System institution in loans to a similar entity that is not 
eligible to borrow directly under Sec. 613.3000, 613.3010, 613.3020, 
613.3100, or 613.3200, for purposes similar to those for which an 
eligible borrower could obtain financing from the participating FCS 
institution.
    (c) Restrictions. Participations by a Farm Credit bank or 
association in loans to a similar entity under this section are subject 
to the following limitations:
    (1) Lending limits. (i) Farm Credit banks operating under title I of 
the Act and direct lender associations. The total amount of all loan 
participations that any Farm Credit bank, agricultural credit bank, or 
direct lender association has outstanding under paragraph (b) of this 
section to a single credit risk shall not exceed:
    (A) Ten (10) percent of its total capital; or
    (B) Twenty-five (25) percent of its total capital if a majority of 
the shareholders of the respective Farm Credit bank or direct lender 
association so approve.
    (ii) Farm Credit banks operating under title III of the Act. The 
total amount of all loan participations that any bank for cooperatives 
or agricultural credit bank has outstanding under paragraph (b) of this 
section to a single credit risk shall not exceed 10 percent of its total 
capital;
    (2) Percentage held in the principal amount of the loan. The 
participation interest in the same loan held by one or more Farm Credit 
bank(s) or association(s) shall not, at any time, equal or exceed 50 
percent of the principal amount of the loan; and
    (3) Portfolio limitations. The total amount of participations that 
any Farm Credit bank or direct lender association has outstanding under 
paragraph (b) of this section shall not exceed 15 percent of its total 
outstanding assets at the end of its preceding fiscal year.
    (d) Approval by other Farm Credit System institutions. (1) No direct 
lender association shall participate in a loan to a similar entity under 
paragraph (b) of this section without the approval of its funding bank. 
A funding bank shall deny such requests only for safety and soundness 
reasons affecting the bank.
    (2) No Farm Credit bank or direct lender association shall 
participate in a loan to a similar entity that is eligible to borrow 
under Sec. 613.3100(b) without the prior approval of the bank for 
cooperatives or agricultural credit bank that, at the time the loan is 
made, has the greatest volume of loans made under title III of the Act 
in the State where the headquarters office of the similar entity is 
located.
    (3) No bank for cooperatives or agricultural credit bank shall 
participate in a loan to a similar entity that is eligible to borrow 
under Sec. 613.3010 or

[[Page 93]]

613.3020 without the prior consent of the Farm Credit bank(s) in whose 
chartered territory the similar entity conducts operations.
    (4) All approvals required under paragraph (d) of this section may 
be granted on an annual basis and under such terms and conditions as the 
various Farm Credit System institutions may agree.

[62 FR 4444, Jan. 30, 1997]



PART 614--LOAN POLICIES AND OPERATIONS--Table of Contents




                     Subpart A--Lending Authorities

Sec.
614.4000  Farm Credit Banks.
614.4010  Agricultural credit banks.
614.4020  Banks for cooperatives.
614.4030  Federal land credit associations.
614.4040  Production credit associations.
614.4050  Agricultural credit associations.
614.4060  Affiliates established pursuant to section 8.5(e)(1) of the 
          Farm Credit Act of 1971.

                    Subpart B--Chartered Territories

614.4070  Loans and chartered territory--Farm Credit Banks, agricultural 
          credit banks, Federal land bank associations, Federal land 
          credit associations, production credit associations, and 
          agricultural credit associations.
614.4080  Loans and chartered territory--banks for cooperatives.

            Subpart C--Bank/Association Lending Relationship

614.4100  Policies governing lending through Federal land bank 
          associations.
614.4110  Transfer of direct lending authority to Federal land bank 
          associations and agricultural credit associations.
614.4120  Policies governing extensions of credit to direct lender 
          associations and OFIs.
614.4125  Funding and discount relationships between Farm Credit Banks 
          or agricultural credit banks and direct lender associations.
614.4130  Funding and discount relationships between Farm Credit Banks 
          or agricultural credit banks and OFIs.

       Subpart D--General Loan Policies for Banks and Associations

614.4150  Lending policies and loan underwriting standards.
614.4155  Interest rates.
614.4160  Differential interst rate programs.
614.4165  Special credit needs.

                  Subpart E--Loan Terms and Conditions

614.4200  General requirements.
614.4231  Certain seasonal commodity loans to cooperatives.
614.4232  Loans to domestic lessors.
614.4233  International loans.

              Subpart F--Collateral Evaluation Requirements

614.4240  Collateral definitions.
614.4245  Collateral evaluation policies.
614.4250  Collateral evaluation standards.
614.4255  Independence requirements.
614.4260  Evaluation requirements.
614.4265  Real property evaluations.
614.4266  Personal and intangible property evaluations.
614.4267  Professional association membership; competency.

Subpart G  [Reserved]

                   Subpart H--Loan Purchases and Sales

614.4325  Purchase and sale of interests in loans.
614.4330  Loan participations.
614.4335  Borrower stock requirements.
614.4336  Borrower rights in connection with loan sales.
614.4337  Disclosure to borrowers.

                   Subpart I--Loss-Sharing Agreements

614.4340  General.
614.4341  Financial assistance.
614.4345  Guaranty agreements.

                  Subpart J--Lending and Leasing Limits

614.4350  Definitions.
614.4351  Computation of lending and leasing limit base.
614.4352  Farm Credit Banks and agricultural credit banks.
614.4353  Direct lender associations.
614.4354  Federal land bank associations.
614.4355  Banks for cooperatives.
614.4356  Farm Credit Leasing Services Corporation.
614.4357  Banks for cooperatives look-through notes.
614.4358  Computation of obligations.
614.4359  Attribution rules.
614.4360  Lending and leasing limit violations.
614.4361  Transition.

                Subpart K--Disclosure of Loan Information

614.4365  Applicability.
614.4366  Definitions.
614.4367  Required disclosures--in general.

[[Page 94]]

614.4368  Disclosure of differential interest rates.

     Subpart L--Actions on Applications; Review of Credit Decisions

614.4440  Definitions.
614.4441  Notice of action on loan application.
614.4442  Credit Review Committee.
614.4443  Review process.
614.4444  Records.

                  Subpart M--Loan Approval Requirements

614.4450  General requirements.
614.4460  Loan approval responsibility.
614.4470  Loans subject to bank approval.

    Subpart N--Loan Servicing Requirements; State Agricultural Loan 
               Mediation Programs; Right of First Refusal

614.4510  General.
614.4511  Federal land bank association compensation.
614.4512  Definitions.
614.4513  Uninsured voluntary and involuntary accounts.
614.4514  Protection of borrowers who meet all loan obligations.
614.4515  [Reserved]
614.4516  Restructuring policy and procedures.
614.4517  Restructuring decision.
614.4518  Notice of denial of restructuring and right to review.
614.4519  Notice before foreclosure; limitation on foreclosure.
614.4520  [Reserved]
614.4521  Participation in State agricultural loan mediation programs.
614.4522  Right of first refusal.

                   Subpart O--Special Lending Programs

614.4525  General.
614.4530  Special loans, production credit associations and agricultural 
          credit associations.

 Subpart P--Farm Credit Bank and Agricultural Credit Bank Financing of 
                      Other Financing Institutions

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 Q--Banks for Cooperatives and Agricultural Credit Banks 
                      Financing International Trade

614.4700  Financing foreign trade receivables.
614.4710  Bankers acceptance financing.
614.4720  Letters of credit.
614.4800  Guarantees and contracts of suretyship.
614.4810  Standby letters of credit.
614.4900  Foreign exchange.

                 Subpart R--Secondary Market Authorities

614.4910  Basic authorities.

                 Subpart S--Flood Insurance Requirements

614.4920  Purpose and scope.
614.4925  Definitions.
614.4930  Requirement to purchase flood insurance where available.
614.4935  Escrow requirement.
614.4940  Required use of standard flood hazard determination form.
614.4945  Forced placement of flood insurance.
614.4950  Determination fees.
614.4955  Notice of special flood hazards and availability of Federal 
          disaster relief assistance.
614.4960  Notice of servicer's identity.

Appendix A to Subpart S of Part 614--Sample Form of Notice of Special 
          Flood Hazards and Availability of Federal Disaster Relief 
          Assistance

    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, 4.12, 4.12A, 4.13, 
4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 4.18, 4.18A, 4.19, 4.25, 4.26, 
4.27, 4.28, 4.36, 4.37, 5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 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, 2019, 2071, 2073, 2074, 2075, 2091, 2093, 2094, 2097, 2121, 2122, 
2124, 2128, 2129, 2131, 2141, 2149, 2183, 2184, 2199, 2201, 2202, 2202a, 
2202c, 2202d, 2202e, 2206, 2206a, 2207, 2211, 2212, 2213, 2214, 2219a, 
2219b, 2243, 2244, 2252, 2279a, 2279a-2, 2279b, 2279c-1, 2279f, 2279f-1, 
2279aa, 2279aa-5); sec. 413 of Pub. L. 100-233, 101 Stat. 1568, 1639.



                     Subpart A--Lending Authorities

    Source: 55 FR 24880, June 19, 1990, unless otherwise noted.



Sec. 614.4000  Farm Credit Banks.

    (a) Long-term real estate lending. Except to the extent such 
authorities are transferred pursuant to section 7.6 of

[[Page 95]]

the Act, Farm Credit Banks are authorized, subject to the requirements 
in Sec. 614.4200 of this part, to make real estate mortgage loans with 
maturities of not less than 5 years nor more than 40 years and 
continuing commitments to make such loans.
    (b) Extensions of credit to Farm Credit direct lender associations. 
Farm Credit Banks are authorized to make loans and extend other similar 
financial assistance to associations with direct lending authority and 
discount for or purchase from such associations, with the association's 
endorsement or guaranty, any note, draft, and other obligations for 
loans that have been made in accordance with the provisions of subparts 
D and E of part 614 of these regulations. Such extensions of credit 
shall be made pursuant to a written financing agreement meeting the 
requirements of Sec. 614.4125.
    (c) Extensions of credit to other financing institutions. Farm 
Credit Banks are authorized to make loans and extend other similar 
financial assistance to any national bank, State bank, trust company, 
agricultural credit corporation, incorporated livestock loan company, 
savings institution, credit union, or any association of agricultural 
producers or any corporation engaged in the making of loans to farmers 
and ranchers or producers or harvesters of aquatic products 
(collectively, ``other financing institutions''), for purposes eligible 
for financing by a production credit association in accordance with 
Sec. 614.4130 and subpart P of this part. Farm Credit Banks are 
authorized to discount for or purchase from such institutions, with the 
institution's endorsement or guaranty, notes, drafts, and other 
obligations or loans made to persons and for purposes eligible for 
financing by a production credit association, in accordance with 
Sec. 614.4130 and subpart P of this part.
    (d) Loan participations. Subject to the requirements of subpart H of 
part 614, a Farm Credit Bank may enter into loan participation 
agreements with:
    (1) Farm Credit banks and associations that are direct lenders and 
lenders that are not Farm Credit institutions on loans of the type it is 
authorized to make under title I of the Act; and
    (2) Farm Credit banks and associations that are direct lenders on 
loans it is not authorized to make, provided the borrower eligibility, 
membership, term, amount, loan security, and stock or participation 
certificate requirements of the originating institution are met.
    (e) Other interests in loans. (1) Subject to the requirements of 
subpart H of this part, Farm Credit Banks may sell interests in loans 
only to:
    (i) Farm Credit System institutions authorized to purchase such 
interests;
    (ii) Other lenders that are not Farm Credit System institutions; and
    (iii) Any certified agricultural mortgage marketing facility, as 
defined by section 8.0(3) of the Act, for the purpose of pooling and 
securitizing such loans under title VIII of the Act.
    (2) Subject to the requirements of subpart H of this part, Farm 
Credit Banks may purchase interests other than participation interests 
in loans and nonvoting stock from other Farm Credit System institutions.
    (3) Farm Credit Banks, in their capacity as certified agricultural 
mortgage marketing facilities under title VIII of the Act, may purchase 
interests in loans (other than participation interests authorized in 
paragraph (d) of this section) from institutions other than Farm Credit 
System institutions only for the purpose of pooling and securitizing 
such loans under title VIII of the Act.
    (f) Residual powers after the transfer of lending authority to an 
association. After transferring its authority to make and participate in 
long-term real estate loans to an agricultural credit association or a 
Federal land credit association pursuant to section 7.6(a) of the Act 
and subpart E of part 611 of these regulations, a Farm Credit Bank 
retains residual authority to:
    (1) Enter into loan participation agreements pursuant to paragraph 
(d) of this section;
    (2) Purchase or sell other interests in loans in accordance with 
paragraph (e) of this section; and
    (3) Make long-term real estate loans in accordance with paragraph 
(a) of this section in areas of its chartered

[[Page 96]]

territory where no active association operates.

[55 FR 24880, June 19, 1990, as amended at 57 FR 38246, Aug. 24, 1992; 
57 FR 43290, Sept. 18, 1992; 62 FR 51013, Sept. 30, 1997; 63 FR 5723, 
Feb. 4, 1998; 64 FR 43049, Aug. 9, 1999; 65 FR 24102, Apr. 25, 2000]



Sec. 614.4010  Agricultural credit banks.

    (a) Long-term real estate lending. Except to the extent such 
authorities are transferred pursuant to section 7.6 of the Act, 
agricultural credit banks are authorized, subject to the requirements of 
Sec. 614.4200, to make real estate mortgage loans with maturities of not 
less than 5 years nor more than 40 years and continuing commitments to 
make such loans.
    (b) Extensions of credit to Farm Credit direct lender associations. 
Agricultural credit banks are authorized to make loans and extend other 
similar financial assistance to associations with direct lending 
authority and discount for or purchase from such associations, with the 
association's endorsement or guaranty, any note, draft, and other 
obligations for loans made by the association in accordance with the 
provisions of this part. Such extensions of credit shall be made 
pursuant to a written financing agreement meeting the requirements of 
Sec. 614.4125.
    (c) Extensions of credit to other financing institutions. 
Agricultural credit banks are authorized to make loans and extend other 
similar financial assistance to any national bank, State bank, trust 
company, agricultural credit corporation, incorporated livestock loan 
company, savings institution, credit union, or any association of 
agricultural producers or corporation engaged in the making of loans to 
farmers, ranchers, or producers or harvesters of aquatic products 
(collectively, ``other financing institutions''), for purposes eligible 
for financing by a production credit association, in accordance with 
Sec. 614.4130 and subpart P of this part. Agricultural credit banks are 
authorized to discount for or purchase from such other financing 
institutions, with the institution's endorsement or guaranty, notes, 
drafts, and other obligations or loans made to persons and for purposes 
eligible for financing by a production credit association, in accordance 
with the requirements of Sec. 614.4130 and subpart P of this part.
    (d) Extensions of credit to or on behalf of eligible cooperatives. 
Agricultural credit banks are authorized to make loans and commitments 
and extend other technical and financial assistance, including but not 
limited to, collateral custody, discounting notes and other obligations, 
guarantees, and currency exchanges necessary to service transactions 
financed under paragraphs (d)(4) and (d)(5) of this section, to:
    (1) Eligible cooperatives, as defined in Sec. 613.3110, in 
accordance with Secs. 614.4200, 614.4231, 614.4232, 614.4233, and 
subpart Q of part 614;
    (2) Other eligible entities, as defined in Sec. 613.3110(c), in 
accordance with Secs. 614.4200, 614.4231, and 614.4232;
    (3) Domestic lessors, for the purpose of providing leased assets to 
stockholders of the bank eligible to borrow under section 3.7(a) of the 
Act for use in such stockholders' operations in the United States, in 
accordance with Sec. 614.4232;
    (4) Domestic or foreign parties with respect to a transaction with a 
voting stockholder of the bank, for the import of agricultural 
commodities, farm supplies, or aquatic products through purchases, sales 
or exchanges, provided such stockholder substantially benefits as a 
result of such extension of credit or assistance, in accordance with 
policies of the bank's board, Sec. 614.4233, and subpart Q of part 614; 
and
    (5) Domestic or foreign parties in which a voting stockholder of the 
bank has a minimum ownership interest, for the purpose of facilitating 
such stockholder's import operations of the type described in paragraph 
(d)(4) of this section, provided the stockholder substantially benefits 
as a result of such extension of credit or assistance, in accordance 
with policies of the bank's board, Sec. 614.4233, and subpart Q of part 
614.
    (6) Any party, subject to the requirements in Sec. 613.3200(c) of 
this chapter, for the export (including the cost of freight) of 
agricultural commodities or products therefrom, aquatic products, or 
farm supplies from the United

[[Page 97]]

States to any foreign country, in accordance with Sec. 614.4233 and 
subpart Q of this part 614; and
    (7) Domestic or foreign parties in which eligible cooperatives, as 
defined in Sec. 613.3100 of this chapter, hold an ownership interest, 
for the purpose of facilitating the international business operations of 
such cooperatives pursuant to the requirements of Sec. 613.3200 (d) and 
(e) of this chapter.
    (e) Loan participations. Subject to the requirements of subpart H of 
this part, an agricultural credit bank may enter into loan participation 
agreements with:
    (1) Farm Credit banks and associations that are direct lenders and 
lenders that are not Farm Credit institutions on loans of the type it is 
authorized to make under the Act;
    (2) Farm Credit banks and associations that are direct lenders on 
loans it is not authorized to make, provided the borrower eligibility, 
membership, term, amount, loan security, and stock or participation 
certificate requirements of the originating institution are met.
    (f) Other interest in loans. (1) Subject to subpart H of this part, 
agricultural credit banks may sell interests in real estate mortgage 
loans identified in paragraph (a) of this section to Farm Credit System 
institutions authorized to purchase such interests, other lenders, and 
certified agricultural mortgage marketing facilities for the Federal 
Agricultural Mortgage Corporation. Agricultural credit banks may also 
sell interests in the types of loans listed in paragraph (d) of this 
section to other Farm Credit System institutions that are authorized to 
purchase such interests.
    (2) Subject to the requirements of subpart H of this part, 
agricultural credit banks may purchase interests other than 
participation interests in loans and nonvoting stock from other Farm 
Credit System institutions.
    (3) Agricultural credit banks, in their capacity as certified 
agricultural mortgage marketing facilities under title VIII of the Act, 
may purchase interests in loans (other than participation interests 
authorized in paragraph (e) of this section) from institutions other 
than Farm Credit System institutions only for the purpose of pooling and 
securitizing such loans under title VIII of the Act.
    (g) Residual powers after the transfer of lending authority to an 
association. After transferring its authority to make and participate in 
long-term real estate loans to an agricultural credit association or a 
Federal land credit association pursuant to section 7.6(a) of the Act 
and subpart E of part 611 of these regulations, an agricultural credit 
bank retains residual authority to:
    (1) Enter into loan participation agreements pursuant to paragraph 
(e) of this section;
    (2) Purchase or sell other interests in loans in accordance with 
paragraph (f) of this section; and
    (3) Make long-term real estate loans in accordance with paragraph 
(a) of this section in areas of its chartered territory where no active 
association operates.

[55 FR 24880, June 19, 1990, as amended at 57 FR 38246, Aug. 24, 1992; 
57 FR 43290, Sept. 18, 1992; 62 FR 4445, Jan. 30, 1997; 62 FR 51013, 
Sept. 30, 1997; 63 FR 5723, Feb. 4, 1998; 64 FR 43049, Aug. 9, 1999; 65 
FR 24102, Apr. 25, 2000]



Sec. 614.4020  Banks for cooperatives.

    (a) Banks for cooperatives are authorized to make loans and 
commitments and extend other technical and financial assistance, 
including but not limited to, collateral custody, discounting notes and 
other obligations, guarantees, and currency exchanges necessary to 
service transactions financed under paragraphs (a)(4) and (a)(5) of this 
section, to:
    (1) Eligible cooperatives, as defined in Sec. 613.3110, in 
accordance with Secs. 614.4200, 614.4231, 614.4232, 614.4233, and 
subpart Q of this part;
    (2) Other eligible entities as defined in Sec. 613.3110(c), in 
accordance with Secs. 614.4200, 614.4231, and 614.4232;
    (3) Domestic lessors, for the purpose of providing leased assets to 
stockholders of the bank eligible to borrow under section 3.7(a) of the 
Act for use in such stockholder's operations in the United States, in 
accordance with Sec. 614.4232;
    (4) Domestic or foreign parties with respect to a transaction with a 
voting stockholder of the bank, for the import

[[Page 98]]

of agricultural commodities, farm supplies, or aquatic products through 
purchases, sales or exchanges, provided such stockholder substantially 
benefits as a result of such extension of credit or assistance, in 
accordance with policies of the bank's board, Sec. 614.4233, and subpart 
Q of this part; and
    (5) Domestic or foreign parties in which a voting stockholder of the 
bank has an ownership interest, for the purpose of facilitating the 
import operations of the type described in paragraph (a)(4) of this 
section, in accordance with policies of the bank's board, Sec. 614.4233, 
and subpart Q of this part.
    (6) Any party, subject to the requirements in Sec. 613.3200(c) of 
this chapter, for the export (including the cost of freight) of 
agricultural commodities or products therefrom, aquatic products, or 
farm supplies from the United States to any foreign country, in 
accordance with Sec. 614.4233 and subpart Q of this part; and
    (7) Domestic or foreign parties in which eligible cooperatives, as 
defined in Sec. 613.3100 of this chapter, hold an ownership interest, 
for the purpose of facilitating the international business operations of 
such cooperatives pursuant to the requirements in Sec. 613.3200 (d) and 
(e) of this chapter.
    (b) Loan participations. Subject to the requirements of subpart H of 
this part, a bank for cooperatives may enter into loan participation 
agreements with:
    (1) Farm Credit banks and associations that are direct lenders and 
lenders that are not Farm Credit institutions on loans of the type it is 
authorized to make under title III of the Act;
    (2) Farm Credit banks and associations that are direct lenders on 
loans of the type it is not authorized to make, provided the borrower 
eligibility, membership, term, amount, loan security, and stock or 
participation certificate requirements of the originating institution 
are met.

[55 FR 24880, June 19, 1990, as amended at 62 FR 4445, Jan. 30, 1997; 62 
FR 51013, Sept. 30, 1997]



Sec. 614.4030  Federal land credit associations.

    (a) Long-term real estate lending. Federal land credit associations 
are authorized, subject to the requirments of Sec. 614.4200, to make 
real estate mortgage loans with maturities of not less than 5 years nor 
more than 40 years and continuing commitments to make such loans.
    (b) Loan participations. Subject to the requirements of subpart H of 
this part, Federal land credit associations may enter into participation 
agreements with:
    (1) Farm Credit banks and associations that are direct lenders and 
lenders that are not Farm Credit institutions on loans of the type it is 
authorized to make under title I of the Act; and
    (2) Farm Credit banks and associations that are direct lenders on 
loans it is not authorized to make, provided the borrower eligibility, 
membership, term, amount, loan security, and stock or participation 
certificate requirements of the originating institution are met.
    (c) Other interests in loans. (1) Subject to the requirements of 
subpart H of this part and the supervision of their respective funding 
banks, Federal land credit associations may sell interests in loans made 
under paragraph (a) of this section only to:
    (i) Farm Credit System institutions, as authorized by their 
respective funding banks;
    (ii) Other lenders that are not Farm Credit System institutions, as 
authorized by their respective funding banks; and
    (iii) Any certified agricultural mortgage marketing facility, as 
defined by section 8.0(3) of the Act, for the purpose of pooling and 
securitizing such loans under title VIII of the Act.
    (2) Subject to the requirements of subpart H of this part, Federal 
land credit associations may purchase interests in loans that comply 
with the requirements of paragraph (a) of this section and nonvoting 
stock from Farm Credit System institutions.
    (3) Federal land credit associations, in their capacity as certified 
agricultural mortgage marketing facilities under title VIII of the Act, 
may purchase interests in loans (other than participation interests 
under paragraph (b) of this section) from institutions other than Farm 
Credit System institutions for the purpose of pooling

[[Page 99]]

and securitizing such loans under title VIII of the Act.

[55 FR 24880, June 19, 1990, as amended at 57 FR 38247, Aug. 24, 1992; 
62 FR 51013, Sept. 30, 1997; 64 FR 43049, Aug. 9, 1999; 65 FR 24102, 
Apr. 25, 2000]



Sec. 614.4040  Production credit associations.

    (a) Loan terms. (1) Production credit associations are authorized to 
make or guarantee loans and other similar financial assistance for the 
following terms:
    (i) Not more than 7 years
    (ii) More than 7 years, but not more than 10 years, subject to 
authorization in policies approved by the funding bank
    (iii) Not more than 15 years to producers or harvesters of aquatic 
products for major capital expenditures, including but not limited to 
the purchase of vessels, construction or purchase of shore facilities, 
and similar purposes directly related to the producing or harvesting 
operation
    (2) Subject to policies approved by the funding bank, production 
credit associations may amortize loans over a period greater than the 
loan terms authorized under paragraph (a)(1) of this section, provided 
that:
    (i) The loan is amortized over a period not to exceed 15 years
    (ii) The loan may be refinanced only if the lender determines, at 
the time of refinancing, that the loan meets its loan policy and 
underwriting criteria;
    (iii) Any refinancing may not extend repayment beyond 15 years from 
the date of the original loan; and
    (iv) The loan is not being made solely for the purpose of acquiring 
unimproved real estate; and
    (3) Short- and intermediate-term loans shall be made with maturities 
that are appropriate for the purpose and underlying collateral of the 
loan and that comply with an institution's loan underwriting standards 
adopted pursuant to Sec. 614.4150 and the general requirements of 
Sec. 614.4200 of this part.
    (b) Loan participations. Subject to the requirements of subpart H of 
this part, a production credit association may enter into participation 
agreements with:
    (1) Farm Credit banks and associations that are direct lenders and 
lenders that are not Farm Credit institutions on loans of the type it is 
authorized to make under title II of the Act; and
    (2) Farm Credit banks and associations that are direct lenders on 
loans it is not authorized to make, provided the borrower eligibility, 
membership, term, amount, loan security, and stock or participation 
certificate requirements of the originating institution are met.
    (c) Other interests in loans. (1) Subject to the requirements of 
subpart H of this part and the supervision of their respective funding 
banks, production credit associations may sell interests in loans that 
are made under paragraph (a) of this section to:
    (i) Banks of the Farm Credit System, as authorized by their 
respective funding banks; and
    (ii) Any certified agricultural mortgage marketing facility, as 
defined by section 8.0(3) of the Act, for the purpose of pooling and 
securitizing such loans under title VIII of the Act.
    (2) Subject to the requirements of subpart H of this part, 
production credit associations, as authorized by their respective 
funding banks, may purchase interests in loans that comply with the 
requirements of paragraph (a) of this section and nonvoting stock from 
banks of the Farm Credit System.
    (3) Production credit associations, in their capacity as certified 
mortgage marketing facilities under title VIII of the Act, may purchase 
from Farm Credit System institutions and institutions that are not Farm 
Credit System institutions interests in loans (other than participation 
interests authorized by paragraph (c) of this section) for the purpose 
of pooling and securitizing such loans under title VIII of the Act.

[55 FR 24880, June 19, 1990; 55 FR 28511, July 11, 1990, as amended at 
57 FR 38247, Aug. 24, 1992; 62 FR 51013, Sept. 30, 1997; 64 FR 43049, 
Aug. 9, 1999; 65 FR 24102, Apr. 25, 2000]



Sec. 614.4050  Agricultural credit associations.

    Agricultural credit associations are authorized to make or 
guarantee, subject to the requirements of Sec. 614.4200 of this part:

[[Page 100]]

    (a) Long-term real estate mortgage loans with maturities of not less 
than 5 nor more than 40 years, and continue commitments to make such 
loans; and
    (b) Short- and intermediate-term loans and provide other similar 
financial assistance for a term of not more than 10 years (15 years for 
aquatic producers and harvesters.
    (c) Loan participations. Subject to the requirements of subpart H of 
this part, agricultural credit associations may enter into participation 
agreements with:
    (1) Farm Credit banks and associations that are direct lenders and 
lenders that are not Farm Credit institutions on loans of the type it is 
authorized to make under titles I and II of the Act; and
    (2) Farm Credit banks and associations that are direct lenders on 
loans of the type it is not authorized to make, provided the borrower 
eligibility, membership, term, amount, loan security, and stock or 
participation certificate requirements of the originating institution 
are met.
    (d) Other interests in loans. (1) Subject to the requirements of 
subpart H of this part and the supervision of their respective funding 
banks, agricultural credit associations may sell:
    (i) Interests in loans made under paragraph (a) of this section only 
to:
    (A) Farm Credit System institutions, as authorized by their 
respective funding banks;
    (B) Lenders that are not Farm Credit System institutions, as 
authorized by their respective funding banks; and
    (C) Any certified agricultural mortgage marketing facility, as 
defined by section 8.0(3) of the Act, for the purpose of pooling and 
securitizing such loans under title VIII of the Act.
    (ii) Interests in loans made under paragraph (b) of this part only 
to:
    (A) Banks of the Farm Credit System, as authorized by their 
respective funding banks; and
    (B) Any certified agricultural mortgage marketing facility, as 
defined by section 8.0(3) of the Act, for the purpose of pooling and 
securitizing such loans under title VIII of the Act.
    (2) Subject to the requirements of subpart H of this part, 
agricultural credit associations may purchase:
    (i) Interests in loans that comply with the requirements in 
paragraph (a) of this section from institutions of the Farm Credit 
System;
    (ii) Interests in loans that comply with the requirements of 
paragraph (b) of this section from banks of the Farm Credit System; and
    (iii) Nonvoting stock from institutions of the Farm Credit System.
    (3) Agricultural credit associations, in their capacity as certified 
agricultural mortgage marketing facilities under title VIII of the Act, 
may purchase interests in loans, other than participation interests 
authorized by paragraph (c) of this section, from institutions other 
than Farm Credit System institutions for the purpose of pooling and 
securitizing such loans under title VIII of the Act.

[55 FR 24880, June 19, 1990; 55 FR 28511, July 11, 1990, as amended at 
57 FR 38247, Aug. 24, 1992; 62 FR 51013, Sept. 30, 1997; 64 FR 43049, 
Aug. 9, 1999; 65 FR 24102, Apr. 25, 2000]



Sec. 614.4060  Affiliates established pursuant to section 8.5(e)(1) of the Farm Credit Act of 1971.

    An affiliate established by one or more Farm Credit System 
institutions pursuant to section 8.5(e)(1) of the Act and Sec. 611.1137 
of this chapter, as a certified agricultural mortgage marketing 
facility, may purchase loans from Farm Credit System institutions and 
institutions other than Farm Credit System institutions in accordance 
with title VIII of the Act and any applicable regulation promulgated 
thereunder.

[57 FR 38247, Aug. 24, 1992]



                    Subpart B--Chartered Territories



Sec. 614.4070  Loans and chartered territory--Farm Credit Banks, agricultural credit banks, Federal land bank associations, Federal land credit associations, 
          production credit associations, and agricultural credit 
          associations.

    (a) A bank or association chartered under title I or II of the Act 
may finance eligible borrower operations conducted wholly within its 
chartered territory regardless of the residence of the applicant.

[[Page 101]]

    (b) A bank or association operating under title I or II of the Act 
may finance the operations of a borrower headquartered and operating in 
its territory even though the operation financed is conducted partially 
outside its territory, provided notice is given to all Farm Credit 
institutions providing similar credit in the territory(ies) in which the 
operations being financed are conducted. A bank or association operating 
under title I or II of the Act may lend to a borrower headquartered 
outside its territory to finance eligible borrower operations that are 
conducted partially within its territory and partially outside its 
territory only if the concurrence of Farm Credit institutions providing 
similar credit for the territories in which the operations are conducted 
is obtained.
    (c) A bank or association chartered under title I or II of the Act 
may finance eligible borrower operations conducted wholly outside its 
chartered territory, provided such loans are authorized by the policies 
of the bank and/or association involved, do not constitute a significant 
shift in loan volume away from the bank or association's assigned 
territory, and are made and administered in accordance with paragraphs 
(c)(1) and (c)(2) of this section.
    (1) If a loan is made to an eligible borrower whose operations are 
conducted wholly outside the chartered territory of the lending bank or 
association, the lending institution shall obtain concurrence of all 
Farm Credit institutions providing similar credit in the territory(ies) 
in which the operation being financed is conducted.
    (2) Loans to finance eligible borrower operations conducted wholly 
outside a bank's or association's territory shall be appropriately 
designated by the bank or association to provide adequate identification 
of the number and volume of such loans, which shall be monitored by the 
bank or association.

[55 FR 24882, June 19, 1990]



Sec. 614.4080  Loans and chartered territory--banks for cooperatives.

    Loans made under title III by banks for cooperatives and 
agricultural credit banks may be made to eligible domestic parties 
domiciled within any territory that may be served by Farm Credit 
institutions under section 1.2 of the Act and to eligible foreign 
parties without regard to domicile.

[55 FR 24882, June 19, 1990]



            Subpart C--Bank/Association Lending Relationship



Sec. 614.4100  Policies governing lending through Federal land bank associations.

    (a) Farm Credit Banks and agricultural credit banks may delegate 
authority to make credit decisions to Federal land bank associations 
that demonstrate the ability to extend and administer credit soundly, 
provided the association develops, implements and maintains adequate 
credit administration guidelines, standards, and practices.
    (b) The board of directors of each Farm Credit Bank and each 
agricultural credit bank lending through Federal land bank associations 
shall adopt policies and procedures governing the exercise of statutory 
and delegated authorities by such associations. Policies governing the 
delegated authorities shall:
    (1) Define authorities to be delegated;
    (2) Require the documented evaluation of the capability and 
responsibility of individuals exercising delegated authorities;
    (3) Provide for reporting of actions taken under delegated authority 
to the delegating bank;
    (4) Provide procedures for periodic review and enforcement;
    (5) Provide for withdrawal of authority where appropriate; and
    (6) Where redelegation from the association's board to association 
employees is authorized, require similar control measures to be used.

[55 FR 24883, June 19, 1990]



Sec. 614.4110  Transfer of direct lending authority to Federal land bank associations and agricultural credit associations.

    (a) Upon the transfer of authority to make and participate in long-
term agricultural real estate mortgage loans by a Farm Credit Bank or 
agricultural

[[Page 102]]

credit bank to a Federal land bank association pursuant to section 
7.6(a) of the Act and subpart E of part 611 of these regulations, the 
association shall be designated a Federal land credit association and 
shall have the powers set forth in Sec. 614.4030.
    (b) Upon the transfer of the authority to make and participate in 
long-term real estate loans by a Farm Credit Bank or agricultural credit 
bank to an agricultural credit association pursuant to section 7.6(d) of 
the Act, the association shall have all of the powers set forth in 
Sec. 614.4050.
    (c) An association to which such long-term lending authority is to 
be transferred shall have in place, prior to the transfer, policies and 
procedures guiding the extension and administration of credit within its 
territory.

[55 FR 24883, June 19, 1990]



Sec. 614.4120  Policies governing extensions of credit to direct lender associations and OFIs.

    The board of directors of each Farm Credit Bank and agricultural 
credit bank shall adopt policies and procedures governing the making of 
direct loans to and the discounting of loans for direct lender 
associations and OFIs. The policies and procedures shall prescribe 
lending policies and loan underwriting standards that are consistent 
with sound financial and credit practices. The policies shall require a 
periodic review of the lending relationship with each direct lender 
association and OFI at intervals consistent with the term of the general 
financing agreement but in no case longer than 5 years. The policies 
shall require an evaluation of the creditworthiness of a direct lender 
association on the basis of credit factors and lending policies and loan 
underwriting standards set forth in part 614, subpart D, and may permit 
lending to such an institution on an unsecured basis only if the overall 
condition of the institution warrants. The stated term of a general 
financing agreement shall not exceed 5 years but may be automatically 
renewable for additional terms not to exceed 5 years if neither party 
objects at the time of renewal. The term of any general financing 
agreement that provides for unsecured lending to a direct lender 
association shall not exceed 1 year and may not be automatically 
renewed.

[63 FR 5724, Feb. 4, 1998]



Sec. 614.4125  Funding and discount relationships between Farm Credit Banks or agricultural credit banks and direct lender associations.

    (a) A Farm Credit Bank or agricultural credit bank shall not advance 
funds to, or discount loans for, any direct lender association except 
pursuant to a general financing agreement.
    (b) The Farm Credit Bank or agricultural credit bank shall deliver a 
copy of the executed general financing agreement and all related 
documents, such as a promissory note or security agreement, and all 
amendments of any of these documents, within 10 business days after any 
such document or amendment is executed, to the Chief Examiner, Farm 
Credit Administration, or to the Farm Credit Administration office that 
the Chief Examiner designates.
    (c) The general financing agreement shall address only those matters 
that are reasonably related to the debtor/creditor relationship between 
the Farm Credit Bank or agricultural credit bank and the direct lender 
association.
    (d) The total credit extended to a direct lender association, 
through direct loan or discounts, shall be consistent with the Farm 
Credit Bank's or agricultural credit bank's lending policies and loan 
underwriting standards and the creditworthiness of the direct lender 
association. The general financing agreement or promissory note shall 
establish a maximum credit limit determined by objective standards as 
established by the Farm Credit Bank or agricultural credit bank.
    (e) A Farm Credit Bank or agricultural credit bank that provides 
notice to a direct lender association that it is in material default of 
any covenant, term, or condition of the general financing agreement, 
promissory note, security agreement, or other related documents 
simultaneously shall provide written notification to the Chief Examiner, 
Farm Credit Administration, or to the Farm Credit Administration office 
that the Chief Examiner

[[Page 103]]

designates and the Director, Risk Management, Farm Credit System 
Insurance Corporation.
    (f) A direct lender association shall provide written notification 
to the Chief Examiner, Farm Credit Administration, or to the Farm Credit 
Administration office that the Chief Examiner designates, and the 
Director, Risk Management, Farm Credit System Insurance Corporation 
immediately upon receipt of a notice that it is in material default 
under any general financing agreement, loan agreement, promissory note, 
security agreement, or other related documents with a Farm Credit Bank, 
agricultural credit bank or non-Farm Credit institution.
    (g) A Farm Credit Bank or agricultural credit bank shall obtain 
prior written consent of the Farm Credit Administration before it takes 
any action that leads to or could lead to the liquidation of a direct 
lender association.
    (h) No direct lender association shall obtain financing from any 
party unless the parties agree to the requirements of this paragraph. No 
Farm Credit Bank, agricultural credit bank, or other party shall 
petition any Federal or State court to appoint a conservator, receiver, 
liquidation agent, or other administrator to manage the affairs of or 
liquidate a direct lender association.

[63 FR 5724, Feb. 4, 1998]



Sec. 614.4130  Funding and discount relationships between Farm Credit Banks or agricultural credit banks and OFIs.

    (a) A Farm Credit Bank or agricultural credit bank shall not advance 
funds to, or discount loans for, an OFI, as defined in Sec. 611.1205(c) 
of this chapter, except pursuant to a general financing agreement.
    (b) The Farm Credit Bank or agricultural credit bank shall deliver a 
copy of the executed general financing agreement and all related 
documents, such as a promissory note or security agreement, and all 
amendments of any of these documents, within 10 business days after any 
such document or amendment is executed, to the Chief Examiner, Farm 
Credit Administration, or to the Farm Credit Administration office that 
the Chief Examiner designates.
    (c) The total credit extended to the OFI, through direct loan or 
discounts, shall be consistent with the Farm Credit Bank's or 
agricultural credit bank's lending policies and loan underwriting 
standards and the creditworthiness of the OFI. The general financing 
agreement or promissory note shall establish a maximum credit limit 
determined by objective standards as established by the Farm Credit Bank 
or agricultural credit bank.

[63 FR 5724, Feb. 4, 1998]



       Subpart D--General Loan Policies for Banks and Associations



Sec. 614.4150  Lending policies and loan underwriting standards.

    Under the policies of its board, each institution shall adopt 
written standards for prudent lending and shall issue written policies, 
operating procedures, and control mechanisms that reflect prudent credit 
practices and comply with all applicable laws and regulations. Written 
policies and procedures shall, at a minimum, prescribe:
    (a) The minimum supporting credit and financial information, 
frequency for collection of information, and verification of information 
required in relation to loan size, complexity and risk exposure
    (b) The procedures to be followed in credit analysis
    (c) The minimum standards for loan disbursement, servicing and 
collections
    (d) Requirements for collateral and methods for its administration
    (e) Loan approval delegations and requirements for reporting to the 
board
    (f) Loan pricing practices
    (g) Loan underwriting standards that include measurable standards:
    (1) For determining that an applicant has the operational, 
financial, and management resources necessary to repay the debt from 
cashflow
    (2) That are appropriate for each loan program and the institution's 
risk-bearing ability; and
    (3) That consider the nature and type of credit risk, amount of the 
loan, and enterprises being financed

[[Page 104]]

    (h) Requirements that loan terms and conditions are appropriate for 
the loan; and
    (i) Such other requirements as are necessary for the professional 
conduct of a lending organization, including documentation for each loan 
transaction of compliance with the loan underwriting standards or the 
compensating factors or extenuating circumstances that establish 
repayment of the loan notwithstanding the failure to meet any one or 
more loan underwriting standard.

[62 FR 51014, Sept. 30, 1997]



Sec. 614.4155  Interest rates.

    Loans made by each bank and direct lender association shall bear 
interest at a rate or rates as may be determined by the institution 
board. The board shall set interest rates or approve individual interest 
rate changes either on a case-by-case basis or pursuant to an interest 
rate plan within which management may establish rates. Any interest rate 
plan shall set loan-pricing policies and objectives, provide guidance 
regarding the circumstances under which management may adjust rates, and 
provide the upper and lower limits on management authority. Any interest 
rate plan adopted shall be reviewed on a continuing basis by the board, 
as well as in conjunction with its review and approval of the 
institution's operational an strategic business plan.

[62 FR 66818, Dec. 22, 1997]



Sec. 614.4160  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.

[61 FR 67186, Dec. 20, 1996. Redesignated at 62 FR 66818, Dec. 22, 1997]



Sec. 614.4165  Special credit needs.

    (a) The board of each direct lender institution shall adopt policies 
to establish programs to provide credit and related services to young, 
beginning, and small farmers, ranchers, and producers or harvesters of 
aquatic products.
    (b) Each Farm Credit Bank and agricultural credit bank shall provide 
to the Farm Credit Administration an annual report summarizing the 
operations and achievements in its chartered territory under such 
programs. Such reports shall be based on the reports from each 
association providing services under these programs and shall be in a 
format prescribed by the Farm Credit Administration.
    (c) Specialized enterprises. Consideration can be given by bank and 
association boards to organizing groups of similar specialized borrowers 
engaged in enterprises involving a high degree of risk into pools by 
which banks or associations may minimize the higher risk occasioned by 
financing such specialized enterprises. Where such programs are 
authorized, the direct lender institution board shall adopt appropriate 
policies that define criteria for the selection of specialized high-risk 
enterprises.

[46 FR 53022, Oct. 28, 1981, as amended at 55 FR 24883, June 19, 1990; 
62 FR 51014, Sept. 30, 1997]



                  Subpart E--Loan Terms and Conditions

    Source: 55 FR 24884, June 19, 1990, unless otherwise noted.



Sec. 614.4200  General requirements.

    (a) Terms and conditions. (1) The terms and conditions of each loan 
made by a Farm Credit bank or association shall be set forth in a 
written document or documents, such as a loan agreement, promissory 
note, or other instrument(s) appropriate to the type and amount of the 
credit extension, in order to establish loan conditions and performance 
requirements. Copies of

[[Page 105]]

all documents executed by the borrower in connection with the closing of 
a loan made under titles I or II of the Act shall be provided to the 
borrower at the time of execution and at any time thereafter that the 
borrower requests additional copies.
    (2) The terms and conditions of all loans shall be adequately 
disclosed in writing to the borrower not later than loan closing. For 
loans made under titles I and II of the Act, the institution shall 
provide prompt written notice of the approval of the loan.
    (3) Applicants shall be provided notification of the action taken on 
each credit application in compliance with the requirements of 12 CFR 
202.9.
    (b) Security. (1) Long-term real estate mortgage loans must be 
secured by a first lien interest in real estate, except that the loans 
may be secured by a second lien interest if the institution also holds 
the first lien on the property. No funds shall be advanced, under a 
legally binding commitment or otherwise, if the outstanding loan balance 
after the advance would exceed 85 percent (or 97 percent as provided in 
section 1.10(a) of the Act) of the appraised value of the real estate, 
except that a loan on which private mortgage insurance is obtained may 
exceed 85 percent of the appraised value of the real estate to the 
extent that the loan amount in excess of 85 percent is covered by such 
insurance. The real estate that is used to satisfy the loan-to-value 
limitation must be comprised primarily of agricultural or rural 
property, including agricultural land and improvements thereto, a farm-
related business, a marketing or processing operation, a rural 
residence, or real estate used as an integral part of an aquatic 
operation.
    (2) Notwithstanding the requirements of paragraph (b)(1) of this 
section, the lending institution may advance funds for the payment of 
taxes or insurance premiums with respect to the real estate, reschedule 
loan payments, grant partial releases of security interests in the real 
estate, and take other actions necessary to protect the lender's 
collateral position. Any action taken that results in exceeding the 
loan-to-value limitation shall be in accordance with a policy of the 
institution's board of directors and adequately documented in the loan 
file.
    (3) Short- and intermediate-term loans may be secured or unsecured 
as the documented creditworthiness of the borrower warrants.
    (4) In addition to the requirements in paragraph (b)(1) of this 
section, a long-term, non-farm rural home loan, including a revolving 
line of credit, shall be secured by a first lien on the property, except 
that it may be secured by a second lien if the institution also holds 
the first lien on the property. A short- or intermediate-term loan on a 
rural home, including a revolving line of credit, must be secured by a 
lien on the property unless the financing is provided exclusively for 
repairs, remodeling, or other improvements to the rural home, in which 
case the loan may be secured by other property or unsecured if warranted 
by the documented creditworthiness of the borrower.
    (5) Except as provided in Sec. 614.4231, loans made under title III 
of the Act may be secured or unsecured, as appropriate for the purpose 
of the loan and the documented creditworthiness of the borrower.

[62 FR 51014, Sept. 30, 1997]



Sec. 614.4231  Certain seasonal commodity loans to cooperatives.

    Loans on certain commodities that are part of government programs 
shall comply with the criteria established for those programs. Security 
taken on program commodities shall be consistent with prudent lending 
practices and ensure compliance with the government program. The bank 
shall provide for periodic review by bank officials of any custodial 
activities and shall provide notice to the custodians that their 
activities are subject to review and examination by the Farm Credit 
Administration.

[62 FR 51015, Sept. 30, 1997]



Sec. 614.4232  Loans to domestic lessors.

    Loans and financial assistance extended by banks for cooperatives 
and agricultural credit banks to domestic lessors to finance equipment 
or facilities leased by a stockholder of the

[[Page 106]]

bank shall be subject to the following terms and conditions:
    (a) The term of the loan shall not be longer than the total period 
of the lease;
    (b) The contract between the lessor and lessee shall establish that 
the leased assets are effectively under the control of the lessee and 
that such control shall continue in effect for essentially all of the 
term of the lease;
    (c) The lessee must hold at least one share of stock or one 
participation certificate; and
    (d) The leased equipment and facilities must be primarily for use in 
the lessee's operations in the United States.

[55 FR 24884, June 19, 1990, as amended at 64 FR 34517, June 28, 1999]



Sec. 614.4233  International loans.

    Term loans made by banks for cooperatives and agricultural credit 
banks under the authority of section 3.7(b) of the Act and Sec. 613.3200 
of this chapter to foreign or domestic parties who are not shareholders 
of the bank shall be subject to the following conditions:
    (a) The loan shall be denominated in a currency to eliminate foreign 
exchange risk on repayment.
    (b) The borrower's obligations shall be guaranteed or insured 
against default under such policies as are available in the United 
States and other countries. Exceptions may be made where a prospective 
borrower has had a longstanding successful business relationship with an 
eligible cooperative borrower or an eligible cooperative which is not a 
borrower if the prospective borrower has a high credit rating as 
determined by the bank.
    (c) For a borrower in which a voting stockholder of the bank has a 
majority ownership interest, financing may be extended for the full 
value of the transaction; otherwise, financing may be extended only to 
approximate the percent of ownership.

[55 FR 24884, June 19, 1990, as amended at 55 FR 28886, July 16, 1990; 
55 FR 50544, Dec. 7, 1990; 56 FR 5927, Feb. 14, 1991; 62 FR 4445, Jan. 
30, 1997]



              Subpart F--Collateral Evaluation Requirements

    Source: 59 FR 46730, Sept. 12, 1994, unless otherwise noted.



Sec. 614.4240  Collateral definitions.

    For the purposes of this part, the following definitions shall 
apply:
    (a) Abundance of caution, when used to describe decisions to require 
collateral, means that the collateral is taken in circumstances in 
which:
    (1) It is not required by statute, regulation, or the institution's 
policies; and
    (2) A prudent lender would extend credit based on a borrower's 
income and/or other collateral, absent the real estate, and the decision 
to extend credit was, in fact, based on other sources of revenue or 
collateral.
    (b) Appraisal means a written statement independently and 
impartially prepared by a qualified appraiser setting forth an opinion 
as to the market value of an adequately described property as of a 
specific date(s), supported by the presentation and analysis of relevant 
market information.
    (c) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, by professional appraisal organizations, as a not-
for-profit corporation under the laws of Illinois, in order to enhance 
the quality of professional appraisals.
    (d) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (e) Business loan means a loan or other extension of credit to any 
corporation, general or limited partnership, business trust, joint 
venture, sole proprietorship, or other business entity (including 
entities and individuals engaged in farming enterprises).
    (f) Cost approach means the process by which an evaluator 
establishes an indicated value by measuring the current market cost to 
construct a reproduction of or replacement for the improvements, minus 
the amount of depreciation (physical deterioration, or functional and/or 
external obsolescence) evident in the structure from all causes, plus 
the market value of the land.

[[Page 107]]

    (g) Evaluation means a study of the nature, quality, or utility of, 
interest in, or aspects of, an asset. An evaluation may take the form of 
a valuation or an appraisal.
    (h) Fee appraiser means a qualified evaluator who is not an employee 
of the party contracting for the completion of the evaluation and who 
performs an evaluation on a fee basis. For purposes of this subpart, a 
fee appraiser may include a staff evaluator from another Farm Credit 
System institution only if the employing institution is not operating 
under joint management with the contracting institution. In addition, 
for purposes of personal and intangible collateral evaluations, the term 
``fee appraiser'' includes, but is not limited to, certified public 
accountants, equipment dealers, grain buyers, livestock buyers, and 
auctioneers.
    (i) FIRREA means the Financial Institutions Recovery, Reform, and 
Enforcement Act of 1989.
    (j) Highest and best use means the reasonable and most probable use 
of the property that would result in the highest market value of vacant 
land or improved property, as of the date of valuation; or that use, 
from among reasonably probable and legally alternative uses, found to be 
physically possible, appropriately supported, financially feasible, and 
which results in the highest land value.
    (k) Income capitalization approach means the procedure that values 
property by measuring the present value of the expected future benefits 
of property ownership. This value is derived from either:
    (1) Capitalizing a single year's income expectancy or an annual 
average of several years' income expectancies at a market-derived 
capitalization rate that reflects a specific income pattern, return on 
investment, and change in the value of the investment; or
    (2) Discounting the annual cashflows for the holding period and the 
reversion at a specified yield rate or specified yield rates which 
reflect market behavior.
    (l) Market value means the most probable price that a property 
should bring in a competitive and open market under all conditions 
requisite to a fair sale, the buyer and seller each acting prudently, 
knowledgeably, and assuming neither is under duress. Implicit in this 
definition is the consummation of a sale as of a specified date and the 
passing of title from seller to buyer under conditions whereby:
    (1) Buyer and seller are typically motivated;
    (2) Both parties are well informed or well advised, and acting in 
what they consider their best interests;
    (3) A reasonable time is allowed for exposure in the open market;
    (4) Payment is made in terms of cash in United States dollars or in 
terms of financial arrangements comparable thereto; and
    (5) The price represents the normal consideration for the property 
sold unaffected by special or creative financing or sales concessions 
granted by anyone associated with the sale.
    (m) Personal property, for purposes of this subpart, means all 
tangible and movable property not considered real property or fixtures.
    (n) Qualified evaluator means an individual who is competent, 
reputable, impartial, and has demonstrated sufficient training and 
experience to properly evaluate property of the type that is the subject 
of the evaluation. For the purposes of this definition, the term 
``qualified evaluator'' includes an appraiser or valuator.
    (o) Real estate means an identified parcel or tract of land, 
including improvements, if any.
    (p) Real estate-related financial transactions means any transaction 
involving:
    (1) The sale, lease, purchase, investment in, or exchange of real 
property, including interests in property or the financing thereof; or
    (2) The refinancing of real property or interests in real property; 
or
    (3) The use of real property or interests in real property as 
security for a loan or investment, including mortgage-backed securities.
    (q) Real property means all interests, benefits, and rights inherent 
in the ownership of real estate.
    (r) Sales comparison approach means the procedure that values 
property by comparing the subject property to similar properties located 
in relatively

[[Page 108]]

close proximity, having similar size and utility, and having been 
recently sold in arm's-length transactions (comparable sales). The sales 
comparison approach requires the evaluator to estimate the degree of 
similarity and difference between the subject property and comparable 
sales. Such comparison shall be made on the basis of conditions of sale, 
financing terms, market conditions, location, physical characteristics, 
and income characteristics. Appropriate adjustments shall be made to the 
sales price of the comparable property based on the identified 
deficiencies or superiorities of the subject property to arrive at a 
probable price for which the subject property could be sold on the date 
of the collateral evaluation.
    (s) State certified appraiser means any individual who has satisfied 
the requirements for and has been certified as a real estate appraiser 
by a State or territory whose requirements for certification currently 
meet or exceed the minimum criteria for certification issued by the 
Appraiser Qualification Board of the Appraisal Foundation. No individual 
shall be a State certified appraiser unless such individual has achieved 
a passing grade on a suitable examination administered by a State or 
territory that is consistent with and equivalent to the Uniform State 
Certification Examination issued or endorsed by the Appraiser 
Qualification Board of the Appraisal Foundation. In addition, the 
Appraisal Subcommittee must not have issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI of FIRREA.
    (t) State licensed appraiser means any individual who has satisfied 
the requirements for licensing and has been licensed as a real estate 
appraiser by a State or territory in which the licensing procedures 
comply with title XI of FIRREA and in which the Appraisal Subcommittee 
has not issued a finding that the policies, practices, or procedures of 
the State or territory are inconsistent with title XI of FIRREA.
    (u) Transaction value means:
    (1) For loans or other extensions of credit, the amount of the loan, 
loan commitment, or other extensions of credit;
    (2) For sales, leases, purchases, investments in, or exchanges of 
real property, the market value of the property interest involved; and
    (3) For the pools of loans or interests in real property, the 
transaction value of the individual loans or the market value of the 
real property interests comprising the pool.
    (v) USPAP means the Uniform Standards of Professional Appraisal 
Practice adopted by the Appraisal Foundation.
    (w) Valuation means the process of estimating a defined value of an 
identified interest or interests in a specific asset or assets as of a 
given date. A valuation results from the completion of a collateral 
evaluation that does not require an appraisal.



Sec. 614.4245  Collateral evaluation policies.

    (a) The board of directors of each Farm Credit System institution 
that engages in lending or leasing secured by collateral shall adopt 
well-defined and effective collateral evaluation policies and standards, 
that comply with the regulations in this subpart, to ensure that 
collateral evaluations are:
    (1) Sufficiently descriptive and detailed to provide ample support 
to the institution's related credit decisions;
    (2) Performed based on criteria established for the purpose of 
determining the circumstances under which collateral evaluations will be 
required and when they will be required. Such criteria must, at a 
minimum:
    (i) Establish when an institution will require a collateral 
appraisal completed under the USPAP rather than a collateral valuation; 
and
    (ii) Take into account such factors as market trends, market 
volatility, and various types of credit, loan servicing, collection, and 
liquidation actions; and
    (3) Completed by a qualified evaluator in an unbiased manner.
    (b) The policies and standards required by this section shall, at a 
minimum, address the criteria outlined in Secs. 614.4250 through 
614.4267 of this subpart.

[[Page 109]]

    (c) A Federal land bank association shall, with the approval of its 
respective Farm Credit bank, adopt collateral evaluation policies that 
are consistent with the bank's policies and standards.
    (d) An institution's board of directors may adopt specific 
collateral evaluation requirements, consistent with the regulations in 
this subpart, for loans designated as part of a minimum information 
program.

[59 FR 46730, Sept. 12, 1994, as amended at 62 FR 51015, Sept. 30, 1997]



Sec. 614.4250  Collateral evaluation standards.

    (a) When real, personal, or intangible property is taken as security 
for a loan or is the subject of a lease, an evaluation of such property 
shall be performed in accordance with Sec. 614.4260 and the 
institutions' policies and procedures. Such a collateral evaluation 
shall be identified as either a collateral valuation or a collateral 
appraisal. Specifically, all collateral evaluations must:
    (1) Value the subject property based upon market value as defined in 
Sec. 614.4240(l);
    (2) Be presented in a written format;
    (3) Consider the purpose for which the property will be used and the 
property's highest and best use, if different from the intended use;
    (4) Be sufficiently descriptive to enable the reader to ascertain 
the reasonableness of the estimated market value and the rationale for 
the estimate;
    (5) Provide sufficient detail (including an identification and 
description of the property) and depth of analysis to reflect the 
relevant characteristics and complexity of the subject property;
    (6) Analyze and report, as appropriate, for real, intangible, and/or 
personal property, on:
    (i) The current income producing capacity of the property;
    (ii) A reasonable marketing period for the property;
    (iii) The current market conditions and trends that will affect 
projected income, to the extent such conditions will affect the value of 
the property;
    (iv) The appropriate deductions and discounts as they would apply to 
the property, including but not limited to, those based on the condition 
of the property, as well as the specialization of the operation and 
property; and
    (v) Potential liabilities, including those associated with any 
hazardous waste or other environmental concerns; and
    (7) Include in the evaluation report a certification that the 
evaluation was not based on a requested minimum valuation or specific 
valuation or approval of a loan.
    (b) For purposes of determining appraisal value as required in 
section 1.10(a) of the Act, the definition of market value and the 
requirements of this subpart shall apply.



Sec. 614.4255  Independence requirements.

    (a) Prohibitions. For all personal and intangible property, and for 
all real property exempted under Sec. 614.4260(c) of this subpart, no 
person may:
    (1) Perform evaluations in connection with transactions in which 
such person has a direct or indirect interest, financial or otherwise, 
in the loan or subject property;
    (2) As a director, vote on or approve a loan decision on which such 
person performed a collateral evaluation; or
    (3) As a director, perform a collateral evaluation in connection 
with any transaction on which such person made or will be required to 
make a credit decision.
    (b) Officers and employees. If the institution's internal control 
procedures required by Sec. 618.8430 of this chapter include 
requirements for either a prior approval or post-review of credit 
decisions, officers and employees may:
    (1) Participate in a vote or approval involving assets on which they 
performed a collateral evaluation; or
    (2) Perform a collateral evaluation in connection with a transaction 
on which they have made or will be required to make a credit decision.
    (c) Real estate appraiser. Except as provided in Sec. 614.4260(c) of 
this subpart, all evaluations of real property that serve as the primary 
security for a loan shall be performed by a qualified real estate 
appraiser who has no direct or indirect interest, financial or 
otherwise, in the loan or subject property and is not engaged in the 
marketing,

[[Page 110]]

lending, collection, or credit decision processes of any of the 
following:
    (1) A Farm Credit System institution making or originating the loan;
    (2) A Farm Credit System institution operating under common 
management with the institution making or originating the loan; or
    (3) A Farm Credit System institution purchasing an interest in the 
loan.
    (d) Fee appraisers. Fee appraisers shall be engaged directly by the 
Farm Credit System institution or its agent, and shall have no direct or 
indirect interest, financial or otherwise, in the property or 
transaction. A Farm Credit System institution may accept a real estate 
appraisal that was prepared by an appraiser engaged directly by another 
Farm Credit System institution, by a United States Government agency, a 
Government-Sponsored Enterprise or by a financial institution subject to 
title XI of FIRREA.
    (e) Loan purchases. No employee who, acting as a State licensed or 
State certified appraiser, performed a real estate appraisal on any 
collateral supporting a loan shall subsequently participate in any 
decision related to the loan purchase.



Sec. 614.4260  Evaluation requirements.

    (a) Valuation. Valuations of personal and intangible property, as 
well as real property exempted under paragraph (c) of this section, 
shall be performed by qualified individuals who meet the established 
standards of this subpart and the Farm Credit System institution 
obtaining the collateral valuation.
    (b) Appraisal. (1) Appraisals for real estate-related financial 
transactions with transaction values of more than $250,000 shall be 
performed by a qualified appraiser who is a State licensed or a State 
certified real estate appraiser.
    (2) Appraisals for real estate-related financial transactions with 
transaction values of more than $1,000,000 shall be performed by a 
qualified appraiser who is a State certified real estate appraiser.
    (c) Appraisals not required. An appraisal performed by a State 
certified or State licensed appraiser is not required for any real 
estate-related financial transaction in which any of the following 
conditions are met:
    (1) The transaction value is $250,000 or less;
    (2) The transaction is a ``business loan'' as defined in 
Sec. 614.4240(e) that:
    (i) Has a transaction value of $1,000,000 or less; and
    (ii) Is not dependent on income derived from the sale or cash rental 
of real estate as the primary source of repayment;
    (3) A lien on real property has been taken as collateral in an 
abundance of caution, and the application, when evaluated on the five 
basic credit factors, without considering the subject real estate, would 
support the credit decision that was based on other sources of repayment 
or collateral;
    (4) A lien on real estate is not statutorily required and has been 
taken for purposes other than the real estate's value;
    (5) Subsequent loan transactions (which include but are not limited 
to loan servicing actions, reamortizations, modifications of loan terms, 
and partial releases), provided that either:
    (i) The transaction does not involve the advancement of new loan 
funds other than funds necessary to cover reasonable closing costs; or
    (ii) There has been no obvious and material change in market 
conditions or physical aspects of the property that threatens the 
adequacy of the Farm Credit System institution's real estate collateral 
protection, even with the advancement of new loan funds;
    (6) A Farm Credit System institution purchases a loan or an interest 
in a loan, pool of loans, or interests in real property, including 
mortgage-backed securities, provided that:
    (i) The appraisal prepared for each loan, pooled loan, or real 
property interest, when originated, met the standards of this subpart, 
other Federal regulations adopted pursuant to FIRREA, or the 
requirements of the government-sponsored secondary market intermediaries 
under whose auspices the interest is sold; and
    (ii) There has been no obvious and material change in market 
conditions or physical aspects of the property that would threaten the 
Farm Credit System institution's collateral position, or

[[Page 111]]

    (7) A Farm Credit System institution makes or purchases a loan 
secured by real estate, which loan is guaranteed by an agency of the 
United States Government and is supported by an appraisal that conforms 
to the requirements of the guaranteeing agency.
    To qualify for exceptions in paragraphs (c)(1) through (c)(7) of 
this section from the requirements of this subpart, the institution must 
have documentation justifying the use of such exceptions in the 
applicable loan file(s). In addition, the institution must document that 
the repayment of a ``business loan'' is not dependent on income derived 
from the sale or cash rental of real estate.
    (d) FCA-required appraisals. The FCA reserves the right to require 
an appraisal under this subpart whenever it believes it is necessary to 
address safety and soundness issues.
    (e) Reciprocity. The requirements of this subpart are satisfied by 
the use of State certified or State licensed appraisers from any State 
provided that:
    (1) The appraiser is qualified to perform such appraisals;
    (2) The applicable Farm Credit System institution has established 
policies providing for such interstate appraisals; and
    (3) The applicable State appraiser licensing and certification 
agency recognizes the certification or license of the appraiser's State 
of permanent certification or licensure.

[59 FR 46730, Sept. 12, 1994, as amended at 60 FR 2687, Jan. 11, 1995]



Sec. 614.4265  Real property evaluations.

    (a) Real estate shall be valued on the basis of market value.
    (b) Market value shall be determined by a reasonable valuation 
method that:
    (1) Considers the income capitalization approach, the sales 
comparison approach, and/or the cost approach, as appropriate, to 
determine market value;
    (2) Explains and documents the elimination of any approach not used.
    (3) Reconciles the market values of the applicable approaches; and
    (c) Where real estate appraisals or real estate collateral 
valuations for business loans in excess of $250,000 that would not 
otherwise be exempted under Sec. 614.4260(c) are required, such 
evaluations shall be completed in accordance with the USPAP and shall 
include a legal description of the subject property.
    (d) At a minimum, the institution shall develop and document the 
evaluation of the income and debt servicing capacity for the property 
and operation where the transaction value exceeds $250,000 and the real 
estate taken as collateral:
    (1) Is an integral part of and supports the principal source of loan 
repayment; or
    (2) Is not an integral part of and does not support the principal 
source of loan repayment, but has demonstrable rental market appeal, is 
statutorily required, and fully or partially constitutes an integral 
part of an agricultural or aquatic operation.
    (e) The income-earning and debt-servicing capacity established under 
paragraph (d) of this section on such properties shall be documented as 
part of the credit analysis for any related loan action, whether or not 
the income capitalization approach value is used as the basis for the 
market value conclusion stated in the evaluation report.
    (f) Collateral closely aligned with, an integral part of, and 
normally sold with real estate (fixtures) may be included in the value 
of the real estate. All other collateral associated with the real 
estate, but designated as personal property, shall be evaluated as 
personal property in accordance with Secs. 614.4250 and 614.4266.
    (g) The evaluation shall properly identify all nonagricultural 
influences, including, but not limited to, urban development, mineral 
deposits, and commercial building development value, and the reasoning 
supporting the evaluator's highest and best-use conclusion.
    (h) Where an evaluation of real property is completed by a fee 
appraiser, as defined in Sec. 614.4240(g), the institution's standards 
shall include provisions for periodic collateral inspections performed 
by the institution's account officer or appropriate designee.



Sec. 614.4266  Personal and intangible property evaluations.

    (a) Personal property and intangibles shall be valued on the basis 
of market

[[Page 112]]

value in accordance with the institution's evaluation standards and 
policies.
    (b) Personal property evaluations shall include a source of 
comparisons of value (i.e., equipment dealer listings, Blue Book, market 
sales reports, etc.) and a description of the property being evaluated, 
including location of the property and, where applicable, quantity, 
species/variety, measure/weight, value per unit and in total, type of 
identification (such as brand, bill of lading, or warehouse receipt), 
quality, condition, and date.
    (c) Evaluations of intangibles shall include a review and 
description of the documents supporting the property interests and the 
marketability of the intangible property, including applicable terms, 
conditions, and restrictions contained in the document that would affect 
the value of the property.
    (d) Where an evaluation of personal or intangible property is 
completed by a fee appraiser, as defined in Sec. 614.4240(g), the 
institution's standards shall include provisions for periodic collateral 
inspections and verification by the institution's account officer or 
appropriate designee.
    (e) When a Farm Credit System institution deems an appraisal 
necessary, personal or intangible property shall be appraised in 
accordance with procedures and standards established by the institution 
by individuals deemed qualified by the institution to complete the work 
under the USPAP Competency and Ethics Provisions.

[59 FR 46730, Sept. 12, 1994, as amended at 59 FR 50964, Oct. 6, 1994]



Sec. 614.4267  Professional association membership; competency.

    (a) Membership in appraisal organizations. A State certified 
appraiser or a State licensed appraiser may not be excluded from 
consideration for an assignment for a real estate-related transaction 
solely by virtue of membership or lack of membership in any particular 
appraisal organization.
    (b) Competency. All staff and fee evaluators, including appraisers, 
performing evaluations in connection with real, personal, or intangible 
property taken as collateral in connection with extensions of credit 
must meet the qualification requirements of this subpart. However, an 
evaluator (as defined in Sec. 614.4240(n)) may not be considered 
competent solely by virtue of being certified, licensed, or accredited. 
Any determination of competency shall be based on the individual's 
experience and educational background as they relate to the particular 
evaluation assignment for which such individual is being considered.

Subpart G  [Reserved]



                   Subpart H--Loan Purchases and Sales

    Source: 57 FR 38247, Aug. 24, 1992, unless otherwise noted.



Sec. 614.4325  Purchase and sale of interests in loans.

    (a) Definitions. For the purposes of this subpart, the following 
definitions shall apply:
    (1) Interests in loans means ownership interests in the principal 
amount, interest payments, or any aspect of a loan transaction and 
transactions involving a pool of loans, including servicing rights.
    (2) Lead lender means a lending institution having a direct 
contractual relationship with a borrower to advance funds, which 
institution sells or assigns an interest or interests in such loan to 
one or more other lenders.
    (3) Loan means any extension of credit or similar financial 
assistance of the type authorized under the Act, such as guarantees, 
letters of credit, and other similar transactions.
    (4) Loan participation means a fractional undivided interest in the 
principal amount of a loan that is sold by a lead lender to a 
participating institution in accordance with the requirements of 
Sec. 614.4330 of this subpart. The term ``loan participation'' does not 
include a subordinated participation interest.
    (5) Participating institution means an institution that purchases a 
fractional undivided interest in the principal amount of a loan 
originated by another lender.
    (6) Sale with recourse means a sale of a loan or an interest in a 
loan in which the seller:

[[Page 113]]

    (i) Retains some risk of loss from the transferred asset for any 
cause except the seller's breach of usual and customary warranties or 
representations designed to protect the purchaser against fraud or 
misrepresentation; or
    (ii) Has an obligation to make payments of principal or interest to 
any party resulting from:
    (A) Default on the payment of principal or interest on the loan by 
the borrower or guarantor or any other deficiencies in the obligor's 
performance;
    (B) Changes in the market value of the assets after transfer;
    (C) Any contractual relationship between the seller and purchaser 
incident to the transfer that, by its terms, could continue even after 
final payment, default, or other termination of the assets transferred; 
or
    (D) Any other cause, except the retention at servicing rights alone 
shall not constitute recourse.
    (7) Subordinated participation interest means an interest in a loan 
that bears the first risk of loss, including the retention of such an 
interest when a loan is sold to a pooler certified by the Federal 
Agricultural Mortgage Corporation pursuant to title VIII of the Act, or 
an interest in a pool of subordinated participation interests purchased 
to satisfy the requirements of title VIII of the Act with respect to a 
loan sold to such a certified pooler.
    (b) Authority to purchase and sell interests in loans. Loans and 
interests in loans may only be sold in accordance with each 
institution's lending authorities, as set forth in subpart A of this 
part. No Farm Credit System institution may purchase from an institution 
that is not a Farm Credit System institution any interest in a loan, 
except for the purpose of pooling and securitizing such loans under 
title VIII of the Act, unless such an interest is a participation 
interest that qualifies under the institution's lending authority, as 
set forth in subpart A of this part, and meets the requirements of 
Sec. 614.4330 of this subpart.
    (c) Policies. Each Farm Credit System institution that is authorized 
to sell or purchase interests in loans under subpart A of this part 
shall exercise that authority in accordance with a policy adopted by its 
board of directors that addresses the following matters:
    (1) The types of purchasers to which the institution is authorized 
to sell interests in loans;
    (2) The types of loans in which the institution may purchase or sell 
an interest and the types of interests which may be purchased or sold;
    (3) The underwriting standards to be applied in the purchase of 
interests in loans:
    (4) Such limitations on the aggregate principal amount of interests 
in loans that the institution may purchase from a single institution as 
are necessary to diversify risk, and such limitations on the aggregate 
amount the institution may purchase from all institutions as are 
necessary to assure that service to the territory is not impeded;
    (5) Provision for the identification and reporting of loans in which 
interests are sold or purchased;
    (6) Requirements for providing and securing in a timely manner 
adequate credit and other information needed to make an independent 
credit judgment; and
    (7) Any limitations or conditions to which sales or purchases are 
subject that the board deems appropriate, including arbitration.
    (d) Purchase and sale agreements. Agreements to purchase or sell an 
interest in a loan shall, at a minimum:
    (1) Identify the particular loan(s) to be covered by the agreement;
    (2) Provide for the transfer of credit and other borrower 
information on a timely and continuing basis;
    (3) Provide for sharing, dividing, or assigning collateral;
    (4) Identify the nature of the interest(s) sold or purchased;
    (5) Set forth the rights and obligations of the parties and the 
terms and conditions of the sale; and
    (6) Contain any terms necessary for the appropriate administration 
of the loan and the protection of the interests of the Farm Credit 
System institution.
    (e) Independent credit judgment. Each institution that purchases an 
interest in a loan shall make a judgment on the creditworthiness of the 
borrower that is independent of the originating or lead lender and any 
intermediary seller or broker prior to the purchase of the

[[Page 114]]

interest and prior to any servicing action that alters the terms of the 
original agreement, which judgment shall not be delegated to any 
person(s) not employed by the institution. A Farm Credit System 
institution that purchases a loan or any interest therein may use 
information, such as appraisals or collateral inspections, furnished by 
the originating or lead lender, or any intermediary seller or broker; 
however, the purchasing Farm Credit System institution shall 
independently evaluate such information when exercising its independent 
credit judgment. No employee who performed a real estate appraisal on 
any collateral supporting a loan shall participate in the decision to 
purchase that loan. The independent credit judgment shall be documented 
by a credit analysis that considers factors set forth in the loan 
underwriting standards adopted pursuant to Sec. 614.4150 of this part 
and is independent of the originating institution and any intermediary 
seller or broker. The credit analysis shall consider such credit and 
other borrower information as would be required by a prudent lender and 
shall include an evaluation of the capacity and reliability of the 
servicer. Boards of directors of jointly managed institutions shall 
adopt procedures to ensure that the interests of their respective 
shareholders are protected in participation between such institutions.
    (f) Limitations. The aggregate principal amount of interests in 
loans purchased from a single lead lender and the aggregate principal 
amount of interests in loans purchased from other institutions shall not 
exceed the limits set in the institution's policy.
    (g) Sales with recourse. When a loan or interest in a loan is sold 
with recourse, it shall be accorded the following treatment:
    (1) The loan shall be considered, to the extent of the recourse, an 
extension of credit by the purchaser to the seller, as well as an 
extension of credit from the seller to the borrower(s), for the purpose 
of determining whether credit extensions to a borrower are within the 
lending limits established in subpart J of this part.
    (2) The amount of the loan subject to the recourse agreement shall 
be considered a loan sold with recourse for the purpose of computing 
permanent capital ratios.
    (h) Transactions through agents. Transactions pertaining to 
purchases of loans, including the judgement on creditworthiness, may be 
performed through an agent, provided that:
    (1) The institution establishes the necessary criteria in a written 
agency agreement that outlines, at a minimum, the scope of the agency 
relationship and obligates the agent to comply with the institution's 
underwriting standards;
    (2) The institution periodically reviews the agency relationship to 
determine if the agent's actions are in the best interest of the 
institution;
    (3) The agent must be independent of the seller or intermediate 
broker in the transaction; and
    (4) If an association's funding bank serves as its agent, the agency 
agreement must provide that:
    (i) The association can terminate the agreement upon no more than 60 
days notice to the bank;
    (ii) The association may, in its discretion, require the bank to 
purchase from the association any interest in a loan that the 
association determines does not comply with the terms of the agency 
agreement or the association's loan underwriting standards.

[57 FR 38247, Aug. 24, 1992, as amended at 58 FR 40321, July 28, 1993; 
62 FR 51015, Sept. 30, 1997; 64 FR 34517, June 28, 1999]



Sec. 614.4330  Loan participations.

    Agreements to purchase or sell a participation interest shall be 
subject to the provisions of Sec. 614.4325 of this subpart, and, in 
addition, shall satisfy the requirements of this section.
    (a) Participation agreements. Agreements to purchase or sell a 
participation interest in a loan shall, in addition to meeting the 
requirements of Sec. 614.4325(d) of this subpart, at a minimum:
    (1) Define the duties and responsibilities of the participating 
institution and the lead lender, and/or the servicing institution, if 
different from the lead lender.
    (2) Provide for loan servicing and monitoring of the servicer;

[[Page 115]]

    (3) Set forth authorization and conditions for action in the event 
of borrower distress or default;
    (4) Provide for sharing of risk;
    (5) Set forth conditions for the offering and acceptance of the loan 
participation and termination of the agreement;
    (6) Provide for sharing of fees, interest charges, and costs between 
participating institutions;
    (7) Provide for a method of resolution of disagreements arising 
under the agreement between two or more institutions;
    (8) Specify whether the contract is assignable by either party; and
    (9) Provide for the issuance of certificates evidencing an undivided 
interest in a loan.
    (b) Retention requirement. No participation interest may be 
purchased from an institution that is not a Farm Credit System 
institution unless the servicing institution has an ownership interest 
in the principal amount equal to the lesser of 10 percent of the 
principal amount or such lesser amount as represents the servicing 
institution's lending limit, which ownership interest cannot be assigned 
separately from the servicing rights.
    (c) Intrasystem participations. Loans participated between or among 
Farm Credit System institutions shall meet the borrower eligibility, 
membership, loan term, loan amount, loan security, and stock purchase 
requirements of the originating lender.



Sec. 614.4335  Borrower stock requirements.

    (a) In general. Except as provided in paragraph (b) of this section, 
a borrower shall meet the minimum borrower stock purchase requirements 
as a condition of obtaining a loan.
    (b) Loans designated for sale into a secondary market. (1) An 
institution's bylaws may provide that the institution's minimum borrower 
stock purchase requirements do not apply if a loan is designated, at the 
time it is made, for sale into a secondary market.
    (2) If a loan designated for sale under paragraph (b)(1) of this 
section is not sold into a secondary market during the 180-day period 
that begins on the date of designation, the institution's minimum 
borrower stock purchase requirements shall apply.
    (c) Retirement of borrower stock. (1) In general. Borrower stock may 
be retired only if the institution meets the minimum permanent capital 
requirements imposed by the FCA pursuant to the Act or regulations and, 
except as provided in paragraph (c)(2) of this section, in accordance 
with the following:
    (i) Borrower stock may be retired if the entire loan is sold without 
recourse, provided that when the loan is sold without recourse to 
another Farm Credit System institution, the borrower may elect to hold 
stock in either the selling or purchasing institution.
    (ii) Borrower stock may not be retired when the entire loan is sold 
with recourse.
    (iii) When an interest in a loan is sold without recourse, a 
proportionate amount of borrower stock may be retired, but in no event 
may stock be retired below the institution's minimum stock purchase 
requirements for the interest retained.
    (iv) If an institution repurchases a loan on which the stock has 
been retired, the borrower shall be required to repurchase stock in the 
amount of the minimum stock purchase requirement.
    (2) Loans sold into a secondary market. An institution's bylaws may 
provide that all outstanding voting stock held by a borrower with 
respect to a loan shall be retired when the loan is sold into a 
secondary market.
    (d) Applicability. In the case of a loan sold into a secondary 
market under title VIII of the Act, paragraphs (b)(1) and (c)(2) of this 
section apply regardless of whether the institution retains a 
subordinated participation interest in a loan or pool of loans or 
contributes to a cash reserve.

[62 FR 63646, Dec. 2, 1997]



Sec. 614.4336  Borrower rights in connection with loan sales.

    (a) Loan sales to Farm Credit System institutions. Loans made by 
qualified lenders (as defined in section 4.14A(a)(6) of the Act) and 
interests in such loans that are sold to other qualified lenders are 
subject to the borrower rights provisions of title IV of the Act.
    (b) Loans designated for sale into a secondary market. (1) Except as 
provided in

[[Page 116]]

paragraph (b)(2) of this section, the borrower rights provisions of 
sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 of the Act do not 
apply to a loan made on or after February 10, 1996, that is designated 
for sale into a secondary market at the time it is made.
    (2) If a loan designated for sale under paragraph (b)(1) of this 
section is not sold into a secondary market during the 180-day period 
that begins on the date of designation, the borrower rights provisions 
specified as inapplicable pursuant to paragraph (b)(1) of this section 
shall apply, provided that if the loan is subsequently sold into a 
secondary market, the borrower rights specified in paragraph (b)(1) of 
this section become inapplicable beginning on the date of the subsequent 
sale.
    (c) Other loan sales. (1) Except for loans sold to another Farm 
Credit institution or designated for sale into a secondary market, a 
qualified lender must comply with one of the following two requirements 
before selling a loan or interest in a loan that is subject to the 
borrower rights provisions of title IV of the Act:
    (i) Include provisions in the contract with the borrower, or a 
written modification thereto, that ensure that the purchaser of the loan 
will be obligated to accord the borrower the same rights qualified 
lenders must provide under the Act; or
    (ii) Obtain from the borrower a signed written consent to the sale 
that explicitly states that the borrower relinquishes the statutory 
borrower rights. The consent to the loan sale and the relinquishment of 
the borrower rights shall have no effect until the loan is actually sold 
and shall be ineffective in the event that the lender or any other Farm 
Credit System institution repurchases the loan or any interest therein.
    (2) Before obtaining the borrower's consent to the sale of the loan 
and the relinquishment of borrower rights pursuant to paragraph 
(c)(1)(ii) of this section, the lending institution shall disclose in 
writing to the borrower:
    (i) A full and complete description of the statutory rights that the 
borrower is asked to relinquish;
    (ii) Any changes in the loan terms or conditions that will occur if 
the loan is not sold; and
    (iii) The fact that the relinquishment of the statutory borrower 
rights will not become effective unless the loan is actually sold and 
shall become ineffective in the event that the lender or any other Farm 
Credit System institution repurchases the loan or any interest therein.
    (3) The making of a loan may not be conditioned on the borrower's 
consent to its sale and relinquishment of statutory borrower rights.

[62 FR 63647, Dec. 2, 1997]



Sec. 614.4337  Disclosure to borrowers.

    When a loan or an interest in a loan other than a participation 
interest is sold with servicing rights, the disclosure shall be made to 
the borrower in accordance with this section:
    (a) The selling institution shall disclose to the borrower at least 
10 days prior to the borrower's next payment date;
    (1) The name, address, and telephone number of the purchasing 
institution;
    (2) The name and address of the party to whom payment is to be made;
    (3) A description of the impact of the sale on statutory borrower 
rights after the sale;
    (4) Any terms in the agreement that would permit a purchaser to 
change the terms or conditions of the loan.
    (b) A Farm Credit System institution that purchases a loan or a non-
participation interest therein shall not take any servicing action that 
adversely affects the borrower until it ensures that disclosure has been 
made to the borrower of:
    (1) The name, address, and telephone number of the purchasing 
institution; and
    (2) The address where the payment should be sent.



                   Subpart I--Loss-Sharing Agreements



Sec. 614.4340  General.

    (a) Upon the approval of the board of directors of the respective 
Farm Credit System institutions, any System bank, association, or 
service corporation or

[[Page 117]]

service association may enter into an agreement to share loan and other 
losses with any other institution(s) of the System. As appropriate, a 
loss-sharing agreement may contain provisions relating to definitions of 
terms, terms and conditions for activation, determinations of assessment 
formulas, limitations on assessments, reimbursements, administration, 
arbitration, and provisions for amendment and termination.
    (b) System institutions may agree among themselves to share losses 
for the purpose of protecting against the impairment of capital stock or 
participation certificates, or for any other purpose. Agreements may 
provide for sharing losses that arise in the future or that were 
recognized by one or more of the signatory institutions before the date 
of the agreement. Agreements may contain provisions that are not 
entirely reciprocal among the signatories to the agreement. Loss-sharing 
agreements can provide for the sharing of loan losses, operating losses, 
casualty losses, losses on high risk assets, or any other losses.

[49 FR 48910, Dec. 17, 1984, as amended at 54 FR 1151, Jan. 12, 1989; 54 
FR 50736, Dec. 11, 1989]



Sec. 614.4341  Financial assistance.

    No institution shall reverse any financial assistance provided under 
the 37-Bank Capital Preservation Agreement, or any other capital 
preservation/loss-sharing program that was received or accrued prior to 
July 1, 1986.

[53 FR 3191, Feb. 4, 1988]



Sec. 614.4345  Guaranty agreements.

    Guaranty agreements under which a percentage of the risk associated 
with specific loans is assumed may be entered into by or among System 
banks and associations.

[49 FR 48910, Dec. 17, 1984, as amended at 54 FR 1151, Jan. 12, 1989; 54 
FR 50736, Dec. 11, 1989]



                  Subpart J--Lending and Leasing Limits

    Source: 58 FR 40321, July 28, 1993, unless otherwise noted.



Sec. 614.4350  Definitions.

    For purposes of this subpart, the following definitions shall apply:
    (a) Borrower means an individual, partnership, joint venture, trust, 
corporation, or other business entity to which an institution has made a 
loan or a commitment to make a loan either directly or indirectly. 
Excluded are a Farm Credit System association or other financing 
institution that comply with the criteria in section 1.7(b) of the Act 
and the regulations in subpart P of this part. For the purposes of this 
subpart, the term ``borrower'' includes any customer to whom an 
institution has made a lease or a commitment to make a lease.
    (b) Commitment means a legally binding obligation to extend credit, 
enter into lease financing, purchase or participate in loans or leases, 
or pay the obligation of another, which becomes effective at the time 
such commitment is made.
    (c) Loan means any extension of, or commitment to extend, credit 
authorized under the Act whether it results from direct negotiations 
between a lender and a borrower or is purchased from or discounted for 
another lender. This includes participation interests. The term ``loan'' 
includes loans and leases outstanding, obligated but undisbursed 
commitments to lend or lease, contracts of sale, notes receivable, other 
similar obligations, guarantees, and all types of leases. An institution 
``makes a loan or lease'' when it enters into a commitment to lend or 
lease, advances new funds, substitutes a different borrower or lessee 
for a borrower or lessee who is released, or where any other person's 
liability is added to the outstanding loan, lease or commitment.
    (d) Primary liability means an obligation to repay that is not 
conditioned upon an unsuccessful prior demand on another party.
    (e) Secondary liability means an obligation to repay that only 
arises after an unsuccessful demand on another party.

[58 FR 40321, July 28, 1993, as amended at 64 FR 34517, June 28, 1999]

[[Page 118]]



Sec. 614.4351  Computation of lending and leasing limit base.

    (a) Lending and leasing limit base. An institution's lending and 
leasing limit base is composed of the permanent capital of the 
institution, as defined in Sec. 615.5201(l) of this chapter, with 
adjustments provided for in Sec. 615.5210(d), (e)(1), (e)(2), (e)(3), 
(e)(4), and (e)(6) of this chapter, and with the following further 
adjustments:
    (1) Where one institution invests in another institution in 
connection with the sale of a loan participation interest, the amount of 
investment in the institution purchasing this participation interest 
that is owned by the institution originating the loan shall be counted 
in the lending and leasing limit base of the originating institution and 
shall not be counted in the lending and leasing limit base of the 
purchasing institution.
    (2) Stock protected under section 4.9A of the Act may be included in 
the lending and leasing limit base until January 1, 1998.
    (b) Timing of calculation. The lending limit base will be calculated 
on a monthly basis as of the preceding month end.

[58 FR 40321, July 28, 1993, as amended at 59 FR 37403, July 22, 1994; 
64 FR 34517, June 28, 1999]



Sec. 614.4352  Farm Credit Banks and agricultural credit banks.

    (a) Farm Credit Banks. No Farm Credit Bank may make or discount a 
loan to a borrower, if the consolidated amount of all loans outstanding 
and undisbursed commitments to that borrower exceed 25 percent of the 
bank's lending and leasing limit base.
    (b) Agricultural credit banks. (1) No agricultural credit bank may 
make or discount a loan to a borrower under the authority of title I of 
the Act, if the consolidated amount of all loans outstanding and 
undisbursed commitments to that borrower exceeds 25 percent of the 
bank's lending and leasing limit base.
    (2) No agricultural credit bank may make or discount a loan to a 
borrower under the authority of title III of the Act, if the 
consolidated amount of all loans outstanding and undisbursed commitments 
to that borrower exceeds the lending and leasing limits prescribed in 
Sec. 614.4355 of this subpart.

[58 FR 40321, July 28, 1993, as amended at 64 FR 34517, June 28, 1999]



Sec. 614.4353  Direct lender associations.

    No association may make a loan to a borrower, if the consolidated 
amount of all loans outstanding and undisbursed commitments to that 
borrower exceeds 25 percent of the association's lending and leasing 
limit base.

[58 FR 40321, July 28, 1999, as amended at 64 FR 34517, June 28, 1999]



Sec. 614.4354  Federal land bank associations.

    No Federal land bank association may assume endorsement liability on 
any loan if the total amount of the association's endorsement liability 
on loans outstanding and undisbursed commitments to that borrower would 
exceed 25 percent of the association's lending and leasing limit base.

[58 FR 40321, July 28, 1999, as amended at 64 FR 34517, June 28, 1999]



Sec. 614.4355  Banks for cooperatives.

    No bank for cooperatives may make a loan if the consolidated amount 
of all loans outstanding and undisbursed commitments to that borrower 
exceeds the following percentages of the lending and leasing limit base 
of the bank:
    (a) Basic limit. (1) Term loans to eligible cooperatives: 25 
percent.
    (2) Term loans to foreign and domestic parties: 10 percent.
    (3) Lease loans qualifying under Sec. 614.4020(a)(3) and applying to 
the lessee: 25 percent.
    (4) Standby letters of credit qualifying under Sec. 614.4810: 35 
percent.
    (5) Guarantees qualifying under Sec. 614.4800: 35 percent.
    (6) Seasonal loans exclusive of commodity loans qualifying under 
Sec. 614.4231: 35 percent.
    (7) Foreign trade receivables qualifying under Sec. 614.4700: 50 
percent.
    (8) Bankers' acceptances held qualifying under Sec. 614.4710 and 
commodity loans qualifying under Sec. 614.4231: 50 percent.
    (9) Export and import letters of credit qualifying under 
Sec. 614.4321: 50 percent.

[[Page 119]]

    (b) Total limit. (1) The sum of term and seasonal loans exclusive of 
commodity loans qualifying under Sec. 614.4231: 35 percent.
    (2) The sum of paragraphs (a)(1) through (a)(9) of this section: 50 
percent.

[58 FR 40321, July 28, 1993, as amended at 62 FR 51015, Sept. 30, 1997; 
64 FR 34517, June 28, 1999]



Sec. 614.4356  Farm Credit Leasing Services Corporation.

    The Farm Credit Leasing Services Corporation may enter into a lease 
agreement with a lessee if the consolidated amount of all leases and 
undisbursed commitments to that lessee or any related entities does not 
exceed 25 percent of its lending and leasing limit base.

[64 FR 34517, June 28, 1999]



Sec. 614.4357  Banks for cooperatives look-through notes.

    Where a bank for cooperatives makes a loan to an eligible borrower 
that is secured by notes of individuals or business entities, the basic 
lending limits provided in Sec. 614.4355 may be applied to each original 
notemaker rather than to the loan to the eligible borrower, if:
    (a) Each note is current and carries a full recourse endorsement or 
unconditional guarantee by the borrower;
    (b) The bank determines the financial condition, repayment capacity, 
and other credit factors of the loan to the original maker reasonably 
justify the credit granted by the endorser; and
    (c) The loans are fully supported by documented loan files, which 
include, at a minimum:
    (1) A credit report supporting the bank's finding that the financial 
condition, repayment capacity, and other factors of the maker of the 
notes being pledged justify the credit extended by the bank and/or 
endorser;
    (2) A certification by a bank officer designated for that purpose by 
the loan or executive committee that the financial responsibility of the 
original notemaker has been evaluated by the loan committee and the bank 
is relying primarily on each such maker for the payment of the 
obligation; and
    (3) Other credit information normally required of a borrower when 
making and administering a loan.

[58 FR 40321, July 28, 1993. Redesignated at 64 FR 34517, June 28, 1999]



Sec. 614.4358  Computation of obligations.

    (a) Inclusions. The computation of total loans to each borrower for 
the purpose of computing their lending and leasing limit shall include:
    (1) The total unpaid principal of all loans and lease balances 
outstanding and the total amount of undisbursed commitments except as 
excluded by paragraph (b) of this section. This amount shall include 
loans that have been charged off on the books of the institution in 
whole or in part but have not been collected, except to the extent that 
such amounts are not legally collectible;
    (2) Purchased interests in loans, including participation interests, 
to the extent of the amount of the purchased interest, including any 
undisbursed commitment;
    (3) Loans attributed to a borrower in accordance with Sec. 614.4359.
    (b) Exclusions. The following loans when adequately documented in 
the loan file, may be excluded from loans to a borrower subject to the 
lending and leasing limit:
    (1) Any loan or portion of a loan that carries a full faith and 
credit performance guaranty or surety of any department, agency, bureau, 
board, commission, or establishment of the United States government, 
provided there is no evidence to suggest that the guaranty has become 
unenforceable and the institution can demonstrate that it is in 
compliance with the terms and conditions of the guaranty.
    (2) Any loan or portion of a loan guaranteed by a Farm Credit System 
institution, pursuant to the provisions of Sec. 614.4345 on guaranty 
agreements. This exclusion does not apply to the institution providing 
the guaranty.
    (3) Any loan or portion of a loan that is secured by bonds, notes, 
certificates of indebtedness, or Treasury bills of the United States or 
by other obligations guaranteed as to principal and interest by the 
United States government, provided the loans are fully secured by the 
current market value of

[[Page 120]]

such obligations. If the market value of the collateral declines to 
below the balance of the loan, and the entire loan, individually, or 
when combined with other loans and undisbursed commitments to or 
attributed to the borrower, causes the borrower's total indebtedness to 
exceed the institution's lending limit, the institution shall have 5 
business days to bring the loan into conformance before it shall be 
deemed to be in violation of the lending limit.
    (4) Interests in loans sold, including participation interests, when 
the sale agreement meets the following requirements:
    (i) The interest sold must be an undivided interest in the principal 
amount of the loan and in the collateral securing the loan; and
    (ii) The interest must be sold without recourse; and
    (iii) The agreement under which the interest is sold must provide 
for the sharing of all payments of principal, collection expenses, 
collateral proceeds, and risk of loss on a pro rata basis according to 
the percentage interest in the principal amount of the loan. Agreements 
that provide for the pro rata sharing to commence at the time of default 
or similar event, as defined in the agreement under which the interest 
is sold, shall be considered to be pro rata agreements, notwithstanding 
the fact that advances are made and payments are distributed on a basis 
other than pro rata prior to that time.
    (5) Interests in leases sold when the sale agreement provides that:
    (i) The interest sold must be:
    (A) An undivided interest in all the lease payments or the residual 
value of all the leased property; or
    (B) A fractional undivided interest in the total lease transaction;
    (ii) The interest must be sold without recourse; and
    (iii) Sharing of all lease payments must be on a pro rata basis 
according to the percentage interest in the lease payments.
    (6) Loans sold in their entirety to a pooler certified by the 
Federal Agricultural Mortgage Corporation, if an interest in a pool of 
subordinated participation interests is purchased to satisfy the 
requirements of title VIII of the Act.

[58 FR 40321, July 28, 1993. Redesignated and amended at 64 FR 34517, 
June 28, 1999]



Sec. 614.4359  Attribution rules.

    (a) For the purpose of applying the lending and leasing limit to the 
indebtedness of a borrower, loans to a related borrower shall be 
combined with loans outstanding to the borrower and attributed to the 
borrower when any one of the following three conditions exist:
    (1) Liability. (i) The borrower has primary or secondary liability 
on a loan made to the related borrower. The amount of such loan 
attributable to the borrower is limited to the amount of the borrower's 
liability.
    (ii) This section does not require attribution of a guarantee taken 
out of an abundance of caution. To qualify for the abundance of caution 
exception to the requirements of this subpart, the institution must 
document in the loan file that the loan, when evaluated under the loan 
underwriting standards adopted pursuant to Sec. 614.4150 of this part 
without considering the guarantee, would support the credit decision 
under the same basic terms and conditions.
    (iii) For the banks for cooperatives and agricultural credit banks 
operating under title III authorities of the Act, look-through notes are 
exempt from the lending limit provisions provided they meet the criteria 
of Sec. 614.4357.
    (2) Financial interdependence. The operations of a borrower and 
related borrower are financially interdependent. Financial 
interdependence exists if the borrower is the primary source of 
repayment for a related borrower's loan, or if the operations of the 
borrower and the related borrower are commingled.
    (i) The borrower shall be considered the primary source of repayment 
on the loan to the related borrower if the borrower is obligated to 
supply 50 percent or more of the related borrower's annual gross 
receipts, and reliance on the income from one another is such that, 
regardless of the solvency and liquidity of the borrower's operations, 
the debt service obligation of the related borrower could not be met if 
income flow from the borrower is interrupted or terminated. For the 
purpose

[[Page 121]]

of this paragraph, gross receipts include, but are not limited to, 
revenues, intercompany loans, dividends and capital contributions.
    (ii) The assets or operations of the borrower and related borrower 
are considered to be commingled if they cannot be separated without 
materially impacting the economic survival of the individual operations 
and their ability to repay their loans.
    (3) Control. The borrower directly or indirectly controls the 
related borrower. A borrower is deemed to control a related borrower if 
either paragraph (a)(3)(i) or (a)(3)(ii) of this section exist:
    (i) The borrower, directly or acting through one or more other 
persons, owns 50 percent or more of the stock of the related borrower; 
or
    (ii) The borrower, directly or acting through one or more other 
persons, owns or has the power to vote 25 percent or more of the voting 
stock of a related borrower, and meets at least one of the following 
three conditions:
    (A) The borrower shares a common directorate or management with a 
related borrower. A common directorate is deemed to exist when a 
majority of the directors, trustees, or other persons performing similar 
functions of one borrower also serves the other borrower in a like 
capacity. A common management is deemed to exist if any employee of the 
borrower holds the position of chief executive officer, chief operating 
officer, chief financial officer, or an equivalent position in the 
related borrower's organization.
    (B) The borrower controls in any manner the election of a majority 
of directors of a related borrower.
    (C) The borrower exercises or has the power to exercise a 
controlling influence over management of a related borrower's operations 
through the provisions of management placement or marketing agreements, 
or providing services such as insurance carrier or bookkeeping.
    (b) Each institution shall make provisions for appropriately 
designating loans to a related borrower that are combined with the 
borrower's loan and attributed to the borrower to ensure that loans to 
the borrower are within the lending and leasing limits.
    (c) Attribution rules table. For the purposes of applying the 
lending and leasing limit to the indebtedness of a borrower, loans to a 
related borrower shall be combined with loans outstanding to the 
borrower and attributed to the borrower when any one of three 
attribution rules are met as outlined in Table 1.

                                 Table 1
------------------------------------------------------------------------
                                    Criteria per Sec.
        Attribution rule                614.4359            Attribute
------------------------------------------------------------------------
(A) Liability..................  Borrower has primary    Yes.*
                                  or secondary
                                  liability.
*to the extent of the            Borrower's liability    No.*
 borrower's liability.            is taken out of an
                                  abundance of caution.
                                 Look-through notes (BC  No.
                                  only).
(B) Financial Interdependence..  Source of Repayment:
(Economic survival of the        Borrower is obligated   Yes.
 borrower's operation will        to supply 50 percent
 materially impact economic       or more of related
 survival of the related          borrower's annual
 borrowers operation).            gross receipts, and
                                  reliance on the
                                  income from one
                                  another is such that
                                  the debt service of
                                  the related borrower
                                  could not be met if
                                  income flow from the
                                  borrower is
                                  interrupted or
                                  terminated.
                                 Commingled Operations:
                                 Assets or operations    Yes.
                                  of the borrowers are
                                  commingled and cannot
                                  be separated without
                                  materially impacting
                                  the borrowers'
                                  repayment capacity
(C) Control....................  The borrower owns 50    Yes.
                                  percent or more of
                                  the stock of the
                                  related borrower.
(The borrower, directly or       The borrower owns or    Yes.
 indirectly, controls the         has the power to vote
 related borrower).               25 percent or more of
                                  the voting stock of a
                                  related borrower, and
                                 (1) Shares a common
                                  directorate or
                                  management with a
                                  related borrower, or.
                                 (2) Controls the
                                  election of a
                                  majority of directors
                                  of a related
                                  borrower, or.
                                 (3) Exercises a
                                  controlling influence
                                  over management of a
                                  related borrower's
                                  operations through
                                  the provisions of
                                  management placement
                                  or marketing
                                  agreements, or
                                  providing services
                                  such as insurance
                                  carrier or
                                  bookkeeping.
------------------------------------------------------------------------


[[Page 122]]


[58 FR 40321, July 28, 1993, as amended at 62 FR 51015, Sept. 30, 1997. 
Redesignated and amended at 64 FR 34517, June 28, 1999]



Sec. 614.4360  Lending and leasing limit violations.

    (a) Each loan, except loans that are grandfathered under the 
provisions of Sec. 614.4361, shall be in compliance with the lending and 
leasing limit on the date the loan is made, and at all times thereafter. 
Except as provided for in paragraph (b) of this section, loans which are 
in violation of the lending and leasing limit shall comply with the 
provisions of Sec. 615.5090 of this chapter.
    (b) Under the following conditions a loan that violates the lending 
and leasing limit shall be exempt from the provisions of Sec. 615.5090 
of this chapter:
    (1) A loan in which the total amount of principal outstanding and 
undisbursed commitments exceed the lending and leasing limit because of 
a decline in permanent capital after the loan was made.
    (2) Loans on which funds are advanced pursuant to a commitment that 
was within the lending and leasing limit at the time the commitment was 
made, even if the lending and leasing limit subsequently declines.
    (3) A loan that exceeds the lending and leasing limit as a result of 
the consolidation of the debt of two or more borrowers as a consequence 
of a merger or the acquisition of one borrower's operations by another 
borrower. Such a loan may be extended or renewed, for a period not to 
exceed 1 year from the date of such merger or acquisition, during which 
period the institution may advance and/or readvance funds not to exceed 
the greater of:
    (i) 110 percent of the advances to the borrower in the prior 
calendar year; or
    (ii) 110 percent of the average of the advances to the borrower in 
the past 3 calendar years.
    (c) For all lending and leasing limit violations except those 
exempted under Sec. 614.4360(b)(3), within 90 days of the identification 
of the violation, the institution must develop a written plan 
prescribing the specific actions that will be taken by the institution 
to bring the total amount of loans and commitments outstanding or 
attributed to that borrower within the new lending and leasing limit, 
and must document the plan in the loan file.
    (d) All leases, except those permitted under Sec. 614.4361, reading 
``effective date of this subpart'' in Sec. 614.4361(a) and ``effective 
date of these regulations'' in Sec. 614.4361(b) as ``effective date of 
this amendment,'' must comply with the lending and leasing limit on the 
date the lease is made, and at all times after that.
    (e) Nothing in this section limits the authority of the FCA to take 
administrative action, including, but not limited to, monetary 
penalties, as a result of lending and leasing limit violations.

[58 FR 40321, July 28, 1993. Redesignated and amended at 64 FR 34517, 
June 28, 1999]



Sec. 614.4361  Transition.

    (a) A loan (not including a commitment) made or attributed to a 
borrower prior to the effective date of this subpart, which does not 
comply with the limits contained in this subpart, will not be considered 
a violation of the lending and leasing limits during the existing 
contract terms of such loans. A new loan must conform with the rules set 
forth in this subpart. A new loan includes but is not limited to:
    (1) Funds advanced in excess of existing commitment;
    (2) A different borrower is substituted for a borrower who is 
subsequently released; or
    (3) An additional person becomes an obligor on the loan.
    (b) A commitment made prior to the effective date of these 
regulations which exceeds the lending and leasing limit may be funded to 
the full extent of the legal commitment. Any advances that exceed the 
lending and leasing limit are subject to the provisions prescribed in 
Sec. 614.4360.

[58 FR 40321, July 28, 1993. Redesignated and amended at 64 FR 34517, 
34518, June 28, 1999]



                Subpart K--Disclosure of Loan Information

    Source: 53 FR 35451, Sept. 14, 1988, unless otherwise noted.



Sec. 614.4365  Applicability.

    This subpart applies only to loans from qualified lenders if the 
loans are

[[Page 123]]

not subject to the Truth in Lending Act (15 U.S.C. 1601 et seq.).



Sec. 614.4366  Definitions.

    For purposes of this subpart, the following definitions shall apply:
    (a) Adjustable rate loan means a loan on which the interest rate 
payable over the term of the loan may be changed by a qualified lender. 
The term includes loans which are titled adjustable rate or variable 
rate or any other similar designation.
    (b) Effective interest rate means the interest rate applicable to 
the loan at a point in time, adjusted to take into consideration the 
amount of any stock or participation certificates which the borrower 
must purchase pursuant to bylaw, policy or regulation in order to obtain 
the loan, and any loan origination charges.
    (c) Fixed rate loan means any loan on which the interest rate is not 
subject to adjustment or variation over the term of the loan, even 
though the effective interest rate on the loan may be so subject.
    (d) Interest rate means the stated contract rate of interest 
applicable to the loan at a point in time, excluding any charges payable 
by the borrower in obtaining the loan.
    (e) Loan means a loan made to a farmer, rancher, or producer or 
harvester of aquatic products, for any agricultural or aquatic purpose 
and other credit needs of the borrower, including financing for basic 
processing and marketing directly related to the borrower's operations 
and those of other eligible farmers, ranchers, and producers or 
harvesters of aquatic products.
    (f) Loan origination charges mean initial one-time transaction 
charges or fees, which may or may not be computed as a percentage of the 
transaction amount, and which are imposed on a borrower by a qualified 
lender to obtain a loan, but do not include charges imposed by someone 
other than the lender for services that are not required by the lender.
    (g) Qualified lender means:
    (1) A System institution that makes loans (as defined in paragraph 
(e) of this section) except a bank for cooperatives; and
    (2) Each bank, institution, corporation, company, union, and 
association described in section 1.7(b)(1)(B) of the Act but only with 
respect to loans discounted or pledged under section 1.7(b)(1) of the 
Act.
    (h) Standard adjustments factors means those financial elements, 
including but not limited to, a qualified lender's cost of funds, 
operating expenses, provision for loan losses, and changes in retained 
earnings, which are typically taken into consideration by a qualified 
lender in adjusting the interest rate on loans.



Sec. 614.4367  Required disclosures--in general.

    (a) Each qualified lender shall furnish the following information in 
writing to a prospective borrower not later than the time of the loan 
closing:
    (1) The current rate of interest on the loan;
    (2) In the case of an adjustable rate loan:
    (i) The amount and frequency by which the interest rate can be 
adjusted during the term of the loan or, if there are no limitations on 
the amount or frequency of such adjustments, a statement to that effect; 
and
    (ii) An identification of the specific standard adjustment factors 
that are taken into account in making adjustments to the interest rate 
on the loan;
    (3) The current effective interest rate on the loan with one or more 
representative examples of the impact of stock or participation 
certificate ownership and applicable loan origination charges on the 
current interest rate computed on an annualized basis;
    (4) A statement indicating that stock that is purchased is at risk;
    (5) A statement indicating the various types of loan options 
available to borrowers, with an explanation of the terms and borrower's 
rights that apply to each type of loan.
    (b) Each qualified lender that adjusts the interest rate on an 
outstanding loan shall furnish the following information in writing to 
the borrower:
    (1) The new interest rate on the loan;
    (2) The date on which the new rate is effective; and
    (3) A statement of any factors other than standard adjustment 
factors

[[Page 124]]

which were taken into account in establishing the new interest rate. The 
notice required by this paragraph shall be made not later than 10 days 
after the effective date of a change in the interest rate. However, if 
the interest rate is directly tied to an external index that is widely 
publicized, the notice of change must be made promptly but not later 
than 30 days after the change in interest rate.
    (c) Each qualified lender that takes any action which changes the 
amount of stock or participation certificates which borrowers are 
required to own and that modifies the effective interest rate on a loan 
shall furnish the following information in writing to the borrower at 
least 10 days before the date on which such action takes effect:
    (1) The impact on the effective interest rate by disclosing the new 
effective interest rate or by a representative example;
    (2) The date on which the new rate is effective; and
    (3) A statement of the action(s) taken by the qualified lender that 
have resulted in the new effective interest rate.
    (d) In the case of a loan involving more than one primary obligor, 
the requirements of paragraphs (a) through (d) of this section will be 
satisfied by providing the disclosure to any one of such parties.

[53 FR 35451, Sept. 14, 1988, as amended at 63 FR 63647, Dec. 2, 1997]

            Appendix to 12 CFR 614.4367--Required Disclosure

                         Model Disclosure Forms

                                 General

    The following are model disclosure forms which qualified lenders may 
use to satisfy the notification requirements of section 4.13(a) of the 
Act and of 12 CFR 614.4367. The forms have been developed in order to 
give qualified lenders an idea of the type and extent of information 
that should be contained therein. Qualified lenders are not required to 
follow the format of the sample forms. Qualified lenders may develop and 
use other forms provided the statements contain comparable disclosures 
in clear, understandable English and otherwise meet the requirements of 
the Act and regulations.

                                 Form 1

    This loan is NOT subject to the Truth in Lending Act, 15 U.S.C. 
1601, et seq. The following disclosure is made in accordance with 
section 4.13(a) of the Farm Credit Act of 1971, as amended, 12 U.S.C. 
2199.

                        INTEREST RATE DISCLOSURE

Date:___________________________________________________________________
Lender:_________________________________________________________________
          (Name)
Borrower:_______________________________________________________________
            (Name)

                          STATED INTEREST RATE

    The rate of interest currently applicable to your loan

_______________________________________________________________________
(Percentage)

                       EFFECTIVE INTEREST RATE \1\
---------------------------------------------------------------------------

    \1\ This is a projection subject to change should particular loan 
provisions be modified during the term of the loan, such as the amount 
of stock or participation certificates held or the timing of repayment. 
For example, if the amount of stock or participation certificates held 
is increased to ____, the effective interest rate will be ____.
---------------------------------------------------------------------------

    The stated rate of interest adjusted to take into account loan 
origination charges and purchase of stock

_______________________________________________________________________
(Percentage)

    Check Applicable Box

{time}  This is a FIXED RATE LOAN--the stated rate of interest is not 
          subject to change during the life of the loan.
{time}  This is an ADJUSTABLE RATE LOAN--the stated rate of interest is 
          subject to change during the life of the loan.
    If an Adjustable Rate Loan--
    The interest rate on the loan may be changed (Period).
    The interest rate may be changed a maximum (Percentage).
    You will be notified 10 days prior to any increase in the effective 
rate or simultaneously with any decrease in the effective rate.
    The Standard Adjustment Factor(s) which the institution takes into 
account in making adjustments to the interest rate is (are) (list the 
factors).
    The Standard Adjustment Factors may {time}  or may not {time}  be 
changed during the life of the loan.
    Except with respect to eligible borrower stock under section 4.9A of 
the Farm Credit Act of 1971, stock that is purchased in this institution 
is at risk.
    See your contract documents for further information on loan terms 
and conditions.

[[Page 125]]

    Should you have any questions concerning the information contained 
in this form please contact us at (Telephone Number).

                                 Form 2

    This loan is not subject to the Truth in Lending Act, 15 U.S.C. 
1601, et seq. The following disclosure is made in accordance with 
section 4.13(a) of the Farm Credit Act of 1971, as amended, 12 U.S.C. 
2199.

          DISCLOSURE OF A CHANGE IN THE EFFECTIVE INTEREST RATE

Date:___________________________________________________________________

Lender:_________________________________________________________________
          (Name)
Borrower:_______________________________________________________________
            (Name)

    This is to inform you that on (loan and loan number),

{time}  The effective rate of interest will be adjusted effective 
          (Date).
    The effective rate of interest on your loan is changed to 
(Percentage) from (Percentage).
    This change resulted from a:

{time}  1. Change in the amount of stock borrowers are required to hold 
          in the lender to (Percentage) from (Percentage).
{time}  2. Change in the stated rate of interest on your loan effective 
          (Date).
    The stated rate of interest on your loan changed to (Percentage) 
from (Percentage).
    The change was computed based on the:

{time}  Standard adjustment factors--factors mentioned on the initial 
          interest rate disclosure.
{time}  Other--describe.
{time}  3. Change for other reasons--describe.
    Should you have any questions concerning the information contained 
herein, please contact us at (Telephone Number).

[53 FR 35451, Sept. 14, 1988, as amended at 54 FR 1153, Jan. 12, 1989; 
54 FR 50736, Dec. 11, 1989; 61 FR 11304, Mar. 20, 1996]



Sec. 614.4368  Disclosure of differential interest rates.

    (a) A qualified lender offering more than one rate of interest to 
borrowers shall, at the request of a borrower:
    (1) Provide a review of the loan to determine if the proper interest 
rate has been established;
    (2) Explain to the borrower in writing the basis for the interest 
rate charged; and
    (3) Explain to the borrower in writing how the credit status of the 
borrower may be improved to receive a lower interest rate on the loan.
    (b) A qualified lender offering more than one rate of interest as 
described in paragraph (a) of this section, shall notify prospective 
borrowers not later than the time of loan closing of their right to 
request a review under paragraph (a) of this section.



     Subpart L--Actions on Applications; Review of Credit Decisions

    Source: 53 FR 35452, Sept. 14, 1988, unless otherwise noted.



Sec. 614.4440  Definitions.

    For purposes of this subpart, the following definitions shall apply:
    (a) Adverse credit decision means a decision to deny the credit 
applied for, or approve an extension of credit in an amount less than 
the amount applied for; to deny an application for restructuring;
    (b) Applicant means any person who completes and executes a formal 
application for an extension of credit from a qualified lender, or a 
borrower who completes an application for restructuring;
    (c) Application for restructuring means a written request--
    (1) From a borrower for the restructuring of a distressed loan in 
accordance with a preliminary restructuring plan proposed by the 
borrower as a part of the application;
    (2) Submitted on the appropriate forms prescribed by the qualified 
lender; and
    (3) Accompanied by sufficient financial information and repayment 
projections, where appropriate, as required by the qualified lender to 
support a sound credit decision.
    (d) Application for a loan or loan application means a formal 
application for an extension of credit from a qualified lender;
    (e) Distressed loan means a loan for which the borrower does not 
have the financial capacity, as determined by the lender, to pay 
according to its terms and which exhibits one or more of the following 
characteristics:
    (1) The borrower is demonstrating adverse financial and repayment 
trends;
    (2) The loan is delinquent or past due under the terms of the loan 
contract; and

[[Page 126]]

    (3) One or both of the factors listed in paragraphs (e) (1) and (2) 
of this section, together with inadequate collateralization, present a 
high probability of loss to the lender.
    (f) Independent evaluator, for the purposes of this subpart, means 
an individual who is a qualified evaluator and who satisfies the 
standards established by Sec. 614.4260 of subpart F of this part and by 
the Farm Credit System institution for the type of property to be 
evaluated. The independent evaluator may not be a Farm Credit System 
institution employee or have a relationship with the institution or any 
of its officers or directors that contravenes the provisions of part 612 
of this chapter.
    (g) Loan means a loan made to a farmer, rancher, or producer or 
harvester of aquatic products, for any agricultural or aquatic purpose 
and other credit needs of the borrower, including financing for basic 
processing and marketing directly related to the borrower's operations 
and those of other eligible farmers, ranchers, and producers or 
harvesters of aquatic products.
    (h) Qualified lender means:
    (1) A System institution that makes loans (as defined in paragraph 
(g) of this section) except a bank for cooperatives; and
    (2) Each bank, institution, corporation, company, union, and 
association described in section 1.7(b)(1)(B) of the Act, but only with 
respect to loans discounted or pledged under section 1.7(b)(1).
    (i) Restructure and restructuring means rescheduling, 
reamortization, renewal, deferral of principa1 or interest, monetary 
concessions, or the taking of any other action to modify the terms of, 
or forbear on, a loan in any way that will make it probable that the 
operations of the borrower will become financially viable.

[53 FR 35452, Sept. 14, 1988, as amended at 57 FR 54699, Nov. 20, 1992; 
57 FR 58860, Dec. 11, 1992; 61 FR 67187, Dec. 20, 1996; 65 FR 40491, 
June 30, 2000]



Sec. 614.4441  Notice of action on loan application.

    Each qualified lender shall render its decision on a loan 
application in as expeditious a manner as is practicable. Upon reaching 
a decision on a loan application, the qualified lender shall provide 
prompt written notice of its decision to the applicant. In the case of a 
loan application involving more than one primary obligor, the notice may 
be provided to any one of such parties. Where the qualified lender makes 
an adverse credit decision on a loan application, the notice shall 
include:
    (a) The specific reasons for the qualified lender's action;
    (b) Notification that the applicant can request a review of the 
decision;
    (c) Notification that any request for review must be made in writing 
within 30 days after the applicant's receipt of the qualified lender's 
notice; and
    (d) A brief explanation of the process for seeking review of the 
decision, including the appraisal process, whom to contact at the lender 
for access to the relevant information, and the right to appear before 
the credit review committee.



Sec. 614.4442  Credit Review Committee.

    The board of directors of each qualified lender shall establish one 
or more credit review committees to review adverse credit decisions made 
by the lender with ultimate decision-making authority on the loan. The 
membership of each committee shall include at least one member from the 
lender's board. In no case shall a loan officer involved in the adverse 
credit decision on the loan being reviewed serve on the credit review 
committee when the committee reviews such loan. The duties of the 
members of the credit review committee may not be delegated to any other 
person, except that the credit review committee duties of the board 
member may be performed from time to time by an alternate designated by 
the board who shall also be a board member.



Sec. 614.4443  Review process.

    (a) Personal appearance. Each applicant or borrower who is entitled 
to and has requested a review may appear in person before the credit 
review committee. The applicant or borrower may be accompanied by 
counsel or by any other representative of such person's

[[Page 127]]

choice, to seek a reversal of the decision on the application under 
review.
    (b) Documentation. An applicant may submit any documents or other 
evidence to support the information contained in the unsuccessful loan 
or restructuring application which the applicant believes will 
demonstrate that the loan or restructuring applied for is an eligible 
loan or eligible restructuring plan that satisfies the credit standards 
of the lender.
    (c) Independent collateral evaluations. (1) An applicant for a loan 
that has been denied may, as part of the request for a review, request 
an independent collateral evaluation by an independent evaluator, as 
defined in Sec. 614.4440 of this subpart, of any interests in property 
securing the loan (other than the stock or participation certificates of 
the lender held by the borrower).
    (2) Within 30 days after a request for a collateral evaluation, the 
credit review committee shall present the applicant or borrower with a 
list of three independent evaluators approved by the qualified lender. 
The borrower shall select and engage the services of an evaluator from 
the list to perform the collateral evaluation. The collateral evaluation 
must be completed within a reasonable period of time. The cost of the 
evaluation shall be borne by the applicant or borrower.
    (3) The credit review committee shall consider the results of any 
such collateral evaluation in any final determination with respect to 
the loan or restructuring, provided the applicant's or borrower's 
evaluator has provided a copy of the evaluation report to the lender not 
less than 15 business days prior to any scheduled meeting of the credit 
review committee.
    (4) Any such collateral evaluations that are not completed in 
conformance with the collateral evaluation requirements described in 
subpart F of this part, relative to collateral evaluation standards, 
independence requirements, and qualification requirements, need not be 
considered by the credit review committee. To facilitate the proper 
completion of such collateral evaluations, a copy of part 614, subpart 
F, shall be provided to the borrower for presentation to the borrower's 
evaluator, and a copy signed by the borrower's evaluator shall be a 
required exhibit in the subsequent evaluation report.
    (d) Decision. The credit review committee shall reach a decision on 
the application in its sole discretion, and such decision shall be the 
final decision of the lender. The credit review committee shall make 
every reasonable effort to conduct reviews and render decisions in as 
expeditious a manner as possible. Promptly after a review by the credit 
review committee, the committee shall notify the applicant or borrower 
in writing of the decision of the committee and the reasons for the 
decision.

[53 FR 35452, Sept. 14, 1988, as amended at 59 FR 46734, Sept. 12, 1994]



Sec. 614.4444  Records.

    A qualified lender shall maintain a complete file of all requests 
for reviews by the credit review committee, including participation in 
State mediation programs, and the disposition of each review by the 
committee. 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.

[53 FR 35452, Sept. 14, 1988, as amended at 61 FR 67187, Dec. 20, 1996]



                  Subpart M--Loan Approval Requirements



Sec. 614.4450  General requirements.

    Authority for loan approval is vested in the Farm Credit banks and 
associations.

[51 FR 41947, Nov. 20, 1986]



Sec. 614.4460  Loan approval responsibility.

    Approval of the following loans is the responsibility of each 
district board of directors. The responsibility may be discharged by 
prior approval of such loans by the appropriate bank board, or 
establishment of a policy under which the authority to approve such 
loans is delegated to bank management (except paragraphs (d) and (e) of 
this section

[[Page 128]]

which cannot be delegated to management). If the approval of such loans 
is to be delegated to bank management, the loans are to be submitted 
promptly for post review by the bank board and a report disclosing all 
material facts relating to the credit relationship involved shall be 
submitted annually by bank management to the district board.
    (a) Loans to a member of the Farm Credit Administration Board.
    (b) Loans to a member of the district board.
    (c) Loans to a cooperative of which a member of a bank board of 
directors is a member of the board of directors, an officer, or 
employee.
    (d) Loans to the president of a Farm Credit bank.
    (e) Loans to employees of the Farm Credit Administration.
    (f) Loans where directors, officers or employees designated above:
    (1) Are to receive proceeds of the loan in excess of an amount 
prescribed by an appropriate bank board, or
    (2) Are stockholders or owners of equity in a legal entity to which 
the loan is to be made wherein they have a significant personal or 
beneficial interest in the loan proceeds thereof or the security, or
    (3) Are endorsers, guarantors or co-makers in excess of an amount 
prescribed by an appropriate bank board.

[38 FR 27837, Oct. 9, 1973, as amended at 39 FR 29585, Aug. 16, 1974. 
Redesignated at 46 FR 51878, Oct. 22, 1981, and amended at 51 FR 41947, 
Nov. 20, 1986; 54 FR 1151, Jan. 12, 1989; 54 FR 50736, Dec. 11, 1989; 56 
FR 2674, Jan. 24, 1991]



Sec. 614.4470  Loans subject to bank approval.

    (a) The following loans (unless such loans are of a type prohibited 
under part 612) shall be subject to prior approval of the bank 
supervising the association in which the loan application originates:
    (1) Loans to a director of the association.
    (2) Loans to a director of an association which is under joint 
management when the application originates in one of the associations.
    (3) Loans to an employee of the association.
    (4) Loans to an employee of an association which is under joint 
management when the application originates in one of the associations.
    (5) Loans to bank employees when the application originates in one 
of the associations supervised by the employing bank.
    (b) Loans to any borrower shall be subject to the prior approval of 
the bank supervising the association in which the loan application 
originates whenever a director or an employee of the association or an 
employee of the bank supervising the association:
    (1) Will receive proceeds of the loan in excess of the amount 
prescribed by the supervising bank board, or
    (2) Has a significant personal or beneficial interest in the loan, 
the proceeds, or the security, or controls the borrower, or
    (3) Is an endorser, guarantor, or comaker with respect to the loan 
in excess of an amount prescribed by the supervising bank board.
    (c) Any loan which will result in any one borrower being obligated 
(as defined in subpart J of this part) in excess of an amount 
established by the supervising bank under its policies for delegation of 
authority to associations shall be subject to prior approval of the 
supervising bank.

[47 FR 49832, Nov. 3, 1982, as amended at 58 FR 40324, July 28, 1993; 60 
FR 20010, Apr. 24, 1995]



    Subpart N--Loan Servicing Requirements; State Agricultural Loan 
               Mediation Programs; Right of First Refusal



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

[[Page 129]]

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.
    (b) The servicing of loans which are participated in by Farm Credit 
System institutions shall be in accordance with Sec. 614.4325.
    (c) In the development of loan servicing policies and procedures, 
the following criteria shall be included:
    (1) Term loans. The objective shall be to provide borrowers with 
prompt and efficient service with respect to actions in such areas as 
personal liability, partial release of security, insurance requirements 
or adjustments, loan divisions or transfers, or conditional payments. 
Procedures shall provide for adequate inspections, reanalyses, 
reappraisals, controls on payment of insurance and taxes (and for 
payment when necessary), and prompt exercise of legal options to 
preserve the lender's collateral position or guard against loss. Loan 
servicing policies for rural home loans shall recognize the inherent 
differences between agricultural and rural home lending.
    (2) Operating loans. The objective shall be to service such loans to 
assure disbursement in accordance with the basis of approval, repayment 
from the sources obligated or pledged, and to minimize risk exposure to 
the lender. Procedures shall require:
    (i) The procurement of periodic operating data essential for 
maintaining control, for the proper analysis of such data, and prompt 
action as needed;
    (ii) Inspections, reappraisals, and borrower visits appropriate to 
the nature and quality of the loan; and
    (iii) Controls on insurance, margin requirements, warehousing, and 
the prompt exercise of legal options to preserve the lender's collateral 
position and guard against loss.
    (3) Legal entity loans. In addition to the foregoing servicing 
objectives for term and operating loans, procedures for servicing these 
loans shall require procurement of data on changes in ownership, 
control, and management; review of business objectives, financing 
programs, organizational structure, and operating methods, and 
appropriate analysis of such changes with provision for action as 
needed.

[37 FR 11424, June 7, 1972, as amended at 40 FR 17745, Apr. 22, 1975. 
Redesignated at 46 FR 51878, Oct. 22, 1981 and amended at 48 FR 54475, 
Dec. 5, 1983; 51 FR 39502, Oct. 28, 1986; 57 FR 38250, Aug. 24, 1992; 61 
FR 67187, Dec. 20, 1996]



Sec. 614.4511  Federal land bank association compensation.

    Bank financial policies on Federal land bank association 
compensation are subject to the approval of the bank board. Compensation 
may be paid to associations in an amount which reflects the value of the 
services being rendered for the bank and other financial policies and 
objectives. Compensation plans and changes thereto shall be approved by 
the bank board.

[47 FR 12146, Mar. 22, 1982, as amended at 54 FR 1151, Jan. 12, 1989; 54 
FR 50736, Dec. 11, 1989]



Sec. 614.4512  Definitions.

    For the purposes of this subpart, the following definitions apply:
    (a) Application for restructuring means a written request--
    (1) From a borrower for the restructuring of a distressed loan in 
accordance with a preliminary restructuring plan proposed by the 
borrower as a part of the application;
    (2) Submitted on the appropriate forms prescribed by the qualified 
lender; and
    (3) Accompanied by sufficient financial information and repayment 
projections, where appropriate, as required by the qualified lender to 
support a sound credit decision.
    (b) Certified lender means a qualified lender that has been 
certified for financial assistance under section 6.4 of the Act.
    (c) Cost of foreclosure means:
    (1) The difference between the outstanding balance due as provided 
by the loan documents on a loan made by a qualified lender and the 
liquidation value of the loan, taking into consideration the borrower's 
repayment capacity and the liquidation value of the collateral used to 
secure the loan;

[[Page 130]]

    (2) The estimated cost of maintaining a loan classified as a high-
risk asset;
    (3) The estimated cost of administrative and legal actions necessary 
to foreclose a loan and dispose of property acquired as the result of 
the foreclosure, including attorneys' fees and court costs;
    (4) The estimated cost of changes in the value of collateral used to 
secure a loan during the period beginning on the date of the initiation 
of an action to foreclose or liquidate the loan and ending on the date 
of the disposition of the collateral; and
    (5) All other costs incurred as the result of the foreclosure or 
liquidation of a loan.
    (d) Distressed loan means a loan for which the borrower does not 
have the financial capacity, as determined by the lender, to pay 
according to its terms and which exhibits one or more of the following 
characteristics:
    (1) The borrower is demonstrating adverse financial and repayment 
trends;
    (2) The loan is delinquent or past due under the terms of the loan 
contract;
    (3) One or both of the factors listed in paragraphs (d) (1) and (2) 
of this section, together with inadequate collateralization, present a 
high probability of loss to the lender.
    (e) Foreclosure proceeding means:
    (1) A foreclosure or similar legal proceeding to enforce a lien on 
property, whether real or personal, that secures a noninterest-earning 
asset or distressed loan; or
    (2) The seizing of and realizing on non-real property collateral, 
other than collateral subject to a statutory lien arising under title I 
or II of the Act to effect collection of a nonaccrual or distressed 
loan.
    (f) Loan means a loan made to a farmer, rancher, or producer or 
harvester of aquatic products, for any agricultural or aquatic purpose 
and other credit needs of the borrower, including financing for basic 
processing and marketing directly related to the borrower's operations 
and those of other eligible farmers, ranchers, and producers or 
harvesters of aquatic products.
    (g) Qualified lender means:
    (1) A System institution that makes loans (as defined in paragraph 
(f) of this section) except a bank for cooperatives; and
    (2) Each bank, institution, corporation, company, union, and 
association described in section 1.7(b)(1)(B) of the Act, but only with 
respect to loans discounted or pledged under section 1.7(b)(1) of the 
Act.
    (h) Restructure or restructuring means rescheduling, reamortization, 
renewal, deferral of principal or interest, monetary concessions, and 
the taking of any other action to modify the terms of, or forbear on, a 
loan in any way that will make it probable that the operations of the 
borrower will become financially viable.

[53 FR 35454, Sept. 14, 1988, as amended at 58 FR 48791, Sept. 20, 1993]



Sec. 614.4513  Uninsured voluntary and involuntary accounts.

    (a) Borrowers may make voluntary advance payments on their loans or, 
under agreement with a System institution, may make voluntary advance 
conditional payments intended to be applied to future maturities. The 
monies in the advance conditional payment accounts may be available for 
return to the borrower in lieu of increasing his loan. System 
institutions may pay interest on advance conditional payments for the 
time the funds are held unapplied at a rate not to exceed the rate 
charged on the related loan(s). System institutions shall hold any 
advance conditional payments received in accordance with this section in 
voluntary advance payment accounts.
    (b) System institutions may establish involuntary payment accounts 
including, but not limited to, funds held for the borrower, such as loan 
proceeds to be disbursed for which the borrower is obligated; the 
unapplied insurance proceeds arising from any insured loss; and total 
insurance premiums and applicable taxes collected in advance in 
connection with any loan.

[53 FR 35454, Sept. 14, 1988]



Sec. 614.4514  Protection of borrowers who meet all loan obligations.

    (a) A qualified lender may not foreclose on any loan because of the 
failure of the borrower to post additional collateral, if the borrower 
has made all

[[Page 131]]

accrued payments of principal, interest, and penalties with respect to 
the loan.
    (b) A qualified lender may not require any borrower to reduce the 
outstanding principal balance of any loan made to the borrower by any 
amount that exceeds the regularly scheduled principal installment 
payment (when due and payable), unless:
    (1) The borrower sells or otherwise disposes of part or all of the 
collateral and the proceeds from the sale or disposition are not applied 
to the loan; or
    (2) The parties agree otherwise in a written agreement entered into 
by the parties.
    (c) After a borrower has made all accrued payments of principal, 
interest, and penalties with respect to a loan made by a qualified 
lender, the lender shall not enforce acceleration of the borrower's 
repayment schedule due to the borrower having not timely made one or 
more principal and/or interest payments.
    (d) If a qualified lender places any loan in a noninterest-earning 
status and such action results in an adverse action being taken against 
the borrower, such as revocation of any undisbursed loan commitment, the 
lender shall document such change of status and promptly notify the 
borrower in writing of such action and the reasons therefore. If the 
borrower was not delinquent in any principal or interest payment under 
the loan at the time of such action and the borrower's request to have 
the loan placed back into accrual status is denied, the borrower may 
obtain a review of such denial before the appropriate credit review 
committee pursuant to Secs. 614.4441 and 614.4443. The borrower must 
request such a review within 30 days after receipt of the notice.

[53 FR 35454, Sept. 14, 1988, as amended at 58 FR 48791, Sept. 20, 1993]



Sec. 614.4515  [Reserved]



Sec. 614.4516  Restructuring policy and procedures.

    Loan restructurings are to be accomplished in accordance with the 
policy adopted by the bank board of directors under section 4.14A(g) of 
the Act.
    (a) Notice. When a qualified lender determines that a loan is or has 
become a distressed loan, the lender shall provide written notice to the 
borrower that the loan may be suitable for restructuring. The qualified 
lender shall include with such notice:
    (1) A copy of the policy of the lender established under section 
4.14A(g) of the Act that governs the treatment of distressed loans; and
    (2) All materials necessary to enable the borrower to submit an 
application for restructuring on the loan. Such notice shall be provided 
not later than 45 days before a qualified lender begins foreclosure 
proceedings with respect to any such loan outstanding to the borrower. 
In the case of a loan involving more than one primary obligor, the 
requirements of this section will be satisfied by providing the notice 
to any one of such parties.
    (b) Opportunity for meeting. The lender shall provide any borrower 
to whom a notice has been sent with a reasonable opportunity to meet 
personally with a representative of the lender:
    (1) To review the status of the loan, the financial condition of the 
borrower, and the suitability of the loan for restructuring;
    (2) With respect to a loan that is in a noninterest-earning status, 
to develop a plan for restructuring the loan if the loan is suitable for 
restructuring as determined by the qualified lender.
    (c) Voluntary consideration of restructuring. A qualified lender 
may, in the absence of an application for restructuring from a borrower, 
propose a restructuring plan for an individual borrower.

[53 FR 35455, Sept. 14, 1988, as amended at 58 FR 48791, Sept. 20, 1993; 
58 FR 62514, Nov. 29, 1993; 61 FR 67187, Dec. 20, 1996; 62 FR 25831, May 
12, 1997]



Sec. 614.4517  Restructuring decision.

    (a) Consideration of application. When a qualified lender receives 
an application for restructuring from a borrower, the lender shall 
determine whether or not to restructure the loan, taking into 
consideration:
    (1) Whether the cost to the lender of restructuring the loan is 
equal to or less than the cost of foreclosure considering all relevant 
factors including:

[[Page 132]]

    (i) The present value of interest and principal foregone by the 
lender in carrying out the restructuring plan;
    (ii) Reasonable and necessary administrative expenses involved in 
working with the borrower to finalize and implement the restructuring 
plan;
    (iii) Whether the borrower has presented a preliminary restructuring 
plan and cash-flow analysis taking into account income from all sources 
to be applied to the debt and all assets to be pledged, showing a 
reasonable probability that orderly debt retirement will occur as a 
result of the proposed restructuring; and
    (iv) Whether the borrower has furnished or is willing to furnish 
complete and current financial statements in a form acceptable to the 
institution;
    (2) Whether the borrower is applying all income over and above 
necessary and reasonable living and operating expenses to the payment of 
primary obligations;
    (3) Whether the borrower has the financial capacity and the 
management skills to protect the collateral from diversion, dissipation, 
or deterioration;
    (4) Whether the borrower is capable of working out existing 
financial difficulties, taking into consideration any prior 
restructurings on the loan, reestablishing a viable operation, and 
repaying the loan on a rescheduled basis; and
    (5) In the case of a distressed loan that is not delinquent, whether 
restructuring consistent with sound lending practices may be taken to 
reasonably ensure that the loan will not become a loan that it is 
necessary to place in a noninterest-earning status.
    (b) Required restructuring. If a qualified lender determines that 
the potential cost to such qualified lender of restructuring the loan in 
accordance with a proposed restructuring plan is less than or equal to 
the potential cost of foreclosure, the qualified lender shall 
restructure the loan in accordance with the plan. If two or more 
restructuring alternatives are available to a qualified lender with 
respect to a distressed loan, the lender shall restructure the loan in 
conformity with the alternative that results in the least cost to the 
lender.
    (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.

[53 FR 35455, Sept. 14, 1988, as amended at 58 FR 48791, Sept. 20, 1993; 
61 FR 67187, Dec. 20, 1996]



Sec. 614.4518  Notice of denial of restructuring and right to review.

    Each qualified lender shall render its decision on an application 
for restructuring in as expeditious a manner as is practicable. Upon 
reaching a decision on a restructuring application, the lender shall 
provide prompt written notice, by certified mail or in any manner that 
requires a primary obligor to acknowledge receipt of the lender's 
decision. In the case of a loan involving one or more primary obligors, 
the notice may be provided to any one of such parties. Where an 
application for restructuring is denied, the notice shall include:
    (a) The reason(s) for the denial, and any critical assumptions and 
relevant information upon which the reasons are based, except that any 
confidential information shall not be disclosed;
    (b) Notification that the borrower may request a review of the 
denial;
    (c) Notification that any request for such review must be made in 
writing within 7 days after receiving such notice;
    (d) A brief explanation of the process for seeking review of the 
denial, including the appraisal process; and the right to appear before 
the credit review committee, pursuant to Secs. 614.4442 and 614.4443 
accompanied by counsel or by any other representative, if the borrower 
so chooses.

[53 FR 35455, Sept. 14, 1988]



Sec. 614.4519  Notice before foreclosure; limitation on foreclosure.

    (a) Not later than 45 days before any qualified lender begins 
foreclosure proceedings with respect to a loan outstanding to any 
borrower, the lender shall notify the borrower that the loan may be 
suitable for restructuring and that the lender will review any such

[[Page 133]]

suitable loan for possible restructuring, and shall include with such 
notice a copy of the policy and the materials described in 
Sec. 614.4516(a)(2). The notice shall also inform the borrower that the 
alternative to restructuring may be foreclosure.
    (b) No qualified lender may foreclose or continue any foreclosure 
proceeding with respect to any distressed loan before the lender has 
completed any pending consideration of the loan for restructuring under 
this subpart, and completion of credit review committee consideration, 
if applicable. This section shall not prevent a lender from taking any 
action necessary to avoid the dissipation of assets, or the destruction, 
diversion or deterioration of collateral if the lender has reasonable 
grounds to believe that such dissipation, destruction, diversion or 
deterioration may occur.
    (c) Any foreclosure proceeding which is commenced by a certified 
lender after the lender's credit review committee has rejected a 
borrower's appeal on a restructuring application must be terminated if 
the Special Asset Group in its district prescribes a restructuring plan 
to the lender which the borrower accepts.

[53 FR 35455, Sept. 14, 1988]



Sec. 614.4520  [Reserved]



Sec. 614.4521  Participation in State agricultural loan mediation programs.

    (a) If initiated by a borrower, System institutions shall, either 
concurrently with consideration of loan restructuring under 
Sec. 614.4517 or at any other appropriate time, participate in State 
mediation programs certified under section 501 of the Agricultural 
Credit Act of 1987, and shall present and explore debt restructuring 
proposals advanced in the course of such mediation. If provided in the 
certified program, System institutions may initiate mediation at any 
time.
    (b) System institutions shall cooperate in good faith with requests 
for information or analysis of information made in the course of 
mediation under any such loan mediation program.
    (c) No System institution may make a loan secured by a mortgage or 
lien on agricultural property to a borrower on the condition that the 
borrower waive any right under the agricultural loan mediation program 
of any State.

[53 FR 35456, Sept. 14, 1988]



Sec. 614.4522  Right of first refusal.

    (a) For purposes of this section, in addition to the definitions in 
Sec. 614.4512, the following definitions shall apply:
    (1) Acquired real estate means agricultural real estate acquired by 
an institution of the System as a result of a loan foreclosure or a 
voluntary conveyance by a borrower who, as determined by the institution 
does not have the financial resources to avoid foreclosure;
    (2) Previous owner means the prior record owner who was a borrower 
from a System institution who did not have the financial resources, as 
determined by the institution, to avoid foreclosure on agricultural real 
estate; where the borrower is not the prior record owner, previous owner 
means the prior record owner where that owner's land was used as 
collateral for a loan to a System borrower; and
    (3) System institution or institution of the System means all System 
institutions, except banks for cooperatives.
    (b) Upon acquiring agricultural real estate as a result of a loan 
foreclosure or voluntary conveyance by a borrower, the System 
institution shall determine whether the borrower had the financial 
resources to avoid foreclosure and document this determination in the 
file for the acquired real estate.
    (c) Except as provided in paragraph (e) of this section, System 
institutions electing to sell acquired real estate, or any portion of 
such property, of a previous owner, as defined in this section:
    (1) Shall notify the previous owner by certified mail, within 15 
days of the decision to sell the property, of the appraised fair market 
value of the property as established by an accredited appraiser and of 
the right:
    (i) To purchase the property at the appraised fair market value, or
    (ii) To offer to purchase the property at a price less than the 
appraised value.

The notice shall inform the previous owner that any offer must be 
received within 30 days of receipt of the notification.

[[Page 134]]

    (2) Shall accept an offer from the previous owner to purchase the 
property at the appraised value, within 15 days after the receipt of 
such offer, and sell the property to the previous owner, if the offer 
was received within 30 days of the notification required in paragraph 
(c)(1) of this section.
    (3) Shall consider an offer from a previous owner to purchase the 
acquired real estate at a price less than the appraised value, if the 
offer was received within 30 days of the notification required in 
paragraph (c)(1) of this section. Notice of the decision to accept or 
reject such offer must be provided to the previous owner within 15 days 
of receipt of such offer. If the institution rejects such an offer, the 
institution may not sell the property to any other person:
    (i) At a price equal to, or less than, that offered by the previous 
owner; or
    (ii) On different terms or conditions than those that were extended 
to the previous owner; without first notifying the previous owner by 
certified mail and providing an opportunity to purchase the property at 
such price or under such terms and conditions.
    The previous owner shall have 15 days from receipt of the 
notification to submit an offer to purchase at such price or under such 
terms and conditions.
    (4) For purposes of this section, financing by the System 
institution shall not be considered a term or condition of the sale of 
acquired real estate. A System institution shall not be required to 
provide financing to the previous owner in connection with the sale of 
acquired real estate.
    (d) Except as provided in paragraph (e) of this section, System 
institutions electing to lease acquired real estate, or any portion of 
such property, of a previous owner, as defined in this section:
    (1) Shall notify the previous owner by certified mail, within 15 
days of the decision to lease, of the appraised rental value of the 
property, as established by an accredited appraiser, and of the right 
to:
    (i) Lease the property at a rate equivalent to the appraised rental 
value of the property, or
    (ii) To offer to lease the property at rate that is less than the 
appraised rental value of the property.

The notice shall inform the previous owner that any offer must be 
received within 15 days of receipt of the notification.
    (2) Shall accept an offer from a previous owner to lease the 
property at the appraised rental value, within 15 days after the receipt 
of such offer, and lease the property to the previous owner, unless the 
institution determines that the previous owner:
    (i) Does not have the resources available to conduct a successful 
farming or ranching operation; or
    (ii) Cannot meet all of the payments, terms and conditions of such 
lease.
    (3) Shall consider an offer from a previous owner to lease the 
property at a rate that is less than the appraised rental value of the 
property. Notice of the decision to accept or reject such offer must be 
provided to the previous owner within 15 days of receipt of such offer. 
If the institution rejects such an offer, the institution may not lease 
the property to any other person:
    (i) At a rate equal to or less than that offered by the previous 
owner; or
    (ii) On different terms and conditions than those that were extended 
to the previous owner, without first notifying the previous owner by 
certified mail and providing an opportunity to lease the property at 
such rate or under such terms and conditions.

The previous owner shall have 15 days after receipt of the notification 
in which to agree to lease the property at such rate or under such terms 
and conditions.
    (e) System institutions electing to sell or lease acquired real 
estate or a portion thereof through a public auction, competitive 
bidding process, or other similar public offering:
    (1) Shall notify the previous owner, by certified mail, of the 
availability of such property. Such notice shall contain the minimum 
amount, if any, required to qualify a bid as acceptable to the 
institution and any terms or conditions to which such sale or lease will 
be subject;
    (2) If two or more qualified bids in the same amount are received by 
the institution, such bids are the highest

[[Page 135]]

received, and one of the qualified bids is from the previous owner, the 
institution shall accept the offer by the previous owner; and
    (3) Shall not discriminate against a previous owner.
    (f) Each certified mail notice requirement in this section shall be 
fully satisfied by mailing one certified mail notice to the last known 
address of the former borrower.
    (g) The rights provided under section 4.36 of the Act, and this 
section, shall not diminish any right of first refusal under the law of 
the State in which the property is located.

[53 FR 35456, Sept. 14, 1988, as amended at 53 FR 52401, Dec. 28, 1988; 
58 FR 48791, Sept. 20, 1993]



                   Subpart O--Special Lending Programs



Sec. 614.4525  General.

    (a) To provide the best possible credit service to farmers, 
ranchers, and producers or harvesters of aquatic products, bank and 
association boards may adopt policies permitting the bank or association 
to enter into agreements with agents, dealers, cooperatives, other 
lenders, and individuals to facilitate its making of loans to eligible 
farmers, ranchers, and producers or harvesters of aquatic products.
    (b) A bank or association, pursuant to its board policies, may enter 
into an agreement with third parties that will accrue to the benefit of 
the borrower and the lender to perform functions in the making or 
servicing of loans other than the evaluation and approval of loans. When 
such an agreement is developed, and the territory covered by the 
agreement extends outside the territorial limits of the originating 
association or bank, the written consent of all affected banks or 
associations is required. Reasonable compensation may be paid for 
services rendered.
    (c) Production credit associations and agricultural credit 
associations may enter into agreements with private dealers or 
cooperatives permitting them to take applications for loans from the 
association to purchase farm or aquatic equipment, supplies, and 
machinery. Such agreements shall normally be limited to persons or 
businesses selling to farmers, ranchers, or producers or harvesters of 
aquatic products and shall contain credit limits consistent with sound 
credit standards. When the sales territory of a dealer or cooperative 
extends outside the territory of the originating association or the Farm 
Credit district, written consent of each bank and association affected 
shall be obtained before making such loans. Reasonable compensation may 
be paid or charged to a dealer or cooperative for services rendered in 
connection with such programs.
    (d) Farm Credit System institutions that are direct lenders may 
enter into memoranda of understanding among themselves or with other 
lenders for the simultaneous processing and closing of loans to a mutual 
borrower. The basic policies and principles of each System lender shall 
apply.

[47 FR 12146, Mar. 22, 1982. Redesignated at 53 FR 35454, Sept. 14, 
1988, and amended at 55 FR 24886, June 19, 1990; 61 FR 67187, Dec. 20, 
1996]



Sec. 614.4530  Special loans, production credit associations and agricultural credit associations.

    Under policies approved by the bank board and procedures developed 
by the bank, production credit associations and agricultural credit 
associations may make the following special types of loans on 
commodities covered by price support programs. Notwithstanding the 
regulations covering other loans made by an association, loans may be 
made to members on any commodity for which a Commodity Credit 
Corporation price support program is in effect, at such rate of interest 
and upon such terms as the bank board may prescribe subject to the 
following conditions:
    (a) The commodity offered as security for the loan shall be eligible 
for price support under a Commodity Credit Corporation price support 
program and shall be stored in a bonded public warehouse, holding 
storage agreement for such commodity approved by Commodity Credit 
Corporation.
    (b) The member shall have complied with all Commodity Credit 
Corporation eligibility requirements.

[[Page 136]]

    (c) The loan shall mature not later than 30 days prior to the 
expiration of the period during which the Commodity Credit Corporation 
loan or other price support may be obtained on the commodity and shall 
be secured by pledge of negotiable warehouse receipts covering the 
commodity.
    (d) The borrower shall appoint the association as his attorney-in-
fact to obtain a Commodity Credit Corporation loan (or other such price 
support as is available) in the event that the borrower fails to do so 
prior to maturity or repayment of the loan.

[37 FR 11424, June 7, 1972. Redesignated at 46 FR 51878, Oct. 22, 1981, 
and amended at 55 FR 24886, June 19, 1990]



 Subpart P--Farm Credit Bank and Agricultural Credit Bank Financing of 
                      Other Financing Institutions

    Source: 63 FR 36547, July 7, 1998, unless otherwise noted.



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

[[Page 137]]

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 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

[[Page 138]]

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.



    Subpart Q--Banks for Cooperatives and Agricultural Credit Banks 
                      Financing International Trade



Sec. 614.4700  Financing foreign trade receivables.

    (a) Banks for cooperatives and agricultural credit banks, under 
policies adopted by their boards of directors, are authorized to finance 
foreign trade receivables on behalf of eligible cooperatives to include 
the following:
    (1) Advances against collections;
    (2) Trade acceptances;
    (3) Factoring; and
    (4) Open accounts.

[[Page 139]]

    (b) To reduce credit, political, and other risks associated with 
foreign trade receivable financing, the banks for cooperatives and 
agricultural credit banks shall avail themselves of such guarantee and 
insurance plans as are available in the United States and other 
countries, such as the Foreign Credit Insurance Association and the 
Export-Import Bank of the United States. Exceptions may be made where a 
prospective borrower has had a longstanding successful business 
relationship with the eligible cooperative borrower or an eligible 
cooperative which is not a borrower if the prospective borrower has a 
high credit rating as determined by the bank.
    (c) When financing a draft drawn on a foreign importer, the banks 
should retain recourse to the exporter unless their credit evaluation of 
and experience with the importer indicate recourse is not necessary or 
unless appropriate guarantees or insurance plans are used.
    (d) The financing of foreign trade receivables shall be limited by 
the policies of each bank's board of directors. The policies shall 
provide a method of determining the maximum amount in dollars, by 
country, to be financed and establishing a maximum percentage of the 
amount of a draft drawn on a foreign party against which the bank may 
advance funds. The banks shall take into consideration the following 
factors:
    (1) The reputation and financial strength of the foreign importer.
    (2) The reputation and payment record of the class of importers in 
the same country as the subject importer in regard to prompt payment of 
drafts drawn upon them.
    (3) The quality of the supporting documents offered with the draft.
    (4) The degree of ease with which necessary foreign exchange 
conversion can be made, or the extent to which foreign currency exposure 
may be hedged by forward or future contracts.
    (5) The reputation and financial strength of the exporter.
    (e) The banks may establish foreign trade receivable financing 
programs by which eligible parties pledge collections to the bank, and 
then may borrow from the bank up to a stated maximum percentage of the 
total amount of receivables pledged at any one time.
    (f) When financing foreign trade receivables, the banks shall take 
such precautions and obtain such credit information as necessary to 
ascertain that all parties to the transaction(s) being financed are 
reputable and capable of performing their responsibilities under the 
contract of sale.
    (g) When financing foreign trade receivables, the banks shall 
determine that all shipments are covered by maritime insurance while on 
the high seas.
    (h) Countries where credit is to be extended will be analyzed 
periodically and systematically on a centralized basis. The resulting 
country studies will be disseminated to all banks for cooperatives and 
agricultural credit banks to be used as inputs in credit grading 
decisions.

[46 FR 51879, Oct. 22, 1981, as amended at 55 FR 24886, June 19, 1990; 
62 FR 4445, Jan. 30, 1997]



Sec. 614.4710  Bankers acceptance financing.

    The Funding Corporation is authorized to accept drafts or bills of 
exchange drawn upon banks for cooperatives and agricultural credit 
banks. With the exception of acceptances eligible for purchase by the 
Federal Reserve Banks under the direction and regulation of the Federal 
Open Market Committee and rediscounted, acceptances shall be subject to 
the provisions of subpart J of this part and must be combined with any 
other loan to the account party by the banks for cooperatives and 
agricultural credit banks for the purpose of applying the lending and 
leasing limits of Sec. 614.4355 of this part.
    (a) Limitations. (1) The Funding Corporation is authorized to accept 
drafts or bills of exchange drawn upon a bank for cooperatives or an 
agricultural credit bank having not more than 6 months' sight to run, 
exclusive of days of grace, that are derived from transactions involving 
the importation or exportation of agricultural commodities, farm 
supplies, or aquatic products into or out of the United States; or are 
derived from transactions involving the domestic shipment of goods that 
were produced from agriculture or

[[Page 140]]

commerical fishing or that have an agriculturally or aquatically related 
purpose; or are secured at the time of acceptance by title covering 
readily marketable staples.
    (i) The dollar amount of such acceptances outstanding at any one 
time to any one borrower, exclusive of participations sold to others, 
shall be limited to 10 percent of the net worth of a bank for 
cooperatives or an agricultural credit bank as calculated on a monthly 
basis after eliminating from its net worth an amount equal to the total 
of the bank's investments made to capitalize participation interests 
purchased by other institutions. However, if such acceptances are 
secured either by attached documents or by some other actual security 
growing out of the same transaction as the acceptance, the 10-percent 
limit shall not apply.
    (ii) The sum of all acceptance liabilities outstanding described in 
paragraph (a)(1) of this section, exclusive of participations sold to 
others, issued to all borrowers shall not exceed 150 percent of the bank 
for cooperatives' or agricultural credit bank's net worth, but the 
aggregate of acceptances growing out of domestic transactions shall not 
exceed 50 percent of net worth calculated on a monthly basis.
    (2) The limit specified in paragraph (a)(1)(i) of this section is 
separate from and in addition to the lending and leasing limits of 
Sec. 614.4355 of this part if the acceptances are rediscounted.
    (3) During any period within which a bank for cooperatives or an 
agricultural credit bank holds its own acceptance, having given value 
therefor, the amount thereof shall be included against the lending and 
leasing limits set forth in Sec. 614.4355 of this part of the customer 
for whom the acceptance was made.
    (4) The terms and requirements for the offering and purchase of 
participations in acceptance financing shall be the same as those for 
loans made under Sec. 614.4020(b) of this part.
    (5) When acceptances denominated in foreign currencies are not 
funded in the same currency, the bank for cooperatives or an 
agricultural credit bank shall take corresponding action to minimize 
foreign exchange risk.
    (b) Purchases of participations in bankers acceptances. (1) A bank 
for cooperatives or an agricultural credit bank shall determine limits 
on purchasing participations in discounted acceptances of another bank 
for cooperatives or an agricultural credit bank on the same basis as 
prescribed in Sec. 614.4355 of this part for purchasing participations 
in loans of another bank for cooperatives or an agricultural credit 
bank.
    (2) Participations in discounted acceptances shall be offered in 
accordance with Sec. 614.4020(b) of this part.
    (c) Funding Corporation. All acceptances created by the banks for 
cooperatives or agricultural credit banks shall be physically accepted 
by the Funding Corporation when intended for rediscount.

[55 FR 24886, June 19, 1990, as amended at 57 FR 38250, Aug. 24, 1992; 
58 FR 40324, July 28, 1993; 59 FR 37404, July 22, 1994; 62 FR 4445, Jan. 
30, 1997; 64 FR 34518, June 28, 1999]



Sec. 614.4720  Letters of credit.

    Banks for cooperatives and agricultural credit banks, under policies 
adopted by their boards of directors, may issue, advise, or confirm 
import or export letters of credit in accordance with the Uniform 
Commercial Code, or the Uniform Customs and Practice for Documentary 
Credits, to or on behalf of its customers. In addition, as a matter of 
sound banking practice, letters of credit shall be issued in conformity 
with the list which follows.
    (a) Each letter of credit shall be in writing and shall 
conspicuously state that it is a letter of credit, or be conspicuously 
entitled as such.
    (b) The letter of credit shall contain a specified expiration date 
or be for a definite term.
    (c) The letter of credit shall contain a sum certain.
    (d) The bank's obligation to pay should arise only upon fulfilling 
the terms and conditions as specified in the letter of credit. The bank 
must not be called upon to determine questions of fact or law at issue 
between the account party and the beneficiary.
    (e) The bank's customer should have an unqualified obligation to 
reimburse the bank for payments made under the letter of credit.

[[Page 141]]

    (f) All letters of credit shall be irrevocable.

[46 FR 51879, Oct. 22, 1981, as amended at 55 FR 24887, June 19, 1990; 
62 FR 4445, Jan. 30, 1997; 64 FR 43049, Aug. 9, 1999]



Sec. 614.4800  Guarantees and contracts of suretyship.

    A bank for cooperatives or an agricultural credit bank, under a 
policy approved by the bank's board of directors, may lend its credit, 
be itself a surety to indemnify another, or otherwise become a guarantor 
if an eligible cooperative substantially benefits from the performance 
of the transaction involved. A bank may guarantee the debt of eligible 
cooperatives and foreign parties or otherwise agree to make payments on 
the occurrence of readily ascertainable events if the guarantee or 
agreement specifies a maximum monetary liability. Guarantees may be 
secured or unsecured, and can include, but are not limited to, such 
events as nonpayment of taxes, rentals, customs duties, costs of 
transport, and loss of or nonconformance of shipping documents. The 
bank's customer shall have an unqualified obligation to reimburse the 
bank for payments made under a guarantee or surety.

[55 FR 24887, June 19, 1990, as amended at 62 FR 4445, Jan. 30, 1997]



Sec. 614.4810  Standby letters of credit.

    (a) The banks for cooperatives and agricultural credit banks are 
authorized to issue on behalf of parties eligible for financing under 
regulations Sec. 614.4010(d) or Sec. 614.4020 standby letters of credit 
that represent an obligation to the beneficiary on the part of the 
issuer:
    (1) To repay money borrowed by, advanced to, or for the account of 
the account party, or
    (2) To make payment on account of any indebtedness undertaken by the 
account party, or
    (3) To make payment on account of any default by the account party 
in the performance of an obligation.
    (b) As a matter of sound banking practice, banks for cooperatives 
and agricultural credit banks shall evaluate applications for standby 
letters of credit on the basis of the loan underwriting standards 
adopted pursuant to Sec. 614.4150 of the regulations.

[46 FR 51879, Oct. 22, 1981, as amended at 55 FR 24887, June 19, 1990; 
62 FR 4445, Jan. 30, 1997; 62 FR 51015, Sept. 30, 1997]



Sec. 614.4900  Foreign exchange.

    (a) Before a bank for cooperatives or an agricultural credit bank 
may engage in any financial transaction which transports monetary 
instruments from any place within the United States to or through any 
place outside the United States or to any place within the United 
States, the bank must have policies adopted by the bank's board of 
directors governing such transactions and must have established bank 
procedures to safeguard the interests of the stockholders of the bank in 
regard to such transactions.
    (b) Under policies adopted by the bank's board of directors, a bank 
for cooperatives or an agricultural credit bank may engage in currency 
exchange activities necessary to service individual transactions that 
may be financed under the regulations authorizing export, import, and 
other internationally related credit and financial services. These 
currency exchange activities shall not include any loans or commitments 
intended to finance speculative futures transactions by eligible 
borrowers in foreign currencies. The bank may engage, on behalf of the 
eligible borrowers or on its own behalf, in bona fide hedging 
transactions and positions, where such transactions or positions 
normally reduce risks in the conduct and management of international 
financial activities. The bank's policies should include established 
guidelines for:
    (1) Net overnight positions, by currency.
    (2) Maturity distribution, by currency, of foreign currency assets, 
liabilities, and foreign exchange contracts.
    (3) Outstanding contracts with individual customers and banks.
    (4) Credit approval procedures safeguarding against delivery or 
settlement risk.
    (5) Total value of outstanding contracts--spot and forward.
    (c) A bank for cooperatives or an agricultural credit bank is 
responsible for

[[Page 142]]

its compliance with the laws of the United States in regard to reporting 
requirements of the Department of the Treasury pertaining to currency 
exchange activities and international transfers of monetary instruments.
    (d) A bank for cooperatives or an agricultural credit bank engaged 
in foreign exchange trading shall have written policies describing the 
scope of trading activity authorized, delegation of authority, types of 
services offered, trading limits, reporting requirements, and internal 
accounting controls.
    (e) The bank's trading guideline policies should provide for 
reporting procedures adequate to inform management properly of trading 
activities and to facilitate detection of lack of compliance with policy 
directives.
    (f) The bank's policies shall establish foreign exchange delivery 
limits for eligible customers with relationship to the customer's 
financial capability to bear the financial risks assumed. The bank will 
be expected to maintain documentary evidence that a customer's delivery 
exposure is reasonable, and that responsible bank officers routinely 
review outstanding delivery exposure of individual customers.
    (g) The bank's personnel policies shall include written standards of 
conduct for those involved with foreign exchange activities, including 
the following which should be prohibited:
    (1) Trading with entities affiliated with the bank or with members 
of the board of directors.
    (2) Foreign exchange and deposit transactions with other bank 
employees.
    (3) Personal business relationships with foreign exchange and money 
brokers with whom the bank deals.
    (h) The bank's policies should provide detailed instructions 
regarding the need for bank officers to disclose the limits of 
responsibility and liability of the bank when it holds positions or 
executes contracts for the account of eligible parties. The bank's 
policies regarding the respective procedures should provide reasonable 
assurance that reports on trading activities are current and complete, 
and that the opportunity for concealment of unauthorized transactions is 
kept at the absolute minimum.
    (i) The banks for cooperatives and agricultural credit banks shall 
use the Funding Corporation for purposes of trading foreign exchange. 
All foreign exchange transactions shall be made by the Funding 
Corporation on behalf of the banks consistent with instructions received 
from the respective banks.
    (j) Guidelines (b) through (i) of this section will not apply if a 
bank purchases or sells foreign exchange through a commercial bank and 
has no foreign exchange risk exposure.

[46 FR 51879, Oct. 22, 1981, as amended at 55 FR 24887, June 19, 1990; 
62 FR 4445, Jan. 30, 1997]



                 Subpart R--Secondary Market Authorities



Sec. 614.4910  Basic authorities.

    (a) Any bank or association of the Farm Credit System, except a bank 
for cooperatives, with direct lending authority may originate 
agricultural real estate loans for sale to one or more certified 
agricultural mortgage marketing facilities under title VIII of the Act.
    (b) Any bank or association of the Farm Credit System, except a bank 
for cooperatives, may operate as an agricultural mortgage marketing 
facility under title VIII of the Act, either acting alone or jointly 
with other banks and/or associations, if so certified by the Federal 
Agricultural Mortgage Corporation.

[54 FR 1155, Jan. 12, 1989]



                 Subpart S--Flood Insurance Requirements

    Source: 61 FR 45711, Aug. 29, 1996, unless otherwise noted.



Sec. 614.4920  Purpose and scope.

    (a) Purpose. This subpart implements the requirements of the 
National Flood Insurance Act of 1968 (1968 Act), as amended, and the 
Flood Disaster Protection Act of 1973 (1973 Act), as amended (42 U.S.C. 
4001-4129).
    (b) Scope. This subpart, except for Secs. 614.4940 and 614.4950, 
applies to loans of Farm Credit System (System) institutions that are 
secured by buildings

[[Page 143]]

or mobile homes located or to be located in areas determined by the 
Director of the Federal Emergency Management Agency to have special 
flood hazards. Sections 614.4940 and 614.4950 apply to loans secured by 
buildings or mobile homes, regardless of location.



Sec. 614.4925  Definitions.

    (a) Building means a walled and roofed structure, other than a gas 
or liquid storage tank, that is principally above ground and affixed to 
a permanent site, and a walled and roofed structure while in the course 
of construction, alteration, or repair.
    (b) Community means a State or a political subdivision of a State 
that has zoning and building code jurisdiction over a particular area 
having special flood hazards.
    (c) Designated loan means a loan secured by a building or a mobile 
home that is located or to be located in a special flood hazard area in 
which flood insurance is available under the 1968 Act.
    (d) Director of FEMA means the Director of the Federal Emergency 
Management Agency.
    (e) Mobile home means a structure, transportable in one or more 
sections, that is built on a permanent chassis and designed for use with 
or without a permanent foundation when attached to the required 
utilities. The term mobile home does not include a recreational vehicle. 
For purposes of this subpart, the term mobile home means a mobile home 
on a permanent foundation. The term mobile home includes a manufactured 
home as that term is used in the NFIP.
    (f) NFIP means the National Flood Insurance Program authorized under 
the 1968 Act.
    (g) Residential improved real estate means real estate upon which a 
home or other residential building is located or to be located.
    (h) Servicer means the person responsible for:
    (1) Receiving any scheduled, periodic payments from a borrower under 
the terms of a loan, including amounts for taxes, insurance premiums, 
and other charges with respect to the property securing the loan; and
    (2) Making payments of principal and interest and any other payments 
from the amounts received from the borrower as may be required under the 
terms of the loan.
    (i) Special flood hazard area means the land in the flood plain 
within a community having at least a one percent chance of flooding in 
any given year, as designated by the Director of FEMA.
    (j) Table funding means a settlement at which a loan is funded by a 
contemporaneous advance of loan funds and an assignment of the loan to 
the person advancing the funds.



Sec. 614.4930  Requirement to purchase flood insurance where available.

    (a) In general. A System institution shall not make, increase, 
extend or renew any designated loan unless the building or mobile home 
and any personal property securing the loan are covered by flood 
insurance for the term of the loan. The amount of insurance must be at 
least equal to the outstanding principal balance of the designated loan 
or the maximum limit of coverage available for the particular type of 
property under the 1968 Act. Flood insurance coverage under the Act is 
limited to the overall value of the property securing the designated 
loan minus the value of the land on which the property is located.
    (b) Table funded loans. A System institution that acquires a loan 
from a mortgage broker or other entity through table funding shall be 
considered to be making a loan for purposes of this part.
    (c) Exemptions. The flood insurance requirement of paragraph (a) of 
this section does not apply with respect to:
    (1) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and 
periodically revises the list of States falling within this exemption; 
or
    (2) Property securing any loan with an original principal balance of 
$5,000 or less and a repayment term of one year or less.



Sec. 614.4935  Escrow requirement.

    If a System institution requires the escrow of taxes, insurance 
premiums,

[[Page 144]]

fees, or any other charges for a loan secured by residential improved 
real estate or a mobile home that is made, increased, extended or 
renewed on or after October 4, 1996, the institution shall also require 
the escrow of all premiums and fees for any flood insurance required 
under Sec. 614.4930. The institution, or a servicer acting on behalf of 
the institution, shall deposit the flood insurance premiums on behalf of 
the borrower in an escrow account. This escrow account will be subject 
to escrow requirements adopted pursuant to section 10 of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), which 
generally limits the amount that may be maintained in escrow accounts 
for certain types of loans and requires escrow account statements for 
those accounts, only if the loan is otherwise subject to RESPA. 
Following receipt of a notice from the Director of FEMA or other 
provider of flood insurance that premiums are due, the institution, or a 
servicer acting on behalf of the institution, shall pay the amount owed 
to the insurance provider from the escrow account by the date when such 
premiums are due.



Sec. 614.4940  Required use of standard flood hazard determination form.

    (a) Use of form. System institutions must use the standard flood 
hazard determination form developed by the Director of FEMA when 
determining whether the building or mobile home offered as collateral 
security for a loan is or will be located in a special flood hazard area 
in which flood insurance is available under the 1968 Act. The standard 
flood hazard determination form may be used in a printed, computerized, 
or electronic manner. A System institution may obtain the standard flood 
hazard determination form by written request to FEMA, P.O. Box 2012, 
Jessup, MD 20794-2012.
    (b) Retention of form. System institutions shall retain a copy of 
the completed standard flood hazard determination form, in either hard 
copy or electronic form, for the period of time the institution owns the 
loan.

[61 FR 45711, Aug. 29, 1996, as amended at 64 FR 71274, Dec. 21, 1999]



Sec. 614.4945  Forced placement of flood insurance.

    If a System institution, or a servicer acting on behalf of the 
institution, determines at any time during the term of a designated 
loan, that the building or mobile home and any personal property 
securing the designated loan are not covered by flood insurance or are 
covered by flood insurance in an amount less than the amount required 
under Sec. 614.4930(a), then the institution or its servicer shall 
notify the borrower that the borrower should obtain flood insurance, at 
the borrower's expense, in an amount at least equal to the amount 
required under Sec. 614.4930(a), for the remaining term of the loan. If 
the borrower fails to obtain flood insurance within 45 days after 
notification, then the institution or its servicer shall purchase 
insurance on the borrower's behalf. The institution or its servicer may 
charge the borrower for the cost of premiums and fees incurred in 
purchasing the insurance.



Sec. 614.4950  Determination fees.

    (a) General. Notwithstanding any Federal or State law other than the 
1973 Act, any System institution, or a servicer acting on behalf of the 
institution, may charge a reasonable fee for determining whether the 
building or mobile home securing the loan is located or will be located 
in a special flood hazard area. A determination fee may also include, 
but is not limited to, a fee for life-of-loan monitoring.
    (b) Borrower fee. The determination fee authorized by paragraph (a) 
of this section may be charged to the borrower if the determination:
    (1) Is made in connection with a making, increasing, extending, or 
renewing of the loan that is initiated by the borrower;
    (2) Reflects the Director of FEMA's revision or updating of 
floodplain areas or flood-risk zones;
    (3) Reflects the Director of FEMA's publication of a notice or 
compendium that:
    (i) Affects the area in which the building or mobile home securing 
the loan is located; or
    (ii) By determination of the Director of FEMA, may reasonably 
require a determination whether the building or

[[Page 145]]

mobile home securing the loan is located in a special flood hazard area; 
or
    (4) Results in the purchase of flood insurance coverage under 
Sec. 614.4945.
    (c) Purchaser or transferee fee. The determination fee authorized by 
paragraph (a) of this section may be charged to the purchaser or 
transferee of a loan in the case of the sale or transfer of the loan.



Sec. 614.4955  Notice of special flood hazards and availability of Federal disaster relief assistance.

    (a) Notice requirement. When a System institution makes, increases, 
extends, or renews a loan secured by a building or a mobile home located 
or to be located in a special flood hazard area, the institution shall 
mail or deliver a written notice containing the information specified in 
paragraph (b) of this section to the borrower and to the servicer of the 
loan. Notice is required whether or not flood insurance is available 
under the 1968 Act for the collateral securing the loan.
    (b) Contents of notice. The written notice must include the 
following information:
    (1) A warning, in a form approved by the Director of FEMA, that the 
building or the mobile home is or will be located in a special flood 
hazard area;
    (2) A description of the flood insurance purchase requirements set 
forth in section 102(b) of the 1973 Act (42 U.S.C. 4012a(b));
    (3) A statement, where applicable, that flood insurance coverage is 
available under the NFIP and also may be available from private 
insurers; and
    (4) A statement whether Federal disaster relief assistance may be 
available in the event of damage to the building or the mobile home 
caused by flooding in a Federally declared disaster.
    (c) Timing of notice. The institution shall provide the notice 
required by paragraph (a) of this section to the borrower within a 
reasonable time before the completion of the transaction, and to the 
servicer as promptly as practicable after the institution provides 
notice to the borrower and in any event no later than the time the 
institution provides other similar notices to the servicer concerning 
hazard insurance and taxes. Notice to the servicer may be made 
electronically or may take the form of a copy of the notice to the 
borrower.
    (d) Record of receipt. Each institution shall retain a record of the 
receipt of the notices by the borrower and the servicer for the period 
of time the institution owns the loan.
    (e) Alternate method of notice. Instead of providing the notice to 
the borrower required by paragraph (a) of this section, an institution 
may obtain satisfactory written assurance from a seller or lessor that, 
within a reasonable time before the completion of the sale or lease 
transaction, the seller or lessor has provided such notice to the 
purchaser or lessee. The institution shall retain a record of the 
written assurance from the seller or lessor for the period of time the 
institution owns the loan.
    (f) Use of prescribed form of notice. An institution will be 
considered to be in compliance with the requirements of this section for 
notice to the borrower by providing written notice to the borrower 
containing the language presented in appendix A to this subpart within a 
reasonable time before the completion of the transaction. The notice 
presented in appendix A to this subpart satisfies the borrower notice 
requirements of the 1968 Act.



Sec. 614.4960  Notice of servicer's identity.

    (a) Notice requirement. When a System institution makes, increases, 
extends, renews, sells, or transfers a loan secured by a building or 
mobile home located or to be located in a special flood hazard area, the 
institution shall notify the Director of FEMA (or the Director's 
designee) in writing of the identity of the servicer of the loan. The 
Director of FEMA has designated the insurance provider to receive the 
institution's notice of the servicer's identity. This notice may be 
provided electronically if electronic transmission is satisfactory to 
the Director of FEMA's designee.
    (b) Transfer of servicing rights. The institution shall notify the 
Director of FEMA (or the Director's designee) of any change in the 
servicer of a loan described in paragraph (a) of this section within 60 
days after the effective date

[[Page 146]]

of the change. This notice may be provided electronically if electronic 
transmission is satisfactory to the Director of FEMA's designee. Upon 
any change in the servicing of a loan described in paragraph (a) of this 
section, the duty to provide notice under this paragraph (b) shall 
transfer to the transferee servicer.

 Appendix A to Subpart S of Part 614--Sample Form of Notice of Special 
  Flood Hazards and Availability of Federal Disaster Relief Assistance

    We are giving you this notice to inform you that:
    The building or mobile home securing the loan for which you have 
applied is or will be located in an area with special flood hazards.
    The area has been identified by the Director of the Federal 
Emergency Management Agency (FEMA) as a special flood hazard area using 
FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary Map for the 
following community: ________________. This area has at least a one 
percent (1%) chance of a flood equal to or exceeding the base flood 
elevation (a 100-year flood) in any given year. During the life of a 30-
year mortgage loan, the risk of a 100-year flood in a special flood 
hazard area is 26 percent (26%).
    Federal law allows a lender and borrower jointly to request the 
Director of FEMA to review the determination of whether the property 
securing the loan is located in a special flood hazard area. If you 
would like to make such a request, please contact us for further 
information.
    ______ The community in which the property securing the loan is 
located participates in the National Flood Insurance Program (NFIP). 
Federal law will not allow us to make you the loan that you have applied 
for if you do not purchase flood insurance. The flood insurance must be 
maintained for the life of the loan. If you fail to purchase or renew 
flood insurance on the property, Federal law authorizes and requires us 
to purchase the flood insurance for you at your expense.
     Flood insurance coverage under the NFIP may be purchased 
through an insurance agent who will obtain the policy either directly 
through the NFIP or through an insurance company that participates in 
the NFIP. Flood insurance also may be available from private insurers 
that do not participate in the NFIP.
     At a minimum, flood insurance purchased must cover the 
lesser of:
    (1) The outstanding principal balance of the loan; or
    (2) The maximum amount of coverage allowed for the type of property 
under the NFIP.
    Flood insurance coverage under the NFIP is limited to the overall 
value of the property securing the loan minus the value of the land on 
which the property is located.
     Federal disaster relief assistance (usually in the form of 
a low-interest loan) may be available for damages incurred in excess of 
your flood insurance if your community's participation in the NFIP is in 
accordance with NFIP requirements.
    ______ Flood insurance coverage under the NFIP is not available for 
the property securing the loan because the community in which the 
property is located does not participate in the NFIP. In addition, if 
the non-participating community has been identified for at least one 
year as containing a special flood hazard area, properties located in 
the community will not be eligible for Federal disaster relief 
assistance in the event of a Federally-declared flood disaster.



PART 615--FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS, AND FUNDING OPERATIONS--Table of Contents




                           Subpart A--Funding

Sec.
615.5000  General responsibilities.
615.5010  Funding Corporation.
615.5030  Borrowings from commercial banks.
615.5040  Borrowings from financial institutions other than commercial 
          banks.

                          Subpart B--Collateral

615.5045  Definitions.
615.5050  Collateral requirements.
615.5060  Special collateral requirement.
615.5090  Reduction in carrying value of collateral.

 Subpart C--Issuance of Bonds, Notes, Debentures and Similar Obligations

615.5100  Authority to issue.
615.5101  Requirements for issuance.
615.5102  Issuance of debt obligations through the Funding Corporation.
615.5103-615.5104  [Reserved]
615.5105  Consolidated Systemwide notes.

                        Subpart D--Other Funding

615.5110  Authority to issue (other funding).
615.5120  Purchase eligibility requirement.
615.5130  Procedures.

                    Subpart E--Investment Management

615.5131  Definitions.

[[Page 147]]

615.5132  Investment purposes.
615.5133  Investment management.
615.5134  Liquidity reserve requirement.
615.5135  Management of interest rate risk.
615.5136  Emergencies impeding normal access of Farm Credit banks to 
          capital markets.
615.5140  Eligible investments.
615.5141  Stress tests for mortgage securities.
615.5142  Association investments.
615.5143  Disposal of ineligible investments.
615.5144  Banks for cooperatives and agricultural credit banks.

    Subpart F--Property, Transfers of Capital, and Other Investments

615.5170  Real and personal property.
615.5171  Transfer of capital from banks to associations.
615.5172  Production credit association and agricultural credit 
          association investment in farmers' notes given to cooperatives 
          and dealers.
615.5173  Stock of the Federal Agricultural Mortgage Corporation.
615.5174  Farmer Mac securities.

                Subpart G--Risk Assessment and Management

615.5180  Interest rate risk management by banks--general.
615.5181  Bank interest rate risk management program.
615.5182  Interest rate risk management by associations and other Farm 
          Credit System institutions other than banks.

                       Subpart H--Capital Adequacy

615.5200  General.
615.5201  Definitions.
615.5205  Minimum permanent capital standards.
615.5210  Computation of the permanent capital ratio.
615.5215  Distribution of earnings.
615.5216  [Reserved]

                     Subpart I--Issuance of Equities

615.5220  Capitalization bylaws.
615.5230  Implementation of cooperative principles.
615.5240  Permanent capital requirements.
615.5250  Disclosure requirements.

                    Subpart J--Retirement of Equities

615.5260  Retirement of eligible borrower stock.
615.5270  Retirement of other equities.
615.5280  Retirement in event of default.
615.5290  Retirement of capital stock and participation certificates in 
          event of restructuring.

             Subpart K--Surplus and Collateral Requirements

615.5301  Definitions.
615.5330  Minimum surplus ratios.
615.5335  Bank net collateral ratio.
615.5336  Compliance and reporting.

  Subpart L--Establishment of Minimum Capital Ratios for an Individual 
                               institution

615.5350  General--Applicability.
615.5351  Standards for determination of appropriate individual 
          institution minimum capital ratios.
615.5352  Procedures.
615.5353  Relation to other actions.
615.5354  Enforcement.

                Subpart M-Issuance of a Capital Directive

615.5355  Purpose and scope.
615.5356  Notice of intent to issue a capital directive.
615.5357  Response to notice.
615.5358  Decision.
615.5359  Issuance of a capital directive.
615.5360  Reconsideration based on change in circumstances.
615.5361  Relation to other administrative actions.

Subpart N [Reserved]

       Subpart O--Book-Entry Procedures for Farm Credit Securities

615.5450  Definitions.
615.5451  Book-entry and definitive securities.
615.5452  Law governing rights and obligations of Federal Reserve Banks, 
          Farm Credit banks, and Funding Corporation; rights of any 
          person against Federal Reserve Banks, Farm Credit banks, and 
          Funding Corporation.
615.5453  Law governing other interests.
615.5454  Creation of participant's security entitlement; security 
          interests.
615.5455  Obligations of the Farm Credit banks and the Funding 
          Corporation; no adverse claims.
615.5456  Authority of Federal Reserve Banks.
615.5457  Withdrawal of eligible book-entry securities for conversion to 
          definitive form.
615.5458  Waiver of regulations.
615.5459  Liability of Farm Credit banks, Funding Corporation and 
          Federal Reserve Banks.
615.5460  Additional provisions.
615.5461  Lost, stolen, destroyed, mutilated or defaced Farm Credit 
          securities, including coupons.
615.5462  Restrictive endorsement of bearer securities.

[[Page 148]]

                    Subpart P--Global Debt Securities

615.5500  Definitions.
615.5502  Issuance of global debt securities.

                     Subpart Q--Bankers Acceptances

615.5550  Bankers acceptances.

     Subpart R--Farm Credit System Financial Assistance Corporation 
                               Securities

615.5560  Book-entry Procedure for Farm Credit System Financial 
          Assistance Corporation Securities.

     Subpart S--Federal Agricultural Mortgage Corporation Securities

615.5570  Book-entry procedures for Federal Agricultural Mortgage 
          Corporation securities.

    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, 8.3, 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.



                           Subpart A--Funding



Sec. 615.5000  General responsibilities.

    (a) The System banks, acting through the Federal Farm Credit Banks 
Funding Corporation (Funding Corporation), have the primary 
responsibility for obtaining funds for the lending operations of the 
System institutions.
    (b) The System's funding operations have a significant impact upon 
the investment community, the general public, and the national economy 
in both the volume and the manner by which funds are raised. The Farm 
Credit Administration supervises compliance with the statutory 
collateral requirements for the debt obligations issued. The Chairman of 
the Farm Credit Administration, under policies adopted by the Board, 
consults with the Secretary of the Treasury concerning the System's 
funding activities, pursuant to section 5.10 of the Act.

[54 FR 1158, Jan. 12, 1989]



Sec. 615.5010  Funding Corporation.

    (a) The Funding Corporation shall issue, market, and handle the 
obligations of the banks issued under section 4.2(b) through (d) of the 
Act and interbank or intersystem flow of funds as may from time to time 
be required, and, upon request of the banks, shall handle investment 
portfolios. The Funding Corporation shall maintain accurate and timely 
records. The System banks shall provide for the sale of such obligations 
through the Funding Corporation by negotiation, offer, bid, or syndicate 
sale, and for the delivery of such obligations by book entry, wire 
transfer, or such other means as may be appropriate.
    (b) The interaction of the System with the financial community shall 
be conducted principally through the Funding Corporation. The Funding 
Corporation shall be subject to regulation and examination by the Farm 
Credit Administration.

[54 FR 1158, Jan. 12, 1989]



Sec. 615.5030  Borrowings from commercial banks.

    (a) Each System bank board, by resolution, shall authorize all 
commercial bank borrowings by that System bank.
    (b) The Financial Assistance Corporation may borrow from commercial 
banks with the approval of the Farm Credit Administration.

[54 FR 1159, Jan. 12, 1989]



Sec. 615.5040  Borrowings from financial institutions other than commercial banks.

    The Farm Credit banks may borrow from other financial institutions, 
such as insurance companies, Federal agencies, or Federal reserve banks.

[37 FR 11434, June 7, 1972, as amended at 54 FR 1151, Jan. 12, 1989; 54 
FR 50736, Dec. 11, 1989]



                          Subpart B--Collateral

    Source: 54 FR 1159, Jan. 12, 1989, unless otherwise noted.



Sec. 615.5045  Definitions.

    (a) Cost means the actual amount paid for any asset.

[[Page 149]]

    (b) Market value means the price at which a willing seller would 
sell to a willing buyer, neither under any compulsion to buy or sell.
    (c) Unpaid balance means total principal and accrued interest owed.
    (d) Secured interbank loan means a loan from one Farm Credit System 
bank to another Farm Credit System bank, secured by assets of the 
borrowing Farm Credit System bank.



Sec. 615.5050  Collateral requirements.

    (a) Each bank shall have on hand at the time of issuance of any 
notes, bonds, debentures, or other similar obligations, and at all times 
thereafter maintain, free from any lien or other pledge, assets 
consisting of notes and other obligations representing loans made under 
the authority of the Act, real or personal property acquired in 
connection with loans made under the Act, obligations of the United 
States or any agency thereof direct or fully guaranteed, other bank 
assets (including marketable securities) approved by the Farm Credit 
Administration, cash, or cash equivalents approved by the Farm Credit 
Administration, in an aggregate value equal to the total amount of 
notes, bonds, debentures, or other similar obligations outstanding for 
which the bank is primarily liable.
    (b) The collateral value of eligible investments (as defined in 
Sec. 615.5140) shall be the lower of cost or market value.
    (c)(1) Except as otherwise provided in this paragraph, the 
collateral value of notes and other obligations representing loans made 
under the authority of any Farm Credit Act shall be the unpaid balance 
of such loans adjusted for any allowance for loan losses (except as 
provided for in Sec. 615.5090).
    (2) The collateral value of loans in process of liquidation or 
foreclosure, judgments, and sales contracts shall be the unpaid balance 
of such loans, judgments, and contracts adjusted for any allowance for 
losses.
    (3) The collateral value of loans which have been restructured by 
any action, such as an extension, deferment, or partial release, shall 
be the new unpaid balance of the loans adjusted for any allowance for 
losses.
    (4) The collateral value of property acquired in the liquidation of 
loans shall be the book value of such property adjusted for any 
allowance for losses.
    (5) Collateral shall not include the amount of any loan that exceeds 
the maximum amount authorized under the Act or part 614 of these 
regulations.
    (6) Collateral may include the collateral value of secured interbank 
loans, computed as provided in Sec. 615.5050(c)(1), provided that the 
assets securing the loan could serve as collateral supporting the 
issuance of obligations under Sec. 615.5050(a). In computing its 
eligible collateral, the borrowing bank shall not count the assets 
securing such loan.
    (d) Each bank shall have procedures which will ensure that the bank 
is in compliance with the statutory requirements for maintenance of 
collateral. Such procedures shall include provisions for:
    (1) Adequate safekeeping facilities;
    (2) Methods to determine that debt instruments meet all requirements 
of law and regulations;
    (3) A report signed by an authorized bank officer at each regular 
meeting of the board of directors certifying the eligibility and the 
adequacy of collateral. Items to be reported will include but not be 
limited to the total amount of eligible collateral, amount of ineligible 
loans, amount of deductions, and the amount of excess collateral; and
    (4) Written procedures and practices to ensure that there will be a 
high degree of accuracy in protecting and accounting for the collateral.



Sec. 615.5060  Special collateral requirement.

    (a) An attorney lien certification need not be obtained at the time 
a note is accepted as collateral if the counsel for the bank or 
association has determined, in writing, that the bank or association 
procedures provide sufficient safeguards to ensure that a real estate 
mortgage loan, within the meaning of section 1.7(a) of the Act, made by 
the bank or association will be secured by a first lien or its 
equivalent on the borrower's interest in the primary real estate 
security. However, the note shall be withdrawn from collateral upon the 
expiration of 1 year from the date of

[[Page 150]]

the loan closing, unless, before the end of such period:
    (1) An attorney has certified that the bank or association has a 
first lien or its equivalent from a security standpoint in the primary 
real estate security for the loan; or
    (2) The bank or association has obtained a title insurance policy 
insuring that it has a first lien or its equivalent from a security 
standpoint in the primary real estate security for the loan, and all of 
the following requirements are satisfied:
    (i) The final policy was issued by a title insurance company that 
has been licensed to issue such policies by the appropriate state 
insurance regulatory body or bodies, has not been barred or suspended, 
and has been approved by the lending institution;
    (ii) The standard form on which the final policy was issued has been 
approved by the counsel for the lending institution;
    (iii) The final policy was issued for an amount at least equal to 
the balance outstanding on the real estate mortgage loan or, if separate 
policies are issued to insure separate tracts, the minimum amount 
insured by each policy shall bear the same ratio to the outstanding 
balance of the loan that the appraised value of the tract insured by 
that policy bears to the appraised value of all the real estate security 
for the loan; and
    (iv) Personnel meeting written standards of training and experience 
in real estate title matters prescribed by the counsel for the lending 
institution certified in writing that:
    (A) They reviewed the final policy and that the policy complies with 
standards prescribed by such counsel; and
    (B) The final policy insures that a first lien or its equivalent 
from a security standpoint has been obtained on the primary real estate 
security for the loan.
    (b) A loan participation agreement to which a System bank or 
association is a participant and involving a loan originated by another 
lender shall constitute an obligation meeting the collateral 
requirements of Sec. 615.5050(a).

[54 FR 1159, Jan. 12, 1989, as amended at 59 FR 3787, Jan. 27, 1994]



Sec. 615.5090  Reduction in carrying value of collateral.

    When the bank or Farm Credit Administration determines that a loan 
did not conform to the requirements of the law or regulations at the 
time the loan was closed, such loan shall be withdrawn from collateral 
until the cause of ineligibility is remedied. When a loan has been 
classified as a loss loan, the bank shall adjust the collateral value of 
the loan accordingly.



 Subpart C--Issuance of Bonds, Notes, Debentures and Similar Obligations



Sec. 615.5100  Authority to issue.

    The Act authorizes each bank of the System, subject to the 
collateral requirements of section 4.3(c) of the Act, to issue:
    (a) Notes, bonds, debentures, or other similar obligations;
    (b) Consolidated obligations, together with any or all banks 
organized and operating under the same title of the Act;
    (c) Systemwide obligations, together with other banks of the System; 
and
    (d) Investment bonds to the authorized purchasers subject to the 
limitations contained in the regulations set forth in subpart D.

[54 FR 1160, Jan. 12, 1989]



Sec. 615.5101  Requirements for issuance.

    Except as provided in section 4.2(e) of the Act, each debt 
obligation shall meet the following requirements:
    (a) Each debt obligation shall be issued through the Federal Farm 
Credit Banks Funding Corporation acting for System banks.
    (b) Each debt obligation shall be authorized by resolution of the 
board(s) of directors of the issuer(s). Each participating bank shall 
provide, in its authorizing resolution, for its primary liability on the 
portion of any consolidated or Systemwide obligation issued on its 
behalf and be jointly and severally liable for the payment of any 
additional sums as called upon by the Farm Credit Administration, in 
accordance with section 4.4 of the Act, in the event any bank primarily 
liable therefor is unable to pay.

[[Page 151]]

    (c) Each issuance of debt obligations shall meet the collateral 
requirements set forth in subpart B.
    (d) Each issuance of debt obligations shall be approved by the Farm 
Credit Administration.
    (e)(1) Consultation with the Secretary of the Treasury required by 
31 U.S.C. 9108 shall be conducted by System representatives and shall 
have occurred prior to each debt issuance.
    (2) Under policies adopted by the Board of the Farm Credit 
Administration, the Chairman will consult with the Secretary of the 
Treasury on a regular basis concerning the exercise by the System of the 
powers conferred under section 4.2 of the Act.

[54 FR 1160, Jan. 12, 1989]



Sec. 615.5102  Issuance of debt obligations through the Funding Corporation.

    (a) The amount, maturities, rates or interest, terms and conditions 
of participation by the System banks in each issue of joint, 
consolidated or Systemwide obligations shall be determined by the 
Funding Corporation established pursuant to section 4.9 of the Act, 
acting for the banks of the System, subject to the approval of the Farm 
Credit Administration in accordance with Sec. 615.5102.
    (b) The Funding Corporation shall plan and develop funding 
guidelines, priorities, and objectives based upon the asset/liability 
management policies of the System institutions and the requirements of 
the market. The guidelines, priorities, and objectives shall be designed 
to ensure that the debt marketing responsibilities of the Funding 
Corporation will continue to provide flexibility for the banks and are 
fiscally sound.
    (c) For all debt issuances conducted by the Funding Corporation, the 
specific prior approval of the Farm Credit Administration must be 
obtained prior to the distribution and sale of the obligation pursuant 
to section 4.9 of the Act.

[54 FR 1160, Jan. 12, 1989]



Secs. 615.5103-615.5104  [Reserved]



Sec. 615.5105  Consolidated Systemwide notes.

    Consolidated Systemwide notes authorized under Sec. 615.5100(b) 
shall be subject to the following provisions unless otherwise approved 
by the Farm Credit Administration:
    (a) Maturities shall be not less than five days nor more than 365 
days.
    (b) Prices shall be on a discount yield basis or as determined by 
the Funding Corporation.

[42 FR 32227, June 24, 1977, as amended at 47 FR 28609, July 1, 1982; 54 
FR 1160, Jan. 12, 1989; 60 FR 20011, Apr. 24, 1995]



                        Subpart D--Other Funding



Sec. 615.5110  Authority to issue (other funding).

    Any Farm Credit bank may issue Farm Credit Investment Bonds directly 
to those eligible as set forth in Sec. 615.5120(a). The bonds are 
subject to the limitations contained in the Federal Reserve Board's 
Regulation Q.

[43 FR 47489, Oct. 16, 1978; 43 FR 55239, Nov. 27, 1978]



Sec. 615.5120  Purchase eligibility requirement.

    (a) Limitations. Eligibility to purchase Farm Credit Investment 
Bonds shall be limited to members and employees of the Farm Credit banks 
and associations, except any bank officers, directors, and employees who 
are involved in setting the term or rate, to retired employees who are 
beneficiaries of a pension or retirement program of the Farm Credit 
banks or associations, and to retired employees of the Farm Credit 
Administration. A member of a Farm Credit association or a bank for 
cooperatives need not be an active borrower to be eligible. A member of 
any Farm Credit institution may purchase investment bonds from any of 
the institutions in the district which offer the purchase program. 
Patrons, members, employees, or stockholder of other financing 
institutions discounting loans with a Farm Credit Bank or agricultural 
credit bank or of

[[Page 152]]

any legal entity which is a borrower from any Farm Credit institution as 
such are ineligible as they are not members of a Farm Credit 
institution. Stock or participation certificates shall not be sold 
merely to qualify a party for the purchase of Farm Credit Investment 
Bonds. For purposes of this section ``member'' means a stockholder or 
participation certificate holder who acquired stock or participation 
certificates to obtain a loan, to purchase stock for investment or to 
qualify for other services of the association or bank. A person who 
assumes a loan is not a member unless he becomes a stockholder or 
participation certificate holder in connection with that loan. Employee 
means a regular full-time employee of a Farm Credit bank or association. 
Retired employee means a retiree who is a direct beneficiary of a 
pension or retirement program of a Farm Credit bank or association or 
the Farm Credit Administration under civil service retirement.
    (b) Form and ownership. Farm Credit Investment Bonds are registered 
bonds issued in definitive or book-entry form depending on investor 
preference. The registration used must express the actual ownership of 
an interest in the bond and will be considered by the issuing 
institution as conclusive of such ownership and interest. No designation 
of an attorney, agent, or other representative to request or receive 
payment on behalf of the owner or coowner, nor any restriction on the 
right of the owner or coowner to receive payment of the bond or 
interest, except as provided in this section may be made in the 
registration or otherwise. Registrations requested in applications for 
the purchase shall be clear, accurate, complete, and conform with one of 
the registration provisions set forth in this section, and include the 
appropriate taxpayer identifying number. Registrations requested will be 
inscribed on the face of the bond if in definitive form or on the 
confirmation of investment if in book-entry form. The following 
provisions shall apply for registration of Farm Credit Investment Bonds:
    (1) In all cases the member's name (whether a natural person, 
fiduciary, or legal entity) or employee's name must appear as owner of 
the bond.
    (2) A bond may be registered in the name of a fiduciary only if the 
fiduciary is in fact the member.
    (3) A member or employee may not use a form of registration (such as 
a gift to a minor, irrevocable trust, etc.) which would divest himself 
of ownership. However, a minor may be named as coowner or beneficiary.
    (4) If a member is a natural person, a second natural person, member 
or nonmember, may be named as coowner or beneficiary. Coownership may 
not involve a fiduciary or private organization.
    (5) In the coownership form the connective ``or'' shall serve the 
same purpose as ``joint tenants with right of survivorship.''

[43 FR 47489, Oct. 16, 1978; 43 FR 55239, Nov. 27, 1978, as amended at 
56 FR 2675, Jan. 24, 1991; 61 FR 67187, Dec. 20, 1996]



Sec. 615.5130  Procedures.

    Procedures relating to issuance, pricing, payment of interest, 
redemption, replacement of lost or stolen bonds and other matters shall 
be promulgated under the authority of this regulation as operating 
instructions to banks and associations.

[37 FR 11434, June 7, 1972]



                    Subpart E--Investment Management



Sec. 615.5131  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Asset-backed securities (ABS) mean investment securities that 
provide for ownership of a fractional undivided interest or collateral 
interests in specific assets of a trust that are sold and traded in the 
capital markets. For the purposes of this subpart, ABS exclude mortgage 
securities that are defined in Sec. 615.5131(i).
    (b) Bank means a Farm Credit Bank, agricultural credit bank, or bank 
for cooperatives.
    (c) Eurodollar time deposit means a non-negotiable deposit 
denominated in United States dollars and issued by an overseas branch of 
a United States bank or by a foreign bank outside the United States.

[[Page 153]]

    (d) Final maturity means the last date on which the remaining 
principal amount of a security is due and payable (matures) to the 
registered owner. It does not mean the call date, the expected average 
life, the duration, or the weighted average maturity.
    (e) General obligations of a State or political subdivision means:
    (1) The full faith and credit obligations of a State, the District 
of Columbia, the Commonwealth of Puerto Rico, a territory or possession 
of the United States, or a political subdivision thereof that possesses 
general powers of taxation, including property taxation; or
    (2) An obligation that is unconditionally guaranteed by an obligor 
possessing general powers of taxation, including property taxation.
    (f) Liquid investments are assets that can be promptly converted 
into cash without significant loss to the investor. In the money market, 
a security is liquid if the spread between its bid and ask price is 
narrow and a reasonable amount can be sold at those prices.
    (g) Loans are defined by Sec. 621.2(f) of this chapter and they are 
calculated quarterly (as of the last day of March, June, September, and 
December) by using the average daily balance of loans during the 
quarter.
    (h) Market risk means the risk to the financial condition of your 
institution because the value of your holdings may decline if interest 
rates or market prices change. Exposure to market risk is measured by 
assessing the effect of changing rates and prices on either the earnings 
or economic value of an individual instrument, a portfolio, or the 
entire institution.
    (i) Mortgage securities means securities that are either:
    (1) Pass-through securities or participation certificates that 
represent ownership of a fractional undivided interest in a specified 
pool of residential (excluding home equity loans), multifamily or 
commercial mortgages, or
    (2) A multiclass security (including collateralized mortgage 
obligations and real estate mortgage investment conduits) that is backed 
by a pool of residential, multifamily or commercial real estate 
mortgages, pass-through mortgage securities, or other multiclass 
mortgage securities.
    (j) Nationally Recognized Statistical Rating Organization (NRSRO) 
means a rating organization that the Securities and Exchange Commission 
recognizes as an NRSRO.
    (k) Revenue bond means an obligation of a municipal government that 
finances a specific project or enterprise but it is not a full faith and 
credit obligation. The obligor pays a portion of the revenue generated 
by the project or enterprise to the bondholders.
    (l) Weighted average life (WAL) means the average time until the 
investor receives the principal on a security, weighted by the size of 
each principal payment and calculated under specified prepayment 
assumptions.
    (m) You means a Farm Credit bank, association, or service 
corporation.

[64 FR 28895, May 28, 1999]



Sec. 615.5132  Investment purposes.

    Farm Credit Banks, banks for cooperatives and agricultural credit 
banks are authorized to hold eligible investments, listed under 
Sec. 615.5140, in an amount not to exceed 30 percent of the total 
outstanding loans of such banks, for the purposes of complying with the 
liquidity reserve requirement of Sec. 615.5134, managing surplus short-
term funds, and for managing interest rate risk under Sec. 615.5135.

[58 FR 63056, Nov. 30, 1993]



Sec. 615.5133  Investment management.

    (a) Responsibilities of Board of Directors. Your board must adopt 
written policies for managing your investment activities. Your board of 
directors must also ensure that management complies with these policies 
and that appropriate internal controls are in place to prevent loss. 
Annually, the board of directors must review these investment policies 
and make any changes that are needed.
    (b) Investment policies. Your board's written investment policies 
must address the purposes and objectives of investments, risk tolerance, 
delegations of authority, and reporting requirements. Investment 
policies must be appropriate for the size, types, and risk 
characteristics of your investments.
    (c) Risk tolerance. Your investment policies must establish risk 
limits and

[[Page 154]]

diversification requirements for the various classes of eligible 
investments and for the entire investment portfolio. These policies must 
ensure that you maintain appropriate diversification of your investment 
portfolio. Risk limits must be based on your institutional objectives, 
capital position, and risk tolerance. Your policies must identify the 
types and quantity of investments that you will hold to achieve your 
objectives and control credit, market, liquidity, and operational risks. 
The policy of any association or service corporation that holds 
significant investments and each bank must establish risk limits for the 
following four types of risk.
    (1) Credit risk. Investment policies must establish:
    (i) Credit quality standards, limits on counterparty risk, and risk 
diversification standards that limit concentrations based on a single or 
related counterparty(ies), a geographical area, industries or 
obligations with similar characteristics.
    (ii) Criteria for selecting brokers, dealers, and investment bankers 
(collectively, securities firms). You must buy and sell eligible 
investments with more than one securities firm. As part of your annual 
review of your investment policies, your board of directors must review 
the criteria for selecting securities firms and determine whether to 
continue your existing relationships with them.
    (iii) Collateral margin requirements on repurchase agreements.
    (2) Market risk. Investment policies must set market risk limits for 
specific types of investments, the investment portfolio, or your 
institution. Your board of directors must establish market risk limits 
in accordance with these regulations and our other policies.
    (3) Liquidity risk. Investment policies must describe the liquidity 
characteristics of eligible investments that you will hold to meet your 
liquidity needs and institutional objectives.
    (4) Operational risk. Investment policies must address operational 
risks, including delegations of authority and internal controls in 
accordance with paragraphs (d) and (e) of this section.
    (d) Delegation of authority. All delegations of authority to 
specified personnel or committees must state the extent of management's 
authority and responsibilities for investments.
    (e) Internal controls. You must:
    (1) Establish appropriate internal controls to detect and prevent 
loss, fraud, embezzlement, conflicts of interest, and unauthorized 
investments.
    (2) Establish and maintain a separation of duties and supervision 
between personnel who execute investment transactions and personnel who 
approve, revaluate, and oversee investments.
    (3) Maintain management information systems that are appropriate for 
the level and complexity of your investment activities.
    (f) Securities valuation. (1) Before you purchase a security, you 
must evaluate its credit quality and its price sensitivity to changes in 
market interest rates. You must also verify the value of a security that 
you plan to purchase, other than a new issue, with a source that is 
independent of the broker, dealer, counterparty or other intermediary to 
the transaction.
    (2) You must determine the fair market value of each security in 
your portfolio and the fair market value of your whole investment 
portfolio at least monthly. You must also evaluate the credit quality 
and price sensitivity to change in market interest rates of all 
investments that you hold on an ongoing basis.
    (3) Before you sell a security, you must verify its value with a 
source that is independent of the broker, dealer, counterparty, or other 
intermediary to the transaction.
    (g) Reports to the board. Each quarter, management must report to 
the board of directors or a board committee on the performance and risk 
of each class of investments and the entire investment portfolio. These 
reports must identify all gains and losses that you incur during the 
quarter on individual securities that you sold before maturity. Reports 
must also identify potential risk exposure to changes in market interest 
rates and other factors that

[[Page 155]]

may affect the value of your bank's investment holdings. Management's 
report must discuss how investments affect your bank's overall financial 
condition and must evaluate whether the performance of the investment 
portfolio effectively achieves the board's objectives. Any deviations 
from the board's policies must be specifically identified in the report.

[64 FR 28895, May 28, 1999]



Sec. 615.5134  Liquidity reserve requirement.

    (a) Each Farm Credit Bank, bank for cooperatives, and agricultural 
credit bank shall use cash and the eligible investments under 
Sec. 615.5140 of this subpart to maintain liquidity sufficient to fund:
    (1) Fifty (50) percent of the bank's bonds, notes, Farm Credit 
Investment Bonds, and interest due within the next 90 days divided by 3;
    (2) Fifty (50) percent of the bank's discount notes due within the 
next 30 days; and
    (3) Fifty (50) percent of the bank's commercial bank borrowing due 
within the next 30 days.
    (b) All investments that the bank holds for the purpose of meeting 
the liquidity reserve requirement of this section must be free of lien.
    (c) The liquidity reserve requirement shall be calculated as of the 
last day of each month utilizing month end data.

[58 FR 63056, Nov. 30, 1993, as amended at 64 FR 28896, May 28, 1999]



Sec. 615.5135  Management of interest rate risk.

    The board of directors of each Farm Credit Bank, bank for 
cooperatives, and agricultural credit bank shall develop and implement 
an interest rate risk management program as set forth in subpart G of 
this part. The board of directors shall adopt an interest rate risk 
management section of an asset/liability management policy which 
establishes interest rate risk exposure limits as well as the criteria 
to determine compliance with these limits. At a minimum, the interest 
rate risk management section shall establish policies and procedures for 
the bank to:
    (a) Identify and analyze the causes of risks within its existing 
balance sheet structure;
    (b) Measure the potential impact of these risks on projected 
earnings and market values by conducting interest rate shock tests and 
simulations of multiple economic scenarios at least on a quarterly 
basis;
    (c) Explore and implement actions needed to obtain its desired risk 
management objectives;
    (d) Document the objectives that the bank is attempting to achieve 
by purchasing eligible investments that are authorized by Sec. 615.5140 
of this subpart;
    (e) Evaluate and document, at least quarterly, whether these 
investments have actually met the objectives stated under paragraph (d) 
of this section.

[58 FR 63056, Nov. 30, 1993, as amended at 63 FR 39225, July 22, 1998]



Sec. 615.5136  Emergencies impeding normal access of Farm Credit banks to capital markets.

    An emergency shall be deemed to exist whenever a financial, 
economic, agricultural or national defense crisis could impede the 
normal access of Farm Credit banks to the capital markets. Whenever the 
Farm Credit Administration determines after consultations with the 
Federal Farm Credit Banks Funding Corporation that such an emergency 
exists, the Farm Credit Administration Board shall, in its sole 
discretion, adopt a resolution that:
    (a) Increases the amount of eligible investments that Farm Credit 
Banks, banks for cooperatives and agricultural credit banks are 
authorized to hold pursuant to Sec. 615.5132 of this subpart; and/or
    (b) Modifies or waives the liquidity reserve requirement in 
Sec. 615.5134 of this subpart.

[58 FR 63057, Nov. 30, 1993]



Sec. 615.5140  Eligible investments.

    (a) You may hold only the following types of investments listed in 
the Investment Eligibility Criteria Table. These investments must be 
denominated in United States dollars.

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

[[Page 158]]

    (c) Marketable securities. All eligible investments, except money 
market instruments, must be marketable. An eligible investment is 
marketable if you can sell it quickly at a price that closely reflects 
its fair value in an active and universally recognized secondary market.
    (d) Obligor limits. (1) You may not invest more than 20 percent of 
your total capital in eligible investments issued by any single 
institution, issuer, or obligor. This obligor limit does not apply to 
obligations, including mortgage securities, that are issued or 
guaranteed as to interest and principal by the United States, its 
agencies, instrumentalities, or corporations.
    (2) Obligor limits for your holdings in an investment company. You 
must count securities that you hold through an investment company 
towards the obligor limit of this section unless the investment 
company's holdings of the security of any one issuer do not exceed five 
(5) percent of the investment company's total portfolio.
    (e) Other investments approved by the FCA. You may purchase and hold 
other investments that we approve. Your request for our approval must 
explain the risk characteristics of the investment and your purpose and 
objectives for making the investment.

[64 FR 28896, May 28, 1999]



Sec. 615.5141  Stress tests for mortgage securities.

    Mortgage securities are not eligible investments unless they pass a 
stress test. You must perform stress tests to determine how interest 
rate changes will affect the cashflow and price of each mortgage 
security that you purchase and hold, except for adjustable rate 
securities that reprice at intervals of 12 months or less and are tied 
to an index. You must also use stress tests to gauge how interest rate 
fluctuations on mortgage securities affect your institution's capital 
and earnings. You may conduct the stress tests as described in either 
paragraph (a) or (b) of this section.
    (a) Mortgage securities must comply with the following three tests 
at the time of purchase and each following quarter:
    (1) Average Life Test. The expected WAL of the instrument does not 
exceed 5 years.
    (2) Average Life Sensitivity Test. The expected WAL does not extend 
for more than 2 years, assuming an immediate and sustained parallel 
shift in the yield curve of plus 300 basis points, nor shorten for more 
than 3 years, assuming an immediate and sustained parallel shift in the 
yield curve of minus 300 basis points.
    (3) Price Sensitivity Test. The estimated change in price is not 
more than thirteen (13) percent due to an immediate and sustained 
parallel shift in the yield curve of plus or minus 300 basis points.
    (4) Exemption. A floating rate mortgage security is subject only to 
the price sensitivity test in paragraph (a)(3) of this section if at the 
time of purchase and each quarter thereafter it bears a rate of interest 
that is below its contractual cap.
    (b) You may use an alternative stress test to evaluate the price 
sensitivity of your mortgage securities. An alternative stress test must 
be able to measure the price sensitivity of mortgage instruments over 
different interest rate/yield curve scenarios. The methodology that you 
use to analyze mortgage securities must be appropriate for the 
complexity of the instrument's structure and cashflows. Prior to 
purchase and each quarter thereafter, you must use the stress test to 
determine that the risk in the mortgage security is within the risk 
limits of your board's investment policies. The stress test must enable 
you to determine at the time of purchase and each subsequent quarter 
that the mortgage security does not expose your capital or earnings to 
excessive risks.
    (c) You must rely on verifiable information to support all your 
assumptions, including prepayment and interest rate volatility 
assumptions, when you apply the stress tests in either paragraph (a) or 
(b) of this section. You must document the basis for all assumptions 
that you use to evaluate the security and its underlying mortgages. You 
must also document all subsequent changes in your assumptions. If at any 
time after purchase, a mortgage

[[Page 159]]

security no longer complies with requirements in this section, you must 
divest it in accordance with Sec. 615.5143.

[64 FR 28899, May 28, 1999]



Sec. 615.5142  Association investments.

    An association may hold eligible investments listed in 
Sec. 615.5140, with the approval of its funding bank, for the purposes 
of reducing interest rate risk and managing surplus short-term funds. 
Each bank must review annually the investment portfolio of every 
association that it funds.

[64 FR 28899, May 28, 1999]



Sec. 615.5143  Disposal of ineligible investments.

    You must dispose of an ineligible investment within 6 months unless 
we approve, in writing, a plan that authorizes you to divest the 
instrument over a longer period of time. An acceptable divestiture plan 
must require you to dispose of the ineligible investment as quickly as 
possible without substantial financial loss. Until you actually dispose 
of the ineligible investment, the managers of your investment portfolio 
must report at least quarterly to your board of directors about the 
status and performance of the ineligible instrument, the reasons why it 
remains ineligible, and the managers' progress in disposing of the 
investment.

[64 FR 28899, May 28, 1999]



Sec. 615.5144  Banks for cooperatives and agricultural credit banks.

    As may be authorized by the banks for cooperatives' or agricultural 
credit banks boards of directors ownership investment may be made in 
foreign business entities solely for the purpose of obtaining credit 
information and other services needed to facilitate transactions which 
may be financed under section 3.7(b) of the Farm Credit Act Amendments 
of 1980. Such an investment shall not exceed the level required to 
access credit and other services of the entity and shall not be made for 
earnings purposes. The business entity shall be deemed to be principally 
engaged in providing credit information to and performing such servicing 
functions for its members where such activities constitute a materially 
important line of business to its members. Also, investments must be 
made by a bank for cooperatives or agricultural credit bank for its own 
account and not on behalf of its members. The bank for cooperatives or 
agricultural credit bank shall use only those services provided by the 
business entity as necessary to facilitate transactions authorized by 
section 3.7(b) of the Farm Credit Act Amendments of 1980.

[46 FR 55088, Nov. 6, 1981, as amended at 54 FR 1151, Jan. 12, 1989; 54 
FR 50736, Dec. 11, 1989; 61 FR 67187, Dec. 20, 1996. Redesignated at 64 
FR 28899, May 28, 1999]



    Subpart F--Property, Transfers of Capital, and Other Investments



Sec. 615.5170  Real and personal property.

    Real estate and personal property may be acquired, held, or disposed 
of by any Farm Credit institution for the necessary and normal 
operations of its business. The purchase, lease, or construction of 
office quarters shall be limited to facilities reasonably necessary to 
meet the foreseeable requirements of the institution. Property shall not 
be acquired if it involves, or appears to involve, a bank or association 
in the real estate or other unrelated business.

[50 FR 48554, Nov. 26, 1985. Redesignated at 58 FR 63056, Nov. 30, 1993, 
and amended at 60 FR 20011, Apr. 24, 1995]



Sec. 615.5171  Transfer of capital from banks to associations.

    (a) Definitions for this section--(1) Transfer of capital means any 
payment or forbearance by a Farm Credit Bank or agricultural credit bank 
(collectively, bank) to an affiliated association, including but not 
limited to:
    (i) The purchase of nonvoting stock or participation certificates;
    (ii) The payment of cash;
    (iii) Debt forgiveness or reduction;
    (iv) Interest rate concessions or interest-free loans;
    (v) The transfer of loans at other than fair market value;
    (vi) The reduction or elimination of standard loan servicing or 
other fees; and

[[Page 160]]

    (vii) The assumption of operating or other expenses, such as legal 
fees or insurance premiums.
    (2) Preferential transfer of capital means a transfer of capital 
that is not available to all similarly situated affiliated associations.
    (3) Nonroutine transfer of capital means a transfer of capital that 
is not available in the ordinary course of business.
    (b) Considerations for preferential or nonroutine transfers of 
capital. Before authorizing a preferential or nonroutine transfer of 
capital, a bank board of directors must take into account and document 
whether:
    (1) The transfer of capital is in the best interests of all of the 
shareholders;
    (2) The bank will be able to achieve its capital adequacy and 
business plan goals after making the transfer of capital; and
    (3) The transfer of capital is the ``least cost'' alternative 
available and will enable the association to maintain sound, adequate, 
and constructive service to borrowers.
    (c) Notification requirements. At least 30 days before making a 
preferential or nonroutine transfer of capital to an affiliated 
association, banks must provide shareholders and the Chief Examiner of 
the Farm Credit Administration with a description of the transfer and 
the documentation required by paragraph (b) of this section.

[64 FR 49961, Sept. 15, 1999]



Sec. 615.5172  Production credit association and agricultural credit association investment in farmers' notes given to cooperatives and dealers.

    (a) In accordance with policies prescribed by the board of directors 
of the Farm Credit Bank or agricultural credit bank and each production 
credit association and agricultural credit association (hereinafter 
association(s)), such association(s) may invest in notes, conditional 
sales contracts, and other similar obligations given to cooperatives and 
private dealers by farmers and ranchers eligible to borrow from such 
associations.
    (b) Such notes and other obligations evidencing purchases of farm 
machinery, supplies, equipment, home appliances, and other items of a 
capital nature handled by cooperatives and private dealers will be 
eligible for purchase as investments.
    (c) The total amount which an association may invest in such 
obligations at any one time shall not exceed 15 percent of the balance 
of its loans outstanding at the close of the association's preceding 
fiscal year. In addition, the total amount which an association may 
invest in such obligations that are originated by any one cooperative or 
private dealer, at any one time, shall not exceed 50 percent of 
association capital and surplus.
    (d) All notes in which an association invests shall be endorsed with 
full recourse against the cooperative or dealer. The association shall 
contact each notemaker who meets the association's credit standards to 
encourage him to become a borrower.

[54 FR 1158, Jan. 12, 1989, as amended at 55 FR 24888, June 19, 1990; 55 
FR 38313, Sept. 18, 1990. Redesignated at 58 FR 63056, Nov. 30, 1993]



Sec. 615.5173  Stock of the Federal Agricultural Mortgage Corporation.

    Banks and associations of the Farm Credit System are authorized to 
purchase and hold Class B common stock of the Federal Agricultural 
Mortgage Corporation pursuant to section 8.4 of the Farm Credit Act.

[58 FR 63058, Nov. 30, 1993]



Sec. 615.5174  Farmer Mac securities.

    (a) General authority. You may purchase and hold mortgage securities 
that are issued or guaranteed as to both principal and interest by the 
Federal Agricultural Mortgage Corporation (Farmer Mac securities). You 
may purchase and hold Farmer Mac securities for the purposes of managing 
credit and interest rate risks, and furthering your mission to finance 
agriculture. The total value of your Farmer Mac securities cannot exceed 
your total outstanding loans, as defined by Sec. 615.5131(g).
    (b) Board and management responsibilities. Your board of directors 
must adopt written policies that will govern your investments in Farmer 
Mac securities. All delegations of authority to specified personnel or 
committees

[[Page 161]]

must state the extent of management's authority and responsibilities for 
managing your investments in Farmer Mac securities. The board of 
directors must also ensure that appropriate internal controls are in 
place to prevent loss, in accordance with Sec. 615.5133(e). Management 
must submit quarterly reports to the board of directors on the 
performance of all investments in Farmer Mac securities. Annually, your 
board of directors must review these policies and the performance of 
your Farmer Mac securities and make any changes that are needed.
    (c) Policies. Your board of directors must establish investment 
policies for Farmer Mac securities that include your:
    (1) Objectives for holding Farmer Mac securities.
    (2) Credit risk parameters including:
    (i) The quantities and types of Farmer Mac mortgage securities that 
are collateralized by qualified agricultural mortgages, rural home 
loans, and loans guaranteed by the Farm Service Agency.
    (ii) Product and geographic diversification for the loans that 
underlie the security; and
    (iii) Minimum pool size, minimum number of loans in each pool, and 
maximum allowable premiums or discounts on these securities.
    (3) Liquidity risk tolerance and the liquidity characteristics of 
Farmer Mac securities that are suitable to meet your institutional 
objectives. A bank may not include Farmer Mac mortgage securities in the 
liquidity reserve maintained to comply with Sec. 615.5134.
    (4) Market risk limits based on the effects that the Farmer Mac 
securities have on your capital and earnings.
    (d) Stress Test. You must perform stress tests on mortgage 
securities that are issued or guaranteed by Farmer Mac in accordance 
with the requirements of Sec. 615.5141(b) and (c). If a Farmer Mac 
security fails a stress test, you must divest it as required by 
Sec. 615.5143.

[64 FR 28899, May 28, 1999]



                Subpart G--Risk Assessment and Management

    Source: 63 FR 39225, July 22, 1998, unless otherwise noted.



Sec. 615.5180  Interest rate risk management by banks--general.

    The board of directors of each Farm Credit Bank, bank for 
cooperatives, and agricultural credit bank shall develop and implement 
an interest rate risk management program tailored to the needs of the 
institution and consistent with the requirements set forth in 
Sec. 615.5135 of this part. The program shall establish a risk 
management process that effectively identifies, measures, monitors, and 
controls interest rate risk.



Sec. 615.5181  Bank interest rate risk management program.

    (a) The board of directors of each Farm Credit Bank, bank for 
cooperatives, and agricultural credit bank is responsible for providing 
effective oversight to the interest rate risk management program and 
must be knowledgeable of the nature and level of interest rate risk 
taken by the institution.
    (b) Senior management is responsible for ensuring that interest rate 
risk is properly managed on both a long-range and a day-to-day basis.



Sec. 615.5182  Interest rate risk management by associations and other Farm Credit System institutions other than banks.

    Any association or other Farm Credit System institution other than 
banks, excluding the Federal Agricultural Mortgage Corporation, with 
interest rate risk that could lead to significant declines in net income 
or in the market value of capital shall comply with the requirements of 
Secs. 615.5180 and 615.5181. The interest rate risk management program 
required under Sec. 615.5181 shall be commensurate with the level of 
interest rate risk of the institution.

[[Page 162]]



                       Subpart H--Capital Adequacy

    Source: 53 FR 39247, Oct. 6, 1988, unless otherwise noted.



Sec. 615.5200  General.

    (a) The Board of Directors of each Farm Credit System institution 
shall determine the amount of total capital, core surplus, total 
surplus, and unallocated surplus needed to assure the institution's 
continued financial viability and to provide for growth necessary to 
meet the needs of its borrowers. The minimum capital standards specified 
in this part are not meant to be adopted as the optimal capital level in 
the institution's capital adequacy plan. Rather, the standards are 
intended to serve as minimum levels of capital that each institution 
must maintain to protect against the credit and other general risks 
inherent in its operations.
    (b) Each Board of Directors shall establish, adopt, and maintain a 
formal written capital adequacy plan as a part of the financial plan 
required by Sec. 618.8440 of this chapter. The plan shall include the 
capital targets that are necessary to achieve the institution's capital 
adequacy goals as well as the minimum permanent capital and surplus 
standards. The plan shall address any projected dividends, patronage 
distribution, equity requirements, or other action that may decrease the 
institution's capital or the components thereof for which minimum 
amounts are required by this part. The plan shall set forth the 
circumstances in which retirements or revolvements of stock or equities 
may occur. If the plan provides for retirement or revolvement of 
equities included in core surplus, in connection with a loan default or 
the death of a former borrower, the plan must require the institution to 
make a prior determination that such retirement or revolvement is in the 
best interest of the institution, and also require the institution to 
charge off an amount of the indebtedness on the loan equal to the amount 
of the equities that are retired or canceled. In addition to factors 
that must be considered in meeting the minimum standards, the board of 
directors shall also consider at least the following factors in 
developing the capital adequacy plan:
    (1) Capability of management;
    (2) Quality of operating policies, procedures, and internal 
controls;
    (3) Quality and quantity of earnings;
    (4) Asset quality and the adequacy of the allowance for losses to 
absorb potential loss within the loan and lease portfolios;
    (5) Sufficiency of liquid funds;
    (6) Needs of an institution's customer base; and
    (7) Any other risk-oriented activities, such as funding and interest 
rate risks, potential obligations under joint and several liability, 
contingent and off-balance-sheet liabilities or other conditions 
warranting additional capital.

[53 FR 39247, Oct. 6, 1988, as amended at 62 FR 4446, Jan. 30, 1997]



Sec. 615.5201  Definitions.

    For the purpose of this subpart, the following definitions shall 
apply:
    (a) Allocated investment means earnings allocated but not paid in 
cash by a System bank to an association or other recipient.
    (b) Commitment means any arrangement that legally obligates an 
institution to purchase loans or securities, to participate in loans or 
leases, to extend credit in the form of loans or leases, to pay the 
obligation of another, to provide overdraft, revolving credit or 
underwriting facilities, or to participate in similar transactions.
    (c) Credit conversion factor means that number by which an off-
balance-sheet item shall be multiplied to obtain a credit equivalent 
before placing the item in a risk-weight category.
    (d) Deferred-tax assets that are dependent on future income or 
future events means:
    (1) Deferred-tax assets arising from deductible temporary 
differences dependent upon future income that exceed the amount of taxes 
previously paid that could be recovered through loss carrybacks if 
existing temporary differences (both deductible and taxable and 
regardless of where the related tax-deferred effects are recorded on the 
institution's balance sheet) fully reverse;

[[Page 163]]

    (2) Deferred-tax assets dependent upon future income arising from 
operating loss and tax carryforwards; or
    (3) Deferred-tax assets arising from temporary differences that 
could be recovered if existing temporary differences that are dependent 
upon other future events (both deductible and taxable and regardless of 
where the related tax-deferred effects are recorded on the institution's 
balance sheet) fully reverse.
    (e) Direct lender institution means an institution that extends 
credit in the form of loans or leases to eligible borrowers in its own 
right and carries such loan of lease assets on its books.
    (f) Government agency means an agency of the United States 
Government whose obligations are explicitly guaranteed by the United 
States Government or their successors.
    (g) Government-sponsored agency means agencies or instrumentalities 
chartered by the United States Congress to serve a public purpose whose 
debt obligations are not explicitly guaranteed by the United States 
Government.
    (h) Institution means a Farm Credit bank, Federal land bank 
association, Federal land credit association, production credit 
association, agricultural credit association, Farm Credit Leasing 
Corporation, bank for cooperatives, agricultural credit bank, and their 
successors.
    (i) Nonagreeing association means an association that does not have 
an allotment agreement in effect with a Farm Credit Bank or agricultural 
credit bank pursuant to Sec. 615.5210(e).
    (j) OECD means the group of countries that are full members of the 
Organization for Economic Cooperation and Development, regardless of 
entry date, as well as countries that have concluded special lending 
arrangements with the International Monetary Fund's General Arrangement 
to Borrow, excluding any country that has rescheduled its external 
sovereign debt within the previous 5 years.
    (k) Performance-based standby letter of credit means any letter of 
credit or similar arrangement that represents an irrevocable obligation 
to be beneficiary on the part of the issuer to make payment on any 
default by the account party in the performance of a nonfinancial or 
commercial obligation.
    (l) Permanent capital means--
    (1) Current year retained earnings;
    (2) Allocated and unallocated earnings (which, in the case of 
earnings allocated in any form by a System bank to any association or 
other recipient and retained by the bank, shall be considered, in whole 
or in part, permanent capital of the bank or of any such association or 
other recipient as provided under an agreement between the bank and each 
such association or other recipient);
    (3) All surplus;
    (4) Stock issued by a System institution, except--
    (i) Stock that may be retired by the holder of the stock on 
repayment of the holder's loan, or otherwise at the option or request of 
the holder;
    (ii) Stock that is protected under section 4.9A of the Act or is 
otherwise not at risk;
    (iii) Farm Credit Bank equities required to be purchased by Federal 
land bank associations in connection with stock issued to borrowers that 
is protected under section 4.9A of the Act;
    (iv) Capital subject to revolvement, unless:
    (A) The bylaws of the institution clearly provide that there is no 
express or implied right for such capital to be retired at the end of 
the revolvement cycle or at any other time; and
    (B) The institution clearly states in the notice of allocation that 
such capital may only be retired at the sole discretion of the board in 
accordance with statutory and regulatory requirements and that no 
express or implied right to have such capital retired at the end of the 
revolvement cycle or at any other time is thereby granted;
    (5) Term preferred stock with an original maturity of at least 5 
years and on which, if cumulative, the board of directors has the option 
to defer dividends, provided that, at the beginning of each of the last 
5 years of the term of the stock, the amount that is eligible to be 
counted as permanent capital is reduced by 20 percent of the original 
amount of the stock (net of redemptions);
    (6) Payments to, or obligations to pay, the Farm Credit System 
Financial

[[Page 164]]

Assistance Corporation to the extent permitted by section 6.26(c)(5)(G) 
of the Act and Sec. 615.5210(d); and
    (7) Financial assistance provided by the Farm Credit System 
Insurance Corporation that the Farm Credit Administration determines 
appropriate to be considered permanent capital.
    (m) Qualifying bilateral netting contract means a bilateral netting 
contract that meets at least the following conditions:
    (1) The contract is in writing;
    (2) The contract is not subject to a walkaway clause, defined as a 
provision that permits a non-defaulting counterparty to make lower 
payments than it would make otherwise under the contract, or no payment 
at all, to a defaulter or to the estate of a defaulter, even if the 
defaulter or the estate of the defaulter is a net creditor under the 
contract;
    (3) The contract creates a single obligation either to pay or to 
receive the net amount of the sum of positive and negative mark-to-
market values for all derivative contracts subject to the qualifying 
bilateral netting contract;
    (4) The institution receives a legal opinion that represents, to a 
high degree of certainty, that in the event of legal challenge the 
relevant court and administrative authorities would find the 
institution's exposure to be the net amount;
    (5) The institution establishes a procedure to monitor relevant law 
and to ensure that the contracts continue to satisfy the requirements of 
this section; and
    (6) The institution maintains in its files adequate documentation to 
support the netting of a derivatives contract.
    (n) Risk-adjusted asset base means the total dollar amount of the 
institution's assets adjusted in accordance with Sec. 615.5210 (d) and 
(e) and weighted on the basis of risk in accordance with 
Sec. 615.5210(f).
    (o) Standby letter of credit means any letter of credit or similar 
arrangement that represents an irrevocable obligation to the beneficiary 
on the part of the issuer:
    (1) To repay money borrowed by or advanced to or for the account of 
the account party; or
    (2) To make payment on account of any indebtedness undertaken by the 
account party, in the event the account party fails to fulfill its 
obligation to the beneficiary.
    (p) Stock means stock and participation certificates.
    (q) Total capital means assets minus liabilities, valued in 
accordance with generally accepted accounting principles (GAAP), except 
that liabilities shall not include obligations to retire stock protected 
under section 4.9A of the Act.

[53 FR 39247, Oct. 6, 1988, as amended at 56 FR 2675, Jan. 24, 1991; 59 
FR 37404, July 22, 1994; 62 FR 4446, Jan. 30, 1997; 63 FR 39225, July 
22, 1998]



Sec. 615.5205  Minimum permanent capital standards.

    Each institution shall at all times maintain permanent capital at a 
level of at least 7 percent of its risk-adjusted asset base.

[62 FR 4446, Jan. 30, 1997]



Sec. 615.5210  Computation of the permanent capital ratio.

    (a) The institution's permanent capital ratio shall be determined on 
the basis of the financial statements of the institution prepared in 
accordance with generally accepted accounting principles except that the 
obligations of the Farm Credit System Financial Assistance Corporation 
issued to repay banks in connection with the capital preservation and 
loss-sharing agreements described in section 6.9(e)(1) of the Act shall 
not be considered obligations of any institution subject to this 
regulation prior to their maturity.
    (b) The institution's asset base and permanent capital shall be 
computed using average daily balances for the most recent 3 months.
    (c) The institution's permanent capital ratio shall be calculated by 
dividing the institution's permanent capital, adjusted in accordance 
with paragraph (e) of this section (the numerator), by the risk-adjusted 
asset base (the denominator), to derive a ratio expressed as a 
percentage.
    (d) Until September 27, 2002, payments of assessments to the Farm 
Credit System Financial Assistance

[[Page 165]]

Corporation, and any part of the obligation to pay future assessments to 
the Farm Credit System Financial Assistance Corporation that is 
recognized as an expense on the books of a bank or association, shall be 
included in the capital of such bank or association for the purpose of 
determining its compliance with regulatory capital requirements, to the 
extent allowed by section 6.26(c)(5)(G) of the Act. If the bank directly 
or indirectly passes on all or part of the payments to its affiliated 
associations pursuant to section 6.26(c)(5)(D) of the Act, such amounts 
shall be included in the capital of the associations and shall not be 
included in the capital of the bank. After September 27, 2002, no 
payments of assessments or obligations to pay future assessments may be 
included in the capital of the bank or association.
    (e) For the purpose of computing the institution's permanent capital 
ratio, the following adjustments shall be made prior to assigning assets 
to risk-weight categories and computing the ratio:
    (1) Where two Farm Credit System institutions have stock investments 
in each other, such reciprocal holdings shall be eliminated to the 
extent of the offset. If the investments are equal in amount, each 
institution shall deduct from its assets and its total capital an amount 
equal to the investment. If the investments are not equal in amount, 
each institution shall deduct from its total capital and its assets an 
amount equal to the smaller investment. The elimination of reciprocal 
holdings required by this paragraph shall be made prior to making the 
other adjustments required by this section.
    (2) Where a Farm Credit Bank or an agricultural credit bank is owned 
by one or more Farm Credit System institutions, the double counting of 
capital shall be eliminated in the following manner:
    (i) All equities of a Farm Credit Bank or agricultural credit bank 
that have been purchased by other Farm Credit institutions shall be 
considered to be permanent capital of the Farm Credit Bank or 
agricultural credit bank.
    (ii) Each Farm Credit Bank or agricultural credit bank and each of 
its affiliated associations may enter into an agreement that specifies, 
for the purpose of computing permanent capital only, a dollar amount 
and/or percentage allotment of the association's allocated investment 
between the bank and the association. The following conditions shall 
apply:
    (A) The agreement shall be for a term of 1 year or longer.
    (B) The agreement shall be entered into on or before its effective 
date.
    (C) The agreement may be amended according to its terms, but no more 
frequently than annually except in the event that a party to the 
agreement is merged or reorganized, or in the event of a reallotment 
pursuant to paragraph (e)(2)(ii)(G) of this section. The agreement shall 
include a provision addressing how the agreement will be amended if a 
reallotment is required by paragraph (e)(2)(ii)(G) of this section.
    (D) On or before the effective date of the agreement, a certified 
copy of the agreement, and any amendments thereto, shall be sent to the 
field office of the Farm Credit Administration responsible for examining 
the institution. A copy shall also be sent within 30 calendar days of 
adoption to the bank's other affiliated associations.
    (E) Unless the parties otherwise agree, if the bank and the 
association have not entered into a new agreement on or before the 
expiration of an existing agreement, the existing agreement shall 
automatically be extended for another 12 months, unless either party 
notifies the Farm Credit Administration in writing of its objection to 
the extension prior to the expiration of the existing agreement.
    (F) In the absence of an agreement between a Farm Credit Bank or an 
agricultural credit bank and one or more associations, or in the event 
that an agreement expires and at least one party has timely objected to 
the continuation of the terms of its agreement, the following formula 
shall be applied with respect to the allocated investments held by those 
associations with which there is no agreement (nonagreeing 
associations), and shall not be applied to the allocated investments 
held by those associations with which the bank has an agreement 
(agreeing associations):

[[Page 166]]

    (1) The allotment formula shall be calculated annually.
    (2) The permanent capital ratio of the Farm Credit Bank or 
agricultural credit bank shall be computed as of the date that the 
existing agreement terminates, using a 3-month average daily balance, 
excluding the allocated investment from nonagreeing associations but 
including any allocated investments of agreeing associations that are 
allotted to the bank under applicable allocation agreements. The 
permanent capital ratio of each nonagreeing association shall be 
computed as of the same date using a 3-month average daily balance, and 
shall be computed excluding its allocated investment in the bank.
    (3) If the permanent capital ratio for the Farm Credit Bank or 
agricultural credit bank calculated in accordance with paragraph 
(e)(2)(ii)(F)(2) of this section is 7 percent or above, the allocated 
investment of each nonagreeing association whose permanent capital ratio 
calculated in accordance with paragraph (e)(2)(ii)(F)(2) of this section 
is 7 percent or above shall be allotted 50 percent to the bank and 50 
percent to the association.
    (4) If the permanent capital ratio of the Farm Credit Bank or 
agricultural credit bank calculated in accordance with paragraph 
(e)(2)(ii)(F)(2) of this section is 7 percent or above, the allocated 
investment of each nonagreeing association whose capital ratio is below 
7 percent shall be allotted to the association until the association's 
capital ratio reaches 7 percent or until all of the investment is 
allotted to the association, whichever occurs first. Any remaining 
unallotted allocated investment shall be allotted 50 percent to the bank 
and 50 percent to the association.
    (5) If the permanent capital ratio of the Farm Credit Bank or 
agricultural credit bank calculated in accordance with paragraph 
(e)(2)(ii)(F)(2) of this section is less than 7 percent, the amount of 
additional capital needed by the bank to reach a permanent capital ratio 
of 7 percent shall be determined, and an amount of the allocated 
investment of each nonagreeing association shall be allotted to the Farm 
Credit Bank or agricultural credit bank as follows:
    (i) If the total of the allocated investments of all nonagreeing 
associations is greater than the additional capital needed by the bank, 
the allocated investment of each nonagreeing association shall be 
multiplied by a fraction whose numerator is the amount of capital needed 
by the bank and whose denominator is the total amount of allocated 
investments of the nonagreeing associations, and such amount shall be 
allotted to the bank. Next, if the permanent capital ratio of any 
nonagreeing association is less than 7 percent, a sufficient amount of 
unallotted allocated investment shall then be allotted to each 
nonagreeing association, as necessary, to increase its permanent capital 
ratio to 7 percent, or until all such remaining investment is allotted 
to the association, whichever occurs first. Any unallotted allocated 
investment still remaining shall be allotted 50 percent to the bank and 
50 percent to the nonagreeing association.
    (ii) If the additional capital needed by the bank is greater than 
the total of the allocated investments of the nonagreeing associations, 
all of the remaining allocated investments of the nonagreeing 
associations shall be allotted to the bank.
    (G) If a payment or part of a payment to the Farm Credit System 
Financial Assistance Corporation pursuant to section 6.9(e)(3)(D)(ii) of 
the Act would cause a bank to fall below its minimum permanent capital 
requirement, the bank and one or more associations shall amend their 
allocation agreements to increase the allotment of the allocated 
investment to the bank sufficiently to enable the bank to make the 
payment to the Farm Credit System Financial Assistance Corporation, 
provided that the associations would continue to meet their minimum 
permanent capital requirement. In the case of a nonagreeing association, 
the Farm Credit Administration may require a revision of the allotment 
sufficient to enable the bank to make the payment to the Farm Credit 
System Financial Assistance Corporation, provided that the association 
would continue to meet its minimum permanent capital requirement. The 
Farm Credit Administration Board may, at the request of

[[Page 167]]

one or more of the institutions affected, waive the requirements of this 
paragraph (e)(2)(ii)(G) if the Board deems it is in the overall best 
interest of the institutions affected.
    (3) A Farm Credit Bank or agricultural credit bank and a recipient, 
other than an association, of allocated earnings from such bank may 
enter into an agreement specifying a dollar amount and/or percentage 
allotment of the recipient's allocated earnings in the bank between the 
bank and the recipient. Such agreement shall comply with the provisions 
of paragraph (e)(2) of this section, except that, in the absence of an 
agreement, the allocated investment shall be allotted 100 percent to the 
allocating bank and 0 percent to the recipient. All equities of the bank 
that are purchased by a recipient shall be considered as permanent 
capital of the issuing bank.
    (4) A bank for cooperatives and a recipient of allocated earnings 
from such bank may enter into an agreement specifying a dollar amount 
and/or percentage allotment of the recipient's allocated earnings in the 
bank between the bank and the recipient. Such agreement shall comply 
with the provisions of paragraph (e)(2) of this section, except that, in 
the absence of an agreement, the allocated investment shall be allotted 
100 percent to the allocating bank and 0 percent to the recipient. All 
equities of a bank that are purchased by a recipient shall be considered 
as permanent capital of the issuing bank.
    (5) Where a bank or association invests in an association to 
capitalize a loan participation interest, the investing institution 
shall deduct from its total capital an amount equal to its investment in 
the participating institution.
    (6) The double-counting of capital by a service corporation 
chartered under section 4.25 of the Act and its stockholder institutions 
shall be eliminated by deducting an amount equal to the institution's 
investment in the service corporation from its total capital.
    (7) Each institution shall deduct from its total capital an amount 
equal to all goodwill, whenever required.
    (8) To the extent an institution has deducted its investment in 
another Farm Credit institution from its total capital, the investment 
may be eliminated from its asset base.
    (9) Where a Farm Credit Bank and an association have an enforceable 
written agreement to share losses on specifically identified assets on a 
predetermined quantifiable basis, such assets shall be counted in each 
institution's risk-adjusted asset base in the same proportion as the 
institutions have agreed to share the loss.
    (10) The permanent capital of an institution shall exclude the net 
effect of all transactions covered by the definition of ``accumulated 
other comprehensive income'' contained in the Statement of Financial 
Accounting Standards No. 130, as promulgated by the Financial Accounting 
Standards Board.
    (11) For purposes of calculating capital ratios under this part, 
deferred-tax assets are subject to the conditions, limitations, and 
restrictions described in this paragraph.
    (i) Each institution shall deduct an amount of deferred-tax assets, 
net of any valuation allowance, from its assets and its total capital 
that is equal to the greater of:
    (A) The amount of deferred-tax assets that are dependent on future 
income or future events in excess of the amount that is reasonably 
expected to be realized within 1 year of the most recent calendar 
quarter-end date, based on financial projections for that year, or
    (B) The amount of deferred-tax assets that are dependent on future 
income or future events in excess of ten (10) percent of the amount of 
core surplus that exists before the deduction of any deferred-tax 
assets.
    (ii) For purposes of this calculation:
    (A) The amount of deferred-tax assets that can be realized from 
taxes paid in prior carryback years and from the reversal of existing 
taxable temporary differences shall not be deducted from assets and from 
equity capital.
    (B) All existing temporary differences should be assumed to fully 
reverse at the calculation date.
    (C) Projected future taxable income should not include net operating 
loss carryforwards to be used within 1 year or the amount of existing 
temporary differences expected to reverse within that year.

[[Page 168]]

    (D) Financial projections shall include the estimated effect of tax-
planning strategies that are expected to be implemented to minimize tax 
liabilities and realize tax benefits. Financial projections for the 
current fiscal year (adjusted for any significant changes that have 
occurred or are expected to occur) may be used when applying the capital 
limit at an interim date within the fiscal year.
    (E) The deferred tax effects of any unrealized holding gains and 
losses on available-for-sale debt securities may be excluded from the 
determination of the amount of deferred-tax assets that are dependent 
upon future taxable income and the calculation of the maximum allowable 
amount of such assets. If these deferred-tax effects are excluded, this 
treatment must be followed consistently over time.
    (f) The risk-adjusted asset base (denominator) shall be determined 
in the following manner:
    (1) Each asset on the institution's balance sheet and each off-
balance-sheet item, adjusted by the appropriate credit conversion factor 
in paragraph (f)(3) of this section, shall be assigned to one of five 
risk categories in accordance with this section. The aggregate dollar 
value of the assets in each category shall be multiplied by the 
percentage weight assigned to that category. The sum of the weighted 
dollar values from each of the five risk categories shall comprise the 
denominator for computation of the permanent capital ratio.
    (2) Balance sheet assets shall be assigned to the percentage risk 
categories as follows:
    (i) Category 1: 0 Percent.
    (A) Cash on hand and demand balances held in domestic or foreign 
banks.
    (B) Claims on Federal Reserve Banks.
    (C) Goodwill.
    (D) Direct claims on and portions of claims unconditionally 
guaranteed by the United States Treasury, United States Government 
agencies, or central governments in other OECD countries. A United 
States Government agency is defined as an instrumentality of the United 
States Government whose obligations are fully and explicitly guaranteed 
as to the timely repayment of principal and interest by the full faith 
and credit of the United States Government.
    (ii) Category 2: 20 Percent.
    (A) Portions of loans and other assets collateralized by United 
States Government-sponsored agency securities. A United States 
Government-sponsored agency is defined as an agency originally chartered 
or established to serve public purposes specified by the United States 
Congress but whose obligations are not explicitly guaranteed by the full 
faith and credit of the United States Government.
    (B) Portions of loans and other assets conditionally guaranteed by 
the United States Government or its agencies.
    (C) Portions of loans and other assets collateralized by securities 
issued or guaranteed (fully or partially) by the United States 
Government or its agencies (but only to the extent guaranteed).
    (D) Claims on domestic banks (exclusive of demand balances).
    (E) Claims on, or guarantees by, OECD banks.
    (F) Claims on non-OECD banks with a remaining maturity of 1 year or 
less.
    (G) Investments in State and local government obligations backed by 
the ``full faith and credit of State or local government.'' Other claims 
(including loans) and portions of claims guaranteed by the full faith 
and credit of a State government (but only to the extent guaranteed).
    (H) Claims on official multinational lending institutions or 
regional development institutions in which the United States Government 
is a shareholder or contributor.
    (I) Loans and other obligations of and investments in Farm Credit 
institutions.
    (J) Local currency claims on foreign central governments to the 
extent that the Farm Credit institution has local liabilities in that 
country.
    (K) Cash items in the process of collection.
    (iii) Category 3: 50 Percent.
    (A) All other investment securities with maturities under 1 year.
    (B) Rural housing loans secured by first lien mortgages or deeds of 
trust.
    (iv) Category 4: 100 Percent.

[[Page 169]]

    (A) All other claims on private obligors.
    (B) Claims on non-OECD banks with a remaining maturity greater than 
1 year.
    (C) All other assets not specified above, including but not limited 
to, leases, fixed assets, and receivables.
    (D) All non-local currency claims on foreign central governments, as 
well as local currency claims on foreign central governments that are 
not included in Category 2(J).
    (3) Off-Balance-Sheet Items.
    (i) The dollar amount of off-balance-sheet items that shall be 
assigned to a risk-weight category for inclusion in the denominator 
shall be determined by multiplying the face amount of the item by the 
appropriate credit conversion factor set forth in paragraph (f)(3)(ii) 
of this section. The resulting amount shall be then assigned to the 
appropriate risk-weight category described in paragraph (f)(2) of this 
section on the basis of the type of obligor.
    (ii) Credit conversion factors shall be applied to off-balance-sheet 
items as follows:
    (A) 0 Percent.
    (1) Unused commitments with an original maturity of 14 months or 
less; or
    (2) Unused commitments with an original maturity of greater than 14 
months if:
    (B) 20 Percent
    (1) Short-term, self-liquidating, trade-related contingencies, 
including but not limited to, commercial letters of credit.
    (C) 50 Percent
    (1) Transaction-related contingencies (e.g. bid bonds, performance 
bonds, warranties, and performance-based standby letters of credit 
related to a particular transaction).
    (2) Unused loan commitments with an original maturity exceeding 14 
months, including underwriting commitments and commercial credit lines.
    (3) Revolving underwriting facilities (RUFs), note issuance 
facilities (NIFs) and other similar arrangements pursuant to which the 
institution's customer can issue short-term debt obligations in its own 
name, but for which the institution has a legally binding commitment to 
either:
    (i) Purchase the obligations the customer is unable to sell by a 
stated date; or
    (ii) Advance funds to its customer if the obligations cannot be 
sold.
    (D) 100 Percent
    (1) Direct credit substitutes including financial-guarantee-type 
standby letters of credit that support financial claims on the account 
party. The face amount of a direct credit substitute shall be netted 
against any participations sold in that item. The amount not so sold 
shall be assigned to a risk-weight category using the criteria of 
Sec. 615.5210(f)(2).
    (2) Acquisitions of risk participations in bankers acceptances and 
participations in direct credit substitutes.
    (3) Sale and repurchase agreements and asset sales with recourse, if 
not already included on the balance sheet.
    (4) Forward agreements (i.e., contractual obligations) to purchase 
assets, including financing facilities with certain drawdown.
    (iii) Credit equivalents of interest rate contracts and foreign 
contracts. (A) Credit equivalents of interest rate contracts and foreign 
exchange contracts (except single currency floating/floating interest 
rate swaps) shall be determined by adding the replacement cost (mark-to-
market value, if positive) to the potential future credit exposure, 
determined by multiplying the notional principal amount by the following 
credit conversion factors as appropriate.

                        Conversion Factor Matrix
                              [In Percent]
------------------------------------------------------------------------
                                     Interest     Exchange
        Remaining maturity             rate         rate      Commodity
------------------------------------------------------------------------
1 year or less...................          0.0          1.0         10.0
Over 1 to 5 years................          0.5          5.0         12.0
Over 5 years.....................          1.5          7.5         15.0
------------------------------------------------------------------------


[[Page 170]]

    (B) For any derivative contract that does not fall within one of the 
categories in the above table, the potential future credit exposure 
shall be calculated using the commodity conversion factors. The net 
current exposure for multiple derivative contracts with a single 
counterparty and subject to a qualifying bilateral netting contract 
shall be the net sum of all positive and negative mark-to-market values 
for each derivative contract. The positive sum of the net current 
exposure shall be added to the adjusted potential future credit exposure 
for the same multiple contracts with a single counterparty. The adjusted 
potential future credit exposure shall be computed as

Anet = (0.4  x  Agross) + 0.6 (NGR  x  
    Agross)

where:
(1) Anet is the adjusted potential future credit exposure;
(2) Agross is the sum of potential future credit exposures 
determined by multiplying the notional principal amount by the 
appropriate credit conversion factor; and
(3) NGR is the ratio of the net current credit exposure divided by the 
gross current credit exposure determined as the sum of only the positive 
mark-to-markets for each derivative contract with the single 
counterparty.

    (iv) Credit equivalents of single currency floating/floating 
interest rate swaps shall be determined by their replacement cost (mark-
to-market).

[53 FR 39247, Oct. 6, 1988, as amended at 54 FR 31323, July 28, 1989; 59 
FR 37404, July 22, 1994; 62 FR 4446, Jan. 30, 1997; 63 FR 39226, July 
22, 1998]



Sec. 615.5215  Distribution of earnings.

    The boards of directors of System institutions may not reduce the 
permanent capital of the institution through the payment of patronage 
refunds or dividends, or the retirement of stock or allocated equities 
except retirements pursuant to Secs.  615.5280 and 615.5290 if, after or 
due to the action, the permanent capital of the institution would fail 
to meet the minimum permanent capital adequacy standard established 
under Sec. 615.5205 for that period. This limitation shall not apply to 
the payment of noncash patronage refunds by any institution exempt from 
Federal income tax if the entire refund paid qualifies as permanent 
capital at the issuing institution. Any System institution subject to 
Federal income tax may pay patronage refunds partially in cash if the 
cash portion of the refund is the minimum amount required to qualify the 
refund as a deductible patronage distribution for Federal income tax 
purposes and the remaining portion of the refund paid qualifies as 
permanent capital.

[53 FR 39247, Oct. 6, 1988, as amended at 53 FR 40046, Oct. 13, 1988]



Sec. 615.5216  [Reserved]



                     Subpart I--Issuance of Equities

    Source: 53 FR 40046, Oct. 13, 1988, unless otherwise noted.



Sec. 615.5220  Capitalization bylaws.

    (a) The board of directors of each System bank and association 
shall, pursuant to section 4.3A of the Farm Credit Act of 1971 (Act), 
adopt capitalization bylaws, subject to the approval of its voting 
shareholders that set forth:
    (1) Classes of equities and the manner in which they shall be 
issued, transferred, converted and retired;
    (2) For each class of equities, a description of the class(es) of 
persons to whom such stock may be issued, voting rights, dividend rights 
and preferences, and priority upon liquidation, including rights, if 
any, to share in the distribution of the residual estate;
    (3) The number of shares and par value of equities authorized to be 
issued for each class of equities, except that equities that are 
required to be purchased as a condition of obtaining a loan and 
nonvoting stock into which voting stock is converted after repayment of 
the loan may be authorized to be issued in unlimited amounts;
    (4) For Farm Credit Banks, agricultural credit banks (with respect 
to loans other than to cooperatives), and associations, the percentage 
or dollar amount of equity investment (which may be expressed as a range 
within which the board of directors may from time to time determine the 
requirement) that will be required to be purchased as a condition for 
obtaining a loan, which shall be not less than, 2

[[Page 171]]

percent of the loan amount or $1,000, whichever is less;
    (5) For banks for cooperatives and agricultural credit banks (with 
respect to loans to cooperatives), the percentage or dollar amount of 
equity or guaranty fund investment (which may be expressed as a range 
within which the board may from time to time determine the requirement) 
that serves as a target level of investment in the bank for patronage-
sourced business, which shall not be less than, 2 percent of the loan 
amount or $1,000, whichever is less;
    (6) The manner in which equities will be retired, including a 
provision stating that equities other than those protected under section 
4.9A of the Act are retirable at the sole discretion of the board, 
provided minimum permanent capital adequacy standards established in 
subpart H of this part are met;
    (7) The manner in which earnings will be allocated and distributed, 
including the basis on which patronage refunds will paid, which shall be 
in accord with cooperative principles; and
    (8) For Farm Credit banks, the manner in which the capitalization 
requirements of the Farm Credit Bank shall be allocated and equalized 
from time to time among its owners.
    (b) The board of directors of each service corporation (including 
the Farm Credit Leasing Services Corporation) shall adopt capitalization 
bylaws, subject to the approval of its voting shareholders, that set 
forth the requirements of paragraphs (a)(1), (a)(2), and (a)(3) of this 
section to the extent applicable. Such bylaws shall also set forth the 
manner in which equities will be retired and the manner in which 
earnings will be distributed.

[53 FR 40046, Oct. 13, 1988, as amended at 62 FR 4446, Jan. 30, 1997; 63 
FR 39227, July 22, 1998]



Sec. 615.5230  Implementation of cooperative principles.

    (a) Voting shareholders of Farm Credit banks and associations shall 
be accorded full voting rights in accordance with cooperative 
principles.
    (1) Voting shareholders of associations and banks for cooperatives 
shall:
    (i) Have only one vote, regardless of the number of shares owned or 
the number of loans outstanding, except as otherwise required by statute 
or regulation and except as modified by paragraph (b) of this section;
    (ii) Unless regional election of directors is provided for in the 
bylaws pursuant to Sec. 615.5230(a)(3), be accorded the right to vote in 
the election of each director (except for a director that is elected by 
the other directors);
    (iii) Unless regional election of directors is provided for in the 
bylaws, or unless otherwise provided in the bylaws, be allowed to 
cumulate such votes and distribute them among the candidates in the 
shareholder's discretion.
    (2) Each voting shareholder of a Farm Credit Bank shall:
    (i) Have one vote that is assigned a weight proportional to the 
number of the association's voting shareholders in a manner that does 
not discriminate against agricultural credit associations that have 
resulted from the merger or consolidation of Federal land bank 
associations and production credit associations; and
    (ii) Have the right to vote in the election of each director and be 
allowed to cumulate such votes and distribute them among the candidates 
in the shareholder's discretion, except that cumulative voting for 
directors may be eliminated if 75 percent of the associations that are 
shareholders of the Farm Credit Bank vote in favor of elimination. In a 
vote to eliminate cumulative voting, each association shall be accorded 
one vote.
    (3) Regional election of directors is permitted under the following 
conditions:
    (i) A bylaw establishing regional elections is approved by a 
majority of voting shareholders, voting in person or by proxy, prior to 
implementation;
    (ii) The bylaw provides that all voting shareholders of the 
institution, whether or not they reside in the director's region, have 
the right to vote in any shareholder vote to remove each director;
    (iii) There are an approximately equal number of voting shareholders 
in each of the institution's voting regions. The regions shall be deemed 
to have an approximately equal number of

[[Page 172]]

voting shareholders if no region contains more than 25 percent more 
voting shareholders than in any other region. At least once every 3 
years, the institution shall count the number of voting shareholders in 
each region and, if the regions do not have an approximately equal 
number of shareholders, shall adjust the regional boundaries to achieve 
such result; and
    (iv) An institution may provide for more than one director to 
represent a region. In such case, for purposes of determining whether 
the regions have an approximately equal number of voting shareholders, 
the number of voting shareholders in the region with more than one 
director shall be divided by the number of director positions 
representing that region, and the resulting quotient shall be the number 
that is compared to the number of voting shareholders in other regions.
    (b) Each equityholder of each institution shall be equitably treated 
in the operation of the institution.
    (1) Each issuance of preferred stock (other than preferred stock 
outstanding on October 5, 1988, and stock into which such outstanding 
stock is converted that has substantially similar preferences) shall be 
approved by a majority of the shares of each class of equities affected 
by the preference, voting as a class, whether or not such classes are 
otherwise authorized to vote;
    (2) Any dividends paid to the holders of common stock and 
participation certificates shall be on a per share basis and without 
preference as to rate or priority of payment between classes of common 
stock, between classes of participation certificates, between classes of 
common stock and classes of participation certificates, or between 
holders of the same class of stock or participation certificates, except 
that any class of common stock or participation certificates that result 
from the conversion of allocated surplus may be subordinated to other 
classes of common stock and participation certificates in the payment of 
dividends.
    (3) Any patronage refunds that are paid shall be paid in accordance 
with cooperative principles, on an equitable and nondiscriminatory basis 
determined by the board of directors in accordance with the 
capitalization bylaws, provided that any earning pools that may be 
established for the payment of patronage shall be established on a 
rational and equitable basis that will ensure that each patron of the 
institution receives its fair share of the earnings of the institution 
and bears its fair share of the expenses of the institution.
    (4) All classes of common stock and participation certificates 
(except those resulting from a conversion of allocated surplus) must be 
accorded the same priority with respect to impairment and restoration of 
impairment and have the same rights and priority upon liquidation.
    (5) Each bank shall endeavor to assure that there is a choice of at 
least two nominees for each elective office to be filled and that the 
board represents as nearly as possible all types of agriculture in the 
district. If fewer than two nominees for each position are named, the 
efforts of the bank to locate two willing nominees shall be documented 
in the records of the bank. The bank shall also maintain a list of the 
type or types of agriculture engaged in by each director on its board.

[53 FR 40046, Oct. 13, 1988, as amended at 54 FR 6118, Feb. 8, 1989; 60 
FR 57921, Nov. 24, 1995; 62 FR 4446, Jan. 30, 1997; 62 FR 49908, Sept. 
24, 1997; 63 FR 39228, July 22, 1998]



Sec. 615.5240  Permanent capital requirements.

    (a) The capitalization bylaws shall enable the institution to meet 
the minimum permanent capital adequacy standards established under 
subparts H and K of this part and the total capital requirements 
established by the board of directors of the institution.
    (b) In order to qualify as permanent capital, equities issued under 
the bylaws must meet the following requirements:
    (1) For common stock and participation certificates--
    (i) Retirement must be solely at the discretion of the board of 
directors and not upon a date certain or upon the happening of any 
event, such as repayment of the loan, and not pursuant to any automatic 
retirement or revolvement plan;

[[Page 173]]

    (ii) Retirement must be at not more than book value;
    (iii) Disclosure must have been made pursuant to Sec. 615.5250 of 
the nature of the investment and the terms and conditions under which it 
is issued, and the rights, if any, to share in any patronage 
distributions that may be made.
    (iv) Dividends must be payable only at the discretion of the board 
and must be noncumulative.
    (2) For perpetual preferred stock issued to persons other than the 
Farm Credit System Financial Assistance Corporation:
    (i) Retirement must be solely at the discretion of the board of 
directors and not upon a date certain or upon the happening of any 
event, such as repayment of the loan, and not pursuant to any automatic 
retirement or revolvement plan;
    (ii) Retirement must be at not more than book value;
    (iii) Dividends must be payable only in the discretion of the board, 
and may be cumulative; and
    (iv) Disclosure must have been made pursuant to Sec. 615.5250 of the 
nature of the investment and the terms and conditions under which it is 
issued.
    (3) For term preferred stock:
    (i) Retirement must be solely at the discretion of the board of 
directors and not upon a date certain, other than the original maturity 
date, or upon the happening of any event, such as repayment of the loan;
    (ii) Retirement must be at not more than book value;
    (iii) Dividends may be cumulative, but the board of directors must 
have the option to defer payment; and
    (iv) Disclosure must have been made pursuant to Sec. 615.5250 of the 
nature of the investment and the terms and conditions under which it is 
issued.
    (c) Once an institution's board of directors has made a 
determination that the institution's capital position is adequate, the 
institution's board of directors may delegate to management the decision 
whether to retire borrower stock, provided that:
    (1) Any such retirements are in accordance with the institution's 
capital adequacy plan or capital restoration plan;
    (2) The institution's permanent capital ratio will be in excess of 9 
percent after any such retirements;
    (3) The institution meets and maintains all applicable minimum 
surplus and collateral standards; and
    (4) The aggregate amount of stock purchases, retirements, and the 
net effect of such activities are reported to the board of directors 
each quarter.

[53 FR 40046, Oct. 13, 1988, as amended at 62 FR 4446, Jan. 30, 1997]



Sec. 615.5250  Disclosure requirements.

    (a) Equities purchased as a condition for obtaining a loan. Prior to 
loan closing, the institution shall provide the prospective borrower 
with the following:
    (1) The institution's most recent annual report filed under 12 CFR 
part 620;
    (2) The institution's most recent quarterly report filed under 12 
CFR part 620, if more recent than the annual report;
    (3) A copy of the institution's capitalization bylaws; and
    (4) A written description of the terms and conditions under which 
the equity is issued. In addition to specific terms and conditions, the 
description shall disclose:
    (i) That the equity is an at-risk investment and not a compensating 
balance;
    (ii) That the equity is retirable only at the discretion of the 
board of directors and only if minimum permanent capital standards 
established under subpart H of this part are met;
    (iii) Whether the institution presently meets its minimum permanent 
capital standards; and
    (iv) Whether the institution knows of any reason the institution may 
not meet its permanent capital standard on the next earnings 
distribution date.
    (b) Notwithstanding the provisions of paragraph (a) of this section, 
no materials previously provided to a purchaser need be provided again 
unless the purchaser requests, except the disclosure required by 
paragraph (a)(4) of this section.
    (c) Other equities. (1) No stock or participation certificates other 
than those required to be purchased as a condition of obtaining a loan 
may be offered for sale except pursuant to a

[[Page 174]]

disclosure statement containing all of the information required by 12 
CFR part 620 in the annual report to shareholders as of a date within 
135 days of the proposed sale, which disclosure statement must have been 
reviewed and cleared by the Farm Credit Administration. The most recent 
annual report to shareholders and the most recent quarterly report filed 
with the Farm Credit Administration may be incorporated by reference 
into the disclosure statement in satisfaction of this requirement. In 
addition, the disclosure statement shall include items in (3) and (4) of 
paragraph (a) of this section and a discussion of the intended use of 
the sale proceeds. No materials previously provided to the purchaser 
need be provided again unless the purchaser requests it, except the 
disclosure required by paragraph (a)(4) of this section and a discussion 
of the use of sale proceeds.
    (2) At least 45 days prior to the proposed sale of such equities, 
the institution shall submit the disclosure statement required by 
paragraph (d)(1) of this section to the Farm Credit Administration for 
review and clearance.
    (3) Within 30 days of the receipt of such disclosure statement and 
any clarifying information the Farm Credit Administration may request, 
the Farm Credit Administration shall inform the institution whether the 
Farm Credit Administration will consider the issuance permanent capital 
for the purpose of meeting the minimum permanent capital standards 
established under subpart H and shall inform the institution of any 
required changes or additions to the disclosure materials.
    (4) No officer, director, employee, or agent of a System institution 
shall make any disclosure, through the disclosure statement or 
otherwise, in connection with the sale of equities that is inaccurate or 
misleading, or omit to make any statement needed to make other 
disclosures made by such person not misleading.
    (5) The Farm Credit Administration may waive any or all of the 
disclosure requirements of paragraph (b) of this section when a single 
investor acquires $100,000 or more of a single class of equity if the 
sophistication of the purchaser warrants, provided that any certificate 
that may be issued evidencing such an equity states on its face in 
boldface type:

    The denomination of this equity may not be reduced to less than 
$100,000 without the prior written approval of the Farm Credit 
Administration.

    (d) 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.

[53 FR 40046, Oct. 13, 1988, as amended at 56 FR 2675, Jan. 24, 1991; 61 
FR 67187, Dec. 20, 1996; 62 FR 4447, Jan. 30, 1997]



                    Subpart J--Retirement of Equities



Sec. 615.5260  Retirement of eligible borrower stock.

    (a) Definitions. For the purposes of this subpart the following 
definitions shall apply:
    (1) Eligible borrowers stock means:
    (i) Stock, participation certificates or allocated equities 
outstanding on January 6, 1988, or purchased as a condition of obtaining 
a loan prior to the earlier of the date of shareholder approval of 
capitalization bylaws under section 4.3A of the Act or October 6, 1988; 
and
    (ii) Any stock, participation certificates or allocated equities for 
which such eligible borrower stock is exchanged in connection with a 
merger, consolidation, or other reorganization or a transfer of 
territory. Eligible borrower stock does not include equities for which 
eligible borrower stock is required to be exchanged pursuant to the 
bylaws adopted under section 4.3A or equities for which eligible 
borrower stock is voluntarily exchanged except in connection with a 
merger, consolidation or other reorganization or a transfer of 
territory.
    (2) Retirement in the ordinary course of business means:
    (i) Retirement upon repayment of a loan or under a retirement or 
revolvement plan in effect prior to January 6, 1988, and for eligible 
borrower stock issued after that date, at the time the loan was made; or
    (ii) Retirement pursuant to Secs. 615.5280 and 615.5290.

[[Page 175]]

    (3) Par value means:
    (i) In the case of stock, par value;
    (ii) In the case of participation certificates and other equities, 
face or equivalent value; or
    (iii) In the case of participation certificates and allocated 
surplus subject to retirement under a revolving cycle and retired out or 
order pursuant to Secs. 615.5280 and 615.5290 or otherwise under the 
Act, par or face value discounted at a rate determined by the 
institution to reflect the present value of the equity as of the date of 
such retirement.
    (b) When an institution retires eligible borrower stock in the 
ordinary course of business, such equities shall be retired at par, even 
if book value is less than par.
    (c) When a Farm Credit Bank retires stock for the sole purpose of 
enabling an association to retire eligible borrower stock that was 
issued in connection with a long term real estate loan, such stock shall 
be retired at par even if its book value is less than par.

[53 FR 40048, Oct. 13, 1988; 54 FR 7029, Feb. 16, 1989, as amended at 62 
FR 4447, Jan. 30, 1997; 63 FR 39228, July 22, 1998]



Sec. 615.5270  Retirement of other equities.

    (a) Equities other than eligible borrower stock shall be retired at 
not more than their book value.
    (b) No equities shall be retired, except pursuant to Secs. 615.5280 
and 615.5290, or term stock at its stated maturity unless after the 
retirement the institution would continue to meet the minimum permanent 
capital standards established under subpart H of this part.

[53 FR 40048, Oct. 13, 1988; 54 FR 7029, Feb. 16, 1989, as amended at 62 
FR 4447, Jan. 30, 1997]



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 bank association, Federal 
land credit association or agricultural credit association is in 
default, such institution may, but shall not be required to, retire at 
par eligible borrower stock owned by such borrower 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.
    (f) Prior to making any retirement pursuant to this section, except 
retirements pursuant to paragraphs (c) and (d) of this section, the 
institution shall provide the borrower with written notice of the 
following matters;

[[Page 176]]

    (1) A statement that the institution has declared the borrower's 
loan to be in default;
    (2) A statement that the institution will retire all or part of the 
equities of the borrower in total or partial liquidation of his or her 
loan;
    (3) A description of the effect of the retirement on the 
relationship of the borrower to the institution;
    (4) A statement of the amount of the outstanding debt that will be 
owed to the institution after the retirement of the borrower's equities; 
and
    (5) The date on which the institution will retire the equities of 
the borrower.
    (g) The notice required by this section shall be provided in person 
at least 10 days prior to the retirement of any equities of a holder, or 
by mailing a copy of the notice by first class mail to the last known 
address of the equity holder at least 13 days prior to the retirement of 
such person's equities.
    (h) The requirements of this section may be satisfied by notices 
given pursuant to Secs. 614.4516, 614.4518, and 614.4519 of title 12 of 
the Code of Federal Regulations that contain the information required by 
this section.

[53 FR 40048, Oct. 13, 1988; 54 FR 7029, Feb. 16, 1989, as amended at 61 
FR 67187, Dec. 20, 1996; 62 FR 13213, Mar. 19, 1997]



Sec. 615.5290  Retirement of capital stock and participation certificates in event of restructuring.

    (a) If a Farm Credit Bank or agricultural credit bank forgives and 
writes off, under Sec. 614.4517, any of the principal outstanding on a 
loan made to any borrower, where appropriate the Federal land bank 
association of which the borrower is a member and stockholder shall 
cancel the same dollar amount of borrower stock held by the borrower in 
respect of the loan, up to the total amount of such stock, and to the 
extent provided for in the bylaws of the Bank relating to its 
capitalization, the Farm Credit Bank or agricultural credit bank shall 
retire an equal amount of stock owned by the Federal land bank 
association.
    (b) If a production credit association or merged association 
forgives and writes off, under Sec. 614.4517, any of the principal 
outstanding on a loan made to any borrower, the association shall cancel 
the same dollar amount of borrower stock held by the borrower in respect 
of the loan, up to the total amount of such loan.
    (c) Notwithstanding paragraphs (a) and (b) of this section, the 
borrower shall be entitled to retain at least one share of stock to 
maintain the borrower's membership and voting interest.

[53 FR 35457, Sept. 14, 1988, as amended at 61 FR 67188, Dec. 20, 1996]



             Subpart K--Surplus and Collateral Requirements

    Source: 62 FR 4447, Jan. 30, 1997, unless otherwise noted.



Sec. 615.5301  Definitions.

    For the purposes of this subpart, the following definitions shall 
apply:
    (a) The terms deferred-tax assets that are dependent on future 
income or future events, institution, permanent capital, and total 
capital shall have the meanings set forth in Sec. 615.5201.
    (b) Core surplus. (1) Core surplus means:
    (i) Undistributed earnings/unallocated surplus less, for 
associations only, an amount equal to the net investment in the bank;
    (ii) Nonqualified allocated equities (including stock) that are not 
distributed according to an established plan or practice, provided that, 
in the event that a nonqualified patronage allocation is distributed, 
other than as required by section 4.14B of the Act, or in connection 
with a loan default or the death of an equityholder whose loan has been 
repaid (to the extent provided for in the institution's capital adequacy 
plan), any remaining nonqualified allocations that were allocated in the 
same year will be excluded from core surplus.
    (iii) Perpetual common or noncumulative perpetual preferred stock 
(other than allocated stock) that is not retired according to an 
established plan or practice, provided that, in the event that stock 
held by a borrower is retired, other than as required by section 4.14B 
of the Act or in connection with a loan default to the extent provided 
for in the institution's capital plan, the

[[Page 177]]

remaining perpetual stock of the same class or series shall be excluded 
from core surplus;
    (iv) A capital instrument or a particular balance sheet entry or 
account that the Farm Credit Administration has determined to be the 
functional equivalent of a component of core surplus. The Farm Credit 
Administration may permit an institution to include all or a portion of 
such instrument, entry, or account as core surplus, permanently or on a 
temporary basis, for purposes of this subpart.
    (2) For associations only, other allocated equities may also be 
included in the core surplus ratio to the extent permitted by 
Sec. 615.5330(b) if the following conditions are met:
    (i) The allocated equities are includible in total surplus; and
    (ii) The allocated equities, if subject to a plan or practice of 
revolvement or retirement, are not scheduled or intended to be revolved 
or retired during the next 3 years, provided that, in the event that 
such allocated equities included in core surplus are retired, other than 
as required by section 4.14B of the Act, or in connection with a loan 
default or the death of an equityholder whose loan has been repaid (to 
the extent provided for in the institution's capital adequacy plan), any 
remaining such allocated equities that were allocated in the same year 
will be excluded from core surplus.
    (3) The deductions required to be made by an institution in the 
computation of its permanent capital pursuant to Sec. 615.5210(e) (6), 
(7), (9), and (11) shall also be made in the computation of its core 
surplus. Deductions required by Sec. 615.5210(e)(1) shall also be made 
to the extent that they do not duplicate deductions calculated pursuant 
to this section and required by Sec. 615.5330(b)(2).
    (4) Equities issued by System institutions and held by other System 
institutions shall not be included in the core surplus of the issuing 
institution or of the holder, unless approved pursuant to paragraph 
(b)(1)(iv) of this section, except that equities held in connection with 
a loan participation shall not be excluded by the holder. This paragraph 
shall not apply to investments by an association in its affiliated bank, 
which are governed by Sec. 615.5301(b)(1)(i).
    (5) The core surplus of an institution shall exclude the net effect 
of all transactions covered by the definition of ``accumulated other 
comprehensive income'' contained in the Statement of Financial 
Accounting Standards No. 130, as promulgated by the Financial Accounting 
Standards Board.
    (6) The Farm Credit Administration may, if it finds that a 
particular component, balance sheet entry, or account has 
characteristics or terms that diminish its contribution to an 
institution's ability to absorb losses, require the deduction of all or 
a portion of such component, entry, or account from core surplus.
    (c) Net collateral means the value of a bank's collateral as defined 
by Sec. 615.5050 (except that eligible investments as described in 
Sec. 615.5140 are to be valued at their amortized cost), less an amount 
equal to that portion of the allocated investments of affiliated 
associations that is not counted as permanent capital by the bank.
    (d) Net collateral ratio means a bank's net collateral, divided by 
the bank's total liabilities.
    (e) Net investment in the bank means the total investment by an 
association in its affiliated bank, less reciprocal investments and 
investments resulting from a loan originating/service agency 
relationship, including participations.
    (f) Nonqualified allocated equities means allocations of earnings 
designated to the institution's members that are not deducted from the 
gross taxable income of the allocating institution at the time of 
allocation.
    (g) Perpetual stock or equity means stock or equity not having a 
maturity date, not redeemable at the option of the holder, and having no 
other provisions that will require the future redemption of the issue.
    (h) Qualified allocated equities means allocations of earnings that 
are deducted from the gross taxable income of the allocating institution 
and designated to the institution's members.
    (i) Total surplus means:
    (1) Undistributed earnings/unallocated surplus;
    (2) Allocated equities, including allocated surplus and stock, that 
are not subject to a plan or practice of revolvement or retirement of 5 
years or

[[Page 178]]

less and are eligible to be included in permanent capital pursuant to 
Sec. 615.5201(j)(4)(iv); and
    (3) Stock (other than allocated stock) that is not purchased or held 
as a condition of obtaining a loan, provided that it is either perpetual 
stock or term stock with an original maturity of at least 5 years, and 
provided that the institution has no established plan or practice of 
retiring such perpetual stock or of retiring such term stock prior to 
its stated maturity. The amount of term stock that is eligible to be 
included in total surplus shall be reduced by 20 percent (net of 
redemptions) at the beginning of each of the last 5 years of the term of 
the instrument.
    (4) The total surplus of an institution shall exclude the net effect 
of all transactions covered by the definition of ``accumulated other 
comprehensive income'' contained in the Statement of Financial 
Accounting Standards No. 130, as promulgated by the Financial Accounting 
Standards Board.
    (5) A capital instrument or a particular balance sheet entry or 
account that the Farm Credit Administration has determined to be the 
functional equivalent of a component of total surplus. The Farm Credit 
Administration may permit one or more institutions to include all or a 
portion of such instrument, entry, or account as total surplus, 
permanently or on a temporary basis, for purposes of this subpart.
    (6) The Farm Credit Administration may, if it finds that a 
particular component, balance sheet entry, or account has 
characteristics or terms that diminish its contribution to an 
institution's ability to absorb losses, require the deduction of all or 
a portion of such component, entry, or account from total surplus.
    (7) Any deductions made by an institution in the computation of its 
permanent capital pursuant to Sec. 615.5210(e) shall also be made in the 
computation of its total surplus.

[62 FR 4447, Jan. 30, 1997; 62 FR 19219, Apr. 21, 1997; 63 FR 39228, 
July 22, 1998]



Sec. 615.5330  Minimum surplus ratios.

    (a) Total surplus. (1) Each institution shall achieve and at all 
times maintain a ratio of a least 7 percent of total surplus to the 
risk-adjusted asset base.
    (2) The risk-adjusted asset base is the total dollar amount of the 
institution's assets adjusted in accordance with Sec. 615.5301(i)(7) and 
weighted on the basis of risk in accordance with Sec. 615.5210(f).
    (b) Core surplus. (1) Each institution shall achieve and at all 
times maintain a ratio of core surplus to the risk-adjusted asset base 
of a least 3.5 percent, of which no more than 2 percentage points may 
consist of allocated equities otherwise includible pursuant to 
Sec. 615.5301(b).
    (2) Each association shall compute its core surplus ratio by 
deducting an amount equal to the net investment in the bank from its 
core surplus.
    (3) The risk-adjusted asset base is the total dollar amount of the 
institution's assets adjusted in accordance with Secs. 615.5301(b)(3) 
and 615.5330(b)(2), and weighted on the basis of risk in accordance with 
Sec. 615.5210(f).
    (c) An institution shall compute its risk-adjusted asset base, total 
surplus, and core surplus ratios using average daily balances for the 
most recent 3 months.

[63 FR 39228, July 22, 1998]



Sec. 615.5335  Bank net collateral ratio.

    (a) Each bank shall achieve and at all times maintain a net 
collateral ratio of at least 103 percent.
    (b) At a minimum, a bank shall compute its net collateral ratio as 
of the end of each month. A bank shall have the capability to compute 
its net collateral ratio a day after the close of a business day using 
the daily balances outstanding for assets and liabilities for that date.

[63 FR 39229, July 22, 1998]



Sec. 615.5336  Compliance and reporting.

    (a) Noncompliance and reporting. An institution that meets the 
minimum applicable surplus ratios and net collateral ratio established 
in Secs. 615.5330 and 615.5335 at or after the end of the quarter in 
which these regulations become effective and subsequently falls below 
one or more minimum requirements shall be in violation of the applicable 
regulations. Such institution shall report its noncompliance to the

[[Page 179]]

Farm Credit Administration within 20 calendar days following the month 
end in which the institution initially determines that it is not in 
compliance with the requirements.
    (b) Initial compliance and reporting requirements.
    (1) An institution that fails to satisfy one or more of its minimum 
applicable surplus and net collateral ratios at the end of the quarter 
in which these regulations become effective shall report its initial 
noncompliance to the Farm Credit Administration within 20 days following 
such quarter end and shall also submit a capital restoration plan for 
achieving and maintaining the standards, demonstrating appropriate 
annual progress toward meeting the goal, to the Farm Credit 
Administration within 60 days following such quarter end. If the capital 
restoration plan is not approved by the Farm Credit Administration, the 
Agency shall inform the institution of the reasons for disapproval, and 
the institution shall submit a revised capital restoration plan within 
the time specified by the Farm Credit Administration.
    (2) Approval of compliance plans. In determining whether to approve 
a capital restoration plan submitted under this section, the FCA shall 
consider the following factors, as applicable:
    (i) The conditions or circumstances leading to the institution's 
falling below minimum levels, the exigency of those circumstances, and 
whether or not they were caused by actions of the institution or were 
beyond the institution's control;
    (ii) The overall condition, management strength, and future 
prospects of the institution and, if applicable, affiliated System 
institutions;
    (iii) The institution's capital, adverse assets (including 
nonaccrual and nonperforming loans), allowance for loss, and other 
ratios compared to the ratios of its peers or industry norms;
    (iv) How far an institution's ratios are below the minimum 
requirements;
    (v) The estimated rate at which the institution can reasonably be 
expected to generate additional earnings;
    (vi) The effect of the business changes required to increase 
capital;
    (vii) The institution's previous compliance practices, as 
appropriate;
    (viii) The views of the institution's directors and senior 
management regarding the plan; and
    (ix) Any other facts or circumstances that the FCA deems relevant.
    (3) An institution shall be deemed to be in compliance with the 
surplus and collateral requirements of this subpart if it is in 
compliance with a capital restoration plan that is approved by the Farm 
Credit Administration within 180 days following the end of the quarter 
in which these regulations become effective.



  Subpart L--Establishment of Minimum Capital Ratios for an Individual 
                               Institution

    Source: 62 FR 4448, Jan. 30, 1997, unless otherwise noted.



Sec. 615.5350  General--Applicability.

    (a) The rules and procedures specified in this subpart are 
applicable to a proceeding to establish required minimum capital ratios 
that would otherwise be applicable to an institution under 
Secs. 615.5205, 615.5330, and 615.5335. The Farm Credit Administration 
is authorized to establish such minimum capital requirements for an 
institution as the Farm Credit Administration, in its discretion, deems 
to be necessary or appropriate in light of the particular circumstances 
of the institution. Proceedings under this subpart also may be initiated 
to require an institution having capital ratios greater than those set 
forth in Secs. 615.5205, 615.5330, or 615.5335 to continue to maintain 
those higher ratios.
    (b) The Farm Credit Administration may require higher minimum 
capital ratios for an individual institution in view of its 
circumstances. For example, higher capital ratios may be appropriate 
for:
    (1) An institution receiving special supervisory attention;
    (2) An institution that has, or is expected to have, losses 
resulting in capital inadequacy;
    (3) An institution with significant exposure due to operational 
risk, interest rate risk, the risks from concentrations of credit, 
certain risks arising

[[Page 180]]

from other products, services, or related activities, or management's 
overall inability to monitor and control financial risks presented by 
concentrations of credit and related services activities;
    (4) An institution exposed to a high volume of, or particularly 
severe, problem loans;
    (5) An institution that is growing rapidly; or
    (6) An institution that may be adversely affected by the activities 
or condition of System institutions with which it has significant 
business relationships or in which it has significant investments.
    (7) An institution with significant exposures to declines in net 
income or in the market value of its capital due to a change in interest 
rates and/or the exercising of embedded or explicit options.

[62 FR 4448, Jan. 30, 1997, as amended at 63 FR 39229, July 22, 1998]



Sec. 615.5351  Standards for determination of appropriate individual institution minimum capital ratios.

    The appropriate minimum capital ratios for an individual institution 
cannot be determined solely through the application of a rigid 
mathematical formula or wholly objective criteria. The decision is 
necessarily based in part on subjective judgment grounded in Agency 
expertise. The factors to be considered in the determination will vary 
in each case and may include, for example:
    (a) The conditions or circumstances leading to the Farm Credit 
Administration's determination that higher minimum capital ratios are 
appropriate or necessary for the institution;
    (b) The exigency of those circumstances or potential problems;
    (c) The overall condition, management strength, and future prospects 
of the institution and, if applicable, affiliated institutions;
    (d) The institution's capital, adverse assets (including nonaccrual 
and nonperforming loans), allowance for loss, and other ratios compared 
to the ratios of its peers or industry norms; and
    (e) The views of the institution's directors and senior management.



Sec. 615.5352  Procedures.

    (a) Notice. When the Farm Credit Administration determines that 
minimum capital ratios greater than those set forth in Secs. 615.5205, 
615.5330, or 615.5335 are necessary or appropriate for a particular 
institution, the Farm Credit Administration will notify the institution 
in writing of the proposed minimum capital ratios and the date by which 
they should be reached (if applicable) and will provide an explanation 
of why the ratios proposed are considered necessary or appropriate for 
the institution.
    (b) Response. (1) The institution may respond to any or all of the 
items in the notice. The response should include any matters which the 
institution would have the Farm Credit Administration consider in 
deciding whether individual minimum capital ratios should be established 
for the institution, what those capital ratios should be, and, if 
applicable, when they should be achieved. The response must be in 
writing and delivered to the designated Farm Credit Administration 
official within 30 days after the date on which the institution received 
the notice. In its discretion, the Farm Credit Administration may extend 
the time period for good cause. The Farm Credit Administration may 
shorten the time period with the consent of the institution or when, in 
the opinion of the Farm Credit Administration, the condition of the 
institution so requires, provided that the institution is informed 
promptly of the new time period.
    (2) Failure to respond within 30 days or such other time period as 
may be specified by the Farm Credit Administration shall constitute a 
waiver of any objections to the proposed minimum capital ratios or the 
deadline for their achievement.
    (c) Decision. After the close of the institution's response period, 
the Farm Credit Administration will decide, based on a review of the 
institution's response and other information concerning the institution, 
whether individual minimum capital ratios should be established for the 
institution and, if so, the ratios and the date the requirements will 
become effective. The institution will be notified of the decision in 
writing. The notice will include

[[Page 181]]

an explanation of the decision, except for a decision not to establish 
individual minimum capital requirements for the institution.
    (d) Submission of plan. The decision may require the institution to 
develop and submit to the Farm Credit Administration, within a time 
period specified, an acceptable plan to reach the minimum capital ratios 
established for the institution by the date required.
    (e) Reconsideration based on change in circumstances. If, after the 
Farm Credit Administration's decision in paragraph (c) of this section, 
there is a change in the circumstances affecting the institution's 
capital adequacy or its ability to reach the required minimum capital 
ratios by the specified date, either the institution or the Farm Credit 
Administration may propose a change in the minimum capital ratios for 
the institution, the date when the minimums must be achieved, or the 
institution's plan (if applicable). The Farm Credit Administration may 
decline to consider proposals that are not based on a significant change 
in circumstances or are repetitive or frivolous. Pending a decision on 
reconsideration, the Farm Credit Administration's original decision and 
any plan required under that decision shall continue in full force and 
effect.



Sec. 615.5353  Relation to other actions.

    In lieu of, or in addition to, the procedures in this subpart, the 
required minimum capital ratios for an institution may be established or 
revised through a written agreement or cease and desist proceedings 
under part C of title V of the Act, or as a condition for approval of an 
application.



Sec. 615.5354  Enforcement.

    An institution that does not have or maintain the minimum capital 
ratios applicable to it, whether required in subparts H and K of this 
part, in a decision pursuant to this subpart, in a written agreement or 
temporary or final order under part C of title V of the Act, or in a 
condition for approval of an application, or an institution that has 
failed to submit or comply with an acceptable plan to attain those 
ratios, will be subject to such administrative action or sanctions as 
the Farm Credit Administration considers appropriate. These sanctions 
may include the issuance of a capital directive pursuant to subpart M of 
this part or other enforcement action, assessment of civil money 
penalties, and/or the denial or condition of applications.



               Subpart M--Issuance of a Capital Directive

    Source: 62 FR 4449, Jan. 30, 1997, unless otherwise noted.



Sec. 615.5355  Purpose and scope.

    (a) This subpart is applicable to proceedings by the Farm Credit 
Administration to issue a capital directive under sections 4.3(b) and 
4.3A(e) of the Act. A capital directive is an order issued to an 
institution that does not have or maintain capital at or greater than 
the minimum ratios set forth in Secs. 615.5205, 615.5330, and 615.5335; 
or established for the institution under subpart L, by a written 
agreement under part C of title V of the Act, or as a condition for 
approval of an application. A capital directive may order the 
institution to:
    (1) Achieve the minimum capital ratios applicable to it by a 
specified date;
    (2) Adhere to a previously submitted plan to achieve the applicable 
capital ratios;
    (3) Submit and adhere to a plan acceptable to the Farm Credit 
Administration describing the means and time schedule by which the 
institution shall achieve the applicable capital ratios;
    (4) Take other action, such as reduction of assets or the rate of 
growth of assets, restrictions on the payment of dividends or patronage, 
or restrictions on the retirement of stock, to achieve the applicable 
capital ratios, or reduce levels of interest rate and other risk 
exposures, or strengthen management expertise, or improve management 
information and measurement systems; or
    (5) A combination of any of these or similar actions.
    (b) A capital directive may also be issued to the board of directors 
of an institution, requiring such board to comply with the requirements 
of section 4.3A(d) of the Act prohibiting the reduction of permanent 
capital.

[[Page 182]]

    (c) A capital directive issued under this rule, including a plan 
submitted under a capital directive, is enforceable in the same manner 
and to the same extent as an effective and outstanding cease and desist 
order which has become final as defined in section 5.25 of the Act. 
Violation of a capital directive may result in assessment of civil money 
penalties in accordance with section 5.32 of the Act.

[62 FR 4449, Jan. 30, 1997, as amended at 63 FR 39229, July 22, 1998]



Sec. 615.5356  Notice of intent to issue a capital directive.

    The Farm Credit Administration will notify an institution in writing 
of its intention to issue a capital directive. The notice will state:
    (a) The reasons for issuance of the capital directive;
    (b) The proposed contents of the capital directive, including the 
proposed date for achieving the minimum capital requirement; and
    (c) Any other relevant information concerning the decision to issue 
a capital directive.



Sec. 615.5357  Response to notice.

    (a) An institution may respond to the notice by stating why a 
capital directive should not be issued and/or by proposing alternative 
contents for the capital directive or seeking other appropriate relief. 
The response shall include any information, mitigating circumstances, 
documentation, or other relevant evidence that supports its position. 
The response may include a plan for achieving the minimum capital ratios 
applicable to the institution. The response must be in writing and 
delivered to the Farm Credit Administration within 30 days after the 
date on which the institution received the notice. In its discretion, 
the Farm Credit Administration may extend the time period for good 
cause. The Farm Credit Administration may shorten the 30-day time 
period:
    (1) When, in the opinion of the Farm Credit Administration, the 
condition of the institution so requires, provided that the institution 
shall be informed promptly of the new time period;
    (2) With the consent of the institution; or
    (3) When the institution already has advised the Farm Credit 
Administration that it cannot or will not achieve its applicable minimum 
capital ratios.
    (b) Failure to respond within 30 days or such other time period as 
may be specified by the Farm Credit Administration shall constitute a 
waiver of any objections to the proposed capital directive.



Sec. 615.5358  Decision.

    After the closing date of the institution's response period, or 
receipt of the institution's response, if earlier, the Farm Credit 
Administration may seek additional information or clarification of the 
response. Thereafter, the Farm Credit Administration will determine 
whether or not to issue a capital directive, and if one is to be issued, 
whether it should be as originally proposed or in modified form.



Sec. 615.5359  Issuance of a capital directive.

    (a) A capital directive will be served by delivery to the 
institution. It will include or be accompanied by a statement of reasons 
for its issuance.
    (b) A capital directive is effective immediately upon its receipt by 
the institution, or upon such later date as may be specified therein, 
and shall remain effective and enforceable until it is stayed, modified, 
or terminated by the Farm Credit Administration.



Sec. 615.5360  Reconsideration based on change in circumstances.

    Upon a change in circumstances, an institution may request the Farm 
Credit Administration to reconsider the terms of its capital directive 
or may propose changes in the plan to achieve the institution's 
applicable minimum capital ratios. The Farm Credit Administration also 
may take such action on its own motion. The Farm Credit Administration 
may decline to consider requests or proposals that are not based on a 
significant change in circumstances or are repetitive or frivolous. 
Pending a decision on reconsideration, the capital directive and plan 
shall continue in full force and effect.

[[Page 183]]



Sec. 615.5361  Relation to other administrative actions.

    A capital directive may be issued in addition to, or in lieu of, any 
other action authorized by law, including cease and desist proceedings, 
civil money penalties, or the conditioning or denial of applications. 
The Farm Credit Administration also may, in its discretion, take any 
action authorized by law, in lieu of a capital directive, in response to 
an institution's failure to achieve or maintain the applicable minimum 
capital ratios.

Subpart N [Reserved]



       Subpart O--Book-Entry Procedures for Farm Credit Securities

    Source: 61 FR 67192, Dec. 20, 1996, unless otherwise noted.



Sec. 615.5450  Definitions.

    In this subpart, unless the context otherwise requires or indicates:
    (a) Adverse claim means a claim that a claimant has a property 
interest in a security and that it is a violation of the rights of the 
claimant for another person to hold, transfer, or deal with the 
security.
    (b) Book-entry security means a Farm Credit security issued or 
maintained in the Book-entry System.
    (c) Book-entry System means the automated book-entry system operated 
by the Federal Reserve Banks, acting as the fiscal agent for the Farm 
Credit banks, through which book-entry securities are issued, recorded, 
transferred and maintained in book-entry form.
    (d) Definitive Farm Credit security means a Farm Credit security in 
engraved or printed form, or that is otherwise represented by a 
certificate.
    (e) Eligible book-entry security means a book-entry security issued 
or maintained in the Book-entry System, which by the terms of its 
securities documentation, is eligible to be converted from book-entry 
into definitive form.
    (f) Entitlement Holder means a person to whose account an interest 
in a book-entry security is credited on the records of a securities 
intermediary.
    (g) Farm Credit banks means one or more Farm Credit Banks, 
agricultural credit banks, and banks for cooperatives.
    (h) Farm Credit securities means consolidated notes, bonds, 
debentures, or other similar obligations of the Farm Credit banks and 
Systemwide notes, bonds, debentures, or similar obligations of the Farm 
Credit banks issued under sections 4.2(c) and 4.2(d), respectively, of 
the Act, or laws repealed thereby.
    (i) Federal Reserve Bank means a Federal Reserve Bank or Branch 
acting as agent for the Farm Credit banks and the Funding Corporation.
    (j) Federal Reserve Bank Operating Circular means the publication 
issued by each Federal Reserve Bank that sets forth the terms and 
conditions under which the Federal Reserve Bank maintains book-entry 
securities accounts and transfers book-entry securities.
    (k) Funding Corporation means the Federal Farm Credit Banks Funding 
Corporation established pursuant to section 4.9 of the Act, which issues 
Farm Credit securities on behalf of the Farm Credit banks.
    (l) Funds Account means a reserve and/or clearing account at a 
Federal Reserve Bank to which debits or credits are posted for transfers 
against payment, book-entry securities transaction fees, or principal 
and interest payments.
    (m) Participant means a person that maintains a participant's 
securities account with a Federal Reserve Bank.
    (n) Participant's Securities Account means an account in the name of 
a participant at a Federal Reserve Bank to which book-entry securities 
held for a participant are or may be credited.
    (o) Person means an individual, corporation, company, governmental 
entity, association, firm, partnership, trust, estate, representative 
and any other similar organization, but does not mean the United States, 
a Farm Credit bank, the Funding Corporation or a Federal Reserve Bank.
    (p) Revised Article 8 means Uniform Commercial Code, Revised Article 
8, Investment Securities (with Conforming and Miscellaneous Amendments 
to Articles 1, 3, 4, 5, 9, and 10)

[[Page 184]]

1994 Official Text, and has the same meaning as in 31 CFR 357.2.
    (q) Securities Documentation means the applicable statement of 
terms, trust indenture, securities agreement, offering circular or other 
documents establishing the terms of a book-entry security.
    (r) Securities Intermediary means:
    (1) A person that is registered as a ``clearing agency'' under the 
Federal securities laws; a Federal Reserve Bank; any other person that 
provides clearance or settlement services with respect to a book-entry 
security that would require it to register as a clearing agency under 
the Federal securities laws but for an exclusion or exemption from the 
registration requirement, if its activities as a clearing corporation, 
including promulgation of rules, are subject to regulation by a Federal 
or State governmental authority; or
    (2) A person (other than an individual, unless such individual is 
registered as a broker or dealer under the Federal securities laws) 
including a bank or broker, that in the ordinary course of its business 
maintains securities accounts for others and is acting in that capacity.
    (s) Security means a Farm Credit security as defined in paragraph 
(h) of this section.
    (t) Security Entitlement means the rights and property interest of 
an entitlement holder with respect to a book-entry security.
    (u) State means any State of the United States, the District of 
Columbia, Puerto Rico, the Virgin Islands, or any other territory or 
possession of the United States.
    (v) Transfer Message means an instruction of a participant to a 
Federal Reserve Bank to effect a transfer of a book-entry security 
maintained in the Book-entry System, as set forth in Federal Reserve 
Bank Operating Circulars.

[61 FR 67192, Dec. 20, 1996, as amended at 62 FR 53229, Oct. 14, 1997]



Sec. 615.5451  Book-entry and definitive securities.

    Subject to subpart C of this part:
    (a) Farm Credit banks operating under the same title of the Act may 
issue consolidated securities in book-entry form.
    (b) Farm Credit banks may issue Systemwide securities in book-entry 
form.
    (c) Consolidated and Systemwide securities also may be issued in 
either registered or bearer definitive form.

[61 FR 67192, Dec. 20, 1996, as amended at 62 FR 53229, Oct. 14, 1997]



Sec. 615.5452  Law governing rights and obligations of Federal Reserve Banks, Farm Credit banks, and Funding Corporation; rights of any person against Federal 
          Reserve Banks, Farm Credit banks, and Funding Corporation.

    (a) Except as provided in paragraph (b) of this section, the 
following are governed solely by the regulations contained in this 
subpart O, the securities documentation, and Federal Reserve Bank 
Operating Circulars:
    (1) The rights and obligations of the Farm Credit banks, the Funding 
Corporation, and the Federal Reserve Banks with respect to:
    (i) A book-entry security or security entitlement, and
    (ii) The operation of the Book-entry System as it applies to Farm 
Credit securities; and
    (2) The rights of any person, including a participant, against the 
Farm Credit banks, the Funding Corporation, and the Federal Reserve 
Banks with respect to:
    (i) A book-entry security or security entitlement, and
    (ii) The operation of the Book-entry System as it applies to Farm 
Credit securities.
    (b) A security interest in a security entitlement that is in favor 
of a Federal Reserve Bank from a participant and that is not recorded on 
the books of a Federal Reserve Bank pursuant to Sec. 615.5454(c)(1) of 
this subpart, is governed by the law (not including the conflict-of-law 
rules) of the jurisdiction where the head office of the Federal Reserve 
Bank maintaining the participant's securities account is located. A 
security interest in a security entitlement that is in favor of a 
Federal Reserve Bank from a person that is not a participant, and that 
is not recorded on the books of a Federal Reserve Bank pursuant to 
Sec. 615.5454(c)(1)of

[[Page 185]]

this subpart, is governed by the law determined in the manner specified 
in Sec. 615.5453 of this subpart.
    (c) If the jurisdiction specified in the first sentence of paragraph 
(b) of this section is a State that has not adopted revised Article 8 
(see 31 CFR 357.2) then the law specified in paragraph (b) of this 
section shall be the law of that State as though revised Article 8 had 
been adopted by that State.

[61 FR 67192, Dec. 20, 1996, as amended at 62 FR 53229, Oct. 14, 1997]



Sec. 615.5453  Law governing other interests.

    (a) To the extent not inconsistent with these regulations, the law 
(not including the conflict-of-law rules) of a securities intermediary's 
jurisdiction governs:
    (1) The acquisition of a security entitlement from the securities 
intermediary;
    (2) The rights and duties of the securities intermediary and 
entitlement holder arising out of a security entitlement;
    (3) Whether the securities intermediary owes any duties to an 
adverse claimant to a security entitlement;
    (4) Whether an adverse claim can be asserted against a person who 
acquires a security entitlement from the securities intermediary or a 
person who purchases a security entitlement or interest therein from an 
entitlement holder; and
    (5) Except as otherwise provided in paragraph (c) of this section, 
the perfection, effect of perfection or non-perfection and priority of a 
security interest in a security entitlement.
    (b) The following rules determine a ``securities intermediary's 
jurisdiction'' for purposes of this section:
    (1) If an agreement between the securities intermediary and its 
entitlement holder specifies that it is governed by the law of a 
particular jurisdiction, that jurisdiction is the securities 
intermediary's jurisdiction.
    (2) If an agreement between the securities intermediary and its 
entitlement holder does not specify the governing law as provided in 
paragraph (b)(1) of this section, but expressly specifies that the 
securities account is maintained at an office in a particular 
jurisdiction, that jurisdiction is the securities intermediary's 
jurisdiction.
    (3) If an agreement between the securities intermediary and its 
entitlement holder does not specify a jurisdiction as provided in 
paragraph (b)(1) or (b)(2) of this section, the securities 
intermediary's jurisdiction is the jurisdiction in which is located the 
office identified in an account statement as the office serving the 
entitlement holder's account.
    (4) If an agreement between the securities intermediary and its 
entitlement holder does not specify a jurisdiction as provided in 
paragraph (b)(1) or (b)(2) of this section and an account statement does 
not identify an office serving the entitlement holder's account as 
provided in paragraph (b)(3) of this section, the securities 
intermediary's jurisdiction is the jurisdiction in which is located the 
chief executive office of the securities intermediary.
    (c) Notwithstanding the general rule in paragraph (a)(5) of this 
section, the law (but not the conflict-of-law rules) of the jurisdiction 
in which the person creating a security interest is located governs 
whether and how the security interest may be perfected automatically or 
by filing a financing statement.
    (d) If the jurisdiction specified in paragraph (b) of this section 
is a State that has not adopted revised Article 8 (see 31 CFR 357.2), 
then the law for the matters specified in paragraph (a) of this section 
shall be the law of that State as though revised Article 8 had been 
adopted by that State. For purposes of the application of the matters 
specified in paragraph (a) of this section, the Federal Reserve Bank 
maintaining the securities account is a clearing corporation, and the 
participant's interest in a book-entry security is a security 
entitlement.



Sec. 615.5454  Creation of participant's security entitlement; security interests.

    (a) A participant's security entitlement is created when a Federal 
Reserve Bank indicates by book entry that a book-entry security has been 
credited to a participant's securities account.

[[Page 186]]

    (b) A security interest in a security entitlement of a participant 
in favor of the United States to secure deposits of public money, 
including without limitation deposits to the Treasury tax and loan 
accounts, or other security interest in favor of the United States that 
is required by Federal statute, regulation, or agreement, and that is 
marked on the books of a Federal Reserve Bank is thereby effected and 
perfected, and has priority over any other interest in the securities. 
Where a security interest in favor of the United States in a security 
entitlement of a participant is marked on the books of a Federal Reserve 
Bank, such Federal Reserve Bank may rely, and is protected in relying, 
exclusively on the order of an authorized representative of the United 
States directing the transfer of the security. For purposes of this 
paragraph, an ``authorized representative of the United States'' is the 
official designated in the applicable regulations or agreement to which 
a Federal Reserve Bank is a party, governing the security interest.
    (c)(1) The Farm Credit Banks, the Funding Corporation, and the 
Federal Reserve Banks have no obligation to agree to act on behalf of 
any person or to recognize the interest of any transferee of a security 
interest or other limited interest in favor of any person except to the 
extent of any specific requirement of Federal law or regulation or to 
the extent set forth in any specific agreement with the Federal Reserve 
Bank on whose books the interest of the participant is recorded. To the 
extent required by such law or regulation or set forth in an agreement 
with a Federal Reserve Bank, or the Federal Reserve Bank Operating 
Circular, a security interest in a security entitlement that is in favor 
of a Federal Reserve Bank, a Farm Credit Bank, the Funding Corporation, 
or a person may be created and perfected by a Federal Reserve Bank 
marking its books to record the security interest. Except as provided in 
paragraph (b) of this section, a security interest in a security 
entitlement marked on the books of a Federal Reserve Bank shall have 
priority over any other interest in the securities.
    (2) In addition to the method provided in paragraph (c)(1) of this 
section, a security interest, including a security interest in favor of 
a Federal Reserve Bank, may be perfected by any method by which a 
security interest may be perfected under applicable law as described in 
Sec. 615.5452(b) or Sec. 615.5453 of this subpart. The perfection, 
effect of perfection or non-perfection and priority of a security 
interest are governed by that applicable law. A security interest in 
favor of a Federal Reserve Bank shall be treated as a security interest 
in favor of a clearing corporation in all respects under that law, 
including with respect to the effect of perfection and priority of the 
security interest. A Federal Reserve Bank Operating Circular shall be 
treated as a rule adopted by a clearing corporation for such purposes.

[62 FR 67192, Dec. 20, 1996, as amended at 62 FR 53229, Oct. 14, 1997]



Sec. 615.5455  Obligations of the Farm Credit banks and the Funding Corporation; no adverse claims.

    (a) Except in the case of a security interest in favor of the United 
States or a Federal Reserve Bank or otherwise as provided in 
Sec. 615.5454(c)(1), for the purposes of this subpart O, the Farm Credit 
banks, the Funding Corporation and the Federal Reserve Banks shall treat 
the participant to whose securities account an interest in a book-entry 
security has been credited as the person exclusively entitled to issue a 
transfer message, to receive interest and other payments with respect 
thereof and otherwise to exercise all the rights and powers with respect 
to such security, notwithstanding any information or notice to the 
contrary. The Federal Reserve Banks, the Farm Credit banks, and the 
Funding Corporation are not liable to a person asserting or having an 
adverse claim to a security entitlement or to a book-entry security in a 
participant's securities account, including any such claim arising as a 
result of the transfer or disposition of a book-entry security by a 
Federal Reserve Bank pursuant to a transfer message that the Federal 
Reserve Bank reasonably believes to be genuine.

[[Page 187]]

    (b) The obligation of the Farm Credit banks and the Funding 
Corporation to make payments (including payments of interest and 
principal) with respect to book-entry securities is discharged at the 
time payment in the appropriate amount is made as follows:
    (1) Interest or other payments on book-entry securities are either 
credited by a Federal Reserve Bank to a funds account maintained at the 
Federal Reserve Bank or otherwise paid as directed by the participant.
    (2) Book-entry securities are redeemed in accordance with their 
terms by a Federal Reserve Bank withdrawing the securities from the 
participant's securities account in which they are maintained and by 
either crediting the amount of the redemption proceeds, including both 
principal and interest, where applicable, to a funds account at the 
Federal Reserve Bank or otherwise paying such principal and interest as 
directed by the participant. No action by the participant is required in 
connection with the redemption of a book-entry security.

[61 FR 67192, Dec. 20, 1996, as amended at 62 FR 53229, Oct. 14, 1997]



Sec. 615.5456  Authority of Federal Reserve Banks.

    (a) Each Federal Reserve Bank is hereby authorized as fiscal agent 
of the Farm Credit banks and the Funding Corporation to perform 
functions with respect to the issuance of book-entry securities offered 
and sold by the Farm Credit banks and the Funding Corporation to which 
this subpart applies, in accordance with the terms of the securities 
documentation and the provisions of this subpart:
    (1) To service and maintain book-entry securities in accounts 
established for such purposes;
    (2) To make payments of principal and interest, as directed by the 
Farm Credit banks and the Funding Corporation;
    (3) To effect transfer of book-entry securities between 
participants' securities accounts as directed by the participants;
    (4) To effect conversions between book-entry securities and 
definitive Farm Credit securities with respect to those securities as to 
which conversion rights are available pursuant to the applicable 
securities documentation; and
    (5) To perform such other duties as fiscal agent as may be requested 
by the Farm Credit banks and the Funding Corporation.
    (b) Each Federal Reserve Bank may issue Operating Circulars not 
inconsistent with this subpart, governing the details of its handling of 
book-entry securities, security entitlements, and the operation of the 
Book-entry System under this subpart.



Sec. 615.5457  Withdrawal of eligible book-entry securities for conversion to definitive form.

    (a) Eligible book-entry securities may be withdrawn from the Book-
entry System by requesting delivery of like definitive Farm Credit 
securities.
    (b) A Federal Reserve Bank shall, upon receipt of appropriate 
instructions to withdraw eligible book-entry securities from book-entry 
in the Book-entry System, convert such securities into definitive Farm 
Credit securities and deliver them in accordance with such instructions.
    (c) Farm Credit securities which are to be delivered upon withdrawal 
may be issued in either registered or bearer form, to the extent 
permitted by the applicable securities documentation.
    (d) All requests for withdrawal of eligible book-entry securities 
must be made prior to the maturity or the applicable date of call of the 
Farm Credit securities.

[61 FR 67192, Dec. 20, 1996, as amended at 62 FR 53230, Oct. 14, 1997]



Sec. 615.5458  Waiver of regulations.

    The Farm Credit Administration reserves the right, in the Farm 
Credit Administration's discretion, to waive any provision(s) of the 
regulations in this subpart in any case or class of cases for the 
convenience of the Farm Credit banks and the Funding Corporation or in 
order to relieve any person(s) of unnecessary hardship, if such action 
is not inconsistent with law, does not adversely affect any substantial 
existing rights, and the Farm Credit Administration is satisfied that 
such action will not subject the Farm Credit banks and the Funding 
Corporation to any substantial expense or liability.

[[Page 188]]



Sec. 615.5459  Liability of Farm Credit banks, Funding Corporation and Federal Reserve Banks.

    The Farm Credit banks, the Funding Corporation, and the Federal 
Reserve Banks may rely on the information provided in a transfer message 
or other transaction documentation, and are not required to verify the 
information. The Farm Credit banks, the Funding Corporation, and the 
Federal Reserve Banks shall not be liable for any action taken in 
accordance with the information set out in the transfer message, other 
transaction documentation, or evidence submitted in support thereof.



Sec. 615.5460  Additional provisions.

    (a) Additional requirements. In any case or any class of cases 
arising under the regulations in this subpart, the Farm Credit banks and 
the Funding Corporation may require such additional evidence and a bond 
of indemnity, with or without surety, as may in the judgment of the Farm 
Credit banks and the Funding Corporation be necessary for the protection 
of the interests of the Farm Credit banks and the Funding Corporation.
    (b) Notice of attachment for Farm Credit securities in the Book-
entry System. The interest of a debtor in a security entitlement may be 
reached by a creditor only by legal process upon the securities 
intermediary with whom the debtor's securities account is maintained, 
except where a security entitlement is maintained in the name of a 
secured party, in which case the debtor's interest may be reached by 
legal process upon the secured party. These regulations do not purport 
to establish whether a Federal Reserve Bank is required to honor an 
order or other notice of attachment in any particular case or class of 
cases.
    (c) Conversion of definitive securities into book-entry securities. 
Definitive Farm Credit securities may be converted to book-entry form in 
accordance with the terms of the applicable securities documentation and 
Federal Reserve Operating Circular.

[61 FR 67192, Dec. 20, 1996, as amended at 62 FR 53230, Oct. 14, 1997]



Sec. 615.5461  Lost, stolen, destroyed, mutilated or defaced Farm Credit securities, including coupons.

    (a) Relief on the account of the loss, theft, destruction, 
mutilation, or defacement of any definitive consolidated or Systemwide 
securities of the Farm Credit banks and coupons of such securities may 
be granted on the same basis and to the same extent as relief may be 
granted under the statutes of the United States and the regulations of 
the Department of the Treasury on the account of the loss, theft, 
destruction, mutilation, or defacement of United States securities and 
coupons of such securities.
    (b) Applicants for relief under paragraph (a) of this section, shall 
present claims and proof of loss:
    (1) To the Division of Special Investments, Bureau of the Public 
Debt, P.O. Box 396, Parkersburg, WV 26102-0396, in the case of 
consolidated or Systemwide securities of the Farm Credit banks issued 
prior to May 1, 1978; or
    (2) To the Federal Farm Credit Banks Funding Corporation, 10 
Exchange Place, Suite 1401, Jersey City, NJ 07302, in the case of 
consolidated or Systemwide securities issued on or after May 1, 1978.



Sec. 615.5462  Restrictive endorsement of bearer securities.

    When consolidated and Systemwide bearer securities of the Farm 
Credit banks are being presented to Federal Reserve Banks, for 
redemption, exchange, or conversion to book entry, such securities may 
be restrictively endorsed. The restrictive endorsement shall be placed 
thereon in substantially the same manner and with the same effects as 
prescribed in United States Treasury Department regulations, now or 
hereafter in force, governing like transactions in United States bonds; 
and consolidated or Systemwide securities of the Farm Credit banks so 
endorsed shall be prepared for shipment and shipped in the manner 
prescribed in such regulations for United States bearer securities. (See 
31 CFR part 328.)

[[Page 189]]



                    Subpart P--Global Debt Securities



Sec. 615.5500  Definitions.

    In this subpart, unless the context otherwise requires or indicates:
    (a) Global debt securities means consolidated Systemwide debt 
securities issued by the Funding Corporation on behalf of the Farm 
Credit banks under section 4.2(d) of the Act through a fiscal agent or 
agents and distributed either exclusively outside the United States or 
simultaneously inside and outside the United States.
    (b) Global agent means any fiscal agent, other than the Federal 
Reserve Banks, used by the Funding Corporation to facilitate the sale of 
global debt securities.

[60 FR 57919, Nov. 24, 1995]



Sec. 615.5502  Issuance of global debt securities.

    (a) The Funding Corporation may provide for the sale of global debt 
securities on behalf of the Farm Credit banks through a global agent or 
agents by negotiation, offer, bid, or syndicate sale, and deliver such 
obligations by book-entry, wire transfer, or such other means as may be 
appropriate.
    (b) The Funding Corporation Board of Directors shall establish 
appropriate criteria for the selection of global agents and shall 
approve each global agent.

[60 FR 57919, Nov. 24, 1995]



                     Subpart Q--Bankers Acceptances



Sec. 615.5550  Bankers acceptances.

    Subject to the provisions of Sec. 614.4710, banks for cooperatives 
may rediscount with other purchasers the acceptances they have created. 
The bank for cooperatives' board of directors, under established 
policies, may delegate this authority to management.

[55 FR 24888, June 19, 1990]



     Subpart R--Farm Credit System Financial Assistance Corporation 
                               Securities



Sec. 615.5560  Book-entry Procedure for Farm Credit System Financial Assistance Corporation Securities.

    (a) The Farm Credit System Financial Assistance Corporation 
(Financial Assistance Corporation) is a federally chartered 
instrumentality of the United States, and an institution of the Farm 
Credit System, subject to the examination and regulation of the Farm 
Credit Administration.
    (b) Subject to the approval of the Farm Credit System Assistance 
Board, the Financial Assistance Corporation is authorized by section 
6.26 of the Act to issue uncollateralized bonds, notes, debentures, and 
similar obligations, guaranteed as to the timely payment of principal 
and interest by the Secretary of the Treasury, for a term of 15 years 
(Financial Assistance Corporation securities). The Financial Assistance 
Corporation may prescribe the forms, the denominations, the rates of 
interest, the conditions, the manner of issuance and the prices of such 
Financial Assistance Corporation obligations.
    (c) Financial Assistance Corporation securities shall be governed by 
Secs. 615.5450, and 615.5452 through 615.5460. In interpreting those 
sections for purposes of this subpart, unless the context requires 
otherwise, the term ``Financial Assistance Corporation securities'' 
shall be read for ``Farm Credit securities,'' and ``Financial Assistance 
Corporation'' shall be read for ``Farm Credit banks'' and ``Funding 
Corporation.'' These terms shall be read as though modified where 
necessary to effectuate the application of the designated sections of 
subpart O of this part to the Financial Assistance Corporation.

[53 FR 12141, Apr. 13, 1988; 53 FR 27156, July 19, 1988, as amended at 
61 FR 67195, Dec. 20, 1996]

[[Page 190]]



     Subpart S--Federal Agricultural Mortgage Corporation Securities



Sec. 615.5570  Book-entry procedures for Federal Agricultural Mortgage Corporation Securities.

    (a) The Federal Agricultural Mortgage Corporation (Farmer Mac) is a 
Federally chartered instrumentality of the United States and an 
institution of the Farm Credit System, subject to the examination and 
regulation of the Farm Credit Administration.
    (b) Farmer Mac, either in its own name or through an affiliate 
controlled or owned by Farmer Mac, is authorized by section 8.6 of the 
Act:
    (1) To issue and/or guarantee the timely payment of principal and 
interest on securities representing interests in or obligations backed 
by pools of agricultural real estate loans (guaranteed securities); and
    (2) To issue debt obligations (which, together with the guaranteed 
securities described in paragraph (b)(1) of this section, are referred 
to as Farmer Mac securities). Farmer Mac may prescribe the forms, the 
denominations, the rates of interest, the conditions, the manner of 
issuance, and the prices of Farmer Mac securities.
    (c) Farmer Mac securities shall be governed by Secs. 615.5450, and 
615.5452 through 615.5460. In interpreting those sections for purposes 
of this subpart, unless the context requires otherwise, the term 
``Farmer Mac securities'' shall be read for ``Farm Credit securities,'' 
and ``Farmer Mac'' shall be read for ``Farm Credit banks'' and ``Funding 
Corporation.'' These terms shall be read as though modified where 
necessary to effectuate the application of the designated sections of 
subpart O of this part to Farmer Mac.

[61 FR 31394, June 20, 1996, as amended at 61 FR 67195, Dec. 20, 1996]



PART 616--LEASING--Table of Contents




Sec.
616.6000  Definitions.
616.6100  Purchase and sale of interests in leases.
616.6200  Out-of-territory leasing.
616.6300  Leasing policies, procedures, and underwriting standards.
616.6400  Documentation.
616.6500  Investment in leased assets.
616.6600  Leasing limit.
616.6700  Stock purchase requirements.
616.6800  Disclosure requirements.

    Authority: 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, 3.9, 3.10, 3.20, 
3.28, 4.3, 4.3A, 4.13, 4.13A, 4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 
4.18, 4.18A, 4.25, 4.26, 4.27, 4.28, 4.36, 4.37, 5.9, 5.10, 5.17, 7.0, 
7.2, 7.3, 7.6, 7.8, 7.12, 7.13 of the Farm Credit Act (12 U.S.C. 2011, 
2013, 2014, 2015, 2017, 2018, 2019, 2071, 2073, 2074, 2075, 2091, 2093, 
2094, 2097, 2121, 2122, 2124, 2128, 2129, 2130, 2131, 2141, 2149, 2154, 
2154a, 2199, 2200, 2201, 2202, 2202a, 2202c, 2202d, 2202e, 2206, 2206a, 
2211, 2212, 2213, 2214, 2219a, 2219b, 2243, 2244, 2252, 2279a, 2279a-2, 
2279a-3, 2279b, 2279c-1, 2279f, 2279f-1).

    Source: 64 FR 34518, June 28, 1999, unless otherwise noted.



Sec. 616.600  Definitions.

    For the purposes of this part, the following definitions apply:
    (a) Interests in leases means ownership interests in any aspect of a 
lease transaction, including, but not limited to, servicing rights.
    (b) Lease means any contractual obligation to own and lease, or 
lease with the option to purchase, equipment or facilities used in the 
operations of persons eligible to borrow under part 613 of this chapter.
    (c) Sale with recourse means a sale of a lease or an interest in a 
lease in which the seller:
    (1) Retains some risk of loss from the transferred asset for any 
cause except the seller's breach of usual and customary warranties or 
representations designed to protect the purchaser against fraud or 
misrepresentation; or
    (2) Has an obligation to make payments to any party resulting from:
    (i) Default on the lease by the lessee or guarantor or any other 
deficiencies in the lessee's performance;
    (ii) Changes in the market value of the assets after transfer;
    (iii) Any contractual relationship between the seller and purchaser 
incident to the transfer that, by its terms, could continue even after 
final payment, default, or other termination of the assets transferred; 
or
    (iv) Any other cause, except that the retention of servicing rights 
alone shall not constitute recourse.

[[Page 191]]



Sec. 616.6100  Purchase and sale of interests in leases.

    (a) Authority to buy interests in leases. A Farm Credit System 
institution may buy leases and interests in leases.
    (b) Policies. Each Farm Credit System institution that sells or buys 
interests in leases must do so only under a policy adopted by its board 
of directors that addresses the following:
    (1) The types of leases in which the institution may buy or sell an 
interest and the types of interests which may be bought or sold;
    (2) The underwriting standards for the purchase of interests in 
leases;
    (3) Such limits on the aggregate lease payments and residual amount 
of interests in leases that the institution may buy from a single 
institution as are necessary to diversify risk, and such limits on the 
aggregate amounts the institution may buy from all institutions as are 
necessary to assure that service to the territory is not impeded;
    (4) Identification and reporting of leases in which interests are 
sold or bought;
    (5) Requirements for securing from the selling lessor in a timely 
manner adequate financial and other information about the lessee needed 
to make an independent judgment; and
    (6) Any limits or conditions to which sales or purchases are subject 
that the board considers appropriate, including arbitration.
    (c) Purchase and sale agreements. Each agreement to buy or sell an 
interest in a lease must, at a minimum:
    (1) Identify the particular lease(s) to be covered by the agreement;
    (2) Provide for the transfer of lessee information on a timely and 
continuing basis;
    (3) Identify the nature of the interest(s) sold or bought;
    (4) Specify the rights and obligations of the parties and the terms 
and conditions of the sale;
    (5) Contain any terms necessary for the appropriate administration 
of the lease, including lease servicing and monitoring of the servicer 
and authorization and conditions for action in the event of lessee 
distress or default;
    (6) Provide for a method of resolution of disagreements arising 
under the agreement;
    (7) Specify whether the contract is assignable by either party; and
    (8) In the case of lease transactions through agents, comply with 
Sec. 614.4325(h) of this chapter, reading the term ``lease'' or 
``leases'' in place of the term ``loan'' or ``loans,'' as applicable.
    (d) Independent judgment. Each institution that buys an interest in 
a lease must make a judgment on the payment ability of the lessee that 
is independent of the originating or lead lessor and any intermediary 
seller or broker. This must occur before the purchase of the interest 
and before any servicing action that alters the terms of the original 
agreement. The institution must not delegate such judgment to any 
person(s) not employed by the institution. A Farm Credit System 
institution that buys a lease or any interest in a lease may use 
information, such as appraisals or inspections, provided by the 
originating or lead lessor, or any intermediary seller or broker; 
however, the buying Farm Credit System institution must independently 
evaluate such information when exercising its judgment. The independent 
judgment must be documented by a payment analysis that considers factors 
set forth in Sec. 616.6300. The payment analysis must consider such 
financial and other lessee information as would be required by a prudent 
lessor and must include an evaluation of the capacity and reliability of 
the servicer. Boards of directors of jointly managed institutions must 
adopt procedures to ensure the interests of their respective 
shareholders are protected in participation between such institutions.
    (e) Sales with recourse. When a lease or interest in a lease is sold 
with recourse:
    (1) For the purpose of determining the lending and leasing limit in 
subpart J of part 614 of this chapter, the lease must be considered, to 
the extent of the recourse or guaranty, a lease by the buyer to the 
seller, and in addition, the seller must aggregate the lease with other 
obligations of the lessee; and
    (2) The lease subject to the recourse agreement must be considered 
an asset sold with recourse for the purpose of computing capital ratios.

[[Page 192]]

    (f) Similar entity lease transactions. The provisions of 
Sec. 613.3300 of this chapter that apply to interests in loans made to 
similar entities apply to interests in leases made to similar entities. 
In applying these provisions, the term ``loan'' shall be read to include 
the term ``lease'' and the term ``principal amount'' shall be read to 
include the term ``lease amount.''



Sec. 616.6200  Out-of-territory leasing.

    A System institution may make leases outside its chartered 
territory.



Sec. 616.6300  Leasing policies, procedures, and underwriting standards.

    The board of each institution engaged in lease underwriting must 
adopt a written policy (or policies). Management, at the direction of 
the board, must develop procedures that reflect lease practices that 
control risk and comply with all applicable laws and regulations. Any 
leasing activity must comply with the lending policies and loan 
underwriting requirements in Sec. 614.4150 of this chapter. An 
institution engaged in the making, buying, or syndicating of leases also 
must adopt written policies and procedures that address the additional 
risks associated with leasing. Written policies and procedures must 
address the following, if applicable:
    (a) Appropriateness of the lease amount, purpose, and terms and 
conditions, including the residual value established at the inception of 
the lease;
    (b) Process for estimating the leased asset's market value during 
the lease term;
    (c) Types of equipment and facilities the institution will lease;
    (d) Remarketing of leased property and associated risks;
    (e) Property tax and sales tax reporting;
    (f) Title and ownership of leased assets;
    (g) Title and licensing for motor vehicles;
    (h) Liability associated with ownership, including any environmental 
hazards or risks;
    (i) Insurance requirements for both the lessor and lessee;
    (j) Classification of leases in accordance with generally accepted 
accounting principles; and
    (k) Tax treatment of lease transactions and associated risks.



Sec. 616.6400  Documentation.

    Each institution must document that any asset it leases is within 
its statutory authority.



Sec. 616.6500  Investment in leased assets.

    An institution may acquire property to be leased that is consistent 
with current or planned leasing programs.



Sec. 616.6600  Leasing limit.

    All leases made by Farm Credit System institutions shall be subject 
to the lending and leasing limit in subpart J of part 614 of this 
chapter.



Sec. 616.6700  Stock purchase requirements.

    (a) Each System institution, except the Farm Credit Leasing Services 
Corporation, making an equipment lease under titles II or III of the Act 
must require the lessee to buy or own at least one share of stock or one 
participation certificate in the institution making the lease, in 
accordance with its bylaws.
    (b) The disclosure requirements of Sec. 615.5250(a) and (b) of this 
chapter apply to stock (or participation certificates) bought as a 
condition for obtaining a lease.



Sec. 616.6800  Disclosure requirements.

    (a) Each System institution must give to each lessee a copy of all 
lease documents signed by the lessee within a reasonable time following 
lease closing.
    (b) Each System institution must make its decision on a lease 
application as soon as possible and provide prompt written notice of its 
decision to the applicant.



PART 617--REFERRAL OF KNOWN OR SUSPECTED CRIMINAL VIOLATIONS--Table of Contents




Sec.
617.1  Purpose and scope.
617.2  Referrals.

[[Page 193]]

617.3  Notification of board of directors and bonding company.
617.4  Institution responsibilities.

    Authority: Secs. 5.9, 5.17 of the Farm Credit Act (12 U.S.C. 2243, 
2252).

    Source: 62 FR 24566, May 6, 1997, unless otherwise noted.



Sec. 617.1  Purpose and scope.

    (a) This part applies to all institutions of the Farm Credit System 
as defined in section 1.2(a) of the Farm Credit Act of 1971, as amended, 
(Act) (12 U.S.C. 2002(a)) including, but not limited to, associations, 
banks, service corporations chartered under section 4.25 of the Act, the 
Federal Farm Credit Banks Funding Corporation, the Farm Credit System 
Financial Assistance Corporation, the Farm Credit Leasing Services 
Corporation, and the Federal Agricultural Mortgage Corporation 
(hereinafter, institutions). The purposes of this part are to ensure 
public confidence in the Farm Credit System, to ensure the reporting of 
known or suspected criminal activity, to reduce potential losses to 
institutions, and to ensure the safety and soundness of institutions. 
This part requires that institutions use the Farm Credit Administration 
Criminal Referral Form (hereinafter FCA Referral Form) to notify the 
appropriate Federal authorities when any known or suspected Federal 
criminal violations of the type described in Sec. 617.2 are discovered 
by institutions.
    (b) The specific referral requirements of this part apply to known 
or suspected criminal violations of the United States Code involving the 
assets, operations, or affairs of an institution. This part prescribes 
procedures for referring those violations to the proper Federal 
authorities and the Farm Credit Administration. No specific procedural 
requirements apply to the referral of violations of State or local laws.
    (c) Nothing in this part should be construed as reducing in any way 
an institution's ability to report known or suspected criminal 
activities to the appropriate investigatory or prosecuting authorities, 
whether Federal, State, or local, even when the circumstances in which a 
report is required under Sec. 617.2 are not present.
    (d) It shall be the responsibility of each System institution to 
determine whether there appears to be a reasonable basis to conclude 
that a criminal violation has been committed and, if so, to report the 
matter to the proper law enforcement authorities for consideration of 
prosecution.
    (e) Each referral required by Sec. 617.2(a) shall be made on the FCA 
Referral Form in accordance with the FCA Referral Form instructions 
relating to its filing and distribution.



Sec. 617.2  Referrals.

    (a) Each institution and its board of directors shall exercise due 
diligence to ensure the discovery, appropriate investigation, and 
reporting of criminal activity. Within 30 calendar days of determining 
that there is a known or suspected criminal violation of the United 
States Code involving or affecting its assets, operations, or affairs, 
the institution shall refer such criminal violation to the appropriate 
regional offices of the United States Attorney, and the Federal Bureau 
of Investigation or the United States Secret Service or both, using the 
FCA Referral Form. A copy of the completed FCA Referral Form, 
accompanied by any relevant documentation, shall be provided at the same 
time to the Farm Credit Administration's Office of General Counsel. In 
the event that a Farm Credit bank makes a loan through a Federal land 
bank association which services the loan, the Federal land bank 
association must inform the Farm Credit bank of any known or suspected 
violation involving that loan and the Farm Credit bank shall refer the 
violation to Federal law enforcement authorities under this section. A 
report is required in circumstances where there is:
    (1) Any known or suspected criminal activity (e.g., theft, 
embezzlement), mysterious disappearance, unexplained shortage, 
misapplication, or other defalcation of property and/or funds, 
regardless of amount, where an institution employee, officer, director, 
agent, or other person participating in the conduct of the affairs of 
such an institution is suspected;
    (2) Any known or suspected criminal activity involving an actual or 
potential loss of $5,000 or more, through false

[[Page 194]]

statements or other fraudulent means, where the institution has a 
substantial basis for identifying a possible suspect or group of 
suspects and the suspect(s) is not an institution employee, officer, 
director, agent, or other person participating in the conduct of the 
affairs of such an institution;
    (3) Any known or suspected criminal activity involving an actual or 
potential loss of $25,000 or more, through false statements or other 
fraudulent means, where the institution has no substantial basis for 
identifying a possible suspect or group of suspects; or
    (4) Any known or suspected criminal activity involving a financial 
transaction in which the institution was used as a conduit for such 
criminal activity (such as money laundering/structuring schemes).
    (b) In circumstances where there is a known or suspected violation 
of State or local criminal law, the institution shall notify the 
appropriate State or local law enforcement authorities.
    (c) In addition to the requirements of paragraph (a) of this 
section, the institution shall immediately notify by telephone the 
appropriate Federal law enforcement authorities and FCA offices 
specified on the FCA Referral Form upon determining that a known or 
suspected criminal violation of Federal law requiring urgent attention 
has occurred or is ongoing. Such cases include, but are not limited to, 
those where:
    (1) There is a likelihood that the suspect(s) will flee;
    (2) The magnitude or the continuation of the known or suspected 
criminal violation may imperil the institution's continued operation; or
    (3) Key institution personnel are involved.



Sec. 617.3  Notification of board of directors and bonding company.

    (a) The institution's board of directors shall be promptly notified 
of any criminal referral by the institution, except that if the criminal 
referral involves a member of the board of directors, discretion may be 
exercised in notifying such member of the referral.
    (b) The institution involved shall promptly make all required 
notifications under any applicable surety bond or other contract for 
protection.



Sec. 617.4  Institution responsibilities.

    Each institution shall establish effective policies and procedures 
designed to ensure compliance with this part, including, but not limited 
to, adequate internal controls.



PART 618--GENERAL PROVISIONS--Table of Contents




                       Subpart A--Related Services

Sec.
618.8000  Definitions.
618.8005  Eligibility.
618.8010  Related services authorization process.
618.8015  Policy guidelines.
618.8020  Feasibility requirements.
618.8025  Feasibility reviews.
618.8030  Out-of-territory related services.

                       Subpart B--Member Insurance

618.8040  Authorized insurance services.

Subparts C-F [Reserved]

                    Subpart G--Releasing Information

618.8300  General regulation.
618.8310  Lists of borrowers and stockholders.
618.8320  Data regarding borrowers and loan applicants.
618.8325  Disclosure of loan documents.
618.8330  Production of documents and testimony during litigation.
618.8340  [Reserved]

               Subpart H--Disposition of Obsolete Records

618.8360  [Reserved]
618.8370  [Reserved]

Subpart I [Reserved]

                      Subpart J--Internal Controls

618.8430  Internal controls.
618.8440  Planning.

    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 A--Related Services

    Source: 60 FR 34099, June 30, 1995, unless otherwise noted.

[[Page 195]]



Sec. 618.8000  Definitions.

    For the purposes of this subpart, the following definitions shall 
apply:
    (a) Program means the method or procedures used to deliver a related 
service. This distinguishes the particulars of how a related service 
will be provided from the type of activity or concept.
    (b) Related service means any service or type of activity provided 
by a System bank or association that is appropriate to the recipient's 
on-farm, aquatic, or cooperative operations, including control of 
related financial matters. The term ``related service'' includes, but is 
not limited to, technical assistance, financial assistance, financially 
related services and insurance, but does not include lending or leasing 
activities.
    (c) System banks and associations means Farm Credit Banks, 
agricultural credit banks, banks for cooperatives, agricultural credit 
associations, production credit associations, Federal land bank 
associations, Federal land credit associations, and service corporations 
formed pursuant to section 4.25 of the Act.



Sec. 618.8005  Eligibility.

    (a) Farm Credit Banks and associations may offer related services to 
persons eligible to borrow as defined in Secs. 613.3000 (a) and (b), 
613.3010, and 613.3300 of this chapter.
    (b) Banks for cooperatives may offer related services to entities 
eligible to borrow as defined in Secs. 613.3100, 613.3200, and 613.3300 
of this chapter.
    (c) Agricultural credit banks may offer related services appropriate 
to on-farm and aquatic operations of persons eligible to borrow 
specified in paragraph (a) of this section and may offer related 
services appropriate to cooperative operations of entities eligible to 
borrow as specified in paragraph (b) of this section.
    (d) Service corporations formed pursuant to section 4.25 of the Act 
may offer related services to persons eligible to borrow from the owners 
of the service corporation, pursuant to paragraphs (a), (b), (c), and 
(e) of this section.
    (e) System banks and associations may provide related services to 
recipients that do not otherwise meet the requirements of this section 
in connection with loan applications, loan servicing, and other 
transactions between these recipients and persons eligible to borrow as 
defined in paragraphs (a), (b), or (c) of this section, as long as the 
service provided is requested by an eligible borrower or necessary to 
the transaction between the parties. Such services include, but are not 
limited to, fee appraisals of agricultural assets provided to any 
Federal agency, commercial banks, and other lenders.

[60 FR 34099, June 30, 1995, as amended at 62 FR 4450, Jan. 30, 1997]



Sec. 618.8010  Related services authorization process.

    (a) Authorities. System banks and associations may only offer 
related services that meet the criteria specified in this regulation and 
are authorized by the FCA.
    (b) New service proposals. (1) A System bank or association that 
proposes or intends to offer a related service that the FCA has not 
previously authorized must submit to the FCA, in writing, a proposal 
that includes a description of the service, a statement of how it meets 
the regulatory definition of ``related services'' in Sec. 618.8000(b), 
and the risk analysis cited in Sec. 618.8020(b)(3). The FCA will 
evaluate the proposed service based on the information submitted, and 
may also consider whether there are extenuating circumstances or other 
compelling reasons that justify the proposed service or support a 
determination that the service is not authorized. This evaluation will 
focus primarily on Systemwide issues rather than on institution or 
program-specific factors.
    (2) When authorizing a proposed related service, at its discretion, 
the FCA may impose special conditions or limitations on any related 
service or program to offer a related service.
    (3) At its discretion the FCA may, at any time during its evaluation 
of a proposed related service, publish the proposed related service in 
the Federal Register for public comment.
    (4) Within 60 days of the FCA receiving a completed proposal, 
including any additional information the FCA may require, the FCA will 
act on the

[[Page 196]]

request to authorize a new service. The FCA shall approve the request, 
deny the request, or publish the service for public comment in the 
Federal Register. For good cause and prior to the expiration of the 60 
days, the FCA may extend this period for an additional 60 days.
    (5) Within the time period established in paragraph (b)(4) of this 
section, the FCA shall notify the requesting institution of its actions. 
Following notification of the requesting institution, the FCA will 
notify all System banks and associations of its determination on the 
proposed service by bookletter or other means. If a service is not 
authorized, the reasons for denial will be included in the notifications 
to the System and the requesting institution.
    (c) Previously authorized services. (1) For related services that 
have been authorized by the FCA, any System bank or association may 
develop a program and subsequently offer the related service to eligible 
recipients, subject to any special conditions or institutional limits 
placed by the FCA. These programs will be subject to review and 
evaluation during the examination and enforcement process.
    (2) The FCA shall make available to all System banks and 
associations a list of such related services (``related services list'' 
or ``list'') and will update the list in accordance with paragraph 
(b)(5) of this section. The list will contain the following:
    (i) A description of each related service; and
    (ii) The types of institutions authorized to offer each type of 
related service;
    (iii) Identification of any special conditions on how the related 
service may be offered. The special conditions and description of the 
service will be fully detailed in FCA's notice to System institutions 
under paragraph (b)(5) of this section.
    (3) At least 10 business days prior to implementing a related 
service program already on the list, the System bank or association must 
notify the FCA Office of Examination field office responsible for 
examining that institution in writing and provide it with a description 
of the proposed related service program.



Sec. 618.8015  Policy guidelines.

    (a) The board of directors of each System bank or association 
providing related services must adopt a policy addressing related 
services. The policy shall include clearly stated purposes, objectives, 
and operating parameters for offering related services and a requirement 
that each service offered be consistent with the institution's business 
plan and long-term strategic goals. Such policy shall also be subject to 
review under an appropriate internal control policy.
    (b) All related services must be offered to recipients on an 
optional basis. If the institution requires a related service as a 
condition to borrow, it must inform the recipient that the related 
service can be obtained from the institution or from any other person or 
entity offering the same or similar related services.
    (c) All fees for related services must be separately identified from 
loan interest charges and disclosed to the recipient of the service 
prior to providing or implementing the service.



Sec. 618.8020  Feasibility requirements.

    For every related service program a System bank or association 
provides, it must document program feasibility. The feasibility analysis 
shall include the following:
    (a) Support for the determination that the related service is 
authorized; and
    (b) An overall cost-benefit analysis that demonstrates program 
feasibility, taking into consideration the following items:
    (1) An analysis of how the program relates to or promotes the 
institution's business plan and strategic goals, and whether offering 
the service is consistent with the long-term goals described in its 
capital plan;
    (2) An analysis of the expected financial returns of the program 
which, at a minimum, must include an evaluation of market, pricing, 
competition issues, and expected profitability. This analysis should 
include an explanation of how the program will contribute to the

[[Page 197]]

overall financial health of the institution; and
    (3) An analysis of the risk in the program, including:
    (i) An evaluation of the operational costs and risks involved in 
offering the program, such as management and personnel requirements, 
training requirements, and capital outlays;
    (ii) An evaluation of the financial liability that may be incurred 
as a result of offering the program and any insurance or other measures 
that are necessary to minimize these risks; and
    (iii) An evaluation of the conflicts of interest, whether real or 
perceived, that may arise as a result of offering the program and any 
steps that are necessary to eliminate or appropriately manage these 
conflicts.



Sec. 618.8025  Feasibility reviews.

    (a) Prior to an association offering a related service program for 
the first time or offering a service that it did not offer during the 
most recently completed business cycle (generally 1 year), the board of 
directors of the funding bank must verify that the association has 
performed a feasibility analysis pursuant to Sec. 618.8020. The bank 
review is limited to a determination that the feasibility analysis is 
complete and that the analysis establishes that it is feasible for the 
association to provide the program. Any conclusion by the bank that the 
feasibility analysis is incomplete or fails to demonstrate program 
feasibility must be fully supported and communicated to the association 
in writing within 60 days of its submission to the bank.
    (b) Prior to a service corporation offering a service for the first 
time or offering a service that it did not offer during the most 
recently completed business cycle (generally 1 year), the owners of the 
service corporation must verify that the service corporation has 
performed a feasibility analysis pursuant to Sec. 618.8020. If the 
owners all agree, one bank with a significant ownership interest can be 
delegated this responsibility.

[60 FR 34099, June 30, 1995; 60 FR 42029, Aug. 15, 1995]



Sec. 618.8030  Out-of-territory related services.

    (a) System banks and associations may offer related services outside 
their chartered territories subject to the following conditions:
    (1) The System bank or association obtains consent from all 
chartered institutions currently offering the same type of service in 
the territory in which the service is to be provided; or
    (2) If no System bank or association is currently offering the same 
type of service in the territory, then the out-of-territory institution 
must obtain the consent of at least one direct lender institution 
chartered in the territory in which the related service is to be 
provided.
    (3) The consent obtained pursuant to paragraphs (a)(1) and (a)(2) of 
this section shall be in the form of a written agreement with specific 
terms and conditions including timeframes.
    (b) System banks and associations providing out-of-territory 
services must fulfill all requirements of subparts A and B of this part 
618.
    (c) An institution that consents to another bank or association 
providing a related service in its chartered territory must meet the 
requirements of this section, but need not comply with the other 
requirements of subparts A and B of this part 618, unless the program 
consented to imposes a financial obligation on the consenting 
institution. If a financial obligation exists, then the consenting 
institution must comply with Secs. 618.8015, 618.8020 and 618.8025.
    (d) Service corporations must follow the requirements of this 
section in offering related services out-of-territory. A service 
corporation cannot consent to an out-of-territory institution providing 
services in its chartered territory.



                       Subpart B--Member Insurance



Sec. 618.8040  Authorized insurance services.

    (a) Farm Credit System banks (excluding banks for cooperatives) 
(hereinafter banks) and associations may sell to their members and 
borrowers, on an optional basis, credit or term life

[[Page 198]]

and credit disability insurance appropriate to protect the loan 
commitment in the event of death or disability of the debtors. The sale 
of other insurance necessary to protect a member's or borrower's farm or 
aquatic unit is permitted, but limited to hail and multiple-peril crop 
insurance, title insurance, and insurance necessary to protect the 
facilities and equipment of aquatic members and borrowers. A member or 
borrower shall have the option, without coercion from the bank or 
association, to accept or reject such insurance.
    (b) Bank and association board policies governing the provision of 
member insurance programs shall be established within the following 
general guidelines:
    (1) A System bank or association may provide credit or term-life or 
credit-disability insurance only to persons who have a loan or lease 
with any System bank or association, without regard to whether such 
institution is the provider. Term-life insurance coverage may continue 
after the loan has been repaid or the lease terminated, provided the 
member can reasonably be expected to borrow again within 2 years, and 
provided the continuation of insurance is not contrary to state law.
    (2) A debtor-creditor relationship is not required for the sale of 
other insurance specified in paragraph (a) of this section, as long as 
purchasers are members of a System bank or association. For the purposes 
of this section, ``member'' means someone eligible to borrow who is a 
stockholder or participation certificate holder and who acquired stock 
or participation certificates to obtain a loan, for investment purposes, 
or to qualify for other services of the association or bank.
    (3) In making insurance available through private insurers, each 
bank shall approve the programs of more than two insurers for each type 
of insurance offered in the bank's chartered territory, provided that 
more than two insurers for each type of insurance have proposed programs 
to the bank that will, in all likelihood, have long-term viability, and 
meet the requirements of Sec. 618.8040(b)(4)(i) of this section. The 
banks shall make a reasonable and good faith effort to attract more than 
two qualified insurers for each insurance program offered to borrowers 
in all States of the bank's chartered territory. Where the bank is 
unable to approve more than two insurers, the bank shall document its 
efforts to attract additional qualified insurers for the affected 
insurance program and State. The banks may provide comparative 
information relating to costs and quality of approved programs and the 
financial condition of approved companies.
    (4) Member insurance services may be offered only if:
    (i) The insurance program has been approved by the bank or 
association from among eligible programs made available to it by 
insurers--
    (A) Meeting reasonable financial and quality of service standards 
prescribed by the bank; and
    (B) Licensed under State law to do business in the State(s) in which 
the insurance is offered:
    (ii) The bank or association has the capacity to render authorized 
insurance services in an effective and efficient manner;
    (iii) There exists the probability that the service will generate 
sufficient revenue to cover all costs;
    (iv) Rendering the insurance service will not have an adverse effect 
on the credit or other operations of the bank or association; and
    (v) In making insurance available through approved insurers, the 
board of directors of the bank or association shall make a reasonable 
and good faith effort to select and offer at least two approved insurers 
for each type of insurance made available to the members and borrowers. 
In the event that the bank or association has selected less than two 
insurers for any insurance program, such bank or association shall 
document the reasons why it is unable to offer members and borrowers 
additional insurers for the affected insurance program.
    (5) All costs to members and borrowers for insurance services 
provided shall be disclosed separately from interest charges.
    (6) Bank and association personnel shall not benefit from insurance 
sales by receipt of commissions or gifts from underwriting insurance 
companies.

[[Page 199]]

However, employees may participate in an incentive plan under which 
incentive compensation is provided based on the sale of insurance.
    (i) In any single year, for all employees except full-time insurance 
personnel or full-time supervisors or managers of insurance departments, 
incentive compensation attributable to sales of all types of insurance 
cannot exceed an amount equivalent to 5 percent of the recipient's 
annual base salary.
    (ii) In any single year, for full-time insurance personnel and full-
time supervisors and managers of insurance departments, incentive 
compensation for sales of credit life and similar types of insurance 
(i.e. insurance that pays on a loan or mortgage upon the death or 
disability of the debtor) cannot exceed an amount equivalent to 5 
percent of the recipient's annual base salary.
    (iii) No incentive compensation limit applies to sales of other 
insurance (crop, title, etc.) by full-time insurance personnel or full-
time supervisors or managers of insurance departments.
    (7) Term insurance may be written for the amount of coverage desired 
by the member or borrower, but in no case may the amount of term 
insurance, credit life insurance, or a combination of the two with an 
institution of the System, be in excess of total loan commitments to the 
member or borrower by the institution writing the insurance.
    (8) The banks may, only by agreement with an insurer, offer services 
traditionally furnished by insurers to the Farm Credit System. This 
shall include master marketers when considering the sale of Federal crop 
insurance. The banks shall not underwrite insurance, adjust claim 
payments or settlements, or train and school or service adjustors or 
insurance agents.
    (9) No bank or association shall, directly or indirectly, condition 
the extension of credit or provision of other service on the purchase of 
insurance sold or endorsed by a bank or association. At the time 
insurance sold or endorsed by a bank or association is offered to a 
member or borrower, a bank or association shall present a written notice 
that the service is optional. The notice shall be in prominent type and 
separately signed by the member or borrower. The bank or association 
shall explain to the member or borrower that purchase of insurance from 
the association is optional and that the member or borrower will not be 
discriminated against for obtaining the insurance elsewhere.
    (10) No bank or association shall, directly or indirectly, 
discriminate in any manner against any agent, broker, or insurer that is 
not affiliated with such bank or association, or against any party who 
purchases insurance through any such nonaffiliated insurance agent, 
broker, or insurer.
    (11) Bank supervision shall ensure that insurance services offered 
by approved insurers consistently provide members or borrowers with a 
high quality and cost-effective service as prescribed by policies of the 
bank's board of directors, but such supervision shall be without any 
coercion or suasion from any bank in favor of any agent or insurer.
    (12) Records must be maintained by banks and associations in 
sufficient detail to facilitate the review and supervision required 
herein.

[47 FR 38867, Sept. 3, 1982, as amended at 53 FR 35305, Sept. 13, 1988; 
56 FR 65990, Dec. 20, 1991. Redesignated and amended at 60 FR 34099, 
34101, June 30, 1995]

Subparts C-F [Reserved]



                    Subpart G--Releasing Information



Sec. 618.8300  General regulation.

    Except as necessary in performing official duties or as authorized 
in the following paragraphs, no director or employee of a bank, 
association, or agency thereof shall disclose information of a type not 
ordinarily contained in published reports or press releases regarding 
any such banks or associations or their borrowers or members.

[37 FR 11442, June 7, 1972. Redesignated at 47 FR 12151, Mar. 22, 1982]



Sec. 618.8310  Lists of borrowers and stockholders.

    (a) Any System institution, for the purpose of protecting the 
security position of the institution, may provide lists of borrowers to 
buyers, warehousemen, and others who deal in

[[Page 200]]

produce or livestock of the kind that secures such loans, except to the 
extent such actions are prohibited by State laws adopted in accordance 
with the Food Security Act of 1985, Pub. L. 99-198, 99 Stat. 1354. Lists 
of borrowers or stockholders shall not otherwise be released by any bank 
or association except in accordance with paragraph (b) of this section.
    (b)(1) Within 7 days after receipt of a written request by a 
stockholder, each agricultural credit bank, bank for cooperatives, 
Federal land bank association, production credit association, merged 
association, or Farm Credit Bank shall provide a current list of its 
stockholders to such requesting stockholder. As a condition to providing 
the list, the bank or association may require that the stockholder agree 
and certify in writing that the stockholder will:
    (i) Utilize the list exclusively for communicating with stockholders 
for permissible purposes; and
    (ii) Not make the list available to any person, other than the 
stockholder's attorney or accountant, without first obtaining the 
written consent of the institution.
    (2) As an alternative to receiving a list of stockholders, a 
stockholder may request the institution to mail or otherwise furnish to 
each stockholder a communication for a permissible purpose on behalf of 
the requesting stockholder. This alternative may be used at the 
discretion of the requesting stockholder, provided that the requester 
agrees to defray the reasonable costs of the communication. In the event 
the requester decides to exercise this option, the institution shall 
provide the requester with a written estimate of the costs of handling 
and mailing the communication as soon as practicable after receipt of 
the stockholder's request to furnish a communication.
    (3) For purposes of paragraph (b) of this section ``permissible 
purpose'' is defined to mean matters relating to the business operations 
of the bank or association. This shall include matters relating to the 
effectiveness of management, the use of corporate assets, and the 
performance of directors and officers. This shall not include 
communications involving commercial, social, political, or charitable 
causes, communications relating to the enforcement of a personal claim 
or the redress of a personal grievance, or proposals advocating that the 
bank or association violate any Federal, State, or local law or 
regulation.

[51 FR 39503, Oct. 28, 1986, as amended at 53 FR 35457, Sept. 14, 1988; 
61 FR 67188, Dec. 20, 1996]



Sec. 618.8320  Data regarding borrowers and loan applicants.

    (a) Except as provided in paragraph (b) of this section, the 
directors, officers, and employees of every bank and association shall 
hold in strict confidence all information regarding the character, 
credit standing, and property of borrowers and applicants for loans. 
They shall not exhibit or quote the following documents: Loan 
applications; supplementary statements by applicants; letters and 
statements relative to the character, credit standing, and property of 
borrowers and applicants; recommendations of loan committees; and 
reports of inspectors, fieldmen, investigators, and appraisers.
    (b) The requirements of paragraph (a) of this section are subject to 
the following exceptions.
    (1) Examiners and other authorized representatives of the Farm 
Credit Administration and the bank concerned shall have free access to 
all information, records, and files.
    (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.
    (3) The chairman of the presidents committees and the presidents of 
the banks may supply statistical and other impersonal information 
pertaining to groups of borrowers, applicants, and loans, in response to 
requests from any department or independent office of the Government of 
the United States, or responsible private organizations,

[[Page 201]]

with the understanding that the information will not be published.
    (4) Information concerning borrowers may be given for the 
confidential use of any Farm Credit institution in contemplation of the 
extension of credit or the collection of loans.
    (5) Impersonal information based solely on transactions or 
experience with a borrower, such as amounts of loans, terms, and payment 
records, may be given by a bank or association to any reliable 
organization for its confidential use in contemplation of the extension 
of credit or to a consumer reporting agency.
    (6) Credit information concerning any borrower may be given when 
such borrower consents thereto in writing.
    (7) An unsuccessful applicant for credit which primarily is for 
personal, family, or household purposes, if his application was rejected 
either wholly or partly because of information contained in a consumer 
report from a consumer reporting agency shall be advised as required in 
section 615(a) of the Fair Credit Reporting Act (84 Stat. 1133), and if 
his application was rejected either wholly or partly because of 
information obtained from a person other than a consumer reporting 
agency shall be advised as required in section 615(b) thereof.
    (8)(i) Any information or analysis of information requested during 
the course of mediation by a State agency, governor's office or mediator 
under any State mediation program certified under section 501 of the 
Agricultural Credit Act of 1987, may be provided to the State agency, 
governor's office or mediator, with the approval of the borrower.
    (ii) Information concerning borrowers contained in an appraisal 
report may be given by a Farm Credit institution to any State agency 
certifying and licensing real estate appraisers provided that the Farm 
Credit institution:
    (A) Certifies that the information is required in connection with an 
employee's application for certification and licensure and that the 
institution has taken appropriate steps to protect the confidentiality 
of any borrower information that is not essential to the State's 
evaluation of the application; and
    (B) Determines that the State certification and licensing program 
makes reasonable provisions for protecting the confidentiality of the 
borrower information contained in the appraisal report.
    (9) Collateral evaluation reports may be released to a loan 
applicant, when required by the Equal Credit Opportunity Act or related 
regulations.
    (c) The exceptions in paragraph (b) of this section shall be 
exercised by Farm Credit institutions with full awareness of the 
requirements of the Fair Credit Reporting Act.

[37 FR 11442, June 7, 1972. Redesignated at 47 FR 12151, Mar. 22, 1982, 
and amended at 53 FR 35457, Sept. 14, 1988; 56 FR 2675, Jan. 24, 1991; 
58 FR 51994, Oct. 6, 1993; 59 FR 46734, Sept. 12, 1994; 61 FR 67188, 
Dec. 20, 1996; 62 FR 25831, May 12, 1997; 64 FR 43049, Aug. 9, 1999]



Sec. 618.8325  Disclosure of loan documents.

    (a) For purposes of this section, the following definitions shall 
apply:
    (1) Borrower means any signatory to a loan contract who is either 
primarily or secondarily liable on such contract, including guarantors, 
endorsers, cosigners or the like.
    (2) Execution of the loan means the time at which the borrower and 
the qualified lender have entered into a legal, binding, and enforceable 
loan contract and any subsequent amendment or modification of such 
contract.
    (3) Loan means a loan made to a farmer, rancher, or producer or 
harvester of aquatic products, for any agricultural or aquatic purpose 
and other credit needs of the borrower, including financing for basic 
processing and marketing directly related to the borrower's operations 
and those of other eligible farmers, ranchers, and producers or 
harvesters of aquatic products.
    (4) Loan contract means any written agreement under which a 
qualified lender lends or agrees to lend funds to a borrower in 
consideration for, among other things, the borrower's promise to repay 
the loaned funds at an agreed-upon rate of interest.
    (5) Loan document means any form, application, agreement, contract, 
instrument, or other writing to which a borrower affixes his signature 
or seal

[[Page 202]]

and which the qualified lender intends to retain in its files as 
evidence relating to the loan contract entered into between it and the 
borrower, but shall not include any document related to a loan which the 
borrower has not signed.
    (6) Qualified lender means:
    (i) A System institution that makes loans (as defined in paragraph 
(a)(3) of this section) except a bank for cooperatives; and
    (ii) Each bank, institution, corporation, company, union, and 
association described in section 1.7(b)(1)(B) of the Act, but only with 
respect to loans discounted or pledged under section 1.7(b)(1) of the 
Act.
    (b) Each qualified lender shall provide a copy of all loan documents 
to the borrower or the borrower's legal representative at the execution 
of the loan. Subsequently, upon written request of a borrower or a 
borrower's legal representative, a qualified lender shall provide, as 
soon as practicable, a copy of any loan documents signed by the 
borrower, a copy of other documents delivered by such borrower to that 
qualified lender, and a copy of each collateral evaluation of the 
borrower's assets made or used by the qualified lender. To the extent 
that a collateral evaluation may contain confidential third party 
information, the lender may protect such confidential third party 
information by withholding any information that would disclose 
identifying characteristics of the third party or his property. One copy 
shall be furnished free of charge. The lender may assess reasonable 
copying charges for any additional copies requested by the borrower.
    (c) Each System bank and association shall have available in its 
offices copies of the institution's articles of incorporation or charter 
and bylaws for inspection and shall furnish a copy of such documents to 
any owner of stock or participation certificates upon request.

[51 FR 39504, Oct. 28, 1986, as amended at 53 FR 35458, Sept. 14, 1988; 
56 FR 2675, Jan. 24, 1991; 59 FR 46734, Sept. 12, 1994; 61 FR 67188, 
Dec. 20, 1996]



Sec. 618.8330  Production of documents and testimony during litigation.

    (a) If your bank or association is a party to litigation with a 
borrower or a successor in interest, you or your directors, officers, or 
employees may disclose confidential information about that borrower or 
the successor in interest during the litigation.
    (b) If the Government or your bank or association is not a party to 
litigation, you or your directors, officers, or employees may produce 
confidential documents or testimony only if a court of competent 
jurisdiction issues a lawful order signed by a judge.

[64 FR 43049, Aug. 9, 1999]



Sec. 618.8340  [Reserved]



               Subpart H--Disposition of Obsolete Records



Sec. 618.8360  [Reserved]



Sec. 618.8370  [Reserved]

Subpart I [Reserved]



                      Subpart J--Internal Controls



Sec. 618.8430  Internal controls.

    Each Farm Credit institution's board of directors shall adopt an 
internal control policy which provides adequate direction to the 
institution in establishing effective control over and accountability 
for operations, programs, and resources. The policy shall include, at a 
minimum, the items enumerated in the list which follows:
    (a) Direction to management which assigns responsibility for the 
internal control function (financial, credit, credit review, collateral, 
and administrative) to an officer (or officers) of the institution.
    (b) Adoption of internal audit and control procedures that evidence 
responsibility for review and maintenance of comprehensive and effective 
internal controls.
    (c) Direction for the operation of a program to review and assess 
its assets. These policies shall include standards which address the 
administration of this program, described in the list which follows:

[[Page 203]]

    (1) Loan, loan-related assets, and appraisal review standards, 
including standards for scope of review selection and standards for 
workpapers and supporting documentation.
    (2) Asset quality classification standards to be utilized in 
accordance with a standardized classification system consistent among 
associations within a district and their funding Farm Credit Bank or 
agricultural credit bank.
    (3) Standards for assessing credit administration, including the 
appraisal of collateral.
    (4) Standards for the training required to initiate the program.

[55 FR 24888, June 19, 1990]



Sec. 618.8440  Planning.

    (a) No later than 30 days after the commencement of each calendar 
year, the board of directors of each Farm Credit System institution 
shall adopt an operational and strategic business plan for at least the 
succeeding 3 years.
    (b) The plan shall include, at a minimum, the following:
    (1) A mission statement.
    (2) A review of the internal and external factors that are likely to 
affect the institution during the planning period.
    (3) Quantifiable goals and objectives.
    (4) Pro forma financial statements for each year of the plan.
    (5) A detailed operating budget for the first year of the plan.
    (6) The capital adequacy plan adopted pursuant to Secs. 615.5200(b), 
615.5330 (c), and 615.5335(b).

[53 FR 39250, Oct. 6, 1988, as amended at 62 FR 4450, Jan. 30, 1997; 64 
FR 34519, June 28, 1999]



PART 619--DEFINITIONS--Table of Contents




Sec.
619.9000  The Act.
619.9010  Additional security.
619.9015  Agricultural credit associations.
619.9020  Agricultural credit banks.
619.9025  Agricultural land.
619.9050  Associations.
619.9060  Bank for cooperatives.
619.9110  Consolidation.
619.9130  Differential interest rates.
619.9135  Direct lender.
619.9140  Farm Credit bank(s).
619.9145  Farm Credit Bank.
619.9146  Farm Credit institutions.
619.9155  Federal land credit association.
619.9170  Fixed interest rate.
619.9180  Fixed interest spread.
619.9185  Funding Corporation.
619.9195  Loan participation.
619.9200  Loss-sharing agreements.
619.9210  Merger.
619.9230  Open-end mortgage loan plans.
619.9240  Participation agreement.
619.9250  Participation certificates.
619.9260  Primary security.
619.9330  Speculative purposes.
619.9340  Variable interest rate.

    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.

    Source: 37 FR 11446, June 7, 1972, unless otherwise noted.



Sec. 619.9000  The Act.

    The Farm Credit Act of 1971; Pub. L. 92-181 and amendments.



Sec. 619.9010  Additional security.

    Supplementary collateral to the primary security taken in connection 
with the loan.



Sec. 619.9015  Agricultural credit associations.

    Agricultural credit associations are associations created by the 
merger of one or more Federal land bank associations or Federal land 
credit associations and one or more production credit associations and 
which have received a transfer of authority to make and participate in 
long-term real estate mortgage loans pursuant to section 7.6 of the Act.

[55 FR 24888, June 19, 1990]



Sec. 619.9020  Agricultural credit banks.

    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.

[55 FR 24888, June 19, 1990]



Sec. 619.9025  Agricultural land.

    Land improved or unimproved which is devoted to or available for the 
production of crops and other products such as but not limited to fruits 
and timber or for the raising of livestock.

[37 FR 11446, June 7, 1972. Redesignated at 55 FR 24888, June 19, 1990]

[[Page 204]]



Sec. 619.9050  Associations.

    The term associations includes (individually or collectively) 
Federal land bank associations, Federal land credit associations, 
production credit associations, and agricultural credit associations.

[55 FR 24888, June 19, 1990]



Sec. 619.9060  Bank for cooperatives.

    A bank for cooperatives is a bank that is operating under section 
3.0 of the Act.

[61 FR 67188, Dec. 20, 1996]



Sec. 619.9110  Consolidation.

    Creation of one new organizational entity from two or more existing 
entities or parts thereof.



Sec. 619.9130  Differential interest rates.

    An interest rate program under which different rates of interest may 
be made applicable to individual or classes of loans on the basis of 
type, purpose, amount, quality of loan, or a combination of these 
factors.



Sec. 619.9135  Direct lender.

    The term direct lender refers to Farm Credit banks and associations 
(production credit associations, agricultural credit associations, and 
Federal land credit associations) authorized to lend to eligible 
borrowers identified in Sec. 613.3000.

[55 FR 24889, June 19, 1990]



Sec. 619.9140  Farm Credit bank(s).

    Except as otherwise defined, the term Farm Credit bank(s) includes 
Farm Credit Banks, agricultural credit banks, and banks for 
cooperatives.

[55 FR 24889, June 19, 1990]



Sec. 619.9145  Farm Credit Bank.

    The term Farm Credit Bank refers to a bank resulting from the 
mandatory merger of the Federal land bank and the Federal intermediate 
credit bank in each Farm Credit district pursuant to section 410 of the 
Agricultural Credit Act of 1987, Pub. L. 100-233, or any bank resulting 
from a merger of two or more Farm Credit Banks.

[55 FR 24889, June 19, 1990]



Sec. 619.9146  Farm Credit institutions.

    Except as otherwise defined, the term Farm Credit institutions 
refers to all institutions chartered and regulated by the Farm Credit 
Administration as described in section 1.2 of the Act, and to the 
Funding Corporation.

[55 FR 24889, June 19, 1990, as amended at 56 FR 2675, Jan. 24, 1991]



Sec. 619.9155  Federal land credit association.

    The term Federal land credit association refers to a Federal land 
bank association that has received a transfer of direct long-term real 
estate lending authority pursuant to section 7.6 of the Act.

[55 FR 24889, June 19, 1990]



Sec. 619.9170  Fixed interest rate.

    The rate of interest specified in the note or loan document which 
will prevail as the maximum rate chargeable to the borrower during the 
period of the loan.



Sec. 619.9180  Fixed interest spread.

    A percentage to be added to the cost of money to the bank or 
association as the means of establishing a lending rate.



Sec. 619.9185  Funding Corporation.

    The term Funding Corporation refers to the Federal Farm Credit Banks 
Funding Corporation established pursuant to section 4.9 of the Act.

[55 FR 24889, June 19, 1990]



Sec. 619.9195  Loan participation.

    A fractional undivided interest in the principal amount of a loan 
that is sold by a lead lender to a participating institution in 
accordance with the requirements of Sec. 614.4330 of this chapter. The 
term ``loan participation'' does not include a subordinated 
participation interest.

[57 FR 38250, Aug. 24, 1992]



Sec. 619.9200  Loss-sharing agreements.

    A contractual arrangement under which the parties agree to share 
losses

[[Page 205]]

associated with loans or otherwise, as may be provided for in the 
agreement.

[42 FR 20457, Apr. 20, 1977]



Sec. 619.9210  Merger.

    Combining of one or more organizational entities into another 
similar entity.



Sec. 619.9230  Open-end mortgage loan plans.

    A mortgage loan which permits the borrower to obtain additional sums 
during the term of the loan.



Sec. 619.9240  Participation agreement.

    A contract under which a lender agrees to sell a portion of a loan 
to one or more purchasers under specific terms set forth in the 
agreement.



Sec. 619.9250  Participation certificates.

    Evidence of investment in a bank or association to which all the 
rights and obligations of stock attach with the exception of the right 
to vote in the affairs of the institution.



Sec. 619.9260  Primary security.

    The basic collateral securing the loan.



Sec. 619.9330  Speculative purposes.

    To buy or sell with the expectation of profiting by fluctuations in 
price.

[40 FR 49078, Oct. 21, 1975]



Sec. 619.9340  Variable interest rate.

    An interest rate on the outstanding loan balances, which may be 
changed from time to time during the period of the loan, if provision is 
made in the note or loan document.



PART 620--DISCLOSURE TO SHAREHOLDERS--Table of Contents




                           Subpart A--General

Sec.
620.1  Definitions.
620.2  Preparing and filing the reports.
620.3  Prohibition against incomplete, inaccurate, or misleading 
          disclosure.

                Subpart B--Annual Report to Shareholders

620.4  Preparing and distributing the annual report.
620.5  Contents of the annual report to shareholders.

                       Subpart C--Quarterly Report

620.10  Preparing the quarterly report.
620.11  Content of quarterly report to shareholders.

                    Subpart D--Notice to Shareholders

620.15  Notice.
620.17  Contents of the notice.

       Subpart E--Association Annual Meeting Information Statement

620.20  Preparing and distributing the information statement.
620.21  Contents of the information statement and other information to 
          be furnished in connection with the annual meeting.

            Subpart F--Bank Director Disclosure Requirements

620.30  Disclosure statement for bank director candidates.
620.31  Contents of disclosure statements.

   Subpart G--Annual Report of Condition of the Federal Agricultural 
                          Mortgage Corporation

620.40  Content, timing, and distribution of Federal Agricultural 
          Mortgage Corporation's annual report of condition.

    Authority: Secs. 5.17, 5.19, 8.11 of the Farm Credit Act (12 U.S.C. 
2252, 2254, 2279aa-ll) sec. 424 of Pub. L. 100-233, 101 Stat. 1568, 
1656.



                           Subpart A--General



Sec. 620.1  Definitions.

    For the purpose of this part, the following definitions shall apply:
    (a) Affiliated organization means any organization, other than a 
Farm Credit organization, of which a director, senior officer or nominee 
for director of the reporting institution is a partner, officer, or 
majority shareholder.
    (b) Association means any of the associations as described in 
Sec. 619.9050 of this chapter.
    (c) Bank means any of the Farm Credit banks as described in 
Sec. 619.9140 of this chapter.
    (d) Direct lender association means any association that is a direct 
lender as described in Sec. 619.9135 of this chapter.
    (e) Immediate family means spouse, parents, siblings, children, 
mothers-

[[Page 206]]

and fathers-in-law, brothers- and sisters-in-law, and sons- and 
daughters-in-law.
    (f) Institution means any bank or association chartered by the Act.
    (g) Loan means any extension of credit or lease that is recorded as 
an asset of a reporting institution, whether made directly or purchased 
from another lender. The term ``loan'' includes, but is not limited to, 
loans originated through direct negotiations between the reporting 
institution and a borrower; purchased loans or interests in loans, 
including participation interests, retained subordinated participation 
interests in loans sold, interests in pools of subordinated 
participation interests that are held in lieu of retaining a 
subordinated participation interest in loans sold; contracts of sale; 
notes receivable; and other similar obligations and lease financings.
    (h) Material. The term material, when used to qualify a requirement 
to furnish information as to any subject, limits the information 
required to those matters to which there is a substantial likelihood 
that a reasonable person would attach importance in making shareholder 
decisions or determining the financial condition of the institution.
    (i) Normal risk of collectibility means the ordinary risk inherent 
in the lending operation. Loans that are deemed to have more than a 
normal risk of collectibility include, but are not limited to, any 
adversely classified loans.
    (j) Permanent capital shall have the same meaning as set forth in 
Sec. 615.5201(l) of this chapter.
    (k) Protected borrower capital means eligible borrower stock as 
defined in Sec. 615.5260 of this chapter.
    (l) Related association means an association within the reporting 
bank's chartered territory that generates loans for the bank or whose 
operations the bank funds.
    (m) Related bank means a reporting association's funding bank or the 
bank for which it generates loans.
    (n) Related organization means any Farm Credit institution that is a 
shareholder of the reporting institution or in which the reporting 
institution has an ownership interest.
    (o) Report refers to the annual report, quarterly report, notice, or 
information statement required by the part unless otherwise specified.
    (p) Senior officer means any person designated by the board of 
directors as responsible for a major management function.
    (q) Shareholder means a holder of any equity interest in an 
institution.
    (r) Significant event means any event that is likely to have a 
material impact on the reporting institution's financial condition, 
results of operations, cost of funds, or reliability of sources of 
funds. The term ``significant event'' includes, but is not limited to, 
actual or probable noncompliance with the regulatory minimum permanent 
capital standards or capital adequacy requirements, stock impairment, 
the imposition of or entering into enforcement actions, execution of 
financial assistance agreements with other institutions, collateral 
deficiencies that impact a bank's ability to obtain loan funds, or 
defaults on debt obligations.

[51 FR 8656, Mar. 13, 1986, as amended at 51 FR 42086, Nov. 21, 1986; 53 
FR 3337, Feb. 5, 1988; 56 FR 29421, June 27, 1991; 56 FR 42649, Aug. 28, 
1991; 58 FR 48791, Sept. 20, 1993; 59 FR 37406, July 22, 1994; 62 FR 
15092, Mar. 31, 1997; 63 FR 39229, July 22, 1998]



Sec. 620.2  Preparing and filing the reports.

    For the purposes of this part, the following shall apply:
    (a) Three copies of each report required by this section, including 
financial statements and related schedules, exhibits, and all other 
papers and documents that are part of the report shall be filed with the 
Chief Examiner, Farm Credit Administration, McLean, Virginia 22102-5090, 
or with such other Farm Credit Administration offices as the Chief 
Examiner designates. The Farm Credit Administration must receive the 
report the report within the period prescribed under applicable subpart 
sections. The reports shall be available for public inspection at the 
issuing institution and the farm Credit Administration office with which 
the reports are filed. Bank reports shall also be available for public 
inspection at each related association office.

[[Page 207]]

    (b) At least one of the reports filed with the Farm Credit 
Administration shall be dated and manually signed on behalf of the 
institution by:
    (1) The person designated by the board of directors to certify the 
reports of condition and performance in accordance with Sec. 621.14 of 
this chapter;
    (2) The chief executive officer; and
    (3)(i) For each quarterly report or notice filed under this section, 
each member of the board or one of the following board members formally 
designated by action of the board to certify reports of condition and 
performance on behalf of the individual board members: The chairperson 
of the board; the chairperson of the audit committee; or a board member 
designated by the chairperson of the board.
    (ii) For all other reports, each member of the board.

The name and position title of each person signing the report shall be 
typed or printed beneath his or her signature. The statement to which 
the signers of the report shall attest shall read as follows:

    The undersigned certify that this report has been prepared in 
accordance with all applicable statutory and regulatory requirements and 
that the information contained herein is true, accurate, and complete to 
the best of his or her knowledge and belief.


If any officer or any member of the board is unable to or refuses to 
sign the report, the institution shall disclose the individual's name 
and position title and the reasons such individual is unable or refuses 
to sign the report.
    (c) The report sent to shareholders shall be signed and dated by and 
on behalf of the institution and its board of directors by its chief 
executive officer and the chairman of the board of directors. If any 
person required to sign the report submitted to the Farm Credit 
Administration pursuant to paragraph (b) of this section has not signed 
the report, the name and position title of the individual and the 
reasons such individual is unable or refuses to sign shall be disclosed 
in the report sent to shareholders.
    (d) Information in any part of this report may be incorporated by 
reference in answer or partial answer to any other item of the report.
    (e) All items of essentially the same character as items required to 
be reported in the reports of condition and performance pursuant to part 
621 of this chapter shall be prepared in accordance with the rules set 
forth in part 621.
    (f) No disclosure required by subparts B and E of this part shall be 
deemed to violate any regulation of the Farm Credit Administration.
    (g) Each Farm Credit institution shall present its reports in 
accordance with generally accepted accounting principles and in a manner 
that provides the most meaningful disclosure to shareholders.
    (1) Any Farm Credit institution that presents its annual and 
quarterly financial statements on a combined or consolidated basis shall 
also include in the report the statement of condition and statement of 
income of the institution on a stand-alone basis. The stand-alone 
statements may be in summary form and shall disclose the basis of 
presentation if different from accounting policies of the combined or 
consolidated statements.
    (2) Any bank that prepares its financial statements on a stand-alone 
basis shall provide in the footnotes accompanying its annual report 
supplemental information containing a condensed statement of condition 
and statement of income for the bank's related associations on a 
combined basis. The condensed statements may be unaudited and shall 
disclose the basis of presentation if different from accounting policies 
of the bank-only statements.
    (h)(1) Each annual report or notice shall include a statement in a 
prominent location within the report or notice that the institution's 
quarterly reports are available free of charge on request. The statement 
shall include approximate dates of availability of the quarterly reports 
and the telephone numbers and addresses where shareholders may obtain a 
copy of the reports.
    (2) Each association shall include a statement in a prominent 
location within each report that the shareholders' investment in the 
association may be materially affected by the financial condition and 
results of operations of the related bank an (if not

[[Page 208]]

otherwise provided) that a copy of the bank's financial reports to 
shareholders will be made available free of charge on request. The 
statement shall also include the telephone numbers and addresses where 
shareholders may obtain copies of the related bank's financial reports.
    (3) Each institution shall, after receiving a request for a report, 
mail or otherwise furnish the report to the requestor. The first copy of 
the requested report shall be provided to the requestor free of charge.
    (i) Any events that have affected one or more related organizations 
of the reporting institution that are likely to have a material effect 
on the financial condition, results of operations, cost of funds, or 
reliability of sources of funds of the reporting institution shall be 
considered significant events for the reporting institution and shall be 
disclosed in the reports. Any significant event affecting the reporting 
institution that occurred during the preceding fiscal quarters that 
continues to have a material effect on the reporting institution shall 
be considered significant events of the current fiscal quarter and shall 
be disclosed in the reports.

[51 FR 8656, Mar. 13, 1986, as amended at 51 FR 21340, June 12, 1986; 56 
FR 29421, June 27, 1991; 58 FR 27923, May 12, 1993; 58 FR 48791, Sept. 
20, 1993; 62 FR 15092, Mar. 31, 1997]



Sec. 620.3  Prohibition against incomplete, inaccurate, or misleading disclosure.

    No institution and no employee, officer, director, or nominee for 
director of the institution shall make any disclosure to shareholders or 
the general public concerning any matter required to be disclosed by 
this part that is incomplete, inaccurate, or misleading. When any such 
person makes disclosure that, in the judgment of the Farm Credit 
Administration, is incomplete, inaccurate, or misleading, whether or not 
such disclosure is made in disclosure statements required by this part, 
such institution or person shall make such additional or corrective 
disclosure as is necessary to provide shareholders and the general 
public with a full and fair disclosure.

[56 FR 29422, June 27, 1991]



                Subpart B--Annual Report to Shareholders



Sec. 620.4  Preparing and distributing the annual report.

    (a) Each institution of the Farm Credit System shall prepare and 
distribute to its shareholders an annual report within 90 days of the 
end of its fiscal year.
    (b)(1) Any bank that presents its financial statements on a combined 
basis shall distribute in its annual report to the shareholders of 
related associations within the period required by paragraph (a) of this 
section. Each bank shall coordinate such distribution with its related 
associations.
    (2) Any bank that presents its financial statements on a bank-only 
basis shall distribute its annual report to the shareholders of related 
associations within the period required by paragraph (a) of this section 
in all instances where the bank experiences a significant event that has 
a material effect on the associations. Each bank shall coordinate such 
distribution with its related associations.
    (c) The report shall contain, at a minimum, the information required 
by Sec. 620.5 and, in addition, such other information as is necessary 
to make the required statements, in light of the circumstances under 
which they are made, not misleading.

[51 FR 8656, Mar. 13, 1986. Redesignated and amended at 56 FR 29421, 
29422, June 27, 1991; 62 FR 15093, Mar. 31, 1997]



Sec. 620.5  Contents of the annual report to shareholders.

    The report shall contain the following items in substantially the 
same order:
    (a) Description of business. The description shall include a brief 
discussion of the following items:
    (1) The territory served;
    (2) The persons eligible to borrow;
    (3) The types of lending activities engaged in and related services 
offered. Each bank shall also briefly describe the lending and related 
services offered by its related associations, as well as related 
services offered to the borrowers in the bank's chartered territory by 
any service organization in which it has an ownership interest.

[[Page 209]]

Each association shall briefly describe the lending and related services 
offered by its related organizations or incorporate by reference 
relevant portions of the related bank's report, if such report is 
distributed to association shareholders;
    (4) Any significant developments within the last 5 years that had or 
could have a material impact on earnings or interest rates to borrowers, 
including, but not limited to, changes in the reporting entity and 
financing assistance provided by or to the institution through loss-
sharing or capital preservation agreements or from any other source;
    (5) Any acquisition or disposition of material assets during the 
last fiscal year, other than in the ordinary course of business;
    (6) Any material change during the last fiscal year in the manner of 
conducting the business;
    (7) Any seasonal characteristics of the institution's business;
    (8) Any concentrations of more than 10 percent of its assets in 
particular commodities or particular types of agricultural activity or 
business, and the institution's dependence, if any, upon a single 
customer, or a few customers, including other financing institutions 
(OFIs), the loss of any one of which would have a material effect on the 
institution; and
    (9) A brief description of the business of any related Farm Credit 
institution, as described in Sec. 619.9146 of this chapter, and the 
nature of the institution's relationship with such organization.
    (b) Description of property. State the location of and briefly 
describe the principal offices, i.e., headquarters, and major facilities 
where the institution makes and services its loans, and other materially 
important physical properties (other than property acquired in the 
course of collecting a loan) of the institution. If any such property is 
not held in fee or is held subject to any major encumbrance, so state 
and describe briefly the terms and conditions of the agreement under 
which the property is used or occupied.
    (c) Legal proceedings and enforcement actions. (1) Describe briefly 
any material pending legal proceedings, other than ordinary routine 
litigation incidental to the business, to which the institution is a 
party, of which any of its property is the subject, or which involved 
claims that the institution may be required by contract or operation of 
law, to satisfy. Include the name of the court in which the proceedings 
are pending, the date instituted, the principal parties thereto, a 
description of the factual basis alleged to underlie the proceeding and 
the relief sought.
    (2) Describe the type of and reason for each enforcement action in 
effect, i.e., agreements, cease and desist orders, temporary cease and 
desist orders, prohibitions and removals of officers or directors, or 
civil money penalties, if any, imposed or assessed on the institution or 
its officers or directors and the amount of any civil money penalties 
assessed.
    (d) Description of capital structure. (1) Describe each class of 
stock and participation certificates the institution is authorized to 
issue and the rights, duties, and liabilities of each class. The 
description shall include:
    (i) The number of shares of each class outstanding;
    (ii) The par or face value;
    (iii) The voting and dividend rights;
    (iv) The order of priority upon impairment or liquidation;
    (v) The institution's retirement policies and restrictions on 
transfer;
    (vi) The statutory requirement that a borrower purchase stock as a 
condition to obtaining a loan;
    (vii) The manner in which the stock is purchased (i.e., promissory 
note to the issuer, or cash not advanced by issuing institution);
    (viii) The statutory authority of the institution to require 
additional capital contributions, if any; and
    (ix) The statutory and regulatory restriction regarding retirement 
of stock and distribution of earnings pursuant to Sec. 615.5215, and any 
requirements to add capital under a plan approved by the Farm Credit 
Administration pursuant to Secs. 615.5330, 615.5335, 615.5351, or 
615.5357.
    (2) Describe regulatory minimum capital standards, and the 
institution's compliance with such standards. For banks, also discuss 
any related associations that are not currently in compliance with the 
standards.

[[Page 210]]

    (3) State whether the institution is currently prohibited from 
retiring stock or distributing earnings by the statutory and regulatory 
restrictions described in paragraph (d)(1)(ix) of this section, or knows 
of any reason such prohibitions may apply during the fiscal year 
subsequent to the fiscal year just ended.
    (4) Describe the institution's capital adequacy requirements and the 
minimum stock purchase requirement in effect.
    (e) Description of liabilities. (1) Describe separately the 
institution's insured and uninsured debt, indicating the type, amount, 
maturity, and interest rates of each category of obligations outstanding 
at the end of the fiscal year just ended. Describe the nature of the 
insurance provided under part E of title V of the Act. Describe any 
applicable statutory and regulatory restrictions on the institution's 
ability to incur debt.
    (2) Describe fully the institution's rights and obligations under 
any agreement, formal or informal, between the institution and any other 
person or entity having to do with capital preservation, loss sharing, 
or any other form of financing assistance.
    (3) Describe any statutory authorities or obligations to contribute 
to or on behalf of another institution of the Farm Credit System.
    (4) Describe the statutory responsibility of Farm Credit System 
institutions for repayment of obligations issued by the Farm Credit 
System Financial Assistance Corporation.
    (f) Selected financing data. Furnish in comparative columnar form 
for each of the last 5 fiscal years the following financing data:
    (1) For banks and direct lender associations.
    (i) Balance sheet.
    (A) Total assets.
    (B) Investments.
    (C) Loans.
    (D) Allowance for losses.
    (E) Net loans.
    (F) Other property owned.
    (G) Total liabilities.
    (H) Obligations with maturities less than 1 year.
    (I) Obligations with maturities longer than 1 year.
    (J) Protected borrower capital.
    (K) At-risk capital.
    (1) Stock and participation certificates.
    (2) Allocated surplus.
    (3) Unallocated surplus.
    (ii) Statement of income.
    (A) Net interest income.
    (B) Provision for loan losses.
    (C) Extraordinary items.
    (D) Net income.
    (iii) Key financing ratios.
    (A) Return on average assets.
    (B) Return on average protected borrower capital and at-risk 
capital.
    (C) Net interest margin as a percentage of average earning assets.
    (D) Protected and at-risk capital-to-total assets.
    (E) Net chargeoffs-to-average loans.
    (F) Allowance for loan losses-to-loans.
    (iv) Net income distributed.
    (A) Dividends.
    (B) Patronage refunds.
    (1) Cash.
    (2) Stock.
    (3) Allocated surplus.
    (2) For associations that are not direct lender associations.
    (i) Balance sheet.
    (A) Total assets.
    (B) Accrued obligation under loss-sharing agreement, if any.
    (C) Protected borrower capital.
    (D) At-risk capital.
    (ii) Statement of income.
    (A) Compensation from related bank.
    (B) Total operating expense.
    (C) Extraordinary items.
    (D) Provision for obligation under capital preservation or loss-
sharing agreement, if any.
    (E) Net income.
    (iii) Other.
    (A) Loans serviced for related bank.
    (B) Dividends paid.
    (C) Patronage refunds paid.
    (1) Cash.
    (2) Stock.
    (3) Allocated surplus.
    (D) Payments under loss-sharing agreement.
    (3) For all banks (on a bank-only basis):
    (i) Permanent capital ratio.
    (ii) Total surplus ratio.
    (iii) Core surplus ratio.
    (iv) Net collateral ratio.

[[Page 211]]

    (4) For all associations:
    (i) Permanent capital ratio.
    (ii) Total surplus ratio.
    (iii) Core surplus ratio.
    (g) Management's discussion and analysis of financing condition and 
results of operations. Fully discuss any material aspects of the 
institution's financing condition, changes in financing condition, and 
results of operations during the last 2 fiscal years, identifying 
favorable and unfavorable trends, and significant events or 
uncertainties. In addition to the items enumerated below, the discussion 
shall provide such other information as is necessary to an understanding 
of the institution's financing condition, changes in financing 
condition, and results of operations.
    (1) Loan portfolio. (i) Describe the types of loans in the portfolio 
by major category (e.g., agricultural real estate mortgage loans, rural 
home loans, agricultural production loans, processing and marketing 
loans, farm business loans, and international loans), indicating the 
approximate percentage of the total dollar portfolio represented by each 
major category. Associations that make agricultural production loans 
shall provide the information required for such loans by major 
subcategory (e.g., cash grains, field crops, livestock, dairy, poultry, 
and timber). For each category and subcategory, discuss any special 
features of the loans that may be material to the evaluation of risk and 
any economic or business conditions that have had or are likely to have 
a material impact on their collectibility. For banks, also disclose 
separately the aggregate amount of loans outstanding to related 
associations and other financing institutions.
    (ii) Describe the geographic distribution of the loan portfolio by 
State or other significant geographic division, if any.
    (iii) Purchases and sales of loans. (A) Describe any participation 
in the Federal Agricultural Mortgage Corporation program or origination 
of loans for resale.
    (B) Disclose the amount of purchased loans, loans sold with 
recourse, retained subordinated participation interests in loans sold, 
and interests in pools of subordinated participation interests that are 
held in lieu of retaining a subordinated participation interest in the 
loans sold.
    (iv) Risk exposure. For the periods covered by the financing 
statements provide:
    (A) An analysis of high-risk assets and loan performance categories, 
to include, but not limited to, a discussion of the nature and extent of 
significant potential credit risks within the loan portfolio, or other 
information that could adversely impact performance of the loan 
portfolio in the near future;
    (B) An analysis of the allowance for loan losses that includes the 
ratios of the allowance to loans and net chargeoffs to average loans, 
and a discussion of the adequacy of the allowance for losses to absorb 
the risk inherent in the institution's loan portfolio;
    (C) Financial assistance given or received under districtwide or 
Systemwide loss-sharing or capital preservation agreements or otherwise;
    (D) For banks, a description in the aggregate of the recent loss 
experience of related associations that are its shareholders, including 
the items enumerated in paragraphs (g)(1)(iv) (A), (B), and (C) of this 
section.
    (E) Describe any obligations with respect to loans sold and the 
amount of any contributions made in connection with loans sold into the 
secondary market pursuant to section 8.7 of the Act. Further disclose 
the amount of risk of loss associated with such obligations and the 
amount included in the allowance for losses to provide for such risk.
    (2) Results of operations. (i) Describe, on a comparative basis, 
changes in the major components of net interest income during the last 2 
fiscal years, describing significant factors that contributed to the 
changes and quantifying the amount of change(s) due to an increase in 
volume or the introduction of new services and the amount due to changes 
in interest rates earned and paid, based on averages for each period.
    (ii) Describe any unusual or infrequent events or transactions or 
any significant economic changes, including, but not limited to, 
financing assistance received or paid that materially affected reported 
income. In each

[[Page 212]]

case, indicate the extent to which income was so affected.
    (iii) Discuss the factors underlying the material changes, if any, 
in the return on average assets, the return on average protected 
borrower capital and at-risk capital, and the permanent capital ratio as 
determined in accordance with part 615, subpart H of this chapter. An 
explanation of the basis of the calculation of ratios relating to 
permanent capital and at-risk capital shall be included.
    (iv) Describe, on a comparative basis, the major components of 
operating expense, indicating the reasons for significant increases or 
decreases.
    (v) Describe any other significant components of income or expense, 
including, but not limited to, income from investments, that should be 
described in order to understand the institution's results of 
operations.
    (vi) Discuss any events affecting a related organization that are 
likely to have a material effect on the reporting institution's 
financing condition, results of operations, cost of funds, or 
reliability of sources of funds.
    (vii) Describe any known trends or uncertainties that have had, or 
that the institution reasonably expects will have, a material impact on 
net interest income or net income. Disclose any events known to 
management that will cause a material change in the relationship between 
costs and revenues.
    (3) Liquidity and funding sources. (i) Funding sources. (A) Describe 
the average and yearend amounts, maturities, and interest rates on 
outstanding consolidated Systemwide debt obligations or other bond 
obligations used to fund the institution's lending operations.
    (B) Describe existing lines of credit and their terms.
    (C) Describe the institution's capital accounts and other sources of 
lendable funds.
    (ii) Liquidity. (A) Discuss the institution's liquidity policy and 
the components of asset liquidity, including, but not limited to, cash, 
investment securities, and maturing loan repayments. Assess the ability 
of the institution to generate adequate amounts of cash to fund its 
operations and meet its obligations.
    (B) Discuss any known trends that are likely to result in a 
liquidity deficiency and the course of action management intends to take 
to resolve it. Discuss any material increase or decrease in liquidity 
that is likely to occur.
    (C) Discuss the institution's participation in the Federal 
Agricultural Mortgage Corporation secondary market programs authorized 
by title VIII of the Act and the origination of loans for resale under 
other authorities, if any.
    (iii) Funds management. (A) Discuss the institution's interest rate 
programs and the institution's ability to control interest rate margins.
    (B) Discuss changes in net interest margin (net interest income as a 
percentage of average earning assets), explaining the reasons therefor.
    (4) Capital resources. (i) Describe any material commitments to 
purchase capital assets and the anticipated sources of funding.
    (ii) Describe any material trends or changes in the mix and cost of 
debt and capital resources. The discussion shall consider changes in 
permanent capital, core and total surplus, and net collateral 
requirements, debt, and any off-balance-sheet financing arrangements.
    (iii) Describe any favorable or unfavorable trends in the 
institution's capital resources.
    (iv) Discuss and explain any material changes in capital ratios, 
noting any material adverse variances from regulatory guidelines.
    (v) Discuss the adequacy of the current capital position and any 
material changes in the capital plan adopted pursuant to Sec. 615.5200 
of this chapter, to the extent that such changes may have an effect on 
the institution's minimum stock purchase requirements and its ability to 
retire stock and distribute earnings.
    (vi) Discuss any trends, commitments, contingencies, or events that 
are reasonably likely to have a materially adverse effect upon the 
institution's ability to meet the regulatory minimum capital standards 
and capital adequacy requirements.

[[Page 213]]

    (h) Directors and senior officers. (1) List the names of all 
directors and senior officers of the institution, indicating the 
position title and term of office of each.
    (2) Briefly describe the business experience during the past 5 years 
of each director and senior officer, including each person's principal 
occupation and employment during the past 5 years.
    (3) For each director, list any other business entity on whose board 
the director serves and state the principal business in which it is 
engaged.
    (i) Compensation of directors and senior officers--(1) Director 
compensation. Describe the arrangements under which directors of the 
institution are compensated for all services as a director (including 
total cash compensation and any noncash compensation that exceeds 10 
percent of total compensation) and state the total cash compensation 
paid to all directors as a group during the last fiscal year. If 
applicable, describe any exceptional circumstances justifying the 
additional director compensation as authorized by Sec. 611.400(c)(1) of 
this chapter. For each director, state:
    (i) The number of days served at board meetings;
    (ii) The total number of days served in other official activities;
    (iii) The total compensation paid to each director during the last 
fiscal year.
    (2) Senior officer compensation. Disclose the information on senior 
officer compensation and compensation plans as required by this 
paragraph. Farm Credit System associations may disclose the information 
required by this paragraph in the Association Annual Meeting Information 
Statement (AAMIS), but must include a reference in the annual report 
stating that the senior officer compensation information is included in 
the AAMIS.
    (i) The institution shall disclose the total amount of compensation 
paid to senior officers in substantially the same manner as the tabular 
form specified in the following Summary Compensation Table (table):

                                           Summary Compensation Table
----------------------------------------------------------------------------------------------------------------
                                                                 Annual
  Name of individual or No. in                   --------------------------------------
             group                     Year                                Deferred/       Other        Total
                                                    Salary     Bonus      perquisites
(a)                              (b)                    (c)        (d)             (e)          (f)          (g)
 
----------------------------------------------------------------------------------------------------------------
CEO............................  199X
                                 199X
                                 199X
Aggregate No. of Senior
 Officers
    (X)........................  199X
    (X)........................  199X
    (X)........................  199X
----------------------------------------------------------------------------------------------------------------

    (A) Report the total amount of compensation paid and the amount of 
each component of compensation paid to the institution's chief executive 
officer (CEO) for each of the last 3 completed fiscal years, naming the 
individual. If more than one person served in the capacity of CEO during 
any given fiscal year, individual compensation disclosures must be 
provided for each CEO. Except that, no disclosure need be provided for 
any CEO whose salary and bonus (or annualized salary and bonus, if the 
CEO served in that capacity less than a year) do not exceed $150,000, 
adjusted annually to reflect changes in the Consumer Price Index (CPI) 
for all urban consumers, as published by the Bureau of Labor Statistics. 
The threshold for individually disclosing CEO compensation information 
shall be adjusted in the following manner: Current year's compensation 
disclosure threshold = Prior year's compensation disclosure threshold 
adjusted by the prior year's annual average percent change in the CPI 
for all urban consumers. The 1994 calendar year shall serve as the base 
year for making subsequent CPI adjustments to the $150,000 compensation 
disclosure threshold.

[[Page 214]]

    (B) Report the aggregate amount of compensation paid and the 
components of compensation paid during each of the last 3 completed 
fiscal years to all senior officers as a group, stating the number of 
officers in the group without naming them. At a minimum, disclose the 
aggregate amount of compensation paid to the five most highly 
compensated officers, whether or not designated as a senior officer by 
the board.
    (C) Amounts shown as ``Salary'' (column (c)) and ``Bonus'' (column 
(d)) shall reflect the dollar value of salary and bonus earned by the 
senior officer during the fiscal year. Amounts contributed during the 
fiscal year by the senior officer pursuant to a plan established under 
section 401(k) of the Internal Revenue Code, or similar plan, shall be 
included in the salary column or bonus column, as appropriate. If the 
amount of salary or bonus earned during the fiscal year is not 
calculable by the time the report is prepared, the reporting institution 
shall provide its best estimate of the compensation amount(s) and 
disclose that fact in a footnote to the table.
    (D) Amounts shown as ``deferred/perquisites'' (column (e)) shall 
reflect the dollar value of other annual compensation not properly 
categorized as salary or bonus, including but not limited to:
    (1) Deferred compensation earned during the fiscal year, whether or 
not paid in cash; or
    (2) Perquisites and other personal benefits unless the aggregate 
value of such compensation is the lesser of either $25,000 or 10 percent 
of the total of annual salary and bonus reported for the senior officer 
in columns (c) and (d).
    (E) Compensation amounts reported under the category ``Other'' 
(column (f)) shall reflect the dollar value of all other compensation 
not properly reportable in any other column. Items reported in this 
column shall be specifically identified and described in a footnote to 
the table. Such compensation includes, but is not limited to:
    (1) The amount paid to the senior officer pursuant to a plan or 
arrangement in connection with the resignation, retirement, or 
termination of such officer's employment with the institution; or
    (2) The amount of contributions by the institution on behalf of the 
senior officer to a vested or unvested defined contribution plan unless 
the plan is made available to all employees on the same basis.
    (F) Amounts displayed under ``Total'' (column (g)) shall reflect the 
sum total of amounts reported in columns (c), (d), (e), and (f).
    (ii) Provide a description of all plans pursuant to which cash or 
noncash compensation was paid or distributed during the last fiscal 
year, or is proposed to be paid or distributed in the future for 
performance during the last fiscal year, to those individuals described 
in paragraph (i)(2)(i) of this section. The description of each plan 
must include, but not be limited to:
    (A) A summary of how the plan operates and who is covered by the 
plan;
    (B) The criteria used to determine amounts payable, including any 
performance formula or measure;
    (C) The time periods over which the measurement of compensation will 
be determined;
    (D) Payment schedules; and
    (E) Any material amendments to the plan during the last fiscal year.
    (iii) The annual report or AAMIS shall include a statement that 
disclosure of information on the total compensation paid during the last 
fiscal year to any senior officer or to any other officer included in 
the aggregate whose compensation exceeds $50,000 is available and will 
be disclosed to shareholders of the institution and shareholders of 
related associations (if applicable) upon request.
    (3) Travel, subsistence, and other related expenses. (i) Briefly 
describe your policy addressing reimbursements for travel, subsistence, 
and other related expenses as it applies to directors and senior 
officers. The report shall include a statement that a copy of the policy 
is available to shareholders of the institution and shareholders of 
related associations (if applicable) upon request.
    (ii) For each of the last 3 fiscal years, state the aggregate amount 
of reimbursement for travel, subsistence, and other related expenses for 
all directors as a group.
    (j) Transactions with senior officers and directors. (1) State the 
institution's

[[Page 215]]

policies, if any, on loans to and transactions with officers and 
directors of the institution.
    (2) Transactions other than loans. For each person who served as a 
senior officer or director on January 1 of the year following the fiscal 
year of which the report is filed, or at any time during the fiscal year 
just ended, describe briefly any transaction or series of transactions 
other than loans that occurred at any time since the last annual meeting 
between the institution and such person, any member of the immediate 
family of such person, or any organization with which such person is 
affiliated. State the name of the officer or director who entered into 
the transaction or whose immediate family member or affiliated 
organization entered into the transaction, the nature of the person's 
interest in the transaction, and the terms of the transaction. No 
information need be given where the purchase price, fees, or charges 
involved were determined by competitive bidding or where the amount 
involved in the transaction (including the total of all periodic 
payments) does not exceed $5,000, or the interest of the person arises 
solely as a result of his or her status as a stockholder of the 
institution and the benefit received is not a special or extra benefit 
not available to all stockholders.
    (3) Loans to senior officers and directors. (i) To the extent 
applicable, state that the institution (or in the case of an association 
that does not carry loans to its senior officers and directors on its 
books, its related bank) has had loans outstanding during the last full 
fiscal year to date to its senior officers and directors, their 
immediate family members, and any organizations with which such senior 
officers or directors are affiliated that:
    (A) Were made in the ordinary course of business; and
    (B) Were made on the same terms, including interest rate, 
amortization schedule, and collateral, as those prevailing at the time 
for comparable transactions with other persons.
    (ii) To the extent applicable, state that no loan to a senior 
officer or director, or to any organization affiliated with such person, 
or to any immediate family member who resides in the same household as 
such person or in whose loan or business operation such person has a 
material financing or legal interest, involved more than the normal risk 
of collectibility; provided that no such statement need be made with 
respect to any director or senior officer who has resigned before the 
time for filing the applicable report with the Farm Credit 
Administration (but in no case later than the actual filing), or whose 
term of office will expire or terminate no later than the date of the 
meeting of stockholders to which the report relates.
    (iii) If the conditions stated in paragraphs (j)(3)(i) and (ii) of 
this section do not apply to the loans of the persons or organizations 
specified therein, with respect to such loans state:
    (A) The name of the officer or director to whom the loan was made or 
to whose relative or affiliated organization the loan was made.
    (B) The largest aggregate amount of each indebtedness outstanding at 
any time during the last fiscal year.
    (C) The nature of the loan(s).
    (D) The amount outstanding as of the latest practicable date.
    (E) The reasons the loan does not comply with the criteria contained 
in paragraphs (j)(3)(i) and (j)(3)(ii) of this section.
    (F) If the loan does not comply with paragraph (j)(3)(i)(B) of this 
section, the rate of interest payable on the loan and the repayment 
terms.
    (G) If the loan does not comply with paragraph (j)(3)(ii) of this 
section, the amount past due, if any, and the reason the loan is deemed 
to involve more than a normal risk of collectibility.
    (k) Involvement in certain legal proceedings. Describe any of the 
following events that occurred during the past 5 years and that are 
material to an evaluation of the ability or integrity of any person who 
served as director or senior officer on January 1 of the year following 
the fiscal year for which the report is filed or at any time during the 
fiscal year just ended:
    (1) A petition under the Federal bankruptcy laws or any State 
insolvency law was filed by or against, or a receiver, fiscal agent, or 
similar officer

[[Page 216]]

was appointed by a court for the business or property of such person, or 
any partnership in which such person was a general partner at or within 
2 years before the time of such filing, or any corporation or business 
association of which such person was a senior officer at or within 2 
years before the time of such filing;
    (2) Such person was convicted in a criminal proceeding or is a named 
party in a pending criminal proceeding (excluding traffic violations and 
other misdemeanors);
    (3) Such person was the subject of any order, judgment, or decree, 
not subsequently reversed, suspended, or vacated, by any court of 
competent jurisdiction, permanently or temporarily enjoining or 
otherwise limiting such person from engaging in any type of business 
practice.
    (l) Relationship with independent public accountant. If a change or 
changes in accountants have taken place since the last annual report to 
shareholders or if a disagreement with an accountant has occurred that 
the institution would be required to report to the Farm Credit 
Administration under part 621 of this chapter, the information required 
by Sec. 621.4(c) and (d) of this chapter shall be disclosed.
    (m) Financial statements. (1) Furnish financing statements and 
related footnotes that have been prepared in accordance with generally 
accepted accounting principles and instructions and other requirements 
of the Farm Credit Administration and that have been audited in 
accordance with generally accepted auditing standards by a qualified 
public accountant, as defined in Sec. 621.2(i) of this chapter, and an 
opinion expressed thereon. The statements shall include the following 
statements and related footnotes for the last 3 fiscal years: balance 
sheet, statement of income, statement of changes in protected borrower 
capital and at-risk capital, and statement of cash flows.
    (2) The financing statements shall be accompanied by a letter signed 
by the chief executive officer and the chairman of the board 
representing that the financing statements, in the opinion of 
management, fairly present the financing condition of the institution, 
except as otherwise noted.

[51 FR 8656, Mar. 13, 1986]

    Editorial Note: For Federal Register citations affecting Sec. 620.5, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and on GPO Access.



                       Subpart C--Quarterly Report



Sec. 620.10  Preparing the quarterly report.

    (a) Each Farm Credit bank and direct lender association shall 
prepare a quarterly report within 45 days after the end of each fiscal 
quarter, except that no report need be prepared for the fiscal quarter 
that coincides with the end of the fiscal year of the institution.
    (b) The report shall contain, at a minimum, the information 
specified in Sec. 620.11 and, in addition, such other material 
information (including significant events) as is necessary to make the 
required disclosures, in light of the circumstances under which they are 
made, not misleading.

[62 FR 15093, Mar. 31, 1997]



Sec. 620.11  Content of quarterly report to shareholders.

    (a) General. The information required to be included in the 
quarterly report may be presented in any format deemed suitable by the 
institution, except as otherwise required by this section. The report 
must be organized in an easily understandable format and not presented 
in a manner that is misleading.
    (b) Rules for condensation. For purposes of this section, major 
captions to be provided in the financial statements are the same as 
those provided in the financial statements contained in the 
institution's annual report to shareholders, except that the financial 
statements included in the quarterly report may be condensed into major 
captions in accordance with the rules prescribed under this paragraph 
and paragraph (f) of this section.
    (1) Interim balance sheets. When any major balance sheet caption is 
less than 10 percent of total assets and the amount in the caption has 
not increased or decreased by more than 25

[[Page 217]]

percent since the end of the preceding fiscal year, the caption may be 
combined with others.
    (2) Interim statements of income. When any major income statement 
caption is less than 15 percent of average net income for the 3 most 
recent fiscal years and the amount in the caption has not increased or 
decreased by more than 20 percent since the corresponding interim period 
of the preceding fiscal year, the caption may be combined with others. 
In calculating average net income, loss years should be excluded. If 
losses were incurred in each of the 3 most recent fiscal years, the 
average loss shall be used for purposes of this test.
    (3) The interim financial information shall include disclosure 
either on the face of the financial statements or in accompanying 
footnotes sufficient to make the interim information presented not 
misleading. Institutions may presume that users of the interim financial 
information have read or have access to the audited financial statements 
for the preceding fiscal year and the adequacy of additional disclosure 
needed for a fair presentation may be determined in that context. 
Accordingly, footnote disclosure that would substantially duplicate the 
disclosure contained in the most recent audited financial statements 
(such as a statement of significant accounting policies and practices), 
and details of accounts that have not changed significantly in amount or 
composition since the end of the most recent completed fiscal year may 
be omitted. However, disclosure shall be provided of events occurring 
subsequent to the end of the most recent fiscal year that have a 
material impact on the institution. Disclosures should encompass, for 
example, significant changes since the end of the most recently 
completed fiscal year in such items as accounting principles and 
practices; estimates inherent in the preparation of financial 
statements; status of long-term contracts; capitalization, including 
significant new indebtedness or modification of existing financing 
agreements; and the reporting entity resulting from business 
combinations or dispositions.
    (4) If, during the most recent interim period presented, the 
institution entered into a business combination treated for accounting 
purposes as a pooling of interests, the interim financial statements for 
both the current year and the preceding year shall reflect the combined 
results of the pooled businesses. Supplemental disclosure of the 
separate results of the combined entities for periods prior to the 
combination shall be given, with appropriate comments or comparisons 
between the separate and consolidated results.
    (5) If a material business combination accounted for as a purchase 
has occurred during the current fiscal year, pro forma disclosure shall 
be made of the results of operations for the current year up to the date 
of the most recent interim balance sheet provided (and for the 
corresponding period in the preceding year) as though the companies had 
combined at the beginning of that period. This pro forma information 
shall, at a minimum, show:
    (i) Total operating income.
    (ii) Income before securities gains (losses), extraordinary items, 
and the cumulative effect of accounting changes.
    (iii) Net income.
    (6) In addition to meeting the reporting requirements specified by 
existing accounting pronouncements for accounting changes, the 
institution shall state the date of any material accounting change and 
the reasons for making it. In addition, a letter from the persons who 
verify the institution's financial statements shall be filed as an 
exhibit, indicating whether or not the change is to an alternative 
principle which in their judgment is preferable under the circumstances, 
except that no such letter need be filed when the change is made in 
response to a standard adopted by the Financial Accounting Standards 
Board which requires such change.
    (7) Any material retroactive prior period adjustment made during any 
period covered by the interim financial statements shall be disclosed, 
together with its effect upon net income and upon the balance of 
undivided profits for any prior period included. If results of 
operations for any period presented have been adjusted retroactively by 
such an item subsequent to the initial

[[Page 218]]

reporting of such period, similar disclosure of the effect of the change 
shall be made.
    (8) The interim financial statements furnished shall reflect all 
adjustments that are, necessary to a fair statement of the results for 
the interim periods presented. A statement to that effect shall be 
included. Furnish any material information necessary to make the 
information called for not misleading, such as a statement that the 
results for interim periods are not necessarily indicative of results to 
be expected for the year.
    (c) Management's discussion and analysis of financial condition and 
results of operations. Discuss material changes, if any, to the 
information provided to shareholders pursuant to Sec. 620.5(g) that have 
occurred during the periods specified in paragraphs (d)(1) and (2) of 
this section. Such additional information as is needed to enable the 
reader to assess material changes in financial condition and results of 
operations between the periods specified in paragraphs (d)(1) and (2) of 
this section shall be provided.
    (1) Material changes in financial condition. Discuss any material 
changes in financial condition from the end of the preceding fiscal year 
to the date of the most recent interim balance sheet provided. If the 
interim financial statements include an interim balance sheet as of the 
corresponding interim date of the preceding fiscal year, any material 
changes in financial conditions from that date to the date of the most 
recent interim balance sheet provided also shall be discussed. If 
discussions of changes from both the end and the corresponding interim 
date of the preceding fiscal year are required, the discussions may be 
combined at the discretion of the institution.
    (2) Material changes in results of operations. Discuss any material 
changes in the institution's results of operations with respect to the 
most recent fiscal year-to-date period for which an income statement is 
provided and the corresponding year-to-date period of the preceding 
fiscal year. Such discussion also shall cover material changes with 
respect to that fiscal quarter and the corresponding fiscal quarter in 
the preceding fiscal year. In addition, if the institution has elected 
to provide an income statement for the 12-month period ended as of the 
date of the most recent interim balance sheet provided, the discussion 
also shall cover material changes with respect to that 12-month period 
and the 12-month period ended as of the corresponding interim balance 
sheet date of the preceding fiscal year.
    (d) Financial statements. The following financial statements shall 
be provided:
    (1) An interim balance sheet as of the end of the most recent fiscal 
quarter and as of the end of the preceding fiscal year. A balance sheet 
for the comparable quarter of the preceding fiscal year is optional.
    (2) Interim statements of income for the most recent fiscal quarter, 
for the period between the end of the preceding fiscal year and the end 
of the most recent fiscal quarter, and for the comparable periods for 
the previous fiscal year.
    (3) Interim statements of changes in protected borrower capital and 
at-risk capital for the period between the end of the preceding fiscal 
year and the end of the most recent fiscal quarter, and for the 
comparable period for the preceding fiscal year.
    (4) For banks, interim statements of cash flows for the period 
between the end of the preceding fiscal year and the end of the most 
recent fiscal quarter, and for the comparable period for the preceding 
fiscal year. For associations, interim statements of cash flows are 
optional.
    (e) Review by independent public accountant. The interim financial 
information need not be audited or reviewed by an independent public 
accountant prior to filing. If, however, a review of the data is made in 
accordance with the established professional standards and procedures 
for such a review, the institution may state that the independent 
accountant has performed such a review. If such a statement is made, the 
report of the independent accountant on such review shall accompany the 
interim financial information.
    (f) If any amount that would otherwise be required to be shown by 
this subpart with respect to any item is not material, it need not be 
separately

[[Page 219]]

shown. The combination of insignificant items is permitted.

[51 FR 21341, June 12, 1986, as amended at 53 FR 3337, Feb. 5, 1988. 
Redesignated and amended at 56 FR 29421, 29424, June 27, 1991]



                    Subpart D--Notice to Shareholders

    Source: 62 FR 15093, Mar. 31, 1997, unless otherwise noted.



Sec. 620.15  Notice.

    (a) Each Farm Credit bank and direct lender association shall 
prepare, file with the farm Credit Administration, and distribute a 
notice to shareholders, within 30 days following the monthend that the 
institution initially determines that it is not in compliance with the 
minimum permanent capital standards prescribed under Sec. 615.5205 of 
this chapter.
    (b) An institution that has given notice to shareholders pursuant to 
paragraph (a) of this section or subsequent notice pursuant to this 
paragraph shall also prepare, file with the Farm Credit Administration, 
and distribute to shareholders a notice within 45 days following the end 
of any subsequent quarter at which the institution's permanent capital 
ratio decreases by one-half of 1 percent or more from the level reported 
in the most recent notice distributed to shareholders.
    (c) Each institution required to prepare a notice under Sec. 620.15 
(a) or (b) shall distribute the notice to shareholders by mail or 
otherwise furnish the information required in the notice by publishing 
it in any publication with circulation wide enough to be reasonably 
assured that all of the institution's shareholders have access to the 
information in a timely manner.



Sec. 620.17  Contents of the notice.

    (a) The information required to be in a notice must be conspicuous, 
easily understandable, and not misleading.
    (b) A notice, at a minimum, shall include:
    (1) A statement that:
    (i) Briefly describes the regulatory minimum permanent capital 
standard established by the Farm Credit Administration and the notice 
requirement of Sec. 620.15(a);
    (ii) Indicates the institution's current level of permanent capital; 
and
    (iii) Notifies shareholders that the institution's permanent capital 
is below the Farm Credit Administration regulatory minimum standard.
    (2) A statement of the effect that noncompliance has had on the 
institution and its shareholders, including whether the institution is 
currently prohibited by statute or regulation from retiring stock or 
distributing earnings or whether the Farm Credit Administration has 
issued a capital directive or other enforcement action to the 
institution.
    (3) A complete description of any event(s) that may have 
significantly contributed to the institution's noncompliance with the 
minimum permanent capital standard.
    (4) A statement that the institution is required by regulation to 
distribute another notice to shareholders within 45 days following the 
end of any subsequent quarter at which the institution's permanent 
capital ratio decreases by one half of one percent or more from the 
level reported in the notice.



       Subpart E--Association Annual Meeting Information Statement

    Source: 51 FR 8656, Mar. 13, 1986, unless otherwise noted. 
Redesignated at 56 FR 29421, June 27, 1991, and further redesignated at 
62 FR 15093, Mar. 31, 1997.



Sec. 620.20  Preparing and distributing the information statement.

    (a) Each association of the Farm Credit System shall prepare and 
distribute to its shareholders at least 10 days prior to any meeting at 
which directors are to be elected an information statement 
(``statement'').
    (b) The statement shall incorporate by reference the annual report 
to shareholders required by subpart B of this part and contain the 
information specified in Sec. 620.21 and such other material information 
as is necessary to make the required statement, in light

[[Page 220]]

of the circumstances under which it is made, not misleading.

[51 FR 8656, Mar. 13, 1986, as amended at 53 FR 3337, Feb. 5, 1988. 
Redesignated and amended at 56 FR 29421, 29425, June 27, 1991; 62 FR 
15094, Mar. 31, 1997]



Sec. 620.21  Contents of the information statement and other information to be furnished in connection with the annual meeting.

    The statement shall address the following items:
    (a) Date, time, and place of the meeting(s).
    (b) Voting shareholders. For each class of stock entitled to vote at 
the meeting, state the number of shareholders entitled to vote, and, 
when shareholders are asked to vote on preferred stock, the number of 
shares entitled to vote. State the record date as of which the 
shareholders entitled to vote will be determined and the voting 
requirements for each matter to be voted upon.
    (c) Directors. (1) State the names and ages of persons currently 
serving as directors of the institution, their terms of office, and the 
periods during which such persons have served. No information need be 
given with respect to any director whose term of office as a director 
will not continue after the meeting to which the statement relates.
    (2) State the name of any incumbent director who attended fewer than 
75 percent of the total of board meetings and any board committee 
meeting of committees on which he or she served during the last fiscal 
year.
    (3) If any director resigned or declined to stand for reelection 
since the last annual meeting because of a policy disagreement with the 
board, and if the director has furnished a letter requesting disclosure 
of the nature of the disagreement, state the date of the director's 
resignation and summarize the director's description of the disagreement 
contained in the letter. If the institution holds a different view of 
the disagreement, the institution's view may be summarized.
    (4) If any transactions between the institution and its senior 
officers and directors of the type required to be disclosed in the 
annual report to shareholders under Sec. 620.5(j), or any of the events 
required to be disclosed in the annual report to shareholders under 
Sec. 620.5 (k) have occurred since the end of the last fiscal year and 
were not disclosed in the annual report to shareholders, the disclosures 
required by Sec. 620.5 (j) and (k) shall be made with respect to such 
transactions or events in the annual information statement. If any 
material change in the matters disclosed in the annual report to 
shareholders pursuant to Sec. 620.5 (j) and (k) has occurred since the 
annual report to shareholders was prepared, disclosure shall be made of 
such change in the annual information statement.
    (d) Nominees. (1) If directors are nominated or elected by region, 
describe the regions and state the number of voting shareholders 
entitled to vote in each region. Any nominee from the floor must be an 
eligible candidate for the director position for which the person has 
been nominated.
    (2) If fewer than two nominees for each position are named, describe 
the efforts of the nominating committee to locate two willing nominees.
    (3) State that nominations shall be accepted from the floor.
    (i) If directors are not elected by region, the following shall 
apply:
    (A) If the annual meeting is to be held in more than one session and 
mail balloting will be conducted upon the conclusion of all sessions, 
state that nominations from the floor may be made at any session or, if 
the association's bylaws so provide, state that nominations from the 
floor shall be accepted only at the first session.
    (B) If shareholders will not vote solely by mail ballot upon 
conclusion of all sessions, state that nominations from the floor may be 
made only at the first session.
    (ii) If directors are elected by region, the following shall apply:
    (A) If more than one session of an annual meeting is held in a 
region, and if mail balloting will be conducted at the end of all 
sessions in a region, state that nominations from the floor may be made 
at any session in the region or, if the association's bylaws so provide, 
state that nominations from the floor shall be accepted only at the 
first session held in the region.

[[Page 221]]

    (B) If shareholders will not vote solely by mail ballot upon 
conclusion of all sessions in a region, state that nominations from the 
floor may be made only at the first session held in the region.
    (4) For each nominee, state the nominee's name, age, and business 
experience during the last 5 years, including each person's principal 
occupation and employment during the past 5 years. List any business 
entities on whose board of directors the director serves and state the 
principal business in which the entity is engaged.
    (5) For each nominee who is not an incumbent director, except a 
nominee from the floor, provide the information referred to in 
Sec. 620.5 (j) and (k) and Sec. 620.21(d)(4). If shareholders will vote 
by mail ballot upon conclusion of all sessions, each floor nominee must 
provide the information referred to in Sec. 620.5 (j) and (k) and 
Sec. 620.21(d)(4) in writing to the association within the time period 
prescribed by the association's bylaws. If the association's bylaws do 
not prescribe a time period, state that each floor nominee must provide 
the written disclosure to the association within 5 business days of the 
nomination. The association shall ensure that the information is 
distributed to the voting shareholders with the mailing of the ballots 
for the election of directors in the same format as the comparable 
information contained in the association's annual meeting information 
statement. If shareholders will not vote by mail ballot upon conclusion 
of all sessions, each floor nominee must provide the information 
referred to in Sec. 620.5 (j) and (k) and Sec. 620.21(d)(4) in writing 
at the first session at which voting is held.
    (6) No person may be a nominee for director who does not make the 
disclosures required by this subpart.
    (e) Other shareholder action. (1) If shareholders are asked to vote 
on matters not normally required to be submitted to shareholders for 
approval, describe fully the material circumstances surrounding the 
matter, the reason shareholders are asked to vote, and the vote required 
for approval of the proposition.
    (2) The statement shall describe any other matter that will be 
discussed at the meeting upon which shareholder vote is not required.
    (f) Relationship with independent public accountant. If an 
institution of the Farm Credit System has had a change or changes in 
accountants since the last annual report to shareholders, or if a 
disagreement with an accountant has occurred, the institution shall 
disclose the information required by Sec. 621.4 (c) and (d) of this 
chapter.

[51 FR 8656, Mar. 13, 1986. Redesignated and amended at 56 FR 29421, 
29425, June 27, 1991; 56 FR 42649, Aug. 28, 1991; 58 FR 48791, Sept. 20, 
1993; 60 FR 20013, Apr. 24, 1995; 60 FR 57922, Nov. 24, 1995]



            Subpart F--Bank Director Disclosure Requirements

    Source: 53 FR 50399, Dec. 15, 1988, unless otherwise noted. 
Redesignated at 56 FR 29421, June 27, 1991, and further redesignated at 
62 FR 15093, Mar. 31, 1997.



Sec. 620.30  Disclosure statement for bank director candidates.

    Each bank shall adopt policies and procedures that assure that a 
disclosure statement is prepared by each candidate for election by the 
stockholders to the bank board. The banks shall provide a form providing 
for the information required and distribute or mail copies of completed 
and signed disclosure statements to stockholders with the election 
ballots. No person may be a candidate for bank director who does not 
make the disclosures required by this subpart.



Sec. 620.31  Contents of disclosure statements.

    Disclosure statements shall include the following information:
    (a) A statement of the institution's policies, if any, on loans to 
and transactions with directors of the bank.
    (b) Candidate's name, residential address, business address if any, 
citizenship, business experience during the last 5 years including 
principal occupation and employment during the last 5 years, a list of 
any business entities on whose board of directors the candidate serves 
and state the principal business in which the entities are engaged, and

[[Page 222]]

any information pertinent to the creation of a nepotistic relationship 
upon election to the bank board.
    (c) Transactions other than loans. The disclosure statement should 
describe briefly any transaction or series of transactions other than 
loans that occurred since the last annual meeting between the bank and 
the candidate, any member of the immediate family of such person, or any 
organization with which such person is affiliated, the nature of the 
person's interest in the transaction, and the terms of the transaction. 
No information need be given where the purchase price, fees, or charges 
involved were determined by competitive bidding or where the amount 
involved in the transaction (including the total of all periodic 
payments) does not exceed $5,000, or the interest of the person arises 
solely as a result of his or her status as a stockholder of the 
institution and the benefit received is not a special or extra benefit 
not available to all stockholders.
    (d) Loans to director candidates. (1) To the extent applicable, 
state that the bank has had loans outstanding during the last full 
fiscal year-to-date to the candidate, his or her immediate family 
members, and any organizations with which such persons are affiliated 
that:
    (i) Were made in the ordinary course of business;
    (ii) Were made on the same terms, including interest rate, 
amortization schedule, and collateral, as those prevailing at the time 
for comparable transactions with other persons.
    (2) To the extent applicable, state that no loan to a candidate, or 
to any organization affiliated with the candidate, or to any immediate 
family member who resides in the same household as the candidate or in 
whose loan or business operation the candidate has a material financial 
or legal interest, involved more than the normal risk of collectibility;
    (3) If the conditions stated in paragraphs (d) (1) and (2) of this 
section do not apply to the loan(s) of the candidates or organizations 
specified therein with respect to such loans, state:
    (i) The name of the candidate to whom the loan was made or to whose 
relative or affiliated organization the loan was made;
    (ii) The largest aggregate amount of each indebtedness outstanding 
at any time during the last fiscal year;
    (iii) The nature of the loan(s);
    (iv) The amount outstanding as of the latest practicable date;
    (v) The reasons the loan does not comply with the criteria contained 
in this section;
    (vi) If the loan does not comply with this section, the rate of 
interest payable on the loan and the repayment terms;
    (vii) If the loan does not comply with this section, the amount past 
due, if any, and the reason the loan is deemed to involve more than a 
normal risk of collectibility.
    (e) Involvement in certain legal proceedings. The disclosure 
statement should describe any of the following events that occurred 
during the past 5 years and that are material to an evaluation of the 
ability or integrity of the candidate:
    (1) A petition under the Federal bankruptcy laws or any State 
insolvency law was filed by or against, or a receiver, fiscal agent, or 
similar officer was appointed by a court for the business or property of 
the candidate, or any partnership in which the candidate was a general 
partner at or within 2 years before the time of such filing, or any 
corporation or business association of which the candidate was a senior 
officer at or within 2 years before the time of such filing;
    (2) The candidate was convicted in a criminal proceeding or is a 
named party in a pending criminal proceeding (excluding traffic 
violations and other misdemeanors);
    (3) The candidate was the subject of any order, judgment, or decree, 
not subsequently reversed, suspended, or vacated, by any court of 
competent jurisdiction, permanently or temporarily enjoining or 
otherwise limiting the candidate from engaging in any type of business 
practice.

[[Page 223]]



   Subpart G--Annual Report of Condition of the Federal Agricultural 
                          Mortgage Corporation

    Source: 58 FR 48791, Sept. 20, 1993, unless otherwise noted. 
Redesignated at 62 FR 15093, Mar. 31, 1997.



Sec. 620.40  Content, timing, and distribution of Federal Agricultural Mortgage Corporation's annual report of condition.

    (a) The Federal Agricultural Mortgage Corporation shall prepare and 
publish an annual report of its condition that is equivalent in content 
to the annual report to shareholders required by section 14 of the 
Securities and Exchange Act of 1934.
    (b) The Corporation shall distribute the annual report of condition 
to its shareholders within 120 days of its fiscal year-end.
    (c) Upon receiving a request for an annual report of condition, the 
Corporation shall promptly mail or otherwise furnish to the requestor a 
copy of the most recent annual report described in this section.
    (d) The Corporation shall file three copies of the annual report of 
condition with the Farm Credit Administration's Office of Secondary 
Market Oversight within 120 days of its fiscal year-end.



PART 621--ACCOUNTING AND REPORTING REQUIREMENTS--Table of Contents




                   Subpart A--Purpose and Definitions

Sec.
621.1  Purpose and applicability.
621.2  Definitions.

                        Subpart B--General Rules

621.3  Application of generally accepted accounting principles.
621.4  Audit by qualified public accountant.
621.5  Accounting for the allowance for loan losses and chargeoffs.

          Subpart C--Loan Performance and Valuation Assessment

621.6  Performance categories and other property owned.
621.7  Rule of aggregation.
621.8  Application of payments and income recognition on nonaccrual 
          loans.
621.9  Reinstatement to accrual status.
621.10  Monitoring of performance categories and other property owned.

             Subpart D--Report of Condition and Performance

621.12  Applicability and general instructions.
621.13  Content and standards--general rules.
621.14  Certification of correctness.

  Subpart E--Reports Relating to Securities Activities of the Federal 
                    Agricultural Mortgage Corporation

621.20  Form and content.

    Authority: Secs. 5.17, 8.11 of the Farm Credit Act (12 U.S.C. 2252, 
2279aa-11).

    Source: 58 FR 48786, Sept. 20, 1993, unless otherwise noted.



                   Subpart A--Purpose and Definitions



Sec. 621.1  Purpose and applicability.

    This part sets forth accounting and reporting requirements to be 
followed by all banks, associations, and service organizations chartered 
under the Act; the Federal Farm Credit Banks Funding Corporation; and, 
where specifically indicated, the Federal Agricultural Mortgage 
Corporation. The requirements set forth in this part are of both general 
and specific applicability. Certain requirements focus on areas of 
financial condition and operating performance that are of special 
importance for generating, presenting, and disclosing accurate and 
reliable information.



Sec. 621.2  Definitions.

    For the purposes of this part, the following definitions shall 
apply:
    (a) Accrual basis of accounting means the accounting method in which 
expenses are recorded when incurred, whether paid or unpaid, and income 
is reported when earned, whether received or not received.
    (b) Borrowing entity means the individual(s), partnership, joint 
venture, trust, corporation, or other business entity, or any 
combination thereof, that is primarily obligated on the loan instrument.
    (c) Generally accepted accounting principles means that body of 
conventions,

[[Page 224]]

rules, and procedures necessary to define accepted accounting practices 
at a particular time, as promulgated by the Financial Accounting 
Standards Board (FASB) and other authoritative sources recognized as 
setting standards for the accounting profession in the United States. 
Generally accepted accounting principles include not only broad 
guidelines of general application but also detailed practices and 
procedures that constitute standards by which financial presentations 
are evaluated.
    (d) Generally accepted auditing standards means the standards and 
guidelines adopted by the Auditing Standards Board of the American 
Institute of Certified Public Accountants (AICPA) to govern the overall 
quality of audit performance.
    (e) Institution means any bank, association, or service organization 
chartered under the Act; the Federal Farm Credit Banks Funding 
Corporation, and where specifically noted, the Federal Agricultural 
Mortgage Corporation.
    (f) Loan means any extension of credit or lease that is recorded as 
an asset of a reporting institution, whether made directly or purchased 
from another lender. The term ``loan'' includes, but is not limited to:
    (1) Loans originated through direct negotiations between the 
reporting institution and a borrower;
    (2) Purchased loans or interests in loans, including participation 
interests, retained subordinated participation interests in loans sold, 
and interests in pools of subordinated participation interests that are 
held in lieu of retaining a subordinated participation interest in loans 
sold;
    (3) Contracts of sale; notes receivable; and
    (4) Other similar obligations and lease financing.
    (g) Material means the magnitude of an omission or misstatement of 
accounting information that, in light of surrounding circumstances, 
makes it probable that the judgment of a reasonable person relying on 
the information would have been changed or influenced by the omission or 
misstatement.
    (h) Net realizable value means the net amount the lender would 
expect to be realized from the acquisition and subsequent sale or 
disposition of a loan's underlying collateral. Generally, net realizable 
value is equal to the estimated selling price in the ordinary course of 
business, less estimated costs of acquisition, completion, and disposal.
    (i) Qualified public accountant means a person who:
    (1) Holds a valid and unrevoked certificate, issued to such person 
by a legally constituted State authority, identifying such person as a 
certified public accountant;
    (2) Is licensed to practice as a public accountant by an appropriate 
regulatory authority of a State or other political subdivision of the 
United States;
    (3) Is in good standing as a certified and licensed public 
accountant under the laws of the State or other political subdivision of 
the United States in which is located the home office or corporate 
office of the institution that is to be audited;
    (4) Is not suspended or otherwise barred from practice as an 
accountant or public accountant before the Securities and Exchange 
Commission (SEC) or any other appropriate Federal or State regulatory 
authority; and
    (5) Is independent of the institution that is to be audited. For the 
purposes of this definition the term ``independent'' shall have the same 
meaning as under the rules and interpretations of the AICPA.
    (j) Recorded investment means the face amount of the loan increased 
or decreased by applicable accrued interest and unamortized premium, 
discount, finance charges, or acquisition costs, and may also reflect a 
previous direct write-down of the investment.



                        Subpart B--General Rules



Sec. 621.3  Application of generally accepted accounting principles.

    Each institution shall:
    (a) Prepare and maintain, on an accrual basis, accurate and complete 
records of its business transactions as necessary to prepare financial 
statements and reports, including reports to

[[Page 225]]

the Farm Credit Administration, in accordance with generally accepted 
accounting principles, except as otherwise directed by statutory and 
regulatory requirements;
    (b) Prepare its financial statements and reports, including reports 
to the shareholders, investors, boards of directors, institution 
management and the Farm Credit Administration, in accordance with 
generally accepted accounting principles, except as otherwise directed 
by statutory and regulatory requirements; and
    (c) Prepare and maintain its books and records in such a manner as 
to facilitate reconciliation with financial statements and reports 
prepared from them.



Sec. 621.4  Audit by qualified public accountant.

    (a) Each institution shall, at least annually, have its financial 
statements audited by a qualified public accountant in accordance with 
generally accepted auditing standards.
    (b) The qualified public accountant's opinion of each institution's 
financial statements shall be included as a part of each annual report 
to shareholders.
    (c) If an institution disagrees with the opinion of a qualified 
public accountant required by paragraph (b) of this section, the 
following actions shall be taken immediately:
    (1) The institution shall prepare a brief but thorough written 
description of the scope and content of the disagreement, noting each 
point of disagreement and citing, in all cases, the specific provisions 
of generally accepted accounting principles and generally accepted 
auditing standards upon which the institution's position in the 
disagreement is based;
    (2) A copy of the institution's final description of the 
disagreement shall be given to the accountant who provided the opinion 
with which the institution disagrees;
    (3) The accountant shall have 10 business days to develop and 
provide a brief but thorough final response to the institution's 
description of the disagreement, including all items believed to be 
incorrect or incomplete, and citing, in all cases, the specific 
provisions of generally accepted accounting principles and generally 
accepted auditing standards upon which the accountant's position in the 
disagreement is based;
    (4) Both the institution's final description of the disagreement and 
the accountant's final response to it shall be included in the 
institution's annual report to shareholders directly following the 
accountant's opinion of the institution's financial statements; and
    (5) The institution shall immediately notify the Chief Examiner, 
Farm Credit Administration, of any disagreement with its accountant and 
shall furnish the Farm Credit Administration with the written 
documentation required by paragraphs (c) (1) through (4) of this 
section.
    (d) If an institution selects a qualified public accountant to audit 
its financial statements and provide an opinion thereon for its annual 
report who is different from the accountant whose opinion appeared in 
the institution's most recent annual report, the following items shall 
be sent to the Farm Credit Administration no later than 15 days after 
the end of the month in which the change took place and shall be 
included in the institution's annual meeting information statement and 
annual report to shareholders for the year in which the change of 
accountants took place:
    (1) The name and address of the accountant whose opinion appeared in 
the institution's most recent annual report to shareholders;
    (2) A brief but thorough statement of the reasons the accountant 
selected for the most recent annual report was not selected for the 
current annual report. If the change resulted from a disagreement with 
the accountant, the statement shall describe the institution's 
disagreement with the accountant's opinion and the accountant's final 
response to the institution's disagreement prepared pursuant to 
paragraph (c) of this section; and
    (3) The identification of the highest ranking officer, committee of 
officers, or board of directors, as appropriate, that recommended, 
approved, or otherwise made the decision to change qualified public 
accountants.

[[Page 226]]



Sec. 621.5  Accounting for the allowance for loan losses and chargeoffs.

    Each institution shall:
    (a) Maintain at all times an allowance for loan losses that is 
adequate to absorb all probable and estimable losses that may reasonably 
be expected to exist in the loan portfolio.
    (b) Develop, adopt, and consistently apply policies and procedures 
governing the establishment and maintenance of the allowance for loan 
losses which, at a minimum, conform to the rules, definitions, and 
standards set forth in this part and any other applicable requirements.
    (c) Charge-off loans, wholly or partially, as appropriate, at the 
time they are determined to be uncollectible.
    (d) Ensure that when an institution or the Farm Credit 
Administration determines that the value of a loan or other asset 
recorded on its books and records exceeds the amount that can reasonably 
be expected to be collectible, or when the documentation supporting the 
recorded asset value is inadequate, the institution shall immediately 
charge off the asset in the amount determined to be uncollectible. If 
the amount determined to be uncollectible by the institution is 
different from the amount determined to be uncollectible by the Farm 
Credit Administration, the institution shall charge off such amount as 
the Farm Credit Administration shall direct.



          Subpart C--Loan Performance and Valuation Assessment



Sec. 621.6  Performance categories and other property owned.

    Each institution shall employ the following practices with respect 
to categorizing high-risk loans and loan-related assets. No loan shall 
be put into more than one performance category. At a minimum, loans 
meeting the criteria for both nonaccrual and another performance 
category shall be classified as nonaccrual.
    (a) Nonaccrual loans. A loan shall be considered nonaccrual if it 
meets any of the following conditions:
    (1) Collection of any amount of outstanding principal and all past 
and future interest accruals, considered over the full term of the 
asset, is not expected;
    (2) Any portion of the loan has been charged off, except in cases 
where the prior chargeoff was taken as part of a formal restructuring of 
the loan; or
    (3) The loan is 90 days past due and is not both adequately secured 
and in process of collection.
    (i) A loan is considered adequately secured only if:
    (A) It is secured by real or personal property having a net 
realizable value sufficient to discharge the debt in full; or
    (B) It is guaranteed by a financially responsible party in an amount 
sufficient to discharge the debt in full.
    (ii) A loan is considered in process of collection only if 
collection efforts are proceeding in due course and, based on a probable 
and specific event, are expected to result in the prompt repayment of 
the debt or its restoration to current status. There must be documented 
evidence that collection in full of amounts due and unpaid is expected 
to occur within a reasonable time period, not to exceed 180 days from 
the date that payment was due. The commencement of collection efforts 
through legal action, including bankruptcy or foreclosure, or through 
collection efforts not involving legal action, including ongoing 
workouts and reamortizations, do not, in and of themselves, provide 
sufficient cause to keep a loan out of nonaccrual status. If full 
collection of the debt or its restoration to current status is dependent 
upon completion of any action by the borrower, the institution must 
obtain the borrower's written agreement to complete all such actions by 
the specific dates set forth in agreement.
    (b) Formally restructured loans. A loan is considered formally 
restructured if it meets the ``troubled debt restructuring'' definition 
set forth in Statement of Financial Accounting Standards No. 15, 
Accounting by Debtors and Creditors for Troubled Debt Restructurings, as 
promulgated by the FASB.
    (c) Loans 90 days past due still accruing interest. (1) Loans 90 
days past due still accruing interest means loans that are 90 days or 
more contractually past due, and that are both adequately secured

[[Page 227]]

and in process of collection, as described in this section.
    (2) A loan shall be considered contractually past due when any 
principal repayment or interest payment required by the loan instrument 
is not received on or before the due date. A loan shall remain 
contractually past due until it is formally restructured or until the 
entire amount past due, including principal, accrued interest, and 
penalty interest incurred as the result of past due status, is collected 
or otherwise discharged in full.
    (d) Other property owned means any real or personal property, other 
than an interest-earning asset, that has been acquired as a result of 
full or partial liquidation of a loan, through foreclosure, deed in lieu 
of foreclosure, or other means.



Sec. 621.7  Rule of aggregation.

    (a) When one loan to a borrower is placed in nonaccrual, an 
institution must immediately evaluate whether its other loans to that 
borrower, or related borrowers, should also be placed in nonaccrual. All 
loans on which a borrowing entity, or a component of a borrowing entity, 
is primarily obligated to the reporting institution shall be considered 
as one loan unless a review of all pertinent facts supports a reasonable 
determination that a particular loan constitutes an independent credit 
risk and such determination is adequately documented in the loan file.
    (1) A loan shall be considered an independent credit risk if a 
substantial portion of the loan is guaranteed as to principal and 
interest by a government agency.
    (2) Other loans shall be considered independent credit risks if and 
so long as:
    (i) The primary sources of repayment are independent for each loan;
    (ii) The loans are not cross-collateralized; and
    (iii) The principal obligors are different person(s) and/or 
entity(ies). Related loans will not be considered independent credit 
risks if the operations of a related borrower are so financially 
interdependent with the borrower's operations that the economic survival 
of one will materially affect the economic survival of the other, 
determined in accordance with Sec. 614.4359(a)(2) of this chapter.
    (b) If the evaluation required by paragraph (a) of this section 
results in a determination that the borrower's other loans with the 
institution do not represent an independent credit risk, and full 
collection of such loans is not expected, then all of the borrower's 
loans must be aggregated and classified as nonaccrual. If such other 
loans represent an independent credit risk and are fully collectible, 
then they may remain in their current performance category.
    (c) When an institution becomes aware that a borrower has a loan 
that has been classified nonaccrual by any other lender, the institution 
must re-evaluate the credit risk in its loan to the borrower and then 
determine whether an independent credit risk exists.

[58 FR 48786, Sept. 20, 1993, as amended at 64 FR 34519, June 28, 1999]



Sec. 621.8  Application of payments and income recognition on nonaccrual loans.

    Each institution shall employ the following practices with respect 
to application of cash payments on nonaccrual loans:
    (a) If the ultimate collectibility of the recorded investment, in 
whole or in part, is in doubt, any payment received on such loan shall 
be applied to reduce the recorded investment to the extent necessary to 
eliminate such doubt.
    (b) Once the ultimate collectibility of the recorded investment is 
no longer in doubt, payments received in cash on such loan may qualify 
for recognition as interest income if all of the following 
characteristics are met at the time the payment is received:
    (1) The loan does not have a remaining unrecovered prior chargeoff 
associated with it, except in cases where the prior chargeoff was taken 
as part of a formal restructuring of the loan;
    (2) The payment received has come from a source of repayment 
detailed in the plan of collection;
    (3) The loan, after considering the payment, is not contractually 
past due more than 90 days and is not expected to become 90 days past 
due, or a repayment pattern has been established that

[[Page 228]]

reasonably demonstrates future repayment capacity.
    (c) The institution shall employ the following practices with 
respect to earned but uncollected interest income on loans, leases, 
contracts, and similar assets that are determined not to be fully 
collectible:
    (1) Earned but uncollected interest income that was accrued in the 
current fiscal year and is determined to be uncollectible shall be 
reversed from interest income; and
    (2) Earned but uncollected interest income that was accrued in prior 
fiscal years and is determined to be uncollectible shall be charged off 
against the allowance for loan losses.



Sec. 621.9  Reinstatement to accrual status.

    A loan may be reinstated to accrual status, when each of the 
following criteria are met:
    (a) All contractual principal and interest due on the loan is paid 
and the loan is current;
    (b) Prior chargeoffs are recovered, except for troubled debt 
restructures;
    (c) No reasonable doubt remains regarding the willingness and 
ability of the borrower to perform in accordance with the contractual 
terms of the loan agreement; and
    (d) Reinstatement is supported by a period of sustained performance 
in accordance with the contractual terms of the note and/or loan 
agreement. Sustained performance will generally be demonstrated by 6 
consecutive monthly payments, 4 consecutive quarterly payments, 3 
consecutive semi-annual payments, or 2 consecutive annual payments.



Sec. 621.10  Monitoring of performance categories and other property owned.

    (a) Each institution shall:
    (1) Account for, report, and disclose to shareholders, investors, 
boards of directors, and the Farm Credit Administration all material 
items with respect to performance categories and other property owned in 
accordance with the rules and definitions set forth in this part and any 
other applicable requirements;
    (2) In accordance with Sec. 620.5(g)(1)(iv)(A) of this chapter, 
disclose to shareholders, investors, boards of directors, and the Farm 
Credit Administration the nature and extent of significant potential 
credit risks within the loan portfolio, or other information that could 
adversely impact performance of the loan portfolio in the near future;
    (3) Develop, adopt, and consistently apply policies and procedures 
governing performance categories and other property owned, which, at a 
minimum, conform to the definitions, rules, and standards set forth in 
this part and such other requirements and procedures as may be required 
by the Farm Credit Administration;
    (4) Review the loan portfolio at least quarterly to ensure that all 
high-risk loans have been assigned the appropriate performance category; 
and
    (5) Review all high-risk loans in the loan portfolio at least 
quarterly to determine the collectibility of accrued but uncollected 
income, if any.
    (b) Measures taken to enhance the collectibility of a loan shall not 
be deemed to relieve an institution of the requirement to monitor and 
evaluate the loan for the purpose of determining its performance status.



             Subpart D--Report of Condition and Performance



Sec. 621.12  Applicability and general instructions.

    (a) Each institution, including the Federal Agricultural Mortgage 
Corporation, shall prepare and file such reports of condition and 
performance as may be required by the Farm Credit Administration.
    (b) Reports of condition and performance shall be filed four times 
each year, and at such other times as the Farm Credit Administration may 
require. The reports shall be prepared on the accrual basis of 
accounting and shall fairly represent the financial condition and 
performance of each institution at the end of, and over the period of, 
each calendar quarter, provided that such additional reports as may be 
necessary to ensure timely, complete,

[[Page 229]]

and accurate monitoring and evaluation of the affairs, condition, and 
performance of Farm Credit institutions may be required, as determined 
by the Chief Examiner, Farm Credit Administration.
    (c) All reports of condition and performance shall be filed with the 
Farm Credit Administration, Office of Examination, 1501 Farm Credit 
Drive, McLean, Virginia, 22102-5090.



Sec. 621.13  Content and standards--general rules.

    Each institution, including the Federal Agricultural Mortgage 
Corporation, shall prepare reports of condition and performance:
    (a) In accordance with all applicable laws, regulations, standards, 
and such instructions and specifications and on such media as may be 
prescribed by the Farm Credit Administration;
    (b) In accordance with generally accepted accounting principles and 
such other accounting requirements, standards, and procedures as may be 
prescribed by the Farm Credit Administration; and
    (c) In such manner as to facilitate their reconciliation with the 
books and records of reporting institutions.



Sec. 621.14  Certification of correctness.

    Each report of financial condition and performance filed with the 
Farm Credit Administration shall be certified as having been prepared in 
accordance with all applicable regulations and instructions and to be a 
true and accurate representation of the financial condition and 
performance of the institution to which it applies. The reports shall be 
certified by the officer of the reporting institution named for that 
purpose by action of the reporting institution's board of directors. If 
the board of directors of the institution has not acted to name an 
officer to certify the correctness of its reports of condition and 
performance, then the reports shall be certified by the president or 
chief executive officer of the reporting institution.



  Subpart E--Reports Relating to Securities Activities of the Federal 
                    Agricultural Mortgage Corporation



Sec. 621.20  Form and content.

    (a) The Federal Agricultural Mortgage Corporation (Corporation) 
shall provide the Office of Secondary Market Oversight with three copies 
of any filings made with the SEC pursuant to the Securities Act of 1933 
or the Securities and Exchange Act of 1934. Such copies shall be filed 
with the FCA no later than 1 business day after any SEC filing.
    (b) The Corporation shall make the following filings with the Office 
of Secondary Market Oversight for securities either issued or guaranteed 
by the Corporation that are not registered under the Securities Act of 
1933.
    (1) Three copies of any offering circular, private placement 
memorandum, or information statement prepared in connection with the 
securities offering shall be filed with the Office of Secondary Market 
Oversight at or before the time of the securities offering.
    (2) For securities backed by qualified loans as defined in section 
8.0(9)(A) of the Act, the Corporation shall file one copy of the 
following within 1 business day of the finalization of the transaction:
    (i) The private placement memoranda for securities sold to 
investors; and
    (ii) The pooling and servicing agreement when the security is 
purchased by the Corporation as authorized by section 8.6(g) of the Act.
    (3) For securities backed by qualified loans as defined in section 
8.0(9)(B) of the Act, the Corporation shall provide summary information 
on such securities issued during each calendar quarter in the form 
prescribed by the Office of Secondary Market Oversight. Such summary 
information shall be provided with each report of condition and 
performance filed pursuant to Sec. 621.12, and at such other times as 
the Office of Secondary Market Oversight may require.

[[Page 230]]

    (c) The Corporation shall file with the Office of Secondary Market 
Oversight copies of all substantive correspondence between the 
Corporation and the Securities and Exchange Commission and the 
Department of the Treasury relating to securities activities or 
regulatory compliance. Such correspondence should be filed no later than 
the date of filing of the report of condition and performance for the 
calendar quarter in which the correspondence was received or sent.
    (d) The Corporation shall promptly notify the Office of Secondary 
Market Oversight if it becomes exempt or claims exemption from the 
filing requirements of the Securities and Exchange Act of 1934.

[58 FR 48786, Sept. 20, 1993]



PART 622--RULES OF PRACTICE AND PROCEDURE--Table of Contents




             Subpart A--Rules Applicable to Formal Hearings

Sec.
622.1  Scope of regulations.
622.2  Definitions.
622.3  Appearance and practice.
622.4  Commencement of proceedings.
622.5  Answer.
622.6  Opportunity for informal settlement.
622.7  Conduct of hearings.
622.8  Rules of evidence.
622.9  Subpoenas.
622.10  Depositions.
622.11  Motions.
622.12  Proposed findings and conclusions; recommended decision.
622.13  Exceptions.
622.14  Briefs.
622.15  Oral argument before the Board.
622.16  Notice of submission to the Board.
622.17  Decision of the Board.
622.18  Filing.
622.19  Service.
622.20  Documents in proceedings confidential.
622.21  Computing time.
622.22  Retained authority.
622.23-622.50  [Reserved]

 Subpart B--Rules and Procedures for Assessment and Collection of Civil 
                             Money Penalties

622.51  Definitions.
622.52  Purpose and scope.
622.53  Notification of alleged violations.
622.54  Relevant considerations.
622.55  Notice of assessment of civil money penalty.
622.56  Request for formal hearing on assessment.
622.57  Waiver of hearing; consent.
622.58  Hearing on assessment.
622.59  Assessment order.
622.60  Payment of civil money penalty.
622.61  Adjustment of civil money penalties by the rate of inflation 
          under the Federal Civil Penalties Inflation Adjustment Act of 
          1990, as amended.
622.62--622.75  [Reserved]

 Subpart C--Rules and Procedures Applicable to Suspension or Removal of 
        an Individual Where Certain Crimes are Charged or Proven

622.76  Definitions.
622.77  Purpose and scope.
622.78  Suspension, prohibition or removal.
622.79  Petition for informal hearing.
622.80  Informal hearing.
622.81  Default.
622.82  Decision of the Board.
622.83--622.100  [Reserved]

   Subpart D--Rules and Procedures Applicable to Formal Investigations

622.101  Definitions.
622.102  Scope.
622.103  Formal investigations are confidential.
622.104  Order to conduct formal investigation.
622.105  Conduct of investigation.
622.106  Service of subpoena and payment of witness fees.
622.107  Transcripts.

    Authority: Secs. 5.9, 5.10, 5.17, 5.25-5.37 of the Farm Credit Act 
(12 U.S.C. 2243, 2244, 2252, 2261-2273); 28 U.S.C. 2461 note.

    Source: 51 FR 21139, June 11, 1986, unless otherwise noted.



             Subpart A--Rules Applicable to Formal Hearings



Sec. 622.1  Scope of regulations.

    This subpart prescribes rules of practice and procedure in 
connection with any formal hearing before the Farm Credit Administration 
(FCA) that is required by the Farm Credit Act of 1971, as amended (Act) 
or is ordered for other reasons by the FCA. In connection with any 
particular matter, reference should also be made to any special 
requirements of practice and procedure that may be contained in 
applicable provisions of the Act or the rules

[[Page 231]]

adopted by the FCA in subpart B of this part, which special requirements 
are controlling. The rules in subpart A do not apply to the informal 
hearings described in subpart C of this part, to any other informal 
hearing that may be ordered by the FCA, or to formal investigations 
described in subpart D of this part.



Sec. 622.2  Definitions.

    As used in this part:
    (a) Act means the Farm Credit Act of 1971, as amended. 12 U.S.C. 
2001, et seq.
    (b) FCA means the Farm Credit Administration.
    (c) Board means the Farm Credit Administration Board.
    (d) The terms institution in the System, System institution and 
institution mean all institutions enumerated in section 1.2 of the Act, 
any institution chartered pursuant to or established by the Act, except 
for the Farm Credit System Assistance Board and the Farm Credit System 
Insurance Corporation, and any service organization chartered under part 
E of title IV of the Act.
    (e) Party means the FCA or a person or institution named as a party 
in any notice that commences a proceeding, or any person or institution 
who is admitted as a party or who has filed a written request and is 
entitled as of right to be a party.
    (f) Presiding officer means an administrative law judge or any FCA 
employee or other person designated by the Board to conduct a hearing.
    (g) Ex parte communication means an oral or written communication 
not on the record with respect to which reasonable prior notice to all 
parties is not given. It does not include requests for status reports.

[51 FR 21139, June 11, 1986, as amended at 53 FR 27284, July 19, 1988]



Sec. 622.3  Appearance and practice.

    (a) Appearance before the Board or a presiding officer--(1) By 
nonattorneys. An individual may appear in his or her own behalf; a 
member of a partnership may represent the partnership; a duly authorized 
officer or other agent of a corporation, trust association or other 
entity not specifically listed herein may represent the corporation, 
trust association, or other entity; and a duly authorized officer or 
employee of any government unit, agency or authority may represent that 
unit, agency or authority. Any person appearing in a representative 
capacity shall file a written notice of appearance with the Board which 
shall contain evidence of his or her authority to act in such capacity.
    (2) By attorneys. A party may be represented by an attorney who is a 
member in good standing of the bar of the highest court of any State, 
possession, territory, Commonwealth or the District of Columbia, and who 
has not been suspended or debarred from practice before the FCA in 
accordance with the provisions of part 623 of this chapter. Prior to 
appearing, an attorney representing a person in a proceeding shall file 
a written notice of appearance with the Board, which shall contain a 
declaration that he or she is currently qualified as provided by 
paragraph (a)(2) of this section and is authorized to represent the 
party on whose behalf he or she acts.
    (3) Representation of multiple interests. A person shall not 
represent more than one party without informing each party of any actual 
or potential conflict of interest that may be involved in such 
representation. Such person shall file a statement with the Board 
indicating that such disclosure has been made. The presiding officer has 
authority to take protective measures at any stage of a proceeding, 
including the authority to prohibit multiple representation when deemed 
appropriate.
    (b) Summary suspension. Dilatory, obstructionist, egregious, 
contemptuous, contumacious, or other unethical or improper conduct at 
any proceeding before the Board or a presiding officer shall be grounds 
for exclusion therefrom and suspension for the duration of the 
proceeding, or other appropriate action by the Board or presiding 
officer.



Sec. 622.4  Commencement of proceedings.

    Proceedings under this subpart are commenced by the issuance of a 
notice by the Board. Such notice shall state

[[Page 232]]

the time, place, and nature of the hearing, the name and address of the 
presiding officer if one has been designated, and a statement of the 
matters of fact and law constituting the grounds for the hearing. The 
matters of fact and law alleged in a notice may be amended by the Board 
at any stage of the proceeding and such amended notice may require an 
answer from the party or parties served and may set a new hearing date. 
A copy of any notice served by the FCA on any System association, 
director, officer or other person participating in the conduct of the 
affairs of the association will also be sent to the supervisory bank.



Sec. 622.5  Answer.

    (a) Answer is required. Unless a different period is specified by 
the Board, a party who does not wish to consent to a final order must 
file an answer within 20 days after being served with a notice that 
commences the proceeding. Any subsequent notice which contains amended 
allegations and by its terms requires an answer must similarly be 
answered within 20 days after service.
    (b) Requirements of answer; effect of failure to deny. An answer 
filed under this section shall concisely state any defenses and 
specifically admit or deny each allegation in the notice. A party who 
lacks information or knowledge sufficient to form a belief as to the 
truth of any particular allegation shall so state and this shall have 
the effect of a denial. Any allegation not denied shall be deemed to be 
admitted. A party who intends in good faith to deny only a part of or to 
qualify an allegation shall specify so much of it as is true and shall 
deny only the remainder.
    (c) Admitted allegations. If a party filing an answer under this 
section elects not to contest any of the allegations of fact set forth 
in the notice, the answer shall consist of a statement admitting all of 
the allegations to be true. Such answer constitutes a waiver of hearing 
as to the facts alleged in the notice, and together with the notice will 
provide a record basis on which the presiding officer shall file with 
the Board a recommended decision in accordance with 5 U.S.C. 557. The 
recommended decision shall be served on the party, who may file 
exceptions thereto within the time provided in Sec. 622.13.
    (d) Effect of failure to answer. Failure of a party to file an 
answer required by this section within the time provided constitutes a 
waiver of the party's right to appear and contest the allegations in the 
notice and authorizes the presiding officer, without further notice to 
the party, to find the facts to be as alleged in the notice and to file 
with the Board a recommended decision containing such findings and 
appropriate conclusions. The Board or the presiding officer may, for 
good cause shown, permit the filing of a delayed answer after the time 
for filing and the answer has expired.



Sec. 622.6  Opportunity for informal settlement.

    Any interested party may at any time submit to the Board for 
consideration written offers or proposals for settlement of a 
proceeding, without prejudice to the rights of the parties. No offer or 
proposal shall be admissible into evidence over the objection of any 
party in any hearing in connection with such proceeding. The foregoing 
provisions of this section shall not preclude settlement of any 
proceeding through the regular adjudicatory process by the filing of an 
answer as provided in Sec. 622.5(c), or by submission of the case to the 
presiding officer on a stipulation of facts and an agreed order.



Sec. 622.7  Conduct of hearings.

    (a) Authority of presiding officer. All hearings governed by this 
subpart shall be conducted in accordance with the provisions of chapter 
5 of title 5 of the United States Code. The presiding officer designated 
by the Board to preside at any such hearing shall have complete charge 
of the hearing, shall have the duty to conduct it in a fair and 
impartial manner and shall take all necessary action to avoid delay in 
the disposition of the proceeding. Such officer shall have all powers 
necessary to that end, including the following:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas and subpoenas duces tecum, as authorized by 
law, and

[[Page 233]]

to revoke, quash, or modify any such subpoena;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold conferences for the settlement or simplification of 
issues or for any proper purpose; and
    (7) To consider and rule upon, as justice may require, all 
procedural and other motions appropriate in a proceeding under this 
subpart, except that a presiding officer shall not have power to decide 
any motion to dismiss the proceeding or other motion which results in a 
final determination of the merits of the proceeding. This power rests 
only with the Board. Without limitation on the foregoing, the presiding 
officer shall, subject to the provisions of this subpart, have all the 
authority set forth in 5 U.S.C. 556(c).
    (b) Prehearing conference. The presiding officer may, on his or her 
own initiative or at the request of any party, direct counsel for all 
parties to meet with him or her at a specified time and place prior to 
the hearing, or to submit suggestions to him or her in writing, for the 
purpose of considering any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact and of the contents and 
authenticity of documents;
    (3) Matters of which official notice will be taken; and
    (4) Such other matters as may aid in the orderly disposition of the 
proceeding.

At the conclusion of such conference(s) the presiding officer shall 
enter an order which recites the results of the conference. Such order 
shall include the presiding officer's rulings upon matters considered at 
the conference, together with appropriate directions, if any, to the 
parties. Such order shall control the subsequent course of the 
proceeding, unless modified at the hearing for good cause shown.
    (c) Exchange of information. Thirty (30) days prior to the hearing, 
parties shall exchange a list of the names of witnesses with a general 
description of their expected testimony, and a list and one copy of all 
documents or other physical exhibits which will be introduced in 
evidence in the course of the proceeding.
    (d) Attendance at hearings. All hearings shall be private and shall 
be attended only by the parties, their counsel or authorized 
representatives, witnesses while testifying, and other persons having an 
official interest in the proceeding. However, if the Board, in its 
discretion, after fully considering the views of the party afforded the 
hearing, determines that a public hearing is necessary to protect the 
public interest, the Board may in its sole discretion order that the 
hearing be public.
    (e) Transcript of testimony. Hearings shall be recorded. A copy of 
the transcript of the testimony taken at any hearing, duly certified by 
the reporter, together with all exhibits accepted into evidence shall be 
filed with the presiding officer. The presiding officer shall promptly 
serve notice upon all parties of such filing. The parties shall make 
their own arrangements with the person recording the testimony for 
copies of the testimony and exhibits. The presiding officer shall have 
authority to correct the record sua sponte with notice to all parties 
and to rule upon motions to correct the record. In the event the hearing 
is public, transcripts will be furnished to interested persons upon 
payment of the cost thereof.
    (f) Continuances and changes or extensions of time and changes of 
place of hearing. Except as otherwise provided by law, the presiding 
officer may extend time limits prescribed by these rules or by any 
notice or order issued in the proceedings, may change the time for 
beginning any hearing, continue or adjourn a hearing from time to time, 
and/or change the location of the hearing. Prior to the appointment of a 
presiding officer and after the filing of a recommended decision 
pursuant to Sec. 622.12, the Board may grant such extensions or changes. 
Subject to the approval of the presiding officer, the parties may by 
stipulation change the time limits specified by these rules

[[Page 234]]

or any notice or order issued hereunder.
    (g) Closing of hearing. The record of the hearing shall be closed by 
an announcement to that effect by the presiding officer when the taking 
of evidence has been concluded. In the discretion of the presiding 
officer, the record may be closed as of a future date in order to permit 
the admission into the record, under circumstances determined by the 
presiding officer, of exhibits to be prepared.
    (h) Call for further evidence, oral arguments, briefs, reopening of 
hearing. The presiding officer may call for the production of further 
evidence upon any issue, may permit oral argument and submission of 
briefs at the hearing and, upon appropriate notice, may reopen any 
hearing at any time prior to the filing of his or her recommended 
decision. The Board may reopen the record at anytime permitted by law.
    (i) Order of procedure. The FCA shall open and close.
    (j) Ex parte communications. (1) No person shall make or knowingly 
cause to be made an ex parte communication relevant to the merits of the 
proceeding to the presiding officer or anyone who is or may reasonably 
be expected to be involved in the decisional process.
    (2) No person who is or may reasonably be expected to be involved in 
the decisional process shall make or knowingly cause to be made an ex 
parte communication relevant to the merits of the proceeding to any 
person.
    (3) Except as authorized by law, the presiding officer shall not 
consult anyone on any fact in issue, unless upon notice and opportunity 
for all parties to participate. The presiding officer shall not be 
responsible to, or subject to the supervision or direction of, any 
officer, employee, or agent of the FCA engaged in the performance of 
investigative or prosecuting functions. An officer, employee or agent 
engaged in the performance of such functions in any case shall not, in 
that case or a factually related case, participate or advise in the 
decision of the presiding officer, except as a witness or counsel in the 
proceedings, or as otherwise authorized by law.
    (4) If an ex parte communication is made or knowingly caused to be 
made, all such communications, and any responses, shall be placed in the 
record.
    (5) Upon receipt of a communication knowingly made or caused to be 
made in violation of paragraph (j) of this section, the responsible 
party may be required to show cause why such party's claim or interest 
should not be dismissed, denied, or otherwise adversely affected. To the 
extent consistent with the interests of justice, a knowing violation of 
paragraph (j) of this section may be grounds for a decision adverse to a 
party in violation.
    (6) The prohibitions against ex parte communications apply from the 
time a proceeding is noticed for hearing. However, when the person 
responsible for the communication has knowledge that the proceeding will 
be noticed, the prohibitions apply from the time such knowledge is 
acquired.



Sec. 622.8  Rules of evidence.

    (a) Evidence. Every party shall have the right to present a case or 
defense by oral and documentary evidence, to submit rebuttal evidence, 
and to conduct such cross-examination as may be required for a full and 
true disclosure of the facts. Irrelevant, immaterial or unduly 
repetitious evidence shall be excluded.
    (b) Objections. Objections to the admission or exclusion of evidence 
shall be in short form, stating the grounds of objection relied upon but 
no argument thereon shall be permitted, except as ordered, allowed, or 
requested by the presiding officer. Rulings on such objections and all 
other matters shall be part of the transcript. Failure to object timely 
to the admission or exclusion of evidence or to any ruling constitutes a 
waiver of such objection.
    (c) Stipulations. Independently of the orders or rulings issued as 
provided by Sec. 622.7(b), the parties may stipulate as to any relevant 
matters of fact or the authenticity of any relevant documents. Such 
stipulations may be received in evidence at the hearing, and when so 
received shall be binding on the parties with respect to the matters 
therein stipulated.

[[Page 235]]

    (d) Official notice. All matters officially noticed by the presiding 
officer shall appear on the record.



Sec. 622.9  Subpoenas.

    (a) Issuance. The presiding officer or, in the event he or she is 
unavailable, the Board may issue subpoenas and subpoena duces tecum at 
the request of any party requiring the attendance of witnesses or the 
production of documents at a designated place. The person seeking the 
subpoena may be required, as a condition precedent to the issuance of 
the subpoena, to show the general relevance and reasonable scope of the 
testimony or other evidence sought. Where it appears to the presiding 
officer that a subpoena may be unreasonable, oppressive, excessive in 
scope, unduly burdensome, or delay the proceeding, the presiding officer 
has discretion to refuse to issue a subpoena or to issue it only upon 
such conditions as fairness requires.
    (b) Motions to quash. Any person to whom a subpoena is directed may, 
prior to the time specified therein for compliance but in no event more 
than 10 days after the date the subpoena was served, with notice to the 
party requesting the subpoena, apply to the presiding officer, or in the 
event he or she is unavailable to the Board, to quash or modify the 
subpoena, accompanying such application with a brief statement of the 
reasons therefor. The presiding officer may deny the application or, 
upon notice to the party on whose behalf the subpoena was issued and 
after affording that party an opportunity to reply, may quash or modify 
the subpoena or impose reasonable conditions including, in the case of a 
subpoena duces tecum, a requirement that the party on whose behalf the 
subpoena was issued pay in advance the reasonable cost of copying and 
transporting the documentary evidence to the designated place.
    (c) Service of subpoena. A subpoena may be served upon the person 
named therein by personal service or certified mail with a return 
receipt to the last known address of the person. The fees for one day's 
attendance and mileage as specified in paragraph (d) of this section 
must be tendered at the time of service unless the subpoena is issued on 
behalf of the FCA. If personal service is made by a U.S. marshal, a 
deputy U.S. marshal, or an employee of the FCA, such service shall be 
evidenced by the return thereon. If personal service is made by any 
other person, such person shall sign an affidavit describing the manner 
in which service is made, and return such affidavit with a copy of the 
subpoena. In case of failure to make service, reasons for the failure 
shall be stated on the original subpoena. The original or a copy of the 
subpoena, bearing or accompanied by the required return, affidavit, 
statement or return receipt, shall be returned without delay to the 
presiding officer.
    (d) Attendance of witnesses. The attendance of witnesses at a 
designated place may be required from any place in any State or 
territory subject to the jurisdiction of the United States. Witnesses 
who are subpoenaed shall be paid the same fees and mileage that are paid 
witnesses in the district courts of the United States. Fees required by 
this paragraph shall be paid by the party upon whose application the 
subpoena is issued.
    (e) Production of documents. The production of documents at a 
designated place may be required from any place in any State or 
territory subject to the jurisdiction of the United States. In lieu of 
an original document, a certified or authenticated copy may be produced. 
However, any party has the right to inspect the original document.



Sec. 622.10  Depositions.

    (a) Application to take deposition. Any party desiring to take the 
deposition of any person shall make written application to the presiding 
officer setting forth the name and address of the witness, the subject 
matter concerning which the witness is expected to testify, its 
relevance, the time and place of the deposition, and the reasons why 
such deposition should be taken. The application may include a request 
that specified documents be produced at the deposition. A copy of the 
application shall be served on the other parties at the same time the 
application is filed with the presiding officer.
    (b) Subpoena; notice to other parties. Upon a showing that the 
testimony or other evidence sought will be material,

[[Page 236]]

and the taking of the deposition will not result in any undue burden to 
the witness or any party or undue delay of the proceedings, the 
presiding officer may issue a subpoena or subpoena duces tecum. Notice 
of the issuance of such subpoena shall be served upon all parties at 
least 10 days in advance of the date set for deposition.
    (c) Deposition by notice. The requirements of paragraphs (a) and (b) 
of this section may be waived by agreement of the parties and the 
witness whose testimony or documentary evidence is sought. Such 
agreement shall be embodied in a stipulation which becomes part of the 
record and may provide for the taking of depositions upon notice without 
leave of the presiding officer.
    (d) Procedure on deposition. Depositions may be taken before any 
person having the power to administer oaths. Each witness whose 
testimony is taken by deposition shall be duly sworn before any question 
is propounded. Examination and cross-examination of deponents may 
proceed as permitted at the hearing. Objections to questions or 
documents shall be in short form, stating the grounds relief upon for 
the objection. Failure to object to questions or evidence is deemed a 
waiver if the ground of the objection is one which might have been 
obviated or removed if presented at that time. The questions propounded 
and the answers thereto, together with all objections made (but not 
including argument or debate) shall be recorded by or under the 
direction of the person before whom the deposition is taken. The 
deposition shall be signed by the witness, unless the parties by 
stipulation waive the signing or the witness is physically unable to 
sign, cannot be found, or refuses to sign. The deposition shall also be 
certified as a true and complete transcript by the person recording the 
testimony. If the deposition is not signed by the witness, the person 
recording the testimony shall state this fact and the reason therefor on 
the record. The person before whom the deposition is taken shall 
promptly file the transcript and all exhibits with the presiding 
officer. Interested parties shall make their own arrangements with the 
person recording the testimony for copies of the testimony and exhibits.
    (e) Introduction as evidence. Subject to appropriate rulings by the 
presiding officer on such objections and answers as were noted at the 
time the deposition was taken or as would be valid were the witness 
personally present and testifying at the hearing, the deposition or any 
part thereof may be received in evidence by the presiding officer in his 
or her discretion. Only such part of a deposition as is received in 
evidence at a hearing shall constitute a part of the record upon which a 
decision may be based.
    (f) Payment of fees. Deponents whose depositions are taken and the 
reporter taking the same shall be entitled to the same fees as are paid 
for like services in the district courts of the United States, which 
fees shall be paid by the party upon whose application the deposition is 
taken.



Sec. 622.11  Motions.

    (a) How made. An application or request for an order or ruling not 
otherwise specifically provided for in this subpart, unless made during 
a hearing, shall be made by written motion supported by a memorandum 
which concisely states the grounds therefor.
    (b) Opposition. Within 10 days after service of any written motion, 
or within such other period of time as may be fixed by the presiding 
officer, any party may file a memorandum in opposition thereto. The 
moving party has no right to reply except as permitted by the presiding 
officer. The presiding officer has discretion to waive the requirements 
of this section as to motions for extension of time and may rule upon 
such motions ex parte.
    (c) Oral argument. No oral argument will be heard on motions except 
as otherwise directed by the presiding officer or the Board.
    (d) Rulings and orders. Except as otherwise provided in this 
subpart, the presiding officer shall rule on all motions and may issue 
appropriate orders, except that motions may be referred to the Board if 
the presiding officer is unavailable or determines that such motion 
should be referred to the Board. Prior to the appointment of a presiding 
officer and after a recommended decision is filed pursuant to 
Sec. 622.12, the

[[Page 237]]

Board shall rule on motions filed by the parties.
    (e) Appeal from rulings on motions. All answers, motions, objections 
and rulings shall become part of the record. Rulings of a presiding 
officer on any motion may not be appealed to the Board prior to its 
consideration of the presiding officer's recommended decision, except by 
special permission of the Board. However, such rulings shall be 
considered by the Board in reviewing the record. Requests to the Board 
for special permission to appeal from a ruling of the presiding officer 
shall be filed in writing within 5 days of the ruling, and shall briefly 
state the grounds relied on. The moving party shall immediately serve a 
copy thereof on every other party to the proceeding who may then respond 
to such request within 5 days after service.
    (f) Continuation of hearing. Unless otherwise ordered by the 
presiding officer or the Board, the hearing shall continue pending the 
determination of any request or motion by the Board.



Sec. 622.12  Proposed findings and conclusions; recommended decision.

    (a) Proposed findings and conclusions by parties. Within 30 days 
after the hearing transcript has been filed, any party may file proposed 
findings of fact and conclusions of law. Such proposals shall be 
supported by citation of such statutes, decisions, and other 
authorities, and by specific page references to such portions of the 
record as may be relevant. All such proposals shall become a part of the 
record.
    (b) Recommended decision by presiding officer. Within 30 days after 
the expiration of time allowed under paragraph (a) of this section, or 
within such further time as the Board for good cause allows, the 
presiding officer shall file the entire hearing record, including a 
recommended decision and findings and conclusions, the transcript, 
exhibits (including on request of any of the parties any exhibits 
excluded from evidence or tender of proof), exceptions, rulings and all 
briefs and memoranda filed in connection with the hearing. Promptly upon 
such filing, the presiding officer shall serve a copy of the recommended 
decision, findings and conclusions upon each party to the proceeding.
    (c) Board as presiding officer. In proceedings in which the Board or 
one or more of its members has presided at the reception of evidence, 
the presiding officer's recommended decision, findings of fact, and 
conclusions of law will be omitted. In such proceedings the proposed 
findings and conclusions, briefs, and other submissions permitted under 
paragraph (a) of this section shall be filed with the Board for 
consideration.



Sec. 622.13  Exceptions.

    (a) Filing. Within 15 days after service of the recommended decision 
of the presiding officer, any party may file exceptions thereto or to 
any portion thereof, or to the failure of the presiding officer to make 
any recommendation, finding, or conclusion, or to the admission or 
exclusion of evidence, or to any other ruling of the presiding officer.
    (b) Contents. Each exception shall be supported by a concise 
argument and by citation of such statutes, decisions and other 
authorities, and by page references to such portions of the record as 
may be relevant. If the exception relates to the admission or exclusion 
of evidence, the substance of the evidence admitted or excluded shall be 
set forth in the brief with appropriate references to the transcript.
    (c) Waiver. Failure of a party to file exceptions to those matters 
specified in paragraph (a) of this section within the time prescribed 
shall be a waiver of objection thereto.



Sec. 622.14  Briefs.

    (a) Contents. Any brief filed in a proceeding shall be confined to 
the particular matters in issue, citing statutes, decisions, and other 
authorities, and page references to such portions of the record or the 
recommended decision of the presiding officer as may be relevant.
    (b) Reply briefs. Reply briefs may be filed within 10 days after 
service of original briefs of opposing parties, and shall be confined to 
matters in such briefs. Further briefs may be filed only with permission 
of the presiding officer

[[Page 238]]

or the Board with respect to a matter before the Board.
    (c) Delayed filing. Briefs not filed on or before the time fixed in 
this subpart or by the presiding officer will be received only upon 
special permission of the Board.



Sec. 622.15  Oral argument before the Board.

    Upon its own initiative or upon written request by any party, the 
Board, in its discretion, may order the matter to be set down for oral 
argument before the Board or one or more members thereof. Any request 
for oral argument by a party filing exceptions shall be made within the 
time prescribed for filing such exceptions, or by any other party, 
within the time prescribed for the filing of a reply brief. Oral 
argument before the Board shall be recorded unless otherwise ordered by 
the Board.



Sec. 622.16  Notice of submission to the Board.

    Upon the filing of the record with the Board, and upon the 
expiration of the time for the filing of exceptions and all briefs, 
including reply briefs or any further briefs permitted by the presiding 
officer or the Board, and upon the hearing of oral argument by the 
Board, if ordered by the Board, the Board shall notify the parties in 
writing that the case has been submitted for final decision.



Sec. 622.17  Decision of the Board.

    Any person who has not engaged in the performance of investigative 
or prosecuting functions in the case, or in a factually related case, 
may advise and assist the Board in the consideration of the case. Copies 
of the decision and order of the Board shall be served upon the parties. 
A copy of the order will also be sent to the supervisory bank if the 
order relates to a System association, director, officer, or other 
person participating in the conduct of the affairs of the association.



Sec. 622.18  Filing.

    (a) Filing. Papers required or permitted to be filed with the Board 
shall be filed with the Chairman of the Board, FCA, 1501 Farm Credit 
Drive, McLean, VA 22102-5090 or with the person designated to receive 
papers for the agency in a proceeding. Papers sent by mail must be 
postmarked or received within the prescribed time limit for filing. 
Papers sent by any other means must be received within the prescribed 
time limit for filing.
    (b) Formal requirements. All filed papers shall be printed, 
typewritten, or otherwise reproduced, and copies shall be clear and 
legible. The original of all papers filed by a party shall be signed and 
dated as of the date of execution by the party filing the same, or a 
duly authorized agent or attorney. The signer's address and telephone 
number must appear on the original. Counsel for the FCA shall sign the 
original of all papers filed on behalf of the FCA. All papers filed must 
name in the heading or on a title page, the parties, the docket number 
and the subject of the papers.
    (c) Copies. Parties shall file an original and three copies of all 
documents and papers required or permitted to be filed under this 
subpart (except the transcript of testimony and exhibits), unless 
otherwise specifically provided by the Board.



Sec. 622.19  Service.

    (a) Service. Except as otherwise provided in these rules, each party 
who files papers is responsible for serving a copy thereof upon the 
presiding officer and upon every other party or the attorney or 
representative of record of that party. A copy of all papers filed by 
the presiding officer or the Board, except for the transcript of 
testimony and exhibits, shall be served upon each of the parties. 
Service may be by personal service, private delivery service, or by 
express, certified or regular first-class mail. If a party is not 
represented, service shall be made at the last known address of the 
party or an officer thereof as shown on the records of the FCA.
    (b) Proof of service. Proof of service of papers filed by a party 
shall be filed before action is to be taken thereon. The proof shall 
show the date and manner of service, and may be by written 
acknowledgment of service, by declaration of the person making service, 
or by certificate of an attorney or other

[[Page 239]]

representative of record. Failure to make proof of service shall not 
affect the validity of service. The presiding officer may allow the 
proof to be amended or supplied, unless to do so would result in 
material prejudice to a party.



Sec. 622.20  Documents in proceedings confidential.

    Unless otherwise ordered by the Board or required by law, the entire 
record in any proceeding under this subpart, including the notice of 
hearing, transcript, exhibits, proposed findings and conclusions, 
recommended decision of the presiding officer, exceptions thereto, 
decision and order of the Board, and any other papers which are filed in 
connection with the proceeding shall not be made public, and shall be 
for the confidential use only of the FCA and its staff, the presiding 
officer, the parties, and other appropriate supervisory authorities.



Sec. 622.21  Computing time.

    (a) General rule. In computing any period of time prescribed or 
allowed by this subpart, the date of the act or event from which the 
designated period of time begins to run is not to be included. The last 
day so computed shall be included, unless it is a Saturday, Sunday or 
Federal holiday, in which event the period shall run until the end of 
the next day which is not a Saturday, Sunday, or Federal holiday. When 
the period of time prescribed or allowed is 10 days or less, 
intermediate Saturdays, Sundays, and Federal holidays shall not be 
included in the computation.
    (b) Service by mail. Whenever any party has the right or is required 
to do some act within the period of time prescribed in this subpart 
after the service upon the party of any document or other paper of any 
kind, and such service is made by mail, three days shall be added to the 
prescribed period from the date when the matter served is deposited in 
the United States mail.



Sec. 622.22  Retained authority.

    Nothing is this part is in derogation of powers of examination and 
investigation conferred on the FCA by any provision of law.



Secs. 622.23-622.50  [Reserved]



 Subpart B--Rules and Procedures for Assessment and Collection of Civil 
                             Money Penalties

    Source: 53 FR 27284, July 19, 1988, unless otherwise noted.



Sec. 622.51  Definitions.

    Unless noted otherwise, the definitions set forth in Sec. 622.2 of 
subpart A shall apply to this subpart.



Sec. 622.52  Purpose and scope.

    The rules and procedures specified in this subpart and in subpart A 
are applicable to proceedings by the FCA to assess and collect civil 
money penalties:
    (a) For a violation of the terms of a final cease and desist order 
issued under section 5.25 or 5.26 of the Act, or
    (b) For violation of any provision of the Act or any regulation 
issued under the Act.



Sec. 622.53  Notification of alleged violations.

    Before determining whether to assess a civil money penalty and 
determining the amount of such penalty, the FCA shall notify the 
institution or person to be assessed of the violation(s) alleged to have 
occurred or to be occurring, and shall solicit the written views of the 
institution or person regarding the imposition of such penalty.



Sec. 622.54  Relevant considerations.

    In determining the amount of any penalty assessed, the FCA shall 
consider the financial resources and good faith of the institution or 
person charged, the gravity of the violation, any previous violations, 
and such other matters as justice may require.



Sec. 622.55  Notice of assessment of civil money penalty.

    (a) Notice of assessment. After considering any written materials 
submitted in accordance with Sec. 622.53 and the factors stated in 
Sec. 622.54, the FCA shall commence a civil money penalty proceeding 
with the issuance of a notice of assessment of a civil money penalty. 
The notice of assessment shall state:

[[Page 240]]

    (1) The legal authority for the assessment;
    (2) The amount of the civil money penalty being assessed;
    (3) The date by which the civil money penalty shall be paid;
    (4) The matter of fact or law constituting the grounds for 
assessment of the civil money penalty;
    (5) The right of the institution or person being assessed to a 
formal hearing to challenge the assessment in accordance with 12 U.S.C. 
2268(c) and (d);
    (6) That failure to request a hearing constitutes a waiver of the 
opportunity for a hearing and the notice of assessment shall constitute 
a final and unappealable order in accordance with 12 U.S.C. 2268(c); and
    (7) The time limit to request such a formal hearing.
    (b) Service. The notice of assessment may be served upon the 
institution or person being assessed by personal service or by certified 
mail with a return receipt to the institution's or the person's last 
known address. Such service constitutes issuance of the notice.



Sec. 622.56  Request for formal hearing on assessment.

    An institution or person being assessed may request a formal hearing 
to challenge the assessment of a civil money penalty. The request must 
be filed in writing, within 10 days of the issuance of the notice of 
assessment, with the Chairman of the Board, FCA, 1501 Farm Credit Drive, 
McLean, VA 22102-5090.



Sec. 622.57  Waiver of hearing; consent.

    (a) Waiver. Failure to request a hearing pursuant to Sec. 622.56 
constitutes a waiver of the opportunity for a hearing and the notice of 
assessment issued pursuant to Sec. 622.55 shall constitute a final and 
unappealable order.
    (b) Consent. Any party afforded a hearing who does not appear at the 
hearing personally or by a duly authorized representative is deemed to 
have consented to the issuance of an assessment order.



Sec. 622.58  Hearing on assessment.

    (a) Time and place. An institution or person requesting a hearing 
shall be informed by order of the Board of the time and place set for 
hearing.
    (b) Answer; procedures. The hearing order may require the 
institution or person requesting the hearing to file an answer as 
prescribed in Sec. 622.5 of subpart A. The procedures of the 
Administrative Procedure Act (5 U.S.C. 554-557) and subpart A of these 
rules shall apply to the hearing.



Sec. 622.59  Assessment order.

    (a) Consent. In the event of consent of the parties concerned to an 
assessment, or if, upon the record made at a hearing ordered under this 
subpart, the Board finds that the grounds for having assessed the 
penalty have been established, the Board may issue an order of 
assessment of civil money penalty. In its assessment order, the Board 
may reduce the amount of the penalty specified in the notice of 
assessment.
    (b) Effective date and period. An assessment order is effective 
immediately upon issuance, or upon such other date as may be specified 
therein, and shall remain effective and enforceable unless it is stayed, 
modified, terminated, or set aside by action of the board or a reviewing 
court.
    (c) Service. An assessment order may be served by personal service 
or by certified mail with a return receipt to the last known address of 
the institution or person being assessed. Such service constitutes 
issuance of the order.



Sec. 622.60  Payment of civil money penalty.

    (a) Payment date. Generally, the date designated in the notice of 
assessment for payment of the civil money penalty will be 60 days from 
the issuance of the notice. If, however, the Board finds, in a specific 
case, that the purposes of the statute would be better served if the 60-
day period were changed, the Board may shorten or lengthen the period or 
make the civil money penalty payable immediately upon receipt of the 
notice of assessment. If a timely request for a formal hearing to 
challenge an assessment of a civil money penalty is filed, payment of 
the penalty shall not be required unless and until the Board issues a 
final order of assessment following the hearing. If an assessment order 
is issued, it will specify the date

[[Page 241]]

by which the civil money penalty is to be paid or collected.
    (b) Method of payment. Checks in payment of civil money penalties 
should be made payable to the ``Farm Credit Administration.'' Upon 
collection, the FCA shall forward the amount of the penalty to the 
Treasury of the United States.



Sec. 622.61  Adjustment of civil money penalties by the rate of inflation under the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended.

    The maximum amount of each civil money penalty within FCA's 
jurisdiction is adjusted in accordance with the Federal Civil Penalties 
Inflation Adjustment Act of 1990, as amended (28 U.S.C. 2461 note), as 
follows:
    (a) Amount of civil money penalty imposed under section 5.32 of the 
Act for violation of a final order issued under section 5.25 or 5.26 of 
the Act:

------------------------------------------------------------------------
                                                             The maximum
                If the violation occurred--                     daily
                                                             amount is--
------------------------------------------------------------------------
Before October 23, 2000....................................       $1,100
On or After October 23, 2000...............................        1,170
------------------------------------------------------------------------

    (b) Amount of civil money penalty for violation of the Act or 
regulations:

------------------------------------------------------------------------
                                                             The maximum
                If the violation occurred--                     daily
                                                             amount is--
------------------------------------------------------------------------
Before October 23, 1996....................................         $500
On or after October 23, 1996, but before October 23, 2000..          550
On or After October 23, 2000...............................          580
------------------------------------------------------------------------


[65 FR 46088, July 27, 2000]



Secs. 622.62-622.75  [Reserved]



 Subpart C--Rules and Procedures Applicable to Suspension or Removal of 
        an Individual Where Certain Crimes Are Charged or Proven



Sec. 622.76  Definitions.

    Unless noted otherwise, the definitions set forth in Sec. 622.2 of 
subpart A shall apply to this subpart.



Sec. 622.77  Purpose and scope.

    The rules and procedures set forth in this subpart apply to informal 
hearings afforded to any officer, director, or other person 
participating in the conduct of the affairs of a System institution who 
has been suspended or removed from office or prohibited from further 
participation in any manner in the conduct of the institution's affairs 
by a notice or order issued by the Board upon the grounds set forth in 
section 5.29 of the Act.



Sec. 622.78  Suspension, prohibition or removal.

    (a) Content. The Board may serve a notice of suspension or 
prohibition or order of removal upon a director, officer or other person 
participating in the conduct of the affairs of an institution. A copy of 
such notice or order shall also be served upon the institution, 
whereupon the individual concerned shall immediately cease service to 
the institution or participation in the affairs of the institution. Any 
notice or order shall indicate the basis for the suspension, 
prohibition, or removal and shall inform the individual of the right to 
request in writing, within 30 days of being served with such notice or 
order, an opportunity to show at an informal hearing that continued 
service to or participation in the conduct of the affairs of the 
institution does not, or is not likely to, pose a threat to the 
interests of the institution's shareholders or the investors in Farm 
Credit System obligations or threaten to impair public confidence in the 
institution or the Farm Credit System.
    (b) Service. A notice or order of suspension, removal or prohibition 
may be served by personal service or by certified mail with a return 
receipt to the last known address of the person being served.



Sec. 622.79  Petition for informal hearing.

    (a) Filing. To obtain a hearing, the subject individual must file an 
original and three copies of a petition with the Board within 30 days of 
being served with the notice or order.
    (b) Content. The petition shall:
    (1) State whether the petitioner is requesting termination or 
modification of the notice or order;
    (2) State with particularity how the petitioner intends to show that 
his or

[[Page 242]]

her continued service to or participation in the conduct of the affairs 
of the institution would not, or is not likely to, pose a threat to the 
interests of the institution's shareholders or the investors in Farm 
Credit System obligations or threaten to impair public confidence in the 
institution or the Farm Credit System;
    (3) Include a request to present oral testimony or witnesses at the 
hearing, if the petitioner desires to do so. The request should specify 
the names of the witnesses and a summary of their expected testimony; 
and
    (4) Indicate whether the petitioner desires oral argument or elects 
to have the matter determined solely on the basis of written 
submissions.



Sec. 622.80  Informal hearing.

    (a) Time and place. Upon receipt of a timely petition for a hearing, 
the Board shall notify the petitioner of the time and place fixed for 
the hearing and shall designate one or more Board members or FCA 
employees to preside (``designated FCA representative''). The hearing 
shall be scheduled to be held no later than 30 days from the date a 
petition for hearing is received unless the time is extended at the 
request of the petitioner. Notice of the hearing shall also be sent to 
the FCA's Office of General Counsel.
    (b) Appearance. A petitioner may appear personally or through 
counsel to submit relevant written materials and oral argument. An 
attorney is subject to all the requirements and limitations imposed on 
attorneys in Sec. 622.3 of subpart A. A representative(s) of the FCA's 
Office of General Counsel may participate in the hearing to the extent 
such representative deems appropriate.
    (c) Written material. Any written material the petitioner wishes to 
have considered must be submitted to the designated FCA representative 
and the FCA's Office of General Counsel at least 10 days prior to the 
date of the hearing.
    (d) Oral testimony. Oral testimony may be presented only if 
expressly permitted by the Board in the notice of hearing. The 
designated FCA representative may ask questions of any witness.
    (e) Transcripts. Oral testimony, if any, and oral argument shall be 
recorded. A copy of the transcript shall be filed with the designated 
FCA representative, who shall have authority to correct the record sua 
sponte upon notice, or upon the motion of the petitioner or the 
representative of the FCA's Office of General Counsel. The designated 
FCA representative shall promptly serve notice upon the petitioner and 
the FCA's Office of General Counsel of such filing. Such parties shall 
make arrangements with the person recording the testimony or argument 
for copies of the transcript.
    (f) Closing of record. Upon the request of the petitioner or 
representative of the FCA's Office of General Counsel, the record shall 
remain open for a period of 5 business days following the hearing, 
during which time additional submissions for the record may be made. 
Thereafter, the record shall be closed.
    (g) Rules of evidence and procedure. Neither the formal rules of 
evidence nor the adjudicative procedures of the Administrative Procedure 
Act (5 U.S.C. 554-557) or subpart A of these rules shall apply to the 
informal hearing ordered under this subpart unless the Board orders that 
they apply in whole or in part.



Sec. 622.81  Default.

    If the subject individual fails to file a petition for a hearing, or 
fails to appear at a hearing, either in person or by an attorney, or 
fails to submit a written argument where oral argument has been waived, 
the notice shall remain in effect until the information, indictment, or 
complaint is finally disposed of and the order shall remain in effect 
until terminated by the Board.



Sec. 622.82  Decision of the Board.

    (a) Recommended decision. Within 30 days of the hearing, the 
designated FCA representative shall make a recommendation with findings 
and conclusions to the Board concerning the notice or order of 
suspension, removal, or prohibition.
    (b) Final decision. Within 60 days of the hearing, the Board shall 
notify the subject individual and the FCA's Office

[[Page 243]]

of General Counsel whether the suspension or removal from office, or 
prohibition from participation in any manner in the affairs of the 
institution, will be continued, terminated, or otherwise modified. The 
Board's final decision, if adverse to the individual, shall contain a 
statement of the basis thereof. The Board may satisfy this requirement 
where it adopts the recommended decision of the designated FCA 
representative.
    (c) Guilt not an issue. In deciding upon any suspension of 
prohibition by notice, the ultimate question of the guilt or innocence 
of the individual with respect to the criminal charge that is 
outstanding will not be considered. A finding of not guilty or other 
disposition of the charge shall not preclude the Board from thereafter 
instituting removal proceedings pursuant to section 5.28 of the Act.
    (d) Effective period. A removal or prohibition by order remains in 
effect until terminated by the Board. A suspension or prohibition by 
notice remains in effect until the criminal charge is finally disposed 
of or until terminated by the Board.
    (e) Reconsideration. A suspended or removed individual may petition 
the Board to reconsider the decision any time after the expiration of a 
12-month period from the date of the decision, but no petition for 
reconsideration may be made within 12 months of a previous petition. A 
petition shall state with particularity the relief sought and the 
grounds therefor and may be accompanied by a supporting memorandum and 
any other documentation the petitioner wishes to have considered. No 
hearing need be granted on the petition for reconsideration.



Secs. 622.83--622.100  [Reserved]



   Subpart D--Rules and Procedures Applicable to Formal Investigations



Sec. 622.101  Definitions.

    Unless noted otherwise, the definitions set forth in Sec. 622.2 of 
subpart A shall apply to this subpart.



Sec. 622.102  Scope.

    The rules in this subpart apply to formal investigations initiated 
by order of the Board and pertain to the exercise of powers specified in 
section 5.37 of the Act. These rules do not restrict or in any way 
affect the authority of the FCA, including but not limited to the powers 
enumerated in section 5.37 of the Act, to conduct examinations of System 
institutions.



Sec. 622.103  Formal investigations are confidential.

    Information or documents obtained or testimony recorded in the 
course of a formal investigation shall be confidential and shall be 
disclosed only in accordance with the provisions of 12 CFR part 602.



Sec. 622.104  Order to conduct formal investigation.

    A formal investigation begins with the issuance of an order by the 
Board. The order shall designate the person or persons who will conduct 
the investigation, issue, revoke, quash or modify subpoenas and 
subpoenas duces tecum, take or cause to be taken depositions, administer 
oaths, and receive affirmations as to any matter under investigation by 
the FCA. Upon application and for good cause shown, the Board may limit, 
modify, or withdraw the order at any stage of the proceeding.



Sec. 622.105  Conduct of investigation.

    (a) Review of order. Any person who is compelled or requested to 
furnish testimony, documentary evidence, or other information with 
respect to any matter under formal investigation shall upon request be 
shown the order initiating such investigation.
    (b) Right to counsel. Any person who, in a formal investigation, is 
compelled to appear and testify or who appears and testifies by request 
or permission of the Board may be accompanied, represented, and advised 
by counsel. The right to be accompanied, represented, and advised by 
counsel shall mean the right of a person testifying to have an attorney 
present at all times while testifying and to have this attorney:
    (1) Advise such person before, during and after the conclusion of 
testimony;

[[Page 244]]

    (2) Question such person briefly at the conclusion of testimony to 
clarify any of the answers given; and
    (3) Make summary notes during the testimony solely for the use of 
such person.
    (c) Appearance. The provisions of Sec. 622.3 are applicable to this 
subpart.
    (d) Exclusion. (1) Any person who has given or will give testimony, 
and counsel representing such person, may be excluded from the taking of 
testimony of any other witness in the discretion of the designated FCA 
representative conducting the investigation.
    (2) The designated FCA representative conducting the investigation 
shall report to the Board any instances where any person has been guilty 
of dilatory, obstructionist, egregious, contemptuous, contumacious or 
other unethical or improper conduct during the course of the proceeding 
or any other instance involving a violation of these rules. The Board 
may thereupon take such action as the circumstances may warrant, 
including exclusion of the offending individual or individual from 
participation in the proceeding.



Sec. 622.106  Service of subpoena and payment of witness fees.

    (a) Service. A subpoena may be served upon the person named therein 
by personal service or certified mail with a return receipt to the last 
known address of the person. Witnesses who are subpoenaed shall be paid 
the same fees and mileage that are paid witnesses in the district courts 
of the United States. The fees and mileage need not be tendered at the 
time a subpoena is served.
    (b) Motions to quash. Any person to whom a subpoena is directed may, 
prior to the time specified therein for compliance, but in no event more 
than 5 days after the date of service of such subpoena, apply to the FCA 
representative authorized in the order, or if unavailable to the Board, 
to quash or modify such subpoena, accompanying such application with a 
brief statement of the reasons therefor. The FCA representative, or the 
Board, may:
    (1) Deny the application;
    (2) Quash or revoke the subpoena;
    (3) Modify the subpoena; or
    (4) Condition the granting of the application on such terms as the 
FCA representative or the Board, determines in his, her, or its 
discretion, to be just, reasonable, and proper.



Sec. 622.107  Transcripts.

    Transcripts, if any, of an investigative proceeding shall be 
recorded by any means authorized by the designated FCA representative 
conducting the investigation. A person who has given testimony in an 
investigative proceeding (or counsel for such person) upon proper 
identification shall have the right to inspect the transcript of the 
person's testimony but may not obtain a copy if the FCA's representative 
conducting the investigation has cause to believe that the contents 
should not be disclosed.



PART 623--PRACTICE BEFORE THE FARM CREDIT ADMINISTRATION--Table of Contents




Sec.
623.1  Scope of part.
623.2  Definitions.
623.3  Who may practice.
623.4  Suspension and debarment.
623.5  Reinstatement.
623.6  Duty to file information concerning adverse judicial or 
          administrative action.
623.7  Proceeding under this part.

    Authority: Secs. 5.9, 5.10, 5.17, 5.25-5.37; 12 U.S.C. 2243, 2244, 
2252, 2261-2273.

    Source: 51 FR 21147, June 11, 1986, unless otherwise noted.



Sec. 623.1  Scope of part.

    This part prescribes rules with regard to persons who may practice 
before the Farm Credit Administration and the circumstances under which 
attorneys, accountants, appraisers, or other persons may be suspended or 
debarred, either temporarily or permanently, from practicing before the 
Farm Credit Administration. In connection with any particular matter, 
reference also should be made to any special requirements of procedure 
and practice that may be contained in the particular statute involved or 
the rules and forms adopted by the Farm Credit Administration 
thereunder, which special requirements are controlling. In addition to 
any suspension hereunder, a person

[[Page 245]]

may be excluded from further participation in a particular adjudicative 
proceeding in accordance with Sec. 622.3 or in a formal investigation in 
accordance with Sec. 622.105.



Sec. 623.2  Definitions.

    As used in this part:
    (a) FCA means the Farm Credit Administration.
    (b) Board means the Farm Credit Administration Board.
    (c) Act means the Farm Credit Act of 1971, as amended. 12 U.S.C. 
2001, et seq.
    (d) The terms institution in the System, System institution and 
institution mean all institutions enumerated in section 1.2 of the Act, 
any institution chartered pursuant to or established by the Act, except 
for the Farm Credit System Assistance Board and the Farm Credit System 
Insurance Corporation and any service organization chartered under part 
E of title IV of the Act.
    (e) The term presiding officer includes the Board, one or more 
members thereof, FCA employees, or an administrative law judge. As used 
in this part, the term shall be construed to refer to whichever of the 
above-identified individuals presides at a hearing or other proceeding, 
except as otherwise specified in the text;
    (f) The term attorney means any person who is a member in good 
standing of the bar of the highest court of any State, possession, 
territory, Commonwealth or the District of Columbia;
    (g) The term practice means transacting any business with the FCA, 
including but not limited to:
    (1) The representation of another person at any adjudicatory, 
investigatory, removal or rulemaking proceeding conducted before the FCA 
or a presiding officer;
    (2) The preparation or certification of any statement, opinion, 
report of financial condition and performance, financial statement, 
appraisal report, audit report, or other document or report by any 
attorney, accountant, appraiser or other person which is filed with or 
submitted to the FCA, with such person's consent or knowledge in 
connection with any filing with the FCA;
    (3) A presentation to the FCA or a presiding officer at a conference 
or meeting relating to an institution's or person's rights, privileges 
or liabilities under the laws administered by the FCA and rules and 
regulations promulgated thereunder;
    (4) Any business correspondence or communication with the FCA or a 
presiding officer; and
    (5) The transaction of any other business with the FCA on behalf of 
another, in the capacity of an attorney, accountant, appraiser, licensed 
expert or any other capacity.

[51 FR 21147, June 11, 1986, as amended at 53 FR 27285, July 19, 1988]



Sec. 623.3  Who may practice.

    (a) By nonattorneys. (1) An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a bona 
fide and duly authorized officer or other designated representative of a 
corporation, trust, association or other entity not specifically listed 
herein may represent the corporation, trust, association or other 
entity; and an authorized officer or other designated representative of 
any government unit, agency or authority may represent that unit, agency 
or authority.
    (2) Any accountant, appraiser or licensed expert may practice before 
the FCA in a professional capacity.
    (b) By attorneys. Any entity noted in paragraph (a) of this section 
may be represented in any proceeding or other matter before the FCA by 
an attorney.
    (c) Any person transacting business with the FCA in a representative 
capacity may be required to show evidence of his or her authority to act 
in such capacity and certification of credentials.



Sec. 623.4  Suspension and debarment.

    (a) Grounds. The Board may censure any person practicing before the 
FCA or may deny, temporarily or permanently, the privilege of any person 
to practice before the FCA if such person is found by the Board, after 
notice of and opportunity for hearing in the matter:
    (1) Not to possess the requisite qualifications to represent others;
    (2) To be lacking in character or professional integrity;

[[Page 246]]

    (3) To have engaged in any dilatory, obstructionist, egregious, 
contemptuous, contumacious or other unethical or improper conduct before 
FCA; or
    (4) To have willfully violated, or willfully aided and abetted the 
violation of, any provision of the laws administered by the FCA or the 
rules and regulations promulgated thereunder.
    (b) Automatic suspension. (1) Any person who, after being licensed 
as a professional or expert by any competent authority, has been 
convicted by a Federal or State court of a felony, or of a misdemeanor 
involving moral turpitude, personal dishonesty or breach of trust, shall 
be suspended automatically from practicing before the FCA without a 
hearing.
    (2) Any accountant, appraiser or licensed expert whose license to 
practice has been revoked in any State, possession, territory, 
Commonwealth or the District of Columbia, or who has been suspended or 
otherwise barred from practice before any Federal or State regulatory 
authority, shall be suspended automatically from practicing before the 
FCA without a hearing.
    (3) Any attorney who has been suspended or disbarred by a court of 
the United States or in any State, possession, territory, Commonwealth 
or the District of Columbia, shall be suspended automatically from 
practicing before the FCA without a hearing.
    (4) A conviction (including a judgment or order on a plea of nolo 
contendere), revocation, suspension or disbarment under paragraphs 
(b)(1), (2) and (3) of this section shall be deemed to have occurred 
when the convicting, revoking, suspending or disbarring agency or 
tribunal enters its judgment or order, regardless of whether an appeal 
is pending or could be taken.
    (5) For purposes of this section, it shall be irrelevant that any 
attorney, accountant, appraiser or licensed expert who has been 
suspended, disbarred or otherwise disqualified from practice before a 
court, regulatory authority, or in a jurisdiction continues in 
professional good standing before other courts, regulatory authorities, 
or in other jurisdictions.
    (c) Temporary suspension. (1) The Board, with due regard to the 
public interest and without preliminary hearing, by order, may 
temporarily suspend any person from appearing or practicing before it 
who by name, has been:
    (i) Permanently enjoined (whether by consent, default or summary 
judgment or after trial) by any court of competent jurisdiction or by 
the Board in a final administrative order, by reason of his or her 
misconduct in any action brought by the FCA based upon violations of, or 
aiding and abetting the violation of any provision of any law that is 
administered by the FCA or of any rule or regulation promulgated 
thereunder; or
    (ii) Found by any court of competent jurisdiction (whether by 
consent, default, upon summary judgment or after hearing) or in any 
administrative proceeding in which the FCA is a complainant and he or 
she is a party, to have willfully committed, caused, aided or abetted a 
violation of any provision of any law that is administered by the FCA, 
or of any rule or regulation promulgated thereunder.
    (2) An order of temporary suspension shall become effective when 
served by certified mail with a return receipt directed to the last 
known business or residential address of the person involved. No order 
of temporary suspension shall be entered by the Board pursuant to 
paragraph (c)(1) of this section more than 3 months after the final 
judgment or order entered in a judicial or administrative proceeding 
described in paragraph (c)(1) (i) or (ii) of this section has become 
effective and all review or appeal procedures have been completed or are 
no longer available.
    (3) Any person temporarily suspended from appearing and practicing 
before the FCA in accordance with paragraph (c)(1) of this section may, 
within 30 days after service of the order of temporary suspension, 
petition the Board to lift such suspension. If no petition is received 
by the Board within 30 days, the suspension shall become permanent.
    (4) Within 30 days after the filing of a petition in accordance with 
paragraph (c)(3) of this section, the Board shall either lift the 
temporary suspension or set the matter down for hearing at a time and 
place to be designated by the Board, or both. After opportunity for

[[Page 247]]

hearing, the Board may censure the petitioner or may suspend the 
petitioner from appearing or practicing before the FCA temporarily or 
permanently. In any case in which the temporary suspension has not been 
lifted, the hearing and any other action taken pursuant to this 
paragraph shall be expedited by the Board in order to ensure the 
petitioner's right to address the allegations.
    (5) In any hearing held on a petition filed in accordance with 
paragraph (c)(3) of this section, a showing that the petitioner has been 
enjoined or has been found to have committed, caused, aided or abetted 
violations as described in paragraph (c)(1) of this section, without 
more, may be a basis for suspension or debarment; that showing having 
been made, the burden shall then be on the petitioner to show why the 
petitioner should not be censured or be temporarily or permanently 
suspended or debarred. A petitioner will not be permitted to contest any 
findings against the petitioner or any admissions made by the petitioner 
in the judicial or administrative proceedings upon which the proposed 
censure, suspension or debarment is based. A petitioner who has 
consented to the entry of a permanent injunction or order as described 
in paragraph (c)(1)(i) of this section, without admitting the facts set 
forth in the complaint, shall nevertheless be presumed for all purposes 
under this section to have been enjoined or ordered by reason of the 
misconduct alleged in the complaint.



Sec. 623.5  Reinstatement.

    (a) Any person who is suspended from practicing before the FCA under 
Sec. 623.4 (a) or (c) of this part may file an application for 
reinstatement at any time. Denial of the privilege of practicing before 
the FCA shall continue unless and until the applicant has been 
reinstated by order of the Board for good cause shown.
    (b) Any person suspended under Sec. 623.4(b) shall be reinstated by 
the Board, upon appropriate application, if all of the grounds for 
application of the provisions of that paragraph are removed subsequently 
by a reversal of the conviction or termination of the suspension, 
disbarment of revocation. An application for reinstatement on any other 
grounds by any person suspended under Sec. 623.4(b) may be filed at any 
time. Such application shall state with particularity the relief 
requested and the grounds therefor and shall include supporting 
evidence, when available. The applicant shall be accorded an opportunity 
for an informal hearing in the matter, unless the applicant has waived a 
hearing in the application and, instead, has elected to have the matter 
determined on the basis of written submissions. Such hearing shall 
utilize the procedures established in part 622, subpart C. However, such 
suspension shall continue unless and until the applicant has been 
reinstated by order of the Board for good cause shown.



Sec. 623.6  Duty to file information concerning adverse judicial or administrative action.

    Any person appearing or practicing before the FCA who has been or is 
the subject of a conviction, suspension, debarment, license revocation, 
injunction or other finding of the kind described in Sec. 623.4 (b) or 
(c) of this part is an action not instituted by the FCA shall promptly 
file a copy of the relevant order, judgment or decree with the Board 
together with any related opinion or statement of the agency or tribunal 
involved. Any person who fails to file a copy of such an order, judgment 
or decree within 30 days after the later of the entry of the order, 
judgment or decree, or the date such person initiates practice before 
the FCA, for that reason alone may be disqualified from practicing 
before the FCA until such time as the appropriate filing shall be made, 
but neither the filing of these documents nor the failure of a person to 
file them shall in any way impair the operation of any other provision 
of this part.



Sec. 623.7  Proceeding under this part.

    (a) Rules. All hearings required or permitted to be held under 
paragraphs (a) and (c) of Sec. 623.4 of this part shall be held before a 
presiding officer utilizing the procedures established in the rules of 
practice and procedure under part 622, subpart A.

[[Page 248]]

    (b) Closed hearings. All hearings held under this part shall be 
closed to the public unless the Board directs otherwise on its own 
motion or upon the request of a party.
    (c) Collateral proceedings. Any proceeding brought under any section 
of this part shall not preclude a proceeding under any other section of 
this part or any other part of the FCA's regulations.



PART 624--REGULATORY ACCOUNTING PRACTICES--Table of Contents




Sec.
624.100  General.
624.101  Definitions.
624.102  Deferral of interest costs on debt.
624.103  Deferral of the provisions for loan losses.
624.104  Interest rate evaluation.
624.105  Financial reporting and disclosure.

    Authority: Secs. 1.1, 1.5, 2.2, 2.12, 3.1, 4.8, 5.17, 5.19; 12 
U.S.C. 2001, 2013, 2073, 2093, 2122, 2159, 2252, 2254.

    Source: 53 FR 40050, Oct. 13, 1988, unless otherwise noted.



Sec. 624.100  General.

    (a) The regulations contained in this part implement the provisions 
of the Act relating to the authorities, terms, conditions, and 
restrictions pursuant to which a Farm Credit System institution may use 
regulatory accounting practices to defer and capitalize a portion of its 
interest costs, provisions for loan losses, and premiums paid to retire 
debt instruments, and to amortize such amounts.
    (b) Notwithstanding the provisions of this part, if an institution 
requests that the Farm Credit System Assistance Board (Assistance Board) 
certify the institution to issue preferred stock in accordance with 
title VI of the Act, the Assistance Board may further restrict the 
continued use of regulatory accounting practices by the institution as 
provided in section 6.6 of the Act.
    (c) The authority to defer and capitalize costs is effective until 
December 31, 1992. Amounts capitalized through December 31, 1992 may be 
amortized over the full amortization period of 20 years, but in no 
instance beyond December 31, 2012.



Sec. 624.101  Definitions.

    For the purpose of this part, the following definitions apply:
    (a) Generally accepted accounting principles (GAAP) means that body 
of conventions, rules and procedures necessary to define accepted 
accounting practice at a particular time, as promulgated by the 
Financial Accounting Standards Board and other authoritative sources 
recognized as setting standards for the accounting profession in the 
United States. Generally accepted accounting principles shall include 
not only broad guidelines of general application but also detailed 
practices and procedures that constitute standards against which 
financial presentations are evaluated.
    (b) Institution means any bank or association chartered under the 
Act.
    (c) Loans outstanding means gross loans outstanding net of any 
participations sold at the end of each reporting period. The term loan 
includes loans, participations purchased, contracts of sale, notes 
receivable, and other similar obligations and lease financings. The term 
loan includes loans originated through direct negotiations between the 
reporting institution and a borrowing entity and loans or interest in 
loans purchased from another lender that are recorded as assets of a 
reporting institution.
    (d) Regulatory accounting practices (RAP) means those accounting 
methods and practices directed by statutory and regulatory requirements 
provided for in the Act and in this part and that are not in accordance 
with GAAP.



Sec. 624.102  Deferral of interest costs on debt.

    (a) A bank may capitalize any premium paid to repurchase the bank's 
obligations on consolidated Systemwide notes and bonds issued on or 
before January 1, 1985, and may contract with a third party, including a 
service corporation chartered by the Farm Credit Administration, in 
order to perform a defeasance of these same obligations. The premium 
paid shall be the excess of the cost to repurchase or redeem an 
obligation over the recorded net book value for such obligation.
    (b) A bank may capitalize a portion of its interest expenses which 
have

[[Page 249]]

been paid or will be paid during the period July 1, 1986, through 
December 31, 1992, on Systemwide and consolidated notes and bonds issued 
on or before January 1, 1985. The amount of a bank's interest expense on 
an obligation that may be capitalized shall be limited to the excess of 
the bank's cost on the obligation over the market price for the 
obligation on October 21, 1986.
    (c) An institution that defers any expenses associated with actions 
taken in accordance with this section shall amortize such expenses over 
a period not to exceed 20 years using straight-line amortization. The 
unamortized portion of debt-related costs that are deferred or are 
eligible to be deferred shall not be considered as capital of the 
institution.



Sec. 624.103  Deferral of the provisions for loan losses.

    An institution is authorized during the period July 1, 1986, through 
December 31, 1992, to capitalize the amount of its provision for loan 
losses made on an annual basis in excess of 1/2 of 1 percent of loans 
outstanding. An institution that defers a portion of its provision for 
loan losses in accordance with this section shall amortize such amount 
over a period to not exceed 20 years, using straight-line amortization. 
Institutions using RAP to defer their provisions for loan losses shall 
maintain an allowance for loan losses determined in accordance with 
GAAP.



Sec. 624.104  Interest rate evaluation.

    An institution may take into consideration the use of RAP, among 
other factors, for purposes of evaluating the interest rates charged on 
loans. Such other factors include the institution's cost of funds, 
overhead, expected losses, margin to provide for adequate capital, 
return to stockholders, and any other relevant factors. In no event 
shall such an institution charge a rate of interest which is less than 
the competitive interest rates charged by other lending institutions in 
the same area, for a loan with similar terms, to a borrower of 
equivalent creditworthiness and access to alternative credit.



Sec. 624.105  Financial reporting and disclosure.

    Each institution that uses RAP in accordance with the provisions of 
this part shall prepare and issue its financial statements to 
stockholders in accordance with part 620 of this chapter. In addition, 
each such institution shall disclose clearly in the management 
commentary to its financial statements the purpose and use of the 
regulatory accounting practices adopted by the institution and shall 
reconcile the differences between the application of GAAP and RAP.



PART 625--APPLICATION FOR AWARD OF FEES AND OTHER EXPENSES UNDER THE EQUAL ACCESS TO JUSTICE ACT--Table of Contents




                      Subpart A--General Provisions

Sec.
625.1  Purpose.
625.2  Proceedings covered.
625.3  Eligibility of applicants.
625.4  Standards for awards.
625.5  Allowable fees and expenses.
625.6  Rulemaking on maximum rates for attorney fees.
625.7  Awards against other agencies.

                Subpart B--Applicant Information Required

625.10  Contents of application.
625.11  Net worth exhibit.
625.12  Documentation of fees and expenses.
625.13  When an application may be filed.

           Subpart C--Procedures for Considering Applications

625.20  Settlement.
625.21  Filing and service of documents.
625.22  Answer to application.
625.23  Reply.
625.24  Comments by other parties.
625.25  Further proceedings.
625.26  Recommended decision.
625.27  Board decision.
625.28  Judicial review.
625.29  Payment of award.

    Authority: 5 U.S.C. 504, 12 U.S.C. 2252.

    Source: 57 FR 60109, Dec. 18, 1992, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 625.1  Purpose.

    These rules implement the Equal Access to Justice Act, 5 U.S.C. 504

[[Page 250]]

(EAJA). The EAJA provides for the award of attorney fees and other 
expenses to eligible individuals and entities who are parties to certain 
administrative proceedings (designated by the EAJA as ``adversary 
adjudications'') before Federal agencies. An eligible party may receive 
an award when it prevails over an agency, unless the agency's position 
was substantially justified or special circumstances make an award 
unjust. The rules in this part explain how the EAJA applies to Farm 
Credit Administration (FCA) proceedings. The rules describe the parties 
eligible for awards, how such parties may apply for awards, and the 
procedures and standards that govern FCA consideration of applications.



Sec. 625.2  Proceedings covered.

    (a) The EAJA applies to adversary adjudications conducted by the FCA 
either on its own behalf or in connection with any other agency of the 
United States that participates in or in any way is a part of the 
adversary adjudication. Adversary adjudications are:
    (1) Adjudications under 5 U.S.C. 554 in which the position of the 
FCA or other agency is presented by an attorney or other representative 
who enters an appearance and participates in the proceeding; and
    (2) Enforcement proceedings under 12 U.S.C. 2261-2273.
    (b) The failure of the FCA to identify a type of proceeding as an 
adversary adjudication shall not preclude the filing of an application 
by a party who believes that the proceeding is covered by the EAJA; 
whether the proceeding is covered shall then be an issue for resolution 
in proceedings on the application.
    (c) If a proceeding includes both matters covered and excluded from 
coverage by the EAJA, any award made will include only fees and expenses 
related to covered issues.
    (d) Proceedings under this part may be conducted by the FCA Board 
(Board) or by the presiding officer (referred to as the ``adjudicative 
officer'' in the EAJA), as defined in Sec. 622.2(f) of this chapter. If 
the Board conducts proceedings, reference to the ``presiding officer'' 
in this part shall mean the Board, in applicable context. Where the 
Board presides, the recommended decision under Sec. 625.26 of this part 
will be omitted and the Board will make a final decision on the 
application in accordance with Sec. 625.27 of this part.
    (e) If a court reviews the underlying decision of the adversary 
adjudication, an award for fees and other expenses may be made only 
pursuant to 28 U.S.C. 2412(d)(3).



Sec. 625.3  Eligibility of applicants.

    (a) To be eligible for an award under the EAJA, an applicant must be 
a prevailing party named or admitted to the adversary adjudication for 
which an award is sought. The applicant must show that it meets all 
conditions of eligibility set out in this subpart and in subpart B of 
this part.
    (b) The types of eligible applicants are as follows:
    (1) An individual with a net worth of $2 million or less;
    (2) The sole owner of an unincorporated business who has both a net 
worth of $7 million or less (including personal and business interests), 
and 500 or fewer employees;
    (3) A charitable or other tax-exempt organization described in 
section 501(c)(3) of the Internal Revenue Code (26 U.S.C. 501(c)(3)) 
with 500 or fewer employees;
    (4) A cooperative association as defined in section 15(a) of the 
Agricultural Marketing Act (12 U.S.C. 1141j(a)) with 500 or fewer 
employees; and
    (5) Any other partnership, corporation, association, unit of local 
government, or organization with a net worth of $7 million or less and 
500 or fewer employees.
    (c) For eligibility purposes, the net worth and number of employees 
of an applicant shall be determined as of the date the adversary 
adjudication was initiated.
    (d) An applicant who owns an unincorporated business will be 
considered as an ``individual'' rather than a ``sole owner of an 
unincorporated business'' if the issues on which the applicant prevails 
are related primarily to personal interests rather than to business 
interests.
    (e) The employees of an applicant include all persons who regularly 
perform services for remuneration for that

[[Page 251]]

applicant, under the applicant's direction and control. Part-time 
employees shall be included on a proportional basis.
    (f) The net worth and number of employees of the applicant and all 
of its affiliates shall be aggregated to determine eligibility unless 
the presiding officer determines that aggregation would be unjust and 
contrary to the purposes of the EAJA in light of the actual relationship 
between the affiliated entities.
    (1) For purposes of this part, an affiliate is:
    (i) Any individual, corporation, or other entity that directly or 
indirectly controls or owns a majority of the voting shares or other 
interests of the applicant; or
    (ii) Any corporation or other entity of which the applicant directly 
or indirectly owns or controls a majority of the voting shares or other 
interests.
    (2) The presiding officer may determine that financial relationships 
of the applicant other than those described in paragraph (f)(1) of this 
section constitute special circumstances that would make an award 
unjust.
    (g) An applicant that participates in an adversary adjudication 
primarily on behalf of one or more other persons or entities that would 
be ineligible is not itself eligible for an award.



Sec. 625.4  Standards for awards.

    (a) If an eligible applicant prevails over the FCA in an adversary 
adjudication, or in a significant and discrete substantive portion 
thereof, the applicant may receive an award for fees and expenses 
incurred in the adjudication, or portion thereof, unless the position of 
the FCA over which the applicant prevailed was substantially justified.
    (b) The position of the FCA includes:
    (1) The position taken by the FCA in the adversary adjudication; and
    (2) The action or inaction of the FCA upon which the adversary 
adjudication is based.
    (c) Except as provided in paragraph (d) of this section, the FCA 
must prove that its position was substantially justified before an award 
may be denied to an otherwise eligible applicant.
    (d) An award will be reduced or denied if the applicant has unduly 
or unreasonably protracted the adversary adjudication or if special 
circumstances make the award sought unjust.



Sec. 625.5  Allowable fees and expenses.

    (a) Awards will be based on rates customarily charged by persons 
engaged in the business of acting as attorneys, agents, and expert 
witnesses, even if the services were made available without charge or at 
a reduced rate to the applicant.
    (b) No award for the fee of an attorney or agent under these rules 
may exceed $75 per hour. No award to compensate an expert witness may 
exceed the highest rate at which the FCA pays expert witnesses. However, 
an award also may include the reasonable expenses of the attorney, 
agent, or expert witness as a separate item, if the attorney, agent, or 
expert witness ordinarily charges clients separately for such expenses.
    (c) In determining the reasonableness of the fee sought for an 
attorney, agent, or expert witness, the presiding officer shall consider 
the following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fees for similar services, or, if an 
employee of the applicant, the fully allocated costs of the services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;
    (3) The time actually spent in the representation of the applicant;
    (4) The time reasonably spent in light of the difficulty or 
complexity of the issues in the adversary adjudication; and
    (5) Such other factors as may bear on the value of the services 
provided.
    (d) The reasonable cost of any study, analysis, audit, engineering 
report, test, project, or similar matter prepared on behalf of a party 
may be awarded, to the extent that the charge for the service does not 
exceed the prevailing rate for similar services, and the study or other 
matter was necessary for the preparation of the applicant's case.

[[Page 252]]



Sec. 625.6  Rulemaking on maximum rates for attorney fees.

    (a) If warranted by an increase in the cost of living or by special 
circumstances (such as limited availability of attorneys qualified to 
handle certain types of proceedings), the FCA may adopt regulations 
providing that attorney fees may be awarded at a rate higher than $75 
per hour in some or all of the types of proceedings covered by this 
part. The FCA will conduct any rulemaking proceedings for this purpose 
under the informal rulemaking procedures of the Administrative Procedure 
Act.
    (b) Any person may file with the FCA a petition for rulemaking to 
increase the maximum rate for attorney fees. The petition should 
identify the rate the petitioner believes the FCA should establish and 
the types of proceedings in which the rate should be used. It should 
also explain fully the reasons why the higher rate is warranted. The FCA 
will respond to the petition within 90 days after it is filed, by 
initiating a rulemaking proceeding, denying the petition, or taking 
other appropriate action.



Sec. 625.7  Awards against other agencies.

    If an applicant is entitled to an award because it prevails over 
another agency of the United States that participates in or in any way 
is a part of an adversary adjudication before the FCA and that agency's 
position is not substantially justified, the award or an appropriate 
portion of the award shall be made against that agency.



                Subpart B--Applicant Information Required



Sec. 625.10  Contents of application.

    (a) An application for an award of fees and other expenses under the 
EAJA shall identify the applicant and the adversary adjudication for 
which an award is sought. The application shall show that the applicant 
has prevailed in the adversary adjudication. If the application is made 
on the basis of significant and discrete substantive issues on which the 
applicant prevailed, the issues must be specifically identified. The 
application also shall identify each position of the FCA or other 
agencies that the applicant alleges was not substantially justified. 
Unless the applicant is an individual, the application shall describe 
briefly the type and purpose of its organization or business and state 
the number of persons employed.
    (b) The application shall include a statement that the applicant's 
net worth does not exceed $2 million (if an individual) or $7 million 
(for all other applicants, including their affiliates). However, an 
applicant may omit this statement if:
    (1) It states that it has 500 employees or fewer and attaches a copy 
of a ruling by the Internal Revenue Service that it qualifies as an 
organization described in section 501(c)(3) of the Internal Revenue Code 
(26 U.S.C. 501(c)(3)) or, in the case of a tax-exempt organization not 
required to obtain a ruling from the Internal Revenue Service on its 
exempt status, a statement that describes the basis for the applicant's 
belief that it qualifies under such section; or
    (2) It states that it is a cooperative association as defined in 
section 15(a) of the Agricultural Marketing Act (12 U.S.C. 1141j(a)) 
with 500 or fewer employees.
    (c) The application shall state the total amount of fees and other 
expenses for which an award is sought.
    (d) The application may include any other relevant matters that the 
applicant wishes the FCA to consider in determining whether and in what 
amount an award should be made.
    (e) The application shall be signed by the applicant or an 
authorized officer or attorney of the applicant. The application must 
contain a written verification under oath or under penalty of perjury 
that the information provided in the application and any supporting 
documents is accurate.



Sec. 625.11  Net worth exhibit.

    (a) Each applicant, except a qualified tax-exempt organization or 
cooperative association, must provide with its application a detailed 
exhibit showing the net worth of the applicant and any affiliates (as 
defined in Sec. 625.3(f)(1) of this part) as of the date when the 
adversary adjudication was initiated. The exhibit may be in any 
convenient form

[[Page 253]]

that provides full disclosure of the assets and liabilities of the 
applicant and its affiliates and is otherwise sufficient to demonstrate 
that the applicant qualifies under the standards in this part. The 
presiding officer may require an applicant to file additional 
information supporting its eligibility for an award.
    (b) An applicant that objects to public disclosure of information in 
any portion of the net worth exhibit and believes there are legal 
grounds for withholding it from disclosure may submit that portion of 
the exhibit directly to the presiding officer in a sealed envelope 
labeled ``Confidential Financial Information,'' accompanied by a motion 
under Sec. 622.11 of this chapter to withhold the information from 
public disclosure. The motion shall describe the information sought to 
be withheld and explain, in detail, why it falls within one or more of 
the specific exemptions from mandatory disclosure under the Freedom of 
Information Act, 5 U.S.C. 552(b) (1)-(9), why public disclosure of the 
information would adversely affect the applicant, and why disclosure is 
not required in the public interest. The material in question shall be 
served on counsel representing the FCA, but need not be served on any 
other party to the application proceeding. If the presiding officer, or 
the FCA Board pursuant to Sec. 622.11(e) of this chapter, finds that the 
information should not be withheld from disclosure, it shall be placed 
in the public record of the application proceeding. Otherwise, any 
request to inspect or copy the exhibit shall be treated in accordance 
with the FCA's procedures regarding release of information (12 CFR part 
602).



Sec. 625.12  Documentation of fees and expenses.

    The application shall be accompanied by full documentation of the 
fees and expenses, including the cost of any study, analysis, audit, 
engineering report, test, project, or similar matter, for which an award 
is sought. A separate itemized statement shall be submitted for each 
professional firm or individual whose services are covered by the 
application, showing the hours spent in connection with the proceeding 
by each individual, a description of the specific services performed, 
the rates at which each fee has been computed, any expenses for which 
reimbursement is sought, and the total amount paid or payable by the 
applicant or by any other person or entity for the services provided. 
Under Sec. 625.25 of this part, the presiding officer may require the 
applicant to provide vouchers, receipts, logs, or other substantiation 
for any fees or expenses claimed.



Sec. 625.13  When an application may be filed.

    (a) An application may be filed whenever the applicant has prevailed 
in the adversary adjudication, or in a significant and discrete 
substantive portion thereof, but in no case later than 30 days after the 
FCA's final disposition of the adversary adjudication.
    (b) For purposes of this rule, final disposition means the date on 
which a decision or order disposing of the merits of the adversary 
adjudication is issued or any other complete resolution of the adversary 
adjudication, such as a settlement or voluntary dismissal, becomes final 
and is unreviewable by the FCA, any other administrative body, or the 
courts.
    (c) If review, reconsideration, or appeal is sought or taken of an 
adversary adjudication decision as to which an applicant believes it has 
prevailed, application proceedings for any award of fees and other 
expenses shall be stayed pending final disposition of the underlying 
controversy.



           Subpart C--Procedures for Considering Applications



Sec. 625.20  Settlement.

    A prevailing party and the FCA through its counsel may agree on a 
proposed settlement of an award at any time, either in connection with a 
settlement of the underlying adversary adjudication or after the 
underlying adversary adjudication has been concluded. If a prevailing 
party and the FCA counsel agree on a proposed settlement of an award, 
the proposed settlement must be submitted to the presiding officer for a 
recommended decision pursuant to Sec. 625.26 of this part. If

[[Page 254]]

it has not been previously filed, the application must be submitted to 
the presiding officer along with the proposed settlement.



Sec. 625.21  Filing and service of documents.

    Any application for an award or other pleading or document related 
to an application shall be filed and served on all parties to the 
adversary adjudication in the same manner as other pleadings in the 
adversary adjudication (see Secs. 622.18 and 622.19 of this chapter), 
except as provided in Sec. 625.11(b) of this part for confidential 
financial information.



Sec. 625.22  Answer to application.

    (a) Within 30 days after service, counsel for the FCA may file an 
answer to the application. Unless the FCA counsel requests an extension 
of time for filing or a statement of intent to negotiate under paragraph 
(c) of this section is filed, the presiding officer, upon a satisfactory 
showing of entitlement by the applicant, may make an award for the 
applicant's fees and other expenses under the EAJA.
    (b) The answer shall set forth any objections to the requested award 
and identify the facts relied on in support of the FCA's position. If 
the answer is based on any alleged facts not already in the record of 
the adversary adjudication, the FCA counsel shall include with the 
answer either supporting affidavits or a request for further proceedings 
under Sec. 625.25 of this part.
    (c) If the FCA counsel and the applicant believe that the issues in 
the fee application can be settled, they may jointly file a statement of 
their intent to negotiate a settlement. The filing of this statement 
shall extend the time for filing an answer for an additional 30 days, 
and further extensions may be granted by the presiding officer upon 
request by the FCA counsel and the applicant.



Sec. 625.23  Reply.

    Within 15 days after service of an answer, the applicant may file a 
reply. If the reply is based on any alleged facts not already in the 
record of the adversary adjudication, the applicant shall include with 
the reply either supporting affidavits or a request for further 
proceedings under Sec. 625.25 of this part.



Sec. 625.24  Comments by other parties.

    Any party to a proceeding other than the applicant and FCA counsel 
may file comments on an application within 30 days after it is served or 
on an answer within 15 days after it is served. A commenting party may 
not participate further in proceedings on the application unless the 
presiding officer determines that the public interest requires such 
participation in order to permit full exploration of matters raised in 
the comments.



Sec. 625.25  Further proceedings.

    (a) The determination of an award shall be made on the basis of the 
written record unless the presiding officer finds that further 
proceedings are necessary for full and fair resolution of the issues 
arising from the application. Such further proceedings may be at the 
request of either the applicant or the FCA counsel, or on the presiding 
officer's own initiative, and shall be conducted as promptly as 
possible. Further proceedings may include an informal conference, oral 
argument, additional written submissions, or other actions required by 
the presiding officer, but may not include discovery or an evidentiary 
hearing with respect to the issue of whether the agency's position was 
substantially justified.
    (b) Whether or not the position of the agency was substantially 
justified shall be determined on the basis of the administrative record, 
as a whole, which is made in the adversary adjudication for which fees 
and other expenses are sought.
    (c) A request that the presiding officer order further proceedings 
under this section shall specifically identify the information sought or 
the disputed issues and shall explain why the additional proceedings are 
necessary to resolve the issues.



Sec. 625.26  Recommended decision.

    The presiding officer shall file a recommended decision within 30 
days after completion of proceedings on the application, and, promptly 
upon filing, shall serve a copy of the recommended

[[Page 255]]

decision upon each party to the proceedings. The decision shall include 
written findings and conclusions on the applicant's eligibility, status 
as a prevailing party, the recommended amount of the award, if any, and 
an explanation of the reasons for any difference between the amount 
requested and the amount awarded. The decision shall also include, if at 
issue, findings on whether the FCA's position was substantially 
justified, whether the applicant unduly protracted the adversary 
adjudication, or whether special circumstances make an award unjust. If 
the applicant has sought an award against more than one agency, the 
decision shall allocate responsibility for payment of any award made 
among the agencies, and shall explain the reasons for the allocation 
made.



Sec. 625.27  Board decision.

    Following filing of the recommended decision with the Board, the 
Board shall render a final decision on the application. The Board 
maintains full discretion to uphold, reverse, remand, or alter the 
recommended decision. The Board may order further proceedings (including 
those set forth in Secs. 622.11 and 622.13 through 622.16 of this 
chapter) upon request by any party to the application proceeding or on 
its own initiative, but such proceedings may not include discovery or an 
evidentiary hearing with respect to the issue of whether the agency's 
position was substantially justified.



Sec. 625.28  Judicial review.

    Judicial review of final FCA decisions on awards may be sought as 
provided in 5 U.S.C. 504(c)(2).



Sec. 625.29  Payment of award.

    (a) An applicant seeking payment of an award shall submit to the 
Secretary to the Board a copy of the final decision granting the award, 
accompanied by a certification that the applicant will not seek judicial 
review of the decision. The required submission and certification should 
be sent to: Secretary to the Board, Farm Credit Administration, 1501 
Farm Credit Drive, McLean, Virginia 22102-5090.
    (b) The FCA will pay the amount awarded to the applicant within 60 
days of receipt of the applicant's submission and certification.



PART 626--NONDISCRIMINATION IN LENDING--Table of Contents




Sec.
626.6000  Definitions.
626.6005  Nondiscrimination in lending and other services.
626.6010  Nondiscrimination in applications.
626.6015  Nondiscriminatory appraisal.
626.6020  Nondiscriminatory advertising.
626.6025  Equal housing lender poster.
626.6030  Complaints.

    Authority: Secs. 1.5, 2.2, 2.12, 3.1, 5.9, 5.17 of the Farm Credit 
Act (12 U.S.C. 2013, 2073, 2093, 2122, 2243, 2252); 42 U.S.C. 3601 et 
seq.; 15 U.S.C. 1691 et seq.; 12 CFR 202, 24 CFR 100, 109, 110.

    Source: Subpart E of part 613 added at 37 FR 11421, June 7, 1972, 
and 57 FR 13637, Apr. 17, 1992. Redesignated as part 626 at 62 FR 4441, 
Jan. 30, 1997.



Sec. 626.6000  Definitions.

    For the purpose of this subpart, the following definitions shall 
apply:
    (a) Applicant means any person who requests or who has received an 
extension of credit from a creditor and includes any person who is or 
may become contractually liable regarding an extension of credit.
    (b) Dwelling means any building, structure, or portion thereof which 
is occupied as, or designed or intended for occupancy as, a residence by 
one or more families, and any vacant land which is offered for sale or 
lease for the construction or location thereon of any such building, 
structure, or portion thereof.
    (c) Familial status means one or more individuals (who have not 
attained the age of 18 years) being domiciled with:
    (1) A parent or another person having legal custody of such 
individual or individuals; or
    (2) The designee of such parent or other person having such custody, 
with the written permission of such parent or other person.
    The protections afforded against discrimination on the basis of 
familial status shall apply to any person who is pregnant or is in the 
process of securing legal custody of any individual who has not attained 
the age of 18 years.

[[Page 256]]

    (d) Handicap means, with respect to a person:
    (1) A physical or mental impairment which substantially limits one 
or more of such person's major life activities,
    (2) A record of having such an impairment, or
    (3) Being regarded as having such an impairment,

but such term does not include current, illegal use of or addiction to a 
controlled substance (as defined in section 102 of the Controlled 
Substances Act (21 U.S.C. 802)).

    (e) Residential real estate-related transaction means any of the 
following:
    (1) The making or purchasing of loans or providing other financial 
assistance:
    (i) For purchasing, constructing, improving, repairing, or 
maintaining a dwelling; or
    (ii) Secured by residential real estate.
    (2) The selling, brokering, or appraising of residential real 
property.

[57 FR 13637, Apr. 17, 1992. Redesignated at 62 FR 4441, Jan. 30, 1997]



Sec. 626.6005  Nondiscrimination in lending and other services.

    (a) No Farm Credit institution may discriminate in making credit or 
other financial assistance available in a residential real estate-
related transaction, or in the terms or conditions of such a 
transaction, because of race, color, religion, sex, handicap, familial 
status, or national origin.
    (b) No Farm Credit institution may discriminate in any aspect of a 
credit transaction or a financial service involving a credit transaction 
because of:
    (1) Race, color, religion, national origin, sex, marital status, or 
age (provided that the applicant has the capacity to enter into a 
binding contract); or
    (2) The fact that all or part of the applicant's income derives from 
any public assistance program; or
    (3) The fact that the applicant has in good faith exercised any 
right under title VII (Equal Credit Opportunity Act) of the Consumer 
Credit Protection Act.
    (c) Prohibited practices under this section include, but are not 
limited to, discrimination in fixing the amount, interest rate, 
duration, or other terms or conditions of any loan or a financial 
service involving a credit transaction or in the purchase of loans and 
securities on the basis of race, color, religion, sex, handicap, 
familial status (having one or more children under the age of 18), 
marital status, age (provided the applicant has the capacity to enter 
into a binding contract), or national origin.
    (d) Nothing in this subpart shall be deemed to change the 
eligibility requirements imposed by the Farm Credit Act of 1971, as 
amended, or any Farm Credit Administration regulation adopted pursuant 
thereto.

[57 FR 13638, Apr. 17, 1992. Redesignated at 62 FR 4441, Jan. 30, 1997]



Sec. 626.6010  Nondiscrimination in applications.

    (a) No Farm Credit institution may discourage or refuse to allow, 
receive, or consider any application, request, or inquiry regarding an 
eligible loan or other eligible credit service or discriminate in 
imposing conditions upon, or in processing, any such application, 
request, or inquiry on the basis of:
    (1) Race, color, religion, sex, marital status, age (provided that 
the applicant has the capacity to enter into a binding contract), or 
national origin, as prescribed under title VII (the Equal Credit 
Opportunity Act) of the Consumer Credit Protection Act, as amended by 
the Equal Credit Opportunity Act Amendments of 1976 (15 U.S.C. 1601 et 
seq.), and the Board of Governors of the Federal Reserve System's 
implementing regulation (12 CFR part 202); and
    (2) Race, color, religion, sex, national origin, handicap, or 
familial status, as prescribed under title VIII (the Fair Housing Act) 
of the Civil Rights Act of 1968, as amended by the Fair Housing 
Amendments Act of 1988 (42 U.S.C. 3601 et seq.), and the Department of 
Housing and Urban Development's implementing regulations (24 CFR part 
100).
    (b) The provisions of paragraph (a) of this section shall apply 
whenever:
    (1) An application is made for any such loan or other credit 
service; or
    (2) A request is made for forms or papers to be used to make 
application for any such loan or other credit service; or

[[Page 257]]

    (3) An inquiry is made about the availability of such loan or other 
credit service.

[57 FR 13638, Apr. 17, 1992. Redesignated at 62 FR 4441, Jan. 30, 1997]



Sec. 626.6015  Nondiscriminatory appraisal.

    No Farm Credit institution shall discriminate against any person on 
the basis of race, color, religion, sex, handicap, familial status, or 
national origin when conducting, using, or relying upon an appraisal of 
residential real property that is subject to sale, rental, or other 
financing transaction.

[57 FR 13638, Apr. 17, 1992. Redesignated at 62 FR 4441, Jan. 30, 1997]



Sec. 626.6020  Nondiscriminatory advertising.

    (a) A Farm Credit institution that directly or through third parties 
engages in any form of advertising shall not use words, phrases, 
symbols, directions, forms, or models in such advertising which express, 
imply or suggest a policy of discrimination or exclusion in violation of 
the provisions of title VIII (the Fair Housing Act) of the Civil Rights 
Act of 1968, as amended by the Fair Housing Amendments Act of 1988 (42 
U.S.C. 3601-3631); the Department of Housing and Urban Development's 
implementing regulations (24 CFR parts 100 and 109), and title VII (the 
Equal Credit Opportunity Act) of the Consumer Credit Protection Act, as 
amended by the Equal Credit Opportunity Act Amendments of 1976 (15 
U.S.C. 1691-1691f); and the Board of Governors of the Federal Reserve 
System's implementing regulation (12 CFR part 202), or this subpart.
    (b) Written advertisements relating to dwellings shall include a 
facsimile of the following logotype and legend:
[GRAPHIC] [TIFF OMITTED] TC21SE91.000


[37 FR 16932, Aug. 23, 1972, as amended at 57 FR 13638, Apr. 17, 1992. 
Redesignated at 62 FR 4441, Jan. 30, 1997]



Sec. 626.6025  Equal housing lender poster.

    (a) Each Farm Credit institution that makes loans for the purpose of 
purchasing, constructing, improving, repairing, or maintaining a 
dwelling or any loan secured by a dwelling shall post and maintain an 
Equal Housing Lender Poster in the lobby of each of its offices. The 
poster shall be in a prominent place readily apparent to all persons 
seeking such loans.
    (b) The Equal Housing Lender Poster shall be at least 11 inches by 
14 inches in size, and shall bear the logotype and legend set forth in 
Sec. 626.6020(b) of this subpart and the following text:

       WE DO BUSINESS IN ACCORDANCE WITH FEDERAL FAIR LENDING LAWS

    (The Civil Rights Act of 1968, as amended by the Fair Housing 
Amendments Act of 1988)
    UNDER THE FEDERAL FAIR HOUSING ACT, IT IS ILLEGAL, ON THE BASIS OF 
RACE, COLOR, NATIONAL ORIGIN, RELIGION, SEX, HANDICAP, OR FAMILIAL

[[Page 258]]

STATUS (HAVING CHILDREN UNDER THE AGE OF 18), TO:
     Deny a loan for the purpose of purchasing, constructing, 
improving, repairing, or maintaining a dwelling, or deny any loan 
secured by a dwelling; or
     Discriminate in fixing the amount, interest rate, duration, 
application procedures, or other terms or conditions of such a loan, or 
in appraising property.

 IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD SEND A 
                              COMPLAINT TO:

Assistant Secretary for Fair Housing and Equal Opportunity, Department 
of Housing and Urban Development, Washington, DC 20410, 1-800-669-9777 
(Toll Free), 1-800-927-9275 (TDD), for processing under the Federal Fair 
Housing Act
AND TO:
Farm Credit Administration, Office of Congressional and Public Affairs, 
1501 Farm Credit Drive, McLean, VA 22102-5090, 703-883-4056, 703-883-
4444 (TDD), for processing under Farm Credit Administration Regulations

                 UNDER THE EQUAL CREDIT OPPORTUNITY ACT

    (The Consumer Credit Protection Act, as amended by the Equal Credit 
Opportunity Act Amendments of 1976)

        IT IS ILLEGAL TO DISCRIMINATE IN ANY CREDIT TRANSACTION:

     On the basis of race, color, national origin, religion, 
sex, marital status, or age,
     Because income is from public assistance, or
     Because a right was exercised under the Consumer Credit 
Protection Act.

 IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD SEND A 
                              COMPLAINT TO:

Farm Credit Administration, Office of Congressional and Public Affairs, 
1501 Farm Credit Drive, McLean, VA 22102-5090, 703-883-4056, 703-883-
4444 (TDD).

[57 FR 13638, Apr. 17, 1992. Redesignated at 62 FR 4441, Jan. 30, 1997, 
as amended at 62 FR 4451, Jan. 30, 1997]



Sec. 626.6030  Complaints.

    (a) Complaints regarding discrimination in lending by a Farm Credit 
institution under the Fair Housing Act shall be referred to the 
Assistant Secretary for Fair Housing and Equal Opportunity, United 
States Department of Housing and Urban Development, Washington, DC 
20410, and to the Office of Congressional and Public Affairs, Farm 
Credit Administration, McLean, Virginia 22102-5090.
    (b) Complaints regarding discrimination in lending by a Farm Credit 
institution under the Equal Credit Opportunity Act shall be referred to 
the Office of Congressional and Public Affairs, Farm Credit 
Administration, McLean, Virginia 22102-5090.

[57 FR 13639, Apr. 17, 1992. Redesignated at 62 FR 4441, Jan. 30, 1997]



PART 627--TITLE IV CONSERVATORS, RECEIVERS, AND VOLUNTARY LIQUIDATIONS--Table of Contents




                           Subpart A--General

Sec.
627.2700  General--applicability.
627.2705  Definitions.
627.2710  Grounds for appointment of conservators and receivers.
627.2715  Action for removal of conservator or receiver.

                 Subpart B--Receivers and Receiverships

627.2720  Appointment of receiver.
627.2725  Powers and duties of the receiver.
627.2730  Preservation of equity.
627.2735  Notice to holders of uninsured accounts and stockholders.
627.2740  Creditors' claims.
627.2745  Priority of claims--associations.
627.2750  Priority of claims--banks.
627.2752  Priority of claims--other Farm Credit institutions.
627.2755  Payment of claims.
627.2760  Inventory, audit, and reports.
627.2765  Final discharge and release of the receiver.

              Subpart C--Conservators and Conservatorships

627.2770  Conservators.
627.2775  Appointment of a conservator.
627.2780  Powers and duties of conservators.
627.2785  Inventory, examination, audit, and reports to stockholders.
627.2790  Final discharge and release of the conservator.

                    Subpart D--Voluntary Liquidation

627.2795  Voluntary liquidation.
627.2797  Preservation of equity.

    Authority: Secs. 4.2, 5.9, 5.10, 5.17, 5.51, 5.58 of the Farm Credit 
Act (12 U.S.C. 2183, 2243, 2244, 2252, 2277a, 2277a-7).

    Source: 57 FR 46482, Oct. 9, 1992, unless otherwise noted.

[[Page 259]]



                           Subpart A--General



Sec. 627.2700  General--applicability.

    The provisions of this part shall apply to conservatorships, 
receiverships, and voluntary liquidations.

[63 FR 5724, Feb. 4, 1998]



Sec. 627.2705  Definitions.

    For purposes of this part the following definitions apply:
    (a) Act means the Farm Credit Act of 1971, as amended.
    (b) Farm Credit institution(s) or institution(s) means all 
associations, banks, service corporations chartered under title IV of 
the Act, the Federal Farm Credit Banks Funding Corporation, and the Farm 
Credit System Financial Assistance Corporation.
    (c) Conservator means the Farm Credit System Insurance Corporation 
acting in its capacity as conservator.
    (d) Insurance Corporation means the Farm Credit System Insurance 
Corporation.
    (e) Receiver means the Insurance Corporation acting in its capacity 
as receiver.



Sec. 627.2710  Grounds for appointment of conservators and receivers.

    (a) Upon a determination by the Farm Credit Administration Board of 
the existence of one or more of the factors set forth in paragraph (b) 
of this section, with respect to any bank, association, or other 
institution of the System, the Farm Credit Administration Board may, in 
its discretion, appoint a conservator or receiver for such institution. 
After January 5, 1993, the Insurance Corporation shall be the sole 
entity to be appointed as conservator or receiver.
    (b) The grounds for the appointment of a conservator or receiver for 
a System institution are:
    (1) The institution is insolvent, in that the assets of the 
institution are less than its obligations to creditors and others, 
including its members. For purposes of determining insolvency, 
``obligations to members'' shall not include stock or allocated equities 
held by current or former borrowers.
    (2) There has been a substantial dissipation of the assets or 
earnings of the institution due to the violation of any law, rule, or 
regulation, or the conduct of an unsafe or unsound practice;
    (3) The institution is in an unsafe or unsound condition to transact 
business, including having insufficient capital or otherwise. For 
purposes of this regulation, ``unsafe or unsound condition'' shall 
include, but shall not be limited to, the following conditions:
    (i) For banks, a net collateral ratio below 102 percent.
    (ii) For associations, a default by the association of one or more 
terms of its general financing agreement with its affiliated bank that 
the Farm Credit Administration determines to be a material default.
    (iii) For all institutions, permanent capital of less than one-half 
the minimum required level for the institution.
    (iv) For all institutions, a total surplus ratio of less than 2 
percent.
    (v) For associations, stock impairment.
    (4) The institution has committed a willful violation of a final 
cease-and-desist order issued by the Farm Credit Administration Board; 
or
    (5) The institution is concealing its books, papers, records, or 
assets, or is refusing to submit its books, papers, records, assets, or 
other material relating to the affairs of the institution for inspection 
to any examiner or to any lawful agent of the Farm Credit Administration 
Board.
    (6) The institution is unable to make a timely payment of principal 
or interest on any insured obligation (as defined in section 5.51(3) of 
the Act) issued by the institution individually, or on which it is 
primarily liable.

[51 FR 32443, Sept. 12, 1986, as amended at 54 FR 1148, Jan. 12, 1989. 
Redesignated and amended at 46487, Oct. 9, 1992; 63 FR 39229, July 22, 
1998]



Sec. 627.2715  Action for removal of conservator or receiver.

    Upon the appointment of a conservator or receiver for a Farm Credit 
institution by the Farm Credit Administration Board pursuant to 
Sec. 627.2710 of this part, the institution may, within 30 days of such 
appointment, bring an action in the United States District Court for the 
judicial district in which

[[Page 260]]

the home office of the institution is located, or in the United States 
District Court for the District of Columbia, for an order requiring the 
Farm Credit Administration Board to remove such conservator or receiver 
and, if the charter has been canceled, to rescind the cancellation of 
the charter. Notwithstanding any other provision of subpart B or C of 
this part, the institution's board of directors is empowered to meet 
subsequent to such appointment and authorize the filing of an action for 
removal. An action for removal may be authorized only by such 
institution's board of directors.



                 Subpart B--Receivers and Receiverships



Sec. 627.2720  Appointment of receiver.

    (a) The Farm Credit Administration Board may, in its discretion, 
appoint ex parte and without notice a receiver for any Farm Credit 
institution in accordance with the grounds for appointment set forth in 
Sec. 627.2710 of this part.
    (b) The receiver appointed for a Farm Credit institution shall be 
the Insurance Corporation.
    (c) Upon the appointment of the Insurance Corporation as receiver, 
the Chairman of the Farm Credit Administration Board shall immediately 
notify the institution, and its district bank in the case of an 
association, and shall publish a notice of the appointment in the 
Federal Register.
    (d) In the case of the voluntary or involuntary liquidation of an 
association, the district bank shall institute appropriate measures to 
minimize the adverse effect of the liquidation on those borrowers whose 
loans are purchased by or otherwise transferred to another System 
institution.
    (e) Upon the issuance of the order placing a Farm Credit institution 
into liquidation and appointing the Insurance Corporation as receiver, 
all rights, privileges, and powers of the board of directors, officers, 
and employees of the institution shall be vested exclusively in the 
receiver. The Farm Credit Administration Board may simultaneously, or 
any time thereafter, cancel the charter of the institution.

[57 FR 46482, Oct. 9, 1992, as amended at 63 FR 5724, Feb. 4, 1998]



Sec. 627.2725  Powers and duties of the receiver.

    (a) General. (1) Upon appointment as receiver, the receiver shall 
take possession of a Farm Credit institution pursuant to 12 U.S.C. 2183 
and Sec. 627.2710 of this part in order to wind up the business 
operations of such institution, collect the debts owed to the 
institution, liquidate its property and assets, pay its creditors, and 
distribute the remaining proceeds to stockholders. The receiver is 
authorized to exercise all powers necessary to the efficient termination 
of an institution's operation as provided for in this subpart.
    (2) Upon its appointment as receiver, the receiver automatically 
succeeds to--
    (i) All rights, titles, powers and privileges of the institution and 
of any stockholder, officer, or director of such institution with 
respect to the institution and the assets of the institution; and
    (ii) Title to the books, records, and assets of any previous 
conservator or other legal custodian of such institution.
    (3) The receiver of a Farm Credit institution serves as the trustee 
of the receivership estate and conducts its operations for the benefit 
of the creditors and stockholders of the institution.
    (b) Specific powers. The receiver may:
    (1) Exercise all powers as are conferred upon the officers and 
directors of the institution under law and the charter, articles, and 
bylaws of the institution.
    (2) Take any action the receiver considers appropriate or expedient 
to carry on the business of the institution during the process of 
liquidating its assets and winding up its affairs.
    (3) Extend credit to existing borrowers as necessary to honor 
existing commitments and to effectuate the purposes of the receivership.
    (4) Borrow such sums as necessary to effectuate the purposes of the 
receivership.

[[Page 261]]

    (5) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect the institution's assets or property or 
rehabilitate or improve such property and assets.
    (6) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect any asset or property on which the 
institution has a lien or in which the institution has a financial or 
property interest, and pay off and discharge any liens, claims, or 
charges of any nature against such property.
    (7) Investigate any matter related to the conduct of the business of 
the institution, including, but not limited to, any claim of the 
institution against any individual or entity, and institute appropriate 
legal or other proceedings to prosecute such claims.
    (8) Institute, prosecute, maintain, defend, intervene, and otherwise 
participate in any legal proceeding by or against the institution or in 
which the institution or its creditors or members have any interest, and 
represent in every way the institution, its members, and creditors.
    (9) Employ attorneys, accountants, appraisers, and other 
professionals to give advice and assistance to the receivership 
generally or on particular matters, and pay their retainers, 
compensation, and expenses, including litigation costs.
    (10) Hire any agents or employees necessary for proper 
administration of the receivership.
    (11) Execute, acknowledge, and deliver, in person or through a 
general or specific delegation, any instrument necessary for any 
authorized purpose, and any instrument executed under this paragraph 
shall be valid and effective as if it had been executed by the 
institution's officers by authority of its board of directors.
    (12) Sell for cash or otherwise any mortgage, deed of trust, chose 
in action, note contract, judgment or decree, stock, or debt owed to the 
institution, or any property (real or personal, tangible or intangible).
    (13) Purchase or lease office space, automobiles, furniture, 
equipment, and supplies, and purchase insurance, professional, and 
technical services necessary for the conduct of the receivership.
    (14) Release any assets or property of any nature, regardless of 
whether the subject of pending litigation, and repudiate, with cause, 
any lease or executory contract the receiver considers burdensome.
    (15) Settle, release, or obtain release of, for cash or other 
consideration, claims and demands against or in favor of the institution 
or receiver.
    (16) Pay, out of the assets of the institution, all expenses of the 
receivership and all costs of carrying out or exercising the rights, 
powers, privileges, and duties as receiver.
    (17) Pay out of the assets of the institution all approved claims of 
indebtedness in accordance with priorities established in this subpart.
    (18) Take all actions and have such rights, powers, and privileges 
as are necessary and incident to the exercise of any specific power.
    (19) Take such actions, and have such additional rights, powers, 
privileges, immunities, and duties as the Farm Credit Administration 
Board authorizes by order or by amendment of any order or by regulation.
    (c) Authority to pay claims. The receiver of a bank is also 
empowered to pay claims of holders of notes, bonds, debentures, or other 
obligations issued by the bank under 12 U.S.C. 2153(c) or (d) in 
accordance with procedures specified by the Insurance Corporation 
pursuant to Sec. 627.2740(d) of this part.



Sec. 627.2730  Preservation of equity.

    (a) Except as provided for upon final distribution of the assets of 
the institution, no capital stock, participation certificates, equity 
reserves, or other allocated equities of an institution in receivership 
shall be issued, allocated, retired, sold, distributed, transferred, 
assigned, or applied against any indebtedness of the owners of such 
equities.
    (b) Notwithstanding paragraph (a) of this section, eligible borrower 
stock shall be retired in accordance with section 4.9A of the Act.

[57 FR 46482, Oct. 9, 1992, as amended at 63 FR 5724, Feb. 4, 1998]

[[Page 262]]



Sec. 627.2735  Notice to holders of uninsured accounts and stockholders.

    (a) Upon the placing of an institution in liquidation, the receiver 
shall immediately notify every borrower who has an uninsured account 
(voluntary or involuntary) as described in Sec. 614.4513 of this chapter 
that the funds ceased earning interest when the receivership was 
instituted and will be applied against the outstanding indebtedness of 
any loans of such borrower unless, within 15 days of such notice, the 
borrower directs the receiver to otherwise apply such funds in the 
manner provided for in existing loan documents.
    (b) As soon as practicable after the receiver takes possession of 
the institution, the receiver shall notify, by first class mail, each 
holder of stock and participation certificates of the following matters:
    (1) The number of shares such holder owns;
    (2) That the stock and other equities of the institution may not be 
retired or transferred until the liquidation is completed, whereupon the 
receiver will distribute a liquidating dividend, if any, to the owners 
of such equities; and
    (3) Such other matters as the receiver or the Farm Credit 
Administration deems necessary.



Sec. 627.2740  Creditors' claims.

    (a) The receiver shall publish promptly a notice to creditors to 
present their claims against the institution, with proof thereof, to the 
receiver by a date specified in the notice, which shall be not less than 
90 calendar days after the first publication. The notice shall be 
republished approximately 30 days and 60 days after the first 
publication. The receiver shall promptly send, by first class mail, a 
similar notice to any creditor shown on the institution's books at the 
creditor's last address appearing thereon. Claims filed after the 
specified date shall be disallowed, except as the receiver may approve 
them for full or partial payment from the institution's assets remaining 
undistributed at the time of approval.
    (b) The receiver shall allow any claim that is timely received and 
proved to the receiver's satisfaction. The receiver may disallow in 
whole or in part any creditor's claim or claim of security, preference, 
or priority which is not proved to the receiver's satisfaction or is not 
timely received and shall notify the claimant of the disallowance and 
reason therefor. Sending the notice of disallowance by first class mail 
to the claimant's address appearing on the proof of claim shall be 
sufficient notice. The disallowance shall be final, unless, within 30 
days after the notice of disallowance is mailed, the claimant files a 
written request for payment regardless of the disallowance. The receiver 
shall reconsider any claim upon the timely request of the claimant and 
may approve or disapprove such claim in whole or in part.
    (c) Creditors' claims that are allowed shall be paid by the receiver 
from time to time, to the extent funds are available therefor and in 
accordance with the priorities established in this subpart and in such 
manner and amounts as the receiver deems appropriate. In the event the 
institution has a claim against a creditor of the institution, the 
receiver shall offset the amount of such claim against the claim 
asserted by such creditor.
    (d) The claims of holders of notes, bonds, debentures, or other 
obligations issued by a bank under 12 U.S.C. 2153 (c) or (d) shall be 
made, if deemed necessary or appropriate, in accordance with procedures 
formulated by the Insurance Corporation. In the formulation of such 
procedures, the Insurance Corporation shall consult with the Farm Credit 
Administration.



Sec. 627.2745  Priority of claims--associations.

    The following priority of claims shall apply to the distribution of 
the assets of an association in liquidation:
    (a) All costs, expenses, and debts incurred by the receiver in 
connection with the administration of the receivership.
    (b) Administrative expenses of the association, provided that such 
expenses were incurred within 60 days prior to the receiver's taking 
possession, and that such expenses shall be limited to reasonable 
expenses incurred for services actually provided by accountants, 
attorneys, appraisers, examiners, or management companies, or reasonable

[[Page 263]]

expenses incurred by employees which were authorized and reimbursable 
under a pre-existing expense reimbursement policy, that, in the opinion 
of the receiver, are of benefit to the receivership, and shall not 
include wages or salaries of employees of the association.
    (c) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver 
by an employee of the association whom the receiver determines it is in 
the best interest of the receivership to engage or retain for a 
reasonable period of time.
    (d) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver, 
up to a maximum of three thousand dollars ($3,000) per person as 
adjusted for inflation, by an employee of the association not engaged or 
retained by the receiver. The adjustment for inflation shall be the 
percentage by which the Consumer Price Index (as prepared by the 
Department of Labor) for the calendar year preceding the appointment of 
the receiver exceeds the Consumer Price Index for the calendar year 
1992.
    (e) All claims for taxes.
    (f) All claims of creditors, including the district bank, which are 
secured by assets or equities of the association in accordance with 
applicable Federal or State law.
    (g) All claims of the district bank other than those provided for in 
paragraph (f) of this section, based on the financing agreement between 
the association and the bank, including interest accrued before and 
after the appointment of the receiver, minus any setoff for stock or 
other equity of the district bank owned by the association made in 
accordance with this paragraph or paragraph (f) of this section. Prior 
to making such setoff, the district bank must obtain the approval of the 
Farm Credit Administration Board for the retirement of such equities.
    (h) All claims of general creditors.



Sec. 627.2750  Priority of claims--banks.

    The following priority of claims shall apply to the distribution of 
the assets of a bank in liquidation:
    (a) All costs, expenses, and debts incurred by the receiver in 
connection with the administration of the receivership.
    (b) Administrative expenses of the bank, provided that such expenses 
were incurred within 60 days prior to the receiver's taking possession, 
and that such expenses shall be limited to reasonable expenses incurred 
for services actually provided by accountants, attorneys, appraisers, 
examiners, or management companies, or reasonable expenses incurred by 
employees which were authorized and reimbursable under a pre-existing 
expense reimbursement policy, that, in the opinion of the receiver, are 
of benefit to the receivership, and shall not include wages or salaries 
of employees of the bank.
    (c) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver 
by an employee of the bank whom the receiver determines it is in the 
best interest of the receivership to engage or retain for a reasonable 
period of time.
    (d) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver, 
up to a maximum of three thousand dollars ($3,000) per person as 
adjusted for inflation, by an employee of the bank not engaged or 
retained by the receiver. The adjustment for inflation shall be the 
percentage by which the Consumer Price Index (as prepared by the 
Department of Labor) for the calendar year preceding the appointment of 
the receiver exceeds the Consumer Price Index for the calendar year 
1992.
    (e) All claims for taxes.
    (f) All claims of creditors which are secured by specific assets or 
equities of the bank, with priority of conflicting claims of creditors 
within this same class to be determined in accordance with priorities of 
applicable Federal or State law.
    (g) All claims of holders of bonds issued by the bank individually 
to the extent such are collateralized in accordance with 12 U.S.C. 2154.
    (h) All claims of holders of consolidated and Systemwide bonds and 
claims of the other Farm Credit banks

[[Page 264]]

arising from their payments pursuant to 12 U.S.C. 2155.
    (i) All claims of general creditors.



Sec. 627.2752  Priority of claims--other Farm Credit institutions.

    The following priority of claims shall apply to the distribution of 
the assets of an institution, other than a bank or association, in 
liquidation:
    (a) All costs, expenses, and debts incurred by the receiver in 
connection with the administration of the receivership.
    (b) Administrative expenses of the institution, provided that such 
expenses were incurred within 60 days prior to the receiver's taking 
possession, and that such expenses shall be limited to reasonable 
expenses incurred for services actually provided by accountants, 
attorneys, appraisers, examiners, or management companies, or reasonable 
expenses incurred by employees which were authorized and reimbursable 
under a pre-existing expense reimbursement policy, that, in the opinion 
of the receiver, are of benefit to the receivership, and shall not 
include wages or salaries of employees of the institution.
    (c) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver 
by an employee of the institution whom the receiver determines it is in 
the best interest of the receivership to engage or retain for a 
reasonable period of time.
    (d) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver, 
up to a maximum of three thousand dollars ($3,000) per person as 
adjusted for inflation, by an employee of the institution not engaged or 
retained by the receiver. The adjustment for inflation shall be the 
percentage by which the Consumer Price Index (as prepared by the 
Department of Labor) for the calendar year preceding the appointment of 
the receiver exceeds the Consumer Price Index for the calendar year 
1992.
    (e) All claims for taxes.
    (f) All claims of creditors which are secured by specific assets or 
equities of the institution, with priority of conflicting claims of 
creditors within this same class to be determined in accordance with 
priorities of applicable Federal or State law.
    (g) All claims of general creditors.



Sec. 627.2755  Payment of claims.

    (a) All claims of each class described in Sec. 627.2745, 
Sec. 627.2750, or Sec. 627.2752 of this part, respectively, shall be 
paid in full, or provisions shall be made for such payment, prior to the 
payment of any claim of a lesser priority. If there are insufficient 
funds to pay in full any class of claims described in Sec. 627.2745, 
distribution on such class shall be on a pro rata basis.
    (b) Following the payment of all claims, the receiver shall 
distribute the remainder of the assets of the institution to the owners 
of stock, participation certificates, and other equities in accordance 
with the priorities for impairment set forth in the bylaws of the 
institution.
    (c) Notwithstanding this section, eligible borrower stock shall be 
retired in accordance with section 4.9A of the Act.



Sec. 627.2760  Inventory, audit, and reports.

    (a) As soon as practicable after taking possession of an 
institution, the receiver shall make an inventory of the assets and 
liabilities as of the date possession was taken.
    (b) The institution in receivership shall be audited on an annual 
basis by a certified public accountant selected by the receiver.
    (c) With respect to each receivership, the receiver shall make an 
annual accounting or report, as appropriate, available upon request to 
any stockholder of the institution in receivership or any member of the 
public, with a copy provided to the Farm Credit Administration.
    (d) Upon the final liquidation of the institution, the receiver 
shall send to each stockholder of record a report summarizing the 
disposition of the assets of the receivership and claims against the 
receivership.

[[Page 265]]



Sec. 627.2765  Final discharge and release of the receiver.

    After the receiver has made a final distribution of the assets of 
the receivership, the receivership shall be terminated, the charter 
shall be canceled by the Farm Credit Administration Board if such 
cancellation has not previously occurred, and the receiver shall be 
finally discharged and released.



              Subpart C--Conservators and Conservatorships



Sec. 627.2770  Conservators.

    (a) The Insurance Corporation shall be appointed as conservator by 
the Farm Credit Administration Board pursuant to section 4.12 of the Act 
and Sec. 627.2710 of this part to take possession of an institution in 
accordance with the terms of the appointment. Upon appointment, the 
conservator shall direct the institution's further operation until the 
Farm Credit Administration Board decides whether to place the 
institution into receivership. Upon correction or resolution of the 
problem or condition that provided the basis for the appointment and 
upon a determination by the Farm Credit Administration Board that the 
institution can be returned to normal operations, the Farm Credit 
Administration Board may turn the institution over to such management as 
the Farm Credit Administration Board may direct.
    (b) The conservator shall exercise all powers necessary to continue 
the ongoing operations of the institution, to conserve and preserve the 
institution's assets and property, and otherwise protect the interests 
of the institution, its stockholders, and creditors as provided in this 
subpart.



Sec. 627.2775  Appointment of a conservator.

    (a) The Farm Credit Administration Board may appoint ex parte and 
without notice a conservator for any Farm Credit institution provided 
that one or more of the grounds for appointment as set forth in 
Sec. 627.2710 exist.
    (b) Upon the appointment of a conservator, the Chairman of the Farm 
Credit Administration shall immediately notify the institution and, in 
the case of an association, the district bank, and notice of the 
appointment shall be published in the Federal Register. As soon as 
practicable after the conservator takes possession of the institution, 
the conservator shall notify, by first class mail, each holder of stock 
and participation certificates in the institution of the establishment 
of the conservatorship and shall describe the effect of the 
conservatorship on the institution's operations and on the borrower's 
loan and equity holdings.
    (c) Upon the issuance of the order placing a Farm Credit institution 
in conservatorship, all rights, privileges, and powers of the members, 
board of directors, officers, and employees of the institution are 
vested exclusively in the conservator.
    (d) The conservator is responsible for conserving and preserving the 
assets of the institution and continuing the ongoing operations of the 
institution until the conservatorship is terminated by order of the Farm 
Credit Administration Board.
    (e) The Board may, at any time, terminate the conservatorship and 
direct the conservator to turn over the institution's operations to such 
management as the Board may designate, in which event the provisions of 
this subpart shall no longer apply.



Sec. 627.2780  Powers and duties of conservators.

    (a) The conservator of an institution serves as the trustee of the 
institution and conducts its operations for the benefit of the creditors 
and stockholders of the institution.
    (b) The conservator may, with respect to Farm Credit institutions, 
exercise the powers that a receiver of an institution may exercise under 
any of the provisions of Sec. 627.2725(b) of this part, except 
paragraphs Sec. 627.2725 (b)(2) and (b)(17). In interpreting the 
applicable paragraphs for purposes of this section, the terms 
``conservator'' and ``conservatorship'' shall be read for ``receiver'' 
and ``receivership.''
    (c) The conservator may extend credit to new and existing borrowers 
as is necessary to the continuing operation of the institution and to 
effectuate the purposes of the conservatorship.

[[Page 266]]

    (d) The conservator may also take any other action the conservator 
considers appropriate or expedient to the continuing operation of the 
institution.



Sec. 627.2785  Inventory, examination, audit, and reports to stockholders.

    (a) As soon as practicable after taking possession of a Farm Credit 
institution the conservator shall make an inventory of the assets and 
liabilities of the institution as of the date possession was taken. One 
copy of the inventory shall be filed with the Farm Credit 
Administration.
    (b) The institution in conservatorship shall be examined by the Farm 
Credit Administration in accordance with section 5.19 of the Act. The 
institution shall also be audited by a certified public accountant in 
accordance with part 621 of this chapter.
    (c) Each institution in conservatorship shall prepare and file with 
the Farm Credit Administration financial reports in accordance with the 
requirements of part 621 of this chapter. The conservator of the 
institution shall provide the certification required in Sec. 621.14 of 
this chapter.
    (d) Each institution in conservatorship shall prepare and issue 
published financial reports in accordance with provisions of part 620 of 
this chapter, and the certifications and signatures of the board of 
directors or management provided for in Secs. 620.2(b), 620.2(c), and 
620.5(m)(2) of this chapter shall be provided by the conservator of the 
institution.

[57 FR 46482, Oct. 9, 1992, as amended at 58 FR 48791, Sept. 20, 1993]



Sec. 627.2790  Final discharge and release of the conservator.

    At such time as the conservator shall be relieved of its 
conservatorship duties, the conservator shall file a report on the 
conservator's activities with the Farm Credit Administration. The 
conservator shall thereupon be completely and finally released.



                    Subpart D--Voluntary Liquidation

    Source: 63 FR 5725, Feb. 4, 1998, unless otherwise noted.



Sec. 627.2795  Voluntary liquidation.

    (a) A Farm Credit institution may voluntarily liquidate by a 
resolution of its board of directors, but only with the consent of, and 
in accordance with a plan of liquidation approved by, the Farm Credit 
Administration Board. Upon adoption of such resolution to liquidate, the 
Farm Credit institution shall submit the proposed voluntary liquidation 
plan to the Farm Credit Administration for preliminary approval. The 
Farm Credit Administration Board, in its discretion, may appoint a 
receiver as part of an approved liquidation plan. If a receiver is 
appointed for the Farm Credit institution as part of a voluntary 
liquidation, the receivership shall be conducted pursuant to subpart B 
of this part, except to the extent that an approved plan of liquidation 
provides otherwise.
    (b) If the Farm Credit Administration Board gives preliminary 
approval to the liquidation plan, the board of directors of the Farm 
Credit institution shall submit the resolution to liquidate and the 
liquidation plan to the stockholders for approval.
    (c) The resolution to liquidate and the liquidation plan shall be 
approved by the stockholders if agreed to by at least a majority of the 
voting stockholders of the institution voting, in person or by written 
proxy, at a duly authorized stockholders' meeting.
    (d) The Farm Credit Administration Board will consider final 
approval of the liquidation plan after an affirmative stockholder vote 
on the resolution to liquidate.
    (e) Any subsequent amendments, modifications, revisions, or 
adjustments to the liquidation plan shall require Farm Credit 
Administration Board approval.
    (f) The Farm Credit Administration Board, in its discretion, 
reserves the right to terminate or modify the liquidation plan at any 
time.



Sec. 627.2797  Preservation of equity.

    (a) Immediately upon the adoption of a resolution by its board of 
directors to voluntarily liquidate a Farm Credit institution, the 
capital stock, participation certificates, equity reserves, and 
allocated equities of the Farm Credit

[[Page 267]]

institution shall not be issued, allocated, retired, sold, distributed, 
transferred, assigned, or applied against any indebtedness of the owners 
of such equities. Such activities could resume if the stockholders of 
the Farm Credit institution disapprove the resolution to liquidate or 
the Farm Credit Administration Board disapproves the liquidation plan. 
In the event the resolution to liquidate is approved by the stockholders 
of the Farm Credit institution and the liquidation plan is approved by 
the Farm Credit Administration Board, the liquidation plan shall govern 
disposition of the equities of the Farm Credit institution, except that 
if the Farm Credit institution is placed in receivership, the provisions 
of Sec. 627.2730(a) shall govern further disposition of the equities of 
the Farm Credit institution.
    (b) Notwithstanding paragraph (a) of this section, eligible borrower 
stock shall be retired in accordance with section 4.9A of the Act.



PART 630--DISCLOSURE TO INVESTORS IN SYSTEMWIDE AND CONSOLIDATED BANK DEBT OBLIGATIONS OF THE FARM CREDIT SYSTEM--Table of Contents




                           Subpart A--General

Sec.
630.1  Purpose.
630.2  Definitions.
630.3  Publishing and filing the report to investors.
630.4  Responsibilities for preparing the report to investors.
630.5  Prohibition against incomplete, inaccurate, or misleading 
          disclosure.
630.6  Farm Credit System audit committee and bank audit committees.

                  Subpart B--Annual Report to Investors

630.20  Contents of the annual report to investors.

                Subpart C--Quarterly Reports to Investors

630.40  Contents of the quarterly report to investors.

Appendix A to Part 630--Supplemental Information Disclosure Guidelines

    Authority: Secs. 5.17, 5.19 of the Farm Credit Act (12 U.S.C. 2252, 
2254).

    Source: 59 FR 46742, Sept. 12, 1994, unless otherwise noted.



                           Subpart A--General



Sec. 630.1  Purpose.

    This part sets forth the requirements for preparation and 
publication by the Farm Credit System (FCS or System) of annual and 
quarterly reports to investors and potential investors in Systemwide and 
consolidated bank debt obligations of the System and to other users of 
the reports in the general public.



Sec. 630.2  Definitions.

    For purposes of this part, the following definitions shall apply:
    (a) Bank means any bank chartered under the Farm Credit Act of 1971, 
as amended (Act).
    (b) Combined financial statements means financial statements 
prepared on a combined basis by a group of affiliated entities that 
share the same financial interest, regardless of whether any of the 
entities has the ability to exercise control over another. For purposes 
of this part, unless otherwise specified, combined financial data of a 
bank and its related associations includes financial data of the bank's 
consolidated subsidiaries.
    (c) Disclosure entity means any bank, the Farm Credit System 
Financial Assistance Corporation (Financial Assistance Corporation), and 
the Federal Farm Credit Banks Funding Corporation (Funding Corporation).
    (d) Engagement letter means the proposal, contract, letter, and 
other documents reflecting the understandings between the audit 
committee or board of directors of a bank or an association and its 
independent public accountant regarding the scope, terms, and nature of 
the audit services to be performed.
    (e) Farm Credit System means, collectively, the banks, associations, 
and such other institutions that are or may be made a part of the System 
under the Act, all of which are chartered by and subject to regulation 
by the Farm Credit Administration (FCA). For purposes of this part, the 
System does not include the Federal Agricultural Mortgage Corporation 
(Farmer Mac).

[[Page 268]]

    (f) FCS debt obligation means, collectively, notes, bonds, 
debentures, and other debt securities issued by banks pursuant to 
section 4.2(c) (consolidated bank debt securities) and section 4.2(d) 
(Systemwide debt securities) of the Act.
    (g) Report to investors or report means a report that presents the 
Systemwide combined financial statements, supplemental financial 
statement information, and related financial and nonfinancial 
information pertaining to the System required by this part.
    (h) Systemwide combined financial statements means the combined 
financial statements required by this part.



Sec. 630.3  Publishing and filing the report to investors.

    (a) The disclosure entities shall jointly publish the following 
reports in order to provide meaningful information pertaining to the 
financial condition and results of operations of the System to investors 
and potential investors in FCS debt obligations and other users of the 
report:
    (1) An annual report to investors within 90 days after the end of 
each fiscal year;
    (2) A quarterly report to investors within 60 days after the end of 
each quarter, except for the quarter that coincides with the end of the 
fiscal year.
    (b) Each report to investors shall present Systemwide combined 
financial statements and related footnotes deemed appropriate for the 
purpose of the report to provide investors with the most meaningful 
presentation pertaining to the financial condition and results of 
operations of the System.
    (c) All items of essentially the same character as items required to 
be reported in the reports of condition and performance pursuant to part 
621 of this chapter shall be prepared in accordance with the rules set 
forth in part 621 of this chapter.
    (d) Each report to investors shall contain the information required 
by subparts B and C of this part, as applicable, and such other 
information as is necessary to make the required statements, in light of 
the circumstances under which they are made, not misleading.
    (e) Information in any part of the report may be referenced or 
incorporated in answer or partial answer to any other item of the 
report. Information required by this part may be presented in any order 
deemed suitable by the Funding Corporation.
    (f) Information in documents prepared for investors in connection 
with the offering of debt securities issued through the Federal Farm 
Credit Banks Funding Corporation may be incorporated by reference in the 
annual and quarterly reports in answer or partial answer to any item 
required in the reports under this part. A complete description of any 
offering documents incorporated by reference must be clearly identified 
in the report (e.g., Federal Farm Credit Banks Consolidated Systemwide 
Bonds and Discount Notes--Offering Circular issued on [insert date]). 
Offering documents incorporated by reference in either an annual or 
quarterly report prepared under this part must be filed with the Chief 
Examiner, Farm Credit Administration, McLean, Virginia 22102-5090, 
either prior to or at the time of submission of the report under 
paragraph (h) of this section. Any offering document incorporated by 
reference is subject to the delivery and availability requirements set 
forth in Sec. 630.4(a) (5) and (6).
    (g) The report shall include a statement in a prominent location 
that Systemwide debt securities and consolidated bank debt obligations 
are joint and several liabilities of individual banks and that copies of 
each bank's recent periodic reports to shareholders are available upon 
request. The report shall also include addresses and telephone numbers 
where copies of the report to investors and the periodic reports of 
individual banks can be obtained. Copies of the report to investors 
shall be available for public inspection at the Funding Corporation.
    (h) Three complete copies of the report shall be filed with the 
Chief Examiner, Farm Credit Administration, McLean, Virginia 22102-5090, 
within the applicable period prescribed under paragraphs (a)(1) and 
(a)(2) of this section.
    (1) At least one copy of the report filed with the FCA shall be 
dated and

[[Page 269]]

manually signed by the following officers and director(s) of the Funding 
Corporation on its behalf:
    (i) The officer(s) designated by the board of directors to certify 
the report;
    (ii) The chief executive officer; and
    (iii) Each member of the board or, at a minimum, one of the 
following board members formally designated by action of the board to 
certify on behalf of individual board members: the chairperson of the 
board or a board member designated by the chairperson of the board.
    (2) The name and position title of each person signing the report 
shall be typed or printed beneath his or her signature. Signers of the 
report shall attest as follows:

    The undersigned certify that this report has been prepared in 
accordance with all applicable statutory or regulatory requirements and 
that the information contained herein is true, accurate, and complete to 
the best of his or her knowledge and belief.

[59 FR 46724, Sept. 12, 1994, as amended at 62 FR 15094, Mar. 31, 1997]



Sec. 630.4  Responsibilities for preparing the report to investors.

    (a) Responsibilities of the Funding Corporation. The Funding 
Corporation shall:
    (1) Prepare the reports to investors required by Sec. 630.3(a), 
including the Systemwide combined financial statements and notes 
thereto, and such other disclosures, supplemental information, and 
related analysis as are required by this part to make the reports 
meaningful and not misleading.
    (2) Establish a system of internal controls sufficient to reasonably 
ensure that any information it releases to investors and the general 
public concerning any matter required to be disclosed by this part is 
true and that there are no omissions of material information. The system 
of internal controls, at a minimum, shall require that the Funding 
Corporation:
    (i) Maintain written policies and procedures, approved by the System 
Audit Committee, to be carried out by the disclosure entities for 
preparation of the report to investors;
    (ii) Provide instructions to the disclosure entities regarding the 
information needed for preparation of the Systemwide combined financial 
statements and disclosures required to be presented in the report to 
investors;
    (iii) Review the information submitted to it for preparation of the 
report to investors, and make reasonable inquiries to ascertain whether 
the information is reliable, accurate, and complete; and
    (iv) Specify procedures for monitoring interim disclosures of System 
institutions and disclose, in a timely manner, any material changes in 
information contained in the most recently published report to 
investors.
    (3) Collect from each disclosure entity financial data and related 
analyses and other information needed for preparation of the report to 
investors, including any information that is material to the disclosure 
entity.
    (4) File the reports with the FCA in accordance with Sec. 630.3(g).
    (5) Ensure prompt delivery of sufficient copies of each report to 
selling group dealers for distribution to investors and potential 
investors in FCS debt obligations.
    (6) Make the report available to the general public upon request.
    (7) Notify the FCA if it is unable to prepare and publish the report 
to investors in compliance with the requirements of this part because 
one or more banks have failed to comply with the requirements of 
paragraph (c) of this section. A notification, signed by the officer(s) 
designated by the board of directors of the Funding Corporation to 
certify the report to investors and by the chief executive officer, 
shall be made to the FCA as soon as the Funding Corporation becomes 
aware of its inability to comply. The Funding Corporation shall explain 
the reasons for the notification and may request that the FCA extend the 
due date for the report to investors.
    (8) Include in the report a statement that briefly explains the 
respective responsibilities of the disclosure entities and states that 
the Funding Corporation has policies and procedures in place to ensure, 
to the best of the knowledge and belief of management and the board of 
the Funding Corporation, that the information contained in the report is 
true, accurate, and complete. The statement shall be signed by

[[Page 270]]

the chief executive officer and the chairperson of the board of the 
Funding Corporation.
    (9) Request the FCA to provide information regarding the content of 
the latest Reports of Examination of any banks and related associations, 
if such information is necessary for preparation of a report that is 
meaningful and not misleading and is not forthcoming from a bank in 
accordance with paragraph (c) of this section. The request shall be made 
to the Chief Examiner, Farm Credit Administration, McLean, Virginia 
22102-5090.
    (b) Responsibilities of the Financial Assistance Corporation. The 
Financial Assistance Corporation shall provide to the Funding 
Corporation such information as may be required by the Funding 
Corporation to prepare the report.
    (c) Responsibilities of banks. Each bank shall:
    (1) Provide to the Funding Corporation annual, quarterly, and 
interim financial and other information in accordance with instructions 
of the Funding Corporation for preparation of the report to investors, 
including:
    (i) Financial data of the bank or, if the bank is required under 
generally accepted accounting principles (GAAP) to prepare its financial 
statements on a consolidated basis with its subsidiaries, consolidated 
financial data of the bank and its consolidated subsidiaries; and
    (ii) Combined financial data of the bank (including any consolidated 
subsidiaries of the bank) and related associations of the bank.
    (2) Respond to Funding Corporation inquiries and provide any 
followup information requested by the Funding Corporation in connection 
with the preparation of the report to investors in accordance with 
instructions of the Funding Corporation.
    (3) Notify the Funding Corporation promptly of any events occurring 
subsequent to publication of the report that may be material either to 
the financial condition and results of operations of the bank or to the 
combined financial condition and results of operations of the bank and 
its related associations. Furnish the Funding Corporation with any 
information necessary to provide interim Systemwide disclosure to 
investors to make the most recently published report to investors not 
misleading.
    (4) Provide in the engagement letter with its external auditor that 
the external auditor shall, after notifying the bank, respond to 
inquiries from the Funding Corporation relating to preparation of the 
report.
    (5)(i) Certify to the Funding Corporation that:
    (A) All information needed for preparation of the report to 
investors has been submitted in accordance with the instructions of the 
Funding Corporation;
    (B) The information submitted is prepared in accordance with all 
applicable statutory and regulatory requirements; and
    (C) The information submitted is true, accurate, and complete to the 
best of management's knowledge and belief.
    (ii) The certification required by paragraph (c)(5)(i) of this 
section shall be prepared as specified by the Funding Corporation and 
shall be manually signed and dated on behalf of the bank by:
    (A) The officer(s) designated by the board of directors to certify 
the information submitted to the Funding Corporation; and
    (B) The chief executive officer.
    (d) Responsibilities of associations. Each association shall:
    (1) Provide its related bank with the information necessary to allow 
the bank to provide accurate and complete information regarding the bank 
and its related associations to the Funding Corporation for preparation 
of the report.
    (2) Provide in the engagement letter with its external auditor that 
the external auditor of the association shall, after notifying the 
association, respond to inquiries of the related bank pertaining to 
preparation of the combined financial data of the association and its 
related bank.



Sec. 630.5  Prohibition against incomplete, inaccurate, or misleading disclosure.

    Neither the Funding Corporation, nor any institution supplying 
information to the Funding Corporation under this

[[Page 271]]

part, nor any employee, officer, director, or nominee for director of 
the Funding Corporation or of such institutions, shall make or cause to 
be made any disclosure to investors and the general public required by 
this part that is incomplete, inaccurate, or misleading. When any such 
institution or person makes or causes to be made disclosure under this 
part that, in the judgment of the FCA, is incomplete, inaccurate, or 
misleading, whether or not such disclosure is made in published 
statements required by this part, such institution or person shall 
promptly furnish to the Funding Corporation, and the Funding Corporation 
shall promptly publish, such additional or corrective disclosure as is 
necessary to provide full and fair disclosure to investors and the 
general public. Nothing in this section shall prevent the FCA from 
taking additional actions to enforce this section pursuant to its 
authority under title V, part C of the Act.



Sec. 630.6  Farm Credit System audit committee and bank audit committees.

    (a) Farm Credit System audit committee. (1) The board of the Funding 
Corporation shall establish and maintain a System Audit Committee and 
adopt a written charter describing the committee's composition, 
authorities, and responsibilities.
    (2) The System Audit Committee shall consist of no fewer than three 
members. Members shall be independent of management of any disclosure 
entity and association and free from any relationship that, in the 
opinion of the board of directors of the Funding Corporation, would 
interfere with the exercise of independent judgment as a committee 
member. Members shall be knowledgeable in public and corporate finance, 
and financial reporting and disclosure.
    (3) The System Audit Committee shall report to the board of the 
Funding Corporation and shall be given adequate resources and 
authorities to discharge its responsibilities, including the ability to 
consult the Funding Corporation's legal counsel.
    (4) Responsibilities. At a minimum, the System Audit Committee 
shall:
    (i) Make recommendations to the board of the Funding Corporation 
regarding the selection of an independent auditor of the Systemwide 
combined financial statements;
    (ii) Oversee the Funding Corporation management's preparation of the 
report to investors;
    (iii) Review the impact of any significant accounting and auditing 
developments, and review accounting policy changes relating to 
preparation of the Systemwide combined financial statements;
    (iv) Review the System's annual and quarterly reports to investors 
prior to their release; and
    (v) Oversee the Funding Corporation's system of internal controls 
relating to preparation of the report, including controls relating to 
the System's compliance with applicable laws and regulations.
    (b) Farm Credit System bank audit committees. (1) Each System bank 
shall establish and maintain a bank audit committee that shall report to 
the board of the bank.
    (2) The bank audit committee shall consist of no fewer than three 
members. Members shall be independent of management and free from any 
relationship that, in the opinion of the board of directors of the bank, 
would interfere with the exercise of independent judgment as a committee 
member. Members shall be knowledgeable in public and corporate finance, 
and financial reporting and disclosure.
    (3) Responsibilities. At a minimum, the bank audit committee shall:
    (i) Review the bank's financial statements and significant 
accounting policies;
    (ii) Oversee the bank's financial reporting regarding its disclosure 
to shareholders and to the Funding Corporation for disclosure to 
investors;
    (iii) Oversee the audit activities of the external auditor; and
    (iv) Monitor internal controls, including those relating to 
compliance with laws and regulations.



                  Subpart B--Annual Report to Investors



Sec. 630.20  Contents of the annual report to investors.

    The annual report shall contain the following:

[[Page 272]]

    (a) Description of business. (1) The description shall include a 
brief discussion of the following:
    (i) The System's overall organizational structure, its lending 
institutions by type and their respective authorities, the relationships 
between different types of institutions, and the overall geographic area 
and eligible borrowers served by those institutions;
    (ii) The types of lending activities engaged in and financial 
services offered by System institutions;
    (iii) Any significant developments within the last 5 years that have 
had or could have a material impact on the System's organizational 
structure and the manner in which System institutions conduct business, 
including, but not limited to, statutory or regulatory changes, mergers 
or liquidations of System institutions, terminations of System 
institution status, and financial assistance provided by or to System 
institutions through loss-sharing or capital preservation agreements or 
from any other source;
    (iv) Any acquisition or disposition of material assets during the 
last fiscal year that took place outside the ordinary course of 
business;
    (v) Any concentrations of more than 10 percent of total assets in 
particular types of agricultural activities or businesses, and any 
dependence of an institution or a group of institutions of the System 
upon a specific activity or business, a single customer, or a few 
customers, including other financing institutions (OFIs), the loss of 
any one of which would have a material effect on the System; and
    (vi) The authority of System institutions to purchase and sell 
interests in loans in secondary markets and the risk involved in such 
activities.
    (2) List the address of the headquarters of each disclosure entity 
and service organization of the System.
    (b) Federal regulation and insurance--(1) Farm Credit 
Administration. Describe the regulatory and enforcement authority of the 
FCA over System institutions under the Act.
    (2) Farm Credit System Insurance Corporation. (i) Describe the role 
and authorities of the Farm Credit System Insurance Corporation (FCSIC) 
under part E of title V of the Act. Describe specifically the role of 
the FCSIC in insuring the timely payment of principal and interest on 
FCS debt obligations and in providing assistance to System institutions.
    (ii) Describe the FCSIC's status as a Government corporation and 
state that System institutions have no control over the management of 
the FCSIC or the discretionary expenditures from the Farm Credit 
Insurance Fund (Insurance Fund), which are the sole prerogative of the 
FCSIC.
    (3) Farm Credit System Financial Assistance Corporation. Describe 
the role and authorities of the Financial Assistance Corporation under 
title VI of the Act, debt obligations of the Financial Assistance 
Corporation issued to provide financial assistance to the System, and 
statutory repayment obligations of System institutions.
    (c) Description of legal proceedings and enforcement actions. (1) 
Describe any material pending legal proceedings in which one or more 
System institutions are a party, or that involve claims that a System 
institution(s) may be required by contract or operation of law to 
satisfy, and the potential impact of such proceedings, to the extent 
known, on the System.
    (2) Provide a summary of the types of enforcement actions in effect 
during the year, and any material impact of such proceedings on the 
System.
    (d) Description of liabilities. (1) Describe how the System funds 
its lending operations, including:
    (i) System banks' authority to borrow, and issue notes, bonds, 
debentures, and other obligations, and limitations thereof under section 
4.2 of the Act;
    (ii) A description of the types of debt obligations authorized to be 
issued under the Act, the types of debt obligations currently issued, 
the manner and form in which they are issued, rights of securities 
holders, risk factors, use of proceeds, tax effects of holding 
securities, market information, and other pertinent information;
    (iii) For each of the types of obligations that may be issued, 
whether it is insured, and the extent of any joint and several liability 
for the obligations; and

[[Page 273]]

    (iv) Any applicable statutory and regulatory requirements affecting 
a bank's ability to incur debt.
    (2) Describe agreements among System banks and the Funding 
Corporation affecting a bank's ability to incur debt.
    (3) Describe agreements among System institutions regarding capital 
preservation, loss sharing, or any other forms of financial assistance.
    (e) Description of capital. (1) Describe the capitalization of the 
System, including capital structure, types of stock and participation 
certificates, and voting rights of holders of stock and participation 
certificates.
    (2) Describe the statutory requirement that a borrower purchase 
stock as a condition of obtaining a loan; how such stock is purchased, 
transferred, and retired; and how earnings are distributed.
    (3) Describe any statutory or other authority of a System 
institution to require additional capital contributions from 
stockholders.
    (4) Describe regulatory minimum permanent capital standards and 
capital adequacy requirements for banks and associations. State the 
number of institutions, if any, categorized by banks and associations, 
that are not currently in compliance with such standards and include a 
brief discussion of the reasons for the noncompliance.
    (5) Describe any statutory and regulatory restrictions on retirement 
of stock and distribution of earnings by System institutions. State the 
number of System institutions, if any, categorized by banks and 
associations, that are currently affected by such restrictions and 
provide a summary of the causes of such prohibitions.
    (f) Selected financial data. At a minimum, furnish the following 
combined financial data of the System in comparative columnar form for 
each of the last 5 fiscal years.
    (1) Balance sheet.
    (i) Loans.
    (ii) Allowance for losses.
    (iii) Net loans.
    (iv) Cash and investments.
    (v) Other property owned.
    (vi) Total assets.
    (vii) FCS debt obligations and other bonds, notes, debentures, and 
obligations, presented by type, with a descriptive title.
    (viii) Total liabilities.
    (ix) Capital stock and surplus.
    (2) Statement of income.
    (i) Net interest income.
    (ii) Net other expenses.
    (iii) Provision for loan losses.
    (iv) Extraordinary items.
    (v) Provision for income taxes.
    (vi) Net income (loss).
    (3) Key financial ratios. (i) Return on average assets.
    (ii) Return on average capital stock and surplus.
    (iii) Net interest income as a percentage of average earning assets.
    (iv) Net loan chargeoffs as a percentage of average loans.
    (v) Allowance for loan losses as a percentage of gross loans 
outstanding at yearend.
    (vi) Capital stock and surplus as a percentage of total assets at 
yearend.
    (vii) Debt to capital stock and surplus at yearend.
    (g) Discussion and analysis. Fully discuss any material aspects of 
financial condition, changes in financial condition, and results of 
operations of System institutions, on a combined basis, for the 
comparative years required by paragraph (g)(6)(ii) of this section or 
such other time periods specified in the following paragraphs of this 
section. Identify favorable and unfavorable trends, and significant 
events or uncertainties necessary to understand the financial condition 
and results of operations of the System. At a minimum, the discussion 
shall include the following:
    (1) Loan portfolio--(i) Categorization. Describe the loan portfolio 
of the System by major loan purpose category, indicating the amount and 
approximate percentage of the total dollar portfolio represented by each 
major category.
    (ii) Risk exposure. (A) Describe and analyze all high-risk assets, 
including an analysis of the nature and extent of significant current 
and potential credit risks within the loan portfolio and of other 
information that could adversely affect the loan portfolio and other 
property owned.

[[Page 274]]

    (B) Provide an analysis of the allowance for loan losses that 
includes the ratios of the allowance for loan losses to loans 
(outstanding at yearend) and net chargeoffs to average loans, and a 
discussion of the adequacy of the allowance for loan losses to absorb 
the risk inherent in the loan portfolio and the basis for such 
determination.
    (iii) Secondary market activities. (A) If material, quantify System 
institutions' secondary market activities and the risk involved in such 
activities.
    (B) If material, provide an analysis of historical loss experience 
and the amount provided for risk of loss associated with secondary 
market activities.
    (2) Results of operations. (i) Describe, on a comparative basis, 
changes in the major components of net interest income. Include a 
discussion of significant factors that contributed to the changes and 
quantify the amount of change(s) due to an increase or decrease in 
volume and the amount due to changes in interest rates earned and paid, 
based on averages for each period.
    (ii) Describe any unusual or infrequent events or transactions, or 
any significant economic changes that materially affected reported 
income and, in each case, indicate the extent to which income was so 
affected.
    (iii) Discuss the factors underlying any material changes in the 
return on average assets and return on average capital stock and 
surplus.
    (iv) Describe, on a comparative basis, the major components of 
operating expense and any other significant components of income or 
expense, indicating the reasons for any significant increases or 
decreases.
    (v) Describe any known trends or uncertainties that have had, or 
that are reasonably expected to have, a material impact on net interest 
income or net income. Disclose any known events that will cause a 
material change in the relationship between costs and revenues.
    (vi) Explain the changes that have taken place, by major components 
on a comparative basis, in Insurance Fund assets and related restricted 
capital and how such changes affected reported income.
    (3) Funding sources and liquidity--(i) Funding sources. (A) Provide, 
in tabular form, the component amounts and the total amount of FCS debt 
obligations, debt obligations issued by banks individually, and 
Financial Assistance Corporation debt obligations outstanding at yearend 
for each of the past 2 fiscal years. List debt obligations issued by 
System institutions separately by type, also separating insured 
obligations from uninsured obligations. For each type of debt obligation 
listed, provide the following, at a minimum, for each fiscal year 
listed:
    (1) The beginning balance, the total amount of debt issued, the 
total amount of debt retired, and the yearend balance; and
    (2) The average maturities and average interest rates on debt 
outstanding at yearend, and the average maturities and average interest 
rates of new debt issued during the year.
    (B) Summarize any other sources of funds, including lines of credit 
with commercial lenders, and their terms.
    (ii) Liquidity. (A) Include a brief overview of any FCA regulations 
or System policies with regard to liquidity and liquidity reserves.
    (B) Identify any known trends, demands, commitments, events, or 
uncertainties that will result in, or that are reasonably likely to 
result in, System liquidity increasing or decreasing in any material 
way. If a material liquidity deficiency is identified, indicate the 
course of action that has been taken or is proposed to be taken by 
management of affected System institutions to remedy the deficiency.
    (iii) Investment. Provide a brief overview of the System's 
investment policies and objectives, any regulatory limitations thereon, 
and the contents of the System's existing investment portfolio.
    (iv) Interest rate sensitivity. (A) Provide a brief overview of the 
System's asset and liability management practices, including interest 
rate risk measurement systems, and methods used to control interest rate 
risk, such as the use of investments, derivatives, and other off-
balance-sheet transactions.
    (B) Provide an analysis of the System's exposure to interest rate 
risk and its ability to control such risk.

[[Page 275]]

    (4) Capital resources. (i) Describe any material commitments to 
purchase capital assets and the anticipated sources of funding.
    (ii) Describe any material trends, favorable or unfavorable, in the 
System's capital resources, including any material changes in the mix of 
capital and debt, the relative cost of capital resources, and any off-
balance- sheet financing arrangements.
    (iii) Provide a general discussion of any trends, commitments, 
contingencies, or events that are reasonably likely to have a material 
adverse effect on System institutions' ability to comply with regulatory 
capital standards.
    (5) Insurance Fund. (i) Describe the purposes for which expenditures 
from the Insurance Fund may be made and the statutory requirements for 
making such expenditures.
    (ii) Provide a schedule itemizing the amount of Insurance Fund 
assets that have been specifically identified by the FCSIC for payment 
of estimated obligations of the FCSIC and the amount of Insurance Fund 
assets for which no specific use has been identified or designated by 
the FCSIC. Information provided shall be as of the end of the most 
recent fiscal year.
    (iii) Explain how FCSIC expenditures or designations of Insurance 
Fund assets for payment of future obligations affect the combined assets 
and capital of the System, and quantify the effect, if any.
    (6) Instructions for discussion and analysis. (i) The purpose of the 
discussion and analysis (D&A) shall be to provide to investors and other 
users information relevant to an assessment of the combined financial 
condition and results of operations of System institutions as determined 
by evaluating the amounts and certainty of cashflows from operations and 
from outside sources. The information provided pursuant to this section 
need only include that which is available to System institutions and 
which does not clearly appear in the combined financial statements.
    (ii) The D&A of the financial statements and other statistical data 
shall be presented in a manner designed to enhance a reader's 
understanding of the combined financial condition, results of 
operations, cashflows, and changes in capital of System institutions. 
Unless otherwise specified in Sec. 630.20(g), the discussion shall cover 
the period covered by the financial statements and shall use year-to-
year comparisons or any other understandable format. Where trend 
information is relevant, reference to the 5-year selected financial data 
required by paragraph (f) of this section may be necessary.
    (iii) The D&A shall focus specifically on material events and 
uncertainties known at the time of reporting that would cause reported 
financial information not to be necessarily indicative of future 
operating results or of future financial condition. This should include 
descriptions and amounts of:
    (A) Matters that would have an impact on future operations but that 
have not had an impact in the past; and
    (B) Matters that have had an impact on reported operations but are 
not expected to have an impact on future operations.
    (h) Directors and management--(1) Board of directors. Briefly 
describe the composition of boards of directors of the disclosure 
entities. List the name of each director of such entities, including the 
director's term of office and principal occupation during the past 5 
years, or state that such information is available upon request pursuant 
to Sec. 630.3(f).
    (2) Management. List the names of chief executive officers and 
presidents of disclosure entities, including position title, length of 
service at current position, and positions held during the past 5 years.
    (i) Compensation of directors and senior officers. State that 
information on the compensation of directors and senior officers of 
System banks is contained in each bank's annual report to shareholders 
and that the annual report of each bank is available to investors upon 
request pursuant to Sec. 630.3(f).
    (j) Related party transactions. (1) Briefly describe how System 
institutions, in the ordinary course of business and subject to 
regulation by the FCA, may enter into loan transactions with related 
parties, including their directors, officers, and employees, the 
immediate family members (as defined

[[Page 276]]

in Sec. 620.1(e) of this chapter) of such persons, and any organizations 
with which such persons and their immediate family members are 
affiliated.
    (2) On a comparative basis for each of the fiscal years covered by 
the balance sheet, state the aggregate amount of the following:
    (i) Loans made to related parties;
    (ii) Loans outstanding at yearend to related parties;
    (iii) Loans outstanding at yearend to related parties that are made 
on more favorable terms than those prevailing at the time for comparable 
transactions with unrelated borrowers; and
    (iv) Loans outstanding at yearend to related parties that involve 
more than a normal risk of collectibility (as defined in Sec. 620.1(i) 
of this chapter).
    (k) Relationship with independent public accountant. If a change in 
the accountant who has previously examined and expressed an opinion on 
the Systemwide combined financial statements has taken place since the 
last annual report to investors or if a disagreement with an accountant 
has occurred that the Funding Corporation would be required to report to 
the FCA under part 621 of this chapter, disclose the information 
required by Sec. 621.4(c) and (d) of this chapter.
    (l) Financial statements. Furnish Systemwide combined financial 
statements and related footnotes prepared in accordance with GAAP, and 
accompanied by supplemental information prepared in accordance with the 
requirements of Sec. 630.20(m). The Systemwide combined financial 
statements shall provide investors and potential investors in FCS debt 
obligations with the most meaningful presentation pertaining to the 
financial condition and results of operations of the System. The 
Systemwide combined financial statement and accompanying supplemental 
information shall be audited in accordance with generally accepted 
auditing standards by a qualified public accountant (as defined in 
Sec. 621.2(i) of this chapter). The Systemwide combined financial 
statements shall include the following:
    (1) A balance sheet as of the end of each of the 2 most recent 
fiscal years; and
    (2) Statements of income, statements of changes in capital stock and 
surplus (or, if applicable, statements of changes in protected borrower 
capital and capital stock and surplus), and statements of cash flows for 
each of the 3 most recent fiscal years.
    (m) Supplemental information. Furnish supplemental information 
regarding the components of the Systemwide combined financial statements 
that has been prepared in accordance with the requirements of this 
paragraph and any additional guidance or instructions provided by the 
FCA.
    (1) At a minimum, the supplemental information shall include the 
following:
    (i) Supplemental balance sheet information as of the end of the most 
recent fiscal year; and
    (ii) Supplemental income statement information for the most recently 
completed fiscal year.
    (2) At a minimum, the report shall present supplemental information 
showing combined financial data for the following components on a stand-
alone basis:
    (i) Banks;
    (ii) Associations;
    (iii) Financial Assistance Corporation;
    (iv) Combined financial data of the System without the Insurance 
Fund;
    (v) The Insurance Fund and related combination entries; and
    (vi) Combined financial data of the System with the Insurance Fund.
    (3) The supplemental information shall be presented in a columnar 
format and include, at a minimum, the selected financial data listed in 
the schedules in appendix A of this part. The prescribed components 
shall be designated as column headings and they may be abbreviated in 
the schedules. The financial data required by Sec. 630.20(m)(2)(i) shall 
include the financial data required to be submitted by each bank 
pursuant to the requirement of Sec. 630.4(c)(1)(i).
    (4) The supplemental information may be presented separately or in 
accompanying notes to the Systemwide combined financial statements and 
shall contain additional disclosures sufficient to explain the basis of 
the

[[Page 277]]

presentation of the supplemental information, the components, and any 
adjustments contained therein to enable readers to understand the effect 
of each component on the Systemwide combined financial statements.
    (n) List the names of the System Audit Committee members in the 
report to investors.
    (o) Include a detailed index setting forth the major disclosure 
captions of this subpart and the page or pages on which the required 
information appears in the report.

[59 FR 46742, Sept. 12, 1994, as amended at 63 FR 36549, July 7, 1998]



                Subpart C--Quarterly Reports to Investors



Sec. 630.40  Contents of the quarterly report to investors.

    (a) General. The quarterly report to investors shall contain the 
information specified in this section along with any other material 
information necessary to make the required disclosures, in light of the 
circumstances under which they are made, not misleading. The quarterly 
report must be presented in a format that is easily understandable and 
not misleading.
    (b) Rules for condensation. For purposes of this subpart, major 
captions to be provided in interim financial statements are the same as 
those provided in the financial statements contained in the annual 
report to investors, except that the financial statements included in 
the quarterly report may be condensed into major captions in accordance 
with the rules prescribed under this paragraph.
    (1) Interim balance sheets. When any major balance sheet caption is 
less than 10 percent of total assets and the amount in the caption has 
not increased or decreased by more than 25 percent since the end of the 
preceding fiscal year, the caption may be combined with others.
    (2) Interim statements of income. When any major income statement 
caption is less than 15 percent of average net income for the 3 most 
recent fiscal years and the amount in the caption has not increased or 
decreased by more than 20 percent since the corresponding interim period 
of the preceding fiscal year, the caption may be combined with others. 
In calculating average net income, loss years should be excluded. If 
losses were incurred in each of the 3 most recent fiscal years, the 
average loss shall be used for purposes of this test.
    (3) The interim financial information shall include disclosure 
either on the face of the financial statements or in accompanying 
footnotes sufficient to make the interim information presented not 
misleading. It may be presumed that users of the interim financial 
information have read or have access to the audited financial statements 
for the preceding fiscal year, and the adequacy of additional disclosure 
needed for a fair presentation may be determined in that context. 
Accordingly, footnote disclosure that would substantially duplicate the 
disclosure contained in the most recent audited financial statements 
(such as a statement of significant accounting policies and practices) 
and details of accounts that have not changed significantly in amount or 
composition since the end of the most recently completed fiscal year may 
be omitted.
    (4) Interim reports shall disclose events that have occurred 
subsequent to the end of the most recently completed fiscal year that 
have a material impact on the System. Disclosures should encompass, for 
example, significant changes since the end of the most recently 
completed fiscal year in such items as accounting principles and 
practices, estimates used in the preparation of financial statements, 
status of long-term contracts, capitalization, significant new 
indebtedness or modification of existing financing agreements, financial 
assistance received, significant business combinations and liquidations 
of System institutions, and terminations of System institution status. 
Notwithstanding the provisions of this paragraph, where material 
contingencies exist, disclosure of such matters shall be provided even 
though a significant change since yearend may not have occurred.
    (5) In addition to meeting the reporting requirements specified by 
existing accounting pronouncements for accounting changes, state the 
date of any

[[Page 278]]

material accounting change and the reasons for making it.
    (6) Any material prior period adjustment made during any period 
covered by the interim financial statements shall be disclosed, together 
with its effect upon net income and upon the balance of surplus for any 
prior period included. If results of operations for any period presented 
have been adjusted retroactively by such an item subsequent to the 
initial reporting of such period, similar disclosure of the effect of 
the change shall be made.
    (7) Interim financial statements furnished shall reflect all 
adjustments that are necessary to a fair statement of the results for 
the interim periods presented. A statement to that effect shall be 
included. Furnish any material information necessary to make the 
information called for not misleading, such as a statement that the 
results for interim periods are not necessarily indicative of results to 
be expected for the year.
    (8) If any amount that would otherwise be required to be shown by 
this section with respect to any item is not material, it need not be 
separately shown. The combination of insignificant items is permitted.
    (c) Discussion and analysis of interim financial condition and 
results of operations. Discuss any material changes to the information 
disclosed to investors pursuant to Sec. 630.20(g) that have occurred 
during the periods specified in paragraphs (d)(1) and (d)(2) of this 
section. Provide any additional information needed to enable the reader 
to assess material changes in financial condition and results of 
operations between the periods specified in paragraphs (d)(1) and (d)(2) 
of this section.
    (1) Material changes in financial condition. Discuss any material 
changes in financial condition from the end of the preceding fiscal year 
to the date of the most recent interim balance sheet provided.
    (2) Material changes in results of operations. Discuss any material 
changes in the combined results of operations of the System with respect 
to the most recent fiscal year-to-date period for which an income 
statement is provided and the corresponding year-to-date period of the 
preceding fiscal year. Such discussion shall also cover material changes 
with respect to the most recent fiscal quarter and the corresponding 
fiscal quarter in the preceding fiscal year.
    (d) Financial statements. Interim combined financial statements 
shall be provided in the quarterly report to investors as set forth in 
paragraphs (d)(1) through (4):
    (1) An interim balance sheet as of the end of the most recent fiscal 
quarter and a balance sheet as of the end of the preceding fiscal year.
    (2) Interim statements of income for the most recent fiscal quarter, 
for the period between the end of the preceding fiscal year and the end 
of the most recent fiscal quarter, and for the comparable periods for 
the previous fiscal year.
    (3) Interim statements of changes in capital stock and surplus (or, 
if applicable, interim statements of changes in protected borrower 
capital and capital stock and surplus) for the period between the end of 
the preceding fiscal year and the end of the most recent fiscal quarter, 
and for the comparable period for the preceding fiscal year.
    (4) Interim statements of cash flows for the period between the end 
of the preceding fiscal year and the end of the most recent fiscal 
quarter, and for the comparable period for the preceding fiscal year.
    (e) Supplemental information. The interim report shall present 
supplemental information in accordance with the requirements of 
Sec. 630.20 (m)(2), (m)(3), and (m)(4), as well as other requirements 
and instructions of the FCA, and shall include, at a minimum, the 
following:
    (1) Supplemental balance sheet information as of the end of the most 
recent quarter; and
    (2) Supplemental income statement information for the period between 
the end of the preceding fiscal year and the end of the most recent 
fiscal quarter.
    (f) Review by independent public accountant. Unless otherwise 
ordered by the FCA as a result of a supervisory action, the interim 
financial statements and supplemental information need not be audited or 
reviewed by an independent public accountant prior to filing. If, 
however, a review of the report

[[Page 279]]

is made in accordance with the established professional standards and 
procedures for such a review, a statement that the independent 
accountant has performed such a review may be included. If such a 
statement is made, the report of the independent accountant on such 
review shall accompany the interim financial information.

 Appendix A to Part 630--Supplemental Information Disclosure Guidelines

    Supplemental information required by Secs. 630.20(m) and 630.40(e) 
shall contain, at a minimum, the current year financial data for the 
components listed in the following tables and be presented in the 
columnar format illustrated in the following tables:

[[Page 280]]

[GRAPHIC] [TIFF OMITTED] TR12SE94.000


[[Page 281]]





PART 650--FEDERAL AGRICULTURAL MORTGAGE CORPORATION--Table of Contents




                    Subpart A--Conflicts of Interest

Sec.
650.1  Definitions.
650.2  Conflict-of-interest policy.
650.3  Implementation of policy.
650.4  Director, officer, employee, and agent responsibilities.

Subpart B [Reserved]

                   Subpart C--Receiver and Conservator

650.50  Grounds for appointment of a receiver or conservator.
650.51  Action for removal of receiver or conservator.
650.52  Voluntary liquidation.
650.55  Appointment of a receiver.
650.56  Powers and duties of the receiver.
650.57  Report to Congress.
650.58  Preservation of equity.
650.59  Notice to stockholders.
650.60  Creditor claims.
650.61  Priority of claims.
650.62  Payment of claims.
650.63  Inventory, audit, and reports.
650.64  Final discharge and release of the receiver.
650.65  Appointment of a conservator.
650.66  Powers and duties of the conservator.
650.67  Inventory, examination, and reports to stockholders.
650.68  Final discharge and release of the conservator.

    Authority: Secs. 4.12, 5.9, 5.17, 8.11, 8.37, 8.41 of the Farm 
Credit Act (12 U.S.C. 2183, 2243, 2252, 2279aa-11, 2279bb-6,2279cc); 
sec. 514 of Pub. L. 102-552, 106 Stat. 4102; sec. 118 of Pub. L. 104-
105, 110 Stat. 168.

    Source: 59 FR 9626, Mar. 1, 1994, unless otherwise noted.



                    Subpart A--Conflicts of Interest



Sec. 650.1  Definitions.

    (a) Agent means any person (other than a director, officer, or 
employee of the Corporation) who represents the Corporation in contacts 
with third parties or who provides professional services such as legal, 
accounting, or appraisal services to the Corporation.
    (b) Affiliate means any entity established under authority granted 
to the Corporation under section 8.3(b)(13) of the Farm Credit Act of 
1971, as amended.
    (c) Corporation means the Federal Agricultural Mortgage Corporation 
and its affiliates.
    (d) Employee means any salaried individual working part-time, full-
time, or temporarily for the Corporation.
    (e) Entity means a corporation, company, association, firm, joint 
venture, partnership (general or limited), society, joint stock company, 
trust (business or otherwise), fund, or other organization or 
institution.
    (f) Material, when applied to a potential conflict of interest, 
means the conflicting interest is of sufficient magnitude or 
significance that a reasonable observer with knowledge of the relevant 
facts would question the ability of the person having such interest to 
discharge official duties in an objective and impartial manner in 
furtherance of the interests and statutory purposes of the Corporation.
    (g) Officer means the salaried president, vice presidents, 
secretary, treasurer, and general counsel, or other person, however 
designated, who holds a position of similar authority in the 
Corporation.
    (h) Person means individual or entity.
    (i) Potential conflict of interest means a director, officer, or 
employee of the Corporation has an interest in a transaction, 
relationship, or activity that might adversely affect, or appear to 
adversely affect, the ability of the director, officer, or employee to 
perform his official duties on behalf of the Corporation in an objective 
and impartial manner in furtherance of the interest of the Corporation 
and its statutory purposes. For the purpose of determining whether a 
potential conflict of interest exists, the following interests shall be 
imputed to a person subject to this regulation as if they were that 
person's own interests:
    (1) Interests of that person's spouse;
    (2) Interests of that person's minor child;
    (3) Interests of that person's general partner;
    (4) Interests of an organization or entity that the person serves as 
officer, director, trustee, general partner or employee; and
    (5) Interests of a person, organization, or entity with which that 
person

[[Page 282]]

is negotiating for or has an arrangement concerning prospective 
employment.
    (j) Resolved, when applied to a potential conflict of interest that 
the Corporation has determined is material, means that circumstances 
have been altered so that a reasonable observer with knowledge of the 
relevant facts would conclude that the conflicting interest would not 
adversely affect the person's performance of official duties in an 
objective and impartial manner in furtherance of the interests and 
statutory purposes of the Corporation.



Sec. 650.2  Conflict-of-interest policy.

    The Corporation shall establish and administer a conflict-of-
interest policy that will provide reasonable assurance that the 
directors, officers, employees, and agents of the Corporation discharge 
their official responsibilities in an objective and impartial manner in 
furtherance of the interests and statutory purposes of the Corporation. 
The policy shall, at a minimum:
    (a) Define the types of transactions, relationships, or activities 
that could reasonably be expected to give rise to potential conflicts of 
interest.
    (b) Require each director, officer, and employee to report in 
writing, annually, and at such other times as conflicts may arise, 
sufficient information about financial interests, transactions, 
relationships, and activities to inform the Corporation of potential 
conflicts of interest;
    (c) Require each director, officer, and employee who had no 
transaction, relationship, or activity required to be reported under 
paragraph (b) of this section at any time during the year to file a 
signed statement to that effect;
    (d) Establish guidelines for determining when a potential conflict 
is material in accordance with this subpart;
    (e) Establish procedures for resolving or disclosing material 
conflicts of interest.
    (f) Provide internal controls to ensure that reports are filed as 
required and that conflicts are resolved or disclosed in accordance with 
this subpart.
    (g) Notify directors, officers, and employees of the conflict-of-
interest policy and any subsequent changes thereto and allow them a 
reasonable period of time to conform to the policy.



Sec. 650.3  Implementation of policy.

    (a) The Corporation shall disclose any unresolved material conflicts 
of interest involving its directors, officers, and employees to:
    (1) Shareholders through annual reports and proxy statements; and
    (2) Investors and potential investors through disclosure documents 
supplied to them.
    (b) The Corporation shall make available to any shareholder, 
investor, or potential investor, upon request, a copy of its policy on 
conflicts of interest. The Corporation may charge a nominal fee to cover 
the costs of reproduction and handling.
    (c) The Corporation shall maintain all reports of all potential 
conflicts of interest and documentation of materiality determinations 
and resolutions of conflicts of interest for a period of 6 years.



Sec. 650.4  Director, officer, employee, and agent responsibilities.

    (a) Each director, officer, employee, and agent of the Corporation 
shall:
    (1) Conduct the business of the Corporation following high standards 
of honesty, integrity, impartiality, loyalty, and care, consistent with 
applicable law and regulation in furtherance of the Corporation's public 
purpose;
    (2) Adhere to the requirements of the conflict-of-interest policy 
established by the Corporation and provide any information the 
Corporation deems necessary to discharge its responsibilities under this 
subpart.
    (b) Directors, officers, employees, and agents of the Corporation 
shall be subject to the penalties of part C of title V of the Farm 
Credit Act of 1971, as amended, for violations of this regulation, 
including failure to adhere to the conflict-of-interest policy 
established by the Corporation.

Subpart B [Reserved]

[[Page 283]]



                   Subpart C--Receiver and Conservator

    Source: 62 FR 43636, Aug. 15, 1997, unless otherwise noted.



Sec. 650.50  Grounds for appointment of a receiver or conservator.

    (a) The grounds for the appointment of a receiver or conservator for 
the Corporation are:
    (1) The Corporation is insolvent. For purposes of this paragraph, 
insolvent means:
    (i) The assets of the Corporation are less than its obligations to 
its creditors and others; or
    (ii) The Corporation is unable to pay its debts as they fall due in 
the ordinary course of business;
    (2) There has been a substantial dissipation of the assets or 
earnings of the Corporation due to the violation of any law, rule, or 
regulation, or the conduct of an unsafe or unsound practice;
    (3) The Corporation is in an unsafe or unsound condition to transact 
business;
    (4) The Corporation has committed a willful violation of a final 
cease-and-desist order issued by the Farm Credit Administration Board;
    (5) The Corporation is concealing its books, papers, records, or 
assets, or is refusing to submit its books, papers, records, assets, or 
other material relating to the affairs of the Corporation for inspection 
to any examiner or any lawful agent of the Farm Credit Administration 
Board.
    (b) In addition to the grounds set forth in paragraph (a) of this 
section, a receiver can be appointed for the Corporation if the Farm 
Credit Administration Board determines that the appointment of a 
conservator would not be appropriate when one of the following 
conditions exists:
    (1) The authority of the Corporation to purchase qualified loans or 
issue or guarantee loan-backed securities is suspended; or
    (2) The Corporation is classified under section 8.35 of the Act as 
within enforcement level III or IV and the alternative actions available 
under subtitle B of title VIII of the Act are not satisfactory.
    (c) In addition to the grounds set forth in paragraph (a) of this 
section, a conservator can be appointed for the Corporation if:
    (1) The Corporation is classified under section 8.35 of the Act as 
within enforcement level III or IV; or
    (2) The authority of the Corporation to purchase qualified loans or 
issue or guarantee loan-backed securities is suspended.



Sec. 650.51  Action for removal of receiver or conservator.

    Upon the appointment of a receiver or conservator for the 
Corporation by the Farm Credit Administration Board pursuant to 
Sec. 650.50 of this subpart, the Corporation may, within 30 days of such 
appointment, bring an action in the United States District Court for the 
District of Columbia, for an order requiring the Farm Credit 
Administration Board to remove the receiver or conservator and, if the 
charter has been canceled, to rescind the cancellation of the charter. 
Notwithstanding any other provision of this part, the Corporation's 
board of directors is empowered to meet subsequent to such appointment 
and authorize the filing of an action for removal. An action for removal 
may be authorized only by the Corporation's board of directors.



Sec. 650.52  Voluntary liquidation.

    (a) The Corporation may voluntarily liquidate by a resolution of its 
board of directors, but only with the consent of, and in accordance with 
a plan of liquidation approved by, the Farm Credit Administration Board. 
Upon adoption of such resolution, the Corporation shall submit the 
resolution and proposed voluntary liquidation plan to the Farm Credit 
Administration Board for preliminary approval. The Farm Credit 
Administration Board, in its discretion, may appoint a receiver as part 
of an approved liquidation plan. If a receiver is appointed for the 
Corporation as part of a voluntary liquidation, the receivership shall 
be conducted pursuant to the regulations of this part, except to the 
extent that an approved plan of liquidation provides otherwise.
    (b) If the Farm Credit Administration Board gives preliminary 
approval

[[Page 284]]

to the liquidation plan, the board of directors of the Corporation shall 
submit the resolution to liquidate to the stockholders for a vote in 
accordance with the bylaws of the Corporation.
    (c) The Farm Credit Administration Board will consider final 
approval of the resolution to voluntarily liquidate and the liquidation 
plan after an affirmative stockholder vote on the resolution.



Sec. 650.55  Appointment of a receiver.

    (a) The Farm Credit Administration Board may in its discretion 
appoint, ex parte and without prior notice, a receiver for the 
Corporation provided that one or more of the grounds for appointment as 
set forth in Sec. 650.50 of this subpart exist.
    (b) Upon the appointment of the receiver, the Chairman of the Farm 
Credit Administration Board shall immediately notify the Corporation and 
shall publish a notice of the appointment in the Federal Register.
    (c) Upon the issuance of the order placing the Corporation into 
liquidation and appointing the receiver, all rights, privileges, and 
powers of the board of directors, officers, and employees of the 
Corporation shall be vested exclusively in the receiver. The Farm Credit 
Administration Board may cancel the charter of the Corporation on such 
date as the Farm Credit Administration Board determines is appropriate, 
but not later than the conclusion of the receivership and discharge of 
the receiver.



Sec. 650.56  Powers and duties of the receiver.

    (a) General. (1) Upon appointment as receiver, the receiver shall 
take possession of the Corporation in order to wind up the business 
operations of the Corporation, collect the debts owed to the 
Corporation, liquidate its property and assets, pay its creditors, and 
distribute the remaining proceeds to stockholders. The receiver is 
authorized to exercise all powers necessary to the efficient termination 
of the Corporation's operation as provided for in this part.
    (2) Upon its appointment as receiver, the receiver automatically 
succeeds to:
    (i) All rights, titles, powers, and privileges of the Corporation 
and of any stockholder, officer, or director of the Corporation with 
respect to the Corporation and the assets of the Corporation; and
    (ii) Title to the books, records, and assets of the Corporation in 
the possession of any other legal custodian of the Corporation.
    (3) The receiver of the Corporation serves as the trustee of the 
receivership estate and conducts its operations for the benefit of the 
creditors and stockholders of the Corporation.
    (b) Specific powers. The receiver may:
    (1) Exercise all powers as are conferred upon the officers and 
directors of the Corporation under law and the charter, articles, and 
bylaws of the Corporation.
    (2) Take any action the receiver considers appropriate or expedient 
to carry on the business of the Corporation during the process of 
liquidating its assets and winding up its affairs.
    (3) Borrow funds in accordance with section 8.41(f) of the Act to 
meet the ongoing administrative expenses or other liquidity needs of the 
receivership.
    (4) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect the Corporation's assets or property or 
rehabilitate or improve such property and assets.
    (5) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect any asset or property on which the 
Corporation has a lien or in which the Corporation has a financial or 
property interest, and pay off and discharge any liens, claims, or 
charges of any nature against such property.
    (6) Investigate any matter related to the conduct of the business of 
the Corporation, including, but not limited to, any claim of the 
Corporation against any individual or entity, and institute appropriate 
legal or other proceedings to prosecute such claims.
    (7) Institute, prosecute, maintain, defend, intervene, and otherwise 
participate in any legal proceeding by or against the Corporation or in 
which the Corporation or its creditors or stockholders have any 
interest, and

[[Page 285]]

represent in every way the Corporation, its stockholders and creditors.
    (8) Employ attorneys, accountants, appraisers, and other 
professionals to give advice and assistance to the receivership 
generally or on particular matters, and pay their retainers, 
compensation, and expenses, including litigation costs.
    (9) Hire any agents or employees necessary for proper administration 
of the receivership.
    (10) Execute, acknowledge, and deliver, in person or through a 
general or specific delegation, any instrument necessary for any 
authorized purpose, and any instrument executed under this paragraph 
shall be valid and effective as if it had been executed by the 
Corporation's officers by authority of its board of directors.
    (11) Sell for cash or otherwise any mortgage, deed of trust, chose 
in action, note, contract, judgment or decree, stock, or debt owed to 
the Corporation, or any property (real or personal, tangible or 
intangible).
    (12) Purchase or lease office space, automobiles, furniture, 
equipment, and supplies, and purchase insurance, professional, and 
technical services necessary for the conduct of the receivership.
    (13) Release any assets or property of any nature, regardless of 
whether the subject of pending litigation, and repudiate, with cause, 
any lease or executory contract the receiver considers burdensome.
    (14) Settle, release, or obtain release of, for cash or other 
consideration, claims and demands against or in favor of the Corporation 
or receiver.
    (15) Pay, out of the assets of the Corporation, all expenses of the 
receivership (including compensation to personnel employed to represent 
or assist the receiver) and all costs of carrying out or exercising the 
rights, powers, privileges, and duties as receiver.
    (16) Pay, out of the assets of the Corporation, all approved claims 
of indebtedness in accordance with the priorities established in this 
part.
    (17) Take all actions and have such rights, powers, and privileges 
as are necessary and incident to the exercise of any specific power.
    (18) Take such actions, and have such additional rights, powers, 
privileges, immunities, and duties as the Farm Credit Administration 
Board authorizes by order or by amendment of any order or by regulation.



Sec. 650.57  Report to Congress.

    On a determination by the receiver that there are insufficient 
assets of the receivership to pay all valid claims against the 
receivership, the receiver shall submit to the Secretary of the Treasury 
and Congress a report on the financial condition of the receivership.



Sec. 650.58  Preservation of equity.

    (a) Except as provided for upon final distribution of the assets of 
the Corporation pursuant to Sec. 650.62 of this subpart, no capital 
stock, equity reserves, or other allocated equities of the Corporation 
in receivership shall be issued, allocated, retired, sold, distributed, 
transferred, or assigned.
    (b) Immediately upon the adoption of a resolution by its board of 
directors to voluntarily liquidate the Corporation, the capital stock, 
equity reserves, and allocated equities of the Corporation shall not be 
issued, allocated, retired, sold, distributed, transferred, or assigned. 
Such activities could resume if the stockholders of the Corporation or 
the Farm Credit Administration Board disapprove the resolution. In the 
event the resolution is approved by the stockholders of the Corporation 
and the Farm Credit Administration Board, the liquidation plan shall 
govern disposition of the equities of the Corporation as provided in 
Sec. 650.52 of this subpart.



Sec. 650.59  Notice to stockholders.

    As soon as practicable after a receiver takes possession of the 
Corporation, the receiver shall notify, by first class mail, each holder 
of stock of the following matters:
    (a) The number of shares such holder owns;
    (b) That the stock and other equities of the Corporation may not be 
retired or transferred until the liquidation is completed, whereupon the 
receiver will distribute a liquidating dividend, if any, to the 
stockholders; and

[[Page 286]]

    (c) Such other matters as the receiver or the Farm Credit 
Administration Board deems necessary.



Sec. 650.60  Creditor claims.

    (a) Upon appointment, the receiver shall promptly publish a notice 
to creditors to present their claims against the Corporation, with proof 
thereof, to the receiver by a date specified in the notice, which shall 
be not less than 90 calendar days after the first publication. The 
notice shall be republished approximately 30 days and 60 days after the 
first publication. The receiver shall promptly send, by first class 
mail, a similar notice to any creditor shown on the Corporation's books 
at the creditor's last address appearing thereon. Claims filed after the 
specified date shall be disallowed except as the receiver may approve 
them for full or partial payment from the Corporation's assets remaining 
undistributed at the time of approval.
    (b) The receiver shall allow any claim that is timely received and 
proved to the receiver's satisfaction. The receiver may disallow in 
whole or in part any creditor's claim or claim of security, preference, 
or priority that is not proved to the receiver's satisfaction or is not 
timely received and shall notify the claimant of the disallowance and 
reason therefor. Sending the notice of disallowance by first class mail 
to the claimant's address appearing on the proof of claim shall be 
sufficient notice. The disallowance shall be final unless, within 30 
days after the notice of disallowance is mailed, the claimant files a 
written request for payment regardless of the disallowance. The receiver 
shall reconsider any claim upon the timely request of the claimant and 
may approve or disapprove such claim in whole or in part.
    (c) Creditors' claims that are allowed shall be paid by the receiver 
from time to time, to the extent funds are available therefor and in 
accordance with the priorities established in this part and in such 
manner and amounts as the receiver deems appropriate. In the event the 
Corporation has a claim against a creditor of the Corporation, the 
receiver shall offset the amount of such claim against the claim 
asserted by such creditor.



Sec. 650.61  Priority of claims.

    The following priority of claims shall apply to the distribution of 
the assets of the Corporation in liquidation:
    (a) All costs, expenses, and debts incurred by the receiver in 
connection with the administration of the receivership, all Farm Credit 
Administration assessments for the costs of supervising and examining 
the Corporation, and any amounts borrowed pursuant to Sec. 650.56(b)(3).
    (b) Administrative expenses of the Corporation, provided that such 
expenses were incurred within 60 days prior to the receiver's taking 
possession, and that such expenses shall be limited to reasonable 
expenses incurred for services actually provided by accountants, 
attorneys, appraisers, examiners, or management companies, or reasonable 
expenses incurred by employees that were authorized and reimbursable 
under a preexisting expense reimbursement policy and that, in the 
opinion of the receiver, are of benefit to the receivership, and shall 
not include wages or salaries of employees of the Corporation.
    (c) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver 
by an employee of the Corporation whom the receiver determines it is in 
the best interest of the receivership to engage or retain for a 
reasonable period of time.
    (d) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver, 
up to a maximum of three thousand dollars ($3,000) per person as 
adjusted for inflation, by an employee of the Corporation not engaged or 
retained by the receiver. The adjustment for inflation shall be the 
percentage by which the Consumer Price Index (as prepared by the 
Department of Labor) for the calendar year preceding the appointment of 
the receiver exceeds the Consumer Price Index for the calendar year 
1992.
    (e) All claims for taxes.
    (f) All claims of creditors which are secured by specific assets of 
the Corporation, with priority of conflicting claims of creditors within 
this same class to be determined in accordance

[[Page 287]]

with priorities of applicable Federal or State law.
    (g) All claims of general creditors.



Sec. 650.62  Payment of claims.

    (a) All claims of each class described in Sec. 650.61 of this 
subpart shall be paid in full or provisions shall be made for such 
payment prior to the payment of any claim of a lesser priority. If there 
are insufficient funds to pay all claims in a class in full, 
distribution to that class will be on a pro rata basis.
    (b) Following the payment of all claims, the receiver shall 
distribute the remainder of the assets of the Corporation, if any, to 
the owners of stock and other equities in accordance with the priorities 
for impairment set forth in section 8.4(e)(3) of the Act and the bylaws 
of the Corporation.



Sec. 650.63  Inventory, audit, and reports.

    (a) As soon as practicable after taking possession of the 
Corporation, the receiver shall take an inventory of the assets and 
liabilities as of the date possession was taken.
    (b) The receivership shall be audited on an annual basis by a 
certified public accountant selected by the receiver.
    (c) The receiver shall make an annual accounting or report, as 
appropriate, available for review upon request to any stockholder of the 
Corporation or any member of the public, with a copy provided to the 
Farm Credit Administration.
    (d) As soon as practicable after final distribution, the receiver 
shall send to each stockholder of record a report summarizing the 
disposition of the assets of the receivership and claims against the 
receivership.



Sec. 650.64  Final discharge and release of the receiver.

    After the receiver has made a final distribution of the assets of 
the receivership, the receivership shall be terminated, the charter 
shall be canceled by the Farm Credit Administration Board if such 
cancellation has not previously occurred, and the receiver shall be 
finally discharged and released.



Sec. 650.65  Appointment of a conservator.

    (a) The Farm Credit Administration Board may in its discretion 
appoint, ex parte and without prior notice, a conservator for the 
Corporation provided that one or more of the grounds for appointment as 
set forth in Sec. 650.50 of this subpart exist;
    (b) Upon the appointment of a conservator, the Chairman of the Farm 
Credit Administration shall immediately notify the Corporation and shall 
publish a notice of the appointment in the Federal Register.
    (c) As soon as practicable after the conservator takes possession of 
the Corporation, the conservator shall notify, by first class mail, each 
holder of stock in the Corporation of the establishment of the 
conservatorship and shall describe the effect of the conservatorship on 
the Corporation's operations and equity holdings.
    (d) Upon the issuance of the order placing the Corporation in 
conservatorship, all rights, privileges, and powers of the board of 
directors, officers, and employees of the Corporation are vested 
exclusively in the conservator.
    (e) The Farm Credit Administration Board may, at any time, terminate 
the conservatorship and direct the conservator to turn over the 
Corporation's operations to such management as the Farm Credit 
Administration Board may designate, in which event the provisions of 
this subpart shall no longer apply.



Sec. 650.66  Powers and duties of the conservator.

    (a) The conservator shall direct the Corporation's further operation 
until the Farm Credit Administration Board decides that the Corporation 
can operate without the conservatorship or places the Corporation into 
receivership. Upon correction or resolution of the problem or condition 
that provided the basis for the appointment, the Farm Credit 
Administration Board may turn the Corporation over to such management as 
the Farm Credit Administration Board may direct.
    (b) The conservator shall exercise all powers necessary to continue 
the ongoing operations of the Corporation, to conserve and preserve the 
Corporation's assets and property, and otherwise protect the interests 
of the Corporation, its stockholders, and creditors as provided in this 
subpart.

[[Page 288]]

    (c) The conservator serves as the trustee of the Corporation and 
conducts its operations for the benefit of the creditors and 
stockholders of the Corporation.
    (d) The conservator may exercise the powers that a receiver of the 
Corporation may exercise under any of the provisions of Sec. 650.56(b) 
of this subpart, except paragraphs (b)(2) and (b)(16). In interpreting 
the applicable paragraphs for purposes of this section, the terms 
``conservator'' and ``conservatorship'' shall be read for ``receiver'' 
and ``receivership''.
    (e) The conservator may also take any other action the conservator 
considers appropriate or expedient to the continuing operation of the 
Corporation.



Sec. 650.67  Inventory, examination, and reports to stockholders.

    (a) As soon as practicable after taking possession of the 
Corporation, the conservator shall take an inventory of the assets and 
liabilities of the Corporation as of the date possession was taken. One 
copy of the inventory shall be filed with the Farm Credit 
Administration.
    (b) The conservatorship shall be examined by the Farm Credit 
Administration in accordance with section 8.11 of the Act.
    (c) The conservatorship shall prepare and file financial reports and 
other documents in accordance with the requirements of Sec. 620.40 and 
part 621 of this chapter. The conservator of the Corporation shall 
provide the certification required in Sec. 621.14 of this chapter.



Sec. 650.68  Final discharge and release of the conservator.

    At such time as the conservator shall be relieved of its 
conservatorship duties, the conservator shall file a report on the 
conservator's activities with the Farm Credit Administration. The 
conservator shall thereupon be completely and finally released.

[[Page 289]]



            CHAPTER VII--NATIONAL CREDIT UNION ADMINISTRATION




  --------------------------------------------------------------------


  Editorial Note: For Federal Register citations to interpretations and 
policy statements to Chapter VII, see the List of CFR Sections Affected 
which appears in the Finding Aids section of the printed volume and on 
GPO Access.

            SUBCHAPTER A--REGULATIONS AFFECTING CREDIT UNIONS

Part                                                                Page
700             Definitions.................................         291
701             Organization and operation of Federal credit 
                    unions..................................         292
702             Reserves....................................         317
703             Investment and deposit activities...........         343
704             Corporate credit unions.....................         352
705             Community Development Revolving Loan Program 
                    for Credit Unions.......................         371
706             Credit practices............................         374
707             Truth in savings............................         376
708a            Conversion of insured credit unions to 
                    mutual savings banks....................         427
708b            Mergers of federally-insured credit unions; 
                    voluntary termination or conversion of 
                    insured status..........................         429
709             Involuntary liquidation of Federal credit 
                    unions and adjudication of creditor 
                    claims involving federally insured 
                    credit unions in liquidation............         437
710             Voluntary liquidation.......................         446
711             Management official interlocks..............         448
712             Credit union service organizations (CUSOs)..         452
713             Fidelity bond and insurance coverage for 
                    Federal credit unions...................         456
714             Leasing.....................................         458
715             Supervisory Committee audits and 
                    verifications...........................         460
716             Privacy of Consumer Financial Information...         467
721             Federal credit union insurance and group 
                    purchasing activities...................         484
722             Appraisals..................................         485
723             Member business loans.......................         489

[[Page 290]]

724             Trustees and custodians of pension plans....         495
725             National Credit Union Administration Central 
                    Liquidity Facility......................         496
740             Advertising.................................         503
741             Requirements for insurance..................         505
745             Share insurance and appendix................         514
747             Administrative actions, adjudicative 
                    hearings, rules of practice and 
                    procedure, and investigations...........         531
748             Suspicious activity report; report of 
                    Catastrophic Act and Bank Secrecy Act 
                    compliance..............................         574
749             Records Preservation Program................         576
760             Loans in areas having special flood hazards.         576
   SUBCHAPTER B--REGULATIONS AFFECTING THE OPERATIONS OF THE NATIONAL 
                       CREDIT UNION ADMINISTRATION
790             Description of NCUA; requests for agency 
                    action..................................         581
791             Rules of NCUA Board procedure; promulgation 
                    of NCUA rules and regulations; public 
                    observation of NCUA Board meetings......         585
792             Requests for information under the Freedom 
                    of Information Act and Privacy Act, and 
                    by subpoena; security procedures for 
                    classified information..................         592
793             Tort claims against the Government..........         616
794             Enforcement of nondiscrimination on the 
                    basis of handicap in programs or 
                    activities conducted by the National 
                    Credit Union Administration.............         619
795             OMB control numbers assigned pursuant to the 
                    Paperwork Reduction Act.................         625

[[Page 291]]





            SUBCHAPTER A--REGULATIONS AFFECTING CREDIT UNIONS



PART 700--DEFINITIONS--Table of Contents




    Authority: 12 U.S.C. 1752, 1757(6), 1766.



Sec. 700.1  Definitions.

    As used in this chapter:
    (a) Act means the Federal Credit Union Act (73 Stat. 628, 84 Stat. 
944, 12 U.S.C. 1751 through 1790).
    (b) Administration means the National Credit Union Administration.
    (c) Board means the Board of the National Credit Union 
Administration.
    (d) Credit Union means a credit union chartered under the Federal 
Credit Union Act or, as the context permits, under the laws of any 
State.
    (e) Regional Director means the representative of the Administration 
in the designated geographical area in which the office of the Federal 
credit union is located.
    (f) Regional Office means the office of the Administration located 
in the designated geographical areas in which the office of the Federal 
credit union is located.
    (g) State means a State of the United States, the District of 
Columbia, any of the several Territories and possessions of the United 
States, the Panama Canal Zone, and the Commonwealth of Puerto Rico.
    (h) Remaining maturity is the time period from the date of the 
required reserve transfer to the stated date of maturity of the 
instrument.
    (i)(1) Insolvency. A credit union will be determined to be insolvent 
when the total amount of its shares exceeds the present cash value of 
its assets after providing for liabilities unless:
    (i) It is determined by the Board that the facts that caused the 
deficient share-asset ratio no longer exist; and
    (ii) The likelihood of further depreciation of the share-asset ratio 
is not probable; and
    (iii) The return of the share-asset ratio to its normal limits 
within a reasonable time for the credit union concerned is probable; and
    (iv) The probability of a further potential loss to the insurance 
fund is negligible.
    (2) For purposes of this section, the following definitions are 
used:
    (i) Cash value of assets. Recorded value will be considered the cash 
value of any asset account providing accepted accounting principles and 
practices are followed and the provisions of law, regulation, and bylaws 
are met.
    (ii) Liabilities. Recorded liabilities which are due and payable, 
excluding shares of members and non-members, are considered liabilities.
    (j) For purposes of determining the amount required to be 
transferred to regular reserves under sections 116 and 201(b)(6) of the 
Federal Credit Union Act, gross income means the total of the operating 
income accounts reduced by the following.
    (1) Dividends received on shares in the National Credit Union 
Administration Central Liquidity Facility;
    (2) Dividends received by credit unions on special share accounts 
held in Agent members of the Central Liquidity Facility authorized by 
Sec. 725.7 of this chapter; and
    (3) Interest received by an Agent member of the Central Liquidity 
Facility to the extent of interest paid to the Facility by the Agent 
member. In the case of an Agent member of the Central Liquidity Facility 
that is a group of central credit unions--
    (i) Interest received by the Agent group representative, as defined 
in Sec. 725.1(b) of this chapter, to the extent of interest paid to the 
Facility by the Agent group representative; and
    (ii) Interest received by each central credit union in the Agent 
group (other than the Agent group representative) to the extent of 
interest paid by each such central credit union to the Agent group 
representative on Agent group representative loans, as defined in 
Sec. 725.1(b) of this chapter. Non-operating gains and losses are not 
included in gross income.

[36 FR 23794, Dec. 15, 1971; 37 FR 329, Jan. 11, 1972, as amended at 37 
FR 10342, May 20, 1972; 45 FR 47121, July 14, 1980; 54 FR 48234, Nov. 
22, 1989; 54 FR 52015, Dec. 20, 1989; 55 FR 1794, Jan. 19, 1990; 57 FR 
47985, Oct. 21, 1992; 58 FR 40042, July 27, 1993; 65 FR 44966, July 20, 
2000]

[[Page 292]]



PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS--Table of Contents




Sec.
701.1  Federal credit union chartering, field of membership 
          modifications, and conversions.
701.2-701.5  [Reserved]
701.6  Fees paid by Federal credit unions.
701.7-701.13  [Reserved]
701.14  Change in official or senior executive officer in credit unions 
          that are newly chartered or are in troubled condition.
701.15-701.18  [Reserved]
701.19  Retirement benefits for employees of Federal credit unions.
701.20  [Reserved]
701.21  Loans to members and lines of credit to members.
701.22  Loan participation.
701.23  Purchase, sale, and pledge of eligible obligations.
701.24  Refund of interest.
701.25  Charitable contributions and donations.
701.26  Credit union service contracts.
701.27-701.30  [Reserved]
701.31  Nondiscrimination requirements.
701.32  Payment on shares by public units and nonmembers.
701.33  Reimbursement, insurance, and indemnification of officials and 
          employees.
701.34  Designation of low-income status; receipt of secondary capital 
          accounts by low-income designated credit unions.
701.35  Share, share draft, and share certificate accounts.
701.36  FCU ownership of fixed assets.
701.37  Treasury tax and loan depositaries; depositaries and financial 
          agents of the Government.
701.38  Borrowed funds from natural persons.
701.39  Statutory lien.

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 1761b, 
1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also authorized by 
15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 et 
seq.; 42 U.S.C. 1981 and 3601-3610. Section 701.35 is also authorized by 
42 U.S.C. 4311-4312.



Sec. 701.1  Federal credit union chartering, field of membership modifications, and conversions.

    National Credit Union Administration policies concerning chartering, 
field of membership modifications, and conversions are set forth in 
Interpretive Ruling and Policy Statement 99-1, Chartering and Field of 
Membership Policy (IRPS 99-1), as amended by IRPS 00-1. Copies may be 
obtained by contacting NCUA at the address found in Sec. 790.2(b) of 
this chapter. The combined IRPS are incorporated into this section.

(Approved by the Office of Management and Budget under control number 
3133-0015.)

[65 FR 64521, Oct. 27, 2000]



Secs. 701.2-701.5  [Reserved]



Sec. 701.6  Fees paid by Federal credit unions.

    (a) Basis for assessment. Each calendar year or as otherwise 
directed by the Board, each Federal credit union shall pay to the 
Administration for the current National Credit Union Administration 
fiscal year (January 1 to December 31) an operating fee in accordance 
with a schedule as fixed from time to time by the National Credit Union 
Administration Board based on the total assets of each Federal credit 
union as of December 31 of the preceding year or as otherwise determined 
pursuant to paragraph (b) of this section.
    (b) Coverage. The operating fee shall be paid by each Federal credit 
union engaged in operations as of January 1 of each calendar year, 
except as otherwise provided by this paragraph.
    (1) New charters. A newly chartered Federal credit union will not 
pay an operating fee until the year following the first full calendar 
year after the date chartered.
    (2) Conversions. A state chartered credit union that converts to 
Federal charter will pay an operating fee in the year following the 
conversion. Federal credit unions converting to state charter will not 
receive a refund of the operating fee paid to the Administration in the 
year in which the conversion takes place.
    (3) Mergers. A continuing Federal credit union that has merged with 
another credit union will pay an operating fee in the following year 
based on the combined total assets of the merged credit union and the 
continuing Federal credit union as of December 31 of the year in which 
the merger took place. For purposes of this requirement, a purchase and 
assumption transaction wherein the continuing Federal credit union 
purchases all or essentially all of the assets of another credit union 
shall be deemed a

[[Page 293]]

merger. Federal credit unions merging with other Federal or state credit 
unions will not receive a refund of the operating fee paid to the 
Administration in the year in which the merger took place.
    (4) Liquidations. A Federal credit union placed in liquidation will 
not pay any operating fee after the date of liquidation.
    (c) Notification. Each Federal credit union shall be notified at 
least 30 days in advance of the schedule of fees to be paid. A Federal 
credit union may submit written comments to the Board for consideration 
regarding the existing fee schedule. Any subsequent revision to the 
schedule shall be provided to each Federal credit union at least 15 days 
before payment is due.
    (d) Assessment of Administrative Fee and Interest for Delinquent 
Payment. Each Federal credit union shall pay to the Administration an 
administrative fee, the costs of collection, and interest on any 
delinquent payment of its operating fee. A payment will be considered 
delinquent if it is postmarked later than the date stated in the notice 
to the credit union provided under Sec. 701.6(c). The National Credit 
Union Administration may waive or abate charges or collection of 
interest if circumstances warrant.
    (1) The administrative fee for a delinquent payment shall be an 
amount fixed from time to time by the National Credit Union 
Administration Board and based upon the administrative costs of such 
delinquent payments to the Administration in the preceding year.
    (2) The costs of collection shall be the actual hours expended by 
Administration personnel multiplied by the average hourly salary and 
benefits costs of such personnel as determined by the National Credit 
Union Administration Board.
    (3) The interest rate charged on any delinquent payment shall be the 
U.S. Department of the Treasury Tax and Loan Rate in effect on the date 
when the payment is due as provided in 31 U.S.C. 3717.
    (4) If a credit union makes a combined payment of its operating fee 
and its share insurance deposit as provided in Sec. 741.4 of this 
chapter and such payment is delinquent, only one administrative fee will 
be charged and interest will be charged on the total combined payment.

[44 FR 27380, May 10, 1979, as amended at 50 FR 20745, May 20, 1985; 55 
FR 1799, Jan. 19, 1990; 59 FR 33421, June 29, 1994; 60 FR 58503, Nov. 
28, 1995]



Secs. 701.7-701.13  [Reserved]



Sec. 701.14  Change in official or senior executive officer in credit unions that are newly chartered or are in troubled condition.

    (a) Statement of scope and purpose. Section 212 of the Federal 
Credit Union Act (12 U.S.C. 1790a) sets forth conditions under which a 
credit union must notify NCUA in writing of any proposed changes in its 
board of directors, committee members or senior executive staff. The 
regulation only applies in cases of newly chartered credit unions and 
credit unions in troubled condition.
    (b) Definitions. For the purposes of this section:
    (1) Committee member means any individual who serves as an official 
of the credit union in the capacity of a credit committee member or 
supervisory committee member.
    (2) Senior executive officer means a credit union's chief executive 
officer (typically this individual holds the title of president or 
treasurer/manager), any assistant chief executive officer (e.g., any 
assistant president, any vice president or any assistant treasurer/
manager) and the chief financial officer (controller). The term ``senior 
executive officer'' also includes employees of an entity, such as a 
consulting firm, hired to perform the functions of positions covered by 
the regulation.
    (3) Except as provided in paragraph (b)(4) of this section for 
corporate credit unions, ``troubled condition'' means any insured credit 
union that has one or a combination of the following conditions:
    (i) Has been assigned
    (A) A 4 or 5 Camel composite rating by the NCUA in the case of a 
federal credit union, or
    (B) An equivalent 4 or 5 Camel composite rating by the state 
supervisor in

[[Page 294]]

the case of a federally insured, state-chartered credit union, or
    (C) A 4 or 5 Camel composite rating by NCUA based on core workpapers 
received from the state supervisor in the case of a federally insured, 
state-chartered credit union in a state that does ot use the Camel 
system. In this case, the state supervisor will be notified in writing 
by the Regional Director in the Region in which the credit union is 
located that the credit union has been designated by NCUA as a troubled 
institution;
    (ii) Has been granted assistance as outlined under section 116 or 
208 of the Federal Credit Union Act.
    (4) In the case of a corporate credit union, ``troubled condition'' 
means any insured corporate credit union that has one or a combination 
of the following conditions:
    (i) Has been assigned
    (A) A 4 or 5 Corporate Risk Information System (CRIS) rating by NCUA 
in either the Financial Risk or Risk Management composites, in the case 
of a federal corporate credit union, or
    (B) An equivalent 4 or 5 CRIS rating in either the Financial Risk or 
Risk Management composites by the state supervisor in the case of a 
federally insured, state-chartered corporate credit union in a state 
that has adopted the CRIS system, or an equivalent 4 or 5 CAMEL 
composite rating by the state supervisor in the case of a federally 
insured, state-chartered corporate credit union in a state that uses the 
CAMEL system, or
    (C) A 4 or 5 CRIS rating in either the Financial Risk or Risk 
Management composites by NCUA based on core workpapers received from the 
state supervisor in the case of a federally insured, state-chartered 
credit union in a state that does not use either the CRIS or CAMEL 
system. In this case, the state supervisor will be notified in writing 
by the Director of the Office of Corporate Credit Unions that the 
corporate credit union has been designated by NCUA as a troubled 
institution;
    (ii) Has been granted assistance as outlined under Sections 116 or 
208 of the Federal Credit Union Act.
    (c) Prior notice requirement. An insured credit union shall give 
NCUA written notice at least 30 days prior to the effective date of any 
addition or replacement of a member of the board of directors or 
committee member or the employment or change in responsibilities of any 
individual to a position as a senior executive officer if:
    (1) The credit union has been chartered for less than 2 years; or
    (2) The credit union meets the definition of troubled condition as 
set forth in paragraph 701.14(b)(3) or (4).
    (d) Procedures for notice of proposed change in official or senior 
executive officer. (1) Filing and acceptance. Notices shall be filed 
with the appropriate Regional Director. In the case of a corporate 
credit union, notice shall be filed with the Director of the Office of 
Corporate Credit Unions. Additional references herein to Regional 
Director will, for corporate credit unions, mean the Director of the 
Office of Corporate Credit Unions. State-chartered federally insured 
credit unions shall also file a copy of the notice with their state 
supervisor. The notice shall contain information pertaining to the 
competence, experience, character, or integrity of the individual with 
respect to whom the notice is submitted, subject to the authority of the 
Regional Director or his or her designee to require additional 
information. The information submitted must include the identity, 
personal history, business background, and experience of the individual, 
including material business activities and affiliations during the past 
5 years, and a description of any material pending legal or 
administrative proceedings in which the individual is a party and any 
criminal indictment or conviction of such person by a state or Federal 
court. Each individual on whose behalf the notice is filed must attest 
to the validity of the information filed. At the option of the 
individual, the information may be forwarded to the Regional Director by 
the individual; however, in such cases, the credit union must file a 
notice to that effect. Within ten calendar days after receiving the 
notice, the Regional Director will inform the credit union either that 
the notice is complete or that additional specified information is 
needed and must be submitted within 30 calendar days. If the initial 
notice is

[[Page 295]]

complete, the Regional Director will issue a written decision of 
approval or disapproval to the individual and the credit union within 30 
calendar days of receipt of the notice. If the initial notice is not 
complete, the Regional Director will issue a written decision within 30 
calendar days of receipt of the original notice plus the amount of time 
taken by the credit union to provide the requested additional 
information. If the additional information is not submitted within 30 
calendar days of the Regional Director's request, the Regional Director 
may either disapprove the proposed individual or review the notice based 
on the information provided. If the credit union and the individual have 
submitted all requested information and the Regional Director has not 
issued a written decision within the applicable time period, the 
individual is approved.
    (2) Waiver of prior notice requirement. Parties may petition the 
appropriate Regional Director for a waiver of the prior notice required 
under this section. Waiver may be granted if it is found that delay 
could harm the credit union or the public interest. Any waiver shall not 
affect the authority of NCUA to issue a Notice of Disapproval within 30 
days of the waiver, or within 30 days of any subsequent required notice.
    (3) Election of directors or credit committee members. (i) In the 
case of the election of a new member of the board of directors or credit 
committee member at a meeting of the members of a federally insured 
credit union, prior notice is not required. However, a completed notice 
must be filed with the appropriate Regional Director within 48 hours of 
the election.
    (ii) If a director or credit committee member is disapproved by 
NCUA, the board of directors of the credit union may appoint its own 
alternate, to serve until the next annual meeting, contingent upon NCUA 
approval.
    (e) Commencement of service. A proposed director, committee member 
or senior executive officer may begin to serve temporarily until the 
credit union and the individual are notified in writing of NCUA's 
approval or disapproval of the proposed addition or employment.
    (f) Notice of disapproval. NCUA may disapprove the individual's 
serving as a director, committee member or senior executive officer if 
it finds that the competence, experience, character, or integrity of the 
individual with respect to whom a notice under this section is submitted 
indicates that it would not be in the best interests of the members of 
the credit union or of the public to permit the individual to be 
employed by, or associated with, the credit union. The Notice of 
Disapproval will advise the parties of their rights of appeal pursuant 
to 12 CFR part 747 subpart J, of NCUA's Regulations.

[55 FR 43086, Oct. 26, 1990, as amended at 59 FR 36042, July 15, 1994; 
60 FR 31911, June 19, 1995; 64 FR 28717, May 27, 1999]



Secs. 701.15-701.18  [Reserved]



Sec. 701.19  Retirement benefits for employees of Federal credit unions.

    (a) A Federal credit union may make provision for reasonable 
retirement benefits for its employees and for officers who are 
compensated in conformance with the Act and the bylaws, either 
individually or collectively with other credit unions. In those cases 
where a Federal credit union is to be a plan trustee or custodian, the 
plan must be authorized and maintained in accordance with the provisions 
of part 724 of this chapter. Where the trustee or custodian is to a 
party other than the Federal credit union, the employee benefit plan 
must be maintained in accordance with the applicable laws governing 
employee benefit plans and such rules and regulations as may be 
promulgated by the Secretary of Labor, the Secretary of the Treasury, or 
any other Federal or state authority exercising jurisdiction over such 
plans.
    (b) No Federal credit union shall occupy the position of a 
fiduciary, as defined in the Employee Retirement Income Security Act of 
1974 and rules and regulations promulgated thereunder by the Secretary 
of Labor, unless provision has been made for appropriate liability 
insurance as provided under section 410(b) of the Employee Retirement 
Income Security Act of 1974.

[40 FR 25582, June 17, 1975, as amended at 48 FR 55423, Dec. 13, 1983; 
63 FR 14026, Mar. 24, 1998]

[[Page 296]]



Sec. 701.20  [Reserved]



Sec. 701.21  Loans to members and lines of credit to members.

    (a) Statement of scope and purpose. Section 701.21 complements the 
provisions of section 107(5) of the Federal Credit Union Act (12 U.S.C. 
1757(5)) authorizing Federal credit unions to make loans to members and 
issue lines of credit (including credit cards) to members. Section 
107(5) of the Act contains limitations on matters such as loan maturity, 
rate of interest, security, and prepayment penalties. Section 701.21 
interprets and implements those provisions. In addition, Sec. 701.21 
states the NCUA Board's intent concerning preemption of state laws, and 
expands the authority of Federal credit unions to enforce due-on-sale 
clauses in real property loans. Also, while Sec. 701.21 generally 
applies to Federal credit unions only, its provisions may be used by 
state-chartered credit unions with respect to alternative mortgage 
transactions in accordance with 12 U.S.C. 3801 et seq., and certain 
provisions apply to loans made by federally insured state-chartered 
credit unions as specified in Sec. 741.203 of this chapter. Part 722 of 
this chapter sets forth requirements for appraisals for certain real 
estate secured loans made under Sec. 701.21 and any other applicable 
lending authority. Finally, it is noted that Sec. 701.21 does not apply 
to loans by Federal credit unions to other credit unions (although 
certain statutory limitations in section 107 of the Act apply), nor to 
loans to credit union organizations which are governed by section 
107(5)(D) of the Act and part 712 of this part.
    (b) Relation to other laws--(1) Preemption of state laws. Section 
701.21 is promulgated pursuant to the NCUA's Board's exclusive authority 
as set forth in section 107(5) of the Federal Credit Union Act (12 U.S.C 
1757(5)) to regulate the rates, terms of repayment and other conditions 
of Federal credit union loans and lines of credit (including credit 
cards) to members. This exercise of the Board's authority preempts any 
state law purporting to limit or affect:
    (i)(A) Rates of interest and amounts of finance charges, including:
    (1) The frequency or the increments by which a variable interest 
rate may be changed;
    (2) The index to which a variable interest rate may be tied;
    (3) The manner or timing of notifying the borrower of a change in 
interest rate;
    (4) The authority to increase the interest rate on an existing 
balance;
    (B) Late charges; and
    (C) Closing costs, application, origination, or other fees;
    (ii) Terms of repayment, including:
    (A) The maturity of loans and lines of credit;
    (B) The amount, uniformity, and frequency of payments, including the 
accrual of unpaid interest if payments are insufficient to pay all 
interest due;
    (C) Balloon payments; and
    (D) Prepayment limits;
    (iii) Conditions related to:
    (A) The amount of the loan or line of credit;
    (B) The purpose of the loan or line of credit;
    (C) The type or amount of security and the relation of the value of 
the security to the amount of the loan or line of credit;
    (D) Eligible borrowers; and
    (E) The imposition and enforcement of liens on the shares of 
borrowers and accommodation parties.
    (2) Matters not preempted. Except as provided by paragraph (b)(1) of 
this section, it is not the Board's intent to preempt state laws that do 
not affect rates, terms of repayment and other conditions described 
above concerning loans and lines of credit, for example:
    (i) Insurance laws;
    (ii) Laws related to transfer of and security interests in real and 
personal property (see, however, paragraph (g)(6) of this section 
concerning the use and exercise of due-on-sale clauses);
    (iii) Conditions related to:
    (A) Collection costs and attorneys' fees;
    (B) Requirements that consumer lending documents be in ``plain 
language;'' and
    (C) The circumstances in which a borrower may be declared in default 
and may cure default.

[[Page 297]]

    (3) Other Federal law. Except as provided by paragraph (b)(1) of 
this section, it is not the Board's intent to preempt state laws 
affecting aspects of credit transactions that are primarily regulated by 
Federal law other than the Federal Credit Union Act, for example, state 
laws concering credit cost disclosure requirements, credit 
discrimination, credit reporting practices, unfair credit practices, and 
debt collection practices. Applicability of state law in these instances 
should be determined pursuant to the preemption standards of the 
relevant Federal law and regulations.
    (4) Examination and enforcement. Except as otherwise agreed by the 
NCUA Board, the Board retains exclusive examination and administrative 
enforcement jurisdiction over Federal credit unions. Violations of 
Federal or applicable state laws related to the lending activities of a 
Federal credit union should be referred to the appropriate NCUA regional 
office.
    (5) Definition of State law. For purposes of paragraph (b) of this 
section ``state law'' means the constitution, laws, regulations and 
judicial decisions of any state, the District of Columbia, the several 
territories and possessions of the United States, and the Commonwealth 
of Puerto Rico.
    (c) General rules--(1) Scope. The following general rules apply to 
all loans to members and, where indicated, all lines of credit 
(including credit cards) to members, except as otherwise provided in the 
remaining provisions of Sec. 701.21.
    (2) Written policies. The board of directors of each Federal credit 
union shall establish written policies for loans and lines of credit 
consistent with the relevant provisions of the Act, NCUA's regulations, 
and other applicable laws and regulations.
    (3) Credit applications and overdrafts. Consistent with policies 
established by the board of directors, the credit committee or loan 
officer shall ensure that a credit application is kept on file for each 
borrower supporting the decision to make a loan or establish a line of 
credit. A credit union may advance money to a member to cover an account 
deficit without having a credit application from the borrower on file if 
the credit union has a written overdraft policy. The policy must: set a 
cap on the total dollar amount of all overdrafts the credit union will 
honor consistent with the credit union's ability to absorb losses; 
establish a time limit not to exceed forty-five calendar days for a 
member either to deposit funds or obtain an approved loan from the 
credit union to cover each overdraft; limit the dollar amount of 
overdrafts the credit union will honor per member; and establish the fee 
and interest rate, if any, the credit union will charge members for 
honoring overdrafts.
    (4) Maturity. The maturity of a loan to a member may not exceed 12 
years. Lines of credit are not subject to a statutory or regulatory 
maturity limit. Amortization of line of credit balances and the type and 
amount of security on any line of credit shall be as determined by 
contract between the Federal credit union and the member/borrower.
    (5) Ten percent limit. No loan or line of credit advance may be made 
to any member if such loan or advance would cause that member to be 
indebted to the Federal credit union upon loans and advances made to the 
member in an aggregate amount exceeding 10% of the credit union's total 
unimpaired capital and surplus. In the case of member business loans as 
defined in Sec. 723.1 of this chapter, additional limitations apply as 
set forth in Sec. 723.8 and 723.9 of this chapter.
    (6) Early payment. A member may repay a loan, or outstanding balance 
on a line of credit, prior to maturity in whole or in part on any 
business day without penalty.
    (7) Loan interest rates--(i) General. Except when a higher maximum 
rate is provided for in paragraph (c)(7)(ii) of this section, a Federal 
credit union may extend credit to its members at rates not to exceed 15 
percent per year on the unpaid balance inclusive of all finance charges. 
Variable rates are permitted on the condition that the effective rate 
over the term of the loan (or line of credit) does not exceed the 
maximum permissible rate.
    (ii) Temporary rates--(A) 21 percent maximum rate. Effective from 
December 3, 1980 through May 14, 1987, a Federal credit union may extend 
credit to its

[[Page 298]]

members at rates not to exceed 21 percent per year on the unpaid balance 
inclusive of all finance charges. Loans and line of credit balances 
existing on or before May 14, 1987, may continue to bear rates of 
interest of up to 21 percent per year after May 14, 1987.
    (B) 18 percent maximum rate. Effective May 15, 1987, a Federal 
credit union may extend credit to its members at rates not to exceed 18 
percent per year on the unpaid balance inclusive of all finance charges.
    (C) Expiration. After March 8, 2002, or as otherwise ordered by the 
NCUA Board, the maximum rate on federal credit union extensions of 
credit to members shall revert to 15 percent per year. Higher rates may, 
however, be charged, in accordance with paragraph (c)(7)(ii)(A) and (B) 
of this section, on loans and line of credit balance existing on or 
before May 16, 1987.
    (8)(i) Except as otherwise provided herein, no official or employee 
of a Federal credit union, or immediate family member of an official or 
employee of a Federal credit union, may receive, directly or indirectly, 
any commission, fee, or other compensation in connection with any loan 
made by the credit union.
    (ii) For the purposes of this section:
    Compensation includes non monetary items, except those of nominal 
value.
    Immediate family member means a spouse or other family member living 
in the same household.
    Loan includes line of credit.
    Official means any member of the board of directors or a volunteer 
committee.
    Person means an individual or an organization.
    Senior management employee means the credit union's chief executive 
officer (typically, this individual holds the title of President or 
Treasurer/Manager), any assistant chief executive officers (e.g., 
Assistant President, Vice President, or Assistant Treasurer/Manager), 
and the chief financial officer (Comptroller).
    Volunteer official means an official of a credit union who does not 
receive compensation from the credit union solely for his or her service 
as an official.
    (iii) This section does not prohibit:
    (A) Payment, by a Federal credit union, of salary to employees;
    (B) Payment, by a Federal credit union, of an incentive or bonus to 
an employee based on the credit union's overall financial performance;
    (C) Payment, by a Federal credit union, of an incentive or bonus to 
an employee, other than a senior management employee, in connection with 
a loan or loans made by the credit union, provided that the board of 
directors of the credit union establishes written policies and internal 
controls in connection with such incentive or bonus and monitors 
compliance with such policies and controls at least annually.
    (D) Receipt of compensation from a person outside a Federal credit 
union by a volunteer official or non senior management employee of the 
credit union, or an immediate family member of a volunteer official or 
employee of the credit union, for a service or activity performed 
outside the credit union, provided that no referral has been made by the 
credit union or the official, employee, or family member.
    (d) Loans and lines of credit to officials--(1) Purpose. Sections 
107(5)(A) (iv) and (v) of the Act require the approval of the board of 
directors of the Federal credit union in any case where the aggregate of 
loans to an official and loans on which the official serves as endorser 
or guarantor exceeds $20,000 plus pledged shares. This paragraph 
implements the requirement by establishing procedures for determining 
whether board of directors's approval is required. The section also 
prohibits preferential treatment of officials.
    (2) Official. An ``official'' is any member of the board of 
directors, credit committee or supervisory committee.
    (3) Initial approval. All applications for loans or lines of credit 
on which an official will be either a direct obligor or an endorser, 
cosigner or guarantor shall be initially acted upon by either the board 
of directors, the credit committee or a loan officer, as specified in 
the Federal credit union's bylaws.

[[Page 299]]

    (4) Board of Directors' review. The board of directors shall, in any 
case, review and approve or deny an application on which an official is 
a direct obligor, or endorser, cosigner or guarantor if the following 
computation produces a total in excess of $20,000:
    (i) Add:
    (A) The amount of the current application.
    (B) The outstanding balances of loans, including the used portion of 
an approved line of credit, extended to or endorsed, cosigned or 
guaranteed by the official.
    (C) The total unused portion of approved lines of credit extended to 
or endorsed, cosigned or guaranteed by the official.
    (ii) From the above total subtract:
    (A) The amount of shares pledged by the official on loans or lines 
of credit extended to or endorsed, cosigned or guaranteed by the 
official.
    (B) The amount of shares to be pledged by the official on the loan 
or line of credit applied for.
    (5) Nonpreferential treatment. The rates, terms and conditions on 
any loan or line of credit either made to, or endorsed or guaranteed 
by--
    (i) An official,
    (ii) An immediate family member of an official, or
    (iii) Any individual having a common ownership, investment or other 
pecuniary interest in a business enterprise with an official or with an 
immediate family member of an official,

shall not be more favorable than the rates, terms and conditions for 
comparable loans or lines of credit to other credit union members. 
``Immediate family member'' means a spouse or other family member living 
in the same household.
    (e) Insured, guaranteed and advance commitment loans. A loan secured 
by the insurance or guarantee of, or with an advance commitment to 
purchase the loan by, the Federal Government, a State government, or any 
agency of either, may be made for the maturity and under the terms and 
conditions, including rate of interest, specified in the law, 
regulations or program under which the insurance, guarantee or 
commitment is provided.
    (f) 20-year loans. Notwithstanding the general 12-year maturity 
limit on loans to members, a Federal credit union may make loans with 
maturities of up to 20 years in the case of:
    (1) A loan to finance the purchase of a mobile home if the mobile 
home will be used as the member-borrower's residence and the loan is 
secured by a first lien on the mobile home,
    (2) A second mortgage loan (or a nonpurchase money first mortgage 
loan in the case of a residence on which there is no existing first 
mortgage) if the loan is secured by a residential dwelling which is the 
residence of the member-borrower, and
    (3) A loan to finance the repair, alteration, or improvement of a 
residential dwelling which is the residence of the member-borrower.
    (g) Long-term mortgage loans--(1) Authority. A Federal credit union 
may make residential real estate loans to members, with maturities of up 
to 40 years, or such longer period as may be permitted by the NCUA Board 
on a case-by-case basis, subject to the conditions of this paragraph.
    (2) Statutory limits. The loan shall be made on a one to four family 
dwelling that is or will be the principal residence of the member-
borrower and the loan shall be secured by a perfected first lien in 
favor of the credit union on such dwelling (or a perfected first 
security interest in the case of either a residential cooperative or a 
leasehold or ground rent estate).
    (3) Loan application. The loan application shall be a completed 
standard Federal Housing Administration, Veterans Administration, 
Federal Home Loan Mortgage Corporation, Federal National Mortgage 
Association or Federal Home Loan Mortgage Corporation/Federal National 
Mortgage Association application form. In lieu of use of a standard 
application the Federal credit union may have a current attorney's 
opinion on file stating that the forms in use meet the requirements of 
applicable Federal, state and local laws.
    (4) Security instrument and note. The security instrument and note 
shall be executed on the most current version of the FHA, VA, FHLMC, 
FNMA, or FHLMC/FNMA Uniform Instruments

[[Page 300]]

for the jurisdiction in which the property is located. No prepayment 
penalty shall be allowed, although a Federal credit union may require 
that any partial prepayments be made on the date monthly installments 
are due and be in the amount of that part of one or more monthly 
installments that would be applicable to principal. In lieu of use of a 
standard security instrument and note, the Federal credit union may have 
a current attorney's opinion on file stating that the security 
instrument and note in use meet the requirements of applicable Federal, 
state and local laws.
    (5) First lien, territorial limits. The loan shall be secured by a 
perfected first lien or first security interest in favor of the credit 
union supported by a properly executed and recorded security instrument. 
No loan shall be secured by a residence located outside the United 
States of America, its territories and possessions, or the Commonwealth 
of Puerto Rico.
    (6) Due-on-sale clauses. (i) Except as otherwise provided herein, 
the exercise of a due-on-sale clause by a Federal credit union is 
governed exclusively by section 341 of Pub. L. 97-320 and by any 
regulations issued by the Federal Home Loan Bank Board implementing 
section 341.
    (ii) In the case of a contract involving a long-term (greater than 
twelve years), fixed rate first mortgage loan which was made or assumed, 
including a transfer of the liened property subject to the loan, during 
the period beginning on the date a State adopted a constitutional 
provision or statute prohibiting the exercise of due-on-sale clauses, or 
the date on which the highest court of such state has rendered a 
decision (or if the highest court has not so decided, the date on which 
the next highest court has rendered a decision resulting in a final 
judgment if such decision applies statewide) prohibiting such exercise, 
and ending on October 15, 1982, a Federal credit union may exercise a 
due-on-sale clause in the case of a transfer which occurs on or after 
November 18, 1982, unless exercise of the due-on-sale clause would be 
based on any of the following:
    (A) The creation of a lien or other encumbrance subordinate to the 
lender's security instrument which does not relate to a transfer of 
rights of occupancy in the property;
    (B) The creation of a purchase money security interest for household 
appliances;
    (C) A transfer by devise, descent, or operation of law on the death 
of a joint tenant or tenant by the entirety;
    (D) The granting of a leasehold interest of 3 years or less not 
containing an option to purchase;
    (E) A transfer to a relative resulting from the death of a borrower;
    (F) A transfer where the spouse or children of the borrower become 
an owner of the property;
    (G) A transfer resulting from a decree of a dissolution of marriage, 
a legal separation agreement, or from an incidental property settlement 
agreement, by which the spouse of the borrower becomes an owner of the 
property;
    (H) A transfer into an inter vivos trust in which the borrower is 
and remains a beneficiary and which does not relate to a transfer of 
rights of occupancy in the property; or
    (I) Any other transfer or disposition described in regulations 
promulgated by the Federal Home Loan Bank Board.
    (7) Assumption of real estate loans by nonmembers. A Federal credit 
union may permit a nonmember to assume a member's mortgage loan in 
conjunction with the nonmember's purchase of the member's principal 
residence, provided that the nonmember assumes only the remaining unpaid 
balance of the loan, the terms of the loan remain unchanged, and there 
is no extension of the original maturity date specified in the loan 
agreement with the member. An assumption is impermissible if the 
original loan was made with the intent of having a nonmember assume the 
loan.
    (h) [Reserved]
    (i) Put option purchases in managing increased interest-rate risk 
for real estate loans produced for sale on the secondary market--
    (1) Definitions. For purposes of this Sec. 701.21(i): (i) Financial 
options contract means an agreement to make or take delivery of a 
standardized financial instrument upon demand by the holder of the 
contract at any time prior to the

[[Page 301]]

expiration date specified in the agreement, under terms and conditions 
established either by:
    (A) A contract market designated for trading such contracts by the 
Commodity Futures Trading Commission, or
    (B) By a Federal credit union and a primary dealer in Government 
securities that are counterparties in an over-the-counter transaction.
    (ii) FHLMC security means obligations or other securities which are 
or ever have been sold by the Federal Home Loan Mortgage Corporation 
pursuant to section 305 or 306 of the Federal Home Loan Mortgage 
Corporation Act (12 U.S.C. 1454 and 1455).
    (iii) FNMA security means an obligation, participation, or any 
instrument of or issued by, or fully guaranteed as to principal and 
interest by, the Federal National Mortgage Association.
    (iv) GNMA security means an obligation, participation, or any 
instrument of or issued by, or fully guaranteed as to principal and 
interest by, the Government National Mortgage Association.
    (v) Long position means the holding of a financial options contract 
with the option to make or take delivery of a financial instrument.
    (vi) Primary dealer in Government securities means:
    (A) A member of the Association of Primary Dealers in United States 
Government Securities; or
    (B) Any parent, subsidiary, or affiliated entity of such primary 
dealer where the member guarantees (to the satisfaction of the FCU's 
board of directors) over-the-counter sales of financial options 
contracts by the parent, subsidiary, or affiliated entity to a Federal 
credit union.
    (vii) Put means a financial options contract which entitles the 
holder to sell, entirely at the holder's option, a specified quantity of 
a security at a specified price at any time until the stated expiration 
date of the contract.
    (2) Permitted options transactions. A Federal credit union may, to 
manage risk of loss through a decrease in value of its commitments to 
originate real estate loans at specified interest rates, enter into long 
put positions on GNMA, FNMA, and FHLMC securities:
    (i) If the real estate loans are to be sold on the secondary market 
within ninety (90) days of closing;
    (ii) If the positions are entered into:
    (A) Through a contract market designated by the Commodity Futures 
Trading Commission for trading such contracts, or
    (B) With a primary dealer in Government securities;
    (iii) If the positions are entered into pursuant to written policies 
and procedures which are approved by the Federal credit union's board of 
directors, and include, at a minimum:
    (A) The Federal credit union's strategy in using financial options 
contracts and its analysis of how the strategy will reduce sensitivity 
to changes in price or interest rates in its commitments to originate 
real estate loans at specified interest rates;
    (B) A list of brokers or other intermediaries through which 
positions may be entered into;
    (C) Quantitative limits (e.g., position and stop loss limits) on the 
use of financial options contracts;
    (D) Identification of the persons involved in financial options 
contract transactions, including a description of these persons' 
qualifications, duties, and limits of authority, and description of the 
procedures for segregating these persons' duties,
    (E) A requirement for written reports for review by the Federal 
credit union's board of directors at its monthly meetings, or by a 
committee appointed by the board on a monthly basis, of:
    (1) The type, amount, expiration date, correlation, cost of, and 
current or projected income or loss from each position closed since the 
last board review, each position currently open and current gains or 
losses from such positions, and each position planned to be entered into 
prior to the next board review;
    (2) Compliance with limits established on the policies and 
procedures; and
    (3) The extent to which the positions described contributed to 
reduction of sensitivity to changes in prices or interest rates in the 
Federal credit union's commitments to originate real estate loans at a 
specified interest rate; and

[[Page 302]]

    (iv) If the Federal credit union has received written permission 
from the appropriate NCUA Regional Director to engage in financial 
options contracts transactions in accordance with this Sec. 701.21(i) 
and its policies and procedures as written.
    (3) Recordkeeping and reporting. (i) The reports described in 
Sec. 701.21(i)(2)(iii)(E) for each month must be submitted to the 
appropriate NCUA Regional Office by the end of the following month. This 
monthly reporting requirement may be waived by the appropriate NCUA 
Regional Director on a case-by-case basis for those Federal credit 
unions with a proven record of responsible use of permitted financial 
options contracts.
    (ii) The records described in Sec. 701.21(i)(2)(iii)(E) must be 
retained for two years from the date the financial options contracts are 
closed.
    (4) Accounting. A Federal credit union must account for financial 
options contracts transactions:
    (i) In accordance with standards established by the NCUA Board in 
the Accounting Manual for Federal Credit Unions, available from NCUA, 
Administrative Office, 1776 G St. NW., Washington, DC 20456, or such 
other instruction as may be deemed appropriate; or
    (ii) To the extent not inconsistent with NCUA Board instruction, in 
accordance with generally accepted accounting standards or principles.

[49 FR 30685, Aug. 1, 1984]

    Editorial Note: For Federal Register citations affecting 
Sec. 701.21, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 701.22  Loan participation.

    (a) For purposes of this section:
    (1) Participation loan means a loan where one or more eligible 
organizations participates pursuant to a written agreement with the 
originating lender.
    (2) Eligible organizations means a credit union, credit union 
organization, or financial organization.
    (3) Credit union means any Federal or State chartered credit union.
    (4) Credit union organization means any organization as determined 
by the Board, established primarily to serve the daily operational needs 
of its member credit unions. The term does not include trade 
associations, membership organizations principally composed of credit 
unions, or corporations or other businesses which principally provide 
services to credit union members as opposed to corporations or 
businesses whose business relates to the daily in-house operation of 
credit unions.
    (5) Financial organization means any federally chartered or 
federally insured financial institution.
    (6) Originating lender means the participant with which the member 
contracts.
    (b) Subject to the provisions of this section any Federal credit 
union may participate in making loans with eligible organizations within 
the limitations of the board of director's written participation loan 
policies, Provided:
    (1) No Federal credit union shall obtain an interest in a 
participation loan if the sum of that interest and any (other) 
indebtedness owing to the Federal credit union by the borrower exceeds 
10 per centum of the Federal credit union's unimpaired capital and 
surplus;
    (2) A written master participation agreement shall be properly 
executed, acted upon by the Federal credit union's board of directors, 
or if the board has so delegated in its policy, the investment committee 
or senior management official(s) and retained in the Federal credit 
union's office. The master agreement shall include provisions for 
identifying, either through a document which is incorporated by 
reference into the master agreement or directly in the master agreement, 
the participation loan or loans prior to their sale; and
    (3) A Federal credit union may sell to or purchase from any 
participant the servicing of any loan in which it owns a participation 
interest.
    (c) An originating lender which is a Federal credit union shall:
    (1) Originate loans only to its members;
    (2) Retain an interest of at least 10 per centum of the face amount 
of each loan;
    (3) Retain the original or copies of the loan documents; and

[[Page 303]]

    (4) Require the credit committee or loan officer to use the same 
underwriting standards for participation loans used for loans that are 
not being sold in a participation agreement unless there is a 
participation agreement in place prior to the disbursement of the loan. 
Where a participation agreement is in place prior to disbursement, 
either the credit union's loan policies or the participation agreement 
shall address any variance from non-participation loan underwriting 
standards.
    (d) A participant Federal credit union that is not an originating 
lender shall:
    (1) Participate only in loans it is empowered to grant, having a 
participation policy in place which sets forth the loan underwriting 
standards prior to entering into a participation agreement;
    (2) Participate in participation loans only if made to its own 
members or members of another participating credit union;
    (3) Retain the original or a copy of the written participation loan 
agreement and a schedule of the loans covered by the agreement; and
    (4) Obtain the approval of the board of directors or investment 
committee of the disbursement of proceeds to the originating lender.

[43 FR 51610, Nov. 6, 1978, as amended at 46 FR 38680, July 29, 1981; 46 
FR 43830, Sept. 1, 1981; 47 FR 1371, Jan. 13, 1982; 47 FR 54428, Dec. 3, 
1982. Redesignated and amended at 49 FR 30688, Aug. 1, 1984; 60 FR 
58204, Nov. 27, 1995]



Sec. 701.23  Purchase, sale, and pledge of eligible obligations.

    (a) For purposes of this section:
    (1) Eligible obligation means a loan or group of loans.
    (2) Student loan means a loan granted to finance the borrower's 
attendance at an institution of higher education or at a vocational 
school, which is secured by and on which payment of the outstanding 
principal and interest has been deferred in accordance with the 
insurance or guarantee of the Federal Government, of a State government, 
or any agency of either.
    (b) Purchase. (1) A Federal credit union may purchase, in whole or 
in part, within the limitations of the board of directors' written 
purchase policies:
    (i) Eligible obligations of its members, from any source, if either: 
(A) They are loans it is empowered to grant or (B) they are refinanced 
with the consent of the borrowers, within 60 days after they are 
purchased, so that they are loans it is empowered to grant;
    (ii) Eligible obligations of a liquidating credit union's individual 
members, from the liquidating credit union;
    (iii) Student loans, from any source, if the purchaser is granting 
student loans on an ongoing basis and if the purchase will facilitate 
the purchasing credit union's packaging of a pool of such loans to be 
sold or pledged on the secondary market; and
    (iv) Real estate-secured loans, from any source, if the purchaser is 
granting real estate-secured loans pursuant to Sec. 701.21 on an ongoing 
basis and if the purchase will facilitate the purchasing credit union's 
packaging of a pool of such loans to be sold or pledged on the secondary 
mortage market. A pool must include a substantial portion of the credit 
union's members' loans and must be sold promptly.
    (2) A Federal credit union may make purchases in accordance with 
this paragraph (b), provided:
    (i) The board of directors or investment committee approves the 
purchase;
    (ii) A written agreement and a schedule of the eligible obligations 
covered by the agreement are retained in the purchasers office; and
    (iii) For purchases under paragraph (b)(1)(ii) of this section, any 
advance written approval required by Sec. 741.8 of this chapter is 
obtained before consummation of such purchase.
    (3) The aggregate of the unpaid balance of eligible obligations 
purchased under paragraph (b) of this section shall not exceed 5 percent 
of the unimpaired capital and surplus of the purchaser. The following 
can be exculded in calculating this 5 percent limitation:
    (i) Student loans purchased in accordance with paragraph (b)(1)(iii) 
of this section;

[[Page 304]]

    (ii) Real estate loans purchased in accordance with paragraph 
(b)(1)(iv) of this section;
    (iii) Eligible obligations purchased in accordance with paragraph 
(b)(1)(i) of this section that are refinanced by the purchaser so that 
it is a loan it is empowered to grant;
    (iv) An indirect lending or indirect leasing arrangement that is 
classified as a loan and not the purchase of an eligible obligation 
because the Federal credit union makes the final underwriting decision 
and the sales or lease contract is assigned to the Federal credit union 
very soon after it is signed by the member and the dealer or leasing 
company.
    (c) Sale. A Federal credit union may sell, in whole or in part, to 
any source, eligible obligations of its members, eligible obligations 
purchased in accordance with paragraph (b)(1)(ii) of this section, 
student loans purchased in accordance with paragraph (b)(1)(iii) of this 
section, and real estate loans purchased in accordance with paragraph 
(b)(1)(iv) of this section, within the limitations of the board of 
directors' written sale policies, Provided:
    (1) The board of directors or investment committee approves the 
sale; and
    (2) A written agreement and a schedule of the eligible obligations 
covered by the agreement are retained in the seller's office.
    (d) Pledge. (1) A Federal credit union may pledge, in whole or in 
part, to any source, eligible obligations of its members, eligible 
obligations purchased in accordance with paragraph (b)(1)(ii) of this 
section, student loans purchased in accordance with paragraph 
(b)(1)(iii) of this section, and real estate loans purchased in 
accordance with paragraph (b)(1)(iv) of this section, within the 
limitations of the board of directors' written pledge policies, 
Provided:
    (i) The board of directors or investment committee approves the 
pledge;
    (ii) Copies of the original loan documents are retained; and
    (iii) A written agreement covering the pledging arrangement is 
retained in the office of the credit union that pledges the eligible 
obligations.
    (2) The pledge agreement shall identify the eligible obligations 
covered by the agreement.
    (e) Servicing. A Federal credit union may agree to service any 
eligible obligation it purchases or sells in whole or in part.
    (f) 10 Percent limitation. The total indebtedness owing to any 
Federal credit union by any person, inclusive of retained and reacquired 
interests, shall not exceed 10 percent of its unimpaired capital and 
surplus.

[44 FR 27071, May 9, 1979, as amended at 46 FR 38680, July 29, 1981. 
Redesignated at 49 FR 30688, Aug. 1, 1984, and amended at 53 FR 4844, 
Feb. 18, 1988; 56 FR 15036, Apr. 15, 1991; 56 FR 35811, July 29, 1991; 
60 FR 58504, Nov. 28, 1995; 63 FR 70998, Dec. 23, 1998]



Sec. 701.24  Refund of interest.

    (a) The board of directors of a Federal credit union may authorize 
an interest refund to members who paid interest to the credit union 
during any dividend period and who are members of record at the close of 
business on the last day of such dividend period. Interest refunds may 
be made for a dividend period only if dividends on share accounts have 
been declared and paid for that period.
    (b) The amount of interest refund to each member shall be determined 
as a percentage of the interest paid by the member. Such percentage may 
vary according to the type of extension of credit and the interest rate 
charged.
    (c) The board of directors may exclude from an interest refund:
    (1) A particular type of extension of credit;
    (2) Any extension of credit made at a particular interest rate; and
    (3) Any extension of credit that is presently delinquent or has been 
delinquent within the period for which the refund is being made.

[53 FR 19747, May 31, 1988]



Sec. 701.25  Charitable contributions and donations.

    (a) A federal credit union may make charitable contributions and/or 
donate funds to recipients not organized for profit that are located in 
or conduct activities in a community in which the federal credit union 
has a place of business or to organizations that are tax exempt 
organizations under Section 501(c)(3) of the Internal Revenue Code

[[Page 305]]

and operate primarily to promote and develop credit unions.
    (b) The board of directors must approve charitable contributions 
and/or donations, and the approval must be based on a determination by 
the board of directors that the contributions and/or donations are in 
the best interests of the federal credit union and are reasonable given 
the size and financial condition of the federal credit union. The board 
of directors, if it chooses, may establish a budget for charitable 
contributions and/or donations and authorize appropriate officials of 
the federal credit union to select recipients and disburse budgeted 
funds among those recipients.

[64 FR 19443, Apr. 21, 1999]



Sec. 701.26  Credit union service contracts.

    A Federal credit union may act as a representative of and enter into 
a contractual agreement with one or more credit unions or other 
organizations for the purpose of sharing, utilizing, renting, leasing, 
purchasing, selling, and/or joint ownership of fixed assets or engaging 
in activities and/or services which relate to the daily operations of 
credit unions. Agreements must be in writing, and shall advise all 
parties subject to the agreement that the goods and services provided 
shall be subject to examination by the NCUA Board to the extent 
permitted by law.

[47 FR 30462, July 14, 1982, as amended at 63 FR 10756, Mar. 5, 1998]



Secs. 701.27-701.30  [Reserved]



Sec. 701.31  Nondiscrimination requirements.

    (a) Definitions. As used in this part, the term:
    (1) Application carries the meaning of that term as defined in 12 
CFR 202.2(f) (Regulation B), which is as follows:
    An oral or written request for an extension of credit that is made 
in accordance with procedures established by a creditor for the type of 
credit requested;
    (2) Dwelling carries the meaning of that term as defined in 42 
U.S.C. 3602(b) (Fair Housing Act), which is as follows: ``Any building, 
structure, or portion thereof which is occupied as, or designed or 
intended for occupancy as, a residence by one or more families, and any 
vacant land which is offered for sale or lease for the construction or 
location thereon of any building, structure, or portion thereof''; and
    (3) Real estate-related loan means any loan for which application is 
made to finance or refinance the purchase, construction, improvement, 
repair, or maintenance of a dwelling.
    (b) Nondiscrimination in Lending. (1) A Federal credit union may not 
deny a real estate-related loan, nor may it discriminate in setting or 
exercising its rights pursuant to the terms or conditions of such a 
loan, nor may it discourage an application for such a loan, on the basis 
of the race, color, national origin, religion, sex, handicap, or 
familial status (having children under the age of 18) of:
    (i) Any applicant or joint applicant;
    (ii) Any person associated, in connection with a real estate-related 
loan application, with an applicant or joint applicant;
    (iii) The present or prospective owners, lessees, tenants, or 
occupants of the dwelling for which a real estate-related loan is 
requested;
    (iv) The present or prospective owners, lessees, tenants, or 
occupants of other dwellings in the vicinity of the dwelling for which a 
real estate-related loan is requested.
    (2) With regard to a real estate-related loan, a Federal credit 
union may not consider a lending criterion or exercise a lending policy 
which has the effect of discriminating on the basis of race, color, 
national origin, religion, sex, handicap, or familial status (having 
children under the age of 18). Guidelines concerning possible exceptions 
to this provision appear in paragraph (e)(1) of this section.
    (3) Consideration of any of the following factors in connection with 
a real estate-related loan is not necessary to a Federal credit union's 
business, generally has a discriminatory effect, and is therefore 
prohibited:
    (i) The age or location of the dwelling;
    (ii) Zip code of the applicant's current residence;
    (iii) Previous home ownership;
    (iv) The age or location of dwellings in the neighborhood of the 
dwelling;

[[Page 306]]

    (v) The income level of residents in the neighborhood of the 
dwelling.

Guidelines concerning possible exceptions to this provision appear in 
paragraph (e)(2) of this section.
    (c) Nondiscrimination in appraisals. (1) A Federal credit union may 
not rely upon an appraisal of a dwelling if it knows or should know that 
the appraisal is based upon consideration of the race, color, national 
origin, religion, sex, handicap, or familial status (having children 
under the age of 18) of:
    (i) Any applicant or joint applicant;
    (ii) Any person associated, in connection with a real estate-related 
loan application, with an applicant or joint applicant;
    (iii) The present or prospective owners, lessees, tenants, or 
occupants of the dwelling for which a real estate-related loan is 
requested;
    (iv) The present or prospective owners, lessees, tenants, or 
occupants of other dwellings in the vicinity of the dwelling for which a 
real estate-related loan is requested.
    (2) With respect to a real-estate related loan, a Federal credit 
union may not rely upon an appraisal of a dwelling if it knows or should 
know that the appraisal is based upon consideration of a criterion which 
has the effect of discriminating on the basis of race, color, national 
origin, religion, sex, handicap, or familial status (having children 
under the age of 18). Guidelines concerning possible exceptions to this 
provision appear in paragraph (e)(1) of this section.
    (3) A Federal credit union may not rely upon an appraisal that it 
knows or should know is based upon consideration of any of the following 
criteria, for such criteria generally have a discriminatory effect, and 
are not necessary to a Federal credit union's business:
    (i) The age or location of the dwelling;
    (ii) The age or location of dwellings in the neighborhood of the 
dwelling;
    (iii) The income level of the residents in the neighborhood of the 
dwelling.
    (4) Notwithstanding paragraph (c)(3) of this section, it is 
recognized that there may be factors concerning location of the dwelling 
which can be properly considered in an appraisal. If any such factor(s) 
is relied upon, it must be specifically documented in the appraisal, 
accompanied by a brief statement demonstrating the necessity of using 
such factor(s). Guidelines concerning the consideration of location 
factors appear in paragraph (e)(3) of this section.
    (5) Each Federal credit union shall make available, to any 
requesting member/applicant, a copy of the appraisal used in connection 
with that member's real estate-related loan application. The appraisal 
shall be available for a period of 25 months after the applicant has 
received notice from the Federal credit union of the action taken by the 
Federal credit union on the real estate-related loan application.
    (d) Nondiscrimination in advertising--(1) Advertising notice of 
nondiscrimination compliance. (i) No Federal credit union may directly 
or indirectly engage in any form of advertising of real estate-related 
loans which implies or suggests that the Federal credit union 
discriminates in violation of the provisions of the Fair Housing Act or 
of this section. Advertisements of such loans shall include a facsimile 
of the following:
[GRAPHIC] [TIFF OMITTED] TC21SE91.001

    (ii) Advertisements of real estate-related loans which are broadcast 
on the radio shall contain the following statement:

    The (insert name) Federal Credit Union is an equal housing lender.


[[Page 307]]


    (2) Lobby notice of nondiscrimination compliance. Every Federal 
credit union which engages in real estate-related lending shall 
conspicuously display in the public lobby of such credit union and in 
the public area of each office where such loans are made, in a manner so 
as to be clearly visible to the general public entering such lobby or 
area, a notice that incorporates a facsimile of the logotype and notice 
appearing in paragraph (d)(3) of this section. Posters containing this 
notice and logotype may be obtained from the Regional Offices of the 
National Credit Union Administration.
    (3) Logotype and notice of nondiscrimination compliance. The 
logotype and text of the notice required in paragraph (d)(2) of this 
section shall be as follows:

[[Page 308]]

[GRAPHIC] [TIFF OMITTED] TC21SE91.002

    (e) Guidelines. (1) Compliance with the Fair Housing Act is achieved 
when each loan applicant's creditworthiness is evaluated on an 
individual basis, without presuming that the applicant has certain 
characteristics of a group.

[[Page 309]]

If certain lending policies or procedures do presume group 
characteristics, they may violate the Fair Housing Act, even though the 
characteristics are not based upon race, color, sex, national origin, 
religion, handicap, or familial status. Such a violation occurs when 
otherwise facially nondiscriminatory lending procedures (either general 
lending policies or specific criteria used in reviewing loan 
applications) have the effect of making real estate-related loans 
unavailable or less available on the basis of race, color, sex, national 
origin, religion, handicap, or familial status. Note, however, that a 
policy or criterion which has a discriminatory effect is not a violation 
of the Fair Housing Act if its use achieves a legitimate business 
necessity which cannot be achieved by using less discriminatory 
standards. It is also important to note that the Equal Credit 
Opportunity Act and Regulation B prohibit discrimination, either per se 
or in effect, on the basis of the applicant's age, marital status, 
receipt of public assistance, or the exercise of any rights under the 
Consumer Credit Protection Act.
    (2) Paragraph (b)(3) of this section prohibits consideration of 
certain factors because of their likely discriminatory effect and 
because they are not necessary to make sound real estate-related loans. 
For purposes of clarification, the prohibited use of location factors in 
this section is intended to prevent abandonment of areas in which a 
Federal credit union's members live or want to live. It is not intended 
to require loans in those areas that are geographically remote from the 
FCU's main or branch offices or that contravene the parameters of a 
Federal credit union's charter. Further, this prohibition does not 
preclude requiring a borrower to obtain flood insurance protection 
pursuant to the National Flood Insurance Act and part 760 of NCUA's 
Rules and Regulations, nor does it preclude involvement with Federal or 
state housing insurance programs which provide for lower interest rates 
for the purchase of homes in certain urban or rural areas. Also, the 
legitimate use of location factors in an appraisal does not constitute a 
violation of the provision of paragraph (b)(3) of this section, which 
prohibits consideration of location of the dwelling. Finally, the 
prohibited use of prior home ownership does not preclude a Federal 
credit union from considering an applicant's payment history on a loan 
which was made to obtain a home. Such action entails consideration of 
the payment record on a previous loan in determining creditworthiness; 
it does not entail consideration of prior home ownership.
    (3)(i) Paragraph (c)(3) of this section prohibits consideration of 
the age or location of a dwelling in a real estate-related loan 
appraisal. These restrictions are intended to prohibit the use of 
unfounded or unsubstantiated assumptions regarding the effect upon loan 
risk of the age of a dwelling or the physical or economic 
characteristics of an area. Appraisals should be based on the present 
market value of the property offered as security (including 
consideration of specific improvements to be made by the borrower) and 
the likelihood that the property will retain an adequate value over the 
term of the loan.
    (ii) The term ``age of the dwelling'' does not encompass structural 
soundness. In addition, the age of the dwelling may be used by an 
appraiser as a basis for conducting further inspections of certain 
structural aspects of the dwelling. Paragraph (c)(3) of this section 
does, however, prohibit an unsubstantiated determination that a house 
over X years in age is not structurally sound.
    (iii) With respect to location factors, paragraph (c)(4) of this 
section recognizes that there may be location factors which may be 
considered in an appraisal, and requires that the use of any such 
factors be specifically documented in the appraisal. These factors will 
most often be those location factors which may negatively affect the 
short range future value (up to 3-5 years) of a property. Factors which 
in some cases may cause the market value of a property to decline are 
recent zoning changes or a significant number of abandoned homes in the 
immediate vicinity of the property. However, not all zoning changes will 
cause a decline in property values, and proximity to abandoned buildings 
may not

[[Page 310]]

affect the market value of a property because the cause of abandonment 
is unrelated to high risk. Proper considerations include the condition 
and utility of the improvement and various physical factors such as 
street conditions, amenities such as parks and recreation areas, 
availability of public utilities and municipal services, and exposure to 
flooding and land faults.

[54 FR 46223, Nov. 2, 1989, as amended at 59 FR 36041, July 15, 1994]



Sec. 701.32  Payment on shares by public units and nonmembers.

    (a) Authority. A Federal credit union may, to the extent permitted 
under Section 107(6) of the Act and this section, receive payments on 
shares, (regular shares, share certificates, and share draft accounts) 
from public units and political subdivisions thereof (as those terms are 
defined in Sec. 745.1) and nonmember credit unions, and to the extent 
permitted under the Act, this section and Sec. 701.34, receive payments 
on shares (regular shares, share certificates, and share draft accounts) 
from other nonmembers.
    (b) Limitations. (1) Unless a greater amount has been approved by 
the Regional Director, the maximum amount of all public unit and 
nonmember shares shall not, at any given time, exceed 20% of the total 
shares of the federal credit union or $1.5 million, whichever is 
greater.
    (2) Before accepting any public unit or nonmember shares in excess 
of 20% of total shares, the board of directors must adopt a specific 
written plan concerning the intended use of these shares and forward a 
copy of the plan to the Regional Director. The plan must include:
    (i) A statement of the credit union's needs, sources and intended 
uses of public unit and nonmember shares;
    (ii) Provision for matching maturities of public unit and nonmember 
shares with corresponding assets, or justification for any mismatch; and
    (iii) Provision for adequate income spread between public unit and 
nonmember shares and corresponding assets.
    (3) A federal credit union seeking an exemption from the limits of 
paragraph (b)(1) of this section must submit to the Regional Director a 
written request including:
    (i) The new maximum level of public unit and nonmember shares 
requested, either as a dollar amount or a percentage of total shares;
    (ii) The current plan adopted by the credit union's board of 
directors concerning the use of new public unit and nonmember shares;
    (iii) A copy of the credit union's latest financial statement; and
    (iv) A copy of the credit union's loan and investment policies.
    (4) Where the financial condition and management of the credit union 
are sound and the credit union's plan for the funds is reasonable, there 
will be a presumption in favor of granting the request. When granted, 
exemptions will normally be for a two-year period. The Regional Director 
will provide a written explanation for an exemption that is granted for 
a lesser time period.
    (5) The Regional Director will provide a written determination on an 
exemption request within 30 calendar days after receipt of the request. 
The 30 day period will not begin to run until all necessary information 
has been submitted to the Regional Director. All denials may be appealed 
to the NCUA Board in a timely manner. Appeals should be submitted 
through the Regional Director.
    (6) Upon expiration of an exemption, nonmember shares currently in 
the credit union in excess of the limits established pursuant to (b)(1) 
of this section will continue to be insured by the National Credit Union 
Insurance Fund within applicable limits. No new shares in excess of the 
limits established pursuant to (b)(1) of this section shall be accepted. 
Existing share certificates in excess of the limits established pursuant 
to (b)(1) of this section may remain in the credit union only until 
maturity.
    (c) The limitations herein do not apply to accounts maintained in 
accordance with Sec. 701.37 (Treasury Tax and Loan Depositaries; 
Depositaries and Financial Agents of the Government) and matching funds 
required by Sec. 705.7(b) (Community Development Revolving Loan Program 
for Credit Unions). Once a loan granted pursuant to part 705 is repaid, 
nonmember share

[[Page 311]]

deposits accepted to meet the matching requirement are subject to this 
section.

[54 FR 31184, July 27, 1989, as amended at 54 FR 51384, Dec. 15, 1989; 
55 FR 1794, Jan. 19, 1990; 58 FR 21645, Apr. 23, 1993; 59 FR 26102, May 
19, 1994; 61 FR 3790, Feb. 2, 1996]



Sec. 701.33  Reimbursement, insurance, and indemnification of officials and employees.

    (a) Official. An official is a person who is or was a member of the 
board of directors, credit committee or supervisory committee, or other 
volunteer committee established by the board of directors.
    (b) Compensation. (1) Only one board officer, if any, may be 
compensated as an officer of the board. The bylaws must specify the 
officer to be compensated, if any, as well as the specific duties of 
each of the board officers. No other official may receive compensation 
for performing the duties or responsibilities of the board or committee 
position to which the person has been elected or appointed.
    (2) For purposes of this section, the term compensation specifically 
excludes:
    (i) Payment (by reimbursement to an official or direct credit union 
payment to a third party) for reasonable and proper costs incurred by an 
official in carrying out the responsibilities of the position to which 
that person has been elected or appointed, if the payment is determined 
by the board of directors to be necessary or appropriate in order to 
carry out the official business of the credit union, and is in 
accordance with written policies and procedures, including documentation 
requirements, established by the board of directors. Such payments may 
include the payment of travel costs for officials and one immediate 
family member per official;
    (ii) Provision of reasonable health, accident and related types of 
personal insurance protection, supplied for officials at the expense of 
the credit union: Provided, that such insurance protection must exclude 
life insurance; must be limited to areas of risk, including accidental 
death and dismemberment, to which the official is exposed by reason of 
carrying out the duties or responsibilities of the official's credit 
union position; must cease immediately upon the insured person's leaving 
office, without providing residual benefits other than from pending 
claims, if any; and
    (iii) Indemnification and related insurance consistent with 
paragraph (c) of this section.
    (c) Indemnification. (1) A Federal credit union may indemnify its 
officials and current and former employees for expenses reasonably 
incurred in connection with judicial or administrative proceedings to 
which they are or may become parties by reason of the performance of 
their official duties.
    (2) Indemnification shall be consistent either with the standards 
applicable to credit unions generally in the state in which the 
principal or home office of the credit union is located, or with the 
relevant provisions of the Model Business Corporation Act. A Federal 
credit union that elects to provide indemnification shall specify 
whether it will follow the relevant state law or the Model Business 
Corporation Act. Indemnification and the method of indemnification may 
be provided for by charter or bylaw amendment, contract or board 
resolution, consistent with the procedural requirements of the 
applicable state law or the Model Business Corporation Act, as 
specified. A charter or bylaw amendment must be approved by the National 
Credit Union Administration.
    (3) A Federal credit union may purchase and maintain insurance on 
behalf of its officials and employees against any liability asserted 
against them and expenses incurred by them in their official capacities 
and arising out of the performance of their official duties to the 
extent such insurance is permitted by the applicable state law or the 
Model Business Corporation Act.

[53 FR 29642, Aug. 8, 1988, as amended at 57 FR 54503, Nov. 19, 1992]



Sec. 701.34  Designation of low-income status; receipt of secondary capital accounts by low-income designated credit unions.

    (a) Designation of low-income status. (1) Section 107(6) of the 
Federal Credit Union Act (12 U.S.C. 1757(6)) authorizes

[[Page 312]]

federal credit unions serving predominantly low-income members to 
receive shares, share drafts and share certificates from nonmembers. In 
order to utilize this authority, a federal credit union must receive a 
low-income designation from its Regional Director. The designation may 
be removed by the Regional Director upon notice to the federal credit 
union if the definitions set forth in paragraphs (a) (2) and (3) of this 
section are no longer met. Removals may be appealed to the NCUA Board 
within 60 days. Appeals should be submitted through the Regional 
Director.
    (2) The term low-income members shall mean those members who make 
less than 80 percent of the average for all wage earners as established 
by the Bureau of Labor Statistics or those members whose annual 
household income falls at or below 80 percent of the median household 
income for the nation as established by the Census Bureau or those 
members otherwise defined as low-income members as determined by order 
of the NCUA Board.
    (i) In documenting its low-income membership, a credit union that 
serves a geographic area where a majority of residents fall at or below 
the annual income standard is presumed to be serving predominantly low-
income members. In applying the standards, Regional Directors shall make 
allowances for geographical areas with higher costs of living. The 
following is the exclusive list of geographic areas with the 
differentials to be used:

 
                                                                 Percent
 
Hawaii.........................................................       40
Alaska.........................................................       36
Washington, DC.................................................       19
Boston.........................................................       17
San Diego......................................................       15
Los Angeles....................................................       14
New York.......................................................       13
San Francisco..................................................       13
Seattle........................................................       10
Chicago........................................................        7
Philadelphia...................................................        7
 

    (ii) The term low-income member also includes those members who are 
enrolled as full-time or part-time students in a college, university, 
high school, or vocational school.
    (3) The term predominantly is defined as a simple majority.
    (b) Receipt of secondary capital accounts by low-income designated 
credit unions. A Federal credit union having a designation of low income 
status pursuant to paragraph (a) of this section may offer secondary 
capital accounts to nonnatural person members and nonnatural person 
nonmembers on the following conditions:
    (1) Prior to offering secondary capital accounts, the credit union 
shall adopt, and forward to the appropriate NCUA Regional Director, a 
written plan for use of the funds in the secondary capital accounts and 
subsequent liquidity needs to meet repayment requirements upon maturity 
of the accounts.
    (2) The secondary capital account must be established as a uninsured 
secondary capital account or other form of non-share account.
    (3) The maturity of the secondary capital account must be for a 
minimum of five years.
    (4) The secondary capital account must not be redeemable prior to 
maturity.
    (5) The secondary capital account shall not be insured by the 
National Credit Union Share Insurance Fund or any governmental or 
private entity.
    (6) The secondary capital account holder's claim against the credit 
union must be subordinate to all other claims including those of 
shareholders, creditors and the National Credit Union Share Insurance 
Fund.
    (7) Funds deposited into the secondary capital account, including 
interest accrued and paid into the secondary capital account, must be 
available to cover operating losses realized by the credit union that 
exceed its net available reserves and undivided earnings (i.e., reserves 
and undivided earnings exclusive of allowance accounts for loan losses), 
and to the extent funds are so used, the credit union shall under no 
circumstances restore or replenish the account. The credit union may, in 
lieu of paying interest into the secondary capital account, pay interest 
accrued on the secondary capital account directly to the investor or 
into a separate account from which the secondary capital investor may 
make

[[Page 313]]

withdrawals. Losses shall be distributed pro-rata among all secondary 
capital accounts held by the credit union at the time the losses are 
realized.
    (8) The secondary capital account may not be pledged or provided by 
the account-holder as security on a loan or other obligation with the 
credit union or any other party.
    (9) In the event of merger or other voluntary dissolution of the 
credit union, other than merger into another low-income designated 
credit union, the secondary capital accounts will, to the extent they 
are not needed to cover losses at the time of merger or dissolution, be 
closed and paid out to the account-holder.
    (10) A secondary capital account contract agreement must be executed 
between an authorized representative of the account holder and the 
credit union accurately establishing the terms and conditions of this 
section and containing no provisions inconsistent therewith.
    (11) A disclosure and acknowledgment as set forth in the Appendix to 
this section must be provided to and executed by an authorized 
representative of the secondary capital account holder at the time of 
entering into the account agreement, and original copies of the account 
agreement and the disclosure and acknowledgment must be retained by the 
credit union for the term of the agreement.
    (12) As provided in Sec. 702.204(b)(11) of this chapter, 60 days 
after the effective date of a credit union being classified as 
``critically undercapitalized'' under NCUA's prompt corrective action 
rules, the NCUA Board may prohibit payments of principal, dividends or 
interest on the credit union's uninsured secondary capital accounts 
established after August 7, 2000, except that unpaid dividends or 
interest shall continue to accrue under the terms of the account to the 
extent permitted by law.
    (13) As provided in Secs. 702.304(b) and 702.305(b) of this chapter, 
the NCUA Board may prohibit payments of principal, dividends or interest 
on the uninsured secondary capital accounts established after August 7, 
2000 of a ``moderately capitalized'', ``marginally capitalized'', 
``minimally capitalized'' or ``uncapitalized'' credit union if the 
credit union's net worth ratio has not increased consistent with its 
then-present business plan, or the credit union has failed to undertake 
any mandatory supervisory action prescribed in Secs. 702.304(a) or 
702.305(a) of this chapter. If NCUA takes this action, unpaid dividends 
or interest shall continue to accrue under the terms of the account to 
the extent permitted by law.
    (c) Accounting treatment; weighted value for purposes of recognizing 
capital value of secondary capital accounts. (1) A low-income designated 
credit union that issues secondary capital accounts pursuant to 
paragraph (b) of this section shall record the funds on its balance 
sheet in an equity account entitled ``uninsured secondary capital 
account.'' For such accounts with remaining maturities of less than five 
years, the credit union shall reflect the capital value of the accounts 
in its financial statement in accordance with the following scale:
    (i) Four to less than five years remaining maturity--80 percent.
    (ii) Three to less than four years remaining maturity--60 percent.
    (iii) Two to less than three years remaining maturity--40 percent.
    (iv) One to less than two years remaining maturity--20 percent.
    (v) Less than one year remaining maturity--0 percent.
    (2) The credit union will reflect the full amount of the secondary 
capital on deposit in a footnote to its financial statement.

                         Appendix to Sec. 701.34

    Disclosures and acknowledgment in the following form must be 
provided to any investor in secondary capital accounts in a low-income 
designated credit union.
    An original, signed copy must be retained by the credit union.

                      Disclosure and Acknowledgment

    I, ________ (name of signatory), hereby acknowledge and agree to the 
following in my capacity as ________ (official position or title) of 
________ (name of institutional investor):
     ________ (name of institutional investor) has committed 
________ (amount of funds) to a secondary capital account with ________ 
(name of credit union).
     The funds committed to the secondary capital account are 
committed for a period of ____ years and are not redeemable prior to 
________.

[[Page 314]]

     The secondary capital account is not a share account and 
the funds committed to the secondary capital account are not insured by 
the National Credit Union Share Insurance Fund or any other governmental 
or private entity.
    The funds committed to the secondary capital account and any 
interest paid into the account may be used by __________ (name of credit 
union) to cover any and all operating losses that exceed the credit 
union's reserves and undivided earnings exclusive of allowance accounts 
for loan losses, and in the event the funds are so used ________ (name 
of credit union) will under no circumstances restore or replenish those 
funds to ________ (name of institutional investor).
    By initialing below, ________ (name of credit union) ________ and 
(name of institutional investor) agree that accrued interest will be:

______  ______ paid into and become part of the secondary capital 
          account;
______  ______ paid directly to the investor;
______  ______ paid into a separate account from which the investor may 
          make withdrawals; or
______  ______ any combination of the above provided the details are 
          specified and agreed to in writing.
     In the event of liquidation of ________ (name of credit 
union), the funds committed to the secondary capital account shall be 
subordinate to all other claims on the assets of the credit union, 
including claims of member shareholders, creditors and the National 
Credit Union Share Insurance Fund.
     The NCUA may prohibit payments of principal, dividends or 
interest on ________ (name of credit union) uninsured secondary capital 
accounts established after August 7, 2000, if ________ (name of credit 
union) has been in operation less than 10 years and has $10 million or 
less in assets and the provisions of Sec. 701.34(b)(13) of NCUA's 
regulations are met, or, if ________ (name of credit union) has been in 
operation for 10 years or more or has more than $10 million in assets 
and the provisions of Sec. 701.34(b)(12) of NCUA's regulations are met.

_______________________________________________________________________
(signature)

_______________________________________________________________________
(official title)

[61 FR 3790, Feb. 2, 1996, as amended at 61 FR 50695, 50697, Sept. 27, 
1996; 64 FR 72270, Dec. 27, 1999; 65 FR 21131, Apr. 20, 2000]



Sec. 701.35  Share, share draft, and share certificate accounts.

    (a) Federal credit unions may offer share, share draft, and share 
certificate accounts in accordance with section 107(6) of the Act (12 
U.S.C. 1757(6)) and the board of directors may declare dividends on such 
accounts as provided in section 117 of the Act (12 U.S.C. 1763).
    (b) A Federal credit union shall accurately represent the terms and 
conditions of its share, share draft, and share certificate accounts in 
all advertising, disclosures, or agreements, whether written or oral
    (c) A Federal credit union may, consistent with this section, parts 
707 and 740 of this subchapter, other federal law, and its contractual 
obligations, determine the types of fees or charges and other matters 
affecting the opening, maintaining and closing of a share, share draft 
or share certificate account. State laws regulating such activities are 
not applicable to federal credit unions.
    (d) For purposes of this section, ``state law'' means the 
constitution, statutes, regulations, and judicial decisions of any 
state, the District of Columbia, the several territories and possessions 
of the United States, and the Commonwealth of Puerto Rico.

[47 FR 17979, Apr. 27, 1982, as amended at 50 FR 4637, Feb. 1, 1985; 59 
FR 50445, Sept. 27, 1993]



Sec. 701.36  FCU ownership of fixed assets.

    (a) A Federal credit union's ownership in fixed assets shall be 
limited as described in this chapter.
    (b) Definitions--As used in this section:
    (1) Premises includes any office, branch office, suboffice, service 
center, parking lot, other facility, or real estate where the credit 
union transacts or will transact business.
    (2) Furniture, Fixtures, and Equipment includes all office 
furnishings, office machines, computer hardware and software, automated 
terminals, heating and cooling equipment.
    (3) Fixed Assets means premises and furniture, fixtures and 
equipment as these terms are defined above.
    (4) Investments in fixed assets means:
    (i) Any investment in real property (improved or unimproved) which 
is being used or is intended to be used as premises;
    (ii) Any leasehold improvement on premises;
    (iii) The aggregate of all capital and operating lease payments 
pursuant to lease agreements for fixed assets;

[[Page 315]]

    (iv) Any investment in the bonds, stock, debentures, or other 
obligations of a partnership or corporation, including any entity 
described in part 712, holding any fixed assets used by the Federal 
credit union and any loans to such partnership or corporation; or
    (v) Any investment in furniture, fixtures and equipment.
    (5) Abandoned premises means former Federal credit union premises 
from the date of relocation to new quarters, and property originally 
acquired for future expansion for which such use is no longer 
contemplated.
    (6) Immediate family member means a spouse or other family members 
living in the same household.
    (7) Shares mean all savings (regular shares, share drafts, share 
certificates, other savings) and retained earnings means regular 
reserve, reserve for contingencies, supplemental reserves, reserve for 
losses and undivided earnings.
    (8) Senior management employee means the credit union's chief 
executive officer (typically this individual holds the title of 
President or Treasurer/Manager), any assistant chief executive officers 
(e.g., Assistant President, Vice President or Assistant Treasurer/
Manager) and the chief financial officer (Comptroller).
    (c) Investment in fixed assets. (1) No Federal credit union with 
$1,000,000 or more in assets, without the prior approval of the 
Administration, shall invest in fixed assets if the aggregate of all 
such investments exceeds 5 percent of shares and retained earnings.
    (2) A Federal credit union shall submit such statement and reports 
as the NCUA regional director may require in support of any investment 
in fixed assets in excess of the limit specified above.
    (3) If the Administration determines that the proposal will not 
adversely affect the credit union, an aggregate dollar amount or 
percentage of assets will be approved for investment in fixed assets. 
Once such a limit has been approved, and unless otherwise specified by 
the regional director, a Federal credit union may make future 
acquisitions of fixed assets, provided the aggregate of all such future 
investments in fixed assets does not exceed an additional 1 percent of 
the shares and retained earnings of the credit union over the amount 
approved.
    (4) Federal credit unions shall submit their requests to the NCUA 
regional office having jurisdiction over the geographical area in which 
the credit union's main office is located. The regional office shall 
inform the requesting credit union, in writing, of the date the request 
was received. If the credit union does not receive notification of the 
action taken on its request within 45 calendar days of the request was 
received by the regional office, the credit union may proceed with its 
proposed investment in fixed assets.
    (d) Premises. (1) When real property is acquired for future 
expansion, at least partial utilization should be accomplished within a 
reasonable period, which shall not exceed 3 years unless otherwise 
approved in writing by the Administration. After real property acquired 
for future expansion has been held for 1 year, a board resolution with 
definitive plans for utilization must be available for inspection by an 
NCUA examiner.
    (2) A Federal credit union shall endeavor to dispose of ``abandoned 
premises'' at a price sufficient to reimburse the Federal credit union 
for its investment and costs of acquisition. Current documents must be 
maintained reflecting the Federal credit union's continuing and diligent 
efforts to dispose of ``abandoned premises.'' After ``abandoned 
premises'' have been on the Federal credit union's books for 4 years, 
the property must be publicly advertised for sale. Disposition must 
occur through public or private sale within 5 years of abandonment, 
unless otherwise approved in writing by the Administration.
    (e) Prohibited transactions. (1) With the exception of a short term 
informal lease agreement (maturity less than 1 year) no Federal credit 
union may acquire or lease premises without the prior written approval 
of the Administration from any of the following:
    (i) A director, member of the credit committee or supervisory 
committee, or senior management employee of the Federal credit union, or 
immediate family member of any such individual.
    (ii) A corporation in which any director, member of the credit 
committee or

[[Page 316]]

supervisory committee, official, or senior management employee, or 
immediate family members of any such individual, is an officer or 
director, or has a stock interest of 10 percent or more.
    (iii) A partnership in which any director, member of the credit 
committee or supervisory committee, or senior management employee, or 
immediate family members of any such individual, is a general partner, 
or a limited partner with an interest of 10 percent or more.
    (2) The prohibition contained in paragraph (e)(1) of this section, 
also applies to any employee not otherwise covered if the employee is 
directly involved in investments in fixed assets unless the board of 
directors determines that the employee's involvement does not present a 
conflict of interest.
    (3) All transactions with business associates or family members not 
specifically prohibited by this paragraph (e) must be conducted at arm's 
length and in the interest of the credit union.

[54 FR 18467, May 1, 1989, as amended at 63 FR 10756, Mar. 5, 1998; 63 
FR 71342, Dec. 24, 1998]



Sec. 701.37  Treasury tax and loan depositaries; depositaries and financial agents of the Government.

    (a) Definitions. (1) Treasury Tax and Loan (TT&L) Remittance Account 
means a nondividend-paying account, the balance of which is subject to 
the right of immediate withdrawal, established for receipt of payments 
of Federal taxes and certain United States obligations under United 
States Treasury Department regulations.
    (2) TT&L Note Account means an account subject to the right of 
immediate call, evidencing funds held by depositaries electing the note 
option under United States Treasury Department regulations.
    (3) Treasury General Account means an account, established under 
United States Treasury Department regulations, in which a zero balance 
may be maintained and from which the entire balance may be withdrawn by 
the depositor immediately under all circumstances except closure of the 
credit union.
    (4) U.S. Treasury Time Deposit--Open Account means a nondividend-
bearing account, established under United States Treasury Department 
regulations, which generally may not be withdrawn until the expiration 
of 14 days after the date of the United States Treasury Department's 
written notice of intent to withdraw.
    (b) Subject to regulation of the United States Treasury Department, 
a Federal credit union may serve as a Treasury tax and loan depositary, 
a depositary of Federal taxes, a depositary of public money, and a 
financial agent of the United States Government. In serving in these 
capacities, a Federal credit union may maintain the accounts defined in 
subsection (a), pledge collateral, and perform the services described 
under United States Treasury Department regulations for institutions 
acting in these capacities.
    (c) Funds held in a TT&L Remittance Account, a TT&L Note Account, a 
Treasury General Account, and a U.S. Treasury Time Deposit--Open Account 
shall be considered deposits of public funds. Funds held in a TT&L 
Remittance Account and a TT&L Note Account shall be added together and 
insured up to a maximum of $100,000 in the aggregate. Funds held in a 
Treasury General Account and a U.S. Treasury Time Deposit--Open Account 
shall be added together and insured up to a maximum of $100,000 in the 
aggregate.
    (d) Funds held in a TT&L Remittance Account, a TT&L Note Account, a 
Treasury General Account, and U.S. Treasury Time Deposit--Open Account 
are not subject to the 60-day notice requirement of Article III, section 
5(a) of the Federal Credit Union Bylaws.

[54 FR 18471, May 1, 1989]



Sec. 701.38  Borrowed funds from natural persons.

    (a) Federal credit unions may borrow from a natural person, 
provided:
    (1) The borrowing is evidenced by a signed promissory note which 
sets forth the terms and conditions regarding maturity, prepayment, 
interest rate, method of computation, and method of payment;
    (2) The promissory note and any advertisement for such funds 
contains conspicuous langauge indicating that:
    (i) The note represents money borrowed by the credit union;

[[Page 317]]

    (ii) The note does not represent shares and, therefore, is not 
insured by the National Credit Union Share Insurance Fund.

[45 FR 29271, May 2, 1980, as amended at 47 FR 17979, Apr. 27, 1982]



Sec. 701.39  Statutory lien.

    (a) Definitions. Within this section, each of the following terms 
has the meaning prescribed below:
    (1) Except as otherwise provided by law or except as otherwise 
provided by federal law is a qualifying phrase referring to a federal 
and/or state law, as the case may be, which supersedes a requirement of 
this section. It is the responsibility of the credit union to ascertain 
whether such statutory or case law exists and is applicable;
    (2) Impress means to attach to a member's account and is the act 
which makes the lien enforceable against that account;
    (3) Member means any member who is primarily, secondarily or 
otherwise responsible for an outstanding financial obligation to the 
credit union, including without limitation an obligor, maker, co-maker, 
guarantor, co-signer, endorser, surety or accommodation party;
    (4) Notice means written notice to a member disclosing, in plain 
language, that the credit union has the right to impress and enforce a 
statutory lien against the member's shares and dividends in the event of 
failure to satisfy a financial obligation, and may enforce the right 
without further notice to the member. Such notice must be given at the 
time, or at any time before, the member incurs the financial obligation;
    (5) Statutory lien means the right granted by section 107(11) of the 
Federal Credit Union Act, 12 U.S.C. 1757(11), to a federal credit union 
to establish a right in or claim to a member's shares and dividends 
equal to the amount of that member's outstanding financial obligation to 
the credit union, as that amount varies from time to time.
    (b) Superior claim. Except as otherwise provided by law, a statutory 
lien gives the federal credit union priority over other creditors when 
claims are asserted against a member's account(s).
    (c) Impressing a statutory lien. Except as otherwise provided by 
federal law, a credit union can impress a statutory lien on a member's 
account(s)--
    (1) Account records. By giving notice thereof in the member's 
account agreement(s) or other account opening documentation; or
    (2) Loan documents. In the case of a loan, by giving notice thereof 
in a loan document signed or otherwise acknowledged by the member(s); or
    (3) By-Law or policy. Through a duly adopted credit union by-law or 
policy of the board of directors, of which the member is given notice.
    (d) Enforcing a statutory lien--(1) Application of funds. Except as 
otherwise provided by federal law, a federal credit union may enforce 
its statutory lien against a member's account(s) by debiting funds in 
the account and applying them to the extent of any of the member's 
outstanding financial obligations to the credit union.
    (2) Default required. A federal credit union may enforce its 
statutory lien against a member's account(s) only when the member fails 
to satisfy an outstanding financial obligation due and payable to the 
credit union.
    (3) Neither judgment nor set-off required. A federal credit union 
need not obtain a court judgment on the member's debt, nor exercise the 
equitable right of set-off, prior to enforcing its statutory lien 
against the member's account.

[64 FR 56956, Oct. 22, 1999]



PART 702--PROMPT CORRECTIVE ACTION--Table of Contents




Sec.
702.1  Authority, purpose, scope and other supervisory authority.
702.2  Definitions.

                   Subpart A--Net Worth Classification

702.101  Measure and effective date of net worth classification.
702.102  Statutory net worth categories.
702.103  Applicability of risk-based net worth requirement.
702.104  Risk portfolios defined.
702.105  Weighted-average life of investments.

[[Page 318]]

702.106  Standard calculation of risk-based net worth requirement.
702.107  Alternative components for standard calculation.
702.108  Risk mitigation credit to reduce risk-based net worth 
          requirement.

Appendices A--F to subpart A of part 702

       Subpart B--Mandatory and Discretionary Supervisory Actions

702.201  Prompt corrective action for ``adequately capitalized'' credit 
          unions.
702.202  Prompt corrective action for ``undercapitalized'' credit 
          unions.
702.203  Prompt corrective action for ``significantly undercapitalized'' 
          credit unions.
702.204  Prompt corrective action for ``critically undercapitalized'' 
          credit unions.
702.205  Consultation with State officials on proposed prompt corrective 
          action.
702.206  Net worth restoration plans.

  Subpart C--Alternative Prompt Corrective Action for New Credit Unions

702.301  Scope and definition.
702.302  Net worth categories for new credit unions.
702.303  Prompt corrective action for ``adequately capitalized'' new 
          credit unions.
702.304  Prompt corrective action for ``moderately capitalized,'' 
          ``marginally capitalized'' and ``minimally capitalized'' new 
          credit unions.
702.305  Prompt corrective action for ``uncapitalized'' new credit 
          unions.
702.306  Revised business plans for new credit unions.
702.307  Incentives for new credit unions.

                           Subpart D--Reserves

702.401  Reserves.
702.402  Full and fair disclosure of financial condition.
702.403  Payment of dividends.

    Authority: 12 U.S.C. 1766(a), 1790d.

    Source: 65 FR 8584, Feb. 18, 2000, unless otherwise noted.



Sec. 702.1  Authority, purpose, scope and other supervisory authority.

    (a) Authority. Subparts A, B and C of this part and subpart L of 
part 747 of this chapter are issued by the National Credit Union 
Administration pursuant to section 216 of the Federal Credit Union Act 
(FCUA), 12 U.S.C. 1790d (section 1790d), as added by section 301 of the 
Credit Union Membership Access Act, Pub. L. No. 105-219, 112 Stat. 913 
(1998). Subpart D of this part is issued pursuant to FCUA section 120, 
12 U.S.C. 1766.
    (b) Purpose. The express purpose of prompt corrective action under 
section 1790d is to resolve the problems of federally-insured credit 
unions at the least possible long-term loss to the National Credit Union 
Share Insurance Fund. This part carries out the purpose of prompt 
corrective action by establishing a framework of mandatory and 
discretionary supervisory actions, applicable according to a credit 
union's net worth ratio, designed primarily to restore and improve the 
net worth of federally-insured credit unions.
    (c) Scope. This part implements the provisions of section 1790d as 
they apply to federally-insured credit unions, whether federally- or 
state-chartered; to such credit unions defined as ``new'' pursuant to 
section 1790d(b)(2); and to such credit unions defined as ``complex'' 
pursuant to section 1790d(d). Certain of these provisions also apply to 
officers and directors of federally-insured credit unions. This part 
does not apply to corporate credit unions. Procedures for issuing, 
reviewing and enforcing orders and directives issued under this part are 
set forth in subpart L of part 747 of this chapter, 12 CFR 747.2001 et 
seq.
    (d) Other supervisory authority. Neither Sec. 1790d nor this part in 
any way limits the authority of the NCUA Board or appropriate State 
official under any other provision of law to take additional supervisory 
actions to address unsafe or unsound practices or conditions, or 
violations of applicable law or regulations. Action taken under this 
part may be taken independently of, in conjunction with, or in addition 
to any other enforcement action available to the NCUA Board or 
appropriate State official, including issuance of cease and desist 
orders, orders of prohibition, suspension and removal, or assessment of 
civil money penalties, or any other actions authorized by law.



Sec. 702.2  Definitions

    Except as provided below, the terms used in this part have the same 
meanings as set forth in FCUA sections 101 and 216, 12 U.S.C. 1752, 
1790d.

[[Page 319]]

    (a) Appropriate regional director means the director of the NCUA 
regional office having jurisdiction over federally-insured credit unions 
in the state where the affected credit union is principally located.
    (b) Appropriate State official means the commission, board or other 
supervisory authority having jurisdiction over credit unions chartered 
by the State which chartered the affected credit union.
    (c) Credit union means a federally-insured, natural person credit 
union, whether federally- or State-chartered, as defined by 12 U.S.C. 
1752(6).
    (d) CUSO means a credit union service organization as described in 
12 CFR 712 et seq. for federally-chartered credit unions, and as defined 
under State law for State-chartered credit unions.
    (e) NCUSIF means the National Credit Union Share Insurance Fund as 
defined by 12 U.S.C. 1783.
    (f) Net worth means the retained earnings balance of the credit 
union at quarter end as determined under generally accepted accounting 
principles. Retained earnings consists of undivided earnings, regular 
reserves, and any other appropriations designated by management or 
regulatory authorities. This means that only undivided earnings and 
appropriations of undivided earnings are included in net worth. For low 
income-designated credit unions, net worth also includes secondary 
capital accounts that are uninsured and subordinate to all other claims, 
including claims of creditors, shareholders and the NCUSIF. For any 
credit union, net worth does not include the allowance for loan and 
lease losses account.
    (g) Net worth ratio means the ratio of the net worth of the credit 
union (as defined in paragraph (f) of this section to the total assets 
of the credit union (as defined by a measure chosen under paragraph (j) 
of this section.
    (h) New credit union means a federally-insured credit union which 
both has been in operation for less than ten (10) years and has 
$10,000,000 or less in total assets.
    (i) Shares means deposits, shares, share certificates, share drafts, 
or any other depository account authorized by federal or state law.
    (j) Total assets. (1) Total assets means a credit union's total 
assets as measured by either--
    (i) Average quarterly balance. The average of quarter-end balances 
of the four most recent calendar quarters; or
    (ii) Average monthly balance. The average of month-end balances over 
the three calendar months of the calendar quarter; or
    (iii) Average daily balance. The average daily balance over the 
calendar quarter; or
    (iv) Quarter-end balance. The quarter-end balance of the calendar 
quarter as reported on the credit union's Call Report, and for semi-
annual filers as calculated for the quarters ending March 31 and 
September 30.
    (2) For each quarter, a credit union must elect a measure of total 
assets from paragraph (j)(1) of this section to apply for all purposes 
under this part except Secs. 702.103 through 702.108 [risk-based net 
worth requirement].
    (k) Weighted-average life means the weighted-average time to the 
return of a dollar of principal, calculated by multiplying each portion 
of principal received by the time at which it is expected to be received 
(based on a reasonable and supportable estimate of that time), and then 
summing and dividing by the total amount of principal.

[65 FR 8584, Feb. 18, 2000, as amended at 65 FR 44966, July 20, 2000]



                   Subpart A--Net Worth Classification



Sec. 702.101  Measures and effective date of net worth classification.

    (a) Net worth measures. For purposes of this part, a credit union 
must determine its net worth category classification at the end of each 
calendar quarter using two measures:
    (1) The net worth ratio as defined in Sec. 702.2(g); and
    (2) If determined to be applicable under Sec. 702.103, a risk-based 
net worth requirement.
    (b) Effective date of net worth classification. For purposes of this 
part, the effective date of a federally-insured credit union's net worth 
category classification shall be the most recent to occur of:

[[Page 320]]

    (1) The last day of the calendar month following the end of the 
calendar quarter; or
    (2) The date the credit union's net worth ratio is recalculated by 
or as a result of its most recent final report of examination; or
    (3) The date the credit union received written notice from NCUA or, 
if State-chartered, the appropriate State official, of reclassification 
on safety and soundness grounds as provided under Secs. 702.102(b) or 
702.302(d).
    (c) Notice by credit union of change in net worth category. (1) When 
filing a quarterly or semi-annual Call Report, a federally-insured 
credit union need not otherwise notify the NCUA Board of a change in its 
net worth ratio that places the credit union in a lower net worth 
category;
    (2) A federally-insured credit union which files its Call Reports 
semi-annually shall give written notice to the NCUA Board and, if State-
chartered, to the appropriate State official, of a change in its net 
worth ratio for the quarters ending March 31 and September 30, if that 
change places the credit union in a lower net worth category, provided 
however, that this paragraph does not apply when a credit union has been 
notified by NCUA or, if State-chartered, by the appropriate State 
official, of a change in its net worth ratio that places the credit 
union in a lower net worth category;
    (3) Written notice as required under paragraph (c)(2) of this 
section shall be given no later than 15 calendar days after the 
effective date of the change in net worth category, and shall be deemed 
given upon receipt by the appropriate Regional Director and, if State-
chartered, by the appropriate State official.
    (4) Failure to timely file a Call Report or to timely provide notice 
as required under this section in no way alters the effective date of a 
change in net worth classification under this subparagraph, or the 
affected credit union's corresponding legal obligations under this part.

[65 FR 8584, Feb. 18, 2000; 65 FR 55439, Sept. 14, 2000]



Sec. 702.102  Statutory net worth categories.

    (a) Net worth categories. Except for credit unions defined as 
``new'' under subpart B of this part, a federally-insured credit union 
shall be classified (Table 1)--
    (1) Well capitalized if it has a net worth ratio of seven percent 
(7%) or greater and also meets any applicable risk-based net worth 
requirement under Secs. 702.103 through 702.108; or
    (2) Adequately capitalized if it has a net worth ratio of six 
percent (6%) or more but less than seven percent (7%), and also meets 
any applicable risk-based net worth requirement under Secs. 702.103 
through 702.108 below; or
    (3) Undercapitalized if it has a net worth ratio of four percent 
(4%) or more but less than six percent (6%), or fails to meet any 
applicable risk-based net worth requirement under Secs. 702.103 through 
702.108; or
    (4) Significantly undercapitalized if it
    (i) Has a net worth ratio of two percent (2%) or more but less than 
four percent (4%); or
    (ii) Has a net worth ratio of four percent (4%) or more but less 
than five percent (5%), and either--
    (A) Fails to submit an acceptable net worth restoration plan within 
the time prescribed in Sec. 702.206; or
    (B) Materially fails to implement a net worth restoration plan 
approved by the NCUA Board; or
    (5) Critically undercapitalized if it has a net worth ratio of less 
than two percent (2%).

[[Page 321]]

[GRAPHIC] [TIFF OMITTED] TR18FE00.006

    (b) Reclassification based on supervisory criteria other than net 
worth. The NCUA Board may reclassify a ``well capitalized'' credit union 
as ``adequately capitalized'' and may require an ``adequately 
capitalized'' or ``undercapitalized'' credit union to comply with 
certain mandatory or discretionary supervisory actions as if it were in 
the next lower net worth category (each of such actions hereinafter 
referred to generally as ``reclassification'') in the following 
circumstances:
    (1) Unsafe or unsound condition. The NCUA Board has determined, 
after notice and opportunity for hearing pursuant to Sec.  747.2003 of 
this chapter, that the credit union is in an unsafe or unsound 
condition; or
    (2) Unsafe or unsound practice. The NCUA Board has determined, after 
notice and opportunity for hearing pursuant to Sec. 747.2003 of this 
chapter, that the credit union has not corrected a material unsafe or 
unsound practice of which it was, or should have been, aware.
    (c) Non-delegation. The NCUA Board may not delegate its authority to 
reclassify a credit union under paragraph (b) of this section.
    (d) Consultation with State officials. The NCUA Board shall consult 
and seek to work cooperatively with the appropriate State official 
before reclassifying a federally-insured State-chartered credit union 
under paragraph (b) of this section, and shall promptly notify the 
appropriate State official of its decision to reclassify.

[65 FR 8584, Feb. 18, 2000, as amended at 65 FR 44966, July 20, 2000]



Sec. 702.103  Applicability of risk-based net worth requirement.

    (a) Criteria. For purposes of Sec. 702.102, a credit union is 
defined as ``complex'' and a risk-based net worth requirement is 
applicable only if the credit union meets both of the following criteria 
as reflected its most recent Call Report:
    (1) Minimum asset size. Its quarter-end total assets exceed ten 
million dollars ($10,000,000); and
    (2) Minimum RBNW calculation. Its risk-based net worth requirement 
as calculated under Sec. 702.106 exceeds six percent (6%).
    (b) Optional Call Report filing. For purposes of this part, a credit 
union which is required to file a Call Report only semiannually may 
elect to file a Call Report for the first and/or third quarter of a 
calendar year.

[65 FR 44966, July 20, 2000]



Sec. 702.104  Risk portfolios defined.

    A risk portfolio is a portfolio of assets, liabilities, or 
contingent liabilities as specified below, each expressed

[[Page 322]]

as a percentage of the credit union's quarter-end total assets reflected 
in its most recent Call Report, rounded to two decimal places (Table 1):
    (a) Long-term real estate loans. Total real estate loans and real 
estate lines of credit outstanding, exclusive of those outstanding that 
will contractually refinance, reprice or mature within the next five (5) 
years, and exclusive of all member business loans (as defined in 12 CFR 
723.1 or as approved under 12 CFR 723.20);
    (b) Member business loans outstanding. All member business loans as 
defined in 12 CFR 723.1 or as approved under 12 CFR 723.20;
    (c) Investments. Investments as defined by 12 CFR 703.150 or 
applicable State law, including investments in CUSOs (as defined by 
Sec. 702.2(d));
    (d) Low-risk assets. Cash on hand (e.g., coin and currency, 
including vault, ATM and teller cash) and the NCUSIF deposit;
    (e) Average-risk assets. One hundred percent (100%) of total assets 
minus the sum of the risk portfolios in paragraphs (a) through (d) of 
this section;
    (f) Loans sold with recourse. Outstanding balance of loans sold or 
swapped with recourse, excluding loans sold to the secondary mortgage 
market that have representations and warranties consistent with those 
customarily required by the U.S. Government and government sponsored 
enterprises;
    (g) Unused member business loan commitments. Unused commitments for 
member business loans as defined in 12 CFR 723.1 or as approved under 12 
CFR 723.20; and
    (h) Allowance. The Allowance for Loan and Lease Losses not to exceed 
the equivalent of one and one-half percent (1.5%) of total loans 
outstanding.
[GRAPHIC] [TIFF OMITTED] TR20JY00.000


[65 FR 44966, July 20, 2000]



Sec. 702.105  Weighted-average life of investments.

    Except as provided below (Table 2), the weighted-average life of an 
investment for purposes of Secs. 702.106(c) and 702.107(c) is defined 
pursuant to Sec. 702.2(k):
    (a) Registered investment companies and collective investment funds.
    (1) For investments in registered investment companies (e.g., mutual 
funds) and collective investment funds, the weighted-average life is 
defined as

[[Page 323]]

the maximum weighted-average life disclosed, directly or indirectly, in 
the prospectus or trust instrument;
    (2) For investments in money market funds, as defined in 17 CFR 
270.2a-7, and collective investment funds operated in accordance with 
short-term investment fund rules set forth in 12 CFR 
9.18(b)(4)(ii)(B)(1)-(3), the weighted-average life is defined as one 
(1) year or less; and
    (3) For other investments in registered investment companies or 
collective investment funds, the weighted-average life is defined as 
greater than five (5) years, but less than or equal to seven (7) years;
    (b) Callable fixed-rate debt obligations and deposits. For fixed-
rate debt obligations and deposits that are callable in whole, the 
weighted-average life is defined as the period remaining to the maturity 
date;
    (c) Variable-rate debt obligations and deposits. For variable-rate 
debt obligations and deposits, the weighted-average life is defined as 
the period remaining to the next rate adjustment date;
    (d) Capital in mixed-ownership Government corporations and corporate 
credit unions. For capital stock in mixed-ownership Government 
corporations, as defined in 31 U.S.C. 9101(2), and member paid-in 
capital and membership capital in corporate credit unions, as defined in 
12 CFR 704.2, the weighted-average life is defined as greater than one 
(1) year, but less than or equal to three (3) years;
    (e) Investments in CUSOs. For investments in CUSOs (as defined in 
Sec. 702.2(d)), the weighted-average life is defined as greater than one 
(1) year, but less than or equal to three (3) years; and
    (f) Other equity securities. For other equity securities, the 
weighted average life is defined as greater than ten (10) years.
[GRAPHIC] [TIFF OMITTED] TR20JY00.001


[65 FR 44966, July 20, 2000]



Sec. 702.106  Standard calculation of risk-based net worth requirement.

    A credit union's risk-based net worth requirement is the aggregate 
of the following standard component amounts, each expressed as a 
percentage of the credit union's quarter-end total assets as reflected 
in its most recent Call Report, rounded to two decimal places (Table 3):
    (a) Long-term real estate loans. The sum of:

[[Page 324]]

    (1) Six percent (6%) of the amount of long-term real estate loans 
less than or equal to twenty-five percent (25%) of total assets; and
    (2) Fourteen percent (14%) of the amount in excess of twenty-five 
percent
    (25%) of total assets;
    (b) Member business loans outstanding. The sum of:
    (1) Six percent (6%) of the amount of member business loans 
outstanding less than or equal to twelve and one-quarter percent 
(12.25%) of total assets; and
    (2) Fourteen percent (14%) of the amount in excess of twelve and 
one-quarter percent (12.25%) of total assets;
    (c) Investments. The sum of:
    (1) Three percent (3%) of the amount of investments with a weighted-
average life (as specified in Sec. 702.105 above) of one (1) year or 
less;
    (2) Six percent (6%) of the amount of investments with a weighted-
average life greater than one (1) year, but less than or equal to three 
(3) years;
    (3) Twelve percent (12%) of the amount of investments with a 
weighted-average life greater than three (3) years, but less than or 
equal to ten (10) years; and
    (4) Twenty percent (20%) of the amount of investments with a 
weighted-average life greater than ten (10) years;
    (d) Low-risk assets. Zero percent (0%) of the entire portfolio of 
low-risk assets;
    (e) Average-risk assets. Six percent (6%) of the entire portfolio of 
average-risk assets;
    (f) Loans sold with recourse. Six percent (6%) of the entire 
portfolio of loans sold with recourse;
    (g) Unused member business loan commitments. Six percent (6%) of the 
entire portfolio of unused member business loan commitments; and
    (h) Allowance. Negative one hundred percent (-100%) of the balance 
of the Allowance for Loan and Lease Losses account, not to exceed the 
equivalent of one and one-half percent (1.5%) of total loans 
outstanding.
[GRAPHIC] [TIFF OMITTED] TR20JY00.002


[[Page 325]]



[65 FR 44966, July 20, 2000]



Sec. 702.107  Alternative components for standard calculation.

    A credit union may substitute one or more alternative components 
below, in place of the corresponding standard components in Sec. 702.106 
above, when any alternative component amount, expressed as a percentage 
of the credit union's quarter-end total assets as reflected in its most 
recent Call Report, rounded to two decimal places, is smaller (Table 4):
    (a) Long-term real estate loans. The sum of:
    (1) Eight percent (8%) of the amount of such loans with a remaining 
maturity of greater than 5 years, but less than or equal to 12 years;
    (2) Twelve percent (12%) of the amount of such loans with a 
remaining maturity of greater than 12 years, but less than or equal to 
20 years; and
    (3) Fourteen percent (14%) of the amount of such loans with a 
remaining maturity greater than 20 years;
    (b) Member business loans outstanding. The sum of:
    (1) Fixed rate. Fixed-rate member business loans outstanding as 
follows:
    (i) Six percent (6%) of the amount of such loans with a remaining 
maturity of 3 or fewer years;
    (ii) Nine percent (9%) of the amount of such loans with a remaining 
maturity greater than 3 years, but less than or equal to 5 years;
    (iii) Twelve percent (12%) of the amount of such loans with a 
remaining maturity greater than 5 years, but less than or equal to 7 
years;
    (iv) Fourteen percent (14%) of the amount of such loans with a 
remaining maturity greater than 7 years, but less than or equal to 12 
years; and
    (v) Sixteen percent (16%) of the amount of such loans with a 
remaining maturity greater than 12 years; and
    (2) Variable-rate. Variable-rate member business loans outstanding 
as follows:
    (i) Six percent (6%) of the amount of such loans with a remaining 
maturity of 3 or fewer years;
    (ii) Eight percent (8%) of the amount of such loans with a remaining 
maturity greater than 3 years, but less than or equal to 5 years;
    (iii) Ten percent (10%) of the amount of such loans with a remaining 
maturity greater than 5 years, but less than or equal to 7 years;
    (iv) Twelve percent (12%) of the amount of such loans with a 
remaining maturity greater than 7 years, but less than or equal to 12 
years; and
    (v) Fourteen percent (14%) of the amount of such loans with a 
remaining maturity greater than 12 years.
    (c) Investments. The sum of:
    (1) Three percent (3%) of the amount of investments with a weighted-
average life (as specified in Sec. 702.105 above) of one (1) year or 
less;
    (2) Six percent (6%) of the amount of investments with a weighted-
average life greater than one (1) year, but less than or equal to three 
(3) years;
    (3) Eight percent (8%) of the amount of investments with a weighted-
average life greater than three (3) years, but less than or equal to 
five (5) years;
    (4) Twelve percent (12%) of the amount of investments with a 
weighted-average life greater than five (5) years, but less than or 
equal to seven (7) years;
    (5) Sixteen percent (16%) of the amount of investments with a 
weighted-average life greater than seven (7) years, but less than or 
equal to ten (10) years; and
    (6) Twenty percent (20%) of the amount of investments with a 
weighted-average life greater than ten (10) years.

[[Page 326]]

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[[Page 327]]



[65 FR 44966, July 20, 2000]



Sec. 702.108  Risk mitigation credit to reduce risk-based net worth requirement.

    (a) Application for credit. Upon application by a credit union which 
fails to meet its applicable risk-based net worth requirement, and 
pursuant to guidelines duly adopted by the NCUA Board, the NCUA Board 
may in its discretion grant a credit to reduce a risk-based net worth 
requirement under sections 702.106 and 702.107 upon proof of mitigation 
of:
    (1) Credit risk; or
    (2) Interest rate risk as demonstrated by economic value exposure 
measures.
    (b) Application by FISCU. In the case of a FISCU seeking a risk 
mitigation credit--
    (1) Before an application under paragraph (a) above may be submitted 
to the NCUA Board, it must be submitted in duplicate to the appropriate 
State official and the appropriate Regional Director; and
    (2) The NCUA Board, when evaluating the application of a FISCU, 
shall consult and seek to work cooperatively with the appropriate State 
official, and shall provide prompt notice of its decision to the 
appropriate State official.

[65 FR 44971, July 20, 2000]

[[Page 328]]


                Appendixes A--F to Subpart A of Part 702
      [GRAPHIC] [TIFF OMITTED] TR20JY00.004
      

[[Page 329]]


[GRAPHIC] [TIFF OMITTED] TR20JY00.005


[[Page 330]]


[GRAPHIC] [TIFF OMITTED] TR20JY00.006


[65 FR 44971, July 20, 2000]



       Subpart B--Mandatory and Discretionary Supervisory Actions



Sec. 702.201  Prompt corrective action for ``adequately capitalized'' credit unions

    (a) Earnings transfer. Beginning the effective date of 
classification as ``adequately capitalized'' or lower, a federally-
insured credit union must increase its net worth quarterly by an amount 
equivalent to at least \1/10\th percent (0.1%) of its total assets for 
the current quarter, and must quarterly transfer that amount (or more by 
choice) from undivided earnings to its regular reserve account, until it 
is ``well capitalized.''
    (b) Reduction in earnings transfer. On a case-by-case basis and 
subject to review and revocation no less frequently than quarterly, the 
NCUA Board may permit the credit union to quarterly transfer an amount 
that is less than the equivalent of 1/10th percent (0.1%) of its total 
assets, to the extent the NCUA Board determines that such lesser 
amount--
    (1) Is necessary to avoid a significant redemption of shares; and
    (2) Would further the purpose of this part.

[[Page 331]]



Sec. 702.202  Prompt corrective action for ``undercapitalized'' credit unions

    (a) Mandatory supervisory actions by credit union. A federally-
insured credit union which is ``undercapitalized'' must--
    (1) Earnings transfer. Increase net worth and transfer earnings to 
its regular reserve account in accordance with Sec. 702.201;
    (2) Submit net worth restoration plan. Submit a net worth 
restoration plan pursuant to Sec. 702.206, provided however, that a 
credit union in this category having a net worth ratio of less than five 
percent (5%) which fails to timely submit such a plan, or which 
materially fails to implement an approved plan, is classified 
``significantly undercapitalized'' pursuant to Sec. 702.102(a)(4)(ii) 
above;
    (3) Restrict increase in assets. Beginning the effective date of 
classification as ``undercapitalized'' or lower, not permit the credit 
union's assets to increase beyond its total assets (per Sec. 702.2(j)) 
for the preceding quarter unless--
    (i) Plan approved. The NCUA Board has approved a net worth 
restoration plan which provides for an increase in total assets and--
    (A) The assets of the credit union are increasing consistent with 
the approved plan; and
    (B) The credit union is implementing steps to increase the net worth 
ratio consistent with the approved plan;
    (ii) Plan not approved. The NCUA Board has not approved a net worth 
restoration plan and total assets of the credit union are increasing 
because of increases since quarter-end in balances of:
    (A) Total accounts receivable and accrued income on loans and 
investments; or
    (B) Total cash and cash equivalents; or
    (C) Total loans outstanding, not to exceed the sum of total assets 
(per Sec. 702.2(j)) plus the quarter-end balance of unused commitments 
to lend and unused lines of credit provided however that a credit union 
which increases a balance as permitted under paragraphs (A), (B) or (C) 
cannot offer rates on shares in excess of prevailing rates on shares in 
its relevant market area, and cannot open new branches;
    (4) Restrict member business loans. Beginning the effective date of 
classification as ``undercapitalized'' or lower, not increase the total 
dollar amount of member business loans (defined as loans outstanding and 
unused commitments to lend) as of the preceding quarter-end unless it is 
granted an exception under 12 U.S.C. 1757a(b).
    (b) ``Second tier'' discretionary supervisory actions by NCUA. 
Subject to the applicable procedures for issuing, reviewing and 
enforcing directives set forth in subpart L of part 747 of this chapter, 
the NCUA Board may, by directive, take one or more of the following 
actions with respect to an ``undercapitalized'' credit union having a 
net worth ratio of less than five percent (5%), or a director, officer 
or employee of such a credit union, if it determines that those actions 
are necessary to carry out the purpose of this part:
    (1) Requiring prior approval for acquisitions, branching, new lines 
of business. Prohibit a credit union from, directly or indirectly, 
acquiring any interest in any business entity or financial institution, 
establishing or acquiring any additional branch office, or engaging in 
any new line of business, unless the NCUA Board has approved the credit 
union's net worth restoration plan, the credit union is implementing its 
plan, and the NCUA Board determines that the proposed action is 
consistent with and will further the objectives of that plan;
    (2) Restricting transactions with and ownership of CUSO. Restrict 
the credit union's transactions with a CUSO, or require the credit union 
to reduce or divest its ownership interest in a CUSO;
    (3) Restricting dividends or interest paid. Restrict the dividend or 
interest rates the credit union pays on shares to the prevailing rates 
paid on comparable accounts and maturities in the relevant market area, 
as determined by the NCUA Board, except that dividend rates already 
declared on shares acquired before imposing a restriction under this 
paragraph may not be retroactively restricted;

[[Page 332]]

    (4) Prohibiting or reducing asset growth. Prohibit any growth in the 
credit union's assets or in a category of assets, or require the credit 
union to reduce its assets or a category of assets;
    (5) Alter, reduce or terminate activity. Require the credit union or 
its CUSO to alter, reduce, or terminate any activity which poses 
excessive risk to the credit union;
    (6) Prohibiting nonmember deposits. Prohibit the credit union from 
accepting all or certain nonmember deposits;
    (7) Dismissing director or senior executive officer. Require the 
credit union to dismiss from office any director or senior executive 
officer, provided however, that a dismissal under this clause shall not 
be construed to be a formal administrative action for removal under 12 
U.S.C. 1786(g);
    (8) Employing qualified senior executive officer. Require the credit 
union to employ qualified senior executive officers (who, if the NCUA 
Board so specifies, shall be subject to its approval); and
    (9) Other action to carry out prompt corrective action. Restrict or 
require such other action by the credit union as the NCUA Board 
determines will carry out the purpose of this part better than any of 
the actions prescribed in paragraphs (b)(1) through (8) of this section.
    (c) ``First tier'' application of discretionary supervisory actions. 
An ``undercapitalized'' credit union having a net worth ratio of five 
percent (5%) or more, or which is classified ``undercapitalized'' by 
reason of failing to satisfy a risk-based net worth requirement under 
Sec. 702.105 or 702.106, is subject to the discretionary supervisory 
actions in paragraph (b) of this section if it fails to comply with any 
mandatory supervisory action in paragraph (a) of this section or fails 
to timely implement an approved net worth restoration plan under 
Sec. 702.206, including meeting its prescribed steps to increase its net 
worth ratio.



Sec. 702.203  Prompt corrective action for ``significantly undercapitalized'' credit unions.

    (a) Mandatory supervisory actions by credit union. A federally-
insured credit union which is ``significantly undercapitalized'' must--
    (1) Earnings transfer. Increase net worth and transfer earnings to 
its regular reserve account in accordance with Sec. 702.201;
    (2) Submit net worth restoration plan. Submit a net worth 
restoration plan pursuant to Sec. 702.206;
    (3) Restrict increase in assets. Not permit the credit union's total 
assets to increase except as provided in Sec. 702.202(a)(3) and
    (4) Restrict member business loans. Not increase the total dollar 
amount of member business loans (defined as loans outstanding and unused 
commitments to lend) as provided in Sec. 702.202(a)(4).
    (b) Discretionary supervisory actions by NCUA. Subject to the 
applicable procedures for issuing, reviewing and enforcing directives 
set forth in subpart L of part 747 of this chapter, the NCUA Board may, 
by directive, take one or more of the following actions with respect to 
any ``significantly undercapitalized'' credit union, or a director, 
officer or employee of such credit union, if it determines that those 
actions are necessary to carry out the purpose of this part:
    (1) Requiring prior approval for acquisitions, branching, new lines 
of business. Prohibit a credit union from, directly or indirectly, 
acquiring any interest in any business entity or financial institution, 
establishing or acquiring any additional branch office, or engaging in 
any new line of business, except as provided in Sec. 702.202(b)(1);
    (2) Restricting transactions with and ownership of CUSO. Restrict 
the credit union's transactions with a CUSO, or require the credit union 
to divest or reduce its ownership interest in a CUSO;
    (3) Restricting dividends or interest paid. Restrict the dividend or 
interest rates that the credit union pays on shares as provided in 
Sec. 702.202(b)(3);
    (4) Prohibiting or reducing asset growth. Prohibit any growth in the 
credit union's assets or in a category of assets, or require the credit 
union to reduce assets or a category of assets;
    (5) Alter, reduce or terminate activity. Require the credit union or 
its CUSO(s)

[[Page 333]]

to alter, reduce, or terminate any activity which poses excessive risk 
to the credit union;
    (6) Prohibiting nonmember deposits. Prohibit the credit union from 
accepting all or certain nonmember deposits;
    (7) New election of directors. Order a new election of the credit 
union's board of directors;
    (8) Dismissing director or senior executive officer. Require the 
credit union to dismiss from office any director or senior executive 
officer, provided however, that a dismissal under this clause shall not 
be construed to be a formal administrative action for removal under 12 
U.S.C. 1786(g);
    (9) Employing qualified senior executive officer. Require the credit 
union to employ qualified senior executive officers (who, if the NCUA 
Board so specifies, shall be subject to its approval);
    (10) Restricting senior executive officers' compensation. Except 
with the prior written approval of the NCUA Board, limit compensation to 
any senior executive officer to that officer's average rate of 
compensation (excluding bonuses and profit sharing) during the four (4) 
calendar quarters preceding the effective date of classification of the 
credit union as ``significantly undercapitalized,'' and prohibit payment 
of a bonus or profit share to such officer;
    (11) Other actions to carry out prompt corrective action. Restrict 
or require such other action by the credit union as the NCUA Board 
determines will carry out the purpose of this part better than any of 
the actions prescribed in paragraphs (b)(1) through (10) of this 
section; and
    (12) Requiring merger. Require the credit union to merge with 
another financial institution if one or more grounds exist for placing 
the credit union into conservatorship pursuant to 12 U.S.C. 
1786(h)(1)(F), or into liquidation pursuant to 12 U.S.C. 
1787(a)(3)(A)(i).
    (c) Discretionary conservatorship or liquidation if no prospect of 
becoming ``adequately capitalized.'' Notwithstanding any other actions 
required or permitted to be taken under this section, when a credit 
union becomes ``significantly undercapitalized'' (including by 
reclassification under section 702.102(b) above), the NCUA Board may 
place the credit union into conservatorship pursuant to 12 U.S.C. 
1786(h)(1)(F), or into liquidation pursuant to 12 U.S.C. 
1787(a)(3)(A)(i), provided that the credit union has no reasonable 
prospect of becoming ``adequately capitalized.''



Sec. 702.204  Prompt corrective action for ``critically undercapitalized'' credit unions

    (a) Mandatory supervisory actions by credit union. A federally-
insured credit union which is ``critically undercapitalized'' must--
    (1) Earnings transfer. Increase net worth and transfer earnings to 
its regular reserve account in accordance with Sec. 702.201;
    (2) Submit net worth restoration plan. Submit a net worth 
restoration plan pursuant to Sec. 702.206;
    (3) Restrict increase in assets. Not permit the credit union's total 
assets to increase except as provided in Sec. 702.202(a)(3); and
    (4) Restrict member business loans. Not increase the total dollar 
amount of member business loans (defined as loans outstanding and unused 
commitments to lend) as provided in Sec. 702.202(a)(4).
    (b) Discretionary supervisory actions by NCUA. Subject to the 
applicable procedures for issuing, reviewing and enforcing directives 
set forth in subpart L of part 747 of this chapter, the NCUA Board may, 
by directive, take one or more of the following actions with respect to 
any ``critically undercapitalized'' credit union, or a director, officer 
or employee of such credit union, if it determines that those actions 
are necessary to carry out the purpose of this part:
    (1) Requiring prior approval for acquisitions, branching, new lines 
of business. Prohibit a credit union from, directly or indirectly, 
acquiring any interest in any business entity or financial institution, 
establishing or acquiring any additional branch office, or engaging in 
any new line of business, except as provided by Sec. 702.202(b)(1);
    (2) Restricting transactions with and ownership of CUSO. Restrict 
the credit union's transactions with a CUSO, or require the credit union 
to divest or reduce its ownership interest in a CUSO;

[[Page 334]]

    (3) Restricting dividends or interest paid. Restrict the dividend or 
interest rates that the credit union pays on shares as provided in 
Sec. 702.202(b)(3);
    (4) Prohibiting or reducing asset growth. Prohibit any growth in the 
credit union's assets or in a category of assets, or require the credit 
union to reduce assets or a category of assets;
    (5) Alter, reduce or terminate activity. Require the credit union or 
its CUSO(s) to alter, reduce, or terminate any activity which poses 
excessive risk to the credit union;
    (6) Prohibiting nonmember deposits. Prohibit the credit union from 
accepting all or certain nonmember deposits;
    (7) New election of directors. Order a new election of the credit 
union's board of directors;
    (8) Dismissing director or senior executive officer. Require the 
credit union to dismiss from office any director or senior executive 
officer, provided however, that a dismissal under this clause shall not 
be construed to be a formal administrative action for removal under 12 
U.S.C. 1786(g);
    (9) Employing qualified senior executive officer. Require the credit 
union to employ qualified senior executive officers (who, if the NCUA 
Board so specifies, shall be subject to its approval);
    (10) Restricting senior executive officers' compensation. Reduce or, 
with the prior written approval of the NCUA Board, limit compensation to 
any senior executive officer to that officer's average rate of 
compensation (excluding bonuses and profit sharing) during the four (4) 
calendar quarters preceding the effective date of classification of the 
credit union as ``critically undercapitalized,'' and prohibit payment of 
a bonus or profit share to such officer;
    (11) Restrictions on payments on uninsured secondary capital. 
Beginning 60 days after the effective date of classification of a credit 
union as ``critically undercapitalized,'' prohibit payments of 
principal, dividends or interest on the credit union's uninsured 
secondary capital accounts established after August 7, 2000, except that 
unpaid dividends or interest shall continue to accrue under the terms of 
the account to the extent permitted by law;
    (12) Requiring prior approval. Require a ``critically 
undercapitalized'' credit union to obtain the NCUA Board's prior written 
approval before doing any of the following:
    (i) Entering into any material transaction not within the scope of 
an approved net worth restoration plan (or approved revised business 
plan under subpart C of this part);
    (ii) Extending credit for transactions deemed highly leveraged by 
the NCUA Board or, if State-chartered, by the appropriate State 
official;
    (iii) Amending the credit union's charter or bylaws, except to the 
extent necessary to comply with any law, regulation, or order;
    (iv) Making any material change in accounting methods; and
    (v) Paying dividends or interest on new share accounts at a rate 
exceeding the prevailing rates of interest on insured deposits in its 
relevant market area;
    (13) Other action to carry out prompt corrective action. Restrict or 
require such other action by the credit union as the NCUA Board 
determines will carry out the purpose of this part better than any of 
the actions prescribed in paragraphs (b)(1) through (12) of this 
section; and
    (14) Requiring merger. Require the credit union to merge with 
another financial institution if one or more grounds exist for placing 
the credit union into conservatorship pursuant to 12 U.S.C. 
1786(h)(1)(F), or into liquidation pursuant to 12 U.S.C. 
1787(a)(3)(A)(i).
    (c) Mandatory conservatorship, liquidation or action in lieu 
thereof--(1) Action within 90 days. Notwithstanding any other actions 
required or permitted to be taken under this section (and regardless of 
a credit union's prospect of becoming ``adequately capitalized''), the 
NCUA Board must, within 90 calendar days after the effective date of 
classification of a credit union as ``critically undercapitalized''--
    (i) Conservatorship. Place the credit union into conservatorship 
pursuant to 12 U.S.C. 1786(h)(1)(G); or
    (ii) Liquidation. Liquidate the credit union pursuant to 12 U.S.C. 
1787(a)(3)(A)(ii); or
    (iii) Other corrective action. Take other corrective action, in lieu 
of conservatorship or liquidation, to better

[[Page 335]]

achieve the purpose of this part, provided that the NCUA Board documents 
why such action in lieu of conservatorship or liquidation would do so.
    (2) Renewal of other corrective action. A determination by the NCUA 
Board to take other corrective action in lieu of conservatorship or 
liquidation under paragraph (c)(1)(iii) of this section shall expire 
after an effective period ending no later than 180 calendar days after 
the determination is made, and the credit union shall be immediately 
placed into conservatorship or liquidation under paragraphs (c)(1)(i) 
and (ii), unless the NCUA Board makes a new determination under 
paragraph (c)(1)(iii) of this section before the end of the effective 
period of the prior determination;
    (3) Mandatory liquidation after 18 months--(i) Generally. 
Notwithstanding paragraphs (c)(1) and (2) of this section, the NCUA 
Board must place a credit union into liquidation if it remains 
``critically undercapitalized'' for a full calendar quarter, on a 
monthly average basis, following a period of 18 months from the 
effective date the credit union was first classified ``critically 
undercapitalized.''
    (ii) Exception. Notwithstanding paragraph (c)(3)(i) of this section, 
the NCUA Board may continue to take other corrective action in lieu of 
liquidation if it certifies that the credit union--
    (A) Has been in substantial compliance with an approved net worth 
restoration plan requiring consistent improvement in net worth since the 
date the net worth restoration plan was approved;
    (B) Has positive net income or has an upward trend in earnings that 
the NCUA Board projects as sustainable; and
    (C) Is viable and not expected to fail.
    (iii) Review of exception. The NCUA Board shall, at least quarterly, 
review the certification of an exception to liquidation under paragraph 
(c)(3)(ii) of this section and shall either--
    (A) Recertify the credit union if it continues to satisfy the 
criteria of paragraph (c)(3)(ii) of this section; or
    (B) Promptly place the credit union into liquidation, pursuant to 12 
U.S.C. 1787(a)(3)(A)(ii), if it fails to satisfy the criteria of 
paragraph (c)(3)(ii) of this section.
    (4) Nondelegation. The NCUA Board may not delegate its authority 
under paragraph (c) of this section, unless the credit union has less 
than $5,000,000 in total assets. A credit union shall have a right of 
direct appeal to the NCUA Board of any decision made by delegated 
authority under this section.



Sec. 702.205  Consultation with State officials on proposed prompt corrective action.

    (a) Consultation on proposed conservatorship or liquidation. Before 
placing a federally-insured State-chartered credit union into 
conservatorship (pursuant to 12 U.S.C. 1786(h)(1)(F) or (G)) or 
liquidation (pursuant to 12 U.S.C. 1787(a)(3)) as permitted or required 
under subparts B or C of this part to facilitate prompt corrective 
action--
    (1) The NCUA Board shall seek the views of the appropriate State 
official (as defined in Sec. 702.2(b), and give him or her an 
opportunity to place the credit union into conservatorship or 
liquidation;
    (2) The NCUA Board shall, upon timely request of the appropriate 
State official, promptly provide him or her with a written statement of 
the reasons for the proposed conservatorship or liquidation, and 
reasonable time to respond to that statement; and
    (3) If the appropriate State official makes a timely written 
response that disagrees with the proposed conservatorship or liquidation 
and gives reasons for that disagreement, the NCUA Board shall not place 
the credit union into conservatorship or liquidation unless it first 
considers the views of the appropriate State official and determines 
that--
    (i) The NCUSIF faces a significant risk of loss if the credit union 
is not placed into conservatorship or liquidation; and
    (ii) Conservatorship or liquidation is necessary either to reduce 
the risk of loss, or to reduce the expected loss, to the NCUSIF with 
respect to the credit union.
    (b) Nondelegation. The NCUA Board may not delegate any determination 
under paragraph (a)(3) of this section.

[[Page 336]]

    (c) Consultation on proposed discretionary action. The NCUA Board 
shall consult and seek to work cooperatively with the appropriate State 
official before taking any discretionary supervisory action under 
Secs. 702.201(b), 702.202(b), 702.203(b), 702.204(b), 702.304(b) and 
702.305(b) with respect to a federally-insured State-chartered credit 
union; shall provide prompt notice of its decision to the appropriate 
State official; and shall allow the appropriate State official to take 
the proposed action independently or jointly with NCUA.



Sec. 702.206  Net worth restoration plans.

    (a) Schedule for filing--(1) Generally. A federally-insured credit 
union shall file a written net worth restoration plan (NWRP) with the 
appropriate Regional Director and, if State-chartered, the appropriate 
State official, within 45 calendar days of the effective date of 
classification as either ``undercapitalized,'' ``significantly 
undercapitalized'' or ``critically undercapitalized,'' unless the NCUA 
Board notifies the credit union in writing that its NWRP is to be filed 
within a different period.
    (2) Exception. An otherwise ``adequately capitalized'' credit union 
that is reclassified ``undercapitalized'' on safety and soundness 
grounds under Sec. 702.102(b) is not required to submit a NWRP solely 
due to the reclassification, unless the NCUA Board notifies the credit 
union that it must submit an NWRP.
    (3) Filing of additional plan. Notwithstanding paragraph (a)(1) of 
this section, a credit union that has already submitted and is operating 
under a NWRP approved under this section is not required to submit an 
additional NWRP due to a change in net worth category (including by 
reclassification under Sec. 702.102(b)), unless the NCUA Board notifies 
the credit union that it must submit a new NWRP. A credit union that is 
notified to submit a new or revised NWRP shall file the NWRP in writing 
with the appropriate Regional Director within 30 calendar days of 
receiving such notice, unless the NCUA Board notifies the credit union 
in writing that the NWRP is to be filed within a different period.
    (4) Failure to timely file plan. When a credit union fails to timely 
file an NWRP pursuant to this paragraph, the NCUA Board shall promptly 
notify the credit union that it has failed to file an NWRP and that it 
has 15 calendar days from receipt of that notice within which to file an 
NWRP.
    (b) Assistance to small credit unions. Upon timely request by a 
credit union having total assets of less than $10 million (regardless 
how long it has been in operation), the NCUA Board shall provide 
assistance in preparing an NWRP required to be filed under paragraph (a) 
of this section.
    (c) Contents of NWRP. An NWRP must--
    (1) Specify--
    (i) A quarterly timetable of steps the credit union will take to 
increase its net worth ratio so that it becomes ``adequately 
capitalized'' by the end of the term of the NWRP, and to remain so for 
four (4) consecutive calendar quarters. If ``complex,'' the credit union 
is subject to a risk-based net worth requirement that may require a net 
worth ratio higher than six percent (6%) to become ``adequately 
capitalized'';
    (ii) The projected amount of earnings to be transferred to the 
regular reserve in each quarter of the term of the NWRP equivalent to 
not less than \1/10\ percent (0.1%) of its total assets under 
Sec. 702.201(a), or such lesser amount as the NCUA Board may permit 
under Sec. 702.201(b);
    (iii) How the credit union will comply with the mandatory and 
discretionary supervisory actions imposed on it by the NCUA Board under 
this subpart;
    (iv) The types and levels of activities in which the credit union 
will engage; and
    (v) If reclassified to a lower category under Sec. 702.102(b), the 
steps the credit union will take to correct the unsafe or unsound 
practice(s) or condition(s);
    (2) Include pro forma financial statements, including any off-
balance sheet items, covering a minimum of the next two years; and
    (3) Contain such other information as the NCUA Board has required.
    (d) Criteria for approval of NWRP. The NCUA Board shall not accept a 
NWRP plan unless it--

[[Page 337]]

    (1) Complies with paragraph (c) of this section;
    (2) Is based on realistic assumptions, and is likely to succeed in 
restoring the credit union's net worth; and (3) Would not unreasonably 
increase the credit union's exposure to risk (including credit risk, 
interest-rate risk, and other types of risk).
    (e) Consideration of regulatory capital. To minimize possible long-
term losses to the NCUSIF while the credit union takes steps to become 
``adequately capitalized,'' the NCUA Board shall, in evaluating an NWRP 
under this section, consider the type and amount of any form of 
regulatory capital which may become established by NCUA regulation, or 
authorized by State law and recognized by NCUA, which the credit union 
holds, but which is not included in its net worth.
    (f) Review of NWRP--(1) Notice of decision. Within 45 calendar days 
after receiving an NWRP under this part, the NCUA Board shall notify the 
credit union in writing whether the NWRP has been approved, and shall 
provide reasons for its decision in the event of disapproval.
    (2) Delayed decision. If no decision is made within the time 
prescribed in paragraph (f)(1) of this section, the NWRP is deemed 
approved.
    (3) Consultation with State officials. In the case of an NWRP 
submitted by a federally-insured State-chartered credit union (whether 
an original, new, additional, revised or amended NWRP), the NCUA Board 
shall, when evaluating the NWRP, seek and consider the views of the 
appropriate State official, and provide prompt notice of its decision to 
the appropriate State official.
    (g) NWRP not approved  (1) Submission of revised NWRP. If an NWRP is 
rejected by the NCUA Board, the credit union shall submit a revised NWRP 
within 30 calendar days of receiving notice of disapproval, unless it is 
notified in writing by the NCUA Board that the revised NWRP is to be 
filed within a different period.
    (2) Notice of decision on revised NWRP. Within 30 calendar days 
after receiving a revised NWRP under paragraph (g)(1) of this section, 
the NCUA Board shall notify the credit union in writing whether the 
revised NWRP is approved. The Board may extend the time within which 
notice of its decision shall be provided.
    (3) Disapproval of reclassified credit union's NWRP. A credit union 
which has been classified ``significantly undercapitalized'' under 
Sec. 702.102(a)(4)(ii) shall remain so classified pending NCUA Board 
approval of a new or revised NWRP.
    (h) Amendment of NWRP. A credit union that is operating under an 
approved NWRP may, after prior written notice to, and approval by the 
NCUA Board, amend its NWRP to reflect a change in circumstance. Pending 
approval of an amended NWRP, the credit union shall implement the NWRP 
as originally approved.



  Subpart C--Alternative Prompt Corrective Action for New Credit Unions



Sec. 702.301  Scope and definition.

    (a) Scope. This subpart C applies in lieu of subpart B of this part 
exclusively to credit unions defined in paragraph (b) of this section as 
``new'' pursuant to 12 U.S.C. 1790d(b)(2).
    (b) New credit union defined. A ``new'' credit union for purposes of 
this subpart is a federally-insured credit union that both has been in 
operation for less than ten (10) years and has total assets of not more 
than $10 million. A credit union which exceeds $10 million in total 
assets may become ``new'' if its total assets subsequently decline below 
$10 million while it is still in operation for less than 10 years.
    (c) Effect of spin-offs. A credit union formed as the result of a 
``spin-off'' of a group from the field of membership of an existing 
credit union is deemed to be in operation since the effective date of 
the ``spin-off.'' A credit union whose total assets decline below $10 
million because a group within its field of membership has been ``spun-
off'' is deemed ``new'' if it has been in operation less than 10 years.
    (d) Actions to evade prompt corrective action. If the NCUA Board 
determines that a credit union was formed, or was reduced in asset size 
as a result of a ``spin-off,'' or was merged, primarily to qualify as 
``new'' under this subpart,

[[Page 338]]

the credit union shall be deemed subject to prompt corrective action 
under subpart A of this part.



Sec. 702.302  Net worth categories for new credit unions.

    (a) Net worth measures. For purposes of this part, a new credit 
union must determine its net worth category classification quarterly 
according to its net worth ratio as defined in Sec. 702.2(g).
    (b) Effective date of net worth classification of new credit union. 
For purposes of subpart C, the effective date of a new federally-insured 
credit union's classification within a net worth category in paragraph 
(c) of this section shall be determined as provided in Sec. 702.101(b); 
and written notice to the NCUA Board of a decline in net worth category 
in paragraph (c) of this section shall be given as required by section 
702.101(c).
    (c) Net worth categories. A federally-insured credit union defined 
as ``new'' under this section shall be classified (Table 2)--
    (1) Well capitalized if it has a net worth ratio of seven percent 
(7%) or greater;
    (2) Adequately capitalized if it has a net worth ratio of six 
percent (6%) or more but less than seven percent (7%);
    (3) Moderately capitalized if it has a net worth ratio of three and 
one-half percent (3.5%) or more but less than six percent (6%);
    (4) Marginally capitalized if it has a net worth ratio of two 
percent (2%) or more but less than three and one-half percent (3.5%);
    (5) Minimally capitalized if it has a net worth ratio of zero 
percent (0%) or greater but less than two percent (2%); and
    (6) Uncapitalized if it has a net worth ratio of less than zero 
percent (0%) (e.g., a deficit in retained earnings).
[GRAPHIC] [TIFF OMITTED] TR18FE00.007

    (d) Reclassification based on supervisory criteria other than net 
worth. Subject to Sec. 702.102(b) and (c), the NCUA Board may reclassify 
a ``well capitalized,'' ``moderately capitalized'' or ``marginally 
capitalized'' new credit union to the next lower net worth category 
(each of such actions is hereinafter referred to generally as 
``reclassification'') in either of the circumstances prescribed in 
Sec. 702.102(b).
    (e) Consultation with State officials. The NCUA Board shall consult 
and seek to work cooperatively with the appropriate State official 
before reclassifying a federally-insured State-chartered credit union 
under paragraph (d)

[[Page 339]]

of this section, and shall promptly notify the appropriate State 
official of its decision to reclassify.

[65 FR 8584, Feb. 18, 2000, as amended at 65 FR 44974, July 20, 2000; 65 
FR 55439, Sept. 14, 2000]



Sec. 702.303  Prompt corrective action for ``adequately capitalized'' new credit unions.

    Beginning on the effective date of classification as ``adequately 
capitalized'' or lower, an ``adequately capitalized'' new credit union 
must increase its net worth and transfer earnings to its regular reserve 
account in accordance with Sec. 702.201, until it is ``well 
capitalized.''



Sec. 702.304  Prompt corrective action for ``moderately capitalized,'' ``marginally capitalized'' or ``minimally capitalized'' new credit unions.

    (a) Mandatory supervisory actions by new credit union. A new credit 
union which is ``moderately capitalized,'' ``marginally capitalized,'' 
or ``minimally capitalized'' (including by reclassification under 
Sec. 702.302(d) must--
    (1) Earnings transfer. Beginning on the effective date of 
classification as ``moderately capitalized'' or lower, increase net 
worth and quarterly transfer earnings to the credit union's regular 
reserve account in an amount reflected in the credit union's approved 
initial or revised business plan;
    (2) Submit revised business plan. Submit a revised business plan 
pursuant to Sec. 702.306 if either--
    (i) The credit union's net worth ratio has not increased consistent 
with its then-present approved business plan; or
    (ii) The credit union has no then-present approved business plan; or
    (iii) The credit union has failed to undertake any mandatory 
supervisory action prescribed in this paragraph; and
    (3) Restrict member business loans. Beginning the effective date of 
classification as ``moderately capitalized'' or lower, not increase the 
total dollar amount of member business loans (defined as loans 
outstanding and unused commitments to lend) as provided in 
Sec. 702.202(a)(4).
    (b) Discretionary supervisory actions by NCUA. Subject to the 
applicable procedures set forth in subpart L of part 747 of this chapter 
for issuing, reviewing and enforcing directives, the NCUA Board may, by 
directive, take one or more of the actions prescribed in Sec. 702.204(b) 
if the credit union's net worth ratio has not increased consistent with 
its then-present business plan, or the credit union has failed to 
undertake any mandatory supervisory action prescribed in paragraph (a) 
of this section.
    (c) Discretionary conservatorship or liquidation. Notwithstanding 
any other actions required or permitted to be taken under this section, 
the NCUA Board may place a new credit union which is ``moderately 
capitalized,'' ``marginally capitalized'' or ``minimally capitalized'' 
(including by reclassification under Sec. 702.302(d)) into 
conservatorship pursuant to 12 U.S.C. 1786(h)(1)(F), or into liquidation 
pursuant to 12 U.S.C. 1787(a)(3)(A)(i), provided that the credit union 
has no reasonable prospect of becoming ``adequately capitalized.''



Sec. 702.305  Prompt corrective action for ``uncapitalized'' new credit unions.

    (a) Mandatory supervisory actions by new credit union. If a 
federally-insured new credit union either remains ``uncapitalized'' 
beyond the time period provided in its initial business plan (approved 
at the time the credit union's charter was granted), or subsequently 
declines to that category from a higher category after the expiration of 
that period, it must--
    (1) Earnings transfer. Increase net worth and quarterly transfer 
earnings to the credit union's regular reserve account in an amount 
reflected in the credit union's approved initial or revised business 
plan;
    (2) Submit revised business plan. Within 90 days of the effective 
date of classification as ``uncapitalized'' as provided in paragraph (a) 
of this section, or such shorter period as the NCUA Board specifies, 
submit a revised business plan pursuant to Sec. 702.306 providing for 
alternative means of funding the credit union's earnings deficit; and 
(3) Restrict member business loans. Not increase the total amount of 
member

[[Page 340]]

business loans (defined as loans outstanding and unfunded commitments to 
lend) as provided in Sec. 702.202(a)(4).
    (b) Discretionary supervisory actions by NCUA. Subject to the 
procedures set forth in subpart L of part 747 of this chapter for 
issuing, reviewing and enforcing directives, the NCUA Board may, by 
directive, take one or more of the actions prescribed in Sec. 702.204(b) 
if the credit union's net worth ratio has not increased consistent with 
its then-present business plan, or the credit union has failed to 
undertake any mandatory supervisory action prescribed in paragraph (a) 
of this section.
    (c) Mandatory liquidation or conservatorship. Notwithstanding any 
other actions required or permitted to be taken under this section, the 
NCUA Board--
    (1) Plan not submitted. May place into liquidation pursuant to 12 
U.S.C. 1787(a)(3)(A)(ii), or conservatorship pursuant to 12 U.S.C. 
1786(h)(1)(F), an ``uncapitalized'' new credit union which fails to 
submit a revised business plan within the time provided under paragraph 
(a)(2) of this section; or
    (2) ``Uncapitalized'' after 90 days. Must place into liquidation 
pursuant to 12 U.S.C. 1787(a)(3)(A)(ii), or conservatorship pursuant to 
12 U.S.C. 1786(h)(1)(F), an ``uncapitalized'' new credit union which 
remains ``uncapitalized'' ninety (90) calendar days after the date the 
NCUA Board approved the revised business plan submitted by the credit 
union pursuant to paragraph (a)(2) of this section, unless the credit 
union documents to the NCUA Board why it is viable and has a reasonable 
prospect of becoming ``adequately capitalized.''



Sec. 702.306  Revised business plans for new credit unions.

    (a) Schedule for filing--(1) Generally. A ``moderately 
capitalized,'' ``marginally capitalized'' or ``minimally capitalized'' 
new credit union must file a written revised business plan (RBP) with 
the appropriate Regional Director and, if State-chartered, with the 
appropriate State official within 30 calendar days following the 
effective date (per Sec. 702.101(b)) of the credit union's failure to 
meet a quarterly net worth target prescribed in its then-present 
business plan, unless the NCUA Board notifies the credit union in 
writing that its RBP is to be filed within a different period, or that 
the NCUA Board is waiving the requirement that the credit union file an 
RBP. An ``uncapitalized'' new credit union must file an RBP within the 
time provided under Sec. 702.305(a)(2).
    (2) Failure to timely file plan. When a new credit union fails to 
file an RBP as provided under paragraph (a)(1) of this section, the NCUA 
Board shall promptly notify the credit union that it has failed to file 
an RBP and that it has 15 calendar days from receipt of that notice 
within which to do so.
    (b) Contents of revised business plan. A new credit union's RBP 
must, at a minimum--
    (1) Address changes, since the new credit union's current business 
plan was approved, in any of the business plan elements required for 
charter approval under Chapter 1, section IV.D. of NCUA's Chartering and 
Field of Membership Manual (IRPS 99-1), 63 FR 71998, 72019 (Dec. 30, 
1998), or its successor(s), or for State-chartered credit unions under 
applicable State law;
    (2) Establish a timetable of quarterly targets for net worth during 
each year in which the RBP is in effect so that the credit union becomes 
``adequately capitalized'' and remains so for four (4) consecutive 
calendar quarters. If ``complex,'' the credit union is subject to a 
risk-based net worth requirement that may require a net worth ratio 
higher than six percent (6%) to become ``adequately capitalized'';
    (3) Specify the projected amount of earnings to be transferred 
quarterly to its regular reserve as provided under Sec. 702.304(a)(1) or 
702.305(a)(1);
    (4) Explain how the new credit union will comply with the mandatory 
and discretionary supervisory actions imposed on it by the NCUA Board 
under this subpart;
    (5) Specify the types and levels of activities in which the new 
credit union will engage;
    (6) In the case of a new credit union reclassified to a lower 
category under Sec. 702.302(d), specify the steps the credit union will 
take to correct the unsafe or unsound condition or practice; and
    (7) Include such other information as the NCUA Board may require.

[[Page 341]]

    (c) Criteria for approval. The NCUA Board shall not approve a new 
credit union's RBP unless it--
    (1) Addresses the items enumerated in paragraph (b) of this section;
    (2) Is based on realistic assumptions, and is likely to succeed in 
building the credit union's net worth; and
    (3) Would not unreasonably increase the credit union's exposure to 
risk (including credit risk, interest-rate risk, and other types of 
risk).
    (d) Consideration of regulatory capital. To minimize possible long-
term losses to the NCUSIF while the credit union takes steps to become 
``adequately capitalized,'' the NCUA Board shall, in evaluating an RBP 
under this section, consider the type and amount of any form of 
regulatory capital which may become established by NCUA regulation, or 
authorized by State law and recognized by NCUA, which the credit union 
holds, but which is not included in its net worth.
    (e) Review of revised business plan-- (1) Notice of decision. Within 
30 calendar days after receiving an RBP under this section, the NCUA 
Board shall notify the credit union in writing whether its RBP is 
approved, and shall provide reasons for its decision in the event of 
disapproval. The NCUA Board may extend the time within which notice of 
its decision shall be provided.
    (2) Delayed decision. If no decision is made within the time 
prescribed in paragraph (e)(1) of this section, the RBP is deemed 
approved.
    (3) Consultation with State officials. When evaluating an RBP 
submitted by a federally-insured State-chartered new credit union 
(whether an original, new or additional RBP), the NCUA Board shall seek 
and consider the views of the appropriate State official, and provide 
prompt notice of its decision to the appropriate State official.
    (f) Plan not approved--(1) Submission of new revised plan. If an RBP 
is rejected by the NCUA Board, the new credit union shall submit a new 
RBP within 30 calendar days of receiving notice of disapproval of its 
initial RBP, unless it is notified in writing by the NCUA Board that the 
new RBP is to be filed within a different period.
    (2) Notice of decision on revised plan. Within 30 calendar days 
after receiving an RBP under paragraph (f)(1) of this section, the NCUA 
Board shall notify the credit union in writing whether the new RBP is 
approved. The Board may extend the time within which notice of its 
decision shall be provided.
    (g) Amendment of plan. A credit union that has filed an approved RBP 
may, after prior written notice to and approval by the NCUA Board, amend 
it to reflect a change in circumstance. Pending approval of an amended 
RBP, the new credit union shall implement its existing RBP as originally 
approved.



Sec. 702.307  Incentives for new credit unions.

    (a) Assistance in revising business plans. Upon timely request by a 
credit union having total assets of less than $10 million (regardless 
how long it has been in operation), the NCUA Board shall provide 
assistance in preparing a revised business plan required to be filed 
under Sec. 702.306.
    (b) Assistance. Management training and other assistance to new 
credit unions will be provided in accordance with policies approved by 
the NCUA Board.
    (c) Small credit union program. A new credit union is eligible to 
join and receive comprehensive benefits and assistance under NCUA's 
Small Credit Union Program.



                           Subpart D--Reserves



Sec. 702.401  Reserves.

    (a) Special reserve. Each federally-insured credit union shall 
establish and maintain such reserves as may be required by the FCUA, by 
state law, by regulation, or in special cases by the NCUA Board or 
appropriate State official.
    (b) Regular reserve. Each federally-insured credit union shall 
establish and maintain a regular reserve account for the purpose of 
absorbing losses that exceed undivided earnings and other appropriations 
of undivided earnings, subject to paragraph (c) of this section. 
Earnings required to be transferred annually to a credit union's regular 
reserve under subparts B or C of this part shall be held in this 
account.

[[Page 342]]

    (c) Charges to regular reserve. The board of directors of a 
federally-insured credit union may authorize charges to the regular 
reserve for losses, provided that the authorization states the amount 
and provides an explanation of the need for the charge, and either--
    (1) The charge will not cause the credit union's net worth 
classification to fall below ``well capitalized'' under subparts B or C 
of this part; or
    (2) The appropriate Regional Director or, if State-chartered, the 
appropriate State official, has given written approval for the charge.
    (d) Transfers to regular reserve. The transfer of earnings to a 
federally-insured credit union's regular reserve account when required 
under subparts B or C of this part must occur after charges for loan or 
other losses are addressed as provided in paragraph (c) of this section 
and Sec. 702.402(d), but before payment of any dividends to members.



Sec. 702.402  Full and fair disclosure of financial condition.

    (a) Full and fair disclosure defined. ``Full and fair disclosure'' 
is the level of disclosure which a prudent person would provide to a 
member of a federally-insured credit union, to NCUA, or, at the 
discretion of the board of directors, to creditors to fairly inform them 
of the financial condition and the results of operations of the credit 
union.
    (b) Full and fair disclosure implemented. The financial statements 
of a federally-insured credit union shall provide for full and fair 
disclosure of all assets, liabilities, and members' equity, including 
such valuation (allowance) accounts as may be necessary to present 
fairly the financial condition; and all income and expenses necessary to 
present fairly the statement of income for the reporting period.
    (c) Declaration of officials. The Statement of Financial Condition, 
when presented to members, to creditors or to the NCUA, shall contain a 
dual declaration by the treasurer and the chief executive officer, or in 
the latter's absence, by any other officer designated by the board of 
directors of the reporting credit union to make such declaration, that 
the report and related financial statements are true and correct to the 
best of their knowledge and belief and present fairly the financial 
condition and the statement of income for the period covered.
    (d) Charges for loan losses. Full and fair disclosure demands that a 
credit union properly address charges for loan losses as follows:
    (1) Charges for loan losses shall be made in accordance with 
generally accepted accounting principles (GAAP);
    (2) The allowance for loan and lease losses (ALL) established for 
loans must fairly present the probable losses for all categories of 
loans and the proper valuation of loans. The valuation allowance must 
encompass specifically identified loans, as well as estimated losses 
inherent in the loan portfolio, such as loans and pools of loans for 
which losses have been incurred but are not identifiable on a specific 
loan-by-loan basis;
    (3) Adjustments to the valuation ALL will be recorded in the expense 
account ``Provision for Loan and Lease Losses'';
    (4) The maintenance of an ALL shall not affect the requirement to 
transfer earnings to a credit union's regular reserve when required 
under subparts B or C of this part; and
    (5) At a minimum, adjustments to the ALL shall be made prior to the 
distribution or posting of any dividend to the accounts of members.



Sec. 702.403  Payment of dividends.

    (a) Restriction on dividends. Dividends shall be available only from 
undivided earnings, if any.
    (b) Payment of dividends if undivided earnings depleted. The board 
of directors of a federally-insured credit union which has depleted the 
balance of its undivided earnings account may authorize a transfer of 
funds from the credit union's regular reserve account to undivided 
earnings to pay dividends, provided that either--
    (1) The payment of dividends will not cause the credit union's net 
worth classification to fall below ``well capitalized'' under subpart B 
or C; or
    (2) The appropriate Regional Director or, if State-chartered, the 
appropriate State official, has given prior written approval for the 
transfer.

[[Page 343]]



PART 703--INVESTMENT AND DEPOSIT ACTIVITIES--Table of Contents




Sec.
703.10  What does this part 703 cover?
703.20  What does this part 703 not cover?
703.30  What are the responsibilities of my (a federal credit union's) 
          board of directors?
703.40  What general practices and procedures must I follow in 
          conducting investment transactions?
703.50  What rules govern my dealings with entities I use to purchase 
          and sell investments (``broker-dealers'')?
703.60  What rules govern my safekeeping of investments?
703.70  What must I do to monitor my non-security investments in banks, 
          credit unions, and other depository institutions?
703.80  What must I do to value my securities?
703.90  What must I do to monitor the risk of my securities?
703.100  What investments and investment activities are permissible for 
          me?
703.110  What investments and investment activities are prohibited for 
          me?
703.120  May my officials or employees accept anything of value in 
          connection with an investment transaction?
703.130  May I continue to hold investments purchased before January 1, 
          1998, that will be impermissible after that date?
703.140  What is the investment pilot program and how can I participate 
          in it?
703.150  What additional definitions apply to this part?

    Authority: 12 U.S.C. 1757(7), 1757(8), 1757(15).

    Source: 62 FR 33001, June 18, 1997, unless otherwise noted.



Sec. 703.10  What does this part 703 cover?

    This part 703 interprets several of the provisions of Sections 
107(7), 107(8), and 107(15) (B) and (C) of the Federal Credit Union Act 
(``Act''), 12 U.S.C. 1757(7), 1757(8), 1757(15) (B) and (C), which list 
those securities, deposits, and other obligations in which a federal 
credit union (``you'') may invest.



Sec. 703.20  What does this part 703 not cover?

    This part 703 does not apply to:
    (a) Investment in loans to members and related activities, which is 
governed by Secs. 701.21, 701.22, 701.23, and part 723 of this chapter;
    (b) The purchase of real estate-secured loans pursuant to Section 
107(15)(A) of the Act, which is governed by Sec. 701.23 of this chapter;
    (c) Investment in credit union service organizations, which is 
governed by part 712 of this chapter;
    (d) Investment in fixed assets, which is governed by Sec. 701.36 of 
this chapter;
    (e) Investment by corporate credit unions, which is governed by part 
704 of this chapter; or
    (f) Investment activity by state-chartered credit unions, except as 
provided in Sec. 741.3(a)(3) of this chapter.

[62 FR 33001, June 18, 1997, as amended at 64 FR 33187, June 22, 1999; 
64 FR 57365, Oct. 25, 1999]



Sec. 703.30  What are the responsibilities of my (a federal credit union's) board of directors?

    Your (a federal credit union's) board of directors must establish a 
written investment policy that is consistent with the Act, this part, 
and other applicable laws and regulations. The investment policy may be 
part of a broader, asset-liability management policy. Your board must 
review the policy at least annually. The policy must address the 
following items:
    (a) The purposes and objectives of your investment activities.
    (b) The characteristics of the investments you may make. The 
characteristics of an investment are such things as its issuer, 
maturity, index, cap, floor, coupon rate, coupon formula, call 
provision, average life, and interest rate risk.
    (c) How you will manage your interest rate risk, including the 
amount of risk you can take with your investments in relation to your 
net capital and earnings.
    (d) How you will manage your liquidity risk.
    (e) How you will manage your credit risk. The policy must list 
specific institutions, issuers, and counterparties you may use, or 
criteria for their selection, and limits on the amounts you may invest 
with each. Counterparty means the party on the other side of a 
transaction.
    (f) How you will manage your concentration risk, which can result 
from single or related issuers, lack of geographic distribution, 
holdings of obligations with similar characteristics,

[[Page 344]]

such as maturities and indexes, holdings of bonds having the same 
trustee, and holdings of securitized loans having the same originator, 
packager, or guarantor.
    (g) Who of your officials or employees has investment authority and 
the extent of that authority. The individuals given investment authority 
must be professionally qualified by education and/or experience to 
exercise that authority in a prudent manner and to fully comprehend and 
assess the risk characteristics of investments and investment 
transactions under that authority. Only your officials and employees may 
be voting members of any investment-related committee.
    (h) If you use third-party entities to purchase or sell investments 
(``broker-dealers''), the specific broker-dealers you may use. You must 
maintain the documentation the board used to approve a broker-dealer as 
long as the broker-dealer is approved and until the documentation has 
been audited in accordance with Sec. 701.12 of this chapter and examined 
by NCUA.
    (i) If you use a third-party entity to safekeep your investments, 
the specific entities you may use.
    (j) How you will handle an investment that either is outside board 
policy after purchase or fails a requirement of this part.
    (k) If you engage in trading activities, how you will conduct those 
activities. The policy should address the following:
    (1) The persons who have purchase and sale authority;
    (2) Trading account size limitations;
    (3) Allocation of cash flow to trading accounts;
    (4) Stop loss or sale provisions;
    (5) Dollar size limitations of specific types, quantity and maturity 
to be purchased;
    (6) Limits on the length of time an investment may be inventoried in 
the trading account; and
    (7) Internal controls, including appropriate segregation of duties.

[62 FR 33001, June 18, 1997, as amended at 63 FR 24104, May 1, 1998]



Sec. 703.40  What general practices and procedures must I follow in conducting investment transactions?

    (a) You (a federal credit union) must classify a security as hold-
to-maturity, available-for-sale, or trading, in accordance with 
generally accepted accounting principles and consistent with your 
documented intent and ability regarding the security.
    (b) Except as provided in paragraph (c) of this section, you must 
retain discretionary control over the purchase and sale of investments. 
NCUA does not consider you to have delegated discretionary control when 
you are required to authorize a recommended purchase or sale transaction 
prior to its execution and you, in practice, review such recommendations 
and authorize such transactions.
    (c)(1) You may delegate discretionary control over the purchase and 
sale of investments, within established parameters, to a person other 
than your official or employee, provided that the person is an 
investment adviser registered with the Securities and Exchange 
Commission under the Investment Advisers Act of 1940 (15 U.S.C. 80b).
    (2) In determining whether to transact business with an investment 
adviser, you must analyze his or her background and information 
available from state or federal securities regulators, including any 
enforcement actions against the adviser or associated personnel.
    (3) You may not compensate an investment adviser with discretionary 
control over the purchase and sale of investments on a per transaction 
basis or based on capital gains, capital appreciation, net income, 
performance relative to an index, or any other incentive basis.
    (4) When you have delegated discretionary control over the purchase 
and sale of investments to a person other than your official or 
employee, you do not direct the holdings under that person's control. 
Therefore, you must classify those holdings as either available-for-sale 
or trading.
    (5) You must obtain a report from your investment adviser, at least 
monthly, that details your investments

[[Page 345]]

under his or her control and how they are performing.
    (6) Your aggregate delegation of discretionary control over the 
purchase and sale of investments under this paragraph (c) is limited to 
100 percent of net capital at the time of delegation.
    (d) Except for investments that are issued or fully guaranteed as to 
principal and interest by the U.S. government or its agencies, 
enterprises, or corporations or fully insured (including accumulated 
interest) by the National Credit Union Administration or the Federal 
Deposit Insurance Corporation, you must conduct and document a credit 
analysis of the issuing entity and/or investment before you purchase the 
investment. You must update the analysis at least annually as long as 
you hold the investment.
    (e) You must notify your board of directors as soon as possible, but 
no later than the next regularly scheduled board meeting, of any 
investment that either is outside board policy after purchase or has 
failed a requirement of this part. You must document the board's action 
regarding the investment in the minutes of the board meeting, including 
a detailed explanation of any decision not to sell an investment that 
has failed a requirement of this part. Within 5 days after the board 
meeting, you must notify the appropriate regional director in writing of 
an investment that has failed a requirement of this part.
    (f) You must maintain documentation regarding an investment 
transaction as long as you hold the investment and until the 
documentation has been both audited and examined. The documentation 
should include, where applicable, bids and prices at purchase and sale 
and for periodic updates, relevant disclosure documents or a description 
of the security from an industry-recognized information provider, 
financial data, and tests and reports required by your investment policy 
and this part.



Sec. 703.50  What rules govern my dealings with entities I use to purchase and sell investments (``broker-dealers'')?

    (a) Except as provided in paragraph (c) of this section, you (a 
federal credit union) may use a third-party entity to purchase and sell 
investments (a ``broker-dealer'') as long as the broker-dealer either is 
registered with the Securities and Exchange Commission under the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or is a 
depository institution whose broker-dealer activities are regulated by a 
federal regulatory agency.
    (b) In determining whether to buy or sell investments through a 
broker-dealer, you must analyze and annually update the following 
factors:
    (1) The background of any sales representative with whom you are 
doing business.
    (2) Information available from State or Federal securities 
regulators and securities industry self-regulatory organizations, such 
as the National Association of Securities Dealers and the North American 
Securities Administrators Association, about any enforcement actions 
against the broker-dealer, its affiliates, or associated personnel.
    (3) If the broker-dealer is acting as your counterparty, the ability 
of the broker-dealer and its subsidiaries or affiliates to fulfill 
commitments, as evidenced by capital strength, liquidity, and operating 
results. You should consider current financial data, annual reports, 
reports of nationally recognized statistical rating agencies, relevant 
disclosure documents, and other sources of financial information.
    (c) The requirements of paragraph (a) of this section do not apply 
when you purchase a certificate of deposit or share certificate directly 
from a bank, credit union, or other depository institution.

[62 FR 33001, June 18, 1997, as amended at 62 FR 64147, Dec. 4, 1997; 63 
FR 24105, May 1, 1998]



Sec. 703.60  What rules govern my safekeeping of investments?

    (a) Your (a federal credit union's) purchased investments and 
repurchase collateral must be in your possession, recorded as owned by 
you through the Federal Reserve Book-Entry System, or held by a board-
approved safekeeper under a written custodial agreement. A custodial 
agreement is a contract in which a third party agrees to exercise

[[Page 346]]

ordinary care in protecting the securities held in safekeeping for its 
customers.
    (b) You must obtain an individual confirmation statement for each 
investment purchased or sold.
    (c) Any safekeeper you use must be regulated and supervised by 
either the Securities and Exchange Commission or a federal or state 
depository institution regulatory agency.
    (d) You must obtain and reconcile monthly a statement of purchased 
investments and repurchase collateral held in safekeeping.
    (e) All purchases and sales of investments must be delivery versus 
payment (i.e., payment for an investment must occur simultaneously with 
its delivery).

[62 FR 33001, June 18, 1997, as amended at 62 FR 64147, Dec. 4, 1997]



Sec. 703.70  What must I do to monitor my non-security investments in banks, credit unions, and other depository institutions?

    (a) At least quarterly you (a federal credit union) must prepare a 
written report listing all of your shares and deposits in banks, credit 
unions, and other depository institutions, that have one or more of the 
following features:
    (1) Embedded options;
    (2) Remaining maturities greater than 3 years; or
    (3) Coupon formulas that are related to more than one index or are 
inversely related to, or multiples of, an index.
    (b) The requirement described in paragraph (a) of this section does 
not apply to your shares and deposits that are securities.
    (c) Where you do not have an investment-related committee, each 
member of your board of directors must receive a copy of the report 
described in paragraph (a) of this section. Where you have an 
investment-related committee, each member of the committee must receive 
a copy of the report, and each member of the board must receive a 
summary of the information in the report.



Sec. 703.80  What must I do to value my securities?

    (a) Prior to purchasing or selling a security, except for new issues 
purchased at par or at original issue discount, you (a federal credit 
union) must obtain, either:
    (1) Price quotations on the security from at least two broker-
dealers; or
    (2) A price quotation on the security from an industry-recognized 
information provider.
    (b) At least monthly, you must determine the fair value of each 
security you hold. You may determine fair value by obtaining a price 
quotation on the security from an industry-recognized information 
provider, a broker-dealer, or a safekeeper.
    (c) At least annually, your supervisory committee (itself or through 
its external auditor) must independently assess the reliability of 
monthly price quotations you receive from a broker-dealer or safekeeper. 
Your supervisory committee (or external auditor) must follow Generally 
Accepted Auditing Standards, which require either recomputation or 
reference to market quotations.
    (d) Where you are unable to obtain a price quotation required by 
this section for the precise security in question, you may obtain a 
quotation for a security with substantially similar characteristics.

[62 FR 33001, June 18, 1997, as amended at 62 FR 64147, Dec. 4, 1997]



Sec. 703.90  What must I do to monitor the risk of my securities?

    (a) At least monthly, you (a federal credit union) must prepare a 
written report setting forth, for each security you hold, the fair value 
and dollar change since the prior month-end, with summary information 
for the entire portfolio.
    (b) At least quarterly, you must prepare a written report setting 
forth the sum of the fair values of all fixed and variable rate 
securities you hold that have one or more of the following features:
    (1) Embedded options;
    (2) Remaining maturities greater than 3 years; or

[[Page 347]]

    (3) Coupon formulas that are related to more than one index or are 
inversely related to, or multiples of, an index.
    (c) Where the amount calculated in paragraph (b) of this section is 
greater than your net capital, the report described in that paragraph 
must provide a reasonable and supportable estimate of the potential 
impact, in percentage and dollar terms, of an immediate and sustained 
parallel shift in market interest rates of plus and minus 300 basis 
points on:
    (1) The fair value of each security in your portfolio;
    (2) The fair value of your portfolio as a whole; and
    (3) Your net capital.
    (d) Where you do not have an investment-related committee, each 
member of your board of directors must receive a copy of the reports 
described in paragraphs (a) through (c) of this section. Where you have 
an investment-related committee, each member of the committee must 
receive copies of the reports, and each member of the board must receive 
a summary of the information in the reports.



Sec. 703.100  What investments and investment activities are permissible for me?

    (a) You (a Federal credit union) may contract for the purchase or 
sale of a security as long as the delivery of the security is by 
regular-way settlement. Regular-way settlement means delivery of a 
security from a seller to a buyer within the time frame that the 
securities industry has established for that type of security.
    (b) You may invest in a variable rate investment, as long as the 
index is tied to domestic interest rates and not, for example, to 
foreign currencies, foreign interest rates, or domestic or foreign 
commodity prices, equity prices, or inflation rates. For purposes of 
this part, the U.S. dollar-denominated London Interbank Offered Rate 
(LIBOR) is a domestic interest rate.
    (c) You may purchase shares or deposits in a corporate credit union, 
except where the NCUA Board has notified you that the corporate credit 
union is not operating in compliance with part 704 of this chapter. Your 
aggregate purchase of member paid-in capital and membership capital in 
one corporate credit union is limited to one percent of your assets. 
Member paid-in capital and membership capital are defined in part 704 of 
this chapter.
    (d) You may invest in a registered investment company or collective 
investment fund, as long as the prospectus of the company or fund 
restricts the investment portfolio to investments and investment 
transactions that are permissible for federal credit unions. For the 
purposes of this part, the following definitions apply:
    (1) A registered investment company is an investment company that is 
registered with the Securities and Exchange Commission under the 
Investment Company Act of 1940 (15 U.S.C. 80a). Examples of registered 
investment companies are mutual funds and unit investment trusts.
    (2) A collective investment fund is a fund maintained by a national 
bank under 12 CFR part 9.
    (e) You may invest in fixed or variable rate CMOs/REMICs.
    (f) You may purchase and hold a municipal security only if a 
nationally recognized statistical rating organization (NRSRO) has rated 
it in one of the four highest rating categories. A municipal security is 
a security as defined in Section 107(7)(K) of the Act. An NRSRO is a 
rating organization that the Securities and Exchange Commission has 
recognized as an NRSRO.
    (g) You may sell federal funds to Section 107(8) institutions and 
credit unions, as long as the interest or other consideration received 
from the financial institution is at the market rate for federal funds 
transactions.
    (h) You may invest in the following instruments issued by a Section 
107(8) institution or branch:
    (1) Yankee dollar deposits;
    (2) Eurodollar deposits;
    (3) Bankers acceptances;
    (4) Deposit notes; and
    (5) Bank notes with original weighted average maturities of less 
than five years.
    (i) A repurchase transaction is a transaction in which you agree to 
purchase a security from a counterparty and to resell the same or an 
identical security to that counterparty at a specified future date and 
at a specified

[[Page 348]]

price. You may enter into a repurchase transaction as long as:
    (1) The repurchase securities are legal investments for federal 
credit unions;
    (2) You receive a daily assessment of the market value of the 
repurchase securities, including accrued interest, and maintain adequate 
margin that reflects a risk assessment of the repurchase securities and 
the term of the transaction; and
    (3) You have entered into signed contracts with all approved 
counterparties.
    (j) A reverse repurchase transaction is a transaction in which you 
agree to sell a security to a counterparty and to repurchase the same or 
an identical security from that counterparty at a specified future date 
and at a specified price. You may enter into reverse repurchase and 
collateralized borrowing transactions as long as:
    (1) Any securities you receive are permissible investments for 
federal credit unions, you receive a daily assessment of their market 
value, including accrued interest, and you maintain adequate margin that 
reflects a risk assessment of the securities and the term of the 
transaction;
    (2) Any cash you receive is subject to the borrowing limit specified 
in Section 107(9) of the Act, and any investments you purchase with that 
cash are permissible for federal credit unions and mature no later than 
the maturity of the transaction; and
    (3) You have entered into signed contracts with all approved 
counterparties.
    (k) You may enter into a securities lending transaction as long as:
    (1) You receive written confirmation of the loan;
    (2) Any collateral you receive is a legal investment for federal 
credit unions, you obtain a perfected first priority security interest 
in the collateral, you either take physical possession or control of the 
collateral or are recorded as owner of the collateral through the 
Federal Reserve Book-Entry Securities Transfer System; and you receive a 
daily assessment of the market value of the collateral, including 
accrued interest, and maintain adequate margin that reflects a risk 
assessment of the collateral and the term of the loan;
    (3) Any cash you receive is subject to the borrowing limit specified 
in Section 107(9) of the Act, and any investments you purchase with that 
cash are permissible for federal credit unions and mature no later than 
the maturity of the transaction; and
    (4) You have executed a written loan and security agreement with the 
borrower.
    (l)(1) You may trade securities, including engaging in when-issued 
trading and pair-off transactions, as long as you can show that you have 
sufficient resources, knowledge, systems, and procedures to handle the 
risks.
    (2) You must record any security you purchase or sell for trading 
purposes at fair value on the trade date. The trade date is the date you 
commit, orally or in writing, to purchase or sell a security.
    (3) At least monthly, you must give your board of directors or 
investment-related committee a written report listing all purchase and 
sale transactions of trading securities and the resulting gain or loss 
on an individual basis.

[62 FR 33001, June 18, 1997, as amended at 62 FR 64148, Dec. 4, 1997; 63 
FR 24105, May 1, 1998]



Sec. 703.110  What investments and investment activities are prohibited for me?

    (a) You (a federal credit union) may not purchase or sell financial 
derivatives, such as futures, options, interest rate swaps, or forward 
rate agreements, except as permitted under Sec. 701.21(i) of this 
chapter.
    (b) You may not engage in adjusted trading or short sales.
    (c) You may not purchase stripped mortgage backed securities, 
residual interests in CMOs/REMICs, mortgage servicing rights, commercial 
mortgage related securities, or small business related securities.
    (d) You may not purchase a zero coupon investment with a maturity 
date that is more than 10 years from the settlement date.

[[Page 349]]



Sec. 703.120  May my officials or employees accept anything of value in connection with an investment transaction?

    (a) Your (a federal credit unions) officials and senior management 
employees, and their immediate family members, may not receive anything 
of value in connection with your investment transactions. This 
prohibition also applies to any other employee, such as an investment 
officer, if the employee is directly involved in investments, unless 
your board of directors determines that the employee's involvement does 
not present a conflict of interest. This prohibition does not include 
compensation for employees.
    (b) Your officials and employees must conduct all transactions with 
business associates or family members that are not specifically 
prohibited by paragraph (a) of this section at arm's length and in your 
best interest.
    (c) Senior management employee means your chief executive officer 
(typically this individual holds the title of President or Treasurer/
Manager), any assistant chief executive officers (e.g., Assistant 
President, Vice President, or Assistant Treasurer/Manager) and the chief 
financial officer (Comptroller).
    (d) Immediate family member means a spouse or other family member 
living in the same household.



Sec. 703.130  May I continue to hold investments purchased before January 1, 1998, that will be impermissible after that date?

    (a) Subject to safety and soundness considerations, you may hold a 
CMO/REMIC residual, SMBS, or zero coupon security with a maturity 
greater than 10 years, if you purchased the investment:
    (1) Before December 2, 1991; or
    (2) On or after December 2, 1991, but before January 1, 1998, if for 
the purpose of reducing interest rate risk and you meet the following:
    (i) You have a monitoring and reporting system in place that 
provides the documentation necessary to evaluate the expected and actual 
performance of the investment under different interest rate scenarios;
    (ii) You use the monitoring and reporting system to conduct and 
document an analysis that shows, before purchase, that the proposed 
investment will reduce your interest rate risk;
    (iii) After purchase, you evaluate the investment at least quarterly 
to determine whether or not it actually has reduced your interest rate 
risk; and
    (iv) You classify the investment as either trading or available-for-
sale.
    (b) All grandfathered investments are subject to the valuation and 
monitoring requirements of Secs. 703.70, 703.80, and 703.90.

[63 FR 24105, May 1, 1998]



Sec. 703.140  What is the investment pilot program and how can I participate in it?

    (a) Under the investment pilot program, NCUA will permit a limited 
number of federal credit unions to engage in investment activities 
prohibited by this part but permitted by statute.
    (b) Except as provided in paragraph (c) of this section, before you 
(a federal credit union) may engage in additional activities, you must 
obtain written approval from
    NCUA. To begin the approval process, you must submit a request to 
your regional director that addresses the following items:
    (1) Board policies approving the activities and establishing limits 
on them.
    (2) A complete description of the activities, with specific examples 
of how you will conduct them and how they will benefit you.
    (3) A demonstration of how the activities will affect your financial 
performance, risk profile, and asset-liability management strategies.
    (4) Examples of reports you will generate to monitor the activities.
    (5) A projection of the associated costs of the activities, 
including personnel, computer, audit, etc.
    (6) A description of the internal systems to measure, monitor, and 
report the activities, and the qualifications of the staff and/or 
official(s) responsible for implementing and overseeing the activities.

[[Page 350]]

    (7) The internal control procedures you will implement, including 
audit requirements.
    (c) You need not obtain individual written approval to engage in 
investment activities prohibited by this part but permitted by statute 
where the activities are part of a third-party investment program that 
NCUA has approved under this paragraph (c). A third party seeking 
approval of such a program must submit a request to the Director of the 
Office of Examination and Insurance that addresses the following items:
    (1) A complete description of the activities, with specific examples 
of how a credit union will conduct them and how they will benefit a 
credit union.
    (2) A description of any risks to a credit union from participating 
in the program.



Sec. 703.150  What additional definitions apply to this part?

    The following definitions apply to this part:
    Adjusted trading means selling an investment to a counterparty at a 
price above its current fair value and simultaneously purchasing or 
committing to purchase from the counterparty another investment at a 
price above its current fair value.
    Average life means the weighted average time to principal repayment 
with the amount of the principal paydowns (both scheduled and 
unscheduled) as the weights.
    Bank note means a direct, unconditional, and unsecured general 
obligation of a bank that ranks equally with all other senior unsecured 
indebtedness of the bank, except deposit liabilities and other 
obligations that are subject to any priorities or preferences.
    Banker's acceptance means a time draft that is drawn on and accepted 
by a bank and that represents an irrevocable obligation of the bank.
    Commercial mortgage related security means a mortgage related 
security where the mortgages are secured by real estate upon which is 
located a commercial structure.
    Deposit note means an obligation of a bank that is similar to a 
certificate of deposit but is rated.
    Embedded option means a characteristic of an investment that gives 
the issuer or holder the right to alter the level and timing of the cash 
flows of the investment. Embedded options include call and put 
provisions and interest rate caps and floors. Since a prepayment option 
in a mortgage is a type of call provision, a mortgage-backed security 
composed of mortgages that may be prepaid is an example of an investment 
with an embedded option.
    Eurodollar deposit means a U.S. dollar-denominated deposit in a 
foreign branch of a United States depository institution.
    Fair value means the price at which a security can be bought or sold 
in a current, arms length transaction between willing parties, other 
than in a forced or liquidation sale.
    Industry-recognized information provider means an organization that 
obtains compensation by providing information to investors and receives 
no compensation for the purchase or sale of investments.
    Investment means any security, obligation, account, deposit, or 
other item authorized for purchase by a federal credit union under 
Sections 107(7), 107(8), or 107(15) (B) or (C) of the Federal Credit 
Union Act, or this part, other than loans to members.
    Maturity means the date the last principal amount of a security is 
scheduled to come due and does not mean the call date or the average 
life of the security.
    Mortgage related security means a security as defined in Section 
3(a)(41) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(41)), 
i.e., a privately-issued security backed by mortgages secured by real 
estate upon which is located a dwelling, mixed residential and 
commercial structure, residential manufactured home, or commercial 
structure.
    Mortgage servicing means performing tasks to protect a mortgage 
investment, including collecting the installment payments, managing the 
escrow accounts, monitoring and dealing with delinquencies, and 
overseeing foreclosures and payoffs.
    Net capital means the total of all undivided earnings, regular 
reserves, other reserves (excluding the allowance

[[Page 351]]

for loan losses), net income, accumulated unrealized gains (losses) on 
available-for-sale securities, and secondary capital as defined in 
Sec. 701.34 of this chapter.
    Official means any member of a federal credit union's board of 
directors, credit committee, supervisory committee, or investment-
related committee.
    Pair-off transaction means an investment purchase transaction that 
is closed or sold at, or prior to, the settlement date. In a pair-off, 
an investor commits to purchase an investment, but then pairs-off the 
purchase with a sale of the same investment prior to or on the 
settlement date.
    Prepayment estimate means a reasonable and supportable forecast of 
mortgage prepayments in alternative interest rate scenarios. Broker-
dealers and industry-recognized information providers are sources for 
these estimates. Estimates are used in tests to forecast the weighted 
average life, change in weighted average life, and price sensitivity of 
CMOs/REMICs and mortgage-backed securities.
    Residual interest means the remainder cash flows from a CMO/REMIC, 
or other mortgage-backed security transaction, after payments due 
bondholders and trust administrative expenses have been satisfied.
    Section 107(8) institution means an institution in which Section 
107(8) of the Act authorizes you to make deposits, i.e., an institution 
that is insured by the Federal Deposit Insurance Corporation or is a 
state bank, trust company or mutual savings bank operating in accordance 
with the laws of a state in which you maintain a facility. A facility is 
your home office or any suboffice, including, but not necessarily 
limited to, a credit union service center, wire service, telephonic 
station, or mechanical teller station.
    Security means a share, participation, or other interest in property 
or in an enterprise of the issuer or an obligation of the issuer that: 
(1) Either is represented by an instrument issued in bearer or 
registered form or, if not represented by an instrument, is registered 
in books maintained to record transfers by or on behalf of the issuer;
    (2) Is of a type commonly dealt in on securities exchanges or 
markets or, when represented by an instrument, is commonly recognized in 
any area in which it is issued or dealt in as a medium for investment; 
and
    (3) Either is one of a class or series or by its terms is divisible 
into a class or series of shares, participations, interests, or 
obligations.
    Settlement date means the date to which a purchaser and seller 
originally agree for settlement of the purchase or sale of a security.
    Short sale means the sale of a security not owned by the seller.
    Small business related security means a security as defined in 
Section 3(a)(53) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(53)), i.e., a security that represents ownership of one or more 
promissory notes or leases of personal property which evidence the 
obligation of a small business concern. It does not mean a security 
issued or guaranteed by the Small Business Administration.
    Stripped mortgage-backed security (SMBS) means a security that 
represents either the principal-only or the interest-only portion of the 
cash flows of an underlying pool of mortgages or mortgage-backed 
securities. Some mortgage-backed securities represent essentially 
principal-only cash flows with nominal interest cash flows or 
essentially interest-only cash flows with nominal principal cash flows. 
These securities are considered SMBSs for the purposes of this part.
    When-issued trading of securities means the buying and selling of 
securities in the period between the announcement of an offering and the 
issuance and payment date of the securities.
    Yankee dollar deposit means a deposit in a United States branch of a 
foreign bank licensed to do business in the state in which it is 
located, or a deposit in a state-chartered, foreign controlled bank.
    You means a federal credit union.
    Zero coupon investment means an investment that makes no periodic 
interest payments but instead is sold at a discount from its face value. 
The holder of a zero coupon investment realizes the rate of return 
through the gradual

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appreciation of the investment, which is redeemed at face value on a 
specified maturity date.

[62 FR 33001, June 18, 1997, as amended at 62 FR 64148, Dec. 4, 1997]



PART 704--CORPORATE CREDIT UNIONS--Table of Contents




Sec.
704.1  Scope.
704.2  Definitions.
704.3  Corporate credit union capital.
704.4  Board responsibilities.
704.5  Investments.
704.6  Credit risk management.
704.7  Lending.
704.8  Asset and liability management.
704.9  Liquidity management.
704.10  Divestiture.
704.11  Corporate Credit Union Service Organizations (Corporate CUSOs).
704.12  Services.
704.13  Fixed assets.
704.14  Representation.
704.15  Audit requirements.
704.16  Contracts/written agreements.
704.17  State-chartered corporate credit unions.
704.18  Fidelity bond coverage.
704.19  Wholesale corporate credit unions.

Appendix A to Part 704--Model Forms
Appendix B to Part 704--Expanded Authorities and Requirements

    Authority: 12 U.S.C. 1762, 1766(a), 1781, and 1789.

    Source: 62 FR 12938, Mar. 19, 1997, unless otherwise noted.



Sec. 704.1  Scope.

    (a) This part establishes special rules for all federally insured 
corporate credit unions. Non federally insured corporate credit unions 
must agree, by written contract, to both adhere to the requirements of 
this part and submit to examinations, as determined by NCUA, as a 
condition of receiving shares or deposits from federally insured credit 
unions. This part grants certain additional authorities to federal 
corporate credit unions. Except to the extent that they are inconsistent 
with this part, other provisions of NCUA's Rules and Regulations (12 CFR 
chapter VII) and the Federal Credit Union Act apply to federally 
chartered corporate credit unions and federally insured state-chartered 
corporate credit unions to the same extent that they apply to other 
federally chartered and federally insured state-chartered credit unions, 
respectively.
    (b) The Board has the authority to issue orders which vary from this 
part. This authority is provided under Section 120(a) of the Federal 
Credit Union Act, 12 U.S.C. 1766(a). Requests by state-chartered 
corporate credit unions for waivers to this part and for expansions of 
authority under Appendix B of this part must be approved by the state 
regulator before being submitted to NCUA.



Sec. 704.2  Definitions.

    Adjusted trading means any method or transaction whereby a corporate 
credit union sells a security to a vendor at a price above its current 
market price and simultaneously purchases or commits to purchase from 
the vendor another security at a price above its current market price.
    Asset-backed security means a security that is primarily serviced by 
the cashflows of a discrete pool of receivables or other financial 
assets, either fixed or revolving, that by their terms convert into cash 
within a finite time period plus any rights or other assets designed to 
assure the servicing or timely distribution of proceeds to the 
securityholders. This definition excludes those securities referred to 
in the financial markets as mortgage-backed securities (MBS), which 
includes collateralized mortgage obligations (CMOs) and real estate 
mortgage investment conduits (REMICs).
    Capital means the sum of a corporate credit union's reserves and 
undivided earnings, paid-in capital, and membership capital.
    Capital ratio means the corporate credit union's capital divided by 
its moving daily average net assets.
    Collateralized mortgage obligation (CMO) means a multi-class bond 
issue collateralized by mortgages or mortgage-backed securities.
    Commercial mortgage related security means a mortgage related 
security where the mortgages are secured by real estate upon which is 
located a commercial structure.
    Corporate credit union means an organization that:
    (1) Is chartered under Federal or state law as a credit union;

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    (2) Receives shares from and provides loan services to credit 
unions;
    (3) Is operated primarily for the purpose of serving other credit 
unions;
    (4) Is designated by NCUA as a corporate credit union;
    (5) Limits natural person members to the minimum required by state 
or federal law to charter and operate the credit union; and
    (6) Does not condition the eligibility of any credit union to become 
a member on that credit union's membership in any other organization.
    Correspondent services means services provided by one financial 
institution to another, and includes check clearing, credit and 
investment services, and any other banking services.
    Credit enhancement means collateral, third-party guarantees, and 
other features that are designed to provide structural support and 
protection against losses to investors in a particular security.
    Daily average net assets means the average of net assets calculated 
for each day during the period.
    Dealer bid indication means a dealer's approximation of the bid 
price of a security.
    Dollar roll means the purchase or sale of a mortgage backed security 
to a counterparty with an agreement to resell or repurchase a 
substantially identical security at a future date and at a specified 
price.
    Embedded option means a characteristic of certain assets and 
liabilities which gives the issuer of the instrument the ability to 
change the features such as final maturity, rate, principal amount and 
average life. Options include, but are not limited to, calls, caps, and 
prepayment options.
    Expected maturity means the date on which all remaining principal 
amounts of an instrument or bond are anticipated to be paid off on the 
basis of projected payment assumptions.
    Fair value of a financial instrument means the amount at which an 
instrument could be exchanged in a current arms-length transaction 
between willing parties, other than in a forced liquidation sale. Market 
prices, if available, are the best evidence of the fair value of 
financial instruments. If market prices are not available, the best 
estimate of fair value may be based on the quoted market price of a 
financial instrument with similar characteristics or on valuation 
techniques (for example, the present value of estimated future cash 
flows using a discount rate commensurate with the risks involved, option 
pricing models, or matrix pricing models).
    Federal funds transaction means a short-term or open-ended unsecured 
transfer of immediately available funds by one depository institution to 
another depository institution or entity.
    Foreign bank means an institution which is organized under the laws 
of a country other than the United States, is engaged in the business of 
banking, and is recognized as a bank by the banking supervisory 
authority of the country in which it is organized.
    Forward settlement of a transaction means settlement on a date other 
than the trade date.
    Immediate family member means a spouse or other family member living 
in the same household.
    Industry recognized information provider means an organization which 
obtains compensation by providing information to investors and receives 
no compensation for the purchase or sale of investments.
    Long-term investment means, for the purpose of issue ratings, an 
investment that has an initial maturity, or expected maturity, greater 
than one year.
    Market price means the price at which a security can be bought or 
sold.
    Matched means, with respect to assets and liabilities, that the 
factors which affect cash flows of an asset are replicated in a 
corresponding liability.
    Member paid-in capital means paid-in capital that: Is held by the 
corporate credit union's members; and has an initial maturity of at 
least 20 years. A corporate credit union may not condition membership, 
services, or prices for services on a credit union's ownership of paid-
in capital. When a paid-in capital instrument has a remaining maturity 
of 5 years, the amount of the instrument that may be considered paid-in 
capital for the purposes of this part

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is reduced by a constant monthly amortization which ensures the 
recognition of paid-in capital is fully amortized when the instrument 
has a remaining maturity of 3 years. The terms and conditions of any 
member paid-in capital instrument must be disclosed to the recorded 
owner of such instrument at the time the instrument is created and at 
least annually thereafter.
    Member reverse repurchase transaction means an integrated 
transaction in which a corporate credit union purchases a security from 
one of its member credit unions under agreement by that member credit 
union to repurchase the same security at a specified time in the future. 
The corporate credit union then sells that same security, on the same 
day, to a third party, under agreement to repurchase it on the same date 
on which the corporate credit union is obligated to return the security 
to its member credit union.
    Membership capital means funds contributed by members which are 
available to cover losses that exceed reserves and undivided earnings 
and paid-in capital. In the event of liquidation of the corporate credit 
union, membership capital is payable only after satisfaction of all 
liabilities of the liquidation estate, including uninsured share 
obligations to shareholders and the National Credit Union Share 
Insurance Fund (NCUSIF), but excluding paid-in capital. The funds have a 
minimum withdrawal notice of three years, are not insured by the NCUSIF 
or other share or deposit insurers, and cannot be used to pledge against 
borrowings. A member may sell its membership capital to a credit union 
in the corporate credit union's field of membership, subject to the 
corporate credit union's approval. The funds may be in the form of a 
term certificate, or may be in the form of an adjusted balance account. 
An adjusted balance account may be adjusted in relation to a measure 
(e.g., one percent of a member credit union's assets) established and 
disclosed by the corporate credit union at the time the account is 
opened without regard to any minimum withdrawal notice period. Upon 
written notice of intent to withdraw membership capital, the balance of 
the account will be frozen (no annual adjustment) until the conclusion 
of the notice period. The terms and conditions of a membership capital 
account must be disclosed to the recorded owner of such account at the 
time the account is opened and at least annually thereafter. Upon 
notification of intent to withdraw, the amount of the account on notice 
that can be considered membership capital is reduced by a constant 
monthly amortization which ensures the recognition of membership capital 
is fully amortized at the end of the notice period. The full balance of 
a membership capital account that has been placed on notice, not just 
the remaining non amortized portion, is available to absorb losses in 
excess of the sum of reserves and undivided earnings and paid-in capital 
until the funds are released by the corporate credit union at the 
conclusion of the notice period.
    Mortgage related security means a security as defined in Section 
3(a)(41) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(41)), 
i.e., a privately-issued security backed by mortgages secured by real 
estate upon which is located a dwelling, mixed residential and 
commercial structure, residential manufactured home, or commercial 
structure.
    Mortgage servicing means performing tasks to protect a mortgage 
investment, including collecting the installment accounts, monitoring 
and dealing with delinquencies, and overseeing foreclosures and payoffs.
    Moving daily average net assets means the average of daily average 
net assets for the month being measured and the previous 11 months.
    NCUA means NCUA Board (Board), unless the particular action has been 
delegated by the Board.
    Net assets means total assets less Central Liquidity Facility (CLF) 
stock subscriptions, CLF loans guaranteed by the NCUSIF, U.S. Central 
CLF certificates, and member reverse repurchase transactions. For its 
own account, a corporate credit union's payables under reverse 
repurchase agreements and receivables under repurchase agreements may be 
netted out if the Generally Accepted Accounting Principles (GAAP) 
conditions for offsetting are met.
    Net economic value (NEV) means the fair value of assets minus the 
fair value

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of liabilities. All fair value calculations must include the value of 
forward settlements and embedded options and of off balance sheet 
financial derivatives, such as futures, options, interest rate swaps, 
and forward rate agreements. Membership capital is treated as a 
liability for purposes of this calculation. The NEV ratio is calculated 
by dividing NEV by the fair value of assets.
    Net interest income means the difference between income earned on 
interest bearing assets and interest paid on interest bearing 
liabilities.
    Non member paid-in capital means paid-in capital that is approved by 
NCUA, upon application by the corporate credit union. In determining 
whether or not to approve any paid-in capital instrument, NCUA will 
consider such features as maturity, capital amortization schedule, 
participation, voting, acceleration, redemption, or other rights of the 
holder, if any. NCUA will also consider the strategic purpose and 
financial impact of the proposed paid-in capital issuance and the 
corporate credit union's financial condition and management 
capabilities.
    Non secured obligation means an obligation backed solely by the 
creditworthiness of the obligor.
    Official means any director or committee member.
    Paid-in capital means accounts or other interests of a corporate 
credit union that: Are available to cover losses that exceed reserves 
and undivided earnings; are not insured by the NCUSIF or other share or 
deposit insurers; and are callable only at the option of the corporate 
credit union and only if the corporate credit union meets its minimum 
level of required capital after the funds are called. Paid-in capital 
includes both member paid-in capital and non member paid-in capital. In 
the event of liquidation of the corporate credit union, paid-in capital 
is payable only after satisfaction of all liabilities of the liquidation 
estate, including uninsured share obligations to shareholders, the 
NCUSIF, and membership capital holders. Paid-in capital shall not exceed 
reserves and undivided earnings.
    Pair-off transaction means a security purchase transaction that is 
closed out or sold at, or prior to, the settlement or expiration date.
    Prepayment model means an empirical method which produces a 
reasonable and supportable forecast of mortgage prepayments in 
alternative interest rate scenarios. Models are typically available from 
securities broker-dealers and industry-recognized information providers. 
These models are used in tests to forecast the weighted average life, 
change in weighted average life, and price sensitivity of CMOs/REMICs 
and mortgage-backed securities.
    Real estate mortgage investment conduit (REMIC) means a nontaxable 
entity formed for the sole purpose of holding a fixed pool of mortgages 
secured by an interest in real property and issuing multiple classes of 
interests in the underlying mortgages.
    Regular way settlement means delivery of a security from a seller to 
a buyer within the specified number of days established for that type of 
security.
    Repurchase transaction means a transaction in which a corporate 
credit union agrees to purchase a security from a counterparty and to 
resell the same or any identical security to that counterparty at a 
later date.
    Reserve ratio means the corporate credit union's reserves and 
undivided earnings plus paid in capital divided by its moving daily 
average net assets.
    Reserves and undivided earnings means all forms of retained 
earnings, including regular or statutory reserves and all valuation 
allowances established to meet the full and fair disclosure requirements 
of Sec. 702.3 of this chapter.
    Residual interest means the remainder cash flows from a CMO or REMIC 
transaction after payments due bondholders and trust administrative 
expenses have been satisfied.
    Section 107(8) institution means an institution described in Section 
107(8) of the Federal Credit Union Act (12 U.S.C. 1757(8)).
    Securities lending means lending a security to a counterparty, 
either directly or through an agent, and accepting collateral in return.
    Senior management employee means a chief executive officer, any 
assistant chief executive officer (e.g., any assistant president, any 
vice president or

[[Page 356]]

any assistant treasurer/manager), and the chief financial officer 
(controller).
    Settlement date means the date originally agreed to by a corporate 
credit union and a counterparty for settlement of the purchase or sale 
of a security.
    Short sale means the sale of a security not owned by the seller.
    Short-term investment means, for the purpose of issue ratings, an 
investment that has an initial maturity, or expected maturity, of one 
year or less.
    Small business related security means a security as defined in 
Section 3(a)(53) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(53)), i.e., a security, rated in one of the four highest rating 
categories by a nationally recognized statistical rating organization, 
that represents ownership of one or more promissory notes or leases of 
personal property which evidence the obligation of a small business 
concern. It does not mean a security issued or guaranteed by the Small 
Business Administration.
    Stripped mortgage-backed security means a security that represents 
either the principal or interest only portion of the cash flows of an 
underlying pool of mortgages.
    Trade association means an association of organizations or persons 
formed to promote their common interests. For the purposes of 
Sec. 704.14, the term includes entities owned or controlled directly or 
indirectly by such an association but does not include credit unions.
    Trade date means the date a corporate credit union originally 
agrees, whether orally or in writing, to enter into the purchase or sale 
of a security.
    Weighted average life means the weighted average time to principal 
repayment of a security based upon the proportional balances of the cash 
flows that make up the security.
    When-issued trading means the buying and selling of securities in 
the period between the announcement of an offering and the issuance and 
payment date of the securities.
    Wholesale corporate credit union means a corporate credit union 
which primarily serves other corporate credit unions.



Sec. 704.3  Corporate credit union capital.

    (a) General. A corporate credit union must develop and ensure 
implementation of written short- and long-term capital goals, 
objectives, and strategies which provide for the building of capital 
consistent with regulatory requirements, the maintenance of sufficient 
capital to support the risk exposures that may arise from current and 
projected activities, and the periodic review and reassessment of the 
capital position of the corporate credit union.
    (b) Capital ratio. A corporate credit union will maintain a minimum 
capital ratio of 4 percent, except as otherwise provided in this part. A 
corporate credit union must calculate its capital ratio at least 
monthly.
    (c) Reserve transfers. A corporate credit union's monthly reserve 
transfers are based upon the level of its reserve ratio. Where the 
reserve ratio is greater than or equal to 4 percent, the reserve 
transfer is optional. Where the reserve ratio is greater than or equal 
to 3 percent but less than 4 percent, the corporate credit union must 
transfer .10 percent of its moving daily average net assets. Where the 
reserve ratio is less than 3 percent, the corporate credit union must 
transfer .15 percent of its moving daily average net assets. Reserve 
transfers must be calculated on a monthly basis and funded on at least a 
quarterly basis.
    (d) Individual capital ratio, reserve transfer requirement. (1) When 
significant circumstances or events warrant, NCUA may require a 
different minimum capital ratio and/or reserve transfer level for an 
individual corporate credit union based on its circumstances. Factors 
that might warrant a different minimum capital ratio or reserve transfer 
level include, but are not limited to, for example:
    (i) An expectation that the corporate credit union has or 
anticipates losses resulting in capital inadequacy;
    (ii) Significant exposure exists, unsupported by adequate capital or 
risk management processes, due to credit, liquidity, market, fiduciary, 
operational, and similar types of risks;
    (iii) A merger has been approved; or
    (iv) An emergency exists because of a natural disaster.

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    (2) When NCUA determines that a different minimum capital ratio or 
reserve transfer level is necessary or appropriate for a particular 
corporate credit union, NCUA will notify the corporate credit union in 
writing of the proposed ratio or level and, if applicable, the date by 
which the ratio should be reached. NCUA also will provide an explanation 
of why the proposed ratio or level is considered necessary or 
appropriate for the corporate credit union.
    (3)(i) The corporate credit union may respond to any or all of the 
items in the notice. The response must be in writing and delivered to 
NCUA within 30 calendar days after the date on which the corporate 
credit union received the notice. NCUA may shorten the time period when, 
in its opinion, the condition of the corporate credit union so requires, 
provided that the corporate credit union is informed promptly of the new 
time period, or with the consent of the corporate credit union. In its 
discretion, NCUA may extend the time period for good cause.
    (ii) Failure to respond within 30 calendar days or such other time 
period as may be specified by NCUA shall constitute a waiver of any 
objections to any item in the notice. Failure to address any item in a 
response shall constitute a waiver of any objection to that item.
    (iii) After the close of the corporate credit union's response 
period, NCUA will decide, based on a review of the corporate credit 
union's response and other information concerning the corporate credit 
union, whether a different minimum capital ratio or reserve transfer 
level should be established for the corporate credit union and, if so, 
the ratio or level and the date the requirement will become effective. 
The corporate credit union will be notified of the decision in writing. 
The notice will include an explanation of the decision, except for a 
decision not to establish a different minimum capital ratio or reserve 
transfer level for the corporate credit union.
    (e) Failure to maintain minimum capital ratio requirement. When a 
corporate credit union's capital ratio falls below the minimum required 
by paragraphs (b) or (d) of this section, or Appendix B of this part, as 
applicable, operating management of the corporate credit union must 
notify its board of directors, supervisory committee, and NCUA within 10 
calendar days.
    (f) Capital restoration plan. (1) A corporate credit union must 
submit a plan to restore and maintain its capital ratio at the minimum 
requirement when either of the following conditions exist:
    (i) The capital ratio falls below the minimum requirement and is not 
restored to the minimum requirement by the next month end; or
    (ii) Regardless of whether the capital ratio is restored by the next 
month end, the capital ratio falls below the minimum requirement for 
three months in any 12-month period.
    (2) The capital restoration plan must, at a minimum, include the 
following:
    (i) Reasons why the capital ratio fell below the minimum 
requirement;
    (ii) Descriptions of steps to be taken to restore the capital ratio 
to the minimum requirement within specific time frames;
    (iii) Actions to be taken to maintain the capital ratio at the 
minimum required level and increase it thereafter;
    (iv) Balance sheet and income projections, including assumptions, 
for the current calendar year and one additional calendar year; and
    (v) Certification from the board of directors that it will follow 
the proposed plan if approved by NCUA.
    (3) The capital restoration plan must be submitted to NCUA within 30 
calendar days of the occurrence. NCUA will respond to the corporate 
credit union regarding the adequacy of the plan within 45 calendar days 
of its receipt.
    (g) Capital directive. (1) If a corporate credit union fails to 
submit a capital restoration plan; or the plan submitted is not deemed 
adequate to either restore capital or restore capital within a 
reasonable time; or the credit union fails to implement its approved 
capital restoration plan, NCUA may issue a capital directive.
    (2) A capital directive may order a corporate credit union to:

[[Page 358]]

    (i) Achieve adequate capitalization within a specified time frame by 
taking any action deemed necessary, including but not limited to the 
following:
    (A) Increase the amount of capital to specific levels;
    (B) Reduce dividends;
    (C) Limit receipt of deposits to those made to existing accounts;
    (D) Cease or limit issuance of new accounts or any or all classes of 
accounts;
    (E) Cease or limit lending or making a particular type or category 
of loans;
    (F) Cease or limit the purchase of specified investments;
    (G) Limit operational expenditures to specified levels;
    (H) Increase and maintain liquid assets at specified levels; and
    (I) Restrict or suspend expanded authorities issued under Appendix B 
of this part.
    (ii) Adhere to a previously submitted plan to achieve adequate 
capitalization.
    (iii) Submit and adhere to a capital plan acceptable to NCUA 
describing the means and a time schedule by which the corporate credit 
union shall achieve adequate capitalization.
    (iv) Meet with NCUA.
    (v) Take a combination of these actions.
    (3) Prior to issuing a capital directive, NCUA will notify a 
corporate credit union in writing of its intention to issue a capital 
directive.
    (i) The notice will state:
    (A) The reasons for the issuance of the directive; and
    (B) The proposed content of the directive.
    (ii) A corporate credit union must respond in writing within 30 
calendar days of receipt of the notice stating that it either concurs or 
disagrees with the notice. If it disagrees with the notice, it must 
state the reasons why the directive should not be issued and/or propose 
alternative contents for the directive. The response should include all 
matters that the corporate credit union wishes to be considered. For 
good cause, including the following conditions, the response time may be 
shortened or lengthened:
    (A) When the condition of the corporate requires, and the corporate 
credit union is notified of the shortened response period in the notice;
    (B) With the consent of the corporate credit union; or
    (C) When the corporate credit union already has advised NCUA that it 
cannot or will not achieve adequate capitalization.
    (iii) Failure to respond within 30 calendar days, or another time 
period specified in the notice, shall constitute a waiver of any 
objections to the proposed directive.
    (4) After the closing date of the corporate credit union's response 
period, or the receipt of the response, if earlier, NCUA shall consider 
the response and may seek additional information or clarification. Based 
on the information provided during the response period, NCUA will 
determine whether or not to issue a capital directive and, if issued, 
the form it should take.
    (5) Upon issuance, a capital directive and a statement of the 
reasons for its issuance will be delivered to the corporate credit 
union. A directive is effective immediately upon receipt by the 
corporate credit union, or upon such later date as may be specified 
therein, and shall remain effective and enforceable until it is stayed, 
modified, or terminated by NCUA.
    (6) A capital directive may be issued in addition to, or in lieu of, 
any other action authorized by law in response to a corporate credit 
union's failure to achieve or maintain the applicable minimum capital 
ratios.
    (7) Upon a change in circumstances, a corporate credit union may 
request reconsideration of the terms of the directive. Requests that are 
not based on a significant change in circumstances or are repetitive or 
frivolous will not be considered. Pending a decision on reconsideration, 
the directive shall continue in full force and effect.



Sec. 704.4  Board responsibilities.

    (a) General. A corporate credit union's board of directors must 
approve comprehensive written strategic plans and operating policies, 
review them annually, and provide them upon request to the auditors, 
supervisory committee, and NCUA.

[[Page 359]]

    (b) Operating policies. A corporate credit union's operating 
policies must be commensurate with the scope and complexity of the 
corporate credit union.
    (c) Procedures. The board of directors of a corporate credit union 
must ensure that:
    (1) Senior managers have an in-depth, working knowledge of their 
direct areas of responsibility and are capable of identifying, hiring, 
and retaining qualified staff;
    (2) Qualified personnel are employed or under contract for all line 
support and audit areas, and designated back-up personnel or resources 
with adequate cross-training are in place;
    (3) GAAP is followed, except where law or regulation has provided 
for a departure from GAAP;
    (4) Accurate balance sheets, income statements, and internal risk 
assessments (e.g., risk management measures of liquidity, market, and 
credit risk associated with current activities) are produced timely in 
accordance with Secs. 704.6, 704.8, and 704.9;
    (5) Systems are audited periodically in accordance with industry-
established standards;
    (6) Financial performance is evaluated to ensure that the objectives 
of the corporate credit union and the responsibilities of management are 
met; and
    (7) Planning addresses the retention of external consultants, as 
appropriate, to review the adequacy of technical, human, and financial 
resources dedicated to support major risk areas.



Sec. 704.5  Investments.

    (a) Policies. A corporate credit union must operate according to an 
investment policy that is consistent with its other risk management 
policies, including, but not limited to, those related to credit risk 
management, asset and liability management, and liquidity management. 
The policy must address, at a minimum:
    (1) Appropriate tests and criteria, if any, for evaluating standard 
investments and investment transactions prior to purchase; and
    (2) Risk analysis requirements for any new investment type or 
transaction, not previously owned or marketed by the corporate credit 
union, considered for purchase by the corporate credit union and/or for 
sale to members.
    (b) General. All investments must be U.S. dollar-denominated and 
subject to the credit policy restrictions set forth in Sec. 704.6.
    (c) Authorized activities. A corporate credit union may invest in:
    (1) Securities, deposits, and obligations set forth in Sections 
107(7), 107(8), and 107(15) of the Federal Credit Union Act, 12 U.S.C. 
1757(7), 1757(8), and 1757(15), except as provided in this section;
    (2) Deposits in, the sale of federal funds to, and debt obligations 
of corporate credit unions, Section 107(8) institutions, and state 
banks, trust companies, and mutual savings banks not domiciled in the 
state in which the corporate credit union does business;
    (3) Corporate CUSOs, as defined in and subject to the limitations of 
Sec. 704.11;
    (4) Marketable debt obligations of corporations chartered in the 
United States. This authority does not apply to debt obligations that 
are convertible into the stock of the corporation;
    (5) Asset-backed securities; and
    (6) CMOs/REMICs.
    (d) Repurchase agreements. A corporate credit union may enter into a 
repurchase agreement provided that:
    (1) The corporate credit union, or its agent, nominee, or designee, 
receives written confirmation of the transaction and either takes 
physical possession or control of the repurchase securities or is 
recorded as owner of the repurchase securities through the Federal 
Reserve Book-Entry Securities Transfer System;
    (2) The repurchase securities are legal investments for that 
corporate credit union;
    (3) In the event of default, the corporate credit union sells the 
repurchase securities in a timely manner, subject to a bankruptcy stay, 
to satisfy the commitment of any net principal and interest owed to it 
by the counterparty;
    (4) The corporate credit union receives daily assessment of the 
market value of the repurchase securities, including a market quote or 
dealer bid

[[Page 360]]

indication and any accrued interest, and maintains adequate margin that 
reflects a risk assessment of the repurchase securities and the term of 
the transaction;
    (5) The corporate credit union has entered into signed contracts 
with all approved counterparties. Such contracts must address any 
supplemental terms and conditions necessary to meet the specific 
requirements of this part. Third party arrangements must be supported by 
tri-party contracts in which the repurchase securities are priced and 
reported daily and the tri-party agent ensures compliance; and
    (6) The corporate credit union has sufficient market relationships 
established in advance to timely execute the disposition of the 
repurchase securities.
    (e) Securities Lending. A corporate credit union may enter into a 
securities lending transaction provided that:
    (1) The corporate credit union, or its agent, nominee, or designee, 
receives written confirmation of the loan, obtains a perfected first 
priority security interest in the collateral, and either takes physical 
possession or control of the collateral or is recorded as owner of the 
collateral through the Federal Reserve Book-Entry Securities Transfer 
System;
    (2) The collateral is a legal investment for that corporate credit 
union;
    (3) The corporate credit union, directly or through its agent, 
receives daily assessment of the market value of collateral, including a 
market quote or dealer bid indication and any accrued interest, and 
maintains adequate margin that reflects a risk assessment of the 
collateral and terms of the loan; and
    (4) The corporate credit union, directly or through its agent, has 
executed a written loan and security agreement with the borrower, 
approved any form of agreement attached thereto, and obtained the right 
to approve any material modification to such agreement.
    (f) Investment companies. A corporate credit union may invest in an 
investment company registered with the Securities and Exchange 
Commission under the Investment Company Act of 1940 (15 U.S.C. 80a), 
provided that the portfolio of such investment company is restricted by 
its investment policy solely to investments and investment transactions 
that are permissible for that corporate credit union.
    (g) Forward settlement of transactions later than regular way. A 
corporate credit union may enter into an agreement to purchase or sell 
an instrument, with settlement later than regular way, provided that:
    (1) Delivery and acceptance are mandatory;
    (2) The transaction is clearly disclosed in the appropriate risk 
reporting required under Sec. 704.8(b);
    (3) If the corporate credit union is the purchaser, it has adequate 
cash flow projections evidencing its ability to purchase the instrument;
    (4) If the corporate credit union is the seller, it owns the 
instrument on the trade date; and
    (5) The transaction is settled on a cash basis at the settlement 
date.
    (h) Prohibitions. A corporate credit union is prohibited from:
    (1) Purchasing or selling off balance sheet financial derivatives, 
such as futures, options, interest rate swaps, or forward rate 
agreements;
    (2) Engaging in pair-off transactions, when-issued trading, adjusted 
trading, or short sales; and
    (3) Purchasing stripped mortgage-backed securities, residual 
interests in CMO/REMICs, mortgage servicing rights, commercial mortgage 
related securities, or small business related securities.
    (i) Conflicts of interest. A corporate credit union's officials, 
employees, and immediate family members of such individuals, may not 
receive pecuniary consideration in connection with the making of an 
investment or deposit by the corporate credit union. Employee 
compensation is exempt from this prohibition. All transactions not 
specifically prohibited by this paragraph must be conducted at arm's 
length and in the interest of the corporate credit union.
    (j) Grandfathering. A corporate credit union's authority to hold an 
investment is governed by the regulation in effect at the time of 
purchase. However, all grandfathered investments are

[[Page 361]]

subject to the requirements of Secs. 704.8 and 704.9.

[62 FR 12938, Mar. 19, 1997, as amended at 63 FR 24105, May 1, 1998]



Sec. 704.6  Credit risk management.

    (a) Policies. A corporate credit union must operate according to a 
credit risk management policy that is commensurate with the investment 
and lending risks and activities it undertakes. The policy must address, 
at a minimum:
    (1) The approval process associated with credit limits;
    (2) Due diligence analysis requirements;
    (3) Maximum credit limits with each obligor and transaction 
counterparty, set as a percentage of the sum of reserves and undivided 
earnings and paid-in capital. In addition to addressing loans, deposits, 
and securities, limits with transaction counterparties must address 
aggregate exposures of all transactions, including, but not necessarily 
limited to, repurchase agreements, securities lending, and forward 
settlement of purchases or sales of investments; and
    (4) Concentrations of credit risk (e.g., industry type, sector type, 
and geographic).
    (b) Exemption. The requirements of this section do not apply to 
instruments that are issued or fully guaranteed as to principal and 
interest by the U.S. government or its agencies or enterprises or are 
fully insured (including accumulated interest) by the National Credit 
Union Administration or Federal Deposit Insurance Corporation.
    (c) Concentration limits. (1) Aggregate investments in mortgage-
backed and asset-backed securities are limited to 200 percent of the sum 
of reserves and undivided earnings and paid-in capital for any single 
security or trust.
    (2) Except for investments in a wholesale corporate credit union, 
aggregate investments in repurchase and securities lending agreements 
with any one counterparty are limited to 400 percent of the sum of 
reserves and undivided earnings and paid-in capital.
    (3) Except for investments in a wholesale corporate credit union, 
the aggregate of all investments in non secured obligations of any 
single domestic issuer is limited to 100 percent of the sum of reserves 
and undivided earnings and paid-in capital.
    (4) For purposes of measurement, each new credit transaction must be 
evaluated in terms of the corporate credit union's sum of reserves and 
undivided earnings and paid-in capital at the time of the transaction. A 
subsequent reduction in the sum of reserves and undivided earnings and 
paid-in capital will require a suspension of additional transactions 
until maturities, sales or terminations bring existing exposures within 
the requirements of this part.
    (d) Credit ratings. (1) All debt instruments must have a credit 
rating from at least one nationally recognized statistical rating 
organization (NRSRO).
    (2) The rating(s) must be monitored for as long as the corporate 
owns an instrument.
    (3) At the time of purchase, asset-backed securities must be rated 
no lower than AAA (or equivalent), other long-term investments must be 
rated no lower than AA (or equivalent), and short-term investments must 
be rated no lower than A-1 (or equivalent).
    (4) Any rated instrument that is downgraded by the NRSRO used to 
meet the requirements of this part at the time of purchase must be 
reviewed by the board or an appropriate committee within 30 calendar 
days of the downgrade. Instruments that fall below the minimum rating 
requirements of this part are subject to the requirements of 
Sec. 704.10.
    (e) Reporting and documentation. (1) A written evaluation of each 
credit line must be prepared at least annually and formally approved by 
the board or an appropriate committee. At least monthly, the board or an 
appropriate committee must receive a watch list of existing and/or 
potential credit problems and summary credit exposure reports, which 
demonstrate compliance with the corporate credit union's risk management 
policies.
    (2) At a minimum, the corporate credit union must maintain:
    (i) A justification for each approved credit line;
    (ii) Disclosure documents, if any, for all instruments held in 
portfolio. Documents for an instrument that has been

[[Page 362]]

sold must be retained until completion of the next NCUA examination; and
    (iii) The latest available financial reports, industry analyses, 
internal and external analyst evaluations, and rating agency information 
sufficient to support each approved credit line.



Sec. 704.7  Lending.

    (a) Policies. A corporate credit union must operate according to a 
lending policy which addresses, at a minimum:
    (1) Loan types and limits;
    (2) Required documentation and collateral; and
    (3) Analysis and monitoring standards.
    (b) General. Each loan or line of credit limit will be determined 
after analyzing the financial and operational soundness of the borrower 
and the ability of the borrower to repay the loan.
    (c) Loans to member credit unions. (1) The maximum aggregate amount 
in unsecured loans and irrevocable lines of credit to any one member 
credit union, excluding pass-through and guaranteed loans from the CLF 
and the NCUSIF, shall not exceed 50 percent of capital or 75 percent of 
the sum of reserves and undivided earnings and paid-in capital, 
whichever is greater.
    (2) The maximum aggregate amount in secured loans and irrevocable 
lines of credit to any one member credit union, excluding those secured 
by shares or marketable securities and member reverse repurchase 
transactions, shall not exceed 100 percent of capital or 200 percent of 
the sum of reserves and undivided earnings and paid-in capital, 
whichever is greater.
    (d) Loans to members that are not credit unions. Any loan or 
irrevocable line of credit made to a member, other than a credit union 
or a corporate CUSO, must be made in compliance with part 723 of this 
chapter, governing member business loans, unless such loan or line of 
credit is fully guaranteed by a credit union. The aggregate amount of 
loans and irrevocable lines of credit to members other than credit 
unions and corporate CUSOs shall not exceed 15 percent of the corporate 
credit union's capital plus pledged shares.
    (e) Loans to non member credit unions. A loan to a credit union that 
is not a member of the corporate credit union, other than through a loan 
participation with another corporate credit union, is only permissible 
if the loan is for an overdraft related to the providing of 
correspondent services pursuant to Sec. 704.12. Generally, such a loan 
will have a maturity of only one business day.
    (f) Loans to corporate CUSOs. A corporate credit union may make 
loans and issue lines of credit to corporate CUSOs, subject to the 
limitations of Sec. 704.11.
    (g) Participation loans with other corporate credit unions. A 
corporate credit union is permitted to participate in a loan with 
another corporate credit union and must retain an interest of at least 5 
percent of the face amount of the loan. The participation agreement may 
be executed at any time prior to, during, or after disbursement. A 
participating corporate credit union must exercise the same due 
diligence as if it were the originating corporate credit union.
    (h) Prepayment penalties. If provided for in the loan contract, a 
corporate credit union is authorized to assess prepayment penalties on 
loans.

[62 FR 12938, Mar. 19, 1997, as amended at 64 FR 57365, Oct. 25, 1999]



Sec. 704.8  Asset and liability management.

    (a) Policies. A corporate credit union must operate according to a 
written asset and liability management policy which addresses, at a 
minimum:
    (1) The purpose and objectives of the corporate credit union's asset 
and liability activities;
    (2) The tests that will be used to evaluate instruments prior to 
purchase;
    (3) The maximum allowable percentage decline in net economic value 
(NEV), compared to current NEV;
    (4) The minimum allowable NEV ratio;
    (5) The maximum decline in net income (before reserve transfers), in 
percentage and dollar terms, compared to current net income;
    (6) Policy limits and specific test parameters for the interest rate 
risk simulation tests set forth in paragraph (d) of this section; and

[[Page 363]]

    (7) The modeling of indexes that serve as references in financial 
instrument coupon formulas.
    (b) Asset and liability management committee (ALCO). A corporate 
credit union's ALCO must have at least one member who is also a member 
of the board of directors. The ALCO must review asset and liability 
management reports on at least a monthly basis. These reports must 
address compliance with Federal Credit Union Act, NCUA Rules and 
Regulations (12 CFR chapter VII), and all related risk management 
policies.
    (c) Penalty for early withdrawals. A corporate credit union that 
permits early certificate/share withdrawals must assess market-based 
penalties sufficient to cover the estimated replacement cost of the 
certificate/share redeemed.
    (d) Interest rate sensitivity analysis. (1) A corporate credit union 
must:
    (i) Evaluate the risk in its balance sheet by measuring, at least 
quarterly, the impact of an instantaneous, permanent, and parallel shock 
in the Treasury yield curve of plus and minus 100, 200, and 300 basis 
points on its NEV, NEV ratio, and net interest income. If the base case 
NEV ratio falls below 2 percent at the last testing date, these tests 
must be calculated at least monthly until the base case NEV ratio again 
exceeds 2 percent;
    (ii) Limit its risk exposure to levels that do not result in an NEV 
ratio below 1 percent; and
    (iii) Limit its risk exposures to levels that do not result in a 
decline in NEV of more than 18 percent, except as provided in paragraph 
(e) of this section.
    (2) A corporate credit union that owns an aggregate amount of 
instruments which possess unmatched embedded options in a book value 
amount which exceeds 200 percent of the sum of its reserves and 
undivided earnings and paid-in capital must conduct periodically, as 
appropriate, additional tests that address market factors which 
potentially can impact the value of the instruments and that reflect the 
policy limits addressed in paragraph (a) of this section. These factors 
should include, but not be limited to, the following:
    (i) Changes in the shape of the Treasury yield curve;
    (ii) Adjustments to prepayment projections used for amortizing 
securities to consider the impact of significantly faster/slower 
prepayment speeds;
    (iii) Adjustments to the market spread assumptions for non Treasury 
instruments to consider the impact of widening spreads; and
    (iv) Adjustments to volatility assumptions to consider the impact 
that changing volatilities have on embedded option values.
    (e) Base-plus. (1) In performing the rate stress tests set forth in 
paragraph (d)(1)(i) of this section, the NEV of a corporate credit union 
which has met the requirements of this paragraph (e) may decline as much 
as 25 percent.
    (2) The corporate credit union must meet additional management and 
infrastructure requirements and receive NCUA's written approval. The 
additional requirements are set forth in the NCUA publication Guidelines 
for Submission of Requests for Expanded Authority. The procedures for 
processing base-plus authority are the same as those set forth in 
Appendix B of this part for requesting expanded authorities.
    (3) The corporate credit union must evaluate monthly the changes in 
NEV, NEV ratio, and net interest income for the tests set forth in 
paragraph (d)(1)(i) of this section.
    (4) Regardless of the amount of instruments which possess unmatched 
embedded options, the corporate credit union must conduct periodically, 
as appropriate, the tests set forth in paragraph (d)(2) of this section.
    (f) Regulatory violations. If a corporate credit union's base case 
NEV or NEV ratio or the NEV or NEV ratio resulting from the tests 
indicated in paragraph (d)(1)(i) of this section decline below the 
limits established by this part and are not brought into compliance 
within 10 calendar days, operating management of the corporate credit 
union must immediately report the information to the board of directors, 
supervisory committee, and NCUA. If any of these measures remain below 
the limits established by this part within 30 calendar days of the 
violation, the corporate credit union must

[[Page 364]]

submit a detailed, written action plan to NCUA that sets forth the time 
needed and means by which it intends to correct the violation. If NCUA 
determines that the plan is unacceptable, the corporate credit union 
must immediately restructure the balance sheet to bring the exposures 
back within compliance or adhere to an alternative course of action 
determined by NCUA.
    (g) Policy violations. If a corporate credit union's NEV or NEV 
ratio for any required test(s) exceed the limits established by the 
board, it must determine how it will bring the exposures within policy 
limits. The disclosure to the board of the limit violation must occur no 
later than its next regularly scheduled board meeting.



Sec. 704.9  Liquidity management.

    (a) General. In the management of liquidity, a corporate credit 
union must:
    (1) Evaluate the potential liquidity needs of its membership in a 
variety of economic scenarios;
    (2) Regularly monitor sources of internal and external liquidity;
    (3) Demonstrate that the accounting classification of investment 
securities is consistent with its ability to meet potential liquidity 
demands; and
    (4) Develop a contingency funding plan that addresses alternative 
funding strategies in successively deteriorating liquidity scenarios. 
The plan must:
    (i) List all sources of liquidity, by category and amount, that are 
available to service an immediate outflow of funds in various liquidity 
scenarios;
    (ii) Analyze the impact that potential changes in fair value will 
have on the disposition of assets in a variety of interest rate 
scenarios; and
    (iii) Be reviewed by the board or an appropriate committee no less 
frequently than annually or as market or business conditions dictate.
    (b) Borrowing. A corporate credit union may borrow up to 10 times 
capital or 50 percent of shares (excluding shares created by the use of 
member reverse repurchase agreements) and capital, whichever is greater. 
CLF borrowings and borrowed funds created by the use of member reverse 
repurchase agreements are excluded from this limit. The corporate credit 
union must demonstrate that sufficient contingent sources of liquidity 
remain available.



Sec. 704.10  Divestiture.

    (a) Any corporate credit union in possession of an investment that 
fails to meet a requirement of this part must, within 30 calendar days 
of the failure, report the failed investment to its board of directors, 
supervisory committee, and NCUA. If the corporate credit union does not 
sell the failed investment, and the investment continues to fail to meet 
a requirement of this part, the corporate credit union must, within 30 
calendar days of the failure, provide to NCUA a written action plan that 
addresses:
    (1) The investment's characteristics and risks;
    (2) The process to obtain and adequately evaluate the investment's 
market pricing, cash flows, and risk;
    (3) How the investment fits into the credit union's asset and 
liability management strategy;
    (4) The impact that either holding or selling the investment will 
have on the corporate credit union's earnings, liquidity, and capital in 
different interest rate environments; and
    (5) The likelihood that the investment may again pass the 
requirements of this part.
    (b) NCUA may require, for safety and soundness reasons, a shorter 
time period for plan development than that set forth in paragraph (a) of 
this section.
    (c) If the plan described in paragraph (a) of this section is not 
approved by NCUA, the credit union must adhere to NCUA's directed course 
of action.



Sec. 704.11  Corporate Credit Union Service Organizations (Corporate CUSOs).

    (a) A corporate CUSO is an entity that:
    (1) Is at least partly owned by a corporate credit union;
    (2) Primarily serves credit unions;
    (3) Restricts its services to those related to the normal course of 
business of credit unions; and
    (4) Is structured as a corporation, limited liability company, or 
limited partnership under state law.

[[Page 365]]

    (b) The aggregate of all investments in and loans to member and non 
member corporate CUSOs shall not exceed 15 percent of a corporate credit 
union's capital. However, a corporate credit union may loan to member 
and non member corporate CUSOs an additional 15 percent of capital if 
collateralized by assets in which the corporate credit union has 
perfected a security interest under state law. A corporate credit union 
may not use this authority to acquire control, directly or indirectly, 
of another financial institution, or to invest in shares, stocks, or 
obligations of another financial institution, insurance company, trade 
association, liquidity facility, or similar organization. A corporate 
CUSO must be operated as an entity separate from any credit union. A 
corporate credit union investing in or lending to a corporate CUSO must 
obtain a written legal opinion that the corporate CUSO is organized and 
operated in such a manner that the corporate credit union will not 
reasonably be held liable for the obligations of the corporate CUSO. 
This opinion must address factors that have led courts to ``pierce the 
corporate veil,'' such as inadequate capitalization, lack of separate 
corporate identity, common boards of directors and employees, control of 
one entity over another, and lack of separate books and records.
    (c) An official of a corporate credit union which has invested in or 
loaned to a corporate CUSO may not receive, either directly or 
indirectly, any salary, commission, investment income, or other income, 
compensation, or consideration from the corporate CUSO. This prohibition 
also extends to immediate family members of officials.
    (d) Prior to making an investment in or loan to a corporate CUSO, a 
corporate credit union must obtain a written agreement that the 
corporate CUSO will:
    (1) Follow GAAP;
    (2) Provide financial statements to the corporate credit union at 
least quarterly;
    (3) Obtain an annual CPA opinion audit and provide a copy to the 
corporate credit union; and
    (4) Allow the auditor, board of directors, and NCUA complete access 
to its books, records, and any other pertinent documentation.
    (e) Corporate credit union authority to invest in or loan to a CUSO 
is limited to that provided in this section. A corporate credit union is 
not authorized to invest in or loan to a CUSO under part 712 of this 
chapter.

[62 FR 12938, Mar. 19, 1997, as amended at 63 FR 10756, Mar. 5, 1998]



Sec. 704.12  Services.

    Except for correspondent services to a non member, natural person 
credit union branch office operating in the geographic area defined in 
the corporate credit union's charter, a corporate credit union may 
provide services only to its members, subject to the limitations of this 
part. A corporate credit union may not provide services to non members 
through agreements with other corporate credit unions or pursuant to 
Sec. 701.26 of this chapter, except with the written permission of NCUA.



Sec. 704.13  Fixed assets.

    (a) A corporate credit union's ownership in fixed assets shall be 
limited as described in Sec. 701.36 of this chapter, except that in lieu 
of Sec. 701.36(c)(1) through (4) of this chapter, paragraph (b) of this 
section applies.
    (b) A corporate credit union may invest in fixed assets where the 
aggregate of all such investments does not exceed 15 percent of the 
corporate credit union's capital. A corporate credit union desiring to 
exceed the limitation shall submit a written request to NCUA. Requests 
shall be supplemented by such statements and reports as NCUA may 
require. If the corporate credit union does not receive notification of 
the action taken on its request within 45 calendar days of the date all 
required information has been received, it may proceed with its proposed 
investment in fixed assets.



Sec. 704.14  Representation.

    (a) Board representation. The board shall be determined as 
stipulated in the standard corporate federal credit union bylaws 
governing election procedures, provided that:
    (1) At least a majority of directors, including the chair of the 
board, must

[[Page 366]]

serve on the board as representatives of member credit unions;
    (2) The chair of the board may not serve simultaneously as an 
officer, director, or employee of a credit union trade association;
    (3) A majority of directors may not serve simultaneously as 
officers, directors, or employees of the same credit union trade 
association or its affiliates (not including chapters or other subunits 
of a state trade association);
    (4) For purposes of meeting the requirements of paragraphs (a)(2) 
and (a)(3) of this section, an individual may not serve as a director or 
chair of the board if that individual holds a subordinate employment 
relationship to another employee who serves as an officer, director, or 
employee of a credit union trade association; and
    (5) In the case of a corporate credit union whose membership is 
composed of more than 25 percent non credit unions, the majority of 
directors serving as representatives of member credit unions, including 
the chair, must be elected only by member credit unions.
    (b) Representatives of organizational members. (1) An organizational 
member of a corporate credit union is a member that is not a natural 
person. An organizational member may appoint one of its members or 
officials as a representative to the corporate credit union. The 
representative shall be empowered to attend membership meetings, to 
vote, and to stand for election on behalf of the member. No individual 
may serve as the representative of more than one organizational member 
in the same corporate credit union.
    (2) Any vacancy on the board of a corporate credit union caused by a 
representative being unable to complete his or her term shall be filled 
by the board of the corporate credit union according to its bylaws 
governing the filling of board vacancies.
    (c) Recusal provision. (1) No director, committee member, officer, 
or employee of a corporate credit union shall in any manner, directly or 
indirectly, participate in the deliberation upon or the determination of 
any question affecting his or her pecuniary interest or the pecuniary 
interest of any entity (other than the corporate credit union) in which 
he or she is interested, except if the matter involves general policy 
applicable to all members, such as setting dividend or loan rates or 
fees for services.
    (2) An individual is ``interested'' in an entity if he or she:
    (i) Serves as a director, officer, or employee of the entity;
    (ii) Has a business, ownership, or deposit relationship with the 
entity; or
    (iii) Has a business, financial, or familial relationship with an 
individual whom he or she knows has a pecuniary interest in the entity.
    (3) In the event of the disqualification of any directors, by 
operation of paragraph (c)(1) of this section, the remaining qualified 
directors present at the meeting, if constituting a quorum with the 
disqualified directors, may exercise, by majority vote, all the powers 
of the board with respect to the matter under consideration. Where all 
of the directors are disqualified, the matter must be decided by the 
members of the corporate credit union.
    (4) In the event of the disqualification of any committee member by 
operation of paragraph (c)(1) of this section, the remaining qualified 
committee members, if constituting a quorum with the disqualified 
committee members, may exercise, by majority vote, all the powers of the 
committee with respect to the matter under consideration. Where all of 
the committee members are disqualified, the matter shall be decided by 
the board of directors.
    (d) Administration. (1) A corporate credit union shall be under the 
direction and control of its board of directors. While the board may 
delegate the performance of administrative duties, the board is not 
relieved of its responsibility for their performance. The board may 
employ a chief executive officer who shall have such authority and such 
powers as delegated by the board to conduct business from day to day. 
Such chief executive officer must answer solely to the board of the 
corporate credit union, and may not be an employee of a credit union 
trade association.
    (2) The provisions of Sec. 701.14 of this chapter apply to corporate 
credit unions, except that where ``Regional Director'' is used, read 
``NCUA Board.''

[[Page 367]]



Sec. 704.15  Audit requirements.

    (a) External audit. The corporate credit union supervisory committee 
shall cause an annual opinion audit of the financial statements to be 
made. The audit must be performed in accordance with generally accepted 
auditing standards and the audited financial statements must be prepared 
consistent with GAAP, except where law or regulation has provided for a 
departure from GAAP. The supervisory committee shall submit the audit 
report to the board of directors. A copy of the audit report, and copies 
of all communications that are provided to the corporate credit union by 
the external auditor, shall be submitted to NCUA within 30 calendar days 
after receipt by the board of directors. If requested by NCUA, the 
external auditor's workpapers shall be made available, at the auditor's 
office or elsewhere, for NCUA's review. The corporate credit union shall 
submit a summary of the audit report to the membership at the next 
annual meeting.
    (b) Internal audit. A corporate credit union with average daily 
assets in excess of $400 million for the preceding calendar year, or as 
ordered by NCUA, must employ or contract, on a full- or part-time basis, 
the services of an internal auditor. The internal auditor's 
responsibilities will, at a minimum, comply with the Standards and 
Professional Practices of Internal Auditing, as established by the 
Institute of Internal Auditors. The internal auditor will report 
directly to the chair of the corporate credit union's supervisory 
committee, who may delegate supervision of the internal auditor's daily 
activities to the chief executive officer of the corporate credit union. 
The internal auditor's reports, findings, and recommendations will be in 
writing and presented to the supervisory committee no less than 
quarterly, and will be provided upon request to the external auditor and 
NCUA.



Sec. 704.16  Contracts/written agreements.

    Services, facilities, personnel, or equipment shared with any party 
shall be supported by a written contract, with the duties and 
responsibilities of each party specified and the allocation of service 
fee/expenses fully supported and documented.



Sec. 704.17  State-chartered corporate credit unions.

    (a) This part does not expand the powers and authorities of any 
state-chartered corporate credit union, beyond those powers and 
authorities provided under the laws of the state in which it was 
chartered.
    (b) A state-chartered corporate credit union that is not insured by 
the NCUSIF, but that receives funds from federally insured credit 
unions, is considered an ``institution-affiliated party'' within the 
meaning of Section 206(r) of the Federal Credit Union Act, 12 U.S.C. 
1786(r).
    (c) NCUA will notify, consult with, and provide explanation to the 
appropriate state supervisory authority before taking administrative 
action against a state-chartered corporate credit union.



Sec. 704.18  Fidelity bond coverage.

    (a) Scope. This section provides the fidelity bond requirements for 
employees and officials in corporate credit unions.
    (b) Review of coverage. The board of directors of each corporate 
credit union shall, at least annually, carefully review the bond 
coverage in force to determine its adequacy in relation to risk exposure 
and to the minimum requirements in this section.
    (c) Minimum coverage; approved forms. Every corporate credit union 
will maintain bond coverage with a company holding a certificate of 
authority from the Secretary of the Treasury. All bond forms, and any 
riders and endorsements which limit the coverage provided by approved 
bond forms, must receive the prior written approval of NCUA. Fidelity 
bonds must provide coverage for the fraud and dishonesty of all 
employees, directors, officers, and supervisory and credit committee 
members. Notwithstanding the foregoing, all bonds must include a 
provision, in a form approved by NCUA, requiring written notification by 
surety to NCUA:
    (1) When the bond of a credit union is terminated in its entirety;

[[Page 368]]

    (2) When bond coverage is terminated, by issuance of a written 
notice, on an employee, director, officer, supervisory or credit 
committee member; or
    (3) When a deductible is increased above permissible limits. Said 
notification shall be sent to NCUA and shall include a brief statement 
of cause for termination or increase.
    (d) Minimum coverage amounts. (1) The minimum amount of bond 
coverage will be computed based on the corporate credit union's daily 
average net assets for the preceding calendar year. The following table 
lists the minimum requirements:

------------------------------------------------------------------------
                                                               Minimum
                  Daily average net assets                       bond
                                                              (million)
------------------------------------------------------------------------
Less than $50 million......................................         $1.0
$50-$99 million............................................          2.0
$100-$499 million..........................................          4.0
$500-$999 million..........................................          6.0
$1.0-$1.999 billion........................................          8.0
$2.0-$4.999 billion........................................         10.0
$5.0-$9.999 billion........................................         15.0
$10.0-$24.999 billion......................................         20.0
$25.0 billion plus.........................................         25.0
------------------------------------------------------------------------

    (2) It is the duty of the board of directors of each corporate 
credit union to provide adequate protection to meet its unique 
circumstances by obtaining, when necessary, bond coverage in excess of 
the minimums in the table in paragraph (d)(1) of this section.
    (e) Deductibles. (1) The maximum amount of deductibles allowed are 
based on the corporate credit union's reserve ratio. The following table 
sets out the maximum deductibles, except that in each category the 
maximum deductible shall be $5 million:

------------------------------------------------------------------------
                 Reserve ratio                     Maximum deductible
------------------------------------------------------------------------
Less than 1.0 percent.........................  7.5 percent of the sum
                                                 of reserves and
                                                 undivided earnings and
                                                 paid-in capital.
1.0-1.74 percent..............................  10.0 percent of the sum
                                                 of reserves and
                                                 undivided earnings and
                                                 paid-in capital
1.75-2.24 percent.............................  12.0 percent of the sum
                                                 of reserves and
                                                 undivided earnings and
                                                 paid-in capital.
Greater than 2.25 percent.....................  15.0 percent of the sum
                                                 of reserves and
                                                 undivided earnings and
                                                 paid-in capital.
------------------------------------------------------------------------

    (2) A deductible may be applied separately to one or more insuring 
clauses in a blanket bond. Deductibles in excess of those showing in 
this section must have the written approval of NCUA at least 30 calendar 
days prior to the effective date of the deductibles.
    (f) Additional coverage. NCUA may require additional coverage for 
any corporate credit union when, in the opinion of NCUA, current 
coverage is insufficient. The board of directors of the corporate credit 
union must obtain additional coverage within 30 calendar days after the 
date of written notice from NCUA.



Sec. 704.19  Wholesale corporate credit unions.

    (a) General. Wholesale corporate credit unions are subject to the 
preceding requirements of this part, except as set forth in this 
section.
    (b) Capital. (1) A wholesale corporate credit union will maintain a 
minimum capital ratio of 5 percent.
    (2) A wholesale corporate credit union shall make reserve transfers 
at the lower of .10 percent of its moving daily average net assets or 
the amount that would be required under Sec. 704.3(c).
    (i) Required transfers are to be made from earnings in either the 
prior calendar month or prior twelve-month period. Transfers made during 
the prior twelve-month period must be greater than or equal to the 
aggregate amount of required reserve transfers for each of the months in 
that twelve-month period.
    (ii) NCUA and, in the case of state-chartered wholesale corporate 
credit unions, the state supervisory authority, must be notified within 
30 calendar days of the close of any calendar month in which a wholesale 
corporate credit union's required reserve transfer exceeds earnings for 
that month. The notice must include the dollar amounts of the required 
reserve transfer and earnings for that month and for the prior twelve-
month period. The notice must also provide an explanation of why the 
current month's required reserve transfer exceeded earnings for that 
month.

[[Page 369]]

    (c) Asset and liability management. (1) In conducting the interest 
rate sensitivity analysis set forth in Sec. 704.8(d)(1)(i), a wholesale 
corporate credit union must limit its risk exposure to levels that do 
not result, at any time, in an NEV ratio below .75 percent or a decline 
in NEV of more than 35 percent.
    (2) A wholesale corporate credit union must obtain, at its expense, 
an annual third-party review of its asset and liability management 
modeling system.

                   Appendix A to Part 704--Model Forms

    This appendix contains sample forms intended for use by corporate 
credit unions to aid in compliance with the membership capital account 
and paid-in capital disclosure requirements of Sec. 704.2. Corporate 
credit unions that use this form will be in compliance with those 
requirements.

                              Sample Form 1

           Terms and Conditions of Membership Capital Account

    (1) A membership capital account is not subject to share insurance 
coverage by the NCUSIF or other deposit insurer.
    (2) A member credit union may withdraw membership capital with three 
years' notice.
    (3) Membership capital cannot be used to pledge borrowings.
    (4) Membership capital is available to cover losses that exceed 
reserves and undivided earnings and paid-in capital.
    (5) Where the corporate credit union is liquidated, membership 
capital accounts are payable only after satisfaction of all liabilities 
of the liquidation estate including uninsured obligations to 
shareholders and the NCUSIF.

If the form is used when an account is opened, it must also contain the 
following statement:
    I have read the above terms and conditions and I understand them. I 
further agree to maintain in the credit union's files the annual notice 
of terms and conditions of the membership capital account.

The form must be signed by either all of the directors of the member 
credit union or, if authorized by board resolution, the chair and 
secretary of the board of the credit union.
    If the form is used for the annual notice requirement, it must be 
signed by the chair of the corporate credit union. The chair must then 
sign a statement which certifies that the form has been sent to member 
credit unions with membership capital accounts. The certification must 
be maintained in the corporate credit union's files and be available for 
examiner review.

                              Sample Form 2

                 Terms and Conditions of Paid-In Capital

    (1) Paid-in capital is not subject to share insurance coverage by 
the NCUSIF or other deposit insurer.
    (2) The funds are callable only at the option of the corporate 
credit union and only if the corporate credit union meets its minimum 
level of required capital after the funds are called.
    (3) Paid-in capital is available to cover losses that exceed 
reserves and undivided earnings.
    (4) Paid-in capital is subordinate to membership capital and the 
NCUSIF.
    If the form is used when a paid-in capital instrument is created, it 
must also contain the following statement:
    I have read the above terms and conditions and I understand them. I 
further agree to maintain in the credit union's files the annual notice 
of terms and conditions of the paid-in capital instrument.

The form must be signed by either all of the directors of the credit 
union or, if authorized by board resolution, the chair and secretary of 
the board of the credit union.
    If the form is used for the annual notice requirement, it must be 
signed by the chair of the corporate credit union. The chair must then 
sign a statement which certifies that the form has been sent to credit 
unions with paid-in capital accounts. The certification must be 
maintained in the corporate credit union's files and be available for 
examiner review.

     Appendix B to Part 704-- Expanded Authorities and Requirements

                                 Part I

    A corporate credit union may obtain expanded authorities if it meets 
all of the requirements of this part 704, fulfills additional capital, 
management, infrastructure, and asset and liability requirements, and 
receives NCUA's written approval. The additional requirements and 
authorities are set forth in this Appendix and in the NCUA publication 
Guidelines for Submission of Requests for Expanded Authority. A 
corporate credit union which seeks expanded authorities must submit to 
NCUA a self-assessment plan which analyzes and supports its request. A 
corporate credit union may adopt expanded authorities when NCUA has 
provided final approval. If NCUA denies a request for expanded 
authorities, it will advise the corporate of the reasons for the denial 
and what it must do to resubmit its request. NCUA may revoke these 
expanded authorities at

[[Page 370]]

any time if an analysis indicates a significant deficiency. NCUA will 
notify the corporate credit union in writing of the identified 
deficiency. A corporate credit union may request, in writing, 
reinstatement of the revoked authorities by providing a self-assessment 
plan which details how it has corrected these deficiencies.
    (a) In order to participate in the authorities set forth in 
paragraphs (b) through (d) of this Part I, a corporate credit union 
must:
    (1) Have a minimum capital ratio of 5 percent;
    (2) Evaluate monthly the changes in NEV, NEV ratio, and net interest 
income for the tests set forth in Sec. 704.8(d)(1)(i); and
    (3) Regardless of the amount of instruments which possess unmatched 
embedded options, conduct periodically, as appropriate, the tests set 
forth in Sec. 704.8(d)(2).
    (b) A corporate credit union which has met the requirements of 
paragraph (a) of this Part I is not bound by the concentration limits on 
investments set forth at Sec. 704.6(c)(1) and (2). Instead, the 
corporate credit union must establish limits on such investments as a 
percentage of the sum of reserves and undivided earnings and paid-in 
capital that take into account the relative amount of credit risk 
exposure based upon, but not limited to, the legal and financial 
structure of the transaction, the collateral, all other types of credit 
enhancement, and the term of the transaction.
    (c) A corporate credit union which has met the requirements of 
paragraph (a) of this Part I may:
    (1) Except for investments in a wholesale corporate credit union, 
invest in non secured obligations of any single domestic issuer up to 
150 percent of the sum of reserves and undivided earnings and paid-in 
capital;
    (2) Purchase long-term investments rated no lower than AA-(or 
equivalent);
    (3) Purchase asset-backed securities rated no lower than AA (or 
equivalent);
    (4) Engage in short sales of permissible investments to reduce 
interest rate risk;
    (5) Purchase principal only (PO) stripped mortgage-backed securities 
to reduce interest rate risk;
    (6) Enter into a repurchase transaction where the collateral 
securities are rated no lower than A (or equivalent);
    (7) Enter into a dollar roll transaction; and
    (8) Engage in when-issued trading, when accounted for on a trade 
date basis.
    (d) In performing the rate stress tests set forth in 
Sec. 704.8(d)(1)(i), the NEV of a corporate credit union which has met 
the requirements of paragraph (a) of this Part I may decline as much as 
35 percent.
    (e) The maximum aggregate amount in unsecured loans and irrevocable 
lines of credit to any one member credit union, excluding pass-through 
and guaranteed loans from the CLF and the NCUSIF, shall not exceed 100 
percent of the corporate credit union's capital. The board of directors 
will establish the limit, as a percent of the corporate credit union's 
capital plus pledged shares, for secured loans and irrevocable lines of 
credit.

                                 Part II

    (a) In order to participate in the authorities set forth in 
paragraphs (b)-(d) of this Part II, a corporate credit union must:
    (1) Have a minimum capital ratio of 6 percent; and
    (2) Evaluate monthly the changes in NEV, NEV ratio, and net interest 
income for the tests set forth in Sec. 704.8(d)(1)(i); and
    (3) Regardless of the amount of instruments which possess unmatched 
embedded options, conduct periodically, as appropriate, the tests set 
forth in Sec. 704.8(d)(2).
    (b) A corporate credit union which has met the requirements of 
paragraph (a) of this Part II is not bound by the concentration limits 
on investments set forth at Sec. 704.6(c) (1) and (2). Instead, the 
corporate credit union must establish limits on such investments as a 
percentage of the sum of reserves and undivided earnings and paid-in 
capital, that take into account the relative amount of credit risk 
exposure based upon, but not limited to, the legal and financial 
structure of the transaction, the collateral, all other types of credit 
enhancement, and the term of the transaction.
    (c) A corporate credit union which has met the requirements of 
paragraph (a) of this Part II may:
    (1) Except for investments in a wholesale corporate credit union, 
invest in nonsecured obligations of any single domestic issuer up to 250 
percent of the sum of reserves and undivided earnings and paid-in 
capital;
    (2) Purchase long-term investments rated no lower than A- (or 
equivalent);
    (3) Purchase asset-backed securities rated no lower than AA (or 
equivalent);
    (4) Engage in short sales of permissible investments to reduce 
interest rate risk;
    (5) Purchase principal only (PO) stripped mortgage-backed securities 
to reduce interest rate risk;
    (6) Enter into a dollar roll transaction; and
    (7) Engage in when-issued trading, when accounted for on a trade 
date basis.
    (d) In performing the rate stress tests set forth in 
Sec. 704.8(d)(1)(i), the NEV of a corporate credit union which has met 
the requirements of paragraph (a) of this Part II may decline as much as 
50 percent.
    (e) The maximum aggregate amount in secured and unsecured loans and 
irrevocable lines of credit to any one member credit union, excluding 
pass-through and guaranteed loans from the CLF and the NCUSIF, shall be 
established by the board of directors as a percentage of the corporate 
credit union's capital plus pledged shares.

[[Page 371]]

                                Part III

    (a) A corporate credit union which has met the requirements of 
paragraph (a) of either Part I or Part II of this Appendix may invest 
in:
    (1) Debt obligations of a foreign country; and
    (2) Deposits in, the sale of federal funds to, and debt obligations 
of foreign banks or obligations guaranteed by these banks.
    (b) All foreign investments are subject to the following 
requirements:
    (i) Short-term investments must be rated no lower than A-1 (or 
equivalent);
    (ii) Long-term investments must be rated no lower than AA (or 
equivalent);
    (iii) A sovereign issuer, and/or the country in which a bank issuer/
guarantor is organized, must be rated no lower than AA (or equivalent) 
for political and economic stability;
    (iv) A bank issuer/guarantor must be rated no lower than AA;
    (v) For each approved foreign bank line, the corporate credit union 
must identify the specific banking centers and branches to which it will 
lend funds;
    (vi) Non secured obligations of any single foreign issuer may not 
exceed 150 percent of the sum of reserves and undivided earnings and 
paid-in capital; and
    (vii) Non secured obligations in any single foreign country may not 
exceed 500 percent of the sum of reserves and undivided earnings and 
paid-in capital.

                                 Part IV

    A corporate credit union which has met the requirements of paragraph 
(a) of either Part I or Part II of this Appendix may engage in 
derivatives transactions which are directly related to its financial 
activities and which have been specifically approved by NCUA. A 
corporate credit union may use such derivatives authority only for the 
purposes of creating structured instruments and hedging its own balance 
sheet and the balance sheets of its members.

[62 FR 12938, Mar. 19, 1997, as amended at 63 FR 24105, May 1, 1998]



PART 705--COMMUNITY DEVELOPMENT REVOLVING LOAN PROGRAM FOR CREDIT UNIONS--Table of Contents




Sec.
705.0  Applicability.
705.1  Scope.
705.2  Purpose of the program.
705.3  Definitions.
705.4  Program activities.
705.5  Application for participation.
705.6  Community needs plan.
705.7  Loans to participating credit unions.
705.8  State-chartered credit unions.
705.9  Application period.
705.10  Technical assistance.

    Authority: 12 U.S.C. 1772c-1; 42 U.S.C. 9822 and 9822 note.

    Source: 58 FR 21646, Apr. 23, 1993, unless otherwise noted.



Sec. 705.0  Applicability.

    Monies from the Community Development Revolving Loan Fund for Credit 
Unions are governed by this part. 



Sec. 705.1  Scope.

    (a) This part implements the Community Developments Revolving Loan 
Program for Credit Unions (Program) under the sole administration of the 
National Credit Union Administration.
    (b) This part establishes the following:
    (1) Definitions;
    (2) The application process and requirements for qualifying for a 
loan under the program;
    (3) How loan funds are to be made available and their repayment; and
    (4) Technical assistance to be provided to participating credit 
unions. 



Sec. 705.2  Purpose of the program.

    (a) The Community Development Revolving Loan Program for Credit 
Unions is intended to support the efforts of participating credit unions 
through loans and technical assistance to those credit unions in:
    (1) Providing basic financial and related services to residents in 
their communities; and
    (2) Stimulating economic activities in the communities they service 
which will result in increased income, ownership and employment 
opportunities for low-income residents, and other community growth 
efforts.
    (b) The policy of NCUA is to revolve loan funds to qualifying credit 
unions as often as practical in order to gain maximum economic impact on 
as many participating credit unions as possible. 



Sec. 705.3  Definitions.

    (a)(1) The term ``low-income members'' shall mean those members who 
make less than 80 percent of the average for all wage earners as 
established by the Bureau of Labor Statistics or

[[Page 372]]

those members whose annual household income falls at or below 80% of the 
median household income for the nation as established by the Census 
Bureau or those members otherwise defined as low-income members as 
determined by order of the NCUA Board.
    (2) In documenting its low-income membership, a credit union that 
serves a geographic area where a majority of residents fall at or below 
the annual income standard is presumed to be serving predominantly low-
income members. In applying the standards, Regional Directors shall make 
allowances for geographical areas with higher costs of living. The 
following is the exclusive list of geographic areas and the 
differentials to be used:

 
                                                                 Percent
 
Hawaii.........................................................       40
Alaska.........................................................       36
Washington, DC.................................................       19
Boston.........................................................       17
San Diego......................................................       15
Los Angeles....................................................       14
New York.......................................................       13
San Francisco..................................................       13
Seattle........................................................       10
Chicago........................................................        7
Philadelphia...................................................        7
 

    (b) For purposes of this part, a participating credit union means a 
state- or federally-chartered credit union (excluding student credit 
unions) that is specifically involved in the stimulation of economic 
development activities and community revitalization efforts aimed at 
benefiting the community it serves; whose membership consists of 
predominantly low-income members as defined in paragraph (a) of this 
section or applicable state standards as reflected by a current low-
income designation pursuant to Sec. 701.34(a)(1) or Sec. 741.204 of this 
chapter or, in the case of a state-chartered nonfederally insured credit 
union, under applicable state standards; and has submitted an 
application for a loan and/or technical assistance and has been selected 
for participation in the Program in accordance with this part.

[58 FR 21646, Apr. 23, 1993, as amended at 60 FR 58504, Nov. 28, 1995; 
61 FR 50695, Sept. 27, 1996]



Sec. 705.4  Program activities.

    In order to meet the objectives of the Program, a credit union 
applicant should provide a variety of financial and related services 
designed to meet the particular needs of the low-income community 
served. These activities shall include basic member share account and 
member loan services. 



Sec. 705.5  Application for participation.

    (a) Applications to participate and qualify for a loan or technical 
assistance under the Program may be obtained from the National Credit 
Union Administration, Community Development Revolving Loan Program For 
Credit Unions.
    (b) The application for a loan shall contain the following 
information:
    (1) Information demonstrating a sound financial position and the 
credit union's ability to manage its day-to-day business affairs, 
including the credit union's latest financial statement. Nonfederally 
insured credit unions must include the following:
    (i) A copy of its most recent outside audit report;
    (ii) Proof of deposit and surety bond insurance which states the 
maximum insurance levels permitted by the policies;
    (iii) A balance sheet, an income and expense statement, and a 
schedule of delinquent loans, for the most recent month-end and each of 
the twelve months preceding that month-end.
    (2) Evidence that the credit union has a need for increased funds in 
order to improve financial services to its members.
    (3) The following information concerning a state-chartered credit 
union's field of membership:
    (i) Current field of membership as set forth in the credit union's 
charter;
    (ii) Changes, if any, to be made to the field of membership for 
participation in the Program, including;
    (A) Evidence of approval of change by credit union board of 
directors;
    (B) Evidence of submission and approval of change by the state 
supervisor;
    (iii) Current designation as a low-income credit union if the credit 
union is not federally insured.

[[Page 373]]

    (4) Along with a community needs plan, specifics of how the credit 
union proposes to serve the needs of its members and the community with 
Program funds. The applicant credit union will also construct and submit 
a plan for its growth and development. The plan will set forth 
objectives for financial growth, credit union development and 
capitalization, and the means for achieving these objectives.
    (5) Indication of any other involvement in existing community 
development programs of state and federal agencies.
    (c) NCUA will notify applicant credit unions as to whether or not 
they have qualified for a loan or technical assistance under this part. 
Reasons for nonqualification will be stated. Any applicant whose 
qualification is denied may appeal that decision to the NCUA Board. 

[58 FR 21646, Apr. 23, 1993, as amended at 61 FR 50695, Sept. 27, 1996]



Sec. 705.6  Community needs plan.

    (a) The credit union's board of directors will prepare a Community 
Needs Plan and submit it with its loan application. The Plan will 
contain a list of needed community services that the credit union will 
provide.
    (b) The credit union's board of directors will report on the 
progress of providing needed community services to the credit union 
members once a year, either at the annual meeting or in a written report 
sent to all members. The credit union will also submit the written 
report or a summary of the report given at the annual meeting to NCUA. 



Sec. 705.7  Loans to participating credit unions.

    (a) Amount and recording of loans. A participating credit union will 
be eligible to receive up to $300,000 in the aggregate, as determined by 
the NCUA Board, in the form of a loan from the Community Development 
Revolving Loan Fund for Credit Unions. The amount of the loan will be 
based on funds availability, the creditworthiness of the participating 
credit union, financial need, and a demonstrated capability of a 
participating credit union to provide financial and related services to 
its members. At the discretion of NCUA, a loan will be recorded by a 
participating credit union as either a note payable or a nonmember 
deposit.
    (b) Matching requirements. Participating credit unions will be 
encouraged to develop, as rapidly as possible, a permanent source of 
member shares.
    (1) Generally loan monies made available must be matched by the 
participating credit union by increasing its share deposits in an amount 
equal to the loan amount. However, any loan monies matched by member 
share deposits will be credited as a two-for-one match. Nonmember share 
deposits accepted to meet the matching requirement are not subject to 
the 20% limitation on nonmember deposits under Sec. 701.32. 
Participating credit unions must meet this matching requirement within 
one year of the approval of the loan application and must maintain the 
increase in the total amount of share deposits for the duration of the 
loan. Once the loan is repaid, nonmember share deposits accepted to meet 
the matching requirement are subject to Sec. 701.32.
    (2) Upon approval of its loan application, and before it meets its 
matching requirement, a participating credit union may receive the 
entire loan commitment in a single payment. If any funds are withheld, 
the remainder of the funds committed will be available to the 
participating credit union only after it has documented that it has met 
the match requirement for the total amount of the loan committed.
    (3) Failure of a participating credit union to generate the required 
match within one year of the approval of the loan will result in the 
reduction of the loan proportionate to the amount of match actually 
generated. Payment of any additional funds initially approved will be 
limited as appropriate to reflect the revised amount of the loan 
approved. Any funds already advanced to the participating credit union 
in excess of the revised amount of loan approval must be repaid 
immediately to NCUA. Failure to repay such funds to NCUA upon demand 
shall result in the default of the entire loan.
    (c) Terms and repayment. (1) Assistance made available through 
Program loans, whether recorded by the credit

[[Page 374]]

union as a note payable or nonmember deposit at NCUA's direction, is in 
the form of a loan and must be repaid to NCUA. All loans will be 
scheduled for repayment within the shortest time compatible with sound 
business practices and with objectives of the Program, but in no case 
will the term exceed five years.
    (2) Semiannual interest payments (beginning six months after the 
initial distribution of a loan) and semiannual principal payments 
(beginning one year after the initial distribution of a loan) will be 
required.
    (d) Interest rates. Loans made under this part shall bear interest 
at a fixed annual percentage rate of not more than 3 percent and not 
less than 1 percent as determined by the NCUA Board.
    (e) Default, collections and adjustments. The terms of each loan 
agreement shall provide for the immediate acceleration of the unpaid 
balance for breach or default in the performance by the participating 
credit union of the terms or conditions of the loan. This will include 
misrepresentation, default in making interest/principal payments, 
failure to report, insolvency, failure to maintain adequate match for 
the duration of the loan period, etc. The unpaid balance will also be 
accelerated and immediately due if any part of the loan funds are 
improperly used, or if uninvested loan proceeds remain unused for an 
unreasonable or unjustified period of time.

[58 FR 21646, Apr. 23, 1993, as amended at 61 FR 50696, Sept. 27, 1996]



Sec. 705.8  State-chartered credit unions.

    State-chartered credit union loan applicants approved for 
participation by NCUA must obtain written concurrence from their 
respective state regulatory authority. Such applicants shall make copies 
of their state examination reports available to NCUA and shall agree to 
examination by NCUA for the limited purpose of compliance with this 
part.



Sec. 705.9  Application period.

    NCUA will announce annually and publish in the Federal Register when 
applications for participation in the program may be submitted. Such 
notice will be dependent upon the availability of funds.



Sec. 705.10  Technical assistance.

    NCUA may provide technical assistance to participating credit unions 
directly or through outside providers selected by the credit unions or 
NCUA. NCUA will base technical assistance on funds availability, the 
needs of the participating credit union, and a demonstrated capability 
of the participating credit union to provide financial and related 
services to its members. NCUA will consider applications for technical 
assistance and determine whether to grant them in accordance with 
established procedures and standards that are publicly available. 
Participating credit unions can be provided with technical assistance 
without obtaining a Program loan. NCUA technical assistance will aid 
participating credit unions in providing services to their members and 
in the efficient operation of such credit unions.

[61 FR 50696, Sept. 27, 1996, as amended at 65 FR 80299, Dec. 21, 2000]



PART 706--CREDIT PRACTICES--Table of Contents




Sec.
706.1  Definitions.
706.2  Unfair credit practices.
706.3  Unfair or deceptive cosigner practices.
706.4  Late charges.
706.5  State exemptions.

    Authority: 15 U.S.C. 57a(f).

    Source: 52 FR 46586, Dec. 9, 1987, unless otherwise noted.



Sec. 706.1  Definitions.

    (a) Person. An individual, corporation, or other business 
organization.
    (b) Consumer. A natural person member who seeks or acquires goods, 
services, or money for personal, family, or household use.
    (c) Obligation. An agreement between a consumer and a Federal credit 
union.
    (d) Debt. Money that is due or alleged to be due from one to 
another.
    (e) Earnings. Compensation paid or payable to an individual or for 
his or her account for personal services rendered or to be rendered by 
him or her, whether denominated as wages, salary, commission, bonus, or 
otherwise, including periodic payments pursuant to

[[Page 375]]

a pension, retirement, or disability program.
    (f) Household goods. Clothing, furniture, appliances, one radio and 
one television, linens, china, crockery, kitchenware, and personal 
effects (including wedding rings) of the consumer and his or her 
dependents, provided that the following are not included within the 
scope of the term ``household goods'':
    (1) Works of art;
    (2) Electronic entertainment equipment (except one television and 
one radio);
    (3) Items acquired as antiques; and
    (4) Jewelry (except wedding rings).
    (g) Antique. Any item over one hundred years of age, including such 
items that have been repaired or renovated without changing their 
original form or character.
    (h) Cosigner. A natural person who renders himself or herself liable 
for the obligation of another person without receiving goods, services, 
or money in return for the credit obligation, or, in the case of an 
open-end credit obligation, without receiving the contractual right to 
obtain extensions of credit under the obligation. The term includes any 
person whose signature is requested as a condition to granting credit to 
a consumer, or as a condition for forbearance on collection of a 
consumer's obligation that is in default. The term does not include a 
spouse whose signature is required on a credit obligation to perfect a 
security interest pursuant to state law. A person is a cosigner within 
the meaning of this definition whether or not he or she is designated as 
such on a credit obligation.



Sec. 706.2  Unfair credit practices.

    (a) In connection with the extension of credit to consumers, it is 
an unfair act or practice for a Federal credit union, directly or 
indirectly, to take or receive from a consumer an obligation that:
    (1) Constitutes or contains a cognovit or confession of judgment 
(for purposes other than executory process in the State of Louisiana), 
warrant of attorney, or other waiver of the right to notice and the 
opportunity to be heard in the event of suit or process thereon.
    (2) Constitutes or contains an executory waiver or a limitation of 
exemption from attachment, execution, or other process on real or 
personal property held, owned by, or due to the consumer, unless the 
waiver applies solely to property subject to a security interest 
executed in connection with the obligation.
    (3) Constitutes or contains an assignment of wages or other earnings 
unless:
    (i) The assignment by its terms is revocable at the will of the 
debtor, or
    (ii) The assignment is a payroll deduction plan or preauthorized 
payment plan, commencing at the time of the transaction, in which the 
consumer authorizes a series of wage deductions as a method of making 
each payment, or
    (iii) The assignment applies only to wages or other earnings already 
earned at the time of the assignment.
    (4) Constitutes or contains a nonpossessory security interest in 
household goods other than a purchase money security interest.



Sec. 706.3  Unfair or deceptive cosigner practices.

    (a) Prohibited practices. In connection with the extension of credit 
to consumers, it is:
    (1) A deceptive act or practice for a Federal credit union, directly 
or indirectly, to mispresent the nature or extent of cosigner liability 
to any person.
    (2) An unfair act or practice for a Federal credit union, directly 
or indirectly, to obligate a cosigner unless the cosigner is informed 
prior to becoming obligated, which in the case of open-end credit means 
prior to the time that the agreement creating the cosigner's liability 
for future charges is executed, of the nature of his or her liability as 
cosigner.
    (b) Disclosure requirement. (1) To comply with the cosigner 
information requirement of paragraph (a)(2) of this section, a clear and 
conspicuous disclosure statement shall be given in writing to the 
cosigner prior to becoming obligated. The disclosure statement will 
contain only the following statement, or one which is substantially 
equivalent, and shall either be a separate document or included in the 
documents evidencing the consumer credit obligation.

[[Page 376]]

                           Notice to Cosigner

    You are being asked to guarantee this debt. Think carefully before 
you do. If the borrower doesn't pay the debt, you will have to. Be sure 
you can afford to pay if you have to, and that you want to accept this 
responsibility.
    You may have to pay up to the full amount of the debt if the 
borrower does not pay. You may also have to pay late fees or collection 
costs, which increase this amount.
    The creditor can collect this debt from you without first trying to 
collect from the borrower. The creditor can use the same collection 
methods against you that can be used against the borrower, such as suing 
you, garnishing your wages, etc. If this debt is ever in default, that 
fact may become a part of your credit record.
    This notice is not the contract that makes you liable for the debt.

    (2) If the notice to cosigner is a separate document, nothing other 
than the following items may appear with the notice. Items (i) through 
(v) may not be part of the narrative portion of the notice to cosigner.
    (i) The name and address of the Federal credit union;
    (ii) An identification of the debt to be consigned (e.g., a loan 
identification number);
    (iii) The amount of the loan;
    (iv) The date of the loan;
    (v) A signature line for a cosigner to acknowledge receipt of the 
notice; and
    (vi) To the extent permitted by state law, a cosigner notice 
required by state law may be included in the paragraph (b)(1) notice.
    (3) To the extent the notice to cosigner specified in paragraph 
(b)(1) of this section refers to an action against a cosigner that is 
not permitted by state law, the notice to cosigner may be modified.



Sec. 706.4  Late charges.

    (a) In connection with collecting a debt arising out of an extension 
of credit to a consumer, it is an unfair act or practice for a Federal 
credit union, directly or indirectly, to levy or collect any delinquency 
charge on a payment, which payment is otherwise a full payment for the 
applicable period and is paid on its due date or within an applicable 
grace period, when the only delinquency is attributable to late fee(s) 
or delinquency charge(s) assessed on earlier installment(s).
    (b) For purposes of this section, ``collecting a debt'' means any 
activity other than the use of judicial process that is intended to 
bring about or does bring about repayment of all or part of a consumer 
debt.



Sec. 706.5  State exemptions.

    (a) If, upon application to the NCUA by an appropriate state agency, 
the NCUA determines that:
    (1) There is a state requirement or prohibition in effect that 
applies to any transaction to which a provision of this rule applies; 
and
    (2) The state requirement or prohibition affords a level of 
protection to consumers that is substantially equivalent to, or greater 
than, the protection afforded by this rule; then that provision of this 
rule will not be in effect in the state to the extent specified by the 
NCUA in its determination, for as long as the state administers and 
enforces the state requirement or prohibition effectively.
    (b) States that received an exemption from the Federal Trade 
Commission's Credit Practices Rule prior to September 17, 1987, are not 
required to reapply to NCUA for an exemption under paragraph (a) of this 
section provided that the state forwards a copy of its exemption 
determination to the appropriate Regional Office. NCUA will honor the 
exemption for as long as the state administers and enforces the state 
requirement or prohibition effectively. Any state seeking a greater 
exemption than that granted to it by the Federal Trade Commission must 
apply to NCUA for the exemption.



PART 707--TRUTH IN SAVINGS--Table of Contents




Sec.
707.1  Authority, purpose, coverage and effect on State laws.
707.2  Definitions.
707.3  General disclosure requirements.
707.4  Account disclosures.
707.5  Subsequent disclosures.
707.6  Periodic statement disclosures.
707.7  Payment of dividends.
707.8  Advertising.
707.9  Enforcement and record retention.

Appendix A to Part 707--Annual Percentage Yield Calculation
Appendix B to Part 707--Model Clauses and Sample Forms

[[Page 377]]

Appendix C to Part 707--Official Staff Interpretations

    Authority: 12 U.S.C. 4311.

    Source: 58 FR 50445, Sept. 27, 1993, unless otherwise noted.



Sec. 707.1  Authority, purpose, coverage and effect on State laws.

    (a) Authority. This part is issued by the National Credit Union 
Administration Board to implement the Truth in Savings Act of 1991 
(TISA), contained in the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (12 U.S.C. 4301 et seq., Public Law No. 102-242, 
105 Stat. 2236).
    (b) Purpose. The purpose of this part is to enable credit union 
members and potential members to make informed decisions about accounts 
at credit unions. This part requires credit unions to provide 
disclosures so that members and potential members can make meaningful 
comparisons among credit unions and depository institutions.
    (c) Coverage. This part applies to all credit unions whose accounts 
are either insured by, or eligible to be insured by, the National Credit 
Union Share Insurance Fund, except for any credit union that has been 
designated as a corporate credit union by the National Credit Union 
Administration and any credit union that has $2 million or less in 
assets, after subtracting any nonmember deposits, and is determined to 
be nonautomated by the National Credit Union Administration. In 
addition, the advertising rules in Sec. 707.8 apply to any person who 
advertises an account offered by a credit union, including any person 
who solicits any amount from any other person for placement in a credit 
union.
    (d) Effect on state laws. State law requirements that are 
inconsistent with the requirements of the TISA and this part are 
preempted to the extent of the inconsistency.

[58 FR 50445, Sept. 27, 1993, as amended at 61 FR 68129, Dec. 27, 1996]



Sec. 707.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Account means a share or deposit account at a credit union held 
by or offered to a member or potential member. It includes, but is not 
limited to, accounts such as share, share draft, checking and term share 
accounts. For purposes of the advertising regulations in Sec. 707.8, the 
term also includes an account at a credit union that is held by or 
offered by a share or deposit broker.
    (b) Advertisement means a commercial message, appearing in any 
medium, that promotes directly or indirectly the availability of, or a 
deposit in, an account.
    (c) Annual percentage yield means a percentage rate reflecting the 
total amount of dividends paid on an account, based on the dividend rate 
and the frequency of compounding for a 365-day period and calculated 
according to the rules in appendix A of this part.
    (d) Average daily balance method means the application of a periodic 
rate to the average daily balance in the account for the period. The 
average daily balance is determined by adding the full amount of 
principal in the account for each day of the period and dividing that 
figure by the number of days in the period.
    (e) Board means the National Credit Union Administration Board.
    (f) Bonus means a premium, gift, award, or other consideration worth 
more than $10 (whether in the form of cash, credit, merchandise, or any 
equivalent) given or offered to a member during a year in exchange for 
opening, maintaining, or renewing an account, or increasing an account 
balance. The term does not include dividends, other consideration worth 
$10 or less given during a year, the waiver or reduction of a fee, the 
absorption of expenses, non-dividend membership benefits, or 
extraordinary dividends.
    (g) Credit union means a federal or state-chartered credit union 
that is either insured by, or is eligible to apply for insurance from, 
the National Credit Union Share Insurance Fund.
    (h) Daily balance method means the application of a daily periodic 
rate to the full amount of principal in the account each day.
    (i) Dividend and dividends mean any declared or prospective earnings 
on a member's shares in a credit union to be paid to a member or to the 
member's account. For purposes of this part, the

[[Page 378]]

term does not include the payment of a bonus or other consideration 
worth $10 or less given during a year, the waiver or reduction of a fee, 
the absorption of expenses, non-dividend membership benefits, or 
extraordinary dividends.
    (j) Dividend declaration date means the date that the board of 
directors of a credit union declares a dividend for the preceding 
dividend period.
    (k) Dividend period means the span of time established by the board 
of directors of a credit union by the end of which shares in a member 
account earn dividend credit. The dividend period may be different for 
each type of account.
    (l) Dividend rate means the declared or prospective annual dividend 
rate paid on an account, which does not reflect compounding. For 
purposes of the account disclosures in Sec. 707.4(b)(1)(i), the rate 
may, but need not, be referred to as the ``annual percentage rate'' in 
addition to being referred to as the ``dividend rate.''
    (m) Extraordinary dividends means a nonrepetitive dividend paid at 
an irregular time from funds legally available for such distribution.
    (n) Fixed-rate account means an account that is not a variable rate 
account as defined in paragraph (z) of this section.
    (o) Grace period means a period following the maturity of an 
automatically renewing term share account during which the member may 
withdraw funds without being assessed a penalty.
    (p) Interest means any payment to a member or to a member's account 
for the use of funds in a nondividend-bearing account at a state-
chartered credit union offered pursuant to state law, calculated by 
application of a periodic rate to the balance. For purposes of this 
regulation, the term does not include the payment of a bonus or other 
consideration worth $10 or less given during a year, the waiver or 
reduction of a fee, the absorption of expenses, non-dividend membership 
benefits, or extraordinary dividends. Except as is specifically 
otherwise provided in this part, in the case of an interest-bearing 
account held in or offered by a state-chartered credit union pursuant to 
state law, the word ``interest'' shall be substituted for all references 
to ``dividend'' or ``dividends'' in this part.
    (q) Member means:
    (1) A natural person member of the credit union who holds an account 
primarily for personal, family, or household purposes;
    (2) A natural person nonmember who holds an account primarily for 
personal, family, or household purposes, either jointly with a natural 
person member or in a credit union designated as a low-income credit 
union, or to whom such an account is offered; and
    (3) A natural person nonmember who holds a deposit account in a 
state-chartered credit union pursuant to state law, or to whom such 
deposit account is offered.

The term does not include a natural person who holds an account for 
another in a professional capacity or an unincorporated nonbusiness 
association of natural person members.
    (r) Non-dividend membership benefits means any property or service 
provided by a credit union to its members, the nature of which makes its 
valuation unreasonable and administratively impracticable.
    (s) Passbook account means an account in which the member retains a 
book or other document in which the credit union records transactions on 
the account.
    (t) Periodic statement means a statement setting forth information 
about an account (other than a term share account or passbook account) 
that is provided to a member on a regular basis four or more times a 
year.
    (u) Potential member means a natural person within the credit 
union's field of membership (or an unincorporated nonbusiness 
association of such persons) or otherwise eligible to become a member as 
defined in paragraph (q) of this section.
    (v) State means a state, the District of Columbia, the Commonwealth 
of Puerto Rico, and any territory or possession of the United States.
    (w) Stepped-rate account means an account that has two or more 
dividend rates that take effect in succeeding periods and are known when 
the account is opened.

[[Page 379]]

    (x) Term share account means any share certificate, interest-bearing 
certificate of deposit account, or other account with a maturity of at 
least seven days in which the member generally does not have a right to 
make withdrawals for six days after the account is opened, unless the 
account is subject to an early withdrawal penalty of at least seven 
days' dividends on amounts withdrawn, offered by a credit union to a 
member or potential member.
    (y) Tiered-rate account means an account that has two or more 
dividend rates that are applicable to specified balance levels.
    (z) Variable-rate account means a share, share draft, checking, or 
term share account in which the simple dividend rate may change after 
the account is opened, unless the credit union contracts to give at 
least thirty days advance written notice of rate decreases.

[58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, Mar. 22, 1994; 
59 FR 59899, Nov. 21, 1994]



Sec. 707.3  General disclosure requirements.

    (a) Form. Credit unions shall make the disclosures required by 
Secs. 707.4 through 707.6, as applicable, clearly and conspicuously in 
writing and in a form that the member or potential member may keep. 
Disclosures for each account offered by a credit union may be presented 
separately or they may be combined with disclosures for the credit 
union's other accounts, as long as it is clear which disclosures are 
applicable to the member's account.
    (b) General. The disclosures shall reflect the terms of the legal 
obligation between the member and the credit union. Disclosures may be 
made in languages other than English, provided the disclosures are 
available in English upon request.
    (c) Relation to Regulation E (12 CFR part 205). Disclosures required 
by and provided in accordance with the Electronic Fund Transfer Act (15 
U.S.C. 1601) and its implementing Regulation E (12 CFR part 205) that 
are also required by this part may be substituted for the disclosures 
required by this part.
    (d) Multiple members. If an account is held by more than one member, 
disclosures may be made to any one of the members.
    (e) Oral responses to inquiries. In an oral response to a member or 
potential member's inquiry about dividend rates payable on its accounts, 
the credit union shall state the annual percentage yield. The dividend 
rate may be stated in addition to the annual percentage yield. No other 
rate may be stated. In stating a dividend rate and annual percentage 
yield, a credit union shall:
    (1) For dividend-bearing accounts other than term share accounts, 
specify a dividend rate and annual percentage yield as of the last 
dividend declaration date. In the event that disclosures of a dividend 
rate and annual percentage yield as of the last dividend declaration 
date might be inaccurate because of known or contemplated dividend rate 
changes, the credit union may disclose the prospective dividend rate and 
prospective annual percentage yield. Such prospective dividend rate and 
prospective annual percentage yield may be disclosed either in lieu of, 
or in addition to, the dividend rate and annual percentage yield as of 
the last dividend declaration date.
    (2) For interest-bearing accounts and for dividend-bearing term 
share accounts, specify an interest (dividend) rate and annual 
percentage yield that were offered within the most recent seven calendar 
days; state that the rate and yield are accurate as of an identified 
date; and provide a telephone number members may call to obtain current 
rate information.
    (f) Rounding and accuracy rules for rates and yields--(1) Rounding. 
The annual percentage yield, the annual percentage yield earned, and the 
dividend rate shall be rounded to the nearest one-hundredth of one 
percentage point (.01%) and expressed to two decimal places. For account 
disclosures, the dividend rate may be expressed to more than two decimal 
places.
    (2) Accuracy. The annual percentage yield (and the annual percentage 
yield earned) will be considered accurate if not more than one-twentieth 
of one percentage point (.05%) above or below the annual percentage 
yield (and the

[[Page 380]]

annual percentage yield earned) determined in accordance with the rules 
in appendix A of this part.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996]



Sec. 707.4  Account disclosures.

    (a) Delivery of account disclosures--(1) Account opening. The credit 
union shall provide the account disclosures to the member or potential 
member before an account is opened or a service is provided, whichever 
is earlier. A credit union is deemed to have provided a service when a 
fee required to be disclosed is assessed. If the member is not present 
at the credit union when the account is opened or a service is provided 
and has not already received the disclosures, the credit union shall 
mail or deliver the disclosures no later than twenty calendar days after 
the account is opened or the service is provided, whichever is earlier.
    (2) Requests. (i) A credit union shall provide the account 
disclosures to any member or potential member upon request. A credit 
union may provide the account disclosures to nonmembers in its sole 
discretion. If the member is not present at the credit union when the 
request is made, the credit union shall mail or deliver the disclosures 
within a reasonable time after it receives the request.
    (ii) In providing disclosures upon request, the credit union may:
    (A) Specify rates as follows:
    (1) For dividend-bearing accounts other than term share accounts, 
specify a dividend rate and annual percentage yield as of the last 
dividend declaration date. In the event that disclosures of a dividend 
rate and annual percentage yield as of the last dividend declaration 
date might be inaccurate because of known or contemplated dividend rate 
changes, the credit union may disclose the prospective dividend rate and 
prospective annual percentage yield. Such prospective dividend rate and 
prospective annual percentage yield may be disclosed either in lieu of, 
or in addition to, the dividend rate and annual percentage yield as of 
the last dividend declaration date.
    (2) For interest bearing accounts and for dividend-bearing term 
share accounts, specify an interest rate and annual percentage yield 
that were offered within the most recent seven calendar days; state that 
the rate and yield are accurate as of an identified date; and provide a 
telephone number members may call to obtain current rate information; 
and
    (B) State the maturity of a term share account as either a term or a 
date.
    (b) Content of account disclosures. Account disclosures shall 
include the following, as applicable:
    (1) Rate information--(i) Annual percentage yield and dividend rate. 
(A) For interest-bearing accounts and for dividend-bearing term share 
accounts, the ``annual percentage yield'' and the ``interest rate'' 
(``dividend rate''), using those terms, and for fixed-rate accounts the 
period of time the interest (dividend) rate will be in effect.
    (B) For dividend-bearing accounts other than term share accounts, a 
credit union shall specify a dividend rate and annual percentage yield 
(using those terms) as of the last dividend declaration date. In the 
event that disclosures of a dividend rate and annual percentage yield as 
of the last dividend declaration date might be inaccurate because of 
known or contemplated dividend rate changes, the credit union may 
disclose the prospective dividend rate and prospective annual percentage 
yield. Such prospective dividend rate and prospective annual percentage 
yield may be disclosed either in lieu of, or in addition to, the 
dividend rate and annual percentage yield as of the last dividend 
declaration date.
    (ii) Variable rates. For variable-rate accounts:
    (A) The fact that the dividend rate and annual percentage yield may 
change;
    (B) How the dividend rate is determined;
    (C) The frequency with which the dividend rate may change; and
    (D) Any limitation on the amount the dividend rate may change.
    (2) Compounding and crediting--(i) Frequency. The frequency with 
which dividends are compounded and credited,

[[Page 381]]

and the dividend period for dividend-bearing accounts.
    (ii) Effect of closing an account. If members will forfeit dividends 
if they close an account before accrued dividends are credited, a 
statement that the dividends will not be paid in such cases.
    (3) Balance information--(i) Minimum balance requirements. Any 
minimum balance required to:
    (A) Open the account;
    (B) Avoid the imposition of a fee; or
    (C) Obtain the annual percentage yield disclosed.

Except for the balance to open the account, the disclosure shall state 
how the balance is determined for these purposes.
    (ii) Balance computation method. An explanation of the balance 
computation method specified in Sec. 707.7, used to calculate dividends 
on the account.
    (iii) When dividends begin to accrue. A statement of when dividends 
begin to accrue on noncash deposits.
    (4) Fees. The amount of any fee that may be imposed in connection 
with the account (or an explanation of how the fee will be determined) 
and the conditions under which the fee may be imposed.
    (5) Transaction limitations. Any limitations on the number or dollar 
amount of withdrawals or deposits.
    (6) Features of term share accounts. For term share accounts:
    (i) Time requirements. The maturity date.
    (ii) Early withdrawal penalties. A statement that a penalty will be 
imposed for early withdrawal, how it is calculated, and the conditions 
for its assessment.
    (iii) Withdrawal of dividends prior to maturity. If compounding 
occurs and dividends may be withdrawn prior to maturity, a statement 
that the annual percentage yield assumes dividends remain in the account 
until maturity and that a withdrawal will reduce earnings. For accounts 
with a stated maturity greater than 1 year that do not compound 
dividends on an annual or more frequent basis, that require dividend 
payouts at least annually, and that disclose an APY determined in 
accordance with section E of appendix A of this part, a statement that 
dividends cannot remain on account and that payout of dividends is 
mandatory.
    (iv) Renewal policies. A statement of whether or not the account 
will renew automatically at maturity. If it will, a statement of whether 
or not a grace period will be provided and, if so, the length of that 
period must be stated. If the account will not renew automatically, a 
statement of whether dividends will be paid after maturity if the member 
does not renew the account must be stated.
    (7) Bonuses. The amount or type of any bonus, when the bonus will be 
provided, and any minimum balance and time requirements to obtain the 
bonus.
    (8) Nature of dividends. For accounts earning dividends, other than 
term share accounts, a statement that dividends are paid from current 
income and available earnings, after required transfers to reserves at 
the end of a dividend period.
    (c) Notice to existing account holders--(1) Notice of availability 
of disclosures. Credit unions shall provide a notice to members who 
receive periodic statements and who hold existing accounts of the type 
offered by the credit union on January 1, 1995. The notice shall be 
included on or with the first periodic statement sent after January 1, 
1995 (or on or with the first periodic statement for a statement cycle 
beginning on or after that date). The notice shall state that the 
members may request account disclosures containing terms, fees, and rate 
information for the account. In responding to such a request, credit 
unions shall provide disclosures in accordance with paragraph (a)(2) of 
this section.
    (2) Alternative to notice. As an alternative to the notice described 
in paragraph (c)(1) of this section, credit unions may provide account 
disclosures to members. The disclosures may be provided either with a 
periodic statement or separately, but must be sent no later than when 
the periodic statement described in paragraph (c)(1) of this section is 
sent.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996; 63 
FR 71574, Dec. 29, 1998]

[[Page 382]]



Sec. 707.5  Subsequent disclosures.

    (a) Change in terms--(1) Advance notice required. A credit union 
shall give advance notice to affected members of any change in a term 
required to be disclosed under Sec. 707.4(b), if the change may reduce 
the annual percentage yield or adversely affect the member. The notice 
shall include the effective date of the change. The notice shall be 
mailed or delivered at least 30 calendar days before the effective date 
of the change.
    (2) No notice required. No notice under this section is required 
for:
    (i) Variable-rate changes. Changes in the dividend rate and 
corresponding changes in the annual percentage yield in variable-rate 
accounts.
    (ii) Share draft and check printing fees. Changes in fees for check 
printing.
    (iii) Short-term term share accounts. Changes in any term for term 
share accounts with maturities of one month or less.
    (b) Notice before maturity for term share accounts longer than one 
month that renew automatically. For term share accounts with a maturity 
longer than one month that renew automatically at maturity, credit 
unions shall provide the disclosures described below before maturity. 
The disclosures shall be mailed or delivered at least 30 calendar days 
before maturity of the existing account. Alternatively, the disclosures 
may be mailed or delivered at least 20 calendar days before the end of 
the grace period on the existing account, provided a grace period of at 
least five calendar days is allowed.
    (1) Maturities of longer than one year. If the maturity is longer 
than one year, the credit union shall provide account disclosures set 
forth in Sec. 707.4(b) for the new account, along with the date the 
existing account matures. If the dividend rate and annual percentage 
yield that will be paid for the new account are unknown when disclosures 
are provided, the credit union shall state that those rates have not yet 
been determined, the date when they will be determined, and a telephone 
number members may call to obtain the dividend rate and the annual 
percentage yield that will be paid for the new account.
    (2) Maturities of one year or less but longer than one month. If the 
maturity is one year or less but longer than one month, the credit union 
shall either:
    (i) Provide disclosures as set forth in paragraph (b)(1) of this 
section; or
    (ii) Disclose to the member:
    (A) The date the existing account matures and the new maturity date 
if the account is renewed;
    (B) The dividend rate and the annual percentage yield for the new 
account if they are known (or that those rates have not yet been 
determined, the date when they will be determined, and a telephone 
number the member may call to obtain the dividend rate and the annual 
percentage yield that will be paid for the new account); and
    (C) Any difference in the terms of the new account as compared to 
the terms required to be disclosed under Sec. 707.4(b) for the existing 
account.
    (c) Notice before maturity for term share accounts longer than one 
year that do not renew automatically. For term share accounts with a 
maturity longer than one year that do not renew automatically at 
maturity, credit unions shall disclose to members the maturity date and 
whether dividends will be paid after maturity. The disclosures shall be 
mailed or delivered at least 10 calendar days before maturity of the 
existing account.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996; 63 
FR 71574, Dec. 29, 1998]



Sec. 707.6  Periodic statement disclosures.

    (a) Rule when statement and crediting periods vary. In making the 
disclosures described in paragraph (b) of this section, credit unions 
that calculate and credit dividends for a period other than the 
statement period, such as the dividend period, may calculate and 
disclose the annual percentage yield earned and amount of dividends 
earned based on that period rather than the statement period. The 
information in paragraph (b)(4) shall be stated for that period as well 
as for the statement period.
    (b) Statement disclosures. If a credit union mails or delivers a 
periodic statement, the statement shall include the following 
disclosures:

[[Page 383]]

    (1) Annual percentage yield earned. The ``annual percentage yield 
earned,'' using that term as calculated according to the rules in 
appendix A of this part.
    (2) Amount of dividends. The dollar amount of dividends earned 
(accrued or paid and credited) on the account. The dollar amount of any 
extraordinary dividends earned during the statement period shall be 
shown as a separate figure.
    (3) Fees imposed. Fees required to be disclosed under 
Sec. 707.4(b)(4) of this part and imposed on the account during the 
statement period. The fees shall be itemized by type and dollar amounts.
    (4) Length of period. The total number of days in the statement 
period, or the beginning and ending dates of the period.
    (c) Electronic communication--(1) Definition. The term ``electronic 
communication'' means a message transmitted electronically between a 
member and a credit union in a format that allows visual text to be 
displayed on equipment such as a personal computer monitor.
    (2) Electronic communication between credit union and member. A 
credit union and a member may agree that the credit union will send by 
electronic communication periodic statement disclosures required by 
Sec. 707.6. Periodic statement disclosures sent by electronic 
communication to a member must comply with Sec. 707.3 and any applicable 
timing requirements contained in this part.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 59 FR 59899, Nov. 21, 1994; 
61 FR 114, Jan. 3, 1996; 64 FR 66356, Nov. 26, 1999]



Sec. 707.7  Payment of dividends.

    (a) Permissible methods--(1) Balance on which dividends are 
calculated. Credit unions shall calculate dividends on the full amount 
of principal in an account for each day by use of either the daily 
balance method or the average daily balance method. Credit unions shall 
calculate dividends by use of a daily rate of at least \1/365\ of the 
dividend rate. In a leap year a daily rate of \1/366\ of the dividend 
rate may be used.
    (2) Determination of minimum balance to earn dividends. A credit 
union shall use the same method to determine any minimum balance 
required to earn dividends as it uses to determine the balance on which 
dividends are calculated. A credit union may use an additional method 
that is unequivocally beneficial to the member.
    (b) Compounding and crediting policies. This section does not 
require credit unions to compound or credit dividends at any particular 
frequency.
    (c) Date dividends begin to accrue. Dividends shall begin to accrue 
not later than the day specified in section 606 of the Expedited Funds 
Availability Act (12 U.S.C. 4005) and implementing Regulation CC (12 CFR 
part 229). Dividends shall accrue on funds until the day funds are 
withdrawn.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996]



Sec. 707.8  Advertising.

    (a) Misleading or inaccurate advertisements. An advertisement shall 
not be misleading or inaccurate and shall not misrepresent a credit 
union's account contract. An advertisement shall not refer to or 
describe an account as ``free'' or ``no cost'' (or contain a similar 
term) if any maintenance or activity fee may be imposed on the account. 
The word ``profit'' shall not be used in referring to interest paid on 
an account.
    (b) Permissible rates. If an advertisement states a rate of return, 
it shall state the rate as an ``annual percentage yield,'' using that 
term. (The abbreviation ``APY'' may be used provided the term ``annual 
percentage yield'' is stated at least once in the advertisement.) The 
advertisement shall not state any other rate, except that the ``dividend 
rate,'' using that term, may be stated in conjunction with, but not more 
conspicuously than, the annual percentage yield to which it relates.
    (c) When additional disclosures are required. Except as provided in 
paragraph (e) of this section, if the annual percentage yield is stated 
in an advertisement, the advertisement shall state

[[Page 384]]

the following information, to the extent applicable, clearly and 
conspicuously:
    (1) Variable rates. For variable-rate accounts, a statement that the 
rate may change after the account is opened.
    (2) Time annual percentage yield is offered. For interest-bearing 
accounts and dividend-bearing term share accounts, the period of time 
the annual percentage yield will be offered, or a statement that the 
annual percentage yield is accurate as of a specified date. For 
dividend-bearing accounts other than term share accounts, a statement 
that the annual percentage yield is accurate as of the last dividend 
declaration date. In the event that disclosure of an annual percentage 
yield as of the last dividend declaration date might be inaccurate 
because of known or contemplated dividend rate changes, the credit union 
may disclose the prospective annual percentage yield. Such prospective 
annual percentage yield may be disclosed either in lieu of, or in 
addition to, the dividend rate and annual percentage yield as of the 
last dividend declaration date.
    (3) Minimum balance. The minimum balance required to earn the 
advertised annual percentage yield. For tiered-rate accounts, the 
minimum balance required for each tier shall be stated in close 
proximity and with equal prominence to the applicable annual percentage 
yield.
    (4) Minimum opening deposit. The minimum deposit required to open 
the account, if it is greater than the minimum balance necessary to earn 
the advertised annual percentage yield.
    (5) A statement that fees could reduce the earnings on the account.
    (6) Features of term share accounts. For term share accounts:
    (i) Time requirements. The term of the account.
    (ii) Early withdrawal penalties. A statement that a penalty will or 
may be imposed for early withdrawal.
    (iii) Required dividend payouts. For noncompounding term share 
accounts with a stated maturity greater than one year that do not 
compound dividends on an annual or more frequent basis, that require 
dividend payouts at least annually, and that disclose an APY determined 
in accordance with section E of appendix A of this part, a statement 
that dividends cannot remain on account and that payout of dividends is 
mandatory.
    (d) Bonuses. Except as provided in paragraph (e) of this section, if 
a bonus is stated in an advertisement, the advertisement shall state the 
following information, to the extent applicable, clearly and 
conspicuously:
    (1) The ``annual percentage yield,'' using that term;
    (2) The time requirements to obtain the bonus;
    (3) The minimum balance required to obtain the bonus;
    (4) The minimum balance required to open the account, if it is 
greater than the minimum balance necessary to obtain the bonus; and
    (5) When the bonus will be provided.
    (e) Exemption for certain advertisements--(1) Certain media. If an 
advertisement is made through one of the following media, it need not 
contain the information in paragraphs (c)(1), (c)(2), (c)(4), (c)(5), 
(c)(6)(ii), (d)(4) and (d)(5) of this section:
    (i) Broadcast or electronic media, such as television or radio;
    (ii) Outdoor media, such as billboards; or
    (iii) Telephone response machines.
    (2) Indoors signs. (i) Signs inside the premises of a credit union 
(or the premises of a share or deposit broker) are not subject to 
paragraphs (b), (c), (d) or (e)(1) of this section.
    (ii) If a sign exempted by paragraph (e)(2) of this section states a 
rate of return, it shall:
    (A) State the rate as an ``annual percentage yield,'' using that 
term or the term ``APY.'' The sign shall not state any other rate, 
except that the dividend rate may be stated in conjunction with the 
annual percentage yield to which it relates.
    (B) Contain a statement advising members to contact an employee for 
further information about applicable fees and terms.
    (3) Newsletters. (i) Newsletters sent by a credit union to existing 
members only are not subject to paragraphs (b), (c), (d) or (e)(1) of 
this section.

[[Page 385]]

    (ii) If a newsletter exempted by paragraph (e)(3) of this section 
states a rate of return, it shall:
    (A) State the rate as an ``annual percentage yield,'' using that 
term or the term ``APY.'' The newsletter shall not state any other rate, 
except that the dividend rate may be stated in conjunction with the 
annual percentage yield to which it relates.
    (B) Contain a statement advising members to contact an employee for 
further information about applicable fees and terms.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, Mar. 22, 1994; 
61 FR 114, Jan. 3, 1996; 63 FR 71575, Dec. 29, 1998]



Sec. 707.9  Enforcement and record retention.

    (a) Administrative enforcement. Section 270 of TISA (12 U.S.C. 4309) 
contains the provisions relating to administrative sanctions for failure 
to comply with the requirements of TISA and this part.
    (b) Civil liability. Section 271 of TISA (12 U.S.C. 4310) contains 
the provisions relating to civil liability for failure to comply with 
the requirements of TISA and this part; Section 271 is repealed 
effective September 30, 2001.
    (c) Record retention. A credit union shall retain evidence of 
compliance with this regulation for a minimum of two years after the 
date disclosures are required to be made or action is required to be 
taken.

(Approved by the Office of Management and Budget under control number 
3133-0134)

[58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, Mar. 22, 1994; 
61 FR 114, Jan. 3, 1996; 63 FR 71575, Dec. 29, 1998]

       Appendix A to Part 707--Annual Percentage Yield Calculation

    The annual percentage yield (APY) measures the total amount of 
dividends a credit union pays on an account based on the dividend rate 
and the frequency of compounding. The annual percentage yield is 
expressed as an annualized rate, based on a 365-day year. (Credit unions 
may calculate the annual percentage yield based on a 365-day or a 366-
day year in a leap year.) Part I of this appendix discusses the annual 
percentage yield calculations for account disclosures and 
advertisements, while Part II discusses annual percentage yield earned 
calculations for statements. The annual percentage yield reflects only 
dividends and does not include the value of any bonus, as that term is 
defined in part 707, that may be provided to the member to open, 
maintain, increase or renew an account. Dividends, interest or other 
earnings are not to be included in the annual percentage yield if such 
amounts are determined by circumstances that may or may not occur in the 
future. These formulas apply to both dividend-bearing and interest-
bearing accounts held by credit unions.

Part I. Annual Percentage Yield for Account Disclosures and Advertising 
                                Purposes

    In general, the annual percentage yield for account disclosures 
under Secs. 707.4 and 707.5 and for advertising under Sec. 707.8 is an 
annualized rate that reflects the relationship between the amount of 
dividends that would be earned by the member for the term of the account 
and the amount of principal used to calculate those dividends. The 
amount of dividends that would be earned may be projected based on the 
most recent past declared rate or an anticipated future rate, whichever 
the credit union judges to most reasonably approximate the dividends to 
be earned. Special rules apply to accounts with tiered and stepped 
dividend rates, and to certain term share accounts with a stated 
maturity greater than 1 year.

                            A. General Rules

    Except as provided in Part I. E. of this appendix, the annual 
percentage yield shall be calculated by the formula shown below. Credit 
unions may calculate the annual percentage yield using projected 
dividends based on either the rate at the last dividend declaration date 
or the rate anticipated at a future date. The credit union must disclose 
whichever option it uses to members. Credit unions shall calculate the 
annual percentage yield based on the actual number of days for the term 
of the account. For accounts without a stated maturity date (such as a 
typical share or share draft account), the calculation shall be based on 
an assumed term of 365 days. In determining the total dividends figure 
to be used in the formula, credit unions shall assume that all principal 
and dividends remain on deposit for the entire term, and that no other 
transactions (deposits or withdrawals) occur during the term. (This 
assumption shall not be used if a credit union requires, as a condition 
of the account, that members withdraw dividends during the term. In such 
a case, the dividends (and annual percentage yield calculation) shall 
reflect that requirement.) For term share accounts that are offered in 
multiples of months, credit unions may base the number

[[Page 386]]

of days on either the actual number of days during the applicable 
period, or the number of days that would occur for any actual sequence 
of that many calendar months. If credit unions choose to use this 
permissive rule, they must use the same number of days to calculate the 
dollar amount of dividends that will be earned on the account in the 
annual percentage yield formula (where ``Dividends'' are divided by 
``Principal''.)
    The annual percentage yield is to be calculated by use of the 
following general formula ((``APY'') is used for convenience in the 
formulas):

APY=100 [(1 + Dividends/Principal) (365/Days in term) -1].
    ``Principal'' is the amount of funds assumed to have been deposited 
at the beginning of the account.
    ``Dividends'' is the total dollar amount of dividends earned on the 
Principal for the term of the account.
    ``Days in term'' is the actual number of days in the term of the 
account.
    When the ``days in term'' is 365 (that is, where the stated maturity 
is 365 days or where the account does not have a stated maturity), the 
APY can be calculated by use of the following simple formula:

APY=100 (Dividends/Principal).

Examples:
    (1) If a credit union would pay $61.68 in dividends for a 365-day 
year on $1,000 deposited into a share draft account, the APY is 6.17%:

APY=100 [(1 + 61.68/1,000) (365/365) -1]
APY=6.17%.
    Or, using the simple formula above (since the term is deemed to be 
365 days):

APY=100 (61.68/1,000)
APY=6.17%.
    (2) If a credit union pays $30.37 in dividends on a $1,000 six-month 
term share certificate account (where the six-month period used by the 
credit union contains 182 days), using the general formula above, the 
APY is 6.18%:

APY=100 [(1+30.37/1,000)(365/182)-1]
APY=6.18%.
    The APY is affected by the frequency of compounding, i.e., the 
amount of dividends will be greater the more frequently dividends are 
compounded for a given nominal rate. When two credit unions are offering 
the same dividend rate on, for example, a share account, the APY 
disclosed may be different if the credit unions use a different 
frequency of compounding.
Examples:
    (1) If a credit union pays $1,268.25 in dividends for a 365-day year 
on $10,000 deposited into a regular share account earning 12%, and the 
dividends are compounded monthly, the APY will be 12.68%.

APY=100 ($1,268.25/10,000)
APY=12.68%
    (2) However, if a credit union is compounding dividends on a 
quarterly basis on an account which otherwise has the same terms, the 
dividends will be $1,255.09 and the APY will be 12.55%.

APY=100 ($1,255.09/10,000)
APY=12.55%

 B. Stepped-Rate Accounts (Different Rates Apply in Succeeding Periods)

    For accounts with two or more dividend rates applied in succeeding 
periods (where the rates are known at the time the account is opened), a 
credit union shall assume each dividend rate is in effect for the length 
of time provided for in any share agreement.
Examples:
    (1) If a credit union offers a $1,000 6-month term share 
(certificate) account on which it pays a 5% dividend rate, compounded 
daily, for the first three months (which contain 91 days), and a 5.5% 
dividend rate, compounded daily, for the next three months (which 
contain 92 days), the total dividends for six months is $26.68, and, 
using the general formula above, the APY is 5.39%:

APY=100 [(1+26.68/1,000)(365/183)-1]
APY=5.39%.
    (2) If a credit union offers a $1,000 2-year share certificate on 
which it pays a 6% dividend rate, compounded daily, for the first year, 
and a 6.5% dividend rate, compounded daily, for the next year, the total 
dividends for two years is $133.13, and, using the general formula 
above, the APY is 6.45%:

APY=100 [(1+133.13/1,000)(365/730)-1]
APY=6.45%.

                        C. Variable-Rate Accounts

    For variable-rate accounts without an introductory premium or 
discounted rate, a credit union must base the calculation only on the 
initial dividend rate in effect when the account is opened (or 
advertised), and assume that this rate will not change during the year.
    Variable-rate accounts with an introductory premium or discount rate 
must be treated like stepped-rate accounts. Thus, a credit union shall 
assume that: (1) The introductory simple dividend rate is in effect for 
the length of time provided for in the account contract; and (2) the 
variable dividend rate that would have been in effect when the account 
is opened or advertised (but for the introductory rate) is in effect for 
the remainder of the year. If the variable rate is tied to an index, the 
index-based rate in effect at the time of disclosure must be used for 
the remainder of the year. If the rate is not tied to an index, the rate 
in effect for existing members holding the same account (who are not 
receiving the introductory dividend rate) must be used for the remainder 
of the year.
    For example, if a credit union offers an account on which it pays a 
7% dividend rate,

[[Page 387]]

compounded daily, for the first three months (which, for example, 
contains 91 days), while the variable dividend rate that would have been 
in effect when the account was opened was 5%, the total dividends for a 
365-day year for a $1,000 account balance is $56.52, (based on 91 days 
at 7% followed by 274 days at 5%). Using the simple formula, the APY is 
5.65%:

APY=100 (56.52/1,000)
APY=5.65%.

   D. Accounts with Tiered Rates (Different Rates Apply To Specified 
                             Balance Level)

    For accounts in which two or more dividend rates paid on the account 
are applicable to specified balance levels, the credit union must 
calculate the annual percentage yield in accordance with the method 
described below that it uses to calculate dividends. In all cases, an 
annual percentage yield (or a range of annual percentage yields, if 
appropriate) must be disclosed for each balance tier.
    For purposes of the examples discussed below, assume the following:

------------------------------------------------------------------------
  Simple dividend rate (Percent)     Share balance required to earn rate
------------------------------------------------------------------------
5.25..............................  Up to but not exceeding $2,500.
5.50..............................  Above $2,500, but not exceeding
                                     $15,000.
5.75..............................  Above $15,000.
------------------------------------------------------------------------

                            Tiering Method A

    Under this method, a credit union pays on the full balance in the 
account the stated dividend rate that corresponds to the applicable 
share balance tier. For example, if a member deposits $8,000, the credit 
union pays the 5.50% dividend rate on the entire $8,000. This is also 
known as a ``hybrid'' or ``plateau'' tiered rate account.
    When this method is used to determine dividends, only one annual 
percentage yield will apply to each tier. Within each tier, the annual 
percentage yield will not vary with the amount of principal assumed to 
have been deposited.
    For the dividend rates and account balances assumed above, the 
credit union will state three annual percentage yields--one 
corresponding to each balance tier. Calculation of each annual 
percentage yield is similar for this type of account as for accounts 
with a single fixed dividend rate. Thus, the calculation is based on the 
total amount of dividends that would be received by the member for each 
tier of the account for a year and the principal assumed to have been 
deposited to earn that amount of dividends.
    First tier. Assuming daily compounding, the credit union will pay 
$53.90 in dividends on a $1,000 account balance. Using the general 
formula for the first tier, the APY is 5.39%:

APY=100 [(1+53.90/1,000)(365/365)-1]
APY=5.39%.
    Using the simple formula:

APY=100 (53.90/1,000)
APY=5.39%.
    Second tier. The credit union will pay $452.29 in dividends on an 
$8,000 deposit. Thus, using the simple formula, the annual percentage 
yield for the second tier is 5.65%:

APY=100 (452.29/8,000)
APY=5.65%.
    Third tier. The credit union will pay $1,183.61 in dividends on a 
$20,000 account balance. Thus, using the simple formula, the annual 
percentage yield for the third tier is 5.92%:

APY=100 (1,183.61/20,000)
APY=5.92%.

                            Tiering Method B

    Under this method, a credit union pays the stated dividend rate only 
on that portion of the balance within the specified tier. For example, 
if a member deposits $8,000, the credit union pays 5.25% on only $2,500 
and 5.50% on $5,500 (the difference between $8,000 and the first tier 
cutoff of $2,500). This is also known as a ``pure'' tiered rate account.
    The credit union that computes dividends in this manner must provide 
a range that shows the lowest and the highest annual percentage yields 
for each tier (other than for the first tier, which, like the tiers in 
Method A, has the same annual percentage yield throughout). The low 
figure for an annual percentage yield is calculated based on the total 
amount of dividends earned for a year assuming the minimum principal 
required to earn the dividend rate for that tier. The high figure for an 
annual percentage yield is based on the amount of dividends the credit 
union would pay on the highest principal that could be deposited to earn 
that same dividend rate. If the account does not have a limit on the 
amount that can be deposited, the credit union may assume any amount.
    For the tiering structure assumed above, the credit union would 
state a total of five annual percentage yields--one figure for the first 
tier and two figures stated as a range for the other two tiers.
    First tier. Assuming daily compounding, the credit union could pay 
$53.90 in dividends on a $1,000 account balance. For this first tier, 
using the simple formula, the annual percentage yield is 5.39%:

APY=100 (53.90/1,000)
APY=5.39%.
    Second tier. For the second tier the credit union would pay between 
$134.75 and $841.45 in dividends, based on assumed balances of $2,500.01 
and $15,000, respectively. For $2,500.01, dividends would be figured on 
$2,500 at 5.25% dividend rate plus dividends on $.01 at 5.50%. For the 
low end of the second tier, therefore, the annual percentage yield is 
5.39%. Using the simple formula:


[[Page 388]]


APY=100 (134.75/2,500)
APY=5.39%.
    For $15,000, dividends are figured on $2,500 at 5.25% dividend rate 
plus dividends on $12,500 at 5.50% dividend rate. For the high end of 
the second tier, the annual percentage yield, using the simple formula, 
is 5.61%:

APY=100 (841.45/15,000)
APY=5.61%.
    Thus, the annual percentage yield range that would be stated for the 
second tier is 5.39% to 5.61%.
    Third tier. For the third tier, the credit union would pay $841.45 
and $5,871.78 in dividends on the low end of the third tier (a balance 
of $15,000.01). For $15,000.01, dividends would be figured on $2,500 at 
5.25% dividend rate, plus dividends on $12,500 at 5.50% dividend rate, 
plus dividends on $.01 at 5.75% dividend rate. For the low end of the 
third tier, therefore, the annual percentage yield, using the simple 
formula, is 5.61%:

APY=100 (841.45/15,000)
APY=5.61%.
    Assuming the credit union does not limit the account balance, it may 
assume any maximum amount for the purposes of computing the annual 
percentage yield for the high end of the third tier. For an assumed 
maximum balance amount of $100,000, dividends would be figured on $2,500 
at 5.25% dividend rate, plus dividends on $12,500 at 5.50% dividend 
rate, plus dividends on $85,000 at 5.75% dividend rate. For the high end 
of the third tier, therefore, the annual percentage yield, using the 
simple formula, is 5.87%:

APY=100 (5,871.78/100,000)
APY=5.87%.
    Thus, the annual percentage yield that would be stated for the third 
tier is 5.61% to 5.87%. If the assumed maximum balance amount is 
$1,000,000, credit unions would use $985,000 rather than $85,000 in the 
last calculation. In that case for the high end of the third tier, the 
annual percentage yield, using the simple formula, is 5.91%:

APY=100 (59,134.22/1,000,000)
APY=5.91%
    Thus, the annual percentage yield range that would be stated for the 
third tier is 5.61% to 5.91%.

E. Term Share Accounts with a Stated Maturity Greater than One Year that 
                     Pay Dividends At Least Annually

    1. For term share accounts with a stated maturity greater than one 
year, that do not compound dividends on an annual or more frequent 
basis, and that require the member to withdraw dividends at least 
annually, the annual percentage yield may be disclosed as equal to the 
dividend rate.

Example:
    If a credit union offers a $1,000 two-year term share account that 
does not compound and that pays out dividends semi-annually by check or 
transfer at a 6.00% dividend rate, the annual percentage yield may be 
disclosed as 6.00%.
    2. For term share accounts covered by this paragraph that are also 
stepped-rate accounts, the annual percentage yield may be disclosed as 
equal to the composite dividend rate.

Example:
    (1) If a credit union offers a $1,000 three-year term share account 
that does not compound and that pays out dividends annually by check or 
transfer at a 5.00% dividend rate for the first year, 6.00% dividend 
rate for the second year, and 7.00% dividend rate for the third year, 
the credit union may compute the composite dividend rate and APY as 
follows:
    (a) Multiply each dividend rate by the number of days it will be in 
effect;
    (b) Add these figures together; and
    (c) Divide by the total number of days in the term.
    (2) Applied to the example, the products of the dividend rates and 
days the rates are in effect are (5.00% x 365 days) 1825, (6.00% x 365 
days) 2190, and (7.00% x 365) 2555, respectively. The sum of these 
products, 6570, is divided by 1095, the total number of days in the 
term. The composite dividend rate and APY are both 6.00%.

         Part II. Annual Percentage Yield Earned for Statements

    The annual percentage yield earned for statements under Sec. 707.6 
is an annualized rate that reflects the relationship between the amount 
of dividends actually earned (accrued or paid and credited) to the 
member's account during the period and the average daily balance in the 
account for the period over which the dividends were earned.
    Pursuant to Sec. 707.6(a), when dividends are paid less frequently 
than statements are sent, the APY Earned may reflect the number of days 
over which dividends were earned rather than the number of days in the 
statement period, e.g., if a credit union uses the average daily balance 
method and calculates dividends for a period other than the statement 
period, the annual percentage yield earned shall reflect the 
relationship between the amount of dividends earned and the average 
daily balance in the account for the other period, such as a crediting 
or dividend period.
    The annual percentage yield shall be calculated by using the 
following formulas (``APY Earned'' is used for convenience in the 
formulas):

                           A. General Formula

APY Earned=100 [(1+Dividends earned/
          Balance)(365/Daysinperiod)-1].


[[Page 389]]


    ``Balance'' is the average daily balance in the account for the 
period.
    ``Dividends earned'' is the actual amount of dividends accrued or 
paid and credited to the account for the period.
    ``Days in period'' is the actual number of days over which the 
dividends disclosed on the statement were earned.

Examples:
    (1) If a credit union calculates dividends for the statement period 
(and uses either the daily balance or the average daily balance method), 
and the account had a balance of $1,500 for 15 days and a balance of 
$500 for the remaining 15 days of a 30-day statement period, the average 
daily balance for the period is $1,000. Assume that $5.25 in dividends 
was earned during the period. The annual percentage yield earned (using 
the formula above) is 6.58%:

APY Earned=100 [(1+5.25/1,000)(365/30)-1]
APY Earned=6.58%.
    (2) Assume a credit union calculates dividends on the average daily 
balance for the calendar month and provides periodic statements that 
cover the period from the 16th of one month to the 15th of the next 
month. The account has a balance of $2,000 September 1 through September 
15 and a balance of $1,000 for the remaining 15 days of September. The 
average daily balance for the month of September is $1,500, which 
results in $6.50 in dividends earned for the month. The annual 
percentage yield earned for the month of September would be shown on the 
periodic statement covering September 16 through October 15. The annual 
percentage yield earned (using the formula above) is 5.40%:

APY Earned=100 [(1+6.50/1,500)(365/30)-1]
APY Earned = 5.40%.
    (3) Assume a credit union calculates dividends on the average daily 
balance for a quarter (for example, the calendar months of September 
through November), and provides monthly periodic statements covering 
calendar months. The account has a balance of $1,000 throughout the 30 
days of September, a balance of $2,000 throughout the 31 days of 
October, and a balance of $3,000 throughout the 30 days of November. The 
average daily balance for the quarter is $2,000, which results in $21 in 
dividends earned for the quarter. The annual percentage yield earned 
would be shown on the periodic statement for November. The annual 
percentage yield earned (using the formula above) is 4.28%:

APY Earned=100 [(1+21/2,000)(365/91)-1]
APY Earned=4.28%.

 B. Special formula for use where periodic statement is sent more often 
           than the period for which dividends are compounded.

    Credit unions that use the daily balance method to accrue dividends 
and that issue periodic statements more often than the period for which 
dividends are compounded shall use the following special formula:
[GRAPHIC] [TIFF OMITTED] TR27SE93.000

    The following definition applies for use in this formula (all other 
terms are defined under Part II):
    ``Compounding'' is the number of days in each compounding period.
    Assume a credit union calculates dividends for the statement period 
using the daily balance method, pays a 5.00% dividend rate, compounded 
annually, and provides periodic statements for each monthly cycle. The 
account has a daily balance of $1000.00 for a 30-day statement period. 
The dividend earned of $4.11 for the period, and the annual percentage 
yield earned (using the special formula above) is 5.00%:
[GRAPHIC] [TIFF OMITTED] TR27SE93.001


[[Page 390]]


APY Earned = 5.00%.

[58 FR 50445, Sept. 27, 1993, as amended at 63 FR 71575, Dec. 29, 1998]

         Appendix B to Part 707--Model Clauses and Sample Forms

                            Table of Contents

B-1--Model Clauses for Account Disclosures (Sec. 707.4(b))
B-2--Model Clauses for Changes in Terms (Sec. 707.5(a))
B-3--Model Clauses for Pre-Maturity Notices for Term Share Accounts 
          (Sec. 707.5(b-d))
B-4--Sample Form (Signature Card/ Application for Membership)
B-5--Sample Form (Term Share (Certificate) Account)
B-6--Sample Form (Regular Share Account Disclosures)
B-7--Sample Form (Share Draft Account Disclosures)

        B-8--Sample Form (Money Market Share Account Disclosures)

     B-9--Sample Form (Term Share (Certificate) Account Disclosures)

                 B-10--Sample Form (Periodic Statement)

                B-11--Sample Form (Rate and Fee Schedule)

    General Note: Appendix B contains model clauses and sample forms 
intended for optional use by credit unions to aid in compliance with the 
disclosure requirements of Secs. 707.4 (account disclosures), 707.5 
(subsequent disclosures), 707.6 (statement disclosures), and 707.8 
(advertisements). Section 269(b) of TISA provides that credit unions 
that use these clauses and forms will be in compliance with TISA's 
disclosure provisions.

    As discussed in the supplementary information to Sec. 707.3(a), this 
final rule provides for flexibility in designing the format of the 
disclosures. Credit unions can choose to prepare a single document or 
brochure that incorporates disclosures for all accounts offered, or to 
prepare different documents for each type of account. Credit unions may 
also use inserts to a document, or fill in blanks to show current rates, 
fees and other terms.
    In the model clauses, words in parentheses indicate the type of 
disclosure a credit union should insert in the space provided (for 
example, a credit union might insert ``July 23, 1995'' in the blank for 
a ``(date)'' disclosure). Brackets and ``/'' indicate that a credit 
union must choose the alternative that best describes its practice (for 
example, ``[daily balance/ average daily balance]''). It should be noted 
that only in sections B-6 through B-10 of this appendix have specific 
examples of disclosures been given, with dates and figures. Sections B-1 
through B-5, and section B-11 provide only unspecific model clauses or 
blank forms. The Board felt, as did the FRB in the Appendix A to 
Regulation DD, that a mix of blank clauses and forms and application of 
the model clauses to real specific situations would benefit those who 
must comply with TISA.
    Any references to NCUA Rules and Regulations, the NCUA Standard FCU 
Bylaws, or the NCUA Accounting Manual for FCUs, are provided for 
guidance and as a point of reference for credit unions. Citations to 
these sources does not indicate that their application is required for 
those credit unions who need not follow them.

       B-1  Model Clauses for Account Disclosures (Sec. 707.4(b))

                 (a) Rate Information (Sec. 707.4(b)(1))

           (i) Fixed-Rate Accounts (Sec. 707.4(b)(1)(i)(A-B))

                      1. Interest-bearing Accounts

    The interest rate on your deposit account is ______% with an annual 
percentage yield (APY) of ______%. [For purposes of this disclosure, 
this is a rate and APY that were offered within the most recent seven 
calendar days and were accurate as of (date). Please call (credit union 
telephone number) to obtain current rate information.] You will be paid 
this rate [for (time period)/until (date)/for at least 30 calendar 
days].

    Note: This provision reflects an accurate statement for an interest-
bearing account authorized by state law for state-chartered credit 
unions. While the definition of the term ``interest'' permits its 
substitution for the term ``dividends,'' separate disclosures should be 
made for interest-bearing accounts. Since account opening disclosures 
may be provided to potential members requesting account information 
before opening an account, and members opening new accounts, information 
is provided indicating that the rate may not be current, but that the 
potential member or member may call the credit union to obtain up-to-
date information. When opening a new account, of course, a credit union 
could provide the contractual rate alone, and delete the sentences in 
brackets. Given the definition of fixed-rate account in Sec. 707.2(n), 
credit unions offering fixed-rate accounts must contract to hold rates 
steady for at least a 30-day period. Thus, if the 30-day option of the 
last sentence is not chosen, the period chosen must be longer than 30 
days.

                 2. Dividend-bearing Term Share Accounts

    The dividend rate on your term share account is ______% with an 
annual percentage yield (APY) of ______%. [For purposes of this 
disclosure, this is a rate and APY that were

[[Page 391]]

offered within the most recent seven calendar days and were accurate as 
of (date). Please call (credit union telephone number) to obtain current 
rate information.] You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days].

    Note: This provision reflects an accurate statement for a fixed-
rate, dividend-bearing term share account. Interest-bearing term share 
accounts would use the disclosure in Sec. 1, above. Since account 
opening disclosures may be provided to potential members requesting 
account information before opening an account, and members opening new 
accounts, information is provided indicating that the rate may not be 
current, but that the potential member or member may call the credit 
union to obtain up-to-date information. When opening a new account, of 
course, a credit union could provide the contractual rate alone, and 
delete the sentences in brackets. Given the definition of fixed-rate 
account in Sec. 707.2(n), credit unions offering fixed-rate accounts 
must contract to hold rates steady for at least a 30-day period. Thus, 
if the 30-day option of the last sentence is not chosen, the period 
chosen must be longer than 30 days.

                   3. Other Dividend-bearing Accounts

[As of [the last dividend declaration date/ (date)], the dividend rate 
was ______% with an annual percentage yield (APY) of ______% on your 
account. /or The prospective dividend rate on your account is ______% 
with a prospective APY of ______% for the current dividend period.] You 
will be paid this rate for [(time period)/at least 30 calendar days].

    or

[As of [the last dividend declaration date/ (date)], the dividend rate 
was ______% with an annual percentage yield (APY) of ______% on your 
account. /or The prospective dividend rate on your account is ______% 
with an annual percentage yield (APY) of ______% for this dividend 
period.] This rate will not change unless the credit union notifies you 
at least 30 calendar days prior to any change.

    Note: Credit unions may disclose the dividend rate and annual 
percentage yield on accounts as of the last dividend declaration date. 
This necessitates inclusion of a disclosure of the actual calendar date 
of the last dividend declaration date. Additionally or alternatively (if 
the last dividend rate could be inaccurate), credit unions may disclose 
a prospective dividend rate and a prospective annual percentage yield. 
Such prospective rates and yields must be estimated in good faith, and 
must be declared at the proper time if it is at all possible to do so. 
As for the last sentence in these disclosures, this provision reflects a 
credit union policy to set prospective dividend rates for the next month 
(or at least 30 days), quarter or other period. Many credit unions, at 
their mid-monthly board meeting, set prospective dividend rates for the 
next month beginning on the 1st day of the month and continuing to the 
last day of the month. These rates must be formalized or ratified at the 
end of a dividend period. Given the timing of the board meetings, the 
time to prepare and mail notices and the 30 day period, it will often 
take credit unions 45 to 60 days to effectively change rates. For these 
reasons, the Board strongly suggests that credit unions do not offer 
fixed-rate, dividend-bearing accounts.

           (ii) Variable-Rate Accounts (Sec. 707.4(b)(1)(ii))

                      1. Interest-bearing Accounts

    The interest rate on your deposit account is ______%, with an annual 
percentage yield (APY) of ______%. [For purposes of this disclosure, 
this is a rate and APY that were offered within the most recent seven 
calendar days and were accurate as of (date). Please call (credit union 
telephone number) to obtain current rate information.] The interest rate 
and annual percentage yield may change every (time period) based on 
[(name of index)/the determination of the credit union board of 
directors]. The interest rate for your account will [never change by 
more than ______% each (time period)/never be less/more than ______%/
never exceed ______% above or fall more than ______% below the initial 
interest rate].

    Note: This disclosure combines the requirements of 
Sec. 707.4(b)(1)(i) with Sec. 707.4(b)(1)(ii) for interest-bearing 
accounts. The variable nature of a deposit account usually is based on 
an external index or is set at the discretion of the board. If another 
means of rate setting is used, that, instead of the proposed language, 
must be disclosed. Since account opening disclosures may be provided to 
potential members requesting account information before opening an 
account, and members opening new accounts, information is provided 
indicating that the rate may not be current, but that the potential 
member or member may call the credit union to obtain up-to-date 
information. When opening a new account, of course, a credit union could 
provide the contractual rate alone, and delete the sentences in 
brackets. Rarely would there be limitations on rate changes, but 
language is provided for this situation in the last sentence. Of course, 
it is only to be used if it applies to an account.

                 2. Dividend-bearing Term Share Accounts

    The dividend rate on your term share account is ______%, with an 
annual percentage yield (APY) of ______%. [For purposes of this 
disclosure, this is a rate and APY that were offered within the most 
recent seven calendar days and were accurate as of (date). Please call 
(credit union telephone number)

[[Page 392]]

to obtain current rate information.] The dividend rate and annual 
percentage yield may change every (time period) based on [(name of 
index)/the determination of the credit union board of directors]. The 
dividend rate for your account will [never change by more than ______% 
each (time period)/never be less/more than ______% /never exceed ______% 
above or fall more than ______% below the initial dividend rate].

    Note: This disclosure combines the requirements of 
Sec. 707.4(b)(1)(i) with Sec. 707.4(b)(1)(ii) for dividend-bearing, 
variable-rate term share accounts. The variable nature of a deposit 
account usually is based on an external index or is set at the 
discretion of the board. If another means of rate setting is used, that, 
instead of the model language, must be disclosed. Since account opening 
disclosures may be provided to potential members requesting account 
information before opening an account, and members opening new accounts, 
information is provided indicating that the rate may not be current, but 
that the potential member or member may call the credit union to obtain 
up-to-date information. When opening a new account, of course, a credit 
union could provide the contractual rate alone, and delete the sentences 
in brackets. Rarely would there be limitations on rate changes, but 
language is provided for this situation in the last sentence. Of course, 
it is only to be used if it applies to an account.

                   3. Other Dividend-bearing Accounts

[As of [the last dividend declaration date/ (date)], the dividend rate 
was ______% with an annual percentage yield (APY) of ______% on your 
account. /or The prospective dividend rate on your account is ______% 
with an anticipated annual percentage yield (APY) of ______% for the 
current dividend period.] The dividend rate and annual percentage yield 
may change every (dividend period) as determined by the credit union 
board of directors.

    Note: This language combines the requirements of Sec. 707.4(b)(1)(i) 
with Sec. 707.4(b)(1)(ii). Credit unions may disclose the dividend rate 
and annual percentage yield on accounts as of the last dividend 
declaration date. This necessitates inclusion of a disclosure of the 
actual calendar date of the last dividend declaration date or use of the 
phrase ``last dividend declaration date''. Additionally or 
alternatively, credit unions may disclose a prospective dividend rate 
and a prospective annual percentage yield. Such prospective rates and 
yields must be estimated in good faith, and must be declared at the 
proper time if it is at all possible to do so. As for the last sentence 
in these disclosures, this provision reflects the variable nature of the 
account. Generally, there is only one variable-rate feature for share 
accounts: the frequency of dividend period rate changes (e.g., daily, 
weekly, monthly, quarterly, semi-annually, annually). Normally, there 
are no contractual limitations on share account earnings (unless imposed 
by a regulator), nor are earnings based on any internal or external 
index. If contractual limitations or an index are involved, however, 
those factors would need to be disclosed (unless a regulator orders 
otherwise).

            (iii) Stepped-Rate Accounts (Sec. 707.4(b)(1)(i))

                      1. Interest-bearing Accounts

    The initial interest rate on your deposit account is ______%. You 
will be paid that rate [for (time period)/ until (date)]. After that 
time, the interest rate for your deposit account will be ______% and you 
will be paid that rate [for (time period)/ until (date)]. The annual 
percentage yield (APY) for your account is ______%. [For purposes of 
this disclosure, this is a rate and APY that were offered within the 
most recent seven calendar days and were accurate as of (date). Please 
call (credit union telephone number) to obtain current rate 
information.] You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days].

                 2. Dividend-bearing Term Share Accounts

    The initial dividend rate on your term share account is ______%. You 
will be paid that rate [for (time period)/ until (date)]. After that 
time, the dividend rate for your term share account will be ______% and 
you will be paid that rate [for (time period)/ until (date)]. The annual 
percentage yield (APY) for your account is ______%. [For purposes of 
this disclosure, this is a rate and APY that were offered within the 
most recent seven calendar days and were accurate as of (date). Please 
call (credit union telephone number) to obtain current rate 
information.] You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days].

                   3. Other Dividend-bearing Accounts

[As of [the last dividend declaration date/ (date)], the initial 
dividend rate on your account was ______%. /or The prospective dividend 
rate on your account is ______%.] You will be paid that rate [for (time 
period)/ until (date)]. After that time, the prospective dividend rate 
for your share account will be ______% and you will be paid such rate 
[for (time period)/ until (date)]. The annual percentage yield (APY) for 
your account is ______%. You will be paid this rate for [(time period)/
at least 30 calendar days].

    Note: Stepped-rate accounts are accounts with two or more rates that 
take effect in succeeding periods. The applicable rates and time periods 
are known when the account is opened. By nature these are fixed-rate 
accounts and are usually associated with term

[[Page 393]]

share (certificate) accounts. Accordingly, a contract provision (for 
share accounts) to change rates should be included.

             (iv) Tiered-Rate Accounts (Sec. 707.4(b)(1)(i))

                      1. Interest-bearing Accounts

                            Tiering Method A

    1* If your [daily balance/average daily balance] is $______ or more, 
the interest rate paid on the entire balance in your account will be 
______%, with an annual percentage yield (APY) of ______%.
    2* If your [daily balance/average daily balance] is more than 
$______, but less than $______, the interest rate paid on the entire 
balance in your account will be ______%, with an APY of ______%.
    3* If your [daily balance/average daily balance] is $______ or less, 
the interest rate paid on the entire balance will be ______% with an APY 
of ______%.
    [For purposes of this disclosure, this is a rate and APY that were 
offered within the most recent seven calendar days and were accurate as 
of (date). Please call (credit union telephone number) to obtain current 
rate information.]
    [Fixed-rate--You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days]./ Variable-rate--The interest rate 
and APY may change every (time period) based on [(name of index)/ the 
determination of the credit union board of directors.]

    Note: Tiering Method A pays the stated interest rate that 
corresponds to the applicable deposit tier on the full balance in the 
account. This example contemplates a two-tier system. The option (1, 2 
or 3) most closely matching the terms of the account should be chosen as 
the appropriate disclosure. For tiered-rate accounts, a disclosure may 
be added about the currency of the rate, as is provided in the first set 
of brackets. A disclosure regarding the fixed-rate or variable-rate 
nature of the account must be added, as is provided in the last set of 
brackets.

                            Tiering Method B

    1* An interest rate of ________% will be paid only on the portion of 
your [daily balance/average daily balance] that is greater than 
$________. The annual percentage yield (APY) for this tier will range 
from ________% to ________%, depending on the balance in the account.
    2* An interest rate of ________% will be paid only on the portion of 
your [daily balance/average daily balance] that is greater than 
$________, but less than $________. The annual percentage yield (APY) 
for this tier will range from ________% to ________%, depending on the 
balance in the account.
    3* If your [daily balance/average daily balance] is $________ or 
less, the interest rate paid on the entire balance will be ________%, 
with an annual percentage yield (APY) of ________%.
    [For purposes of this disclosure, this is a rate and APY that were 
offered within the most recent seven calendar days and were accurate as 
of (date). Please call (credit union telephone number) to obtain current 
rate information.]
    [Fixed-rate--You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days]./ Variable-rate--The interest rate 
and APY may change every (time period) based on [(name of index)/ the 
determination of the credit union board of directors.]

    Note: Tiering Method B pays different stated interest rates 
corresponding to applicable deposit tiers, on the applicable balance in 
each tier of the account. For example, a credit union might pay 3% 
interest on account funds of $500 or below, and pay 4% interest on the 
portion of the same account that exceeds $500. The example contemplates 
an account with two tiers, but additional tiers are possible. The option 
(1, 2 or 3) most closely matching the terms of the account should be 
chosen as the appropriate disclosure. For tiered-rate accounts, a 
disclosure may be added about the currency of the rate, as is provided 
in the first set of brackets.
    Tiered-rate accounts can be either fixed-rate or variable-rate 
accounts. The last sentence offers an option of either fixed-rate or 
variable-rate disclosure. Thus, the disclosures outlined above will be 
made in addition to either: (i) Disclosure of the period the fixed-rates 
are in effect or (ii) the variable-rate disclosures. Tiered-rate 
accounts are also subject to the requirement for disclosure of the 
balance computation method, see paragraph (e) to this appendix.

                 2. Dividend-bearing Term Share Accounts

                            Tiering Method A

    1* If your [daily balance/average daily balance] is $________ or 
more, the dividend rate paid on the entire balance in your account will 
be ________%, with an annual percentage yield (APY) of ________%.
    2* If your [daily balance/average daily balance] is more than 
$________, but less than $________, the dividend rate paid on the entire 
balance in your account will be ________%, with an APY of ________%.
    3* If your [daily balance/average daily balance] is $________ or 
less, the dividend rate paid on the entire balance will be ________% 
with an APY of ________%.
    [For purposes of this disclosure, this is a rate and APY that were 
offered within the most recent seven calendar days and were accurate as 
of (date). Please call (credit union telephone number) to obtain current 
rate information.]

[[Page 394]]

    [Fixed-rate--You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days]./ Variable-rate--The interest rate 
and APY may change every (time period) based on [(name of index)/ the 
determination of the credit union board of directors.]

    Note: Tiering Method A pays the stated dividend rate that 
corresponds to the applicable account balance tier on the full balance 
in the account. This example contemplates a two-tier system. The option 
(1, 2 or 3) most closely matching the terms of the account should be 
chosen as the appropriate disclosure. For tiered-rate accounts, a 
disclosure may be added about the currency of the rate, as is provided 
in the first set of brackets. A disclosure regarding the fixed-rate or 
variable-rate nature of the account must be added, as is provided in the 
last set of brackets.

                            Tiering Method B

    1* A dividend rate of ________% will be paid only on the portion of 
your [daily balance/average daily balance] that is greater than 
$________. The annual percentage yield (APY) for this tier will range 
from ________% to ________%, depending on the balance in the account.
    2* A dividend rate of ________% will be paid only on the portion of 
your [daily balance/average daily balance] that is greater than 
$________, but less than $________. The annual percentage yield (APY) 
for this tier will range from ________% to ________%, depending on the 
balance in the account.
    3* If your [daily balance/average daily balance] is $________ or 
less, the dividend rate paid on the entire balance will be ________%, 
with an annual percentage yield (APY) of ________%.
    [For purposes of this disclosure, this is a rate and APY that were 
offered within the most recent seven calendar days and were accurate as 
of (date). Please call (credit union telephone number) to obtain current 
rate information.]
    [Fixed-rate--You will be paid this rate [for (time period)/until 
(date)/for at least 30 calendar days]./ Variable-rate--The interest rate 
and APY may change every (time period) based on [(name of index)/ the 
determination of the credit union board of directors.]

    Note: Tiering Method B pays different stated dividend rates 
corresponding to applicable account balance tiers, on the applicable 
balance in each tier of the account. For example, a credit union might 
pay 3% dividend on account funds of $500 or below, and pay 4% dividend 
on the portion of the same account that exceeds $500. The example 
contemplates an account with two tiers, but additional tiers are 
possible. The option (1, 2 or 3) most closely matching the terms of the 
account should be chosen as the appropriate disclosure. For tiered-rate 
accounts, a disclosure may be added about the currentness of the rate, 
as is provided in the first set of brackets.
    Tiered-rate accounts can be either fixed-rate or variable-rate 
accounts. The last sentence offers an option of either fixed-rate or 
variable-rate disclosure. Thus, the disclosures outlined above will be 
made in addition to either: (i) Disclosure of the period the fixed-rates 
are in effect or (ii) the variable-rate disclosures. Tiered-rate 
accounts are also subject to the requirement for disclosure of the 
balance computation method, see paragraph (e) to this appendix.

                   3. Other Dividend-bearing Accounts

                            Tiering Method A

    1* [As of [the last dividend declaration date/ (date)], if your 
[daily balance/average daily balance] was $________ or more, the 
dividend rate paid on the entire balance in your account was ________%, 
with an annual percentage yield (APY) of ________%. /or If your [daily 
balance/average daily balance] is $________ or more, a prospective 
dividend rate of ________% will be paid on the entire balance in your 
account with a prospective annual percentage yield (APY) of ________% 
for this dividend period.]
    2* [As of [the last dividend declaration date/ (date)], if your 
[daily balance/average daily balance] was more than $________, but was 
less than $________, the dividend rate paid on the entire balance in 
your account was ________%, with an annual percentage yield (APY) of 
________%. /or If your [daily balance/average daily balance] is more 
than $________, but is less than $________, a prospective dividend rate 
of ________% will be paid on the entire balance in your account with a 
prospective annual percentage yield (APY) of ________% for this dividend 
period.]
    3* [As of the last dividend declaration date/ (date)], if your 
[daily balance/average daily balance] was $________ or less, the 
dividend rate paid on the entire balance in your account will be 
________% with an annual percentage yield (APY) of ________%. /or If 
your [daily balance/average daily balance] is $________ or less, the 
prospective dividend rate of ________% will be paid on the entire 
balance in your account with a prospective annual percentage yield (APY) 
of ________% for this dividend period.
    [Fixed-rate--You will be paid this rate for [(time period)/at least 
30 calendar days]./ Variable-rate--The dividend rate and APY may change 
every (dividend period) as determined by the credit union board of 
directors.]

    Note: Tiering Method A pays the stated dividend rate that 
corresponds to the applicable deposit tier on the full balance in the 
account. This example contemplates a two-

[[Page 395]]

tier system. The option (1, 2 or 3) most closely matching the terms of 
the account should be chosen as the appropriate disclosure. For tiered-
rate accounts, a disclosure may be added about the prospective rate. 
Note that the prospective rate disclosure options match the required 
tiered-rate disclosures based on the previous dividend declaration date. 
A disclosure regarding the fixed-rate or variable-rate nature of the 
account must be added, as is provided in the last set of brackets.

                            Tiering Method B

    1* [As of [the last dividend declaration date/ (date)], a dividend 
rate of ________% was paid only on the portion of your [daily balance/
average daily balance] that was greater than $________. The annual 
percentage yield (APY) for this tier ranged from ________% to ________%, 
depending on the balance in the account. /or A prospective dividend rate 
of ________% will be paid only on the portion of your [daily balance/
average daily balance] that is greater than $________ with a prospective 
annual percentage yield (APY) ranging from ________% to ________%, 
depending on the balance in the account, for this dividend period.]
    2* [As of [the last dividend declaration date/ (date)], a dividend 
rate of ________% was paid only on the portion of your [daily balance/
average daily balance] that was greater than $________ but less than 
$________. The annual percentage yield (APY) for this tier ranged from 
________% to ________%, depending on the balance in the account. /or A 
prospective dividend rate of ________% will be paid only on the portion 
of your [daily balance/average daily balance] that is greater than 
$________, but less than $________] with a prospective annual percentage 
yield (APY) ranging from ________% to ________%, depending on the 
balance in the account, for this dividend period.]
    3* [As of [the last dividend declaration date/ (date)], if your 
[daily balance/average daily balance] was $________ or less, the 
dividend rate paid on the entire balance was ________%, with an annual 
percentage yield (APY) of ________%. /or If your [daily balance/average 
daily balance] was $______ or less, the prospective dividend rate paid 
on the entire balance in your account will be ______% with a prospective 
annual percentage yield (APY) of ______% for this dividend period.

    Note: Tiering Method B pays different stated dividend rates 
corresponding to applicable account tiers, on the applicable balance in 
each tier of the account. For example, a credit union might pay a 3% 
dividend on account funds of $500 or below, and pay a 4% dividend on the 
portion of the same account that exceeds $500. The example contemplates 
an account with two tiers, but additional tiers are possible. The option 
(1, 2 or 3) most closely matching the terms of the account should be 
chosen as the appropriate disclosure. Note that the prospective rate 
disclosure options match the required tiered-rate disclosures based on 
the previous dividend declaration date.
    Tiered-rate accounts can be either fixed-rate or variable-rate 
accounts. The last sentence offers an option of either fixed-rate or 
variable-rate disclosures. Thus, the disclosures outlined above must be 
made in addition to either: (i) Disclosure of the period the fixed-rates 
are in effect or (ii) the variable-rate disclosures. Tiered-rate 
accounts are also subject to the requirement for disclosure of the 
balance computation method, see paragraph (e) to this appendix.

               (b) Nature of Dividends (Sec. 707.4(b)(8))

    Dividends are paid from current income and available earnings, after 
required transfers to reserves at the end of a dividend period.

    Note: The Board of Directors declares dividends based on current 
income and available earnings of the credit union after providing for 
the required reserves at the end of the month. The dividend rate and 
annual percentage yield shown may reflect either the last dividend 
declaration date on the account or the earnings the credit union 
anticipates having available for distribution. This disclosure only 
applies to share and share draft (as opposed to deposit) accounts and 
should be grouped with the Rate Information to make the disclosures more 
meaningful. This disclosure also does not apply to term share accounts 
for reasons discussed in the supplementary information regarding 
Secs. 707.3(e) and 707.4(b)(8).

            (c) Compounding and Crediting (Sec. 707.4(b)(2))

    [Dividends/Interest] will be compounded (frequency) and will be 
credited (frequency).

and, if applicable:

    If you close your [share/deposit] account before [dividends/
interest] [are/is] paid, you will not receive the accrued [dividends/
interest].

and, if applicable (for dividend-bearing accounts):

    For this account type, the dividend period is (frequency), for 
example, the beginning date of the first dividend period of the calendar 
year is (date) and the ending date of such dividend period is (date). 
All other dividend periods follow this same pattern of dates. The 
dividend declaration date follows the ending date of a dividend period, 
and for the example is (date).

    Note: Where the word ``(frequency)'' appears, time periods must be 
inserted to coincide with those specified in board resolutions of each 
credit union's board of directors. A

[[Page 396]]

disclosure of dividend period was added to Sec. 707.4(b)(2)(i) in the 
final rule to assist members in knowing when dividend rate and APY 
disclosures would be given by a credit union using the optional 
statement rule of Sec. 707.6(a). The dividend declaration date is 
important for purposes of Sec. 707.4(a)(2)(ii), request disclosures, 
Sec. 707.4(b)(2), account opening disclosures, and Sec. 707.8(c)(2), 
advertising disclosures. The Board believes that this is critical 
information for dividend-bearing accounts, but that provision by an 
example (whether of the first dividend period of the year, or of any 
randomly chosen dividend period) is favorable to providing a list of 
such dates for the entire year or for a period of years (although these 
methods would also be permissible). As noted in the supplementary 
information to Sec. 707.2(j), dividend declaration date, the dividend 
period and actual dividend distribution date may vary. Thus, it is 
possible for crediting periods and dividend periods not to coincide, 
though the Board believes that credit unions should make every effort to 
attempt to coordinate the two periods.

         (d) Minimum Balance Requirements (Sec. 707.4(b)(3)(i))

    (i) To open the account
    The minimum balance required to open this account is $________.

or, for first share account at a credit union

    The minimum required to open this account is the purchase of a (par 
value of a share) share in the credit union.
    (ii) To avoid imposition of fees
    You must maintain a minimum daily balance of $________ in your 
account to avoid a service fee. If, during any (time period), your 
account balance falls below the required minimum daily balance, your 
account will be subject to a service fee of $________ for that (time 
period).

or

    You must maintain a minimum average daily balance of $________ in 
your account to avoid a service fee. If, during any (time period), your 
average daily balance is below the required minimum, your account will 
be subject to a service fee of $________ for that (time period).
    (iii) To obtain the annual percentage yield disclosed
    You must maintain a minimum daily balance of $________ in your 
account each day to obtain the disclosed annual percentage yield.

    or

    You must maintain a minimum average daily balance of $________ in 
your account to obtain the disclosed annual percentage yield.
    (iv) Absence of minimum balance requirements
    No minimum balance requirements apply to this account.
    (v) Par value
    The par value of a share in this credit union is $________.

    Note: Where the words ``(time period)'' appear, time periods should 
be inserted to coincide with those specified in board resolutions of 
each credit union's board of directors. As the supplementary information 
to Sec. 707.4(b)(3)(i) explains, the par value of a share to establish 
membership is a critical disclosure to be made to potential members of 
credit unions. The par value disclosure is required by 
Sec. 707.4(b)(3)(i) as being analogous to a minimum balance account 
opening requirement.

          (e) Balance Computation Method (Sec. 707.4(b)(3)(ii))

    (i) Daily Balance Method
    [Dividends/Interest] [are/is] calculated by the daily balance method 
which applies a daily periodic rate to the balance in the account each 
day.
    (ii) Average Daily Balance Method
    [Dividends/Interest] [are/is] calculated by the average daily 
balance method which applies a periodic rate to the average daily 
balance in the account for the period. The average daily balance is 
calculated by adding the balance in the account for each day of the 
period and dividing that figure by the number of days in the period.

    Note: Any explanation of balance computation method must contain 
enough information for members to grasp the means by which dividends or 
interest will be calculated on their accounts. Using a shorthand form, 
such as ``day in/day out'' for the daily balance method or ``average 
balance'' for the average daily balance method, without more 
information, is insufficient. In addition, any disclosure based on the 
equivalency of the two allowable methods, such as stating that the 
average daily balance method was the same as the daily balance method, 
is impermissible and misleading.

         (f) Accrual of Dividends/Interest on Noncash Deposits 
                         (Sec. 704.4(b)(3)(iii))

    [Dividends/Interest] will begin to accrue on the business day you 
[place/deposit] noncash items (e.g. checks) to your account.

or
    [Dividends/Interest] will begin to accrue no later than the business 
day we receive provisional credit for the [placement/deposit] of noncash 
items (e.g. checks) to your account.

    Note: Accrual information is not included in the explanation of 
balance computation method required by Sec. 707.4(b)(4)(ii). In 
addition, the disclosures required by TISA do not affect the substantive 
requirements of the EFAA and Regulation CC.

    The EFAA and Regulation CC control, and any modifications to them 
should occasion

[[Page 397]]

credit unions to revisit this disclosure with a view to revising it to 
reflect current law.

                 (g) Fees and Charges (Sec. 707.4(b)(4))

    The following fees and charges may be assessed against your account:

(Service/explanation)--$______.
(Service/explanation)--$______.

    Note: Fees and charges may be disclosed in an account disclosure, or 
separately in a Rate and Fee Schedule (see section B-11 of this 
appendix). In either event, the disclosure should also specify when the 
fee will be assessed by using phrases such as ``per item,'' ``per 
month,'' or ``per inquiry.''

             (h) Transaction Limitations (Sec. 707.4(b)(5))

    The minimum amount you may [withdraw/write a draft for] is $________
    During any statement period, you may not make more than six 
withdrawals or transfers to another credit union account of yours or to 
a third party by means of a preauthorized or automatic transfer or 
telephonic order or instruction. No more than three of the six transfers 
may be made by check, draft, debit card, if applicable, or similar order 
to a third party. If you exceed the transfer limitations set forth above 
in any statement period, your account will be subject to [closure by the 
credit union/a fee of $________.

    Note: This paragraph satisfies the requirements of Sec. 707.4(b)(6) 
with respect to Regulation D limitations on share accounts and money 
market accounts. These are some of the more common limitations 
applicable.

    The credit union reserves the right to require a member intending to 
make a withdrawal from any account (except a share draft account) to 
give written notice of such intent not less than seven days and up to 60 
days before such withdrawal.

    Note: This disclosure is limited to federal credit unions with 
Bylaws containing this limitation. See Standard Federal Credit Union 
Bylaws, Art. III, section 5(a). Similar disclosures are required of any 
state-chartered credit unions having similar limitations in their 
bylaws, or under state law. This limitation does not directly relate to 
the ``number'' or ``amount'' of transactions, and accordingly, may not 
be necessary under Sec. 707.4(b)(5), but would, if applicable, be 
required by Sec. 707.3(b).

    (i) Disclosures Related to Term Share Accounts (Sec. 707.4(b)(6))

    (i) Time requirements
    Your account will mature on (date).

or

    Your account will mature after (time period).
    (ii) Early withdrawal penalties
    We [will/may] impose a penalty if you withdraw [any/all] of the 
[funds/principal] in your account before the maturity date. The penalty 
will equal [________ [days'/weeks'/months'] [dividends/interest] on your 
account.

or
    We [will/may] impose a penalty of $__________ if you withdraw [any/
all] of the [funds/principal] before the maturity date.
    If you withdraw some of your funds before maturity, the [dividend/
interest] rate for the remaining funds in your account will be ______%, 
with an annual percentage yield of ______%.

    Note: In most cases, the dividend rate and annual percentage yield 
on the funds remaining in the account after early withdrawal are the 
same as before the withdrawal. Accordingly, the disclosure of dividend 
rate and annual percentage yield after withdrawal is required only if 
the dividend rate and APY will change.

    (iii) Withdrawal of Dividends/Interest Prior to Maturity
    The annual percentage yield is based on an assumption that 
[dividends/interest] will remain in the account until maturity. A 
withdrawal will reduce earnings.

    Note: This disclosure may be used if the credit union compounds 
dividends/interest and allows withdrawal of accrued dividends/interest 
before maturity. This disclosure alerts members that the annual 
percentage yield is based on an assumption that the dividends/interest 
remain on deposit until maturity.

    (iv) Renewal Policies

             1. Automatically Renewable Term Share Accounts

    Your term share account will automatically renew at maturity. You 
will have a grace period of ________ [calendar/business] days after the 
maturity date to withdraw the funds in the account without being charged 
an early withdrawal penalty.

        or

    Your term share account will automatically renew at maturity. There 
is no grace period following the maturity of this account.

           2. Non-Automatically Renewable Term Share Accounts

    This account will not renew automatically at maturity. If you do not 
renew the account, your account will [continue to earn/no longer earn] 
[dividends/interest] after the maturity date.

    Note: These disclosures should agree with the necessary pre-maturity 
notices for term share accounts in B-3 of this appendix.


[[Page 398]]


    (v) Required dividend distribution.
    This account requires the distribution of dividends and does not 
allow dividends to remain in the account.

                     (j) Bonuses (Sec. 704.4(b)(7))

    You will [be paid/receive] [$__________/(description of item)] as a 
bonus [when you open the account/on (date)].
    You must maintain a minimum [daily balance/average daily balance] of 
$__________ to obtain the bonus.
    To earn the bonus, [$__________/your entire principal] must remain 
on deposit [for (time period)/until (date)].

    Note: These disclosures follow the requirements of Sec. 707.4(b)(7) 
and should be used as applicable. Further information may also be added, 
especially if it clarifies the conditions and timing of receiving the 
bonus, or better informs the member about the bonus.

         B-2  Model Clauses for Changes in Terms (Sec. 707.5(a))

    On (date), the (type of fee) will increase to $__________.
    On (date), the [dividend/interest] rate on your account will 
decrease to ______%, with an annual percentage yield (APY) of ______%.
    On (date), the [minimum daily balance/average daily balance] 
required to avoid imposition of a fee will increase to $__________.

    Note: These examples apply to the more common changes necessitating 
a change in terms notice. However, any change, amendment or modification 
reducing the APY or adversely affecting the members holding such 
accounts must be disclosed. For such changes not contemplated by the 
model clauses, the Board recommends the use of as simple language as 
possible to convey the change, along with cross-referencing to the 
particular sections or paragraph numbers of the account opening 
disclosures, when to do so
will assist members in reviewing and understanding the change.

  B-3  Model Clauses for Pre-Maturity Notices for Term Share Accounts 
                            (Sec. 707.5(b-d))

                            (a) Maturity Date

    Your term share account will mature on __________.

                             (b) Nonrenewal

    Unless your term share account is renewed, it will not accrue 
further [dividends/interest] after the maturity date.

                          (c) Rate Information

    The [dividend/interest] rate and annual percentage yield that will 
apply to your term share account if it is renewed have not yet been 
determined. That information will be available on ________. After that 
date, you may call the credit union during regular business hours at 
(telephone number) to find out the [dividend/interest] rate and annual 
percentage yield (APY) that will apply to your term share account if it 
is renewed.

    Note: Pre-maturity notices should follow the requirements of 
Sec. 707.5(b-d) as closely as possible. Care should be taken to explain 
any grace periods used. See discussion of use of alternative timing in 
supplementary information to Sec. 707.2(o) and Sec. 707.5(b-d).

      B-4  Sample Form (Signature Card/Application for Membership)

            Application for Membership/Account Signature Card

          ACCOUNT NUMBER________________________________________________

__________  __________  __________
  (last name) (first name) (middle name)

_______________________________________________________________________

   (street address)   (apartment number)

__________  ______  ________
  (city) (state) (zip code)

____________  ____________
(home telephone number) (business telephone number)

____-____-________    __________
  (Social Security # or TIN) (date of birth)

______________  ________________
  (mother's maiden name) (employer, occupation)

    I hereby make application for membership in and agree to conform to 
the Bylaws, as amended, of __________ Credit Union (the ``Credit 
Union''). I certify that: I am within the field of membership of this 
Credit Union; the information provided on this application is true and 
correct; and my signature on this card applies to all accounts under my 
name at this Credit Union. I also agree to be bound to the terms and 
conditions of any account that I have in the Credit Union now or in the 
future.

_______________________________________________________________________
    (signature of applicant)

    This application approved________(date) by the (Check one)

(  ) Board    (  ) Exec. Committee
(  ) Membership Officer

Signed:_________________________________________________________________
    (Secretary; Exec. Cmte. Member, or Membership Officer)

    Note: This form is modeled on NCUA Form FCU 150, Application for 
Membership, as discussed in the Accounting Manual for FCUs, 
Secs. 5030.1, 5150.3. It is noted that other information can also be 
requested on the signature card, as long as it is in accordance with

[[Page 399]]

federal and state laws. For example, information identifying the member, 
such as a state driver's license number, could be added. The types of 
accounts that the signature applies to could be specified. Furthermore, 
the Board notes that this card contains much identification information 
that may not be necessary for all credit unions; common sense should 
guide credit union boards of directors in designing their applications 
for membership/signature cards. However, the Board believes that the 
information solicited on this form is reasonable and prudent for many 
credit unions. Payable on death designations, joint account language 
required under state law, life savings beneficiary designations, and 
other like variations and designations may be added to the card if so 
desired. The proposed signature card/ application for membership form 
contained taxpayer certification language. One commenter noted that the 
IRS may always change its requirements in this area, which are beyond 
the authority of the Board. Therefore, the Board has deleted reference 
to the IRS taxpayer certification required by 26 USC 3406, but notes 
that such certification must be made in accordance with applicable law 
and IRS rules. The information may be included on the front and back of 
a standard size signature card, or on the front of a large size 
signature card. However, no account terms may be included on a signature 
card unless a copy of the signature card is provided to the member at 
the time of account opening. The Board recommends that credit unions 
refrain from this practice, and instead use standard account 
disclosures. One reason for this is that if laws, regulations or credit 
union policies change, discrepancies may result between them and the 
earlier signature card terms. Given the longevity of credit union 
membership, signature cards may well be in use for up to or over a 
century. In addition, as signature cards are relatively small, they 
probably will not contain enough space to make all desired and required 
disclosures. Fragmentation of terms, some on signature cards, some on 
separate disclosures, could easily lead to member confusion. As terms 
are usually construed against the drafter, credit unions should be very 
careful in their use of account terms and conditions varying from those 
provided as model clauses and sample forms in this appendix.

           B-5  Sample Form (Term Share (Certificate) Account)

                         Term Share Certificate

_______________________________________________________________________
Date Issued

_______________________________________________________________________
Account Number

_______________________________________________________________________
Certificate Number

_______________________________________________________________________
Social Security Number

    This is to certify that (name(s)) __________________ [is/ are] the 
owner(s) of a term share certificate account in the __________ Credit 
Union (the ``Credit Union'') in the amount of __________ Dollars 
($__________). This term share certificate account may be redeemed on 
(maturity date) __________ only upon presentation of the certificate to 
the Credit Union. The dividend rate of this certificate account is ____% 
with an annual percentage yield of ____%. The annual percentage yield 
and dividend rate assume that dividends are to be [check one] (  ) added 
to principal/(  ) paid to regular share account number __________/ (  ) 
mailed to owner(s). This account is subject to all terms and conditions 
stated in the Term Share Certificate Account Disclosures, as they may be 
amended from time to time, and incorporates the same by reference into 
this agreement.

_______________________________________________________________________
Authorized signature

_______________________________________________________________________
Authorized signature

    Note: This form is modeled on NCUA Form FCU 107SCP, Credit Union 
Share Certificate, as discussed in the Accounting Manual for FCUs, 
Secs. 5030.1, 5150.6. It is simplified to reflect the term share 
(certificate) account agreement, the parties involved, the maturity term 
and the annual percentage yield and dividend rate. All other terms are 
incorporated by reference. This should allow the credit union maximum 
flexibility in fashioning certificate, and other term share account, 
products. If a credit union so desired, other terms and conditions could 
be incorporated into the term share certificate itself, as long as a 
copy is presented to the member at the account opening. Care should also 
be taken to ensure that the term share certificate format addresses any 
necessary state law concerns. As the FRB's Regulation D on reserve 
requirements permits all term share accounts to be represented by a 
transferable or nontransferable, or a negotiable or nonnegotiable, 
certificate, instrument, passbook, statement or otherwise, and still be 
considered a ``time deposit'', the Board has made no entry on this 
sample form regarding such terms, leaving the decision instead to each 
credit union's board of directors. 12 CFR 202.4(c)(2).

[[Page 400]]

          B-6  Sample Form (Regular Share Account Disclosures)

                    Regular Share Account Disclosures

    1. Rate information. As of April 1, 1995, the dividend rate was 
5.00% and the annual percentage yield (APY) was 5.13% on your regular 
share account. In addition, the credit union estimates a prospective 
dividend rate of 5.25% and a prospective APY of 5.39% on your share 
account for this dividend period. The dividend rate and annual 
percentage yield may change every quarter as determined by the credit 
union board of directors.
    2. Compounding and crediting. Dividends will be compounded daily and 
will be credited quarterly. For this account type, the dividend period 
is quarterly, for example, the beginning date of the first dividend 
period of the calendar year is January 1 and the ending date of such 
dividend period is March 31. All other dividend periods follow this same 
pattern of dates. The dividend declaration date follows the ending date 
of a dividend period, and for the example is April 1. If you close your 
regular share account before dividends are credited, you will not 
receive accrued dividends.
    3. Minimum balance requirements. The minimum balance to open this 
account is the purchase of a $5 share in the Credit Union. You must 
maintain a minimum daily balance of $500 in your account to avoid a 
service fee. If, during any day during a quarter, your account balance 
falls below the required minimum daily balance, your account will be 
subject to a service fee of $5 for that quarter.
    4. Balance computation method. Dividends are calculated by the daily 
balance method which applies a daily periodic rate to the principal in 
your account each day.
    5. Accrual of dividends. Dividends will begin to accrue on the 
business day you deposit noncash items (e.g., checks) to your account.
    6. Fees and charges. The following fees and charges may be assessed 
against your account.
    a. Statement copies--$5.00 per statement.
    b. Account inquiries--$3.00 per inquiry.
    c. Dormant account fee--$10.00 per month.
    d. Wire transfers--$8.00 per transfer.
    e. Minimum balance service fee--$5.00 per quarter.
    f. Share transfer--$1.00 per transfer.
    g. Excessive share withdrawals $1.00 per item.
    7. Transaction limitations. During any statement period, you may not 
make more than six withdrawals or transfers to another credit union 
account of yours or to a third party by means of a preauthorized or 
automatic transfer or telephonic order or instruction. No more than 
three of the six transfers may be made by check, draft, debit card, if 
applicable, or similar order to a third party. If you exceed the 
transfer limitations set forth above in any statement period, your 
account will be subject to closure by the credit union or to a fee of 
$1.00 per item.
    8. Nature of dividends. Dividends are paid from current income and 
available earnings, after required transfers to reserves at the end of a 
dividend period.
    9. Bylaw Requirements. A member who fails to complete payment of one 
share within __________ of his admission to membership, or within 
__________ from the increase in the par value in shares, or a member who 
reduces his share balance below the par value of one share and does not 
increase the balance to at least the par value of one share within 
__________ of the reduction may be terminated from membership at the end 
of a dividend period. [All blanks should be filled with time chosen by 
credit union board of directors, but must be at least 6 months.] Shares 
may be transferred only from one member to another, by written 
instrument in such form as the Credit Union may prescribe. The Credit 
Union reserves the right, at any time, to require members to give, in 
writing, not more than 60 days notice of intention to withdraw the whole 
or any part of the amounts so paid in by them. No member may withdraw 
shareholdings that are pledged as required on security on loans without 
the written approval of the credit committee or a loan officer, except 
to the extent that such shares exceed the member's total primary and 
contingent liability to the Credit Union. No member may withdraw any 
shareholdings below the amount of his/her primary or contingent 
liability to the Credit Union if he/she is delinquent as a borrower, or 
if borrowers for whom he/she is comaker, endorser, or guarantor are 
delinquent, without the written approval of the credit committee or loan 
officer.
    10. Par value of shares; Dividend period. The par value of a regular 
share in this Credit Union is $5. The dividend period of the Credit 
Union is quarterly.
    11. National Credit Union Share Insurance Fund. Member accounts in 
this Credit Union are federally insured by the National Credit Union 
Share Insurance Fund.
    12. Other Terms and Conditions. [In this item, which may be titled 
or subdivided in any manner by each credit union, NCUA suggests that the 
following issues be covered or handled: Statutory lien or setoff; 
expenses (garnishments and bankruptcy orders and holds on account); 
joint ownership accounts; trust accounts; payable-on-death accounts; 
retirement accounts; Uniform Transfer to Minor Act accounts; sole 
proprietorship accounts; escrow and custodial accounts; corporation 
accounts; not-for-profit corporation accounts; voluntary association 
accounts; partnership accounts; public unit accounts; powers of attorney 
(guardianship orders); tax

[[Page 401]]

disclosures and certifications; Uniform Commercial Code variances; 
amendments; reliance on signature card; change of address; 
incorporations of other documents by reference, such as expedited funds 
availability policies, service charges schedules or electronic banking 
disclosures; ability to suspend services; and operational matters (stop 
payment orders--verbal and written, satisfactory identification, refusal 
of deposits not in proper form, wire transfers, stale check deposits, 
availability of periodic statements or passbook feature.)]

    Note: This form is modeled on the share account disclosures in the 
Accounting Manual for FCUs, Sec. 5150.7. The disclosures are for a 
variable-rate, daily balance method dividend calculation regular share 
account in an FCU with a $500 minimum balance to avoid service fees. For 
the example, the account was opened on May 1, 1995. Other terms are 
self-explanatory. The dividend rate paid and annual percentage yield 
disclosures will reflect the prospective dividend rate for a given 
dividend period. Item nos. 1-8 reflect standard TISA and part 707 
disclosures discussed in sections B-1 through B-3 of this appendix. Note 
that if the credit union limits the maximum amount of shares which may 
be held by one member under NCUA Standard FCU Bylaws, Art. III, section 
2, that this should be stated in item no. 7, transaction limitations. 
Item no. 9 reflects various terms provided in Art. III, sections 3-6 of 
the NCUA Standard FCU Bylaws. If this were a passbook account, then the 
requirements of Art. IV, Receipting for Money--Passbooks, in the NCUA 
Standard FCU Bylaws would also be included in item no. 9. Item no. 10 
reflects the par value amount of regular shares in a federal credit 
union, pursuant to section 117 of the FCU Act, 12 U.S.C. 117, and Art. 
XIV, section 3 of the NCUA Standard FCU Bylaws. It also states the 
dividend period of the credit union, which is set by the board of 
directors. Item no. 11 addresses the requirements of 12 CFR part 740. 
Nonfederally insured credit unions (NICUs) would be expected to disclose 
information required by section 151 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991. 12 USC 1831t. By December 19, 1992, 
all NICUs were required to include conspicuously on all periodic 
statements of account, signature cards, passbooks, share certificates 
and other similar instruments of deposit and in all advertising a notice 
that the credit union is not federally insured. Additional disclosures 
will be required of NICUs by June 19, 1994. Item no. 12 is inserted to 
ensure that credit unions add other account terms and conditions not 
covered by the proposed regulation. These sorts of terms are 
contemplated by proposed Sec. 707.3(b), requiring that the disclosures 
reflect the terms of the legal obligation between the member and the 
credit union. This list is not meant to be exhaustive, but to give a 
general idea of other topics often covered in share account contracts. 
Item no. 12 is not expressly required by either TISA or part 707, but 
any of these terms that are disclosed must be accurate and not 
misleading. Also the Board strongly recommends that such terms are 
included in account opening disclosures to inform the membership and to 
clearly set forth the legal relationship between the members and their 
credit union.

           B-7  Sample Form (Share Draft Account Disclosures)

                     Share Draft Account Disclosures

    1. Rate information. As of January 1, 1995, the dividend rate was 
3.00% and the annual percentage yield (APY) was 3.04% on your share 
account. In addition, the prospective dividend rate on your account is 
3.15% with a prospective annual percentage yield (APY) of 3.20% for the 
current dividend period. The dividend rate and APY may change every 
dividend period as determined by the credit union board of directors.
    2. Compounding and crediting. Dividends will be compounded monthly 
and will be credited monthly. For this account type, the dividend period 
is monthly, for example, the beginning date of the first dividend period 
of the calendar year is January 1 and the ending date of such dividend 
period is January 31. All other dividend periods follow this same 
pattern of dates. The dividend declaration date follows the ending date 
of a dividend period, and for the example above is February 1. If you 
close your share draft account before dividends are credited, you will 
not receive accrued dividends.
    3. No Minimum balance requirements apply to this account.
    4. Balance computation method. Dividends are calculated by the 
average daily balance method which applies a periodic rate to the 
average daily balance in the account for the period. The average daily 
balance is calculated by adding the balance in the account for each day 
of the period and dividing that figure by the number of days in the 
period.
    5. Accrual of dividends. Dividends will begin to accrue no later 
than the business day we receive provisional credit for the placement of 
noncash items (e.g. checks) to your account.
    6. Fees and charges. The following fees and charges may be assessed 
against your account.
    a. Statement copies--$5.00 per statement.
    b. Account inquiries--$3.00 per inquiry.
    c. Dormant account fee--$10.00 per month.
    d. Wire transfers--$8.00 per transfer.
    e. Overdrafts/Returned Items--$5.00 per draft.
    f. Share transfer--$1.00 per transfer.
    g. Excessive share withdrawals--$1.00 per item.

[[Page 402]]

    h. Certified checks--$5.00 per check.
    i. Stop Payment Order--$5.00 per order.
    j. Check Printing Fee--$12.00 per 200 checks (varies depending on 
style of check ordered).
    7. No transaction limitations apply to this account.
    8. Nature of dividends. Dividends are paid from current income and 
available earnings, after required transfers to reserves at the end of a 
dividend period.
    9. Bylaw Requirements. A member who fails to complete payment of one 
share within __________ of his admission to membership, or within 
__________ from the increase in the par value in shares, or a member who 
reduces his share balance below the par value of one share and does not 
increase the balance to at least the par value of one share within 
__________ of the reduction may be terminated from membership at the end 
of a dividend period. [All blanks should be filled with time chosen by 
credit union board of directors, but must be at least 6 months.] Shares 
may be transferred only from one member to another, by written 
instrument in such form as the Credit Union may prescribe. The Credit 
Union reserves the right, at any time, to require members to give, in 
writing, not more than 60 days notice of intention to withdraw the whole 
or any part of the amounts so paid in by them. Shares paid in under an 
accumulated payroll deduction plan may not be withdrawn until credited 
to a member's account. No member may withdraw shareholdings that are 
pledged as required on security on loans without the written approval of 
the credit committee or a loan officer, except to the extent that such 
shares exceed the member's total primary and contingent liability to the 
Credit Union. No member may withdraw any shareholdings below the amount 
of his/her primary or contingent liability to the Credit Union if he/she 
is delinquent as a borrower, or if borrowers for whom he/she is comaker, 
endorser, or guarantor are delinquent, without the written approval of 
the credit committee or loan officer.
    10. Par value of shares; Dividend period. The par value of a regular 
share in this Credit Union is $5. The dividend period of the Credit 
Union is monthly, beginning on the first of a month and ending on the 
last day of the month.
    11. National Credit Union Share Insurance Fund. Member accounts in 
this Credit Union are federally insured by the National Credit Union 
Share Insurance Fund.
    12. Other Terms and Conditions. [See section B-6, item 12, of this 
appendix].

    Note: This form is modeled on the share account disclosures in the 
Accounting Manual for FCUs, Sec. 5150.7. The disclosures are for a 
variable-rate, average daily balance method dividend calculation share 
draft account in an FCU with no minimum balance requirement. For 
purposes of this example, the account was opened on January 15, 1995. 
The Credit Union has monthly dividend periods. Other terms are self-
explanatory. The dividend rate paid and annual percentage yield 
disclosures will reflect the prospective dividend rate for a given 
dividend period. The disclosures are very similar to the ones in section 
B-6 of appendix B, except for the rollback and par value disclosures, 
which have been removed from the final rule and appendices.

        B-8  Sample Form (Money Market Share Account Disclosures)

                 Money Market Share Account Disclosures

    1. Rate information. As of January 1, 1995, if your average daily 
balance was $500 or more, the dividend rate paid on the entire balance 
in your account was 4.75%, with an annual percentage yield (APY) of 
4.85%. If your average daily balance is $500 or more, a prospective 
dividend rate of 4.95% will be paid on the entire balance in your 
account with a prospective APY of 5.00% for this dividend period on your 
account. The dividend rate and APY may change every dividend period as 
determined by the credit union board of directors.
    2. Compounding and crediting. Dividends will be compounded monthly 
and will be credited quarterly. If you close your share money market 
account before dividends are credited, you will not receive accrued 
dividends.
    3. Minimum balance requirements. The minimum balance required to 
open this account is $500. You must maintain a minimum daily balance of 
$500 in your account to avoid a service fee. If, during any (time 
period), your account falls below the required minimum daily balance, 
your account will be subject to a service fee of $5 for that (time 
period).
    4. Balance computation method. Dividends are calculated by the 
average daily balance method which applies a periodic rate to the 
average daily balance in your account for the period. The average daily 
balance is calculated by adding the principal in the account for each 
day of the period and dividing that figure by the number of days in the 
period.
    5. Accrual of dividends. Dividends will begin to accrue on the 
business day you deposit noncash items (e.g., checks) to your account.
    6. Fees and charges. The following fees and charges may be assessed 
against your account.
    a. Statement copies--$5.00 per statement.
    b. Account inquiries--$3.00 per inquiry.
    c. Dormant account fee--$10.00 per month.
    d. Wire transfers--$8.00 per transfer.
    e. Minimum balance service fee--$5.00 per (time period).
    f. Share transfer--$1.00 per transfer.

[[Page 403]]

    g. Excessive share withdrawals--$1.00 per item.
    h. Certified checks--$5.00 per check.
    i. Stop Payment Order--$5.00 per order.
    j. Check Printing Fee--$12.00 per 200 checks (varies depending on 
style of check ordered).
    7. Transaction limitations. During any statement period, you may not 
make more than six withdrawals or transfers to another credit union 
account of yours or to a third party by means of a preauthorized or 
automatic transfer or telephonic order or instruction. No more than 
three of the six transfers may be made by check, draft, debit card, if 
applicable, or similar order to a third party. If you exceed the 
transfer limitations set forth above in any statement period, your 
account will be subject to closure by the credit union or to a fee of 
$1.00 per item.
    8. Nature of dividends. Dividends are paid from current income and 
available earnings, after required transfers to reserves at the end of a 
dividend period.
    9. Bylaw Requirements. [This section should reflect any requirements 
concerning share accounts in the FISCU's bylaws or charter.]
    10. Par value of shares; Dividend period. The par value of a regular 
share in this Credit Union is $50. The dividend period of the Credit 
Union is monthly, beginning on the first of a month and ending on the 
last day of the month.
    11. National Credit Union Share Insurance Fund. Member accounts in 
this Credit Union are federally insured by the National Credit Union 
Share Insurance Fund.
    12. Other Terms and Conditions. [See section B-6, item 12, of this 
appendix.]

    Note: This form is modeled on the share account disclosures in the 
Accounting Manual for FCUs, Sec. 5150.7 and on the share draft account 
disclosures in section B-7 of this appendix. The disclosures are for a 
variable-rate, tiered-rate (method A, option 1), average daily balance 
method dividend calculation, money market share account in a FISCU with 
a $500 minimum balance to open the account and to avoid service fees. 
For purposes of this example, the account was opened on January 29, 
1995. Other terms are self-explanatory. The dividend rate paid and 
annual percentage yield disclosures will reflect the prospective 
dividend rate for a given dividend period. Note that the contents of 
Item 9, Bylaw requirements, must be tailored to the specific bylaws of a 
FISCU or NICU. Also note the high par value amount in Item 10.

     B-9  Sample Form (Term Share (Certificate) Account Disclosures)

              Term Share (Certificate) Account Disclosures

    1. Rate information. [Repeat rates disclosed on face of term share 
certificate, see Sec. B-5, Sample Form (Term Share (Certificate) 
Account)].
    2. Compounding and crediting. Dividends will be compounded monthly 
and will be credited annually. If you close your certificate account 
before dividends are credited, you will not receive accrued dividends.
    3. Minimum balance requirements. The minium balance required to open 
this account is $500.
    4. Balance computation method. Dividends are calculated by the daily 
balance method, which applies a daily periodic rate to the principal in 
your account each day.
    5. Accrual of dividends. Dividends will begin to accrue on the 
business day you deposit noncash items (e.g., checks) to your account.
    6. Fees and charges. The following fees and charges may be assessed 
against your account.
    a. Statement copies--$5.00 per statement.
    b. Account inquiries--$3.00 per inquiry.
    c. Share transfer-- $1.00 per transfer.
    7. Transaction limitations. After the account is opened, you may not 
make deposits into the account until the maturity date stated on the 
certificate.
    8. Maturity date. Your account will mature on January 1, 1996.
    9. Early withdrawal penalties. We may impose a penalty if you 
withdraw any of the funds before the maturity date. The penalty will 
equal three months' dividends on your deposit.
    10. Renewal policies. Your certificate account will automatically 
renew at maturity. You will have a grace period of 10 business days 
after the maturity date to withdraw the funds in the account without 
being charged an early withdrawal penalty.
    11. Bonus. You will receive a new (insert brand name) toaster-oven 
as a bonus when you open the account after December 31, 1994, and before 
June 30, 1995. You must maintain your entire principal on deposit until 
the maturity date of your certificate account to obtain the bonus.
    12. [Reserved]
    13. Bylaw Requirements. [This section should reflect any 
requirements concerning share accounts in the FISCU's bylaws or 
charter.]
    14. Par value of shares; Dividend period. The par value of a regular 
share in this Credit Union is $25. The dividend period of the Credit 
Union on this type of account is annual, beginning on the date the 
account is opened, and ending on the stated maturity date, unless 
renewed.
    15. National Credit Union Share Insurance Fund. Member accounts in 
this Credit Union are federally insured by the National Credit Union 
Share Insurance Fund.
    16. Other Terms and Conditions. [See section B-6, item 12, of this 
appendix.]


[[Page 404]]


    Note: Even though this disclosure if for an account at a FISCU, this 
form is modeled on the share account disclosures in the Accounting 
Manual for FCUs, Sec. 5150.7 and upon the regular share account 
disclosures in section B-6 of this appendix. The disclosures are for a 
fixed-rate, daily balance method dividend calculation, automatically 
renewing term share certificate account in a FISCU with a $500 minimum 
balance to open the account and a ten day grace period. For the example, 
the account is opened on January 1, 1995 and matures on January 1, 1996. 
Other terms are self-explanatory. The dividend rate paid and annual 
percentage yield disclosures reflect the contracted, prospective 
dividend rate for a given dividend period. Note the special disclosures 
for term share certificate accounts, items nos. 8-10. Note also the 
bonus disclosure, item no. 11.

                 B-10  Sample Form (Periodic Statement)

                           Periodic Statement

_______________________________________________________________________
Member Name

_______________________________________________________________________
Account Number

[Transaction account activity by date.]
[Average daily balance of $1,500 for the month, daily compounding.]
    Your account earned $6.72, with an annual percentage yield earned of 
5.40%, for the statement period from May 1 through and including May 31. 
In addition, your account earned $15 in extraordinary dividends for this 
period. Any fees assessed against your account are shown in the body of 
the periodic statement and are identified by the code at the bottom 
margin of this statement.

                          Service Charge Codes

SC-1  Stop Payment Order Fee
SC-2  Statement Copy Fee
SC-3  Draft Return Fee
SC-4  Transfer from Shares
SC-5  Microfilm Copy
SC-6  Share Draft Printing Fee
SC-7  Dormant Account Fee
SC-8  Wire Transfer Fee
SC-9  Excessive Share Withdrawal Fee
SC-10  ______________________

                           Other Transactions

D  Dividends
EC  Error Correction
OR  Overdraft Returned
OL  Overdraft Loan
OS  Overdraft Share Transfer

    Note: This form is modeled on the share draft statement of account, 
Form FCU 107G-SD, in the Accounting Manual for FCUs, Sec. 5150.4. All 
information is self-explanatory. Codes of transactions are not required, 
but are a common credit union practice. The information regarding fees 
could also be included on the line of the periodic statement showing 
when the fees were debited from the account. Alternatively, a credit 
union could show all fees debited against the account for the statement 
period in a special area of the periodic statement. Clarity to the 
member of the required information--annual percentage yield earned; 
amount of dividends; fees imposed and length of period--is the important 
goal. An additional disclosure regarding the dollar value of any 
extraordinary dividends earned must be added to those statements showing 
the payment of such extraordinary dividends to the member.

                B-11  Sample Form (Rate and Fee Schedule)

                          Rate and Fee Schedule

    This Rate and Fee Schedule for all Accounts sets forth certain 
conditions, rates, fees and charges applicable to your regular share, 
share draft, and money market accounts at the __________ Federal Credit 
Union as of __________ [insert date of delivery to member]. This 
schedule is incorporated as part of your account agreement with the 
__________ Federal Credit Union.

                              Regular Share

    Dividend Rate as of Last Dividend Declaration Date ______%.
    Annual Percentage Yield as of Last Dividend Declaration Date 
______%.
    Prospective Dividend Rate ______%.
    Prospective Annual Percentage Yield ______%.
    Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, 
Weekly, Daily].
    Dividends Credited--At close of a dividend period.
    Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, 
Daily].
    Minimum Opening Deposit $5.00 par value share.
    Minimum Monthly Balance [None, $ amount].

                               Share Draft

    Dividend Rate as of Last Dividend Declaration Date ______%.
    Annual Percentage Yield as of Last Dividend Declaration Date 
______%.
    Prospective Dividend Rate ______%.
    Prospective Annual Percentage Yield ______%.
    Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, 
Weekly, Daily].
    Dividends Credited--At close of a dividend period.
    Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, 
Daily].

[[Page 405]]

    Minimum Opening Deposit [None, $ amount].
    Minimum Monthly Balance [None, $ amount].

                              Money Market

    Dividend Rate as of Last Dividend Declaration Date ______%.
    Annual Percentage Yield as of Last Dividend Declaration Date 
______%.
    Prospective Dividend Rate ______%.
    Prospective Annual Percentage Yield ______%.
    Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, 
Weekly, Daily].
    Dividends Credited--At close of a dividend period.
    Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, 
Daily].
    Minimum Opening Deposit [None, $ amount].
    Minimum Monthly Balance [None, $ amount].
    The following fees may be assessed in connection with your accounts:

                     Fees Applicable to All Accounts

    Returned item fee--$____.00 per item.
    Account reconciliation fee--$____.00 per hour.
    Statement copies fee--$____.00 per statement.
    Certified draft fee--$____.00 per draft.
    Wire transfer fee--$____.00 per transfer.
    Account inquiry fee--$____.00 per inquiry.
    Dormant account fee--$____.00 per month.
    Minimum balance service fee--$____.00 per day.
    Share transfer fee--$____.00 per transfer.
    Excessive share withdrawals fee--$____.00 per item.

                        Share Draft Account Fees

    Monthly service fee--$____.00 per month.
    Overdraft transfers fee--$____.00 per overdraft.
    Drafts returned insufficient funds fee--$____.00 per draft.
    Stop payment order fee--$____.00 per order.
    Draft copy fee--$____.00 per copy.
    Check printing fee--$____.00 per 200 drafts.

                     Money Market Share Account Fees

    Monthly service fee--$____.00 per month.
    Check printing fee--$____.00 per 200 drafts.

    Note: This illustration is for use of an FCU. The information 
provided on a Rate and Fee Schedule can be presented in any format. To 
ensure that it is a part of the account agreement, if used, it should be 
incorporated by reference into the appropriate share account 
disclosures. The figures used are illustrative only, except for the 
overdraft transfer fee of $1.00 per overdraft and the excessive share 
transfer fee of $1.00 per item, which are set in the NCUA Standard FCU 
Bylaws, Art. III, sections 4 and 5(f), respectively.

[58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, 13437, Mar. 22, 
1994; 63 FR 71575, Dec. 29, 1998]

         Appendix C to Part 707--Official Staff Interpretations

                              Introduction

    1. Official status. This commentary is the means by which the staff 
of the Office of General Counsel of the National Credit Union 
Administration issues official staff interpretations of Part 707 of the 
NCUA Rules and Regulations. Good faith compliance with this commentary 
affords protection from liability under section 271(f) of the Truth in 
Savings Act (TISA), 12 U.S.C. 4311.

  Section 707.1--Authority, Purpose, Coverage, and Effect on State Laws

                              (c) Coverage

    1. Foreign applicability. Part 707 applies to all credit unions that 
offer share and deposit accounts to residents (including resident 
aliens) of any state as defined in Sec. 707.2(v) and that offer accounts 
insurable by the National Credit Union Share Insurance Fund (NCUSIF) 
whether or not such accounts are insured by the NCUSIF. Corporate credit 
unions designated as such by NCUA under 12 CFR 704.2 (definition of 
``corporate credit union'') are exempt from part 707.
    2. Persons who advertise accounts. Persons who advertise accounts 
are subject to the advertising rules. This includes agent and agented 
accounts, such as a member who subdivides interests in a jumbo term 
share certificate account for sale to other parties or among members who 
form a certificate account investment club. For example, if an agent 
places an advertisement that offers members an interest in an account at 
a credit union, the advertising rules apply to the advertisement, 
whether the account is held by the agent or directly by the member.
    3. Nonautomated credit unions. Nonautomated credit unions with an 
asset size of $2 million or less, after subtracting any nonmember 
deposits, are exempt from TISA and part 707. NCUA defines a 
``nonautomated credit union'' as a credit union without sufficient data 
processing capability and capacity to establish, operate and maintain a 
share and loan software system to timely and accurately process all 
account transactions of all members. The nonautomated credit union 
exemption is available to all credit unions meeting the asset size and 
automation standards of this comment, including newly chartered credit 
unions. If any of the credit unions eligible for this exemption

[[Page 406]]

grow to have more than $2 million in assets as of December 31 of any 
year, the NCUA Board will require such credit unions to comply with TISA 
and part 707 on January 1 of one year after such credit union loses its 
exemption eligibility. Similarly, if a credit union becomes sufficiently 
automated to operate a complete share and loan system, such credit union 
will be entitled to the same compliance phase-in period.

                        (d) Effect on State Laws

    1. Preemption of state laws/Inconsistent requirements. State law 
requirements that are inconsistent with the requirements of TISA and 
part 707 are preempted to the extent of the inconsistency. A state law 
is inconsistent if it requires a credit union to make disclosures or 
take actions that contradict the requirements of the federal law. A 
state law is also contradictory if it requires the use of the same term 
to represent a different amount or a different meaning than the federal 
law, requires the use of a term different from that required in the 
federal law to describe the same item, or permits a method of 
calculating dividends or interest on an account different from that 
required in the federal law.
    2. Preemption determinations. A credit union, state, or other 
interested party may request the Board to determine whether a state law 
requirement is inconsistent with the federal requirements. A request for 
a determination should be addressed to NCUA's Office of General Counsel, 
1775 Duke Street, Alexandria, VA 22314. Written preemption requests 
should cite (or include a copy of) the allegedly inconsistent state law, 
demonstrate the inconsistency with TISA and part 707 and the burden on 
credit unions, and formally request a preemption determination. The 
Office of General Counsel may provide other interested parties, 
particularly affected states, an informal opportunity to comment on any 
request for a preemption determination, unless it finds that such notice 
and opportunity for comment would be impracticable, unnecessary, or 
contrary to the public interest. NCUA will publicize any preemption 
determinations using any means readily at its disposal.
    3. Effect of preemption determinations. After the Board, through its 
Office of General Counsel, determines that a state law is inconsistent, 
a credit union may not make disclosures using the inconsistent term or 
take actions relying on the inconsistent law.
    4. Reversal of determination. The Board reserves the right to 
reverse a determination for any reason bearing on the coverage or effect 
of state or federal law.

                       Section 707.2--Definitions

                               (a) Account

    1. Covered accounts. Examples of accounts subject to the regulation 
are:
    i. Dividend-bearing and interest-bearing accounts.
    ii. Non-dividend-bearing and non-interest-bearing accounts.
    iii. Accounts opened as a condition of obtaining a credit card.
    iv. Escrow accounts with a consumer purpose, such as an account 
established by a member to escrow rental payments, pending resolution of 
a dispute with the member's landlord.
    v. Accounts held by a parent or custodian for a minor under a 
state's Uniform Gift to Minors Act (or Uniform Transfers to Minors Act).
    vi. Individual retirement accounts (IRAs) and simplified employee 
pension (SEP) accounts.
    vii. Payable-on-Death (POD) or ``Totten trust'' accounts.
    2. Other accounts. Examples of accounts not subject to the 
regulation are:
    i. Mortgage escrow accounts for collecting taxes and property 
insurance premiums.
    ii. Accounts established to make periodic disbursements on 
construction loans.
    iii. Trust accounts opened by a trustee pursuant to a formal written 
trust agreement (not merely declarations of trust on a signature card 
such as a ``Totten trust,'' or an IRA or SEP account).
    iv. Accounts opened by an executor in the name of decedent's estate.
    v. Accounts of individuals operating businesses as sole proprietors.
    vi. Certificates of indebtedness. Some credit unions borrow funds 
from their members through a certificate of indebtedness that sets forth 
the terms and conditions of the repayment of the borrowing, such as 
federal credit unions do through 12 CFR 701.38. Such an account does not 
represent an account in a credit union and is not covered by part 707.
    vii. Unincorporated nonbusiness association accounts.
    3. Other investments. The term ``account'' does not apply to these 
products. Examples of products not covered are:
    i. Government securities.
    ii. Mutual funds.
    iii. Annuities.
    iv. Securities or obligations of a credit union.
    v. Contractual arrangements such as repurchase agreements, interest 
rate swaps, and bankers acceptances.
    vi. Purchases of U.S. Savings Bonds through a credit union.
    vii. Services offered through a group purchasing plan or a credit 
union service organization (CUSO).

[[Page 407]]

    4. Options. All dividend-bearing and interest-bearing accounts are 
either fixed-rate or variable-rate accounts.
    5. Use of synonyms. Generally, it is not the purpose of part 707 to 
prohibit specific descriptive terms for accounts. For example, credit 
unions can use adjectives and trade names to describe accounts such as 
``Best Share Draft Account,'' or ``Ultra Money Market Share Account.'' 
Synonyms for share, share draft, money market share, and term share 
accounts may be used to describe various types of credit union share and 
deposit accounts as long as the synonym is accurate and not misleading 
and, for account disclosures, is used in conjunction with the correct 
legal term. For example, the following synonyms may be used:
    i. The term ``checking account'' may be used to describe share draft 
accounts.
    ii. The term ``money market account'' may be used to describe money 
market share accounts.
    iii. The term ``savings account'' may be used to describe regular 
share and share accounts.
    iv. The terms ``share certificate,'' ``certificate account,'' or 
``certificate'' may be used to describe share certificates and other 
dividend-bearing term share accounts.
    v. However, under no circumstances may a credit union describe a 
share account as a deposit account, or vice versa. For example, the term 
``certificate of deposit'' or ``CD'' may not be used to describe share 
certificates and other dividend-bearing term share accounts. Similarly, 
the terms ``time account'' (used in Regulation DD, 12 CFR 230.2(u)) and 
``time deposit'' (used in Regulation D, 12 CFR 204.2(c)) may not be used 
to describe term share accounts.

                            (b) Advertisement

    1. Covered messages. Advertisements include commercial messages in 
visual, oral, or print media that invite, offer, or otherwise announce 
generally to members and potential members the availability of member 
accounts such as:
    i. Telephone solicitations.
    ii. Messages on automated teller machine (ATM) screens (including 
any printout).
    iii. Messages on a computer screen in a credit union's lobby 
(including any printout) other than a screen viewed solely by the credit 
union's employee.
    iv. Messages in a newspaper, magazine, or promotional flyer or on 
radio or television.
    v. Messages promoting an account that are provided along with 
information about the member's existing account at a credit union and 
that promote another account at the credit union (such as account 
promotional messages on the periodic statement).
    2. Other messages. Examples of messages that are not advertisements 
are:
    i. Rate sheets published in newspapers, periodicals, or trade 
journals (unless the credit union or share and deposit broker that 
offers accounts at the credit union pays a fee to have the information 
included or otherwise controls publication).
    ii. Telephone conversations initiated by a member or potential 
member about an account.
    iii. An in-person discussion with a member about the terms for a 
specific account.
    iv. Information provided to members about their existing accounts, 
such as on IRA disbursements, notices for automatically renewable term 
share accounts sent before renewal, or current rates recorded on a voice 
response machine.

                      (c) Annual Percentage Yield.

    1. General. The annual percentage yield (APY) is required for 
disclosures for new accounts, oral responses to inquiries about rates; 
disclosures provided upon request; initial disclosures (if the credit 
union chooses to provide full disclosures instead of the abbreviated 
notice); notices prior to the renewal of a term share account, if known 
at the time the notice is sent, and in advertising. The annual 
percentage yield shows the total amount of dividends for a 365 day 
period (or a 366 day period for a leap year) on an assumed principal 
amount based on the dividend rate and frequency of compounding as a 
percentage of the assumed principal (for accounts such as share or share 
draft accounts) or for the total amount of dividends over the term of 
the account for term share accounts. The annual percentage yield assumes 
the principal amount remains in the account for 365 days (366 days for 
leap year) or for the term of the account.
    2. How Annual Percentage Yield Differs from Annual Percentage Yield 
Earned. The annual percentage yield (APY) differs from the annual 
percentage yield earned (APYE). The annual percentage yield earned is 
required for periodic statements only. The annual percentage yield 
earned shows the total amount of dividends earned for the dividend or 
statement period as a percent of the actual average daily balance in the 
member's account. Unlike the annual percentage yield, the annual 
percentage yield earned is affected by additions and withdrawals during 
the period. The annual percentage yield and the annual percentage yield 
earned must be calculated according to the formulas provided in Appendix 
A to this rule.

                    (d) Average Daily Balance Method

    1. General. One of the two required methods (the daily balance is 
the other) of determining the balance upon which dividends must be 
accrued and paid. The average daily balance method requires the 
application of a periodic rate to the average daily balance in

[[Page 408]]

the account for the average daily balance calculation period. The 
average daily balance is determined by adding the full amount of 
principal in the account for each day of the period and dividing that 
figure by the number of days in the period.

                               (e) Board.

    1. General. The NCUA Board.

                                (f) Bonus

    1. General. Bonuses include items of value offered as incentives to 
members, such as an offer to pay the final installment deposit for a 
holiday club account if the final installment is over $10. Bonuses do 
not include the payment of dividends (including extraordinary 
dividends), the waiver or reduction of a fee, the absorption of 
expenses, non-dividend membership benefits, or other consideration 
aggregating $10 or less per year.
    2. Examples. The following are examples of bonuses.
    i. A credit union offers $25 to potential members for becoming a 
member and opening an account. The $25 could be provided by check, cash, 
or direct deposit.
    ii. A credit union offers $25 to a member with only a regular share 
account to open a share draft account. The $25 could be provided by 
check, cash, or direct deposit.
    iii. A credit union offers a portable radio with a value of $20 to 
members and potential members for opening a share draft account.
    iv. A credit union pays the final installment deposit for a holiday 
club account if over $10.
    3. Examples not comprising bonuses. The following are examples of 
items that are not bonuses:
    i. Discount coupons distributed by credit unions for use at 
restaurants or stores.
    ii. A credit union offers $20 to any member if the member is 
responsible for encouraging a potential member to open an account. The 
$20 is not a bonus because the $20 is not paid to the individual opening 
the account. Any item, including cash, given or offered to a third party 
(that is not a joint member or joint owner in an account being opened) 
in exchange for a member or potential member opening (or a member 
renewing or adding to) an account is not a bonus.
    iii. A credit union offers $25 to a member if the member can locate 
his name in the body of a newsletter.
    iv. Life savings benefits. Many credit unions offer life savings 
benefits to beneficiaries of deceased members. Because the benefit 
accrues to a third party, such life savings plans offered are not 
bonuses.
    v. A credit union offers to pay annual membership dues in a 
benevolent organization for a class of members.
    4. De minimis rule. Items with a de minimis value of $10 or less are 
not bonuses. Credit unions may rely on the valuation standard used by 
the Internal Revenue Service (IRS) to determine if the value of the item 
is de minimis. Items required to be reported by the credit union under 
IRS rules are bonuses under this regulation. Examples of items of de 
minimis values are:
    i. Disability insurance premiums on a share account valued at an 
amount of $10 or less per year.
    ii. Coffee mugs, T-shirts or other merchandise with a market value 
of $10 or less per year.
    5. Aggregation. In determining if an item valued at $10 or less is a 
bonus, credit unions must aggregate per account per calendar year items 
that may be given to members. In making this determination, credit 
unions aggregate per account only the market value of items that may be 
given for a specific promotion. To illustrate, assume a credit union 
offers in January to give members an item valued at $7 for each calendar 
quarter during the year that the average account balance in a share 
draft account exceeds $10,000. The bonus rules are triggered, since 
members are eligible under the promotion to receive up to $28 during the 
year. However, the bonus rules are not triggered if an item valued at $7 
is offered to members opening a share draft account during the month of 
January, even though in November the credit union introduces a new 
promotion that includes, for example, an offer to existing share draft 
accountholders for an item valued at $8 for maintaining an average 
balance of $5,000 for the month.
    6. Waiver or reduction of a fee or absorption of expenses. Bonuses 
do not include value received by members through the waiver or reduction 
of fees for credit union-related services (even if the fees waived 
exceed $10), such as the following:
    i. Waiving a safe deposit box rental fee for one year for members 
who open a new account.
    ii. Waiving fees for travelers checks for members, and waiving check 
and share draft printing fees.
    iii. Nondiscriminatorily waiving all fees for a particular class of 
members, such as seniors or minors.
    iv. Discounts on interest rates charged for loans at the credit 
union.
    v. Rebates of loan interest already paid by a member.
    vi. Discounts on application fees charged for loans at the credit 
union.
    vii. Packaged, linked, or tied-account services.
    7. Non-dividend membership benefits. Such benefits are not bonuses 
because they are sporadic in nature, often difficult to value, and 
providing non-dividend membership benefits is a long-standing unique 
credit union practice. (See commentary to Sec. 707.2(r) for examples of 
such benefits.)

[[Page 409]]

                            (g) Credit Union

    1. General. Includes credit unions in the United States, Puerto 
Rico, Guam, U.S. Virgin Islands, and U.S. territories. Applies to credit 
unions whether or not the accounts in the credit union are federally, 
state, privately insured, or uninsured.

                        (h) Daily Balance Method

    1. General. One of the two required methods (the average daily 
balance is the other) of determining the balance upon which dividends 
must be accrued and paid. The daily balance method requires the 
application of a daily periodic rate to the full amount of principal in 
the account each day.

                       (i) Dividend and Dividends

    1. General. Member savings placed in share accounts are equity 
investments, and the returns earned on these accounts are dividends. 
Federal credit unions may only offer dividend-bearing and non-dividend-
bearing share accounts. State-chartered credit unions may offer both 
share and deposit accounts if permitted by state law. State law, 
including without limitation regulations and official interpretations, 
will determine if returns earned in accounts in state-chartered credit 
unions are dividends. Dividends exclude the payment of a bonus or other 
consideration worth $10 or less given during a year, the waiver or 
reduction of a fee, the absorption of expenses, non-dividend membership 
benefits and extraordinary dividends. Dividend-bearing accounts must be 
either fixed-rate or variable-rate accounts.
    2. Procedure. Credit unions must follow appropriate law (state law 
for state-chartered credit unions and federal law for federal credit 
unions) in determining dividend policies and declaring dividends. 
Generally, dividends may be viewed as a portion of the available account 
and undivided earnings of the credit union which is set apart, after 
required transfer to reserves, by valid act of the board of directors, 
for distribution among the members. As a matter of legal procedure, 
members are usually not entitled to dividends until the following steps 
are completed: (1) The board of the credit union develops a 
nondiscriminatory dividend policy, by establishing dividend periods, 
dividend credit determination dates dividend distribution dates, any 
associated penalties (if applicable), and the method of dividend 
computation for each type of share account; (2) the provisions for 
required transfers to reserves are made; (3) sufficient and available 
prior and/or current earnings are available at the end of the dividend 
period; (4) the board formally makes a dividend declaration in 
accordance with the credit union's dividend policy; and (5) dividends 
must be paid to members by a credit to the appropriate share account, 
payment by check or share draft, or by a combination of the two methods.
    3. When available. Credit unions must follow the law of their 
primary chartering authority to determine when dividends are available. 
Generally, it is the declaration of the dividend itself which creates 
the dividend and the member has no right to receive a dividend until it 
is so declared. The decision of when to declare dividends lies within 
the official discretion of each credit union's board of directors and 
cannot be abrogated by contract. An agreement to pay dividends on a 
share account is generally interpreted not as an obligation to pay the 
stipulated dividends absolutely and unconditionally, but as an 
undertaking to pay them out of the earnings when sufficiently 
accumulated from which dividends in general are properly payable. 
Generally, ``prospective rates'' are rates set in good faith in advance 
of the close of a dividend period, that may be altered if sufficient 
funds are not available, or in the event of a superseding event, such as 
a strike, plant closure, significant fluctuation in market rates and/or 
a significant change in financial structure, natural disaster or 
emergency that alters the assumptions under which the ``prospective 
rates'' were made. It is the intent of TISA that all disclosure be 
accurate when made, and credit unions are urged to make every effort to 
ratify disclosed ``prospective rates.'' ``Prospective rates'' may also 
be referred to as ``projected rates'' or similar wording, but not as 
``estimated rates.'' (See comment 3(b)-2, prohibiting use of estimates).
    4. Sample dividend resolutions. (i) The following resolution may be 
used where the dividend rates are set after the close of a dividend 
period.

    Resolution of Board of Directors for the Declaration of Dividends

    A. I, ________________, certify that I am Secretary of 
________________ Credit Union Board of Directors, and that the following 
is a correct copy of the resolution for declaring dividend adopted by 
the ________________ Credit Union at a meeting of the Board of Directors 
duly and properly held on ____________, 19______. This resolution 
appears in the minutes of this meeting and has not been rescinded or 
modified.
    B. Resolved, that
    (1) The Board of Directors has developed a nondiscriminatory 
dividend policy, by establishing dividend periods, dividend credit 
determination dates, dividend distribution dates, any associated 
penalties (if applicable), and the method of dividend computation for 
each type of share account;
    (2) The required transfers to reserves have been made; and
    (3) Sufficient and available prior and/or current earnings are 
available at the end of this dividend period.

[[Page 410]]

    C. Resolved, further, that the Board of Directors now formally makes 
a dividend declaration in accordance with the Credit Union's dividend 
policy and authorizes that on ____________, 19______, dividends must be 
paid to members by a credit to the appropriate share account, payment by 
share draft or by a combination of the two methods.
    D. I further certify that the Board of Directors of this Credit 
Union has, and the time of adoption of this resolution had, full power 
and lawful authority to adopt the foregoing resolutions and that this 
resolution revokes any prior resolution.
    In witness whereof, this is my signature and the date on which I 
signed this Resolution.

_______________________________________________________________________
Signature

_______________________________________________________________________
Date

[Attach list of accounts with dividend rates for each type of account.]

    (ii) The following resolution may be used where the dividend rates 
are set before the close of a dividend period.

    Resolution of Board of Directors for the Declaration of Dividends

    A. I, ________________, certify that I am the Secretary of 
________________ Credit Union, and that the following is a correct copy 
of the resolution for declaring dividends adopted by the 
________________ Credit Union at a meeting of the Board of Directors 
duly and properly held on ________________, 19________________. This 
resolution appears in the minutes of that meeting and has not been 
rescinded or modified.
    B. Resolved, that the Board of Directors has adopted a 
nondiscriminatory dividend policy, by establishing dividend periods, 
dividend credit determination dates, dividend distribution dates, any 
associated penalties (if applicable) and the method of dividend 
computation for each type of share account.
    C. Resolved, that it is the policy and practice of the Board of 
Directors to meet periodically to establish prospective dividend rates 
for each type of dividend-bearing share account.
    D. Resolved, that if the required transfers to reserves have been 
made and there are sufficient and available prior and/or current 
earnings available at the end of a dividend period, the officers of the 
Credit Union are authorized to pay dividends at the rate prospectively 
established by the Board of Directors for each account for the dividend 
period. The officers may pay the dividends without any further action of 
the Board of Directors. The act of paying the dividends shall constitute 
the declaration of the dividends and shall be a ratification of the 
prospective dividend rate.
    In witness whereof, this is my signature and the date on which I 
signed this Resolution.

_______________________________________________________________________
Signature

_______________________________________________________________________
Date

[Attach list of accounts with prospective dividend rates for each type 
of account.]

    5. Referencing. Except where specifically stated otherwise, use of 
the term ``share'' in part 707, as in ``share account,'' also refers to 
``deposit,'' as in ``deposit account,'' where appropriate (for interest-
bearing or non-interest-bearing deposit accounts at some state-chartered 
credit unions).

                      (j) Dividend Declaration Date

    1. General. The importance of the dividend declaration date is to 
tie the last paid dividend to a certain period of time to place members 
and potential members on notice that the last paid dividend is different 
from the next dividend to be paid. In order to achieve this purpose, a 
credit union may use any of the following methods:
    i. ``As of 3/15/95'' (the date the board of directors last met and 
declared the last paid dividend).
    ii. ``As of 3/31/95'' (the last day of the last dividend period upon 
which a dividend has been paid).
    iii. ``For the period 1/1/95 to 3/31/95'' (the last dividend period 
upon which a dividend has been paid).
    iv. ``For the first quarter of 1995'' (the last dividend period upon 
which a dividend has been paid).
    v. ``For April 1995'' (the last dividend period upon which a 
dividend has been paid).
    vi. ``As of the last dividend declaration date'' (the last dividend 
period upon which a dividend has been paid).

                           (k) Dividend Period

    1. General. The dividend period is to be set by a credit union's 
board of directors for each account type, e.g., regular share, share 
draft, money market share, and term share. The most common dividend 
periods are weekly, monthly, quarterly, semi-annually, and annually. 
Dividend periods need not agree with calendar months, e.g., a monthly 
dividend period could begin March 15 and end April 14.

                            (l) Dividend Rate

    1. General. The dividend rate does not reflect compounding. 
Compounding is reflected in the ``annual percentage yield'' definition.
    2. Referencing. Except where specifically stated otherwise, use of 
the term ``dividend rate'' in part 707 also refers to ``interest

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rate,'' where appropriate (for interest-bearing and non-interest-bearing 
deposit accounts at some state-chartered credit unions).

                       (m) Extraordinary Dividends

    1. General. The definition encompasses all irregularly scheduled and 
declared dividends, and as dividends, extraordinary dividends are exempt 
from the ``bonus'' disclosure requirements. Extraordinary dividends do 
not have to be disclosed on account disclosures, but the dollar amount 
of an extraordinary dividend credited to the account during the 
statement period does have to be separately disclosed on the periodic 
statement for the dividend period during which the extraordinary 
dividends are earned. Extraordinary dividends, like ordinary dividends, 
do not include the payment of a bonus or other consideration worth $10 
or less given during a year, the waiver or reduction of a fee, the 
absorption of expenses or non-dividend membership benefits. See comments 
2(f) 1 through 7 and 2(i) 1 through 4. Extraordinary dividends may be 
calculated by any means determined by the board of directors of a credit 
union and may not be used in the annual percentage yield earned 
calculation.
    2. Use of synonym. Extraordinary dividends may be described as 
``bonus dividends.''

                         (n) Fixed-Rate Account

    1. General. Includes all accounts in which the credit union, by 
contract, agrees to give at least 30 days advance written notice of 
decreases in the dividend rate. Thus, credit unions can decrease rates 
only after providing advance written notice of rate decreases, e.g., a 
``change-in-terms notice.''

                            (o) Grace Period

    1. General. A period after maturity of an automatically renewing 
term share account during which the member may withdraw funds without 
being assessed a penalty. Use of a ``grace period'' is discretionary, 
not mandatory. This definition does not refer to the ``grace period'' 
account, which is a synonym for ``federal rollback method'' or ``in by 
the 10th'' accounts, which are prohibited by TISA and part 707.

                              (p) Interest

    1. General. Member savings placed in deposit accounts are debt 
investments, and the return earned on these accounts is interest. 
Federal credit unions are not authorized to offer any interest-bearing 
deposit accounts. State-chartered credit unions may offer both share and 
deposit accounts if permitted by state law. State law, including without 
limitation regulations and official interpretations, will determine if 
returns earned in accounts in state-chartered credit unions are 
interest. Interest excludes the payment of a bonus or other 
consideration worth $10 or less given during a year, the waiver of 
reduction of a fee, the absorption of expenses, non-dividend membership 
benefits, and extraordinary dividends.
    2. Differences between dividends and interest. Generally, dividends 
are returns on an equity investment (shares); interest is return on a 
debt investment (deposits). Dividends, in general, are not properly 
payable until declared at the close of a dividend period; interest, in 
general, is properly payable daily according to the deposit contract. 
Dividend rates are prospective until actually declared; interest rates 
are set according to contract in advance and are earned on that basis. 
Share accounts establish a member (owner)/credit union (cooperative) 
relationship; deposit accounts establish a depositor (creditor)/
depository (debtor) relationship.
    3. Referencing. Except where specifically stated otherwise, use of 
the terms ``dividend'' or ``dividends'' in part 707 also refers to 
``interest'' where appropriate (for interest-bearing and non-interest-
bearing deposit accounts at some state-chartered credit unions).

                               (q) Member

    1. Professional capacity. Examples of accounts held by a natural 
person in a professional capacity for another are:
    i. Attorney-client trust accounts.
    ii. Trust, estate and court-ordered accounts.
    iii. Landlord-tenant security accounts.
    2. Other accounts. Examples of accounts not held in a professional 
capacity include accounts held by parents for a child under the Uniform 
Gifts to Minors Act (or Uniform Transfers to Minors Act.
    3. Retirement plans. IRAs and SEP accounts are member accounts to 
the extent that funds are invested in accounts subject to the 
regulation. Keogh accounts, like sole proprietor accounts, are not 
subject to the regulation.

                  (r) Non-Dividend Membership Benefits

    1. General. Term reflects unique credit union practices that are 
difficult to value, encourage community spirit, and are not granted in 
such quantity as to be includable as calculable dividends.
    2. Examples. Examples include:
    i Food, refreshments, and drawings and raffles at annual meetings, 
member functions, and branch openings.
    ii. Travel club benefits.
    iii. Prizes offered at annual meetings, such as U.S. Savings Bonds, 
a deposit of funds into the winner's account, trips, and other gifts. 
Such prizes are not bonuses because they are offered as an incentive to 
increase attendance at the annual meeting, and not to entice members to 
open, maintain, or

[[Page 412]]

renew accounts or increase an account balance.
    iv. Life savings benefits.

                          (s) Passbook Account

    1. Relation to Regulation E. Passbook accounts include accounts 
accessed by preauthorized electronic fund transfers to the account (as 
defined in 12 CFR Sec. 205.2(j)), such as an account credited by direct 
share and deposit of social security payments. Accounts that permit 
access by other electronic means are not ``passbook accounts,'' and any 
statements that are sent four or more times a year must comply with the 
requirements of Sec. 707.6.

                         (t) Periodic Statement

    1. General. Periodic statements are not required by part 707. 
Passbook and term share accounts are exempt from periodic statement 
requirements.
    2. Examples. Periodic statements do not include:
    i. Additional statements provided solely upon request.
    ii. Information provided by computer through home electronic credit 
union account services.
    iii. General service information such as a quarterly newsletter or 
other correspondence that describes available services and products.

                          (u) Potential Member

    1. General. A potential member is a natural person eligible for 
membership in a credit union, who has not yet taken the steps necessary 
to become a member. The term also includes natural person nonmembers 
eligible to hold accounts in a credit union pursuant to relevant federal 
or state law.
    2. Verification of eligibility. It is recommended that credit unions 
have sound written procedures in place to identify those eligible for 
membership. If these procedures include verification measures, such as 
an application process, verification telephone call or letter to an 
employer or association within the field of membership, witnessing by an 
existing member, or similar procedure, then the credit union may first 
verify the membership eligibility of a potential member before providing 
account disclosures or other information to the potential member. This 
process of verifying a member's eligibility status, making a 
recommendation for membership, and providing account disclosures should 
be completed within 20 calendar days. This period also applies when 
potential members not on credit union premises request disclosures.
    3. Nonmembers. Within its sole discretion, the board of directors of 
a credit union may provide TISA disclosures to nonmembers who are 
ineligible for membership or to hold an account at the credit union. If 
disclosures are made to such nonmembers, it is the position of the Board 
that no civil liability can accrue to the credit union for any errors in 
such disclosures. (See commentary to Sec. 707.3(d)).

                                (v) State

    1. General. Territories and possessions include American Samoa, 
Guam, the Mariana Islands, and the Marshall Islands.

                        (w) Stepped-Rate Account

    1. General. Stepped-rate accounts are those accounts in which two or 
more dividend rates (known at the time the account is opened) will take 
effect in succeeding periods.
    2. Example. An example of a stepped-rate account is a one-year term 
share certificate account in which a 5.00% dividend rate is paid for the 
first six months, and 5.50% for the second six months.

                         (x) Term Share Account

    1. Relation to Regulation D. Regulation D permits, in limited 
circumstances, the withdrawal of funds without penalty during the first 
six days after a ``time deposit'' is opened. (See 12 CFR 
204.2(c)(1)(i).) But the fact that a member makes a withdrawal as 
permitted by Regulation D does not disqualify the account from being a 
term share account for purposes of this regulation (such as withdrawals 
upon the death of the member, or within a ``grace period'' for 
automatically renewable term share accounts).
    2. Club accounts. Club accounts, including Christmas club, holiday 
club, and vacation club accounts may be either term share or regular 
share accounts, depending on the terms of the account. Although club 
accounts typically have a maturity date, they are not term share 
accounts unless they also require a penalty of at least seven days' 
dividends for withdrawals during the first six days after the account is 
opened.

                         (y) Tiered-Rate Account

    1. General. Tiered-rate accounts are those accounts in which two or 
more dividend rates are paid on the account and are determined by 
reference to a specified balance level. Tiered-rate accounts are of two 
types: Tiering Method A and Tiering Method B. In Tiering Method A 
accounts, the credit union pays the applicable tiered dividends rate on 
the entire amount in the account. This method is also known as the 
``hybrid'' or ``plateau'' tiered-rate account. In Tiering Method B 
accounts, the credit union does not pay the applicable tiered dividends 
rate on the entire amount in the account, but only on the portion of the 
share account balance that falls within each specified tier. This method 
is also known as the ``pure'' or

[[Page 413]]

``split-rate'' tiered-rate account. (See Appendix A, part I, D.)
    2. Example. An example of a tiered-rate account is one in which a 
credit union pays a 5.00% dividend rate on balances below $1,000, and 
5.50% on balances $1,000 and above.
    3. Term share accounts. Term share accounts that pay different rates 
based solely on the amount of the initial share and deposit are not 
tiered-rate accounts.
    4. Minimum balance accounts. A requirement to maintain a minimum 
balance to earn dividends does not make an account a tiered-rate 
account. If dividends are not paid on amounts below a specified balance 
level, then the account has a minimum balance requirement (required to 
be disclosed under Sec. 707.4(b)(3)(i)), but the account does not 
constitute a tiered-rate account. A zero rate (0%) cannot constitute a 
tier. Minimum balance accounts are single rate accounts with a minimum 
balance requirement.

                        (z) Variable-Rate Account

    1. General. Includes accounts in which the credit union does not 
contract to give at least 30 days advance written notice of decreases in 
the dividend rate. An account meets this definition whether the rate 
change is determined by reference to an index, by use of a formula, or 
merely at the discretion of the credit union's board of directors. An 
account that permits one or more rate adjustments prior to maturity at 
the member's option, such as a rate relock option, is a variable-rate 
account.
    2. Differences between fixed-rate and variable-rate accounts. All 
ccounts must either be fixed-rate or variable-rate accounts. Classifying 
an account as variable-rate affects credit unions three ways:
    i. Additional account disclosures are required 
(Sec. 707.4(b)(1)(ii));
    ii. Rate decreases are exempted from change-in-terms requirements 
(Sec. 707.5(a)(2)(i)); and
    iii. Advertising notice required (Sec. 707.8(c)(1)).
    Fixed-rate accounts require a contract term obligating the credit 
union to a 30-day advance, written notice to members before decreasing 
the dividend rate on the account. Term changes adversely affecting the 
member and rate decreases cannot take effect until 30 days after such 
fixed-rate change-in-terms notices are mailed or delivered to members 
(Sec. 707.5(a)).

             Section 707.3--General Disclosure Requirements

                                (a) Form

    1. General. All required disclosures (e.g., account disclosures, 
change-in-terms notices, term share renewal/maturity notices, statement 
disclosures and advertising disclosures) must be made clearly and 
conspicuously, in a form the member may retain. Disclosures need be made 
only as applicable (e.g., disclosures for a non-dividend-bearing account 
would not include disclosure of annual percentage yield, dividend rate, 
or other disclosures pertaining to dividend calculations).
    2. Design requirements. Disclosures must be presented in a format 
that allows members and potential members to readily understand the 
terms of their account. Credit unions are not required to use a 
particular type size or typeface, nor are credit unions required to 
state any term more conspicuously than any other term. Disclosures may 
be made:
    i. In any order.
    ii. In combination with other disclosures or account terms.
    iii. In combination with disclosures for other types of accounts, as 
long as it is clear to members and potential members which disclosures 
apply to their account.
    iv. On more than one page and on the front and reverse sides.
    v. By using inserts to a document or filling in blanks.
    vi. On more than one document, as long as the documents are provided 
at the same time.
    3. Consistent terminology. A credit union must use the same 
terminology to describe terms or features that are required to be 
disclosed. For example, if a credit union describes a monthly fee 
(regardless of account activity), as a ``monthly service fee'' in 
account opening disclosures, the periodic statements and change-in-terms 
notices must use the same terminology so that members and potential 
members can readily identify the fee.

                               (b) General

    1. Terms and conditions. Credit unions are required to have 
disclosures reflect the terms of the legal obligation between the credit 
union and a member at the time the member opens the account. This 
provision does not impose any contract terms or supersede state or other 
laws that define how the legal obligations between a credit union and 
its membership are determined.
    2. Specificity of legal obligation. Credit unions may refer to the 
calendar month or to roughly equivalent intervals during a calendar year 
as a ``month.'' Use of estimates is prohibited in TISA disclosures.
    3. Foreign language. Disclosures may be made in any foreign 
language, if desired by the board of directors of a credit union. 
However, disclosures must also be provided in English, upon request.

                      (c) Relation to Regulation E

    1. General rule. Compliance with Regulation E (12 CFR part 205) is 
deemed to satisfy the disclosure requirements of this regulation, such 
as when:

[[Page 414]]

    i. A credit union changes a term that triggers a notice under 
Regulation E, and the timing and disclosure rules of Regulation E for 
sending change-in-terms notices.
    ii. A member adds an ATM access feature to an account, and the 
credit union provides disclosures pursuant to Regulation E, including 
disclosure of fees before the member receives ATM access. (See 12 CFR 
205.7.)
    iii. A credit union complying with the timing rules of Regulation E 
discloses at the same time fees for electronic services (such as balance 
inquiry fees imposed if the inquiry is made at an ATM) that are required 
to be disclosed by this regulation, but not by Regulation E.
    iv. A credit union relies on Regulation E's rules regarding 
disclosures of limitations on the frequency and amount of electronic 
fund transfers, including security-related exceptions. But any 
limitation on the number of ``intra-institutional transfers'' to or from 
the member's other accounts at the credit union during a given time 
period must be disclosed, even though intra-institutional transfers are 
exempt from Regulation E.

                          (d) Multiple Members

    1. General. When an account has multiple natural person member 
accountholders, delivery of disclosures to any member accountholder or 
agent authorized by the accountholder satisfies the disclosure 
requirements of part 707.

                     (e) Oral Response to Inquiries

    1. Application of rule. Credit unions need not provide rate 
information orally. Disclosures need be made only as appropriate. For 
example, the requirement to give a telephone number for a member to call 
about rates for interest-bearing accounts and dividend-bearing term 
share accounts, would not be necessary for members calling the credit 
union for information. Also, the disclosure reqirements are applicable 
only to credit union employees and volunteers acting in the ordinary 
course of credit union business.
    2. Relation to advertising. The advertising rules do not cover an 
oral response to a question about rates.
    3. Existing accounts. This paragraph does not apply to oral 
responses about rate information for existing term share accounts or 
accounts not currently offered. For example, if a member holding a one-
year term share account requests dividend rate information about the 
account during the term, the credit union need not disclose the annual 
percentage yield, unless the member is calling for rate information 
under a maturity notice.

          (f) Rounding and Accuracy Rules for Rates and Yields

                             (f)(1) Rounding

    1. Permissible rounding. The annual percentage yield, annual 
percentage yield earned and dividend rate must be rounded to the nearest 
one-hundredth of one percentage point (.01%) when disclosed. Examples of 
permissible rounding are an annual percentage yield calculated to be 
5.644%, rounded down and shown as 5.64%; 5.645% would be rounded up and 
disclosed as 5.65%. For account disclosures, the dividend rate may be 
expressed to more than two decimal places.

                             (f)(2) Accuracy

    1. Annual percentage yield and annual percentage yield earned. The 
tolerance for annual percentage yield and annual percentage yield earned 
calculations is designed to accommodate inadvertent errors. Credit 
unions may not purposely incorporate the one-twentieth of one percentage 
point (.05%) tolerance into their calculation of yields.
    2. Dividend rate. There is no tolerance for an inaccuracy in the 
dividend rate.

                   Section 707.4--Account Disclosures

                   (a) Delivery of Account Disclosures

                         (a)(1) Account Opening

    1. New accounts. New account disclosures must be provided when:
    i. A term share account that does not automatically rollover is 
renewed by a member.
    ii. A member changes the term for a renewable term share account 
(from a one-year term share account to a six-month term share account, 
for instance) (see comment 5(b)-5 regarding disclosure alternatives).
    iii. A credit union transfers funds from an account to open a new 
account not at the member's request, unless the credit union previously 
gave account disclosures and any change-in-terms notices for the new 
account (e.g., funds in a money market share account are transferred by 
a credit union to open a new account for the member, such as a share 
draft account, because the member exceeded transaction limitations on 
the money market share account).
    iv. A credit union accepts a deposit from a member to an account 
that the credit union had previously deemed to be ``closed,'' under 
applicable federal or state law, for the purpose of treating accrued, 
but uncredited, dividends as forfeited dividends. New account numbers 
are not required by this requirement.
    2. Acquired accounts. New account disclosures need not be given when 
a credit union acquires an account through an acquisition of, or merger 
with, another credit union (but see Sec. 707.5(a) regarding advance 
notice requirements if terms are changed).

[[Page 415]]

    3. Combination disclosures. New account disclosures need not be 
given when a member has already received disclosures covering several 
accounts, and opens a new account properly disclosed by the already 
received combination disclosures, if the new account is opened within a 
reasonable amount of time after receipt of the combination disclosures 
and if the received disclosures and terms are accurate at the time the 
new account is opened.

                             (a)(2) Requests

                                (a)(2)(i)

    1. Inquiries versus requests. A response to an oral inquiry (by 
telephone or in person) about rates and yields or fees does not trigger 
the duty to provide account disclosures. But, when a member asks for 
written information about an account (whether by telephone, in person, 
or by other means), the credit union must provide disclosures unless the 
account is no longer offered to the public.
    2. General requests. When member's or potential member's request 
disclosures about a type of account (a share draft account, for 
example), a credit union that offers several variations may provide 
disclosures for any one of them. No disclosures need be made to 
nonmembers, though a credit union may provide disclosures to nonmembers 
within its sole discretion.
    3. Timing for response. Twenty calendar days is a reasonable time 
for responding to a request for account information that a member does 
not make in person.

                            (a)(2)(ii)(A)(2)

    1. Recent rates. Credit unions comply with this paragraph if they 
disclose an interest rate (or dividend rate on a dividend-bearing term 
share account) and annual percentage yield accurate within the seven 
calendar days preceding the date they send the disclosures.

                              (a)(2)(ii)(B)

    1. Term. Describing the maturity of a term share account as ``1 
year'' or ``6 months,'' for example, illustrates a response stating the 
maturity of a term share account as a term rather than a date (e.g., 
``June 1, 1995'').

                   (b) Content of Account Disclosures

                         (b)(1) Rate Information

           (b)(1)(i) Annual Percentage Yield and Dividend Rate

    1. Rate disclosures. In addition to the dividend rate and annual 
percentage yield, credit unions may disclose a periodic rate 
corresponding to the dividend rate. No other rate or yield (such as 
``tax effective yield'') is permitted. If the annual percentage yield is 
the same as the dividend rate, credit unions may disclose a single 
figure but must use both terms.
    2. Fixed-rate accounts. For fixed-rate term share accounts paying 
the opening rate until maturity, credit unions may disclose the period 
of time the dividend rate will be in effect by stating, or cross-
referencing, the maturity date. For other fixed-rate accounts, credit 
unions may use a date (such as ``This rate will be in effect through 
June 30, 1995'') or a period (such as ``This rate will be in effect for 
at least 30 days'').
    3. Tiered-rate accounts. Each dividend rate, along with the 
corresponding annual percentage yield for each specified balance level 
(or range of annual percentage yields, if appropriate), must be 
disclosed for tiered-rate accounts. (See Appendix A, Part I, Paragraph 
D.)
    4. Stepped-rate accounts. A single composite annual percentage yield 
must be disclosed for stepped-rate accounts. (See Appendix A, Part I, 
Paragraph B.) The dividend rates and the period of time each will be in 
effect also must be provided. When the initial rate offered for a 
specified time on a variable-rate account is higher or lower than the 
rate that would otherwise be paid on the account, the calculation of the 
annual percentage yield must be made as if for a stepped-rate account. 
(See Appendix A, Part I, Paragraph C.)
    5. Minimum balance accounts. If a credit union sets a minimum 
balance to earn dividends, the credit union may, but need not, state 
that the annual percentage yield is 0% for those days the balance in the 
account drops below the minimum balance level when using the daily 
balance method. Nor is a disclosure of 0% required for credit unions 
using the average daily balance method, if the member fails to meet the 
minimum balance required for the average daily balance period.

                        (b)(1)(ii) Variable Rates

                              (b)(1)(ii)(B)

    1. Determining dividend rates. To disclose how the dividend rate is 
determined, credit unions must:
    i. Identify the index and specific margin, if the dividend rate is 
tied to an index.
    ii. State that rate changes are within the credit union's 
discretion, if the credit union does not tie changes to an index.

                              (b)(1)(ii)(C)

    1. Frequency of rate changes. A credit union reserving the right to 
change rates at its discretion must state the fact that rates may change 
at any time.

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                              (b)(1)(ii)(D)

    1. Limitations. A floor or ceiling on rates or on the amount the 
rate may decrease or increase during any time period must be disclosed. 
Credit unions need not disclose the absence of limitations on rate 
changes.

                    (b)(2) Compounding and Crediting

                           (b)(2)(i) Frequency

    1. General. Descriptions such as ``quarterly'' or ``monthly'' are 
sufficient. Irregular crediting and compounding periods, such as if a 
cycle is out short at year end for tax reporting purposes, need not be 
disclosed.
    2. Dividend period. For dividend-bearing accounts, the dividend 
period must be disclosed. (A specific example must also be given, see 
Appendix B, Sec. B-1(c).) The dividend period for term share accounts 
generally may be disclosed as the account's term (e.g., two years).

                 (b)(2)(ii) Effect of Closing an Account

    1. Deeming an account closed. A credit union may, subject to state 
or other law, provide in account contracts the actions by members that 
will be treated as closing the account and that will result in the 
forfeiture of accrued but uncredited dividends. An example is the 
withdrawal of all funds from the account prior to the date dividends are 
credited. Credit unions are cautioned that bylaw requirements may 
prevent a credit union from deeming a member's account closed until 
certain time periods are extinguished if funds remain in a member's 
account. NCUA Standard FCU Bylaws, Art. III, Sec. 3 (members have at 
least 6 months to replenish membership share before membership 
terminates and account is deemed closed). Such bylaw requirements may 
not be overridden without proper agency approval.

                       (b)(3) Balance Information

                 (b)(3)(i) Minimum Balance Requirements

    1. Par value. Credit unions must disclose any minimum balance 
required to open the account, to avoid the imposition of a fee, or to 
obtain the annual percentage yield. Since members cannot generally 
maintain any accounts until the par value of the membership share is 
paid in full, this section requires that credit unions disclose the par 
value of a share necessary to become a member and maintain accounts at 
the credit union. The par value of a share and the minimum balance 
requirement do not have to be the same amount (e.g., a credit union may 
have a $5 par value for a membership share, in order for accounts to be 
opened and maintained, and a $100 minimum balance requirement, in order 
for the account to earn dividends).
    2. Disclosures. The explanation of minimum balance computation 
methods may be combined with the balance computation method disclosures 
(Sec. 707.4(b)(3)(ii)) if they are the same. If a credit union uses 
different cycles for determining minimum balance requirements for 
purposes of assessing fees and for paying dividends, the credit union 
must disclose the specific cycle or time period used for each purpose 
(e.g., use of a midmonth statement cycle for determining dividends, and 
use of a calendar month cycle for determining fees). Credit unions may 
assess fees by using any method. If fees on one account are tied to the 
balance in another account, such provision must be explained (e.g., if 
share draft fees are tied to a minimum balance in the regular share 
account (or a combination of the share draft and regular share 
accounts), the share draft account must explain that fact and how the 
balance in the regular share account (or both accounts) is determined). 
The fee need not be disclosed in the account disclosures if the fee is 
not imposed on that account.

                  (b)(3)(ii) Balance Computation Method

    1. Methods and periods. Credit unions may use different methods or 
periods to calculate minimum balances for purposes of imposing a fee 
(the daily balance for a calendar month, for example) and accruing 
dividends (the average daily balance for a statement period, for 
example). Each method and corresponding period must be disclosed.

               (b)(3)(iii) When dividends begin to accrue

    1. Additional information. Credit unions must include a statement as 
to when dividends begin to accrue for noncash deposits. Credit unions 
may disclose additional information such as the time of day after which 
deposits are treated as having been received the following business day, 
and may use additional descriptive terms such as ``ledger'' or 
``collected'' balances to disclose when dividends begin to accrue. Under 
the ledger balance method, dividends begin to accrue on the day of 
deposit. Under the collected balance methods, dividends begin to accrue 
when provisional credit is received for the item deposited.

                               (b)(4) Fees

    1. Types of fees. Fees related to the routine use of an account must 
be disclosed. The following are types of fees that must be disclosed in 
connection with an account:
    i. Maintenance fees, such as monthly service fees.
    ii. Fees related to share deposits or withdrawals.
    iii. Fees for special services, such as stop payment fees, fees for 
balance inquiries or verification of share and deposits, fees associated 
with checks returned unpaid, fees for regularly sending to members share 
drafts that otherwise would be held by the credit

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union, and overdraft line of credit access fees (if charged against the 
share account).
    iv. Fees to open or to close an account.
    v. Fees imposed upon dormant or inactive accounts.
    2. Other fees. Credit unions need not disclose fees such as the 
following:
    i. Fees for services offered to members and nonmembers alike, such 
as fees for certain travelers checks, for wire transfers and automated 
clearinghouse (ACH) transfers, to process credit card cash advances, or 
to handle U.S. Savings Bond Redemption (even if different amounts are 
charged to members and nonmembers).
    ii. Incidental fees, such as fees associated with state escheat 
laws, garnishment or attorneys fees, to change names on an account, to 
generate a midcycle periodic statement, to wrap loose coins, for 
photocopying, for statements returned to the credit union because of a 
wrong address, and locator fees.
    3. Amount of fees. Credit unions are cautioned that merely providing 
fee information in an account disclosure may not be sufficient to gain 
the legal right to impose the fee involved under applicable law. Credit 
unions must state the amount and conditions under which a fee may be 
imposed. Naming and describing the fee typically satisfies this 
requirement. Some examples are:
    i. ``$4.00 monthly service fee''.
    ii. $7.00 and up'' or ``fee depends on style of checks ordered'' for 
check printing fees.
    4. Tied-accounts. Credit unions must state if fees that may be 
assessed against an account are tied to other accounts at the credit 
union. For example, if a credit union ties the fees payable on a share 
draft account to balances held in the share draft account and in a 
regular share account, the share draft account disclosures must state 
that fact and explain how the fee is determined.
    5. Regulation E statements. Some fees are required to be disclosed 
under both Regulation E (12 CFR 205.7) and part 707. If such fees, such 
as ATM transaction fees, are disclosed on a Regulation E statement, they 
need not be disclosed again on a periodic statement required under part 
707.

                     (b)(5) Transaction Limitations

    1. General rule. Examples of limitations on the number of dollar 
amount of share deposits or withdrawals that credit unions must disclose 
are:
    i. Limits on the number of share drafts or checks that may be 
written on an account for a given time period.
    ii. Limits on withdrawals or share deposits during the term of a 
term share account.
    iii. Limitations required by Regulation D, such as the number of 
withdrawals permitted from money market share accounts by check to third 
parties each month (credit unions need not disclose reservation of right 
to require a notice for withdrawals from accounts required by federal or 
state law).

                 (b)(6) Features of Term Share Accounts

                       (b)(6)(i) Time Requirements

    1. ``Callable'' term share accounts. In addition to the maturity 
date, credit unions must state the date or the circumstances under which 
the credit union may redeem a term share account at the credit union's 
option (a ``callable'' term share account).

                  (b)(6)(ii) Early Withdrawal Penalties

    1. General. The term ``penalty'' may, but need not, be used to 
describe the loss that may be incurred by members for early withdrawal 
of funds from term share accounts.
    2. Examples. Examples of early withdrawal penalties are:
    i. Monetary penalties, such a specific dollar amount (e.g., 
``$10.00'') or a specific days' worth of dividends (e.g., ``seven days' 
dividends plus accrued but uncredited dividends, but only if the account 
is closed'').
    ii. Adverse changes to terms such as the lowering of the dividend 
rate, annual percentage yield, or reducing the compounding or crediting 
frequency for funds remaining in shares or on deposit.
    iii. Reclamation of bonuses.
    3. Relation to rules for IRAs or similar plans. Penalties imposed by 
the Internal Revenue Code for certain withdrawals from IRAs or similar 
pension or savings plans are not early withdrawal penalties for purposes 
of this regulation.
    4. Disclosing penalties. Penalties may be stated in months, whether 
credit unions assess the penalty using the actual number of days during 
the period or using another method such as a number of days that occurs 
in any actual sequence of the total calendar months involved. For 
example, stating ``one month's dividends'' is permissible, whether the 
credit union assesses 30 days' dividends during the month of April, or 
selects a time period between 28 and 31 days for calculating the 
dividends for all early withdrawals regardless of when the penalty is 
assessed.

                       (b)(6)(iv) Renewal Policies

    1. Rollover term share accounts. Credit unions are not required to 
provide a grace period, to pay dividends during the grace period, or to 
disclose whether or not dividends will be paid during the grace period. 
Credit unions offering a grace period on term share accounts must give 
the length of the grace period. Commentary, Appendix B, Model Clauses, 
Sec. B-1(i)(iv).
    2. Nonrollover term share accounts. Credit unions that pay dividends 
on funds following the maturity of term share accounts that do not renew 
automatically need not state the

[[Page 418]]

rate (or annual percentage yield) that may be paid.

                             (b)(7) Bonuses

    1. General. Credit unions are required to state the amount and type 
of bonus, and disclose any minimum balance or time requirement to obtain 
the bonus and when the bonus will be provided. If the minimum balance or 
time requirement is otherwise required to be disclosed, credit unions 
need not duplicate the disclosure for purposes of this paragraph.

                       (b)(8) Nature of Dividends

    1. General. Dividends are not payable until declared and unless 
sufficient current and undivided earnings are available after required 
transfers to reserves at the close of a dividend period. A disclosure 
explaining dividends educates members and protects credit unions in the 
event that a prospective dividend cannot be paid, or is not properly 
payable. This disclosure is required for all dividend-bearing share 
accounts. Term share accounts need not include a statement regarding the 
nature of dividends.
    2. State-chartered credit unions with interest-bearing deposit 
accounts. State law controls the nature of accounts (i.e., whether an 
account is a share account or a deposit account). If a member of a 
state-chartered credit union is opening only an interest-bearing deposit 
account, or is requesting account disclosures only for an interest-
bearing deposit account (if state law requires the depositor to hold a 
share account), the disclosures must generally include the following 
information on any dividend-bearing share portion of the account (e.g., 
membership share): the par value of a share; a statement that the 
portion of the deposit that represents the par value of the membership 
share will earn dividends, and that dividends are paid from current 
income and available earnings after required transfers to reserves. 
Further additional disclosures, such as a separate dividend rate and 
annual percentage yield for the membership share, are not required (if 
the additional disclosures would agree with the remainder of the account 
which is invested in an interest-bearing deposit).

                  (c) Notice to Existing Accountholders

    1. General. Only members who receive periodic statements (provided 
regularly at least four times per year) and who hold accounts of the 
type offered by the credit union as of the compliance date of part 707 
(generally January 1, 1995) must receive the notice. If following 
receipt of the notice members request disclosures, credit unions have 
twenty calendar days from receipt of the request to provide the 
disclosures. Rate and annual percentage yield information in such 
disclosures must conform to that required for disclosures upon request. 
As an alternative to including the notice in or on the periodic 
statement, the final rule permits credit unions to send the account 
disclosures themselves, as long as they are sent at the same time as the 
periodic statement (the disclosures may be mailed either with the 
periodic statement or separately).
    2. Form of the notice. The notice may be included on the periodic 
statement, in a member newsletter, or on a statement stuffer or other 
insert, if it is clear and conspicuous. The notice cannot be sent in a 
separate mailing from the periodic statement.
    3. Timing. The notice may accompany the first periodic statement 
after the compliance date for part 707, or the periodic statement for 
the first cycle beginning after that date. For example, a credit union's 
statement cycle is December 15, 1994-January 14, 1995. The statement is 
mailed on January 15, The next cycle is January 15, 1995 through 
February 14, 1995, and the statement for that cycle is mailed on 
February 15. The credit union may provide the notice either on or with 
the January 15 statement or on or with the February 15 statement, as it 
covers the first cycle after January 1, 1995.
    4. Early compliance. Credit unions that provide the notice to 
existing members prior to the compliance date of part 707, must be 
prepared to provide accurate and timely disclosures when, following 
receipt of the notice, members ask for account disclosures. Such 
disclosures must be provided even if they are requested before the 
compliance date of part 707. Credit unions who provide early notice to 
existing members need to comply with other aspects of part 707, but need 
not provide disclosures already provided in compliance with part 707.

                  Section 707.5--Subsequent Disclosures

                           (a) Change in Terms

                     (a)(1) Advance Notice required

    1. Form of notice. Credit unions may provide a change-in-term notice 
on or with a regular periodic statement or in another mailing (such as a 
highlighted portion of a newsletter or statement stuffer insert). If a 
credit union provides notice through revised account disclosures, the 
changed term must be highlighted in some manner. For example, credit 
unions may state that a particular fee has been changed (also specifying 
the new amount) or use an accompanying letter that refers to the changed 
term. Credit unions are cautioned that unless credit unions have 
reserved the right to change terms in the account agreement or 
disclosures, a change-in-terms notice may not be sufficient to amend the 
terms under applicable law.

[[Page 419]]

    2. Effective date. An example of a language for disclosing the 
effective date of a change is: ``As of May 11, 1995''.
    3. Terms that change upon the occurrence of an event. A credit union 
offering terms that will automatically change upon the occurrence of a 
stated event need not send an advance notice of the change provided the 
credit union fully describes the conditions of the change in the account 
opening disclosures (and sends any change-in-term notices regardless of 
whether the changed term affects that member's account at that time).
    4. Examples. Examples of changes not requiring an advance change-in-
terms notice are:
    i. The termination of employment for employee-members for whom 
account maintenance or activity fees were waived during their employment 
by the credit union.
    ii. The expiration of one year in a promotion described in the 
account opening disclosures to ``waive $4.00 monthly service charges for 
one year''.

                        (a)(2) No Notice Required

                     (a)(2)(ii) Check Printing Fees

    1. Increase in fees. A notice is not required for an increase in 
fees for printing share drafts (or deposit and withdrawal slips) even if 
the credit union adds some amount to the price charged by the vendor.

(b) Notice Before Maturity for Term Share Accounts Longer Than One Month 
                        That Renew Automatically.

    1. Maturity dates on nonbusiness days. In determining the term of a 
term share account, credit unions may disregard the fact that the term 
will be extended beyond the disclosed number of days if the maturity 
date falls on a nonbusiness day. For example, a holiday or weekend may 
cause a ``one-year'' term share account to extend beyond 365 days (or 
366, in a leap year), or a ``one-month'' term share account to extend 
beyond 31 days.
    2. Disclosing when rates will be determined. Ways to disclose when 
the annual percentage yield will be available include the use of:
    i. A specific date, such as ``October 28''.
    ii. A date that is easily discernible, such as ``the Tuesday prior 
to the maturity date stated on the notice'' or ``as of the maturity date 
stated on this notice''.
    3. Alternative timing rule. Under the alternative timing rule, a 
credit union that offers a 10-day grace period would have to provide the 
disclosures at least 10 calendar days prior to the scheduled maturity 
date.
    4. Club accounts. If members have agreed to the transfer of payments 
from another account to a club term share account for the next club 
period, the credit union must comply with the requirements for 
automatically renewable term share accounts--even though members may 
withdraw funds from the club account at the end of the current club 
period.
    5. Renewal of a term share account. In the case of a change-in-terms 
that becomes effective if a rollover term share account is subsequently 
renewed:
    i. If the change is initiated by the credit union, the disclosure 
requirements of this paragraph apply. (Section 707.5(a) applies if the 
change becomes effective prior to the maturity of the existing term 
share account.)
    ii. If the change is initiated by the member, the account opening 
disclosure requirements of Sec. 707.4(b) apply. (If the notice required 
by this paragraph has been provided, credit unions may give new account 
disclosures or disclosures that reflect the new term.)
    6. Example. If a member receives a notice prior to maturity on a 
one-year term share account and requests a rollover to a six-month 
account, the credit union must provide either account opening 
disclosures including the new maturity date or, if all other terms 
previously disclosed in the prematurity notice remain the same, only the 
new maturity date.

                (b)(1) Maturities of Longer Than One Year

    1. Highlighting changed terms. Credit unions need not highlight 
terms that have changed since the last account disclosures were 
provided.

(c) Notice Before Maturity for Term Share Accounts Longer Than One Year 
                     That Do not Renew Automatically

    1. Subsequent account. When funds are transferred following maturity 
of a nonrollover term share account, credit unions need not provide 
account disclosures unless a new account is established.

              Section 707.6--Periodic Statement Disclosures

           (a) Rule When Statement and Crediting Periods Vary

    1. General. Credit unions are not required to provide periodic 
statements. If they provide periodic statements, disclosures need only 
be furnished to the extent applicable. For example, if no dividends are 
earned for a statement period, credit unions need not state that fact. 
Or, credit unions may disclose ``$0'' dividends earned and ``0%'' annual 
percentage yield earned.
    2. Regulation E interim statements. When a credit union provides 
regular quarterly statements, and in addition provides a monthly interim 
statement to comply with Regulation E, the interim statement need not 
comply with this section unless it states dividend or rate information. 
(See 12 CFR 205.9). For credit unions that choose not to

[[Page 420]]

treat Regulation E activity statements as part 707 periodic statements, 
the quarterly periodic statement must reflect the annual percentage 
yield earned and dividends earned for the full quarter. However, credit 
unions choosing this option need not redisclose fees already disclosed 
on an interim Regulation E activity statement on the quarterly periodic 
statement. For credit unions that choose to treat Regulation E activity 
statements as part 707 periodic statements, the Regulation E statement 
must meet all part 707 requirements.
    3. Combined statements. Credit unions may provide certain 
information about an account (such as a money market share account or 
regular share account) on the periodic statement for another account 
(such as a share draft account) without triggering the disclosures 
required by this section, as long as:
    i. The information is limited to information such as the account 
number, the type of account, balance information, accountholders' names, 
and social security or tax identification number; and
    ii. The credit union also provides members a periodic statement 
complying with this section for the account (the money market share 
account or regular share account, in the example).
    4. Other information. Additional information that may be given on or 
with a periodic statement, includes:
    i. Dividend rates and corresponding periodic rates to the dividend 
rate applied to balances during the statement period.
    ii. The dollar amount of dividends earned year-to-date.
    iii. Bonuses paid (or any de minimis consideration of $10 or less).
    iv. Fees for other products, such as safe deposit boxes.
    v. Accounts not covered by the periodic statement disclosure 
requirements (passbook and term share accounts) may disclose any 
information on the statement related to such accounts, so long as such 
information is accurate and not misleading.
    5. When statement and crediting periods vary. This rule permits 
credit unions, on dividend-bearing share accounts, to report the annual 
percentage yield earned and the amount of dividends earned on a 
statement other than on each periodic statement when the dividend period 
does not agree with, varies from, or is different than, the statement 
period. For dividend-bearing share accounts, credit unions may disclose 
the required information either upon each periodic statement, or on the 
statement on which dividends are actually earned (credited or posted) to 
the member's account. In addition, for accounts using the average daily 
balance method of calculating dividends, when the average daily balance 
period and the statement periods do not agree, vary or are different, 
credit unions may also report annual percentage yield earned and the 
dollar amount of dividends earned on the periodic statement on which the 
dividends or interest is earned. For example, if a credit union has 
quarterly dividend periods, or uses a quarterly average daily balance on 
an account, the first two monthly statements may not state annual 
percentage yield earned and dividends earned figures; the third 
``monthly'' statement will reflect the dividends earned and the annual 
percentage yield earned for the entire quarter. The fees imposed 
disclosure must be given on the periodic statement on which they are 
imposed.
    6. Length of the period. Credit unions must disclose the length of 
both the dividend period (or average daily balance calculation period) 
and the statement period. For example, a statement could disclose a 
statement period of April 16 through May 15 and further state that ``the 
dividends earned and the annual percentage yield earned are based on 
your dividend period (or average daily balance) for the period April 1 
through April 30.''
    7. Dividend period more frequent than statement period. Credit 
unions that calculate dividends on a monthly basis, but send statements 
on a quarterly basis, may disclose a single dividend (and annual 
percentage yield earned) figure. Alternatively, a credit union may 
disclose three dividends earned and three annual percentage yield earned 
figures, one of each month in the quarter, as long as the credit union 
states the number of days (or beginning and ending date) in each 
dividend period if it varies from the statement period.
    8. Additional voluntary disclosures. For credit unions not 
disclosing the annual percentage yield earned and dividends earned on 
all periodic statements, credit unions may place a notice on statements 
without dividends and annual percentage yield earned figures, that the 
annual percentage yield earned and dollar amount of dividends earned 
will appear on the first statement at the close of the dividend (or 
average daily balance) period, or similar wording. Credit unions may 
also choose to include a telephone number to call for interim 
information, if desired by a member.

                        (b) Statement Disclosures

                  (b)(1) Annual Percentage Yield Earned

    1. Ledger and collected balances. Credit unions that accrue interest 
using the collected balance method may use either the ledger or 
collected balance methods to determine the balance used to determine the 
annual percentage yield earned. Ledger balance means the record of the 
balance in a member's account, as per the credit union's records. (The 
ledger balance may reflect additions and deposits for which the credit

[[Page 421]]

union has not yet received final payment). Collected balance means the 
record of balance in a member's account reflecting collected funds, that 
is, cash or checks deposited in the credit union which have been 
presented for payment and for which payment has actually been received. 
(See Regulation CC, 12 CFR 229.14).

                 (b)(2) Amount of Dividends or Interest

    1. Definition of earned. The term ``earned'' is defined to include 
dividends and interest either ``accrued'' or ``paid and credited.'' 
Credit unions may use either the ``ledger'' or the ``collected'' balance 
for either option. (See 707.6(b)(1)1. and 707.7(c)2. of this appendix.)
    2. Accrued interest. Credit unions must state the amount of interest 
that accrued during the statement period, even if it was not credited.
    3. Terminology. In disclosing dividends earned for the period, 
credit unions must use the term ``dividends'' or terminology such as: 
``Dividends paid,'' to describe dividends that have been credited; 
``Dividends accrued,'' to indicate that dividends are not yet credited.
    4. Closed accounts. If a member closes an account between crediting 
periods and forfeits accrued dividends, the credit union may not show 
any figures for ``dividends earned'' or annual percentage yield earned 
for the period (other than zero, at the credit union's option).
    5. Extraordinary dividends. Extraordinary dividends are not a 
component of the annual percentage yield earned or the dividend rate, 
but are an addition to the member's account. The dollar amount of the 
extraordinary dividends paid, denoted as a separate, identified figure, 
must be disclosed on the periodic statement on which the extraordinary 
dividends are earned. A credit union may also disclose information 
regarding the calculation of the extraordinary dividends, and additional 
annual percentage yield earned and dividend rate figures taking into 
account the extraordinary dividend, so long as such information is 
accurate and not misleading.

                           (b)(3) Fees Imposed

    1. General. Periodic statements must state fees disclosed under 
Sec. 707.4(b) that were debited to the account during the statement 
period, even if assessed for an earlier period.
    2. Itemizing fees by type. In itemizing fees imposed more than once 
in the period, credit unions may group fees if they are the same type. 
But, the description must make clear that the dollar figure represents 
more than a single fee, for example, ``total fees for checks written 
this period.''
    Examples of fees that may not be grouped together are:
    i. Monthly maintenance with excess activity fees.
    ii. ``Transfer'' fees, if different dollar amounts are imposed--such 
as $.50 for share deposits and $1.00 for withdrawals.
    iii. Fees for electronic fund transfers with fees for other 
services, such as balance inquiry or maintenance fees.
    3. Identifying fees. Statement details must enable the member to 
identify the specific fee. For example:
    i. Credit unions may use a code to identify a particular fee if the 
code is explained on the periodic statement or in documents accompanying 
the statement.
    ii. Credit unions using debit slips may disclose the date the fee 
was debited on the periodic statement and show the amount and type of 
fee on the dated debit slip.
    4. Relation to Regulation E. Disclosure of fees in compliance with 
Regulation E complies with this section for fees related to electronic 
fund transfers (for example, totaling all electronic funds transfer fees 
in a single figure).

                         (b)(4) Length of Period

    1. General. Credit unions providing the beginning and ending dates 
of the period must make clear whether both dates are included in the 
period. For example, stating ``April 1 through April 30'' would clearly 
indicate that both April 1 and April 30 are included in the period.
    2. Opening or closing an account mid-cycle. If an account is opened 
or closed during the period for which a statement is sent, credit unions 
must calculate the annual percentage yield earned based on account 
balances for each day the account was open.

                   Section 707.7--Payment of Dividends

                         (a) Permissible Methods

    1. Prohibited calculation methods. Calculation methods that do not 
comply with the requirement to pay dividends on the full amount of 
principal in the account each day include:
    i. The ``rollback'' method, also known as the ``grace period'' or 
``in by the 10th'' method, where credit unions pay dividends on the 
lowest balance in the account for the period.
    ii. The ``increments of par value'' method, where credit unions only 
pay dividends on full shares in an account, e.g., a credit union with $5 
par value shares pays dividends on $20 of a $24 account balance.
    iii. The ``ending balance'' method, where credit unions pay 
dividends on the balance in the account at the end of the period.
    iv. The ``investable balance'' method, where credit unions pay 
dividends on a percentage of the balance, excluding an amount credit 
unions set aside for reserve requirements.

[[Page 422]]

    v. The ``low balance'' method, where credit unions pay dividends on 
the lowest balance in the account for any day in that period.
    2. Use of 365-day basis. Credit unions may apply a daily periodic 
rate that is greater than \1/365\ of the dividend rate--such as \1/360\ 
of the dividend rate--as long as it is applied 365 days a year.
    3. Periodic dividend payments. A credit union can pay dividends each 
day on the account and still make uniform dividend payments. For 
example, for a one-year term share account, a credit union could make 
monthly dividend payments that are equal to \1/12\ of the amount of 
dividends that will be earned for a 365-day period (or 11 uniform 
monthly payments--each equal to roughly \1/12\ of the total amount of 
dividends--and one payment that accounts to the remainder of the total 
amount of dividends earned for the period).
    4. Leap year. Credit unions may apply a daily rate of \1/366\ or \1/
365\ of the dividend rate for 366 days in a leap year, if the account 
will earn dividends for February 29.
    5. Maturity of term share accounts. Credit unions are not required 
to pay dividends after term share accounts mature. Examples include:
    i. During any grace period offered by a credit union for an 
automatically renewable term share account, if the member decides during 
that period not to renew the account.
    ii. Following the maturity of nonrollover term share accounts.
    iii. When the maturity date falls on a holiday, and the member must 
wait until the next business day to obtain the funds.
    6. Dormant accounts. Credit unions must pay dividends on funds in an 
account, even if inactivity or the infrequency of transactions would 
permit the credit union to consider the account to be ``inactive'' or 
``dormant'' (or similar status) as defined by state or other law or the 
account contract.
    7. Insufficient funds. Credit unions are not required to pay 
dividends on checks or share drafts deposited to a member's account that 
are returned for insufficient funds. If a credit union accrues dividends 
on a check that it later determines is not good, it may deduct from the 
accrued dividends any dividends attributed to the proceeds of the 
returned check. If dividends have already been credited before the 
credit union determines the item has insufficient funds, the credit 
union may deduct the amount of the check and associated dividends from 
the account balance. The amount deducted will not be reflected in the 
dividend amount and annual percentage yield earned reported for the next 
period.
    8. Account drawn below par value of a share. If a member draws his 
or her account below the par value of a share, dividends would continue 
to accrue on the account so long as any minimum balance requirement is 
met. However, under the NCUA Standard FCU Bylaws, if a member who 
reduces his or her share balance below the value of a par value share 
and does not increase the balance within at least six months, the credit 
union may terminate the member's membership. State-chartered credit 
unions may have similar termination provisions.

        (a)(2) Determination of Minimum Balance to Earn Dividends

    1. General. Credit unions may set minimum balance requirements that 
must be met in order to earn dividends. However, credit unions must use 
the same method to determine a minimum balance required to earn 
dividends as they use to determine the balance upon which dividends will 
accrue and pay. For example, a credit union that calculates dividends on 
the daily balance method must use the daily balance method to determine 
if the minimum balance to earn dividends has been met. Similarly, a 
credit union that calculates dividends on the average daily balance 
method must use the average daily balance method to determine if the 
minimum to earn dividends has been met. Credit unions may have a par 
value of a share that is different from the minimum balance requirement 
to earn dividends. (See commentary to Sec. 707.4(b)(3)(i)).
    2. Daily balance accounts. Credit unions that require a minimum 
balance to earn dividends may choose not to pay dividends for days when 
the balance drops below the required minimum balance if they use the 
daily balance method to calculate dividends. For example, a credit union 
could set a minimum daily balance level of $200 and pay dividends only 
those days the $200 daily balance is maintained.
    3. Average daily balance accounts. Credit unions that require a 
minimum balance to earn dividends may choose not to pay dividends for 
the average daily balance calculation period in which the average daily 
balance drops below the required minimum, if they use the average daily 
balance method to calculate dividends. For example, a credit union could 
set a minimum average daily balance level of $200 and pay dividends only 
if the $200 average daily balance is met for the calculation period.
    4. Beneficial method. Credit unions may not require members to 
maintain both a minimum daily balance and a minimum average daily 
balance to earn dividends, such as by requiring the member to maintain a 
$500 daily balance and a prescribed average daily balance (whether 
higher or lower). But a credit union could offer a minimum balance to 
earn dividends that includes an additional method that is 
``unequivocally beneficial'' to the member such as the following:
    i. A credit union using the daily balance method to calculate 
dividends and requiring a $500 minimum daily balance could choose to pay 
dividends on the account (for those

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days the minimum balance is not met) as long as the member maintained an 
average daily balance throughout the month of $400.
    ii. A credit union using the average daily balance method to 
calculate dividends and requiring a $400 minimum average daily balance 
could choose to pay dividends on the account as long as the member 
maintained a daily balance of $500 for at least half of the days in the 
period.
    iii. A credit union using either the daily balance method or average 
daily balance method to calculate dividends that requires: (A) a $500 
daily balance; or (B) a $400 average daily balance to pay dividends on 
the account.
    5. Paying on full balance. Credit unions must pay dividends on the 
full balance in the account that meets the required minimum balance. For 
example, if $300 is the minimum daily balance required to earn 
dividends, and a member deposits $500, the credit union must pay the 
stated dividend rate on the full $500 and not just on the $200.
    6. Negative balances prohibited. Credit unions must treat a negative 
account balance as zero to determine:
    i. The daily or average daily balance on which dividends will be 
paid.
    ii. Whether any minimum balance to earn dividends is met. (See 
commentary to Appendix A, Part II, which prohibits credit unions from 
using negative balances in calculating the dividends figure for the 
annual percentage yield earned.)
    7. Club accounts. Credit unions offering club accounts (such as a 
``holiday'' or ``vacation'' club accounts) cannot impose a minimum 
balance requirement for dividends based on the total number or dollar 
amount of payments required under the club plan. For example, if a plan 
calls for $10 weekly payments for 50 weeks, the credit union cannot set 
a $500 minimum balance and then pay only if the member makes all 50 
payments.
    8. Minimum balances not affecting dividends. Credit unions may use 
the daily balance, average daily balance, or other computation method to 
calculate minimum balance requirements not involving the payment of 
dividends--such as to compute minimum balances for assessing fees.

                 (b) Compounding and Crediting Policies

    1. General. Credit unions choosing to compound dividends may 
compound or credit dividends annually, semi-annually, quarterly, 
monthly, daily, continuously, or on any other basis.
    2. Withdrawals prior to crediting date. If members withdraw funds 
(without closing the account), prior to a scheduled crediting date, 
credit unions may delay paying the accrued dividends on the withdrawn 
amount until the scheduled crediting date, but may not avoid paying 
dividends.
    3. Closed accounts. Subject to state or other law, a credit union 
may choose not to pay accrued dividends if members close an account 
prior to the date accrued dividends are credited, as long as the credit 
union has disclosed that fact. If accrued dividends are paid, accrued 
dividends must be paid on funds up until the account is closed or the 
account is deemed closed. For example, if an account is closed on a 
Tuesday, accrued dividends on the funds through Monday would be paid. 
Whether (and the conditions under which) credit unions are permitted to 
deem an account closed by a member is determined by state or other law, 
if any. Credit unions are cautioned that bylaw requirements may prevent 
a credit union from deeming a member's account closed until certain time 
periods are extinguished. (See NCUA Standard FCU Bylaws, Art. III, 
Sec. 3 (members have at least 6 months to replenish membership share 
before membership can terminate and the account is deemed closed). Such 
bylaw requirements may not be overridden without proper agency 
approval.)

                   (c) Date Dividends Begin to Accrue

    1. Relation to Regulation CC. Credit unions may rely on the 
Expedited Funds Availability Act (EFAA) and Regulation CC (12 CFR part 
229) to determine, for example, when a deposit is considered made for 
purposes of dividend accrual, or when dividends need not be paid on 
funds because a deposited check is later returned unpaid.
    2. Ledger and collected balances. Credit unions may calculate 
dividends by using a ``ledger'' balance or ``collected'' balance method, 
as long as the crediting requirements of the EFAA are met (12 CFR 
229.14).
    3. Withdrawal of principal. Credit unions must accrue dividends on 
funds until the funds are withdrawn from the account. For example, if a 
check is debited to an account on a Tuesday, the credit union must 
accrue dividends on those funds through Monday.

                       Section 707.8--Advertising

               (a) Misleading or Inaccurate Advertisements

    1. General. All advertisements are subject to the rule against 
misleading or inaccurate advertisements, even though the disclosure 
applicable to various media differ. The word ``profit'' may be used when 
referring to dividend-bearing share accounts, as it reflects the nature 
of dividends. The word ``profit'' may not be used when referring to 
interest-bearing deposit accounts.
    2. Indoor signs. An indoor sign advertising an annual percentage 
yield is not misleading or inaccurate if:
    i. For a tiered-rate account, it also provides the upper and lower 
dollar amounts of the tier corresponding to the advertised annual 
percentage yield.

[[Page 424]]

    ii. For a term share account, it also provides the term required to 
obtain the advertised annual percentage yield.
    3. ``Free'' or ``no cost'' accounts. For purposes of determining 
whether an account can be advertised as ``free'' or ``no cost,'' 
maintenance and activity fees include:
    i. Any fee imposed if a minimum balance requirement is not met, or 
if the member exceeds a specified number of transactions.
    ii. Transaction and service fees that members reasonably expect to 
be imposed on an account on a regular basis (see comments 4(b)(4)-1 and 
2).
    iii. A flat fee, such as a monthly service fee.
    iv. Fees imposed to deposit, withdraw or transfer funds, including 
per-check or per-transaction charges (for example, $.25 for each 
withdrawal, whether by check, in person).
    4. Other fees. Examples of fees that are not maintenance or activity 
fees include:
    i. Fees that are not required to be disclosed under 
Sec. 707.4(b)(4).
    ii. Check printing fees of any type.
    iii. Fees for obtaining copies of checks, whether or not the 
original checks have been truncated or returned to the member 
periodically.
    iv. Balance inquiry fees.
    v. Fees assessed against a dormant account.
    vi. Fees for using an ATM.
    vii. Fees for electronic transfer services that are not required to 
obtain an account, such as preauthorized transfers or home electronic 
credit union services.
    viii. Stop payment fees and fees for share drafts or checks returned 
unpaid.
    5. Similar terms. An advertisement may not use a term such as ``fees 
waived'' if a maintenance or activity fee may be imposed because it is 
similar to the terms ``free'' or ``no cost.''
    6. Specific account services. Credit unions may advertise a specific 
account service or feature as free as long as no fee is imposed for that 
service or feature. For example, credit unions offering an account that 
is free of deposit or withdrawal fees could advertise that fact, as long 
as the advertisement does not mislead members by implying that the 
account is free and that no other fee (a monthly service fee, for 
example) may be charged.
    7. Free for limited time. If an account (or a specific account 
service) is free only for a limited period of time--for example, for one 
year following the account opening--the account (or service) may be 
advertised as free as long as the time period is stated.
    8. Conditions not related to share accounts. Credit unions may 
advertise accounts as ``free'' for members that meet conditions not 
related to share accounts, such as the member's age. For example, credit 
unions may advertise a share draft account as ``free for persons over 65 
years old,'' even though a maintenance or activity fee may be assessed 
on accounts held by members that are 65 or younger.

                          (b) Permissible Rates

    1. Tiered-rate accounts. An advertisement for a tiered-rate account 
that states an annual percentage yield must also state the annual 
percentage yield for each tier, along with corresponding minimum balance 
requirements. Any dividend rates stated must appear in conjunction with 
the annual percentage yields for each tier.
    2. Stepped-rate accounts. An advertisement that states a dividend 
rate for a stepped-rate account must state all the dividend rates and 
the time period that each rate is in effect.
    3. Representative examples. An advertisement that states an annual 
percentage yield for a type of account (such as a term share account for 
a specified term) need not state the annual percentage yield applicable 
to every variation offered by the credit union or indicate that other 
maturity terms are available. In an advertisement stating that rates for 
an account may vary depending on the amount of the initial deposit or 
the term of a term share account, credit unions need not list each 
balance level and term offered. Instead, the advertisement may:
    i. Provide a representative example of the annual percentage yields 
offered, clearly described as such. For example, if a credit union 
offers a $25 bonus on all term share accounts and the annual percentage 
yield will vary depending on the term selected, the credit union may 
provide a disclosure of the annual percentage yield as follows: ``For 
example, our 6-month share certificate currently pays a 3.15% annual 
percentage yield.''
    ii. Indicate that various rates are available, such as by stating 
short-term and longer-term maturities along with the applicable annual 
percentage yields: ``We offer share certificates with annual percentage 
yields that depend on the maturity you choose. For example, our one-
month share certificate earns a 2.75% APY. Or, earn a 5.25% APY for a 
three-year share certificate.''

              (c) When Additional Disclosures are Required

    1. Trigger terms. The following are examples of information stated 
in advertisements that are not ``trigger'' terms:
    i. ``One, three, and five year share certificates available''.
    ii. ``Bonus rates available''.
    iii. ``1% over our current rate,'' so long as the rates are not 
determinable from the advertisement.

[[Page 425]]

             (c)(2) Time Annual Percentage Yield is Offered

    1. Specified recent date. If an advertisement discloses an annual 
percentage yield as of a specified date, that date must be recent in 
relation to the publication or broadcast frequency of the media used. 
For example, the printing date of a brochure printed once for an account 
promotion that will be in effect for six months would be considered 
``recent,'' even though rates change during the six-month period. 
Dividend rates published in a daily newspaper or on television must be a 
rate offered shortly before (or on) the date the rates are published or 
broadcast. Similarly, dividend rates published in a daily newspaper or 
on television must be a rate reflecting either the preceding dividend 
period, or a prospective rate, and the option chosen should be noted.
    2. Reference to date of publication. An advertisement may refer to 
the annual percentage yield as being accurate as of the date of 
publication, if the date is on the publication itself. For instance, an 
advertisement in a periodical may state that a rate is ``current through 
the date of this issue,'' if the periodical shows the date.

                          (c)(5) Effect of Fees

    1. Scope. This requirement applies only to maintenance or activity 
fees as described in paragraph 8(a).

                 (c)(6) Features of Term Share Accounts

                       (c)(6)(i) Time Requirements

    1. Club accounts. If a club account has a maturity date, but the 
term may vary depending on when the account is opened, credit unions may 
use a phrase such as: ``The maturity date of this club account is 
November 15; its term varies depending on when the account is opened.''

                  (c)(6)(ii) Early Withdrawal Penalties

    1. Discretionary penalties. Credit unions imposing early withdrawal 
penalties on a case-by-case basis may disclose that they ``may'' (rather 
than ``will'') impose a penalty if that accurately describes the account 
terms.

                               (d) Bonuses

    1. General reference to ``bonus.'' General statements such as 
``bonus checking'' or ``get a bonus when you open a checking account'' 
do not trigger the bonus disclosures.

                (e) Exemption for Certain Advertisements

                          (e)(1) Certain Media

                                (e)(1)(i)

    1. ATM messages. Messages provided on ATM or computer screens are 
eligible for this exemption.

                               (e)(1)(iii)

    1. Tiered-rate accounts. Solicitations for tiered-rate accounts made 
through telephone response machines must provide all annual percentage 
yields and the balance requirements applicable to each tier.

                           (e)(2) Indoor Signs

                                (e)(2)(i)

    1. General. Indoor signs include advertisements displayed on 
computer screens, banners, preprinted posters, and chalk or peg boards. 
Any advertisement inside the premises that can be retained by a member 
(such as a brochure or a printout from a computer) is not an indoor 
sign.

                           (e)(3) Newsletters

    1. General. The partial exemption applies to all credit union 
newsletters, whether instituted before or after the compliance date of 
part 707. Nor must a newsletter be of any particular circulation 
frequency (e.g., weekly, monthly, quarterly, biannually, annually, or 
irregularly) or of any certain format (e.g. magazine, bulletin, 
broadside, circular, mimeograph, letter, or pamphlet) in order to be 
eligible for the partial advertising exemption.
    2. Permissible Distribution. In order for newsletters to retain the 
partial advertising exemption, newsletters can be sent to existing 
credit union members only. Any distribution reasonably calculated to 
reach only members is also acceptable, such as:
    i. Mailing newsletters to existing members.
    ii. Distributing newsletters at a function reasonably limited to 
members, such as an annual meeting or member picnic.
    iii. Displaying or offering newsletters at a credit union lobby, 
branch, or office.
    3. Impermissible Distribution. Distributing a newsletter in a place 
open to nonmembers, such as a sponsor's lunch room, is not reasonably 
calculated to reach only members, and such newsletter would be subject 
to all applicable advertising rules.

             Section 707.9--Enforcement and Record Retention

                          (c) Record Retention

    1. Evidence of required actions. Credit unions comply with the 
regulation by demonstrating they have done the following:
    i. Established and maintained procedures for paying dividends and 
providing timely disclosures as required by the regulation, and
    ii. Retained sample disclosures for each type account offered to 
members, such as account-opening disclosures, copies of advertisements, 
and change-in-term notices; and

[[Page 426]]

information regarding the dividend rates and annual percentage yields 
offered.
    2. Methods of retaining evidence. Credit unions must be able to 
reconstruct the required disclosures or other actions. They need not 
keep disclosures or other business records in hard copy. Records 
evidencing compliance may be retained on microfilm, microfiche, or by 
other methods that reproduce records accurately (including computer 
files). Credit unions must retain copies of all printed advertisements 
and the text of all advertisements conveyed by electronic or broadcast 
media, and newsletters.
    3. Payment of dividends. Credit unions must retain sufficient rate 
and balance information to permit the verification of dividends paid on 
an account, including the payment of dividends on the full principal 
balance.

       Appendix A to Part 707--Annual Percentage Yield Calculation

Part I. Annual Percentage Yield for Account Disclosures and Advertising 
                                Purposes

    1. Rounding for calculations. The following are examples of 
permissible rounding rules for calculating dividends and the annual 
percentage yield:
    i. The daily rate applied to a balance carried to five or more 
decimals. For example; .008219178%, 3.00% for a 365 day year, would be 
rounded to no less than .00822%.
    ii. The daily dividends or interest earned carried to five or more 
decimals. For example; $.08219178082, daily dividends on $1,000 at 3% 
for a 365 day year, would be rounded to no less than $.08219.
    2. Exponents in a leap year. The annual percentage yield formula's 
exponent numerator will remain 365 in leap years. The ``days in term'' 
figure used in the denominator should be consistent with the length of 
term used in the dividends calculation.
    3. First tier of a tiered-rate account. When credit unions use a 
rate table, the first tier of a tiered rate account is to be disclosed 
and advertised; ``Up to but not exceeding * * * '', ``$.01 to * * * '', 
or similar language.
    4. Term Share Accounts Opened in Midterm. For club accounts that 
meet the definition of a term share account, the annual percentage yield 
is based on the maximum number of days in the term not to exceed 365 
days (or 366 days in a leap year).

     Part II. Annual Percentage Yield Earned for Periodic Statements

    1. Balance method. The dividend or interest figure used in the 
calculation of the annual percentage yield earned may be derived from 
the daily balance method or the average daily balance method. Regardless 
of the dividend calculation method, the balance used in the annual 
percentage yield earned formula is the average daily balance. The 
average daily balance calculation is the sum of the balances for each 
day in the period divided by the number of days in the period. The 
balance for each day is based on a point in time; i.e. beginning of day 
balance, end of day balance, closing of day balance, etc. Each day's 
balance, for dividend accrual and payment purposes, must be based on the 
same point in time and cannot be based on the day's low balance.
    2. Negative balances prohibited. Credit unions must treat a negative 
account balance as zero to determine the balance on which the annual 
percentage yield earned is calculated. (See commentary to 
Sec. 707.7(a)(2).)

                           A. General Formula

    1. Accrued but uncredited dividends. To calculate the annual 
percentage yield earned, accrued but uncredited dividends:
    i. May not be included in the balance for statements that are issued 
at the same time or less frequently than the account's compounding and 
crediting frequency. For example, if monthly statements are sent for an 
account that compounds dividends daily and credits dividends monthly, 
the balance may not be increased each day to reflect the effect of daily 
compounding. Assume a credit union will pay $13.70 in dividends on 
$100,000 for the first day, $6.85 in dividends on $50,013.70 for the 
second day, and $3.43 in dividends on $25,020.55 for the third day. The 
sum of each days balance is $175,000 (does not include accrued, but 
uncredited, dividends amounts $13.70, $6.85, and $3.43), thereby 
resulting in an average daily balance for the three days of $58,333.33.
    ii. Must be included in the balance for succeeding statements if a 
statement is issued more frequently than compounded dividends is 
credited on an account. For example, if monthly statements are sent for 
an account that compounds dividends daily and credits dividends 
quarterly, the balance for the second monthly statement would include 
dividends that had accrued for the prior month. Assume a credit union 
will pay $411.78 in dividends on 30 days of $100,000, $427.28 in 
dividends on 31 days of $100,411.78, and $415.23 in dividends on 30 days 
of $100,839.06. The balance (average daily balance in the account for 
the period) for the second 31 days is $100,411.78.
    2. Rounding. The dividends earned figure used to calculate the 
annual percentage yield earned must be rounded to two decimals to 
reflect the amount actually paid. For example, if the dividends earned 
for a statement period is $20.074 and the credit union pays the member 
$20.07, the credit union must use $20.07 (not $20.074) to calculate the 
annual percentage yield earned. For accounts that pay dividends based on 
the daily balance method, compound and credit dividends or interest 
quarterly, and send

[[Page 427]]

monthly statements, the credit union may, but need not, round accrued 
dividends to two decimals for calculating the ``projected'' or 
``anticipated'' annual percentage yield earned on the first two monthly 
statements issued during the quarter. However, on the quarterly 
statement the dividends earned figure must reflect the amount actually 
paid.
    3. Compounding frequency using the average daily balance method. Any 
compounding frequency, including daily compounding, can be used when 
calculating dividends using the average daily balance method. (See 
comment 707.7(b), which does not require credit unions to compound or 
credit dividends at any particular frequency).

 B. Special Formula for Use Where Periodic Statement is Sent More Often 
           Than the Period for Which Dividends are Compounded

    1. Statements triggered by Regulation E. Credit unions may, but need 
not, use this formula to calculate the annual percentage yield earned 
for accounts that receive quarterly statements and that are subject to 
Regulation E's rule calling for monthly statements when an electronic 
fund transfer has occurred. They may do so even though no monthly 
statement was issued during a specific quarter. This formula must be 
used for accounts that compound and credit dividends quarterly and that 
receive monthly statements, triggered by Regulation E, which comply with 
the provisions of Sec. 707.6.
    2. Days in compounding period. Credit unions using the special 
annual percentage yield earned formula must use the actual number of 
days in the compounding period.

         Appendix B to Part 707--Model Clauses and Sample Forms

    1. Modifications. Credit unions that modify the model clauses will 
be deemed in compliance as long as they do not delete information 
required by TISA or regulation or rearrange the format so as to affect 
the substance or clarity of the disclosures.
    2. Format. Credit unions may use inserts to a document (see Sample 
Form B-11) or fill-in blanks (see Sample Forms B-4 and B-5, which use 
double underlining to indicate terms that have been filled in) to show 
current rates, fees or other terms.
    3. Disclosures for opening accounts. The sample forms illustrate the 
information that must be provided to a member when an account is opened, 
as required by Sec. 707.4(a)(1). (See Sec. 707.4(a)(2), which states the 
requirements for disclosing the annual percentage yield, the dividend 
rate, and the maturity of a term share account in responding to a 
member's request.)
    4. Compliance with Regulation E. Credit unions may satisfy certain 
requirements under Part 707 with disclosures that meet the requirements 
of Regulation E. (See Sec. 707.3(c).) The model clauses and sample forms 
do not give examples of disclosures that would be covered by both this 
regulation and Regulation E (such as disclosing the amount of a fee for 
ATM usage). Credit unions should consult appendix A to Regulation E for 
appropriate model clauses.
    5. Duplicate disclosures. If a requirement such as a minimum balance 
applies to more than one account term (to obtain a bonus and determine 
the annual percentage yield, for example), credit unions need not repeat 
the requirement for each term, as long as it is clear which terms the 
requirement applies to.
    6. Guide to model clauses. In the model clauses, italicized words 
indicate the type of disclosure a credit union should insert in the 
space provided (for example, a credit union might insert ``March 25, 
1995'' in the blank for ``(date)'' disclosure). Brackets and diagonals 
(``/'') indicate a credit union must choose the alternative that 
describes its practice (for example, [daily balance/average daily 
balance]).
    7. Sample forms. The sample forms (B-4 through B-11) serve a purpose 
different from the model clauses. They illustrate various ways of 
adapting the model clauses to specific accounts. The clauses shown 
relate only to the specific transactions described.

[59 FR 59899, Nov. 21, 1994, as amended at 60 FR 21699, May 3, 1995; 61 
FR 68129, Dec. 27, 1996; 63 FR 71575, Dec. 29, 1998]



PART 708a--CONVERSION OF INSURED CREDIT UNIONS TO MUTUAL SAVINGS BANKS--Table of Contents




Sec.
708a.1  Definitions.
708a.2  Authority to convert.
708a.3  Board of directors and membership approval.
708a.4  Voting procedures.
708a.5  Notice to NCUA.
708a.6  Certification of vote on conversion proposal.
708a.7  NCUA oversight of methods and procedures of membership vote.
708a.8  Other regulatory oversight of methods and procedures of 
          membership vote.
708a.9  Completion of conversion.
708a.10  Limit on compensation of officials.

    Authority: 12 U.S.C. 1766, 12 U.S.C. 1785(b).

    Source: 63 FR 65535, Nov. 27, 1998, unless otherwise noted.



Sec. 708a.1  Definitions.

    As used in this part:

[[Page 428]]

    (a) Credit union has the same meaning as insured credit union in 
section 101 of the Federal Credit Union Act.
    (b) Mutual savings bank and savings association have the same 
meaning as in section 3 of the Federal Deposit Insurance Act.
    (c) Federal banking agencies has the same meaning as in section 3 of 
the Federal Deposit Insurance Act.
    (d) Senior management official means a chief executive officer, an 
assistant chief executive officer, a chief financial officer, and any 
other senior executive officer as defined by the appropriate Federal 
banking agency pursuant to section 32(f) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1831i(f).



Sec. 708a.2  Authority to convert.

    An insured credit union, with the approval of its members, may 
convert to a mutual savings bank or a savings association that is in 
mutual form without the prior approval of the NCUA, subject to 
applicable law governing mutual savings banks and savings associations 
and the other requirements of this part.



Sec. 708a.3  Board of directors and membership approval.

    (a) The board of directors must approve a proposal to convert by 
majority vote and set a date for a vote on the proposal by the members 
of the credit union.
    (b) The membership must approve the proposal to convert by the 
affirmative vote of a majority of those members who vote on such 
proposal.



Sec. 708a.4  Voting procedures.

    (a) A member may vote on the proposal to convert in person at a 
special meeting held on the date set for the vote or by written ballot 
filed by the member.
    (b) A credit union that proposes to convert must provide written 
notice of its intent to convert to each member who is eligible to vote 
on the conversion. The notice to members must be submitted 90 calendar 
days, 60 calendar days, and 30 calendar days before the date of the 
membership vote on the conversion and a ballot must be submitted not 
less than 30 calendar days before the date of the vote.
    (c) The notice to members must adequately describe the purpose and 
subject matter of the vote to be taken at the special meeting or by 
submission of the written ballot. The notice must clearly inform the 
member that the member may vote at the special meeting or by submitting 
the written ballot. The notice must state the date, time, and place of 
the meeting.

[63 FR 65535, Nov. 27, 1998, as amended at 64 FR 28735, May 27, 1999]



Sec. 708a.5  Notice to NCUA.

    (a) The credit union must provide the Regional Director for the 
region where the credit union is located with notice of its intent to 
convert during the 90 calendar day period preceding the date of the 
membership vote on the conversion.
    (b) The credit union must give notice to the Regional Director by 
providing a letter describing the material features of the conversion or 
a copy of the filing the credit union has made with another Federal or 
State regulatory agency in which the credit union seeks that agency's 
approval of the conversion. The credit union must include with the 
notice to the Regional Director a copy of the notice the credit union 
provides to members under Sec. 708a.4, as well as, the ballot form and 
all written materials the credit union has distributed or intends to 
distribute to the members.
    (c) If it chooses, the credit union may provide the Regional 
Director notice of its intent to convert prior to the 90 calendar day 
period preceding the date of the membership vote on the conversion. In 
this case, the Regional Director will make a preliminary determination 
regarding the methods and procedures applicable to the membership vote. 
The Regional Director will notify the credit union within 30 calendar 
days of receipt of the credit union's notice of intent to convert if the 
Regional Director disapproves of the proposed methods and procedures 
applicable to the membership vote. The credit union's prior submission 
of the notice of intent does not relieve the credit union of its 
obligation to certify the results of the membership vote required by 
Sec. 708a.6 or eliminate the right of the Regional Director to 
disapprove

[[Page 429]]

the actual methods and procedures applicable to the membership vote if 
the credit union fails to conduct the membership vote in a fair and 
legal manner.

[63 FR 65535, Nov. 27, 1998, as amended at 64 FR 28735, May 27, 1999]



Sec. 708a.6  Certification of vote on conversion proposal.

    The board of directors of the converting credit union must certify 
the results of the membership vote to the Regional Director within 10 
calendar days after the vote is taken. The board of directors must also 
certify at this time that the notice, ballot and other written materials 
provided to members were identical to those submitted pursuant to 
Sec. 708a.5 or provide copies of any new or revised materials and an 
explanation of the reasons for the changes.



Sec. 708a.7  NCUA oversight of methods and procedures of membership vote.

    (a) The Regional Director will issue a determination that the 
methods and procedures applicable to the membership vote are approved or 
disapproved within 10 calendar days of receipt from the credit union of 
the certification of the result of the membership vote required under 
Sec. 708a.6.
    (b) If the Regional Director disapproves of the methods by which the 
membership vote was taken or the procedures applicable to the membership 
vote, the Regional Director may direct that a new vote be taken.
    (c) The Regional Director's review of the methods by which the 
membership vote was taken and the procedures applicable to the 
membership vote includes determining that the notice to members is 
accurate and not misleading, that all notices required by this section 
were timely, and that the membership vote was conducted in a fair and 
legal manner.



Sec. 708a.8  Other regulatory oversight of methods and procedures of membership vote.

    The Federal or State regulatory agency that will have jurisdiction 
over the financial institution after conversion must verify the 
membership vote and may direct that a new vote be taken, if it 
disapproves of the methods by which the membership vote was taken or the 
procedures applicable to the membership vote.



Sec. 708a.9  Completion of conversion.

    (a) Upon receipt of approvals under Sec. 708a.7 and Sec. 708a.8 of 
this part, the credit union may complete the conversion transaction.
    (b) Upon notification by the board of directors of the mutual 
savings bank or mutual savings association that the conversion 
transaction has been completed, the NCUA will cancel the insurance 
certificate of the credit union and, if applicable, the charter of the 
federal credit union.

[63 FR 65535, Nov. 27, 1998, as amended at 64 FR 28735, May 27, 1999]



Sec. 708a.10  Limit on compensation of officials.

    No director or senior management official of an insured credit union 
may receive any economic benefit in connection with the conversion of 
the credit union other than compensation and other benefits paid to 
directors or senior management officials of the converted institution in 
the ordinary course of business.



PART 708b--MERGERS OF FEDERALLY-INSURED CREDIT UNIONS; VOLUNTARY TERMINATION OR CONVERSION OF INSURED STATUS--Table of Contents




Sec.
708b.0  Scope.
708b.1  Definitions.

                           Subpart A--Mergers

708b.101  Mergers generally.
708b.102  Special provisions for Federal insurance.
708b.103  Preparation of merger plan.
708b.104  Submission of merger proposal to NCUA.
708b.105  Approval of merger proposal by NCUA.
708b.106  Approval of the merger proposal by members.
708b.107  Certificate of vote on merger proposal.
708b.108  Completion of merger.

[[Page 430]]

    Subpart B--Voluntary Termination or Conversion of Insured Status

708b.201  Termination of insurance.
708b.202  Notice to members of termination of insurance.
708b.203  Conversion of insurance.
708b.204  Notice to members of conversion of insurance.

                            Subpart C--Forms

708b.301  Termination of insurance.
708b.302  Conversion of insurance.
708b.303  Modifications to notice.

    Authority: 12 U.S.C. 1766, 1785, 1786, 1789.

    Source: 52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, 
Sept. 23, 1994, unless otherwise noted.



Sec. 708b.0  Scope.

    (a) Subpart A of this part prescribes the procedures for merging one 
or more credit unions with a continuing credit union where at least one 
of the credit unions is federally insured.
    (b) Subpart B of this part prescribes the procedures and notice 
requirements for termination of Federal insurance or conversion of 
Federal insurance to nonfederal insurance, including termination or 
conversion resulting from a merger.
    (c) Subpart C of this part sets forth the forms to be used for 
terminating Federal insurance or converting from Federal insurance to 
nonfederal insurance.
    (d) Nothing in this part shall operate as a restriction or otherwise 
impair the authority of NCUA to approve a merger pursuant to section 
205(h) of the Act.
    (e) This part does not address procedures or requirements that may 
be applicable under state law for a state credit union.



Sec. 708b.1  Definitions.

    (a) Continuing credit union means the credit union which will 
continue in operation after the merger.
    (b) Merging credit union means the credit union which will cease to 
exist as an operating credit union at the time of the merger.
    (c) State credit union means any credit union organized and operated 
according to the laws of any state, the several territories and 
possessions of the United States, or the Commonwealth of Puerto Rico. 
Accordingly, state authority means the appropriate state or territorial 
regulatory or supervisory authority for any such credit union.
    (d) Federally-insured means insured by the Board through the 
National Credit Union Share Insurance Fund (NCUSIF).
    (e) Nonfederally-insured means insured by a private or cooperative 
insurance fund or guaranty corporation organized or chartered under 
state law.
    (f) Uninsured means there is no share or deposit insurance available 
on the credit union accounts.
    (g) The terms terminate, termination and terminating, when used in 
reference to insurance, refer to the act of canceling Federal insurance 
and mean that the credit union will become uninsured.
    (h) The term convert, conversion and converting, when used in 
reference to insurance, refer to the act of canceling Federal insurance 
and simultaneously obtaining share or deposit insurance from another 
insurance carrier. They mean that after cancellation of Federal 
insurance the credit union will be nonfederally insured.



                           Subpart A--Mergers



Sec. 708b.101  Mergers generally.

    (a) In any case where a merger will result in the termination of 
Federal insurance or conversion to nonfederal insurance, the merging 
credit union must comply with the provisions of subpart B in addition to 
this subpart A.
    (b) No federally-insured credit union shall merge with any other 
credit union without the prior written approval of the Board.
    (c) Where the continuing credit union is a Federal credit union, 
there must be compliance with the chartering policies of the Board.
    (d) Where the continuing or merging credit union is a state credit 
union, the merger must be permitted by state law or authorized by the 
state authority.



Sec. 708b.102  Special provisions for Federal insurance.

    (a) Where the continuing credit union is federally insured, an 
NCUSIF deposit and a prorated insurance premium (unless waived in whole 
or in part for all insured credit unions during that year)

[[Page 431]]

will be assessed on the additional share accounts insured as a result of 
the merger of a nonfederally-insured or uninsured credit union with a 
federally-insured credit union.
    (b) Where the continuing credit union is nonfederally insured or 
uninsured but desires to be federally insured as of the date of the 
merger, an application shall be submitted to the appropriate Regional 
Director when the merging credit union requests approval of the merger 
proposal. An NCUSIF deposit and a prorated insurance premium (unless 
waived in whole or in part for all insured credit unions during that 
year) will be assessed on any additional share accounts insured as a 
result of the merger.
    (c) Where the continuing credit union is nonfederally insured or 
uninsured and does not make application for insurance, but the merging 
credit union is federally insured, the continuing credit union is 
entitled to a refund of the merging credit union's NCUSIF deposit and to 
a refund of the unused portion of the NCUSIF share insurance premium (if 
any). If the continuing credit union is uninsured, the refund will be 
made only after expiration of the one-year period of continued insurance 
coverage noted in paragraph (e) of this section.
    (d) Where the continuing credit union in nonfederally insured, 
NCUSIF insurance of the member accounts of a merging federally-insured 
credit union ceases as of the effective date of the merger. (Refer to 
subpart B, Secs. 708b.203 and 708b.204 and subpart C, Sec. 708b.302(b).)
    (e) Where the continuing credit union is uninsured, NCUSIF insurance 
of the member accounts of the merging federally-insured credit union 
will continue for a period of one year, subject to the restrictions in 
section 206(d)(1) of the Act as noted in the Notice of Termination set 
forth in Sec. 708b.301(b)(3). (Refer to subpart B, Secs. 708b.201 and 
708b.202, and subpart C, Sec. 708b.301(b).)

[52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, Sept. 23, 1994 
and amended at 59 FR 67620, Dec. 30, 1994]



Sec. 708b.103  Preparation of merger plan.

    (a) Upon the approval of a proposition for merger by the boards of 
directors of the credit unions, a plan for the proposed merger shall be 
prepared. The plan shall include:
    (1) Current financial reports;
    (2) Current delinquent loan schedules annotated to reflect 
collection problems;
    (3) Combined financial report;
    (4) Analyses of share values;
    (5) Explanation of any proposed share adjustments;
    (6) Explanation of any provisions for reserves, undivided earnings 
or dividends;
    (7) Provisions with respect to notification and payment of 
creditors;
    (8) Explanation of any changes relative to insurance such as life 
savings and loan protection insurance and insurance of member accounts;
    (9) Provisions for determining that all assets and liabilities of 
the continuing credit union will conform with the requirements of the 
Act (where the continuing credit union is a Federal credit union); and
    (10) Proposed charter amendments (where the continuing credit union 
is a Federal credit union). These amendments, if any, will usually 
pertain to the name of the credit union and the definition of its field 
of membership.



Sec. 708b.104  Submission of merger proposal to NCUA.

    (a) Upon approval of the merger plan by the boards of directors of 
the credit unions, the following information will be submitted to the 
Regional Director:
    (1) The merger plan, as described in this part;
    (2) Resolutions of the boards of directors;
    (3) Proposed Merger Agreement;
    (4) Proposed Notice of Special Meeting of the Members (for merging 
Federal credit unions);
    (5) Copy of the form of Ballot to be sent to the members (for 
merging Federal credit unions);
    (6) Evidence that the state's supervisory authority is in agreement 
with the merger proposal (for states which require such agreement prior 
to NCUA approval); and
    (7) Application and Agreement for Insurance of Member Accounts (for 
continuing state credit unions desiring to become federally insured).

[[Page 432]]



Sec. 708b.105  Approval of merger proposal by NCUA.

    (a) In any case where the continuing credit union is federally 
insured, and the merging credit union is nonfederally insured or 
uninsured, a determination shall be made by NCUA as to the potential 
risk to the National Credit Union Share Insurance Fund (NCUSIF).
    (b) If NCUA finds that the merger proposal complies with the 
provisions of this part and does not present an undue risk to the 
NCUSIF, it may approve the proposal subject to such other specific 
requirements as may be prescribed to fulfill the intended purposes of 
the proposed merger. In the event NCUA determines that the merging 
credit union, if it is a Federal credit union, is in danger of 
insolvency, and that the proposed merger would reduce the risk or avoid 
a threatened loss to the National Credit Union Share Insurance Fund, 
NCUA may permit the merger to become effective without an affirmative 
vote of the membership of the merging Federal credit union, 
notwithstanding the provisions of Sec. 708b.106; Provided, That the 
continuing credit union is federally insured.
    (c) Any proposed charter amendments for a continuing Federal credit 
union will be approved contingent upon the completion of the merger.

[52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, Sept. 23, 1994 
and amended at 59 FR 67620, Dec. 30, 1994]



Sec. 708b.106  Approval of the merger proposal by members.

    (a) When the merging credit union is a Federal credit union, the 
members shall:
    (1) Have the right to vote on the merger proposal in person at the 
annual meeting, if within 60 days after NCUA approval, or at a special 
meeting to be called within 60 days of such approval, or by mail ballot, 
received no later than the date and time announced for the annual 
meeting or the special meeting called for that purpose.
    (2) Be given advance notice of the meeting at which the merger 
proposal is to be submitted, in accordance with the provisions of 
article V, Meetings of Members, Federal Credit Union Bylaws. The notice 
shall:
    (i) Specify the purpose of the meeting and the time and place;
    (ii) Include a summary of the merger plan, which shall contain, but 
not necessarily be limited to, current financial reports for each credit 
union, a combined financial report for the continuing credit union, 
analyses of share values, explanation of any proposed share adjustments, 
explanation of any changes relative to insurance such as life savings 
and loan protection insurance and insurance of member accounts (refer to 
subpart B, Secs. 708b.202 and 708b.204);
    (iii) State reasons for the proposed merger;
    (iv) Provide name and location (to include branches) of the 
continuing credit union;
    (v) Inform the members that they have the right to vote on the 
merger proposal in person at the meeting or by written ballot to be 
received no later than the date and time announced for the annual 
meeting or the special meeting called for that purpose; and
    (vi) Be accompanied by a Ballot for Merger Proposal.
    (b) The proposal to merge a Federal credit union into a federally-
insured credit union must be approved by an affirmative vote of a 
majority of the members of the merging credit union who vote on the 
proposal. If the continuing credit union is uninsured, the voting 
requirements of Sec. 708b.201(c) apply; if it is nonfederally insured, 
the voting requirements of Sec. 708b.203(c) apply.

[52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, Sept. 23, 1994 
and amended at 59 FR 67620, Dec. 30, 1994]



Sec. 708b.107  Certificate of vote on merger proposal.

    The board of directors of the merging Federal credit union shall 
certify the results of the membership vote to the Regional Director 
within 10 days after the vote is taken.



Sec. 708b.108  Completion of merger.

    (a) Upon approval of the merger proposal by NCUA and by the state 
supervisory authority (where the continuing or merging credit union is a 
state credit union) and by the members of each

[[Page 433]]

credit union where required, action may be taken to complete the merger.
    (b) Upon completion of the merger, the board of directors of the 
continuing credit union shall certify the completion of the merger to 
the Regional Director within 30 days after the effective date of the 
merger.
    (c) Upon NCUA's receipt of certification that the merger has been 
completed, then the charter of the merging Federal credit union (if 
applicable) and the insurance certificate of any merging federally-
insured credit union will be canceled.



    Subpart B--Voluntary Termination or Conversion of Insured Status



Sec. 708b.201  Termination of insurance.

    (a) A state credit union may terminate Federal insurance, if 
permitted by state law, either on its own or by merging into an 
uninsured credit union.
    (b) A Federal credit union may terminate Federal insurance only by 
merging into, or converting its charter to, an uninsured state credit 
union.
    (c) Termination of insurance must be approved by the affirmative 
vote of a majority of the credit union's members. The credit union must 
notify the Board, through the Regional Director, in writing at least 90 
days prior to termination and the membership vote must have been 
obtained within one year prior to giving the Board notice.
    (d) No federally-insured credit union shall terminate Federal 
insurance without the prior written approval of the Board. The Board 
will approve or disapprove the termination in writing within 90 days 
after being notified by the credit union.



Sec. 708b.202  Notice to members of termination of insurance.

    (a) When a federally-insured credit union proposes to terminate 
Federal insurance, including termination due to a merger or conversion 
of charter, it shall provide its members with written notice of the 
proposal to terminate and of the date set for the membership vote. The 
Notice of Proposal shall be as set forth in either Sec. 708b.301 (a)(1) 
or (b)(1), or as provided in Sec. 708b.301(c), as the circumstances 
warrant.
    (b) The notice shall be delivered in person to each member, or 
mailed to each member at the address for such member as it appears on 
the records of the credit union, not more than 30 nor less than 7 days 
prior to the date of the vote. The membership shall be given the 
opportunity to vote by mail ballot. The ballot to be used shall be as 
set forth in either Sec. 708b.301 (a)(2) or (b)(2), as the circumstances 
warrant. The notice of the proposal and the ballot may be provided to 
members at the same time.
    (c) If the proposition for termination of insurance is approved by 
the membership and the Board, prompt and reasonable notice of 
termination shall be given to all members in the form set forth in 
either Sec. 708b.301(a)(3) or (b)(3), as the circumstances warrant.

[52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, Sept. 23, 1994 
and amended at 59 FR 67620, Dec. 30, 1994]



Sec. 708b.203  Conversion of insurance.

    (a) A federally-insured state credit union may convert to nonfederal 
insurance, if permitted by state law, either on its own or by merging 
into a nonfederally-insured credit union.
    (b) A Federal credit union may convert to nonfederal insurance only 
by merging into, or converting its charter to, a nonfederally-insured 
state credit union.
    (c) Conversion of Federal to nonfederal insurance must be approved 
by an affirmative vote of a majority of the credit union's members who 
vote on the proposition, provided at least 20 percent of the total 
membership participates in the voting. The credit union must notify the 
Board, through the Regional Director, in writing at least 90 days prior 
to conversion. Notice to the Board may be given when membership approval 
is solicited or after membership approval is obtained.
    (d) No federally-insured credit union shall convert to nonfederal 
insurance without the prior written approval of the Board. The Board 
will approve or disapprove the conversion in writing within 90 days 
after being notified by the credit union.

[[Page 434]]



Sec. 708b.204  Notice to members of conversion of insurance.

    (a) When a federally-insured credit union proposes to convert to 
nonfederal insurance, including conversion due to a merger or conversion 
of charter, it shall provide its members with written notice of the 
proposal to convert and of the date set for the membership vote. Notice 
of the proposal shall be as set forth in either Sec. 708b.302 (a)(1) or 
(b)(1), or as provided in Sec. 708b.302(c), as the circumstances 
warrant.
    (b) The notice shall be delivered in person to each member, or 
mailed to each member at the address for such member as it appears on 
the records of the credit union, not more than 30 nor less than 7 days 
prior to the date for the vote. The membership shall be given the 
opportunity to vote by mail ballot. The ballot to be used for the 
membership vote shall be as set forth in either Sec. 708b.302 (a)(2) or 
(b)(2), as the circumstances warrant. The notice of the proposal and the 
ballot may be provided to the members at the same time.
    (c) If the proposition for conversion of insurance is approved by 
the membership and the Board, prompt and reasonable notice shall be 
given to all members in the form set forth in either Sec. 708b.302 
(a)(3) or (b)(3), as the circumstances warrant.

[52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, Sept. 23, 1994 
and amended at 59 FR 67620, Dec. 30, 1994]



                            Subpart C--Forms



Sec. 708b.301  Termination of insurance.

    (a) A federally-insured state credit union shall use the following 
language for purposes of terminating Federal insurance:
    (1) Notice of Proposal to Terminate Federal Insurance

(Date)__________________________________________________________________

    The Board of Directors of ____________ Credit Union has approved a 
proposition to terminate Federal share (deposit) insurance, ($100,000, 
provided by the National Credit Union Administration (NCUA), an agency 
of the Federal Government). Termination of Federal insurance may only 
take place upon approval by a majority of our members. The membership 
vote will be taken on (date). (Add directions regarding membership 
meeting and/or mail ballot.)
    If approved, any deposits made by you after the date of termination, 
either new deposits or additions to existing accounts, will not be 
insured by the NCUA or any other entity. In the event the credit union 
fails, these deposits are not insured by the federal government. No 
provision has been made for alternative insurance, therefore, these 
deposits will be uninsured.
    Accounts in the Credit Union on the day of termination, up to a 
maximum of $100,000 for each member, will continue to be insured, as 
provided in the Federal Credit Union Act, for one (1) year after the 
close of business on the day of termination, but any withdrawals after 
the close of business on that date will reduce the insurance coverage by 
the amount of the withdrawal.

    (2) The ballot for obtaining membership approval to terminate 
Federal insurance shall contain the following language:

    This ballot must be received by the Credit Union by (date for vote).
    I understand that if termination of Federal insurance is approved, 
any new deposits or additions to existing accounts made by me will not 
be insured by the National Credit Union Administration, an agency of the 
Federal Government. I also understand that my accounts in the Credit 
Union on the date of termination, up to a maximum of $100,000, will 
continue to be insured for one (1) year after the date of termination, 
but that any withdrawals after the date of termination will reduce the 
insurance coverage by the amount of the withdrawal.
    [  ] Approve termination of insurance.
    [  ] Do not approve termination of insurance.

Signed__________________________________________________________________
    Member's Name
Date____________________________________________________________________

    (3) Notice of Termination

(Date)__________________________________________________________________
    1. The status of the ____________ as an insured credit union under 
the provisions of the Federal Credit Unions Act will terminate as of the 
close of business on the ____________ day of ____________ .
    2. Any deposits made by you after that date, either new deposits or 
additions to existing accounts, will not be insured by the National 
Credit Union Administration.
    3. Accounts in the Credit Union on the ____________ day of 
____________, up to a maximum of $100,000 for each member, will continue 
to be insured, as provided by the Federal Credit Union Act, for one (1) 
year after the close of business on the ____________ day of 
____________; Provided, however, that any

[[Page 435]]

withdrawals after the close of business on the ____________ day of 
____________, ____________, will reduce the insurance coverage by the 
amount of such withdrawals.
(Name of Credit Union)

(Address)

_______________________________________________________________________

    (b) A federally-insured credit union that is merging with an 
uninsured credit union shall use the following language for purposes of 
terminating Federal insurance:

    (1) Notice of Proposal to Merge and Terminate Federal Insurance
    The Board of Directors of (merging) Credit Union has approved a 
proposition to merge the Credit Union into the (continuing) Credit 
Union. The merger must be approved by a majority of the members of 
(merging) Credit Union. The membership vote will be taken on (date). 
(Add directions regarding membership meeting and/or mail ballot.)
    If the membership approves the merger, the share (deposit) insurance 
you now have (up to $100,000 provided by the National Credit Union 
Administration, (NCUA), an agency of the Federal Government) will be 
affected as follows:
    Any deposits made by you after the effective date of the merger, 
either new deposits or additions to existing accounts, will not be 
insured by the NCUA or any other entity. In the event the credit union 
fails, these deposits are not insured by the federal government. No 
provision has been made for alternative insurance, therefore, these 
deposits will be uninsured. Accounts in the merging Credit Union on the 
date of the merger, up to a maximum of $100,000 for each member, will 
continue to be insured, as provided in the Federal Credit Union Act, for 
one (1) year after the close of business on the date of the merger, but 
any withdrawals after the close of business on that date will reduce the 
insurance coverage by the amount of the withdrawal.

    (2) The language for the ballot set forth in paragraph (a)(2) of 
this section, modified by substituting ``the merger and termination'' in 
lieu of ``termination'' each time it appears on the ballot, shall be 
used for obtaining membership approval to merge and terminate Federal 
insurance.
    (3) Notice of Merger and Termination of Federal Insurance

    1. The merger of the (merging) Credit Union into the (continuing) 
Credit Union has been approved, effective (date).
    2. The status of the (merging) Credit Union as an insured credit 
union under the provisions of the Federal Credit Union Act will 
terminate as of the close of business on the ____ day of __________ (day 
preceding merger date).
    3. Any deposits made by you after that date, either new deposits or 
additions to existing accounts, will not be insured by the National 
Credit Union Administration.
    4. Accounts in the Credit Union on the ______ day of ________, (day 
preceding merger date), up to a maximum of $100,000 for each member, 
will continue to be insured, as provided by the Federal Credit Union 
Act, for one (1) year after close of business on the ________ day of 
________ (day preceding merger date); Provided, however, that 
any withdrawals after the close of business on the ________ day of 
________, ________ (day preceding merger date), will reduce the 
insurance coverage by the amount of such withdrawals.
(Name of Credit Union)
(Address)

_______________________________________________________________________

    (c) A Federal credit union that is converting its charter to that of 
an insured state credit union shall use the language contained in 
paragraph (a) of this section, but shall modify the language in 
paragraph (a)(1) of this section to indicate that it is converting its 
charter and terminating Federal insurance.

[52 FR 12374, Apr. 16, 1987, as amended at 54 FR 43280, Oct. 24, 1989; 
63 FR 10519, Mar. 4, 1998]



Sec. 708b.302  Conversion of insurance.

    (a) A federally-insured state credit union shall use the following 
language for purposes of converting from Federal insurance to nonfederal 
insurance:
    (1) Notice of Proposal to Convert to Nonfederally-Insured Status

    The Board of Directors of ________ Credit Union has approved a 
proposition to convert from Federal share (deposit) insurance to 
nonfederal insurance. The conversion must be approved by a majority of 
the members who vote on the proposal and at least 20% of the entire 
membership must participate in the vote. The membership vote will be 
taken on (date). (Add directions regarding membership meeting and/or 
mail ballot.)
    If the membership approves the conversion, the share (deposit) 
insurance you now have (up to $100,000 provided by the National Credit 
Union Administration, an agency of the Federal Government) will 
terminate on the effective date of the conversion. Shares (deposit) in 
the ________ Credit Union will be insured up to $________ by ________, a 
corporation chartered by the State of ________. The insurance provided 
by the National Credit

[[Page 436]]

Union Administration, an independent agency of the United States, is 
backed by the full faith and credit of the United States government. The 
private insurance you will receive from ________ is not guaranteed by 
the Federal or any State government.

    (2) The ballot to obtain membership approval of the conversion shall 
contain the following language:

    This ballot must be received by the Credit Union by (date for vote).
    I understand that, if the conversion of insurance is approved, the 
share (deposit) insurance that I now have (up to $100,000 provided by 
the National Credit Union Administration, an agency of the Federal 
Government) will terminate upon the effective date of the conversion and 
my shares will be insured up to $________ by ________, a corporation 
chartered by the State of ________. The private insurance provided by 
________ is not backed by the full faith and credit of the United States 
government as is the Federal insurance provided by the National Credit 
Union Administration.
    [  ] Approve conversion of insurance.
    [  ] Do not approve conversion of insurance.

Signed__________________________________________________________________
Member's Name
Date____________________________________________________________________

    (3) Notice of Conversion

(Date)__________________________________________________________________
    1. The status of the ________ as an insured credit union under the 
provisions of the Federal Credit Union Act will cease as of the close of 
business on the ________ day of ________, ________.
    2. As of that date, your deposits will no longer be insured by the 
National Credit Union Share Insurance Fund.
    3. Accounts in the credit union will be insured up to $________ by 
________, a corporation chartered by the State of ________.
(Name of Credit Union)
(Address)

_______________________________________________________________________

    (b) A federally-insured credit union that is merging with a 
nonfederally-insured credit union shall use the following language for 
purposes of converting from Federal to nonfederal insurance:
    (1) Notice of Proposal to Merge and Convert to Nonfederally-Insured 
Status

    The Board of Directors of (merging) Credit Union has approved a 
proposition to merge the Credit Union into (continuing) Credit Union. 
The merger must be approved by a majority of the members of (merging) 
Credit Union who vote on the proposal and at least 20% of the entire 
membership must participate in the vote. The membership vote will be 
taken on (date) (Add directions regarding membership meeting and/or mail 
ballot.)
    If the membership approves the merger, the share (deposit) insurance 
you now have (up to $100,000 provided by the National Credit Union 
Administration, an agency of the Federal Government) will terminate on 
the effective date of the merger. Shares (deposit) in the (continuing) 
Credit Union will be insured up to $________ by ________, a corporation 
chartered by the State of ________. The insurance provided by the 
National Credit Union Administration, an independent agency of the 
United States, is backed by the full faith and credit of the United 
States government. The private insurance you will receive from ________ 
is not guaranteed by the Federal or any State government.

    (2) The ballot to obtain membership approval shall contain the 
following language:

    This ballot must be received by the Credit Union by (date for vote).
    I understand that if the merger of the (merging) Credit Union into 
the (continuing) Credit Union is approved, the share (deposit) insurance 
that I now have (up to $100,000 provided by the National Credit Union 
Administration, an agency of the Federal Government) will terminate upon 
the effective date of the merger and my shares in the (continuing) 
Credit Union will be insured up to $________ by ________, a corporation 
chartered by the State of ________. The private insurance provided by 
________ is not backed by the full faith and credit of the United States 
government as is the federal insurance provided by the National Credit 
Union Administration.
    [  ] Approve merger and conversion of insurance.
    [  ] Do not approve merger and conversion of insurance.

Signed__________________________________________________________________
Member's Name
Date____________________________________________________________________

    (3) Notice of Merger and Conversion of Insured Status

(Date)__________________________________________________________________
    1. The merger of the (merging) Credit Union into the (continuing) 
Credit Union has been approved, effective (date).
    2. As of that date, your shares (deposit) are no longer insured by 
the National Credit Union Administration.
    3. Accounts in the (continuing) Credit Union will be insured up to 
$________ by ________, a corporation chartered by the State of ________.
(Name of Credit Union)

(Address)


[[Page 437]]


_______________________________________________________________________

    (c) A Federal credit union that is converting its charter to that of 
a nonfederally-insured credit union shall use the language contained in 
paragraph (a) of this section, but shall modify the language in 
paragraph (a)(1) of this section to indicate that it is converting its 
charter and converting from Federal insurance.

[52 FR 12374, Apr. 16, 1987, as amended at 54 FR 43280, Oct. 24, 1989; 
63 FR 10519, Mar. 4, 1998]



Sec. 708b.303  Modifications to notice.

    (a) Any modifications or additions to the notices or ballot 
concerning insurance coverage, and any additional communications 
concerning insurance coverage included with the notices or ballot, may 
be made with the approval of the Regional Director and, in the case of a 
state credit union, the appropriate state authority. Approval of such 
modifications, additions or additional communications will not be 
withheld unless it is determined that the credit union, by inclusion or 
omission of information, would materially mislead or misinform its 
membership.
    (b) Federally-insured state credit unions may include additional 
language in the notice and ballot regarding state requirements for 
mergers, where appropriate.

[52 FR 12374, Apr. 16, 1987, as amended at 54 FR 43280, Oct. 24, 1989]



PART 709--INVOLUNTARY LIQUIDATION OF FEDERAL CREDIT UNIONS AND ADJUDICATION OF CREDITOR CLAIMS INVOLVING FEDERALLY INSURED CREDIT UNIONS IN LIQUIDATION--Table of Contents




Sec.
709.0  Scope.
709.1  Definitions.
709.2  NCUA Board as liquidating agent.
709.3  Challenge to revocation of charter and involuntary liquidation.
709.4  Powers and duties of liquidating agent.
709.5  Payout priorities in involuntary liquidation.
709.6  Initial determination of creditor claims by the liquidating 
          agent.
709.7  Procedures for appeal of initial determination.
709.8  Administrative appeal of the initial determination.
709.9  Expedited determination of creditor claims.
709.10  Treatment by conservator or liquidating agent of financial 
          assets transferred in connection with a securitization or 
          participation.
709.11  Treatment by conservator or liquidating agent of collateralized 
          public funds.

    Authority: 12 U.S.C. 1757, 1766, 1767, 1786(h), 1787, 1788, 1789, 
1789a.

    Source: 56 FR 56925, Nov. 7, 1991, unless otherwise noted.



Sec. 709.0  Scope.

    The rules and procedures set forth in this part apply to charter 
revocations of federal credit unions under 12 U.S.C. 1787(a)(1)(A), (B), 
the involuntary liquidation and adjudication of creditor claims in all 
cases involving federally-insured credit unions, the treatment by the 
Board as conservator or liquidating agent of financial assets 
transferred in connection with a securitization or participation, and 
the treatment by the Board as conservator or liquidating agent of public 
funds held by a federally-insured credit union. Remaining sections of 
this part are applicable to all federally insured credit unions. This 
part does not apply to share insurance claims arising out of the 
liquidation of a federally insured credit union. Insurance claims are 
decided pursuant to part 745 of this chapter.

[56 FR 56925, Nov. 7, 1991, as amended at 65 FR 55442, Sept. 14, 2000]



Sec. 709.1  Definitions.

    For the purposes of this part, the following definitions apply:
    (a) General Counsel means the General Counsel of the National Credit 
Union Administration or any attorney assigned to the General Counsel's 
staff.
    (b) Liquidating Agent means the NCUA Board or person(s) appointed by 
it with delegated authority to carry out the liquidation of the credit 
union.
    (c) Insolvent means insolvency as that term is defined in 
Sec. 700.1(j) of this chapter.
    (d) Claim means a creditor's claim against the credit union in 
liquidation. This term does not include insurance claims arising out of 
the liquidation of

[[Page 438]]

a federally insured credit union. Insurance claims are decided pursuant 
to part 745 of this chapter.
    (e) Shareholder means members, nonmembers, accountholders or any 
other party or entity that is the owner of a share, share certificate or 
share draft account or the equivalent of such accounts under state law.



Sec. 709.2  NCUA Board as liquidating agent.

    (a) The Board, as liquidating agent, by operation of law and without 
any conveyance or other instrument, act or deed, shall succeed to all 
the rights, titles, powers, and privileges of the credit union, and of 
its shareholders, officers, and directors, with respect to the credit 
union and its assets, and such shareholders, officers, or directors, 
shall not thereafter have or exercise any such rights, powers, or 
privileges or act in connection with any assets or property of any 
nature of the credit union.
    (b) The Board, as liquidating agent, shall take possession of and 
title to books, records, and assets of every description of such credit 
union to which such credit union has rights of possession and title to 
all offices and other facilities of such credit union.



Sec. 709.3  Challenge to revocation of charter and involuntary liquidation.

    If a Federal credit union is determined to be insolvent and placed 
into liquidation pursuant to 12 U.S.C. 1787, the Federal credit union 
may, not later than 10 days after the date on which the Board closes the 
credit union for liquidation, apply to the United States District Court 
for the Judicial district in which the principal office of the credit 
union is located or the United States District Court for the District of 
Columbia for an order requiring the Board to show cause why it should 
not be prohibited from continuing such liquidation. Notwithstanding 
other provisions of this part, the board of directors of the credit 
union may meet following the placing of the institution into liquidation 
for the sole purpose of considering and authorizing the filing of this 
action in the name of the credit union. No such action in the name of 
the credit union may be instituted without the authorization of the 
board of directors of the institution pursuant to a valid board of 
directors resolution. No credit union funds shall be available to pay 
expenses incurred in bringing a legal action to challenge the Board's 
liquidation action.



Sec. 709.4  Powers and duties of liquidating agent.

    (a) Inventory of assets. As soon as practicable after taking 
possession, the liquidating agent shall inventory the assets of such 
credit union as of the date of taking possession, showing the value as 
carried on the books of the credit union, and the security therefor, if 
any, a brief description of the assets and any security, and a record of 
the credit union's creditor and accounts liabilities.
    (b) Notice to creditors. The liquidating agent shall promptly 
publish a notice to the credit union's creditors to present their 
claims, together with proof, to the liquidating agent by a date 
specified in the notice. This date shall be not less than 90 days after 
the publication of the notice. The liquidating agent shall republish 
such notice approximately one and two months, respectively, after the 
initial publication. At the time of initial publication, the liquidating 
agent shall mail a notice similar to the published notice to any 
creditor shown on the credit union's books at the last address appearing 
therein. If the liquidating agent discovers the name of a creditor whose 
name does not appear on the credit union's books, a notice similar to 
the published notice shall be mailed to such creditor within 30 days 
after the discovery of the name and address.
    (c) General. The liquidating agent shall collect all obligations and 
money due such credit union and may, to the extent consistent with its 
appointment, do all things desirable or expedient in its discretion to 
wind up the affairs of the credit union including, but not limited to, 
the following:
    (1) Exercise all rights and powers of the credit union including, 
but not limited to, any rights and powers under any mortgage, deed of 
trust, chose in

[[Page 439]]

action, option, collateral note, contract, judgment or decree, or 
instrument of any nature;
    (2) Institute, prosecute, maintain, defend, intervene, and otherwise 
participate in any and all actions, suits, or other legal proceedings by 
and against the liquidating agent or the credit union or in which the 
liquidating agent, the credit union, or its creditors or shareholders, 
or any of them, shall have an interest, and in every way to represent 
the credit union, its shareholders and creditors, subject to the 
direction of General Counsel;
    (3) Employ on a salary or fee basis such persons as in the judgment 
of the liquidating agent are necessary or desirable to carry out its 
responsibilities and functions, including, but not limited to, 
appraisers and Certified Public Accountants, and pay the costs out of 
the assets of the liquidated credit union;
    (4) Employ or retain any attorney or attorneys designated by, or 
acceptable to, the General Counsel in connection with litigation or for 
legal advice and assistance, for the liquidation generally or in 
particular instances, and pay compensation and retainers of such 
attorney or attorneys, together with all expenses, including, but not 
limited to, the costs and expenses of any litigation, as approved by the 
General Counsel, out of the assets of the liquidated credit union;
    (5) Execute, acknowledge, and deliver any and all deeds, contracts, 
leases, assignments, bills of sale, releases, extensions, satisfactions, 
and other instruments necessary or proper for any purposes, including, 
but not limited to, the effectuation, termination, or transfer of real, 
personal or mixed property, or that shall be necessary or proper to 
liquidate the credit union, and any deed or other instrument executed 
pursuant to the authority hereby given shall be as valid and effective 
for all purposes as if the same had been executed as the act and deed of 
the credit union;
    (6) With concurrence of General Counsel, disaffirm or repudiate any 
contract or lease to which the credit union is a party, the performance 
of which the liquidating agent, in his sole discretion, determines to be 
burdensome, and which disaffirmance or repudiation in the liquidating 
agent's sole discretion will promote the orderly administration of the 
credit union's affairs;
    (7) Deposit, withdraw, or transfer funds, and otherwise exercise 
complete control over all investment or depository accounts maintained 
by or for the credit union at financial dispository or similar 
institutions;
    (8) Do such things, and have such rights, powers, privileges, 
immunities, and duties, whether or not otherwise granted in this part 
709, as shall be authorized, directed, conferred, or imposed from time 
to time by the Board, or as shall be conferred by the Federal Credit 
Union Act;
    (9) Exercise such other authority as is conferred by the Federal 
Credit Union Act; and
    (10) Where acting as liquidating agent for a state-chartered 
federally insured credit union, exercise all the rights, powers, and 
privileges granted by state law to such a liquidating agent.
    (d) Expenditure of funds of the liquidation. The liquidating agent 
shall have power to:
    (1) Pay all costs and expenses of the liquidation as determined by 
the liquidating agent;
    (2) Pay off and discharge taxes and liens;
    (3) Pay out and expend such sums as are deemed necessary or 
advisable for or in connection with the preservation, maintenance, 
conservation, protection, remodeling, repair, rehabilitation, or 
improvement of any asset or property of any nature of the credit union 
or the liquidating agent;
    (4) Pay off and discharge any assessments, liens, claims, or charges 
of any kind against any asset or property of any nature on which the 
credit union or the liquidating agent has a lien by way of mortgage, 
deed of trust, pledge, or otherwise, or in which the credit union or 
liquidating agent has any interest;
    (5) Settle, compromise, or obtain the release of, for cash or other 
consideration, claims and demands against the credit union or the 
liquidating agent; and

[[Page 440]]

    (6) Indemnify its employees and agents from the assets of the credit 
union against liabilities incurred in the good faith performance of 
their duties.
    (e) Assets, claims, and contracts. The liquidating agent shall have 
power to:
    (1) Sell for cash or on terms, exchange, assign, or otherwise 
dispose of, in whole or in part, any or all of the assets and property 
of the credit union, real, personal and mixed, tangible and intangible, 
of any nature, including any mortgage, deed of trust, chose in action, 
bond, note, contract, judgment, or decree, share or certificate of share 
of stock or debt, owing to the credit union or the liquidating agent; 
and
    (2) Surrender, abandon, and release any chose in action, or other 
assets or property of any nature, whether the subject of pending 
litigation or not, and settle, compromise, modify, or release, for cash 
or other consideration, claims and demands in favor of the credit union 
or the liquidating agent.



Sec. 709.5  Payout priorities in involuntary liquidation.

    (a) Claimants whose claims are secured shall receive their security. 
To the extent their respective claims exceed the value of the security 
for those claims, as determined to the satisfaction of the liquidating 
agent, they shall each have an unsecured claim against the credit union 
having priority as provided in paragraph (b) of this section.
    (b) Unsecured claims against the liquidation estate that are proved 
to the satisfaction of the liquidating agent shall have priority in the 
following order:
    (1) Administrative costs and expenses of liquidation;
    (2) Claims for wages and salaries, including vacation, severance, 
and sick leave pay;
    (3) Taxes legally due and owing to the United States or any state or 
subdivision thereof;
    (4) Debts due and owing the United States, including the National 
Credit Union Administration;
    (5) General creditors, and secured creditors (to the extent that 
their respective claims exceed the value of the security for those 
claims);
    (6) Shareholders to the extent of their respective uninsured shares 
and the National Credit Union Share Insurance Fund to the extent of its 
payment of share insurance;
    (7) In a case involving liquidation of a corporate credit union, 
membership capital;
    (8) In a case involving liquidation of a low-income designated 
credit union, any outstanding secondary capital accounts issued pursuant 
to the authority of Secs. 701.34 or 741.204(c) of this chapter; and
    (9) In a case involving liquidation of a corporate credit union, 
paid-in capital.
    (c) Priorities are to be based on the circumstances that exist on 
the date of liquidation.
    (d) If the repudiation or disaffirmance of any contract or lease 
gives rise to a claim for damages, such claim shall be considered a 
general creditor claim under paragraph (b)(5) of this section and not a 
cost or expense of liquidation under paragraph (b)(1) of this section.
    (e) All unsecured claims of any category or class or priority 
described in paragraphs (b)(1) through (b)(7) of this section shall be 
paid in full, or provisions made for such payment, before any claims of 
lesser priority are paid. If there are insufficient funds to pay all 
claims of a category or class, payment shall be made pro rata. 
Notwithstanding anything to the contrary herein, the liquidating agent 
may, at any time, and from time to time, prior to the payment in full of 
all claims of a category or class with higher priority, make such 
distributions to claimants in priority categories described in 
paragraphs (b)(1), (b)(2), (b)(3), (b)(4), and (b)(5) of this section as 
the liquidating agent believes are reasonably necessary to conduct the 
liquidation, provided that the liquidating agent determines that 
adequate funds exist or will be recovered during the liquidation to pay 
in full all claims of any higher priority. If a surplus remains after 
making distribution in full on all allowed claims described in 
paragraphs (b)(1) through (b)(9) of this section, such surplus shall be 
distributed

[[Page 441]]

pro rata to the credit union's shareholders.

[56 FR 56825, Nov. 7, 1991, as amended at 61 FR 3791, Feb. 2, 1996; 62 
FR 12949, Mar. 19, 1997; 64 FR 57365, Oct. 25, 1999]



Sec. 709.6  Initial determination of creditor claims by the liquidating agent.

    (a)(1) Any party wishing to submit a claim against the liquidated 
credit union must submit a written proof of claim in accordance with the 
requirements set forth in the notice to creditors. A failure to submit a 
written claim within the time provided in the notice to creditors shall 
be deemed a waiver of said claim and claimant shall have no further 
rights or remedies with respect to such claim.
    (2) Notwithstanding paragraph (a)(1) of this section, the 
liquidating agent may, at his discretion, consider an untimely claim 
provide the following two criteria are present:
    (i) The claimant did not receive notice of the appointment of the 
liquidating agent in time to file a claim before the date provided for 
in the notice; and
    (ii) The claim is filed in time to permit payment of the claim.
    (b) The liquidating agent may require submission of supplemental 
evidence by the claimant and by interested parties in the event of a 
dispute concerning a claim against any asset of the liquidated credit 
union. In requiring the submission of supplemental evidence, the 
liquidating agent may set such limitations of time, scope, and size as 
the liquidating agent deems reasonable in the circumstances, and may 
refuse to include in the record submissions or portions of submissions 
not in compliance with such limitations or requirements. The liquidating 
agent shall compile such written record of a claim or dispute as, in its 
discretion, is deemed sufficient to provide a reasonable basis for 
allowing or disallowing a claim or resolving a dispute. This written 
record shall be considered the administrative record.
    (c) The liquidating agent shall determine whether to allow or 
disallow a claim and shall notify the claimant within 180 days from the 
date a claim against a credit union is filed pursuant to paragraph 
(a)(1) of the section. This 180-day period may be extended by written 
agreement between the claimant and the liquidating agent. Failure by the 
liquidating agent to determine a claim and notify the claimant within 
the 180-day period or, if the period is extended, within the extended 
period, shall be deemed a denial of the claim.
    (d) If a claim or any portion thereof is disallowed, the notice to 
the claimant shall contain a statement of the reasons for the 
disallowance and an explanation of appeal rights pursuant to Sec. 709.7 
of this part.
    (e) Notice of any determination with respect to a claim shall be 
sufficient if mailed to the most recent address of the claimant which 
appears:
    (1) On the credit union's books;
    (2) In the claim filed by the claimant; or
    (3) In the documents submitted in the proof of claim.
    (f) In the event the liquidating agent disallows all or part of a 
claim, the liquidating agent shall file with the Board, or its 
designated agent, a report of its determination. This report shall 
become part of the record and shall include the notice to the claimant 
and findings on all issues raised and decided by the liquidating agent.



Sec. 709.7  Procedures for appeal of initial determination.

    In order to appeal all or part of an initial decision which 
disallows a claim, in whole or in part, a claimant must, within 60 days 
of the mailing of the initial determination, file an administrative 
appeal pursuant to Sec. 709.8 of this part, or file suit against the 
liquidated credit union in the United States District Court for the 
District of Columbia or in the United States district court having 
jurisdiction over the place where the credit union's principal place of 
business is located, or continue an action commenced before the 
appointment of the liquidating agent. If the claimant does not appeal or 
file or continue a suit, any disallowance shall be final and the 
claimant shall have no further rights or remedies with respect to such 
claim.

[[Page 442]]



Sec. 709.8  Administrative appeal of the initial determination.

    (a) General. A claimant requesting an administrative appeal may 
request review pursuant to any of the procedures listed in paragraph (b) 
or (c) of this section. Any appeal of the initial determination must be 
in writing and must specify what type of appeal the claimant requests. 
The determination of whether to agree to a request for administrative 
appeal shall rest solely with the Board, which shall notify the claimant 
of its decision in writing. The 60 day period for filing a lawsuit in 
United States district court, provided for in Sec. 709.7 of this part, 
shall be tolled from the date of claimant's request for an 
administrative appeal to the date of the Board's decision regarding that 
request.
    (b) Hearing on the record. Except as provided herein, any hearing 
requested pursuant to this section shall be conducted in accordance with 
the provisions of subpart A, part 747, of this chapter. The Board shall 
render a final decision with respect to such claim after consideration 
of the hearing record and recommended decision. The Board's 
determination shall be subject to judicial review under chapter 7 of 
title 5, United States Code. Any claimant seeking judicial review of the 
Board's final decision under this paragraph must file a petition in the 
court of appeals for the circuit in which the principal office of the 
credit union is located, or in the United States Court of Appeals for 
the District of Columbia Circuit, within 30 days of the date of the 
Board's final decision. If a claimant does not file a petition before 
the end of the 30-day period, the Board's decision shall be final, and 
the claimant shall have no further rights or remedies with respect to 
such claim.
    (1) Burden of proof. In any hearing on the record, the burden of 
proof to establish entitlement to any modification of the initial 
determination shall rest solely upon the claimant.
    (2) Order of procedure. In any hearing on the record, at the time 
for opening arguments, counsel for the claimant shall argue first, and 
at the time for closing arguments, counsel for the claimant shall argue 
last.
    (c) Alternative dispute resolution. Paragraphs (c) (1) and (2) of 
this section list alternatives for dispute resolution which may be 
available at the discretion of the Board. From time to time, the NCUA 
Board may authorize additional alternative dispute resolution processes.
    (1) Appeal to the Board. Pursuant to this paragraph (c)(1), the 
claimant may file an appeal with the NCUA Board within the time provided 
for in Sec. 709.7. The appeal must be in writing and filed with the 
Secretary of the Board, National Credit Union Administration, 1775 Duke 
Street, Alexandria, VA 22314-3428. There shall be no personal appearance 
before the Board in connection with an appeal under this paragraph 
(c)(1).
    (i) Content of appeal. Any appeal must include:
    (A) A statement of the facts on which the appeal is based;
    (B) A statement of the basis for the initial determination to which 
the claimant objects and the alleged error in such determination, 
including citations to applicable statutes and regulations;
    (C) Any other evidence relied upon by the claimant which was not 
previously provided to the liquidating agent.
    (ii) Procedures for review of the appeal. (A) Within 60 days of the 
date of the Board's receipt of an appeal, pursuant to paragraph (c)(1) 
of this section, the Board may request in writing that the claimant 
submit supplemental evidence in support of its appeal. If additional 
evidence is requested, the claimant shall have 45 days from the date of 
issuance of such request to provide such additional information. Failure 
by the claimant to provide such additional information may, as 
determined solely by the Board, result in denial of the claimant's 
appeal.
    (B) Within 60 days from the date of the Board's receipt of an 
appeal, pursuant to paragraph (c)(1) of this section, the claimant may 
amend or supplement the appeal in writing. In the event the claimant 
does amend or supplement the appeal, the provisions of paragraph 
(c)(1)(ii)(A) of this section, with respect to requests for additional 
information and responses to such requests, shall apply with equal force 
to

[[Page 443]]

any such amendment or supplement to an appeal.
    (iii) Determination on appeal. (A) Within 180 days from the date of 
receipt of an appeal by the Board, the Board shall issue a decision 
allowing or disallowing claimant's appeal.
    (B) The decision by the Board on appeal shall be provided to the 
claimant in writing, stating the reasons for the decision, and shall 
constitute a final agency decision regarding the claimant's claim.
    (C) Failure by the Board to issue a decision on appeal of the 
claimant's claim within the 180-day period provided for under paragraph 
(c)(1)(iii)(A) of this section shall be deemed to be a denial of such 
appeal for the purposes of paragraph (c)(1)(iv) of this section.
    (iv) Judicial review. (A) For the purposes of seeking judicial 
review of actions taken pursuant to paragraph (c)(1) of this section, 
only a determination on appeal issued by the NCUA Board pursuant to this 
section shall constitute a final determination regarding a claim.
    (B) A final determination by the Board is reviewable in accordance 
with the provisions of chapter 7, title 5, United States Code, by the 
United States Court of Appeals for the District of Columbia or the court 
of appeals for the Federal judicial circuit where the credit union's 
principal place of business is located. Any request for judicial review 
under this paragraph must be filed within 60 days of the date of the 
Board's final decision. If any claimant fails to file before the end of 
the 60-day period, the Board's decision shall be final, and the claimant 
shall have no further rights or remedies with respect to such claim.
    (2) The following additional procedures for dispute resolution may 
be made available at the sole discretion of the Board: mediation; 
nonbinding arbitration; and neutral fact finding.

[56 FR 56925, Nov. 7, 1991, as amended at 59 FR 36041, July 15, 1994]



Sec. 709.9  Expedited determination of creditor claims.

    (a) General. The provisions of this section establish procedures 
under which claimants may request expedited relief in lieu of the 
procedures set forth in Sec. 709.6 of this part. A claimant shall be 
entitled to expedited determination of a claim only upon a showing that 
there exists a legally valid and enforceable or perfected security 
interest in assets of the liquidated credit union and that irreparable 
injury will occur if the routine claims procedure is followed.
    (b) Filing of request for expedited relief. All requests for 
expedited relief must be filed within 30 days from the date of mailing, 
by the liquidating agent, of the notice to the creditor concerned. The 
request shall be deemed to be filed when received by the Secretary of 
the Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, VA 22314-3428. A copy of the request must be simultaneously 
served upon the liquidating agent for the credit union concerned. There 
shall be no right of personal appearance before the Board in connection 
with any claim submitted under this paragraph.
    (c) Content of request for expedited relief. Any Request for 
Expedited Relief must contain the following:
    (1) A clear and concise statement of the facts and issues on which 
the request is based;
    (2) A clear and concise statement describing the nature of any 
security interests in any assets of the credit union;
    (3) A clear and concise statement of the probable, imminent and 
irreparable harm likely to occur if expedited relief is not granted;
    (4) An assessment of the likelihood of success on the merits of the 
underlying claim, including statutory citations and relevant 
documentation supporting the merits of the claim;
    (5) Any other relevant documentation that supports the request;
    (6) Citations to applicable statutes, regulations, or other legal 
authority; and
    (7) A signed statement certifying that a copy of the request has 
been mailed or hand delivered to the liquidating agent on or before the 
day that the request was filed with the Board.
    (d) Burden of proof. The burden of proving entitlement to expedited 
relief rests at all times with the requester.

[[Page 444]]

    (e) Additional information. The Board may order the filing of 
additional information and or documentation in order to make its 
determination. Such filing shall be on a date certain, and failure to 
provide the additional documentation or information may constitute the 
sole grounds for denial of the request.
    (f) Decision. Before the end of the 90-day period beginning on the 
date a request if filed, the Board shall render its decision and provide 
it to the requester. The Board will determine whether to grant expedited 
review and allow or disallow the claim or whether such claim should be 
resolved pursuant to the claims process described in Sec. 709.6 of this 
part.
    (1) Expedited review denied. A decision by the Board that expedited 
review is not appropriate shall be final and the claim shall be decided 
pursuant to the claims adjudication process set forth in Sec. 709.6 of 
this part.
    (2) Expedited review granted. If expedited review is granted, the 
Board shall decide the claim. If the claim is disallowed, in whole or 
part, the decision shall contain a statement of each reason for the 
disallowance and the procedure for obtaining judicial review.
    (g) Period for filing or renewing suit. Any claimant who files a 
request for expedited relief shall be permitted to file a suit, or to 
continue a suit filed before the appointment of the liquidating agent, 
seeking a determination of the claimant's rights with respect to its 
security interest after the earlier of:
    (1) The end of the 90-day period beginning on the date of the filing 
of a request for expedited relief; or
    (2) The date the Board denies all or part of the claim.
    (h) Statute of limitations. If an action described in paragraph (g) 
of this section is not filed, or the motion to renew a previously filed 
suit is not made, before the end of the 30-day period beginning on the 
date on which such action or motion may be filed in accordance with 
paragraph (g) of this section, the claim shall be deemed to be 
disallowed as of the end of such period (other than any portion of such 
claim that was allowed by the Board). Such disallowance shall be final 
and the claimant shall have no further rights or remedies with respect 
to such claim.

[56 FR 56925, Nov. 7, 1991, as amended at 59 FR 36041, July 15, 1994]



Sec. 709.10  Treatment by conservator or liquidating agent of financial assets transferred in connection with a securitization or participation.

    (a) Definitions. (1) Beneficial interest means debt or equity (or 
mixed) interests or obligations of any type issued by a special purpose 
entity that entitle their holders to receive payments that depend 
primarily on the cash flow from financial assets owned by the special 
purpose entity.
    (2) Financial asset means cash or a contract or instrument that 
conveys to one entity a contractual right to receive cash or another 
financial instrument from another entity.
    (3) Legal isolation means that transferred financial assets have 
been put presumptively beyond the reach of the transferor, its 
creditors, a trustee in bankruptcy, or a receiver, either by a single 
transaction or a series of transactions taken as a whole.
    (4) Participation means the transfer or assignment of an undivided 
interest in all or part of a loan or a lease from a seller, known as the 
``lead,'' to a buyer, known as the ``participant,'' without recourse to 
the lead, under an agreement between the lead and the participant. 
Without recourse means that the participation is not subject to any 
agreement that requires the lead to repurchase the participant's 
interest or to otherwise compensate the participant due to a default on 
the underlying obligation.
    (5) Securitization means the issuance by a special purpose entity of 
beneficial interests:
    (i) The most senior class of which at time of issuance is rated in 
one of the four highest categories assigned to long-term debt or in an 
equivalent short-term category (within either of which there may be sub-
categories or gradations indicating relative standing) by one or more 
nationally recognized statistical rating organizations; or

[[Page 445]]

    (ii) Which are sold in transactions by an issuer not involving any 
public offering for purposes of section 4 of the Securities Act of 1933, 
as amended, or in transactions exempt from registration under such Act 
under 17 CFR 230.91 through 230.905 (Regulation S) thereunder (or any 
successor regulation).
    (6) Special purpose entity means a trust, corporation, or other 
entity demonstrably distinct from the federally-insured credit union 
that is primarily engaged in acquiring and holding (or transferring to 
another special purpose entity) financial assets, and in activities 
related or incidental thereto, in connection with the issuance by such 
special purpose entity (or by another special purpose entity that 
acquires financial assets directly or indirectly from such special 
purpose entity) of beneficial interests.
    (b) The Board, by exercise of its authority to disaffirm or 
repudiate contracts under 12 U.S.C. 1787(c), will not reclaim, recover, 
or recharacterize as property of the credit union or the liquidation 
estate any financial assets transferred to another party by a federally-
insured credit union in connection with a securitization or 
participation, provided that a transfer meets all conditions for sale 
accounting treatment under generally accepted accounting principles, 
other than the ``legal isolation'' condition addressed by this section.
    (c) Paragraph (b) of this section will not apply unless the 
federally-insured credit union received adequate consideration for the 
transfer of financial assets at the time of the transfer, and the 
documentation effecting the transfer of financial assets reflects the 
intent of the parties to treat the transaction as a sale, and not as a 
secured borrowing, for accounting purposes.
    (d) Paragraph (b) of this section will not be construed as waiving, 
limiting, or otherwise affecting the power of the Board, as conservator 
or liquidating agent, to disaffirm or repudiate any agreement imposing 
continuing obligations or duties upon the federally-insured credit union 
in conservatorship or the liquidation estate.
    (e) Paragraph (b) of this section will not be construed as waiving, 
limiting or otherwise affecting the rights or powers of the Board to 
take any action or to exercise any power not specifically limited by 
this section, including, but not limited to, any rights, powers or 
remedies of the Board regarding transfers taken in contemplation of the 
credit union's insolvency or with the intent to hinder, delay, or 
defraud the credit union or the creditors of such credit union, or that 
is a fraudulent transfer under applicable law.
    (f) The Board will not seek to avoid an otherwise legally 
enforceable securitization agreement or participation agreement executed 
by a federally-insured credit union solely because such agreement does 
not meet the ``contemporaneous'' requirement of sections 207(b)(9) and 
208(a)(3) of the Federal Credit Union Act.
    (g) This section may be repealed by the NCUA upon 30 days notice and 
opportunity for comment provided in the Federal Register, but any such 
repeal or amendment will not apply to any transfers of financial assets 
made in connection with a securitization or participation that was in 
effect before such repeal or modification. For purposes of this 
paragraph, a securitization would be in effect on the earliest date that 
the most senior level of beneficial interests is issued, and a 
participation would be in effect on the date that the parties executed 
the participation agreement.

[65 FR 55442, Sept. 14, 2000]



Sec. 709.11  Treatment by conservator or liquidating agent of collateralized public funds.

    An agreement to provide for the lawful collateralization of funds of 
a federal, state, or local governmental entity or of any depositor or 
member referred to in section 207(k)(2)(A) of the Act will not be deemed 
to be invalid under sections 207(b)(9) and 208(a)(3) of the Act solely 
because such agreement was not executed contemporaneously with the 
acquisition of collateral or with any changes, increases, or 
substitutions in the collateral made in accordance with such agreement, 
provided the following conditions are met:
    (a) The agreement was undertaken in the ordinary course of business, 
not in contemplation of insolvency, and with

[[Page 446]]

no intent to hinder, delay or defraud the credit union or its creditors;
    (b) The secured obligation represents a bona fide and arm's length 
transaction;
    (c) The secured party or parties are not insiders or affiliates of 
the credit union;
    (d) The grant or creation of the security interest was for adequate 
consideration; and,
    (e) The security agreement evidencing the security interest is in 
writing, was approved by the credit union's board of directors, and has 
been continuously an official record of the credit union from the time 
of its execution.

[65 FR 55443, Sept. 14, 2000]



PART 710--VOLUNTARY LIQUIDATION--Table of Contents




Sec.
710.0  Scope.
710.1  Definitions.
710.2  Responsibility for conducting voluntary liquidation.
710.3  Approval of the liquidation proposal by members.
710.4  Transaction of business during liquidation.
710.5  Notice of liquidation to creditors.
710.6  Distribution of assets.
710.7  Retention of records.
710.8  Certificate of dissolution and liquidation.
710.9  Federally insured state credit unions.

    Authority: 12 U.S.C. 1766(a), 1786, and 1787.

    Source: 58 FR 35365, July 1, 1993, unless otherwise noted.



Sec. 710.0  Scope.

    This part describes the requirements that must be followed to 
accomplish the voluntary liquidation of a Federal credit union. 
Federally insured state credit unions are only subject to the 
notification requirement provided in Sec. 710.9; voluntary liquidation 
is to be accomplished in accordance with state law or procedures 
established by the state regulatory authority.



Sec. 710.1  Definitions.

    For the purpose of this part, the following definitions apply:
    (a) Voluntary liquidation means the dissolution of a solvent Federal 
credit union with the assets being sold or collected, liabilities paid, 
and shares distributed under the direction of the board of directors or 
its duly appointed liquidating agent.
    (b) Liquidation date means the date the members vote to approve 
liquidation.
    (c) Liquidating agent means the person or persons, including any 
legally recognized entity, appointed by the board of directors to 
liquidate the Federal credit union.



Sec. 710.2  Responsibility for conducting voluntary liquidation.

    (a) The board of directors shall be responsible for conserving the 
assets, for expediting the liquidation, and for equitable distribution 
of the assets to the members.
    (b) After voting to present the question of liquidation to the 
members, the board of directors may appoint a liquidating agent and 
delegate all or part of the board's responsibility to such agent and 
authorize reasonable compensation for the services provided.
    (c) The board of directors shall determine that the liquidating 
agent and all persons who handle or have access to funds of the Federal 
credit union are adequately covered by surety bond and that either such 
coverage remains in effect, or the discovery period is extended, for at 
least four months after final distribution of assets.
    (d) Within three days after the decision of the board of directors 
to submit the question of liquidation to the members, the Regional 
Director will be notified in writing, setting forth in detail the 
reasons for the proposed action. A balance sheet and income statement as 
of the previous month-end will be included with the notification. During 
the liquidation process, financial statements will be submitted to the 
Regional Director as requested.
    (e) Promptly after the decision to present the question of 
liquidation to the members, the board of directors or liquidating agency 
shall develop a written plan for the liquidation of the assets and 
payment of shares (liquidation plan). The plan should provide for the 
liquidation of assets and payment of creditors and shareholders within 
one year of the liquidation date. If the

[[Page 447]]

liquidation period is projected to exceed one year, an explanation must 
be provided in the liquidation plan. A copy of the liquidation plan will 
be mailed to the Regional Director within 30 days of the date the board 
of directors votes to present the question of liquidation to the 
members.



Sec. 710.3  Approval of the liquidation proposal by members.

    (a) When the board of directors decides to present the question of 
liquidation to the members, it shall act promptly to obtain the members' 
approval. The members shall be given advance notice of the membership 
meeting at which the liquidation proposal is to be submitted, in 
accordance with the provisions of Article V of the Federal Credit Union 
Bylaws. The notice shall:
    (1) Inform members that they have the right to vote on the 
liquidation proposal in person at the membership meeting called for that 
purpose or by written ballot to be received no later than the time and 
date indicated on the notice.
    (2) Include or be accompanied by a ballot for the liquidation 
proposal.
    (b) The liquidation proposal must be approved by the affirmative 
vote of a majority of the Federal credit union members who vote on the 
proposal.
    (c) If the members do not approve the liquidation, the board of 
directors, or if delegated the authority, the liquidating agent, must 
decide within seven days whether the Federal credit union should resume 
operations or, if good cause exists, to resubmit the question of 
liquidation to the members.
    (d) If the members approve the liquidation, neither the members nor 
the board of directors may rescind the decision to liquidate unless the 
Regional Director concurs in the recision.
    (e) The Regional Director will be notified in writing of the results 
of the membership vote on the voluntary liquidation proposal within 
three days of the date of the vote.



Sec. 710.4  Transaction of business during liquidation.

    (a) Immediately upon decision by the board of directors to present 
the question of liquidation to the members, payments on shares, 
withdrawal of shares (except for transfer of shares to loans and 
interest), transfer of shares to another share account, granting of 
loans, and making of investments other than short-term investments shall 
be suspended pending action by the members on the proposal to liquidate. 
Collection of loans and interest, payment of necessary expenses, 
clearing of share drafts and credit card charges will continue.
    (b) Upon approval of the members, payments on shares, withdrawal of 
shares (except for transfer of shares to loans and interest), transfer 
of shares to another share account, granting of loans, and making of 
investments other than short-term investments shall be discontinued 
permanently. Collection of loans and interest and payment of necessary 
expenses will continue during the period of liquidation. Members will be 
notified to discontinue the use of share drafts and credit cards, and 
items will not be cleared 15 days from the liquidation date.
    (c) Approval of the Regional Director must be obtained prior to 
consummating any sale of assets which would not provide sufficient funds 
to pay shareholders at par.



Sec. 710.5  Notice of liquidation to creditors.

    (a) When approval for liquidation is obtained from the members, the 
board of directors or the liquidating agent shall cause notice to be 
given to creditors to present their claims.
    (1) Federal credit unions with assets in excess of $5 million as of 
the month end prior to the liquidation date shall publish the notice 
once a week in each of three successive weeks, in a newspaper of general 
circulation, in each county in which the Federal credit union maintains 
an office or branch for the transaction of business on the liquidation 
date. The first notice shall be published within seven days of the 
liquidation date.
    (2) Federal credit unions with assets in excess of $500,000 but less 
than $5 million as of the month end prior to the liquidation date shall 
publish the notice once, in a newspaper of general circulation, in each 
county in which

[[Page 448]]

the Federal credit union maintains an office or branch for the 
transaction of business on the liquidation date. The notice shall be 
published within seven days of the liquidation date.
    (3) Federal credit unions with assets less than $500,000 as of the 
month end prior to the liquidation date shall not be required to publish 
the notice.
    (b) Within 10 days of the liquidation date, a copy of the notice of 
liquidation shall be mailed to all creditors reflected on the records of 
the Federal credit union.
    (c) Creditors shall be provided 30 days from the liquidation date to 
submit their claims.



Sec. 710.6  Distribution of assets.

    (a) With the approval of the regional director, a partial pro rata 
distribution of the Federal credit union's assets may be made to its 
members from cash funds available on authorization by the board of 
directors or liquidating agent. Payment of a partial distribution may 
exclude member accounts of less than $25.00.
    (b) After all assets of the Federal credit union have been converted 
to cash or found to be worthless and all loans and debts owing to it 
have been collected or found to be uncollectible and all obligations of 
the Federal credit union have been paid, with the exception of shares 
due its members, the books shall be closed and the pro rata distribution 
to the members shall be computed. The computation shall be based on the 
total amount in each share account.
    (c) Promptly after the pro rata distribution to members has been 
computed, checks shall be drawn for the amounts to be distributed to 
each member. The checks shall be mailed to the members at their last 
known address or handed to them in person.
    (d) Unclaimed share accounts, unpaid claims, and unpaid claims of 
members or creditors who failed to cash their final distribution checks 
shall be trusteed or escheated in accordance with the laws of the state 
in which the member or creditor resides.
    (e) The Regional Director will be notified in writing within three 
days when the final distribution of assets to the members is started.



Sec. 710.7  Retention of records.

    (a) The board of directors or liquidating agent shall appoint a 
custodian for the Federal credit union's records which are to be 
retained after the final distribution of assets.
    (b) All records of the liquidated Federal credit union necessary to 
establish that creditors were paid and that assets were equitably 
distributed to the members shall be retained by the custodian for a 
period of five years following the date of charter cancellation.



Sec. 710.8  Certificate of dissolution and liquidation.

    Within 120 days after the final distribution of assets to members is 
started, a duly executed Certificate of Dissolution and Liquidation 
shall be filed with the Regional Director.



Sec. 710.9  Federally insured state credit unions.

    A federal insured state credit union will notify the Regional 
Director in writing within three days after the board of directors' 
decision to liquidate is made. A balance sheet and income statement as 
of the previous month-end and a copy of any liquidation plan will be 
included with the notification to the Regional Director.



PART 711--MANAGEMENT OFFICIAL INTERLOCKS--Table of Contents




Sec.
711.1  Authority, purpose, and scope.
711.2  Definitions.
711.3  Prohibitions.
711.4  Interlocking relationships permitted by statute.
711.5  Small market share exemption.
711.6  General exemption.
711.7  Change in circumstances.
711.8  Enforcement.

    Authority: 12 U.S.C. 1757 and 3201-3208.

    Source: 61 FR 50702, Sept. 27, 1996, unless otherwise noted.



Sec. 711.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq).
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster

[[Page 449]]

competition by generally prohibiting a management official from serving 
two nonaffiliated depository organizations in situations where the 
management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of federally 
insured credit unions. Section 711.4(c) exempts a management official of 
a credit union from the prohibitions of the Interlocks Act when the 
individual serves as a management official of another credit union. 
Therefore, the Interlocks Act prohibitions contained in this part only 
apply to a management official of a credit union when that individual 
also serves as a management official of another type of depository 
organization (usually a bank or thrift).



Sec. 711.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of that 
section 202, shares held by an individual include shares held by members 
of his or her immediate family. ``Immediate family'' means spouse, 
mother, father, child, grandchild, sister, brother, or any of their 
spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving a depository 
institution based on common ownership does not exist if the appropriate 
federal supervisory agency determines, after giving the affected persons 
the opportunity to respond, that the asserted affiliation was 
established in order to avoid the prohibitions of the Interlocks Act and 
does not represent a true commonality of interest between the depository 
organizations. In making this determination, the appropriate Federal 
supervisory agency considers, among other things, whether a person, 
including members of his or her immediate family, whose shares are 
necessary to constitute the group owns a nominal percentage of the 
shares of one of the organizations and the percentage is substantially 
disproportionate to that person's ownership of shares in the other 
organization.
    (b) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (c) Community means a city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (d) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The property 
line of an office located in an unincorporated city, town, or village is 
the boundary line of that city, town, or village for the purpose of this 
definition.
    (e) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201) having its principal office 
located in the United States.
    (f) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, a 
cooperative bank, an industrial bank, or a credit union, chartered under 
the laws of the United States and having a principal office located in 
the United States. Additionally, a United States office, including a 
branch or agency, of a foreign commercial bank is a depository 
institution.
    (g) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (h) Depository organization means a depository institution or a 
depository holding company.
    (i) District bank means any State bank operating under the Code of 
Law of the District of Columbia.
    (j) Low- and moderate-income areas means census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States

[[Page 450]]

Bureau of the Census) where the median family income is less than 100 
percent of the area median income.
    (k) Management official. (1) The term management official means:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
701.14(b)(2), or a person holding an equivalent position regardless of 
title;
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (m)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisions of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (l) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (m) Person means a natural person, corporation, or other business 
entity.
    (n) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (o) Representative or nominee means a natural person who serves as a 
management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. NCUA will find that 
a person has an obligation to act on behalf of another person only if 
the first person has an agreement, express or implied, to act on behalf 
of the second person with respect to management responsibilities. NCUA 
will determine, after giving the affected persons an opportunity to 
respond, whether a person is a representative or nominee.
    (p) Total assets. (1) The term total assets means assets measured on 
a consolidated basis and reported in the most recent fiscal year-end 
Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (q) United States includes any State or territory of the United 
States of America, the District of Columbia, Puerto Rico, Guam, American 
Samoa, and the Virgin Islands.

[61 FR 50702, Sept. 27, 1996, as amended at 64 FR 66360, Nov. 26, 1999]



Sec. 711.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices in 
the same community.
    (b) RMSA. A management official of a depository organization may not 
serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $20 million or 
more.

[[Page 451]]

    (c) Major assets. A management official of a depository organization 
with total assets exceeding $2.5 billion (or any affiliate thereof) may 
not serve at the same time as a management official of an unaffiliated 
depository organization with total assets exceeding $1.5 billion (or any 
affiliate thereof), regardless of the location of the two depository 
organizations. The NCUA will adjust these thresholds, as necessary, 
based on year-to-year change in the average of the Consumer Price Index 
for the Urban Wage Earners and Clerical Workers, not seasonally 
adjusted, with rounding to the nearest $100 million. The NCUA will 
announce the revised thresholds by publishing a notice in the Federal 
Register.

[61 FR 50702, Sept. 27, 1996, as amended at 64 FR 66360, Nov. 26, 1999]



Sec. 711.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec. 711.3 do not apply in the case of any one 
or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the United 
States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan Bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository institutions 
regulatory agency and is acquired by another depository organization. 
This exemption lasts for five years, beginning on the date the 
depository organization is acquired; and
    (h)(1) A diversified savings and loan holding company (as defined in 
section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who also is a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The NCUA Board or its designee may disapprove a notice of 
proposed service if it finds that:
    (i) The service cannot be structured or limited so as to preclude an 
anticompetitive effect in financial services in any part of the United 
States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by NCUA.
    (3) The NCUA Board or its designee may require that any interlock 
permitted under this paragraph (h) be terminated if a change in 
circumstances occurs with respect to one of the interlocked depository 
organizations that would have provided a basis for disapproval of the 
interlock during the notice period.



Sec. 711.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 711.3(a) or Sec. 711.3(b) is permissible, provided:
    (1) The interlock is not prohibited by Sec. 711.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20% of the deposits, in 
each RMSA or community in which the depository organizations (or their 
depository institution affiliates) are located. The amount of deposits 
will be determined

[[Page 452]]

by reference to the most recent annual Summary of Deposits published by 
the FDIC. This information is available on the Internet at http://
www.fdic.gov.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.

[64 FR 66360, Nov. 26, 1999]



Sec. 711.6  General exemption.

    (a) Exemption. NCUA may, by agency order issued following receipt of 
an application, exempt an interlock from the prohibitions in Sec. 711.3, 
if NCUA finds that the interlock would not result in a monopoly or 
substantial lessening of competition, and would not present other safety 
and soundness concerns.
    (b) Presumptions. In reviewing applications for an exemption under 
this section, NCUA will apply a rebuttable presumption that an interlock 
will not result in a monopoly or substantial lessening of competition if 
the depository organization seeking to add a management official:
    (1) Primarily serves, low- and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in 
Sec. 701.14(b)(3) of this chapter.
    (c) Duration. Unless a shorter expiration period is provided in the 
NCUA approval, an exemption permitted by paragraph (a) of this section 
may continue so long as it would not result in a monopoly or substantial 
lessening of competition, or be unsafe or unsound. If the NCUA grants an 
interlock exemption in reliance upon a presumption under paragraph (b) 
of this section, the interlock may continue for three years, unless 
otherwise provided in the approval.

[64 FR 66360, Nov. 26, 1999]



Sec. 711.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service if a change in circumstances causes the service to become 
prohibited. A change in circumstances may include, but is not limited 
to, an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, an 
increase in the aggregate deposits of the depository organization, or an 
acquisition, merger, consolidation, or reorganization of the ownership 
structure of a depository organization that causes a previously 
permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the depository organization 
involved in the interlock for 15 months following the date of the change 
in circumstances. NCUA may shorten this period under appropriate 
circumstances.

[61 FR 50702, Sept. 27, 1996, as amended at 64 FR 66360, Nov. 26, 1999]



Sec. 711.8  Enforcement.

    Except as provided in this section, NCUA administers and enforces 
the Interlocks Act with respect to federally insured credit unions, and 
may refer any case of a prohibited interlocking relationship involving 
these entities to the Attorney General of the United States to enforce 
compliance with the Interlocks Act and this part.



PART 712--CREDIT UNION SERVICE ORGANIZATIONS (CUSOs)--Table of Contents




Sec.
712.1  What does this part cover?
712.2  How much can an FCU invest in or loan to CUSOs, and what parties 
          may participate?
712.3  What are the characteristics of and what requirements apply to 
          CUSOs?
712.4  What must an FCU and a CUSO do to maintain separate corporate 
          identities?
712.5  What activities and services are preapproved for CUSOs?
712.6  What activities and services are prohibited for CUSOs?
712.7  What must an FCU do to add activities or services that are not 
          preapproved?
712.8  What transaction and compensation limits might apply to 
          individuals related to both an FCU and a CUSO?

[[Page 453]]

712.9  When must an FCU comply with this part?

    Authority: 12 U.S.C. 1756, 1757(5)(D) and (7)(I), 1766, 1782, 1784, 
1785, and 1786.

    Source: 63 FR 10756, Mar. 5, 1998, unless otherwise noted.



Sec. 712.1  What does this part cover?

    This part establishes when a Federal credit union (FCU) can invest 
in and make loans to CUSOs. CUSOs are subject to review by NCUA. This 
part does not apply to corporate credit unions that have CUSOs subject 
to Sec. 704.11 of this title. This part does not apply to state-
chartered credit unions or the subsidiaries of state-chartered credit 
unions that do not have FCU investments or loans.



Sec. 712.2  How much can an FCU invest in or loan to CUSOs, and what parties may participate?

    (a) Investments. An FCU's total investments in CUSOs must not 
exceed, in the aggregate, 1% of its paid-in and unimpaired capital and 
surplus as of its last calendar year-end financial report.
    (b) Loans. An FCU's total loans to CUSOs must not exceed, in the 
aggregate, 1% of its paid-in and unimpaired capital and surplus as of 
its last calendar year-end financial report. Loan authority is 
independent and separate from the 1% investment authority of subsection 
(a) of this section.
    (c) Parties. An FCU may invest in or loan to a CUSO by itself, with 
other credit unions, or with non-credit union parties.
    (d) Measurement for calculating regulatory limitation. For purposes 
of paragraphs (a) and (b) of this section: paid-in and unimpaired 
capital and surplus means shares and undivided earnings; and total 
investments in and total loans to CUSOs will be measured consistent with 
GAAP.
    (e) Divestiture. If the limitations in paragraph (a) of this section 
are reached or exceeded because of the profitability of the CUSO and the 
related GAAP valuation of the investment under the equity method, 
without an additional cash outlay by the FCU, divestiture is not 
required. An FCU may continue to invest up to 1% without regard to the 
increase in the GAAP valuation resulting from a CUSO's profitability.

[63 FR 10756, Mar. 5, 1998, as amended at 64 FR 33187, June 22, 1999]



Sec. 712.3  What are the characteristics of and what requirements apply to CUSOs?

    (a) Structure. An FCU can invest in or loan to a CUSO only if the 
CUSO is structured as a corporation, limited liability company, or 
limited partnership. An FCU may only participate in a limited 
partnership as a limited partner. For purposes of this part, 
``corporation'' means a legally incorporated corporation as established 
and maintained under relevant state law. For purposes of this part, 
``limited partnership'' means a legally established limited partnership 
as established and maintained under relevant state law. For purposes of 
this part, ``limited liability company'' means a legally established 
limited liability company as established and maintained under relevant 
state law, provided that the FCU obtains written legal advice that the 
limited liability company is a recognized legal entity under the 
applicable laws of the state of formation and that the limited liability 
company is established in a manner that will limit potential exposure of 
the FCU to no more than the amount of funds invested in, or loaned to, 
the CUSO.
    (b) Customer base. An FCU can invest in or loan to a CUSO only if 
the CUSO primarily serves credit unions, its membership, or the 
membership of credit unions contracting with the CUSO.
    (c) Federal credit union accounting for financial reporting 
purposes. An FCU must account for its investments in or loans to a CUSO 
in conformity with ``generally accepted accounting principles'' (GAAP).
    (d) CUSO accounting; audits and financial statements; NCUA access to 
information. An FCU must obtain written agreements from a CUSO, prior to 
investing in or lending to the CUSO, that the CUSO will:
    (1) Account for all its transactions in accordance with GAAP;
    (2) Prepare quarterly financial statements and obtain an annual 
opinion audit, by a licensed Certified Public

[[Page 454]]

Accountant, on its financial statements in accordance with ``generally 
accepted auditing standards'' (GAAS); and
    (3) Provide NCUA and its representatives with complete access to any 
books and records of the CUSO and the ability to review CUSO internal 
controls, as deemed necessary by NCUA in carrying out its 
responsibilities under the Act.
    (e) Other laws. A CUSO must comply with applicable Federal, state 
and local laws.

[63 FR 10756, Mar. 5, 1998, as amended at 64 FR 33187, June 22, 1999; 64 
FR 57365, Oct. 25, 1999]



Sec. 712.4  What must an FCU and a CUSO do to maintain separate corporate identities?

    (a) Corporate separateness. An FCU and a CUSO must be operated in a 
manner that demonstrates to the public the separate corporate existence 
of the FCU and the CUSO. Good business practices dictate that each must 
operate so that:
    (1) Its respective business transactions, accounts, and records are 
not intermingled;
    (2) Each observes the formalities of its separate corporate 
procedures;
    (3) Each is adequately financed as a separate unit in the light of 
normal obligations reasonably foreseeable in a business of its size and 
character;
    (4) Each is held out to the public as a separate enterprise;
    (5) The FCU does not dominate the CUSO to the extent that the CUSO 
is treated as a department of the FCU; and
    (6) Unless the FCU has guaranteed a loan obtained by the CUSO, all 
borrowings by the CUSO indicate that the FCU is not liable.
    (b) Legal opinion. Prior to an FCU investing in a CUSO, the FCU must 
obtain written legal advice as to whether the CUSO is established in a 
manner that will limit potential exposure of the FCU to no more than the 
loss of funds invested in, or lent to, the CUSO. In addition, if a CUSO 
in which an FCU has an investment plans to change its structure under 
Sec. 712.3(a), an FCU must also obtain prior, written legal advice that 
the CUSO will remain established in a manner that will limit potential 
exposure of the FCU to no more than the loss of funds invested in, or 
loaned to, the CUSO. The legal advice must address factors that have led 
courts to ``pierce the corporate veil'' such as inadequate 
capitalization, lack of separate corporate identity, common boards of 
directors and employees, control of one entity over another, and lack of 
separate books and records. The legal advice may be provided by 
independent legal counsel of the investing FCU or the CUSO.



Sec. 712.5  What activities and services are preapproved for CUSOs?

    NCUA may at any time, based upon supervisory, legal, or safety and 
soundness reasons, limit any CUSO activities or services, or refuse to 
permit any CUSO activities or services. Otherwise, an FCU may invest in, 
loan to, and/or contract with only those CUSOs that are sufficiently 
bonded or insured for their specific operations and only provide one or 
more of the following activities and services related to the routine, 
daily operations of credit unions:
    (a) Checking and currency services:
    (1) Check cashing;
    (2) Coin and currency services; and
    (3) Money order, savings bonds, travelers checks, and purchase and 
sale of U.S. Mint commemorative coins services;
    (b) Clerical, professional and management services:
    (1) Accounting services;
    (2) Courier services;
    (3) Credit analysis;
    (4) Facsimile transmissions and copying services;
    (5) Internal audits for credit unions;
    (6) Locator services;
    (7) Management and personnel training and support;
    (8) Marketing services;
    (9) Research services; and
    (10) Supervisory committee audits;
    (c) Consumer mortgage loan origination;
    (d) Electronic transaction services:
    (1) Automated teller machine (ATM) services;
    (2) Credit card and debit card services;
    (3) Data processing;
    (4) Electronic fund transfer (EFT) services;

[[Page 455]]

    (5) Electronic income tax filing;
    (6) Payment item processing;
    (7) Wire transfer services; and
    (8) Cyber financial services;
    (e) Financial counseling services:
    (1) Developing and administering Individual Retirement Accounts 
(IRA), Keogh, deferred compensation, and other personnel benefit plans;
    (2) Estate planning;
    (3) Financial planning and counseling;
    (4) Income tax preparation;
    (5) Investment counseling; and
    (6) Retirement counseling;
    (f) Fixed asset services:
    (1) Management, development, sale, or lease of fixed assets; and
    (2) Sale, lease, or servicing of computer hardware or software;
    (g) Insurance brokerage or agency:
    (1) Agency for sale of insurance;
    (2) Provision of vehicle warranty programs; and
    (3) Provision of group purchasing programs;
    (h) Leasing:
    (1) Personal property; and
    (2) Real estate leasing of excess CUSO property;
    (i) Loan support services:
    (1) Debt collection services;
    (2) Loan processing, servicing, and sales; and
    (3) Sale of repossessed collateral;
    (j) Record retention, security and disaster recovery services:
    (1) Alarm-monitoring and other security services;
    (2) Disaster recovery services;
    (3) Microfilm, microfiche, optical and electronic imaging, CD-ROM 
data storage and retrieval services;
    (4) Provision of forms and supplies; and
    (5) Record retention and storage;
    (k) Securities brokerage services;
    (l) Shared credit union branch (service center) operations;
    (m) Student loan origination;
    (n) Travel agency services; and
    (o) Trust and trust-related services:
    (1) Acting as administrator for prepaid legal service plans;
    (2) Acting as trustee, guardian, conservator, estate administrator, 
or in any other fiduciary capacity; and
    (3) Trust services.
    (p) Real estate brokerage services.
    (q) CUSO investments in non-CUSO service providers: In connection 
with providing a permissible service, a CUSO may invest in a non-CUSO 
service provider. The amount of the CUSO's investment is limited to the 
amount necessary to participate in the service provider, or a greater 
amount if necessary to receive a reduced price for goods or services.

[63 FR 10756, Mar. 5, 1998, as amended at 64 FR 33187, June 22, 1999; 64 
FR 66361, Nov. 26, 1999]



Sec. 712.6  What activities and services are prohibited for CUSOs?

    General. CUSOs must not acquire control of, either directly or 
indirectly, another depository financial institution, nor invest in 
shares, stocks, or obligations of an insurance company, trade 
association, liquidity facility or similar organization, corporation, or 
association.

[63 FR 10756, Mar. 5, 1998, as amended at 64 FR 66361, Nov. 26, 1999]



Sec. 712.7  What must an FCU do to add activities or services that are not preapproved?

    In order for an FCU to invest in and/or loan to a CUSO that offers 
an unpreapproved activity or service, the FCU must first receive NCUA 
Board approval. The request for NCUA Board approval of an unpreapproved 
activity or service must include a full explanation and complete 
documentation of the activity or service and how that activity or 
service is associated with routine credit union operations. The request 
must be submitted jointly to your Regional Office and to the Secretary 
of the Board. The request will be treated as a petition to amend 
Sec. 712.5 and NCUA will request public comment or otherwise act on the 
petition within 60 days after receipt.



Sec. 712.8  What transaction and compensation limits might apply to individuals related to both an FCU and a CUSO?

    (a) Officials and Senior Management Employees. The officials, senior 
management employees, and their immediate family members of an FCU that 
has outstanding loans or investments in a CUSO must not receive any 
salary,

[[Page 456]]

commission, investment income, or other income or compensation from the 
CUSO either directly or indirectly, or from any person being served 
through the CUSO. This provision does not prohibit such FCU officials or 
senior management employees from assisting in the operation of a CUSO, 
provided the officials or senior management employees are not 
compensated by the CUSO. Further, the CUSO may reimburse the FCU for the 
services provided by such FCU officials and senior management employees 
only if the account receivable of the FCU due from the CUSO is paid in 
full at least every 120 days. For purposes of this paragraph (a), 
``official'' means affiliated credit union directors or committee 
members. For purposes of this paragraph (a), ``senior management 
employee'' means affiliated credit union chief executive officer 
(typically this individual holds the title of President or Treasurer/
Manager), any assistant chief executive officers (e.g. Assistant 
President, Vice President, or Assistant Treasurer/Manager) and the chief 
financial officer (Comptroller). For purposes of this paragraph (a), 
``immediate family member'' means a spouse or other family members 
living in the same household.
    (b) Employees. The prohibition contained in paragraph (a) of this 
section also applies to FCU employees not otherwise covered if the 
employees are directly involved in dealing with the CUSO unless the 
FCU's board of directors determines that the FCU employees' positions do 
not present a conflict of interest.
    (c) Others. All transactions with business associates or family 
members of FCU officials, senior management employees, and their 
immediate family members, not specifically prohibited by paragraphs (a) 
and (b) of this section must be conducted at arm's length and in the 
interest of the FCU.



Sec. 712.9  When must an FCU comply with this part?

    (a) Investments. An FCU's investments in CUSOs in existence prior to 
April 1, 1998, must conform with this part not later than April 1, 2001, 
unless the Board grants prior approval to continue such investment for a 
stated period.
    (b) Loans. An FCU's loans to CUSOs in existence prior to April 1, 
1998, must conform with this part not later than April 1, 2001, unless:
    (1) The Board grants prior approval to continue the FCU's loan for a 
stated period; or
    (2) Under the terms of its loan agreement, the FCU cannot require 
accelerated repayment without breaching the agreement.



PART 713--FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERAL CREDIT UNIONS--Table of Contents




Sec.
713.1  What is the scope of this section?
713.2  What are the responsibilities of a credit union's board of 
          directors under this section?
713.3  What bond coverage must a credit union have?
713.4  What bond forms may be used?
713.5  What is the required minimum dollar amount of coverage?
713.6  What is the permissible deductible?
713.7  May the NCUA Board require a credit union to secure additional 
          insurance coverage?

    Authority: 12 U.S.C. 1761a, 1761b, 1766(a), 1766(h), 1789(a)(11).

    Source: 64 FR 28720, May 27, 1999, unless otherwise noted.



Sec. 713.1  What is the scope of this section?

    This section provides the requirements for fidelity bonds for 
Federal credit union employees and officials and for other insurance 
coverage for losses such as theft, holdup, vandalism, etc., caused by 
persons outside the credit union.



Sec. 713.2  What are the responsibilities of a credit union's board of directors under this section?

    The board of directors of each Federal credit union must at least 
annually review its fidelity and other insurance coverage to ensure that 
it is adequate in relation to the potential risks facing the credit 
union and the minimum requirements set by the Board.

[64 FR 28720, May 27, 1999, as amended at 64 FR 57365, Oct. 25, 1999]

[[Page 457]]



Sec. 713.3  What bond coverage must a credit union have?

    At a minimum, your bond coverage must:
    (a) Be purchased in an individual policy from a company holding a 
certificate of authority from the Secretary of the Treasury; and
    (b) Include fidelity bonds that cover fraud and dishonesty by all 
employees, directors, officers, supervisory committee members, and 
credit committee members.



Sec. 713.4  What bond forms may be used?

    (a) The following basic bonds may be used without prior NCUA Board 
approval:

------------------------------------------------------------------------
         Credit union form No.                       Carrier
------------------------------------------------------------------------
Credit Union Blanket Bond Standard Form  Various.
 23 of the Surety Association of
 America (revised May 1950).
Extended Form 23.......................  USFG.
100....................................  CUMIS (only approved for
                                          corporate credit union use).
200....................................  CUMIS.
300....................................  CUMIS.
400....................................  CUMIS.
AIG 23.................................  National Union Fire Insurance
                                          Co. of Pitts., PA.
Reliance Preferred Form 23.............  Reliance Insurance Company.
Form 31................................  ITT Hartford.
Form 24 with Credit Union Endorsement..  Continental (only approved for
                                          corporate credit union use).
Form 40325.............................  St. Paul Fire and Marine.
Form F2350.............................  Fidelity & Deposit Co. Of
                                          Maryland.
Form 9993 (6/97).......................  Progressive Casualty Insurance
                                          Co.
Credit Union Blanket Bond (1/96).......  Cooperativas de Seguros
                                          Multiples de Puerto Rico.
------------------------------------------------------------------------

    (b) To use any of the following, you need prior written approval 
from the Board:
    (1) Any other basic bond form; or
    (2) Any rider or endorsement that limits coverage of approved basic 
bond forms.



Sec. 713.5  What is the required minimum dollar amount of coverage?

    (a) The minimum required amount of fidelity bond coverage for any 
single loss is computed based on a Federal credit union's total assets.

------------------------------------------------------------------------
                 Assets                            Minimum bond
------------------------------------------------------------------------
$0 to $10,000..........................  Coverage equal to the credit
                                          union's assets.
$10,001 to $1,000,000..................  $10,000 for each $100,000 or
                                          fraction thereof.
$1,000,001 to $50,000,000..............  $100,000 plus $50,000 for each
                                          million or fraction over
                                          $1,000,000.
$50,000,001 to $295,000,000............  $2,550,000 plus $10,000 for
                                          each million or fraction
                                          thereof over $50,000,000.
Over $295,000,000......................  $5,000,000.
------------------------------------------------------------------------

    (b) This is the minimum coverage required, but a Federal credit 
union's board of directors should purchase additional coverage when 
circumstances, such as cash on hand or cash in transit, warrant.
    (c) While the above is the required minimum amount of bond coverage, 
credit unions should maintain increased coverage equal to the greater of 
either of the following amounts within thirty days of discovery of the 
need for such increase:
    (1) The amount of the daily cash fund, i.e. daily cash plus 
anticipated daily money receipts on the credit union's premises, or
    (2) The total amount of the credit union's money in transit in any 
one shipment.
    (3) Increased coverage is not required pursuant to paragraph (c) of 
this section, however, when the credit union temporarily increased its 
cash fund because of unusual events which cannot reasonably be expected 
to recur.
    (d) Any aggregate limit of liability provided for in a fidelity bond 
policy must be at least twice the single loss limit of liability. This 
requirement

[[Page 458]]

does not apply to optional insurance coverage.
    (e) Any proposal to reduce your required bond coverage must be 
approved in writing by the NCUA Board at least twenty days in advance of 
the proposed effective date of the reduction.



Sec. 713.6  What is the permissible deductible?

    (a)(1) The maximum amount of allowable deductible is computed based 
on a Federal credit union's asset size, as follows:

------------------------------------------------------------------------
                 Assets                         Maximum deductible
------------------------------------------------------------------------
$0-$100,000............................  No deductibles allowed.
$100,001-$250,000......................  $1,000.
$250,001-$1,000,000....................  $2,000.
Over $1,000,001........................  $2,000 plus 1/1000 of total
                                          assets up to a maximum
                                          deductible of $200,000.
------------------------------------------------------------------------

    (2) The deductibles may apply to one or more insurance clauses in a 
policy. Any deductibles in excess of the above amounts must receive the 
prior written permission of the NCUA Board.
    (b) A deductible may not exceed 10 percent of a credit union's 
Regular Reserve unless a separate Contingency Reserve is set up for the 
excess. In computing the maximum deductible, valuation accounts such as 
the allowance for loan losses cannot be considered.



Sec. 713.7  May the NCUA Board require a credit union to secure additional insurance coverage?

    The NCUA Board may require additional coverage when the Board 
determines that a credit union's current coverage is inadequate. The 
credit union must purchase this additional coverage within 30 days.



PART 714--LEASING--Table of Contents




Sec.
714.1  What does this part cover?
714.2  What are the permissible leasing arrangements?
714.3  Must you own the leased property in an indirect leasing 
          arrangement?
714.4  What are the lease requirements?
714.5  What is required if you rely on an estimated residual value 
          greater than 25% of the original cost of the leased property?
714.6  Are you required to retain salvage powers over the leased 
          property?
714.7  What are the insurance requirements applicable to leasing?
714.8  Are the early payment provisions, or interest rate provisions, 
          applicable in leasing arrangements?
714.9  Are indirect leasing arrangements subject to the purchase of 
          eligible obligation limit set forth in Sec. 701.23 of this 
          chapter?
714.10  What other laws must you comply with when engaged in leasing?

    Authority: 12 U.S.C. 1756, 1757, 1766, 1785, 1789.

    Source: 65 FR 34585, May 31, 2000, unless otherwise noted.



Sec. 714.1  What does this part cover?

    This part covers the standards and requirements that you, a federal 
credit union, must follow when engaged in the leasing of personal 
property.



Sec. 714.2  What are the permissible leasing arrangements?

    (a) You may engage in direct leasing. In direct leasing, you 
purchase personal property from a vendor, becoming the owner of the 
property at the request of your member, and then lease the property to 
that member.
    (b) You may engage in indirect leasing. In indirect leasing, a third 
party leases property to your member and you then purchase that lease 
from the third party for the purpose of leasing the property to your 
member. You do not have to purchase the leased property if you comply 
with the requirements of Sec. 714.3.
    (c) You may engage in open-end leasing. In an open-end lease, your 
member assumes the risk and responsibility for any difference in the 
estimated residual value and the actual value of the property at lease 
end.
    (d) You may engage in closed-end leasing. In a closed-end lease, you 
assume the risk and responsibility for any difference in the estimated 
residual value and the actual value of the property at lease end. 
However, your member is always responsible for any

[[Page 459]]

excess wear and tear and excess mileage charges as established under the 
lease.



Sec. 714.3  Must you own the leased property in an indirect leasing arrangement?

    You do not have to own the leased property in an indirect leasing 
arrangement if:
    (a) You obtain a full assignment of the lease. A full assignment is 
the assignment of all the rights, interests, obligations, and title in a 
lease to you, that is, you become the owner of the lease;
    (b) You are named as the sole lienholder of the leased property;
    (c) You receive a security agreement, signed by the leasing company, 
granting you a sole lien in the leased property and the right to take 
possession and dispose of the leased property in the event of a default 
by the lessee, a default in the leasing company's obligations to you, or 
a material adverse change in the leasing company's financial condition; 
and
    (d) You take all necessary steps to record and perfect your security 
interest in the leased property. Your state's Commercial Code may treat 
the automobiles as inventory, and require a filing with the Secretary of 
State.



Sec. 714.4  What are the lease requirements?

    (a) Your lease must be a net lease. In a net lease, your member 
assumes all the burdens of ownership including maintenance and repair, 
licensing and registration, taxes, and insurance;
    (b) Your lease must be a full payout lease. In a full payout lease, 
you must reasonably expect to recoup your entire investment in the 
leased property, plus the estimated cost of financing, from the lessee's 
payments and the estimated residual value of the leased property at the 
expiration of the lease term; and
    (c) The amount of the estimated residual value you rely upon to 
satisfy the full payout lease requirement may not exceed 25% of the 
original cost of the leased property unless the amount above 25% is 
guaranteed. Estimated residual value is the projected value of the 
leased property at lease end. Estimated residual value must be 
reasonable in light of the nature of the leased property and all 
circumstances relevant to the leasing arrangement.



Sec. 714.5  What is required if you rely on an estimated residual value greater than 25% of the original cost of the leased property?

    If the amount of the estimated residual value you rely upon to 
satisfy the full payout lease requirement of Sec. 714.4(b) exceeds 25% 
of the original cost of the leased property, a financially capable party 
must guarantee the excess. The guarantor may be the manufacturer. The 
guarantor may also be an insurance company with an A.M. Best rating of 
at least a B+, or with at least the equivalent of an A.M. Best B+ rating 
from another major rating company. You must obtain or have on file 
financial documentation demonstrating that the guarantor has the 
resources to meet the guarantee.



Sec. 714.6  Are you required to retain salvage powers over the leased property?

    You must retain salvage powers over the leased property. Salvage 
powers protect you from a loss and provide you with the power to take 
action if there is an unanticipated change in conditions that threatens 
your financial position by significantly increasing your exposure to 
risk. Salvage powers allow you:
    (a) As the owner and lessor, to take reasonable and appropriate 
action to salvage or protect the value of the property or your interests 
arising under the lease; or
    (b) As the assignee of a lease, to become the owner and lessor of 
the leased property pursuant to your contractual rights, or take any 
reasonable and appropriate action to salvage or protect the value of the 
property or your interests arising under the lease.



Sec. 714.7  What are the insurance requirements applicable to leasing?

    (a) You must maintain a contingent liability insurance policy with 
an endorsement for leasing or be named as the co-insured if you do not 
own the leased property. Contingent liability insurance protects you 
should you be

[[Page 460]]

sued as the owner of the leased property. You must use an insurance 
company with a nationally recognized industry rating of at least a B+.
    (b) Your member must carry the normal liability and property 
insurance on the leased property. You must be named as an additional 
insured on the liability insurance policy and as the loss payee on the 
property insurance policy.



Sec. 714.8  Are the early payment provisions, or interest rate provisions, applicable in leasing arrangements?

    You are not subject to the early payment provisions set forth in 
Sec. 701.21(c)(6) of this chapter. You are also not subject to the 
interest rate provisions in Sec. 701.21(c)(7).



Sec. 714.9  Are indirect leasing arrangements subject to the purchase of eligible obligation limit set forth in Sec. 701.23 of this chapter?

    Your indirect leasing arrangements are not subject to the eligible 
obligation limit if they satisfy the provisions of Sec. 701.23(b)(3)(iv) 
that require that you make the final underwriting decision and that the 
lease contract is assigned to you very soon after it is signed by the 
member and the dealer or leasing company.



Sec. 714.10  What other laws must you comply with when engaged in leasing?

    You must comply with the Consumer Leasing Act, 15 U.S.C. 1667-67f, 
and its implementing regulation, Regulation M, 12 CFR part 213. You must 
comply with state laws on consumer leasing, but only to the extent that 
the state leasing laws are consistent with the Consumer Leasing Act, 15 
U.S.C. 1667e, or provide the member with greater protections or benefits 
than the Consumer Leasing Act. You are also subject to the lending rules 
set forth in Sec. 701.21 of this chapter, except as provided in 
Sec. 714.8 and Sec. 714.9 of this part. The lending rules in Sec. 701.21 
address the preemption of other state and federal laws that impact on 
credit transactions.



PART 715--SUPERVISORY COMMITTEE AUDITS AND VERIFICATIONS--Table of Contents




Sec.
715.1  Scope of this part.
715.2  Definitions used in this part.
715.3  General responsibilities of the Supervisory Committee.
715.4  Audit responsibility of the Supervisory Committee.
715.5  Audit of Federal Credit Unions.
715.6  Audit of Federally-insured State-chartered credit unions.
715.7  Supervisory Committee audit alternatives to a financial statement 
          audit.
715.8  Requirements for verification of accounts and passbooks.
715.9  Assistance from outside, compensated person.
715.10  Audit report and working paper maintenance and access.
715.11  Sanctions for failure to comply with this part.
715.12  Statutory audit remedies for Federal credit unions.

    Authority: 12 U.S.C. 1761d, 1782(a)(6).

    Source: 64 FR 41035, July 29, 1999, unless otherwise noted.



Sec. 715.1  Scope of this part.

    This part implements section 202(a)(6)(D) of the Federal Credit 
Union Act, 12 U.S.C. 1782(a)(6)(D), as added by section 201(a) of the 
Credit Union Membership Access Act, Pub. L. No. 105-219, 112 Stat. 918 
(1998). This part prescribes the responsibilities of the Supervisory 
Committee to obtain an annual audit of the credit union according to its 
charter type and asset size, and to conduct a verification of members' 
accounts.



Sec. 715.2  Definitions used in this part.

    As used in this part:
    (a) Balance sheet audit refers to the examination of a credit 
union's assets, liabilities, and equity under generally accepted 
auditing standards (GAAS) by an independent public accountant for the 
purpose of opining on the fairness of the presentation on the balance 
sheet. Credit unions required to file call reports consistent with GAAP 
should ensure the audited balance sheet is likewise prepared on a GAAP 
basis. The opinion under this type of engagement would not address the 
fairness of the presentation of the credit

[[Page 461]]

union's income statement, statement of changes in equity (including 
comprehensive income), or statement of cash flows.
    (b) Compensated person refers to any accounting/auditing 
professional, excluding a credit union employee, who is compensated for 
performing more than one supervisory committee audit and/or verification 
of members' accounts per calendar year.
    (c) Financial statements refers to a presentation of financial data, 
including accompanying notes, derived from accounting records of the 
credit union, and intended to disclose a credit union's economic 
resources or obligations at a point in time, or the changes therein for 
a period of time, in conformity with GAAP, as defined herein, or 
regulatory accounting procedures. Each of the following is considered to 
be a financial statement: a balance sheet or statement of financial 
condition; statement of income or statement of operations; statement of 
undivided earnings; statement of cash flows; statement of changes in 
members' equity; statement of revenue and expenses; and statement of 
cash receipts and disbursements.
    (d) Financial statement audit (also known as an ``opinion audit'') 
refers to an audit of the financial statements of a credit union 
performed in accordance with GAAS by an independent person who is 
licensed by the appropriate State or jurisdiction. The objective of a 
financial statement audit is to express an opinion as to whether those 
financial statements of the credit union present fairly, in all material 
respects, the financial position and the results of its operations and 
its cash flows in conformity with GAAP, as defined herein, or regulatory 
accounting practices.
    (e) GAAP is an acronym for ``generally accepted accounting 
principles'' which refers to the conventions, rules, and procedures 
which define accepted accounting practice. GAAP includes both broad 
general guidelines and detailed practices and procedures, provides a 
standard by which to measure financial statement presentations, and 
encompasses not only accounting principles and practices but also the 
methods of applying them.
    (f) GAAS is an acronym for ``generally accepted auditing standards'' 
which refers to the standards approved and adopted by the American 
Institute of Certified Public Accountants which apply when an 
``independent, licensed certified public accountant'' audits financial 
statements. Auditing standards differ from auditing procedures in that 
``procedures'' address acts to be performed, whereas ``standards'' 
measure the quality of the performance of those acts and the objectives 
to be achieved by use of the procedures undertaken. In addition, 
auditing standards address the auditor's professional qualifications as 
well as the judgment exercised in performing the audit and in preparing 
the report of the audit.
    (g) Independent means the impartiality necessary for the 
dependability of the compensated auditor's findings. Independence 
requires the exercise of fairness toward credit union officials, 
members, creditors and others who may rely upon the report of a 
supervisory committee audit report.
    (h) Internal control refers to the process, established by the 
credit union's board of directors, officers and employees, designed to 
provide reasonable assurance of reliable financial reporting and 
safeguarding of assets against unauthorized acquisition, use, or 
disposition. A credit union's internal control structure consists of 
five components: control environment; risk assessment; control 
activities; information and communication; and monitoring. Reliable 
financial reporting refers to preparation of Call Reports (NCUA Forms 
5300 and 5310) that meet management's financial reporting objectives. 
Internal control over safeguarding of assets against unauthorized 
acquisition, use, or disposition refers to prevention or timely 
detection of transactions involving such unauthorized access, use, or 
disposition of assets which could result in a loss that is material to 
the financial statements.
    (i) Reportable conditions refers to a matter coming to the attention 
of the independent, compensated auditor which, in his or her judgment, 
represents a significant deficiency in the design or operation of the 
internal control structure of the credit union, which could adversely 
affect its ability

[[Page 462]]

to record, process, summarize, and report financial data consistent with 
the representations of management in the financial statements.
    (j) Report on Examination of Internal Control over Call Reporting 
refers to an engagement in which an independent, licensed, certified 
public accountant or public accountant, consistent with attestation 
standards, examines and reports on management's written assertions 
concerning the effectiveness of its internal control over financial 
reporting in its most recently filed semiannual or year-end Call Report, 
with a concentration in high risk areas. For credit unions, such high 
risk areas most often include: lending activity; investing activity; and 
cash handling and deposit-taking activity.
    (k) State-licensed person refers to a certified public accountant or 
public accountant who is licensed by the State or jurisdiction where the 
credit union is principally located to perform accounting or auditing 
services for that credit union.
    (l) Supervisory committee refers to a supervisory committee as 
defined in Section 111(b) of the Federal Credit Union Act, 12 U.S.C. 
1786(r). For some federally-insured state chartered credit unions, the 
``audit committee'' designated by state statute or regulation is the 
equivalent of a supervisory committee.
    (m) Supervisory committee audit refers to an engagement under either 
Sec. 715.5 or Sec. 715.6 of this part.
    (n) Working papers refers to the principal record, in any form, of 
the work performed by the auditor and/or supervisory committee to 
support its findings and/or conclusions concerning significant matters. 
Examples include the written record of procedures applied, tests 
performed, information obtained, and pertinent conclusions reached in 
the engagement, proprietary audit programs, analyses, memoranda, letters 
of confirmation and representation, abstracts of credit union documents, 
reviewer's notes, if retained, and schedules or commentaries prepared or 
obtained in the course of the engagement.



Sec. 715.3  General responsibilities of the Supervisory Committee.

    (a) Basic. The supervisory committee is responsible for ensuring 
that the board of directors and management of the credit union--
    (1) Meet required financial reporting objectives;
    (2) And establish practices and procedures sufficient to safeguard 
members' assets.
    (b) Specific. To carry out the responsibilities set forth in 
paragraph (a) of this section, the supervisory committee must determine 
whether:
    (1) Internal controls are established and effectively maintained to 
achieve the credit union's financial reporting objectives which must be 
sufficient to satisfy the requirements of the supervisory committee 
audit, verification of members' accounts and its additional 
responsibilities;
    (2) The credit union's accounting records and financial reports are 
promptly prepared and accurately reflect operations and results;
    (3) The relevant plans, policies, and control procedures established 
by the board of directors are properly administered; and
    (4) Policies and control procedures are sufficient to safeguard 
against error, conflict of interest, self-dealing and fraud.
    (c) Mandates. In carrying out the responsibilities set forth in 
paragraphs (a) and (b) of this section, the Supervisory Committee must:
    (1) Ensure that the credit union adheres to the measurement and 
filing requirements for reports filed with the NCUA Board under 
Sec. 741.6 of this chapter;
    (2) Perform or obtain a supervisory committee audit, as prescribed 
in Sec. 715.4 of this part;
    (3) Verify or cause the verification of members' passbooks and 
accounts against the records of the credit union, as prescribed in 
Sec. 715.8 of this part;
    (4) Act to avoid imposition of sanctions for failure to comply with 
the requirements of this part, as prescribed in Secs. 715.11 and 715.12 
of this part.

[[Page 463]]



Sec. 715.4  Audit responsibility of the Supervisory Committee.

    (a) Annual audit requirement. A federally-insured credit union is 
required to obtain an annual supervisory committee audit which occurs at 
least once every calendar year (period of performance) and must cover 
the period elapsed since the last audit period (period effectively 
covered).
    (b) Financial statement audit option. Any federally-insured credit 
union, whether Federally- or State-chartered and regardless of asset 
size, may choose to fulfill its Supervisory Committee audit 
responsibility by obtaining an annual audit of its financial statements 
performed in accordance with GAAS by an independent person who is 
licensed to do so by the State or jurisdiction in which the credit union 
is principally located. (A ``financial statement audit'' is distinct 
from a ``supervisory committee audit,'' although a financial statement 
audit is included among the options for fulfilling the supervisory 
committee audit requirement. Compare Sec. 715.2(c) and (j).)
    (c) Other audit options. A federally insured credit union which does 
not choose to obtain a financial statement audit as permitted by 
subsection (b) must fulfill its supervisory audit responsibility under 
either of Sec. 715.5 or Sec. 715.6 of this part, whichever is 
applicable. See Table 1. For purposes of this part, a credit union's 
asset size is the amount of total assets reported in the year-end Call 
Report (NCUA form 5300) filed for the calendar year-end immediately 
preceding the period under audit.
[GRAPHIC] [TIFF OMITTED] TR29JY99.000



Sec. 715.5  Audit of Federal Credit Unions.

    (a) Total assets of $500 million or greater. To fulfill its 
Supervisory Committee audit responsibility, a federal credit union 
having total assets of $500 million or greater must obtain an annual 
audit of its financial statements performed in accordance with GAAS by 
an independent person who is licensed to do so by the State or 
jurisdiction in which the credit union is principally located.
    (b) Total assets of less than $500 million but more than $10 
million. To fulfill its

[[Page 464]]

Supervisory Committee audit responsibility, a Federally-chartered credit 
union having total assets of less than $500 million but more than $10 
Million which does not choose to obtain an audit under Sec. 715.5(a), 
must obtain an annual supervisory committee audit as prescribed in 
Sec. 715.7.
    (c) Total assets of $10 million or less. To fulfill its Supervisory 
Committee audit responsibility, a Federally-chartered credit union 
having total assets of $10 million or less must obtain an annual 
Supervisory Committee audit as prescribed in Sec. 715.7.
    (d) Other requirements. A federally chartered credit union, 
regardless of which audit it is required to obtain under this section, 
must meet other applicable requirements of this part.



Sec. 715.6  Audit of Federally-insured State-chartered credit unions.

    (a) Total assets of $500 million or greater. To fulfill its 
Supervisory Committee audit responsibility, a federally-insured State-
chartered credit union having total assets of $500 million or greater 
must obtain an annual audit of its financial statements performed in 
accordance with GAAS by an independent person who is licensed to do so 
by the State or jurisdiction in which the credit union is principally 
located.
    (b) Total assets of less than $500 million. To fulfill its 
Supervisory Committee audit responsibility, a federally-insured State-
chartered credit union having total assets of less than $500 million 
must obtain either an annual supervisory committee audit as prescribed 
under either Sec. 715.6(a) or Sec. 715.7, or an audit as prescribed by 
the State or jurisdiction in which the credit union is principally 
located, whichever audit is more stringent.
    (c) Other requirements. A federally-insured, state-chartered credit 
union, regardless of which audit it is required to obtain under this 
section, must meet other applicable requirements of this part except 
Secs. 715.5 and 715.12.



Sec. 715.7  Supervisory Committee audit alternatives to a financial statement audit.

    A credit union which is not required to obtain a financial statement 
audit may fulfill its supervisory committee responsibility by any one of 
the following engagements:
    (a) Balance sheet audit. A balance sheet audit, as defined in 
Sec. 715.2(a), performed by a person who is licensed to do so by the 
State or jurisdiction in which the credit union is principally located; 
or
    (b) Report on Examination of Internal Control over Call Reporting. 
An engagement and report on management's written assertions concerning 
the effectiveness of internal control over financial reporting in the 
credit union's most recently filed semiannual or year-end call report 
(NCUA Form 5300), as defined in Sec. 715.2(j), performed by a person who 
is licensed to do so by the State or jurisdiction in which the credit 
union is principally located, and in which management specifies the 
criteria on which it based its evaluation of internal control; or
    (c) Audit per Supervisory Committee Guide. An audit performed by the 
supervisory committee, its internal auditor, or any other qualified 
person (such as a certified public accountant, public accountant, league 
auditor, credit union auditor consultant, retired financial institutions 
examiner, etc.) in accordance with the procedures prescribed in NCUA's 
Supervisory Committee Guide. Qualified persons who are not State-
licensed cannot provide assurance services under this subsection.



Sec. 715.8  Requirements for verification of accounts and passbooks.

    (a) Verification obligation. The Supervisory Committee shall, at 
least once every two years, cause the passbooks (including any book, 
statements of account, or other record approved by the NCUA Board) and 
accounts of the members to be verified against the records of the 
treasurer of the credit union.
    (b) Methods. Any of the following methods may be used to verify 
members' passbooks and accounts, as appropriate:
    (1) Controlled verification. A controlled verification of 100 
percent of members' share and loan accounts;
    (2) Statistical method. A sampling method which provides for:
    (i) Random selection:

[[Page 465]]

    (ii) A sample which is representative of the population from which 
it was selected;
    (iii) An equal chance of selecting each dollar in the population;
    (iv) Sufficient accounts in both number and scope on which to base 
conclusions concerning management's financial reporting objectives; and
    (v) Additional procedures to be performed if evidence provided by 
confirmations alone is not sufficient.
    (3) Non-statistical method. When the verification is performed by an 
Independent person licensed by the State or jurisdiction in which the 
credit union is principally located, the auditor may choose among the 
sampling methods set forth in paragraphs (b)(1) and (2) of this section 
and non-statistical sampling methods consistent with GAAS if such 
methods provide for:
    (i) Sufficient accounts in both number and scope on which to base 
conclusions concerning management's financial reporting objectives to 
provide assurance that the General Ledger accounts are fairly stated in 
relation to the financial statements taken as a whole;
    (ii) Additional procedures to be performed by the auditor if 
evidence provided by confirmations alone is not sufficient; and
    (iii) Documentation of the sampling procedures used and of their 
consistency with GAAS (to be provided to the NCUA Board upon request).
    (c) Retention of records. The supervisory committee must retain the 
records of each verification of members' passbooks and accounts until it 
completes the next verification of members' passbooks and accounts.



Sec. 715.9  Assistance from outside, compensated person.

    (a) Unrelated to officials. A compensated auditor who performs a 
Supervisory Committee audit on behalf of a credit union shall not be 
related by blood or marriage to any management employee, member of 
either the board of directors, the Supervisory Committee or the credit 
committee, or loan officer of that credit union.
    (b) Engagement letter. The engagement of a compensated auditor to 
perform all or a portion of the scope of a financial statement audit or 
supervisory committee audit shall be evidenced by an engagement letter. 
In all cases, the engagement must be contracted directly with the 
Supervisory Committee. The engagement letter must be signed by the 
compensated auditor and acknowledged therein by the Supervisory 
Committee prior to commencement of the engagement.
    (c) Contents of letter. The engagement letter shall:
    (1) Specify the terms, conditions, and objectives of the engagement;
    (2) Identify the basis of accounting to be used;
    (3) If a Supervisory Committee Guide audit, include an appendix 
setting forth the procedures to be performed;
    (4) Specify the rate of, or total, compensation to be paid for the 
audit;
    (5) Provide that the auditor shall, upon completion of the 
engagement, deliver to the Supervisory Committee a written report of the 
audit and notice in writing, either within the report or communicated 
separately, of any internal control reportable conditions and/or 
irregularities or illegal acts, if any, which come to the auditor's 
attention during the normal course of the audit (i.e., no notice 
required if none noted);
    (6) Specify a target date of delivery of the written reports, such 
target date not to exceed 120 days from date of calendar or fiscal year-
end under audit (period covered), unless the supervisory committee 
obtains a waiver from the supervising NCUA Regional Director;
    (7) Certify that NCUA staff and/or the State credit union 
supervisor, or designated representatives of each, will be provided 
unconditional access to the complete set of original working papers, 
either at the offices of the credit union or at a mutually agreed upon 
location, for purposes of inspection; and
    (8) Acknowledge that working papers shall be retained for a minimum 
of three years from the date of the written audit report.
    (d) Complete scope. If the engagement is to perform a Supervisory 
Committee Guide audit intended to fully meet the requirements of 
Sec. 715.7(c), the engagement letter shall certify that the audit will 
address the complete scope of that engagement;

[[Page 466]]

    (e) Exclusions from scope. If the engagement is to perform a 
Supervisory Committee Guide audit which will exclude any item required 
by the applicable section, the engagement letter shall:
    (1) Identify the excluded items;
    (2) State that, because of the exclusion(s), the resulting audit 
will not, by itself, fulfill the scope of a supervisory committee audit; 
and
    (3) Caution that the supervisory committee will remain responsible 
for fulfilling the scope of a supervisory committee audit with respect 
to the excluded items.



Sec. 715.10  Audit report and working paper maintenance and access.

    (a) Audit report. Upon completion and/or receipt of the written 
report of a financial statement audit or a supervisory committee audit, 
the Supervisory Committee must verify that the audit was performed and 
reported in accordance with the terms of the engagement letter 
prescribed herein. The Supervisory Committee must submit the report(s) 
to the board of directors, and provide a summary of the results of the 
audit to the members of the credit union orally or in writing at the 
next annual meeting of the credit union. If a member so requests, the 
Supervisory Committee shall provide the member access to the full audit 
report. If the National Credit Union Administration (``NCUA'') so 
requests, the Supervisory Committee shall provide NCUA a copy of each of 
the audit reports it receives or produces.
    (b) Working papers. The supervisory committee shall be responsible 
for preparing and maintaining, or making available, a complete set of 
original working papers supporting each supervisory committee audit. The 
supervisory committee shall, upon request, provide NCUA staff 
unconditional access to such working papers, either at the offices of 
the credit union or at a mutually agreeable location, for purposes of 
inspecting such working papers.



Sec. 715.11  Sanctions for failure to comply with this part.

    (a) Sanctions. Failure of a supervisory committee and/or its 
independent compensated auditor or other person to comply with the 
requirements of this section, or the terms of an engagement letter 
required by this section, is grounds for:
    (1) The regional director to reject the supervisory committee audit 
and provide a reasonable opportunity to correct deficiencies;
    (2) The regional director to impose the remedies available in 
Sec. 715.12, provided any of the conditions specified therein is 
present; and
    (3) The NCUA Board to seek formal administrative sanctions against 
the supervisory committee and/or its independent, compensated auditor 
pursuant to section 206(r) of the Federal Credit Union Act, 12 U.S.C. 
1786(r).
    (b) State Charters. In the case of a federally-insured state 
chartered credit union, NCUA shall provide the state regulator an 
opportunity to timely impose a remedy satisfactory to NCUA before 
exercising it authority under Sec. 741.202 of this chapter to impose a 
sanction permitted under paragraph (a) of this section.



Sec. 715.12  Statutory audit remedies for Federal credit unions.

    (a) Audit by alternative licensed person. The NCUA Board may compel 
a federal credit union to obtain a supervisory committee audit which 
meets the minimum requirements of Sec. 715.5 or Sec. 715.7, and which is 
performed by an independent person who is licensed by the State or 
jurisdiction in which the credit union is principally located, for any 
fiscal year in which any of the following three conditions is present:
    (1) The Supervisory Committee has not obtained an annual financial 
statement audit or performed a supervisory committee audit; or
    (2) The Supervisory Committee has obtained a financial statement 
audit or performed a supervisory committee audit which does not meet the 
requirements of part 715 including those in Sec. 715.8.
    (3) The credit union has experienced serious and persistent 
recordkeeping deficiencies as defined in paragraph (c) of this section.
    (b) Financial statement audit required. The NCUA Board may compel a 
federal credit union to obtain a financial

[[Page 467]]

statement audit performed in accordance with GAAS by an independent 
person who is licensed by the State or jurisdiction in which the credit 
union is principally located (even if such audit is not required by 
Sec. 715.5), for any fiscal year in which the credit union has 
experienced serious and persistent recordkeeping deficiencies as defined 
in paragraph (c) of this section. The objective of a financial statement 
audit performed under this paragraph is to reconstruct the records of 
the credit union sufficient to allow an unqualified or, if necessary, a 
qualified opinion on the credit union's financial statements. An adverse 
opinion or disclaimer of opinion should be the exception rather than the 
norm.
    (c) ``Serious and persistent recordkeeping deficiencies.'' A record-
keeping deficiency is ``serious'' if the NCUA Board reasonably believes 
that the board of directors and management of the credit union have not 
timely met financial reporting objectives and established practices and 
procedures sufficient to safeguard members' assets. A serious 
recordkeeping deficiency is ``persistent'' when it continues beyond a 
usual, expected or reasonable period of time.



PART 716--PRIVACY OF CONSUMER FINANCIAL INFORMATION--Table of Contents




Sec.
716.1  Purpose and scope.
716.2  Rule of construction.
716.3  Definitions.

                 Subpart A--Privacy and Opt Out Notices

716.4  Initial privacy notice to consumers required.
716.5  Annual privacy notice to members required.
716.6  Information to be included in initial and annual privacy notices.
716.7  Form of opt out notice to consumers and opt out methods.
716.8  Revised privacy notices.
716.9  Delivering privacy and opt out notices.

                    Subpart B--Limits on Disclosures

716.10  Limits on disclosure of nonpublic personal information to 
          nonaffiliated third parties.
716.11  Limits on redisclosure and reuse of information.
716.12  Limits on sharing of account number information for marketing 
          purposes.

                          Subpart C--Exceptions

716.13  Exception to opt out requirements for service providers and 
          joint marketing.
716.14  Exceptions to notice and opt out requirements for processing and 
          servicing transactions.
716.15  Other exceptions to notice and opt out requirements

            Subpart D--Relation To Other Laws; Effective Date

716.16  Protection of Fair Credit Reporting Act.
716.17  Relation to state laws.
716.18  Effective date; transition rule.

Appendix A to Part 716--Sample Clauses

    Authority: 15 U.S.C. 6801 et seq., 12 U.S.C. 1751 et seq.

    Source: 65 FR 31740, May 18, 2000, unless otherwise noted.



Sec. 716.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the credit unions listed in paragraph (b) 
of this section. This part:
    (1) Requires a credit union to provide notice to members about its 
privacy policies and practices;
    (2) Describes the conditions under which a credit union may disclose 
nonpublic personal information about consumers to nonaffiliated third 
parties; and
    (3) Provides a method for consumers to prevent a credit union from 
disclosing that information to most nonaffiliated third parties by 
``opting out'' of that disclosure, subject to the exceptions in 
Sec. Sec. 716.13, 716.14, and 716.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
for personal, family or household purposes. This part does not apply to 
information about companies or about individuals who obtain financial 
products or services for business, commercial or agricultural purposes. 
This part applies to federally-insured credit unions. This part refers 
to a federally-insured credit union as ``you'' or ``the credit union.''

[[Page 468]]

    (2) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable financial information 
promulgated by the Secretary of Health and Human Services under the 
authority of Secs. 262 and 264 of the Health Insurance Portability and 
Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).



Sec. 716.2  Rule of construction.

    The examples in this part and the sample clauses in appendix A of 
this part are not exclusive. Compliance with an example or use of a 
sample clause, to the extent applicable, constitutes compliance with 
this part.



Sec. 716.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a)(1) Affiliate means any company that controls, is controlled by, 
or is under common control with another company.
    (2) Examples. (i) An affiliate of a federal credit union is a credit 
union service organization (CUSO), as provided in 12 CFR part 712, that 
is controlled by the federal credit union.
    (ii) An affiliate of a federally-insured, state-chartered credit 
union is a company that is controlled by the credit union.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples. (i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information contained in the notice in clear, 
concise sentences, paragraphs and sections;
    (B) Use short, explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice whenever 
possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology wherever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars.
    (iii) Notices on web sites. If you provide notices on a web page, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the web site (such as text graphics, 
hyperlinks or sound) do not distract attention form the notice, and you 
either:
    (A) Place the notice on a screen frequently accessed by consumers, 
such as a home page or a page on which transactions are conducted; or
    (B) Place a link on a screen frequently accessed by consumers, such 
as a home page or a page on which transactions are conducted, that 
connects directly to the notice and is labeled appropriately to convey 
the importance, nature and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, irrespective 
of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you, that is to be used primarily for 
personal, family or household purposes, or that individual's legal 
representative.
    (2) Examples. (i) An individual who provides nonpublic personal 
information to you in connection with obtaining or seeking to obtain 
credit union

[[Page 469]]

membership is your consumer regardless of whether you establish a member 
relationship.
    (ii) An individual who provides nonpublic personal information to 
you in connection with using your ATM is your consumer.
    (iii) If you hold ownership or servicing rights to an individual's 
loan, the individual is your consumer, even if you hold those rights in 
conjunction with one or more financial institutions. (The individual is 
also a consumer with respect to the other financial institutions 
involved). This applies, even if you, or another financial institution 
with those rights, hire an agent to collect on the loan or to provide 
processing or other services.
    (iv) An individual who is a consumer of another financial 
institution is not your consumer solely because you act as agent for, or 
provide processing or other services to, that financial institution.
    (v) An individual is not your consumer solely because he or she is a 
participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company, as the NCUA 
determines. With respect to state-chartered credit unions, NCUA will 
consult with the appropriate state regulator prior to making its 
determination.
    (4) Example. NCUA will presume a credit union has a controlling 
influence over the management or policies of a CUSO, if the CUSO is 67% 
owned by credit unions.
    (h) Credit union means a federal or state-chartered credit union 
that the National Credit Union Share Insurance Fund insures.
    (i) Customer means a consumer who has a customer relationship with a 
financial institution other than a credit union.
    (j) Customer relationship means a continuing relationship between a 
consumer and a financial institution other than a credit union.
    (k) Federal functional regulator means--
    (1) The National Credit Union Administration Board;
    (2) The Board of Governors of the Federal Reserve System;
    (3) The Office of the Comptroller of the Currency;
    (4) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (5) The Director of the Office of Thrift Supervision; and
    (6) The Securities and Exchange Commission.
    (l)(1)Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activity as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Examples of financial institutions may include, but are not 
limited to: credit unions; banks; insurance companies; securities 
brokers, dealers, and underwriters; loan brokers and servicers; tax 
planners and preparation services; personal property appraisers; real 
estate appraisers; career counselors for employees in financial 
occupations; digital signature services; courier services; real estate 
settlement services; manufacturers of computer software and hardware; 
and travel agencies operated in connection with financial services.
    (3) Financial institution does not include:
    (i) Any person or entity with respect to any financial activity that 
is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);

[[Page 470]]

    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights) or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party.
    (m) (1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (n) Member means a consumer who has a member relationship with you. 
For purposes of this part only, it will include certain nonmembers.
    (o)(1) Member relationship means a continuing relationship between a 
consumer and you under which you provide one or more financial products 
or services to the consumer that are to be used primarily for personal, 
family or household purposes. As noted in the examples, this will 
include certain consumers that are not your members.
    (2) Examples. (i) A consumer has a continuing relationship with you 
if the consumer:
    (A) Is your member as defined in your bylaws;
    (B) Is a nonmember who has a share, share draft, or credit card 
account with you jointly with a member;
    (C) Is a nonmember who has a loan that you service;
    (D) Is a nonmember who has an account with you and you are a credit 
union that has been designated as a low-income credit union; or
    (E) Is a nonmember who has an account in a federally-insured, state-
chartered credit union pursuant to state law.
    (ii) A consumer does not, however, have a member relationship with 
you if the consumer is a nonmember and:
    (A) The consumer only obtains a financial product or service in 
isolated transactions, such as using your ATM to withdraw cash from an 
account maintained at another financial institution or purchasing 
travelers checks; or
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan. (p)(1) Nonaffiliated third party means any person 
except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other company 
that jointly employs the person).
    (q)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description or other grouping of consumers (and 
publicly available information pertaining to them) that is derived using 
any personally identifiable financial information.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (q)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information, other 
than publicly available information.
    (3) Examples of lists. (i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information, 
other than publicly available information, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived using personally identifiable financial 
information, other than publicly available information, either in whole 
or in part, and is not disclosed in a manner that indicates that any of

[[Page 471]]

the individuals on the list is a consumer of a credit union, other than 
publicly available information.
    (r)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Personally identifiable financial information does not include 
publicly available information.
    (3) Examples. (i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain membership, a loan, credit card or other financial product or 
service;
    (B) Account balance information, payment history, overdraft history, 
and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your members 
or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on a loan or 
servicing a loan;
    (F) Any information you collect through an Internet ``cookie'' (an 
information collecting device from a web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as aggregate 
information or blind data that does not contain personal identifiers 
such as account numbers, names, or addresses.
    (s)(1) Publicly available information means any information that you 
have a reasonable basis to believe is lawfully made available to the 
general public from:
    (i) Federal, state or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be made 
by federal, state or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you have 
taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your member or 
consumer has not done so.
    (3) Examples. (i) Government records. Publicly available information 
in government records includes information in government real estate 
records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper or a web site that is available 
to the general public on an unrestricted basis. A web site is not 
restricted merely because an Internet service provider or site operator 
requires a fee or a password, so long as access is available to the 
general public.
    (iii) Reasonable basis. (1) You have a reasonable basis to believe 
that mortgage information is lawfully made available to the general 
public if you have determined that the information is of the type 
included on the public record in the jurisdiction where the mortgage 
would be recorded.
    (2) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if you 
have located the telephone number in the telephone book or have been 
informed by the consumer that the telephone number is not unlisted.

[[Page 472]]

    (t) You means a federally-insured credit union.



                 Subpart A--Privacy and Opt Out Notices



Sec. 716.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to a:
    (1) Member, not later than when you establish a member relationship, 
except as provided in paragraph (e) of this section; and
    (2) Consumer, before you disclose any nonpublic personal information 
about the consumer to any nonaffiliated third party, if you make such a 
disclosure other than as authorized by Sec. Sec. 716.14 and 716.15.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about the 
consumer to any nonaffiliated third party, other than as authorized by 
Sec. Sec. 716.14 and 716.15; and
    (2) You do not have a member relationship with the consumer.
    (c) When you establish a member relationship. (1) General rule. You 
establish a member relationship when you and the consumer enter into a 
continuing relationship.
    (2) Special rule for loans. You establish a member relationship with 
a consumer when you originate, or acquire the servicing rights to a loan 
to the consumer for personal, household or family purposes and that is 
the only basis for the member relationship. If you subsequently transfer 
the servicing rights to that loan to another financial institution, the 
member relationship transfers with the servicing rights.
    (3)(i) Examples of establishing member relationship. You establish a 
member relationship when the consumer:
    (A) Becomes your member under your bylaws;
    (B) Is a nonmember and opens a credit card account with you jointly 
with a member under your procedures;
    (C) Is a nonmember and executes the contract to open a share or 
share draft account with you or obtains credit from you jointly with a 
member, including an individual acting as a guarantor;
    (D) Is a nonmember and opens an account with you and you are a 
credit union designated as a low-income credit union;
    (E) Is a nonmember and opens an account with you pursuant to state 
law and you are a state-chartered credit union.
    (ii) Examples of loan rule. You establish a member relationship with 
a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer and retain the servicing 
rights; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing members. When an existing member obtains a new 
financial product or service that is to be used primarily for personal, 
family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised policy notice, under Sec. 716.8, that 
covers the member's new financial product or service; or
    (2) If the initial, revised, or annual notice that you most recently 
provided to that member was accurate with respect to the new financial 
product or service, you do not need to provide a new privacy notice 
under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a member relationship if:
    (i) Establishing the member relationship is not at the member's 
election;
    (ii) Providing notice not later than when you establish a member 
relationship would substantially delay the member's transaction and the 
member agrees to receive the notice at a later time.
    (2) Examples of exceptions. (i) Not at member's election. 
Establishing a member relationship is not at the member's election if 
you acquire a member's deposit liability from another financial

[[Page 473]]

institution and the member does not have a choice about your 
acquisition.
    (ii) Substantial delay of member's transaction. Providing notice not 
later than when you establish a member relationship would substantially 
delay the member's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
member relationship involving prompt delivery of the financial product 
or service; or
    (B) You establish a member relationship with an individual under a 
program authorized by Title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the member.
    (iii) No substantial delay of member's transaction. Providing notice 
not later than when you establish a member relationship would not 
substantially delay the member's transaction when the relationship is 
initiated in person at your office or through other means by which the 
member may view the notice, such as on a web site.
    (f)(1) Joint relationships. If two or more consumers jointly obtain 
a financial product or service, other than a loan, from you, you may 
satisfy the requirements of paragraph of this section by providing one 
initial notice to those consumers jointly.
    (2) Special rule for loans. (i) You are required to provide an 
initial notice to a borrower or guarantor on a loan if you share his or 
her nonpublic personal information with nonaffiliated third parties 
other than for purposes under Secs. 716.13, 716.14 and 716.15. (ii) You 
may satisfy the annual notice requirements of Sec. 716.5 by providing 
one notice to those borrowers and guarantors jointly.
    (g) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to the methods in 
Sec. 716.9. If you use a short-form initial notice for nonmember 
consumers according to Sec. 716.6(c), you may deliver your privacy 
notice according to Sec. 716.6(c)(3).

[65 FR 31740, May 18, 2000, as amended at 65 FR 36783, June 12, 2000]



Sec. 716.5  Annual privacy notice to members required.

    (a)(1) General rule. You must provide a clear and conspicuous notice 
to members that accurately reflects your privacy policies and practices 
not less than annually during the continuation of the member 
relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may define 
the 12-consecutive-month period, but you must apply it to the member on 
a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the member once in each calendar year following the calendar 
year in which you provide the initial notice. For example, if a member 
opens an account on any day of year one, you must provide an annual 
notice to that member by December 31 of year two.
    (b) (1) Termination of member relationship. You are not required to 
provide an annual notice to a former member.
    (2) Examples. Your member becomes your former member when:
    (i) An individual is no longer your member as defined in your 
bylaws;
    (ii) In the case of a nonmember's share or share draft account, the 
account is inactive under the credit union's policies;
    (iii) In the case of a nonmember's closed-end loan, the loan is paid 
in full, you charge off the loan, or you sell the loan without retaining 
servicing rights;
    (iv) In the case of a credit card relationship or other open-end 
credit relationship with a nonmember, you no longer provide any 
statements or notices to the nonmember concerning that relationship or 
you sell the credit card receivables without retaining servicing rights; 
or
    (v) You have not communicated with the nonmember about the 
relationship for a period of twelve consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to the methods in 
Sec. 716.9.

[[Page 474]]



Sec. 716.6  Information to be included in initial and annual privacy notices.

    (a) General rule. The initial and annual privacy notices under 
Secs. 716.4 and 716.5 must include each of the following items of 
information that applies to you or to the consumers to whom you send 
your privacy notice, in addition to any other information you wish to 
provide:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Secs. 716.14 and 716.15;
    (4) The categories of nonpublic personal information about your 
former members that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose it, other than those 
parties to whom you disclose information under Secs. 716.14 and 716.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec. 716.13 (and no other exception 
applies to that disclosure), a separate statement of the categories of 
information you disclose and the categories of third parties with whom 
you have contracted;
    (6) An explanation of the consumer's right under Sec. 716.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the methods by which the consumer 
may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that is, 
notices regarding the ability to opt out of disclosure of information 
among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosures you make under paragraph (b) of this section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Sec. Sec. 716.14 and 716.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Sec. Sec. 716.4 and 716.5. When describing the 
categories with respect to those parties, you are required to state only 
that you make disclosures to other nonaffiliated third parties as 
permitted by law.
    (c) Short-form initial notice with opt out notice for nonmember 
consumers. (1) You may satisfy the initial notice requirements in 
Secs. 716.4(a)(2), 716.7(b), and 716.7(c) for a consumer who is not a 
member by providing a short-form initial notice at the same time as you 
deliver an opt out notice as required in Sec. 716.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec. 716.9. You are not required to deliver your privacy notice with 
your short form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a consumer 
who receives your short-form notice requests your privacy notice, you 
must deliver your privacy notice according to Sec. 716.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to a consumer 
immediately upon request.
    (d) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and

[[Page 475]]

    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (e) Examples. (1) Categories of nonpublic personal information that 
you collect.
    You satisfy the requirement to categorize the nonpublic personal 
information that you collect if you list the following categories, as 
applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose. (i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (e)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to whom 
you disclose. You satisfy the requirement to categorize the affiliates 
and nonaffiliated third parties to whom you disclose nonpublic personal 
information if you list the following categories, as applicable, and a 
few examples to illustrate the types of third parties in each category.
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec. 716.13 to a nonaffiliated third party to market 
products or services that you offer alone or jointly with another 
financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraphs (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not intend to 
disclose, nonpublic personal information about members or former members 
to affiliates or nonaffiliated third parties except as authorized under 
Secs. 716.14 and 716.15, you may simply state that fact, in addition to 
the information you must provide under paragraphs (a)(1), (a)(8), (a)(9) 
and (c) of this section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security of 
nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information.
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical information 
about the safeguards you use.
    (7) Joint notice with affiliates. You may provide a joint notice 
from you and one or more of your affiliates or other financial 
institutions, as specified in the notice, as long as the notice is 
accurate with respect to you and the other institution.



Sec. 716.7  Form of opt out notice to consumers and opt out methods.

    (a)(1) Form of opt out notice. If you are required to provide an opt 
out notice under Sec. 716.10(a)(1), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:

[[Page 476]]

    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples. (i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal information 
that you disclose or reserve the right to disclose and all of the 
categories of nonaffiliated third parties to whom you disclose the 
information, as described in Sec. 716.6(a)(2) and (3) and state that the 
consumer can opt out of the disclosure of that information; and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his or 
her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that was 
provided with the initial notice but not included with the subsequent 
notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec. 716.4.
    (c) Initial notice required when opt out notice delivered subsequent 
to initial notice. If you provide the opt out notice later than required 
for the initial notice in accordance with Sec. 716.4, you must also 
include a copy of the initial notice in writing or, if the consumer 
agrees, electronically.
    (d) Joint relationships. (1) If two or more consumers jointly obtain 
a financial product or service, other than a loan, from you, you may 
provide only a single opt out notice. Your opt out notice must explain 
how you will treat an opt out direction by a joint consumer as explained 
in the examples in paragraph (d)(5) of this section.
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer to apply to all 
of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint share account with you 
and arrange for you to send statements to John's address, you may do any 
of the following, but you must explain in your opt out notice which opt 
out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.

[[Page 477]]

    (iii) Permit John and Mary to make different opt out directions. If 
you do so, and if John and Mary both opt out, you must permit one or 
both of them to notify you in a single response (such as on a form or 
through a telephone call).
    (6) Special rule for loans. (i) You are required to provide an 
initial opt out notice to a borrower or guarantor on a loan if you share 
his or her nonpublic personal information with nonaffiliated third 
parties other than for purposes under Secs. 716.13, 716.14 and 716.15.
    (ii) You may satisfy your annual opt out notice requirement by 
providing one notice to those borrowers and guarantors jointly.
    (e) Time to comply with opt out. You must comply with the consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction. (1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a member relationship terminates, the member's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to the relationship. If the individual 
subsequently establishes a new member relationship with you, the opt out 
direction that applied to the former relationship does not apply to the 
new relationship.
    (h) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to the methods in 
Sec. 716.9.

[65 FR 31740, May 18, 2000, as amended at 65 FR 36783, June 12, 2000]



Sec. 716.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec. 716.4, unless:
    (1) You have provided to the consumer a revised notice that 
accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before you 
disclose the information to the nonaffiliated third party, to opt out of 
the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples. (1) Except as otherwise permitted by Sec. Sec. 716.13, 
716.14 and 716.15, you must provide a revised notice if you--
    (i) Disclose a new category of nonpublic personal information to any 
nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former member 
to a nonaffiliated third party, and that former member has not had the 
opportunity to exercise an opt out right regarding that disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to the methods in 
Sec. 716.9.



Sec. 716.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices and 
opt out notices, including short-form initial notices, that this part 
requires so that each consumer can reasonably be expected to receive 
actual notice in writing or, if the consumer agrees, electronically.
    (b) (1) Examples of reasonable expectation of actual notice. You may 
reasonably expect that a consumer will receive actual notice if you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically, 
post the

[[Page 478]]

notice on the electronic site and require the consumer to acknowledge 
receipt of the notice as a necessary step to obtaining a particular 
financial product or service;
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectations of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices;
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. You may reasonably expect that a member 
will receive actual notice of your annual privacy notice if:
    (1) The member uses your web site to access financial products and 
services electronically and agrees to receive notices at your web site 
and you post your current privacy notice continuously in a clear and 
conspicuous manner on your web site; or
    (2) The member has requested that you refrain from sending any 
information regarding the member relationship, and your current privacy 
notice remains available to the member upon request.
    (d) Oral description of notice insufficient. You may not provide any 
notice required by this part solely by orally explaining the notice, 
either in person or over the telephone.
    (e) Retention or accessibility of notices for members. (1) For 
members only, you must provide the initial notice required by Sec. 716.4 
(a)(1), the annual notice required by Sec. 716.5(a) and the revised 
notice required by Sec. 716.8 so that the member can retain them or 
obtain them later in writing or, if the member agrees, electronically.
    (2) Examples of retention or accessibility. You provide the privacy 
notice to the member so that the member can retain it or obtain it later 
if you:
    (i) Hand-deliver a printed copy of the notice to the member;
    (ii) Mail a printed copy of the notice to the last known address of 
the member upon request of the member; or
    (iii) Make your current privacy notice available on a web site (or a 
link to another web site) for the member who obtains a financial product 
or service electronically and agrees to receive the notice at the web 
site.



                    Subpart B--Limits on Disclosures



Sec. 716.10  Limits on disclosure of nonpublic personal information to nonaffiliated third parties.

    (a) (1) Conditions for disclosure. Except as otherwise authorized in 
this part, you may not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated third 
party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec. 716.4;
    (ii) You have provided to the consumer an opt out notice as required 
in Sec. 716.7;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that consumer 
to a nonaffiliated third party, other than as permitted by Secs. 716.13, 
716.14 and 716.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.
    (ii) By electronic means. A member opens an on-line account with you 
and agrees to receive the notices required in paragraph (a)(1) of this 
section electronically, and you make the notices available to the member 
on your web site and allow the member to opt out

[[Page 479]]

by any reasonable means within 30 days after the date that the member 
acknowledges receipt of the notices.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a traveler's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if you 
provide the notices required in paragraph (a)(1) of this section at the 
time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information. (1) You must comply with this section, regardless 
of whether you and the consumer have established a member relationship.
    (2) Unless you comply with this section, you may not, directly or 
through an affiliate, disclose any nonpublic personal information about 
a consumer that you have collected, regardless of whether you collected 
it before or after receiving the direction to opt out from the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.



Sec. 716.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec. 716.14 or 716.15 of this part, 
your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information; and
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec. 716.14 or 716.15 in the ordinary course of business to 
carry out the activity covered by the exception under which you received 
the information.
    (2) Example. If you receive a member list from a credit union in 
order to provide correspondent services under the exception in 
Sec. 716.14(a), you may disclose that information under any exception in 
Sec. 716.14 or 716.15 in order to provide those services. For example, 
you could disclose the information in response to a properly authorized 
subpoena or to your attorneys, accountants, and auditors. You could not 
disclose that information to a third party for marketing purposes or use 
that information for your own marketing purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec. 716.14 or 716.15 of 
this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information;
    (iii) To any other person, if the disclosure would be lawful if made 
directly to that person by the financial institution from which you 
received the information; and
    (iv) Pursuant to an exception in Sec. 716.14 or 716.15.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. Sec. 716.14 and 
716.15,
    (i) You may use the list for your own purposes;
    (ii) You may disclose that list to another non-affiliated third 
party only if the financial institution from which you purchased the 
list could have disclosed the list to that third party, that is you may 
disclose the list in accordance with the privacy policy of the financial 
institution from which you received the list, as limited by the opt out 
direction of each consumer whose nonpublic personal information you 
intend to disclose; and
    (iii) You may disclose that list as permitted by Sec. 716.14 or 
716.15, such as to your attorneys or accountants.

[[Page 480]]

    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec. 716.14 or 716.15 of this part, the disclosure and use 
of that information by the third party is limited as follows:
    (1) The third party may disclose the information to your affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the information; 
and
    (3) The third party may disclose and use the information pursuant to 
an exception in Sec. 716.14 or 716.15 in the ordinary course of business 
to carry out the activity covered by the exception under which it 
received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec. 716.14 or 716.15 of this part, the 
third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose the 
information only to the extent the third party can disclose the 
information;
    (3) To any other person, if the disclosure would be lawful if made 
directly to that person by you; and
    (4) Pursuant to an exception in Sec. 716.14 or 716.15.



Sec. 716.12  Limits on sharing of account number information for marketing purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, share 
account or transaction account to any nonaffiliated third party for use 
in telemarketing, direct mail marketing or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider cannot directly initiate charges to the account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the member when the member enters into the program.
    (c) Examples. (1) Account number. An account number, or similar form 
of access number or access code, does not include a number or code in an 
encrypted form, as long as you do not provide the recipient with a means 
to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a share or credit card account. A transaction account does not 
include an account to which a third party cannot initiate a charge.



                          Subpart C--Exceptions



Sec. 716.13  Exception to opt out requirements for service providers and joint marketing.

    (a) General rule. (1) The opt out requirements in Sec. Sec. 716.7 
and 716.10 do not apply when you provide nonpublic personal information 
to a nonaffiliated third party to perform services for you or functions 
on your behalf, if you:
    (i) Provide the initial notice in accordance with Sec. 716.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information other 
than to carry out the purposes for which you disclosed the information, 
including use under an exception in Sec. 716.14 or 716.15 in the 
ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits the 
institution from disclosing or using the nonpublic personal information 
except as necessary to carry out the joint marketing or under

[[Page 481]]

an exception in Sec. 716.14 or 716.15 in the ordinary course of business 
to carry out that joint marketing.
    (b) Service may include joint marketing. The services that a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.



Sec. 716.14  Exceptions to notice and opt out requirements for processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 716.4(a)(2), the opt out in 
Sec. Sec. 716.7 and 716.10 and service providers and joint marketing in 
Sec. 716.13 do not apply if you disclose nonpublic personal information 
as necessary to effect, administer, or enforce a transaction that a 
consumer requests or authorizes, or in connection with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights) or similar transaction related to 
a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service or maintain the 
consumer's account in the ordinary course of providing the financial 
service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit or other payment card, check or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts or interests therein; or
    (C) The audit of debit, credit or other payment information.



Sec. 716.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for initial 
notice to consumers in Sec. 716.4(a)(2), the opt out in Sec. Sec. 716.7 
and 716.10 and service providers and joint marketing in Sec. 716.13 do 
not apply when you disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2)(i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or

[[Page 482]]

    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory organizations, 
guaranty funds or agencies, agencies that are rating you, persons that 
are assessing your compliance with industry standards, and your 
attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a state insurance authority, with 
respect to any person domiciled in that insurance authority's state that 
is engaged in providing insurance, and the Federal Trade Commission), 
self-regulatory organizations, or for an investigation on a matter 
related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.), or
    (ii) From a consumer report reported by a consumer reporting agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with federal, state or local laws, rules and other 
applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal or 
regulatory investigation, or subpoena or summons by federal, state or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance or 
other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated insurance 
company of the fact that the consumer has applied to you for a mortgage 
so that the insurance company can offer homeowner's insurance to the 
consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal information 
as permitted under Sec. 716.7(f).



            Subpart D--Relation to Other Laws; Effective Date



Sec. 716.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), and no inference shall be drawn on the basis of the provisions 
of this part regarding whether information is transaction or experience 
information under section 603 of that Act.



Sec. 716.17  Relation to state laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order or interpretation 
in effect in any state, except to the extent that such state statute, 
regulation, order or interpretation is inconsistent with the provisions 
of this part, and then only to the extent of the inconsistency.
    (b) Greater protection under state law. For purposes of this 
section, a state statute, regulation, order or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Federal Trade Commission, after consultation with the National 
Credit Union Administration, on the Federal Trade Commission's own 
motion or upon the petition of any interested party.



Sec. 718.18  Effective date; transition rule.

    (a) Effective date. This part is effective November 13, 2000. In 
order to provide sufficient time for you to establish policies and 
systems to comply with the requirements of this part, the National 
Credit Union Administration Board has extended the time for compliance 
with this part until July 1, 2001.

[[Page 483]]

    (b)(1) Notice requirement for consumers who were your members on the 
compliance date. By July 1, 2001, you must provide an initial notice, as 
required by Sec. 716.4, to consumers who are your members on July 1, 
2001.
    (2) Example. You provide an initial notice to consumers who are your 
members on July 1, 2001, if, by that date, you have established a system 
for providing an initial notice to all new members and have mailed the 
initial notice to all your existing members.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that you have entered into with a nonaffiliated third 
party to perform services for you or functions on your behalf satisfies 
the provisions of Sec. 716.13(a)(2) of this part, even if the contract 
does not include a requirement that the third party maintain the 
confidentiality of nonpublic personal information, as long as the 
agreement was entered into on or before July 1, 2000.

                 Appendix A to Part 716--SAMPLE CLAUSES

    Credit unions, including a group of affiliates that use a common 
privacy notice, may use the following sample clauses, if the clause is 
accurate for each institution that uses the notice.

     A-1--Categories of information you collect (all credit unions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 716.6(a)(1) to describe the categories of nonpublic personal 
information you collect.

                           Sample Clause A-1:

    We collect nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications or other 
forms;
     Information about your transactions with us, our 
affiliates, or others; and
     Information we receive from a consumer reporting agency.

A-2--Categories of information you disclose (credit unions that disclose 
                       outside of the exceptions)

    You may use one of these clauses, as applicable, to meet the 
requirement of Sec. 716.6(a)(2) to describe the categories of nonpublic 
personal information you disclose. These clauses may be used if you 
disclose nonpublic personal information other than as permitted by the 
exceptions in Sec. Sec. 716.13, 716.14, and 716.15.

                    Sample Clause A-2, Alternative 1:

    We may disclose the following kinds of nonpublic personal 
information about you:
     Information we receive from you on applications or other 
forms, such as [provide illustrative examples, such as ``your name, 
address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such as 
``your account balance, payment history, parties to transactions, and 
credit card usage'']; and
     Information we receive from a consumer reporting agency, 
such as [provide illustrative examples, such as ``your creditworthiness 
and credit history''].

                    Sample Clause A-2, Alternative 2:

    We may disclose all of the information that we collect, as described 
[describe location in the notice, such as ``above'' or ``below''].

  A-3--Categories of information you disclose and parties to whom you 
 disclose (credit unions that do not disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirements of 
Sec. 716.6(a)(2), (3) and (4) to describe the categories of nonpublic 
personal information about members and former members that you disclose 
and the categories of affiliates and nonaffiliated third parties to whom 
you disclose. This clause may be used if you do not disclose nonpublic 
personal information to any party, other than as permitted by the 
exceptions in Sec. Sec. 716.14, and 716.15.

                           Sample Clause A-3:

    We do not disclose any nonpublic personal information about our 
members and former members to anyone, except as permitted by law.

  A-4--Categories of parties to whom you disclose (credit unions that 
                   disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 716.6(a)(3) to describe the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information. This clause may be used if you disclose nonpublic personal 
information other than as permitted by the exceptions in 
Sec. Sec. 716.13, 716.14, and 716.15, as well as when permitted by the 
exceptions in Sec. Sec. 716.14, and 716.15.

                           Sample Clause A-4:

    We may disclose nonpublic personal information about you to the 
following types of third parties:

[[Page 484]]

     Financial service providers, such as [provide illustrative 
examples, such as ``mortgage bankers, securities broker-dealers, and 
insurance agents''];
     Non-financial companies, such as [provide illustrative 
examples, such as ``retailers, direct marketers, airlines, and 
publishers'']; and
     Others, such as [provide illustrative examples, such as 
``non-profit organizations''].
    We may also disclose nonpublic personal information about you to 
nonaffiliated third parties as permitted by law.

             A-5--Service provider/joint marketing exception

    You may use one of these clauses, as applicable, to meet the 
requirements of Sec. 716.6(a)(5) related to the exception for service 
providers and joint marketers in Sec. 716.13. If you disclose nonpublic 
personal information under this exception, you must describe the 
categories of nonpublic personal information you disclose and the 
categories of third parties with whom you have contracted.

                    Sample Clause A-5, Alternative 1:

    We may disclose the following information to companies that perform 
marketing services on our behalf or to other financial institutions with 
whom we have joint marketing agreements:
     Information we receive from you on applications or other 
forms, such as [provide illustrative examples, such as ``your name, 
address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such as 
``your account balance, payment history, parties to transactions, and 
credit card usage'']; and
     Information we receive from a consumer reporting agency, 
such as [provide illustrative examples, such as ``your creditworthiness 
and credit history''].

                    Sample Clause A-5, Alternative 2:

    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

 A-6--Explanation of opt out right (credit unions that disclose outside 
                           of the exceptions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 716.6(a)(6) to provide an explanation of the consumer's right to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right. This clause may be used if you 
disclose nonpublic personal information other than as permitted by the 
exceptions in Secs. 716.13, 716.14, and 716.15.

                           Sample Clause A-6:

    If you prefer that we not disclose nonpublic personal information 
about you to nonaffiliated third parties, you may opt out of those 
disclosures, that is, you may direct us not to make those disclosures 
(other than disclosures permitted by law). If you wish to opt out of 
disclosures to nonaffiliated third parties, you may [describe a 
reasonable means of opting out, such as ``call the following toll-free 
number: (insert number)].

          A-7--Confidentiality and security (all credit unions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 716.6(a)(8) to describe your policies and practices with respect to 
protecting the confidentiality and security of nonpublic personal 
information.

                           Sample Clause A-7:

    We restrict access to nonpublic personal information about you to 
[provide an appropriate description, such as ``those employees who need 
to know that information to provide products or services to you'']. We 
maintain physical, electronic, and procedural safeguards that comply 
with federal regulations to guard your nonpublic personal information.



PART 721--FEDERAL CREDIT UNION INSURANCE AND GROUP PURCHASING ACTIVITIES--Table of Contents




Sec.
721.1  Authority.
721.2  Reimbursement.

    Authority: 12 U.S.C. 1757(16), 1766 and 1789.



Sec. 721.1  Authority.

    A Federal credit union may make insurance and group purchasing plans 
involving outside vendors available to the membership (including 
endorsement), and may perform administrative functions on behalf of the 
vendors.

[47 FR 44243, Oct. 7, 1982]



Sec. 721.2  Reimbursement.

    (a) For purposes of paragraph (b) of this section, the following 
definitions shall apply:
    (1) Dollar amount shall mean $4 per single payment policy, $6 per 
combination policy, or $4 per annum for any other type of policy; and

[[Page 485]]

    (2) Cost amount shall mean the total of the direct and indirect 
costs to the Federal credit union of any administrative functions 
performed on behalf of the vendor. The Federal credit union must be able 
to justify this amount using standard accounting procedures.
    (b) A Federal credit union may be reimbursed or compensated by a 
vendor for activities performed under Sec. 721.1 as follows:
    (1) Except as otherwise provided by applicable state insurance law, 
reimbursement or compensation is not limited with respect to insurance 
sales by the credit union or its employees which are directly related to 
an extension of credit by the credit union or directly related to the 
opening or maintenance of a share, share draft or share certificate 
account at the credit union;
    (2) For insurance sales other than those described in paragraph 
(b)(1), a Federal credit union may receive an amount not exceeding the 
greater of the dollar amount or the cost amount;
    (3) For group purchasing plans other than insurance, a Federal 
credit union may receive an amount not exceeding the cost amount.
    (c) No director, committee member, or senior management employee of 
a Federal credit union or any immediate family member of any such 
individual may receive any compensation or benefit, directly or 
indirectly, in conjunction with any activity under this part. For 
purposes of this section, immediate family member means a spouse or 
other family member living in the same household; and senior management 
employee means the credit union's chief executive officer (typically 
this individual holds the title of President or Treasurer/Manager), any 
assistant chief executive officers (e.g., Assistant President, Vice 
President or Assistant Treasurer/Manager) and the chief financial 
officer (Comptroller).
    (d) The prohibition contained in paragraph (c) of this section also 
applies to any employee not otherwise covered if the employee is 
directly involved in insurance or group purchasing activities unless the 
board of directors determines that the employee's involvement does not 
present a conflict of interest.
    (e) All transactions with business associates or family members not 
specifically prohibited by paragraph (c) of this section must be 
conducted at arm's length and in the interest of the credit union.

[50 FR 16464, Apr. 26, 1985, as amended at 52 FR 43571, Nov. 13, 1987]



PART 722--APPRAISALS--Table of Contents




Sec.
722.1  Authority, purpose, and scope.
722.2  Definitions.
722.3  Appraisals required; transactions requiring a State certified or 
          licensed appraiser.
722.4  Minimum appraisal standards.
722.5  Appraiser independence.
722.6  Professional association membership; competency.
722.7  Enforcement.

    Authority: 12 U.S.C. 1766, 1789 and 3339.

    Source: 55 FR 30207, July 25, 1990, unless otherwise noted.



Sec. 722.1  Authority, purpose, and scope.

    (a) Authority. Part 722 is issued by the National Credit Union 
Administration (``NCUA'') under title XI of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (``FIRREA'') (Pub. L. 101-
73, 103 Stat. 183, 1989) and 12 U.S.C. 1757 and 1766.
    (b) Purpose and scope. (1) Title XI provides protection for federal 
financial and public policy interests in real estate-related 
transactions by requiring real estate appraisals used in connection with 
federally related transactions to be performed in writing, in accordance 
with uniform standards, by appraisers whose competency has been 
demonstrated and whose professional conduct will be subject to effective 
supervision. This part implements the requirements of title XI and 
applies to all federally related transactions entered into by the 
National Credit Union Administration or by federally insured credit 
unions (``regulated institutions'').
    (2) This part: (i) Identifies which real estate-related financial 
transactions require the services of an appraiser;
    (ii) Prescribes which categories of federally related transactions 
shall be appraised by a state-certified appraiser

[[Page 486]]

and which by a state-licensed appraiser; and
    (iii) Prescribes minimum standards for the performance of real 
estate appraisals in connection with federally related transactions 
under the jurisdiction of the National Credit Union Administration.



Sec. 722.2  Definitions.

    (a) Appraisal means a written statement independently and 
impartially prepared by a qualified appraiser setting forth an opinion 
as to the market value of an adequately-described property as of a 
specific date(s), supported by the presentation and analysis of relevant 
market information.
    (b) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, as a not-for-profit corporation under the laws of 
Illinois.
    (c) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (d) Complex 1- to 4-family residential property appraisal means one 
in which the property to be appraised, the form of ownership or market 
conditions are atypical.
    (e) Federally related transaction means any real estate-related 
financial transaction entered into on or after August 9, 1990 that:
    (1) The National Credit Union Administration, or any federally 
insured credit union, engages in or contracts for; and
    (2) Requires the services of an appraiser.
    (f) Market value means the most probable price which a property 
should bring in a competitive and open market under all conditions 
requisite to a fair sale, the buyer and seller each acting prudently and 
knowledgeably and assuming the price is not affected by undue stimulus. 
Implicit in this definition is the consummation of a sale as of a 
specified date and the passing of title from seller to buyer under 
conditions whereby:
    (1) Buyer and seller are typically motivated;
    (2) Both parties are well informed or well advised; and acting in 
what they consider their own best interests;
    (3) A reasonable time is allowed for exposure in the open market;
    (4) Payment is made in terms of cash in U.S. dollars or in terms of 
financial arrangements comparable thereto; and
    (5) The price represents the normal consideration for the property 
sold unaffected by special or creative financing or sales concessions 
granted by anyone associated with the sale.
    (g) Real estate or real property means an identified parcel or tract 
of land, including easements, rights of way, undivided or future 
interests and similar rights in a parcel or tract of land, but does not 
include mineral rights, timber rights, and growing crops, water rights 
and similar interests severable from the land when the transaction does 
not involve the associated parcel or tract of land.
    (h) Real estate-related financial transaction means any transaction 
involving:
    (1) The sale, lease, purchase, investment in or exchange of real 
property, including interests in property, or the financing thereof; or
    (2) The refinancing of real property or interests in real property; 
or
    (3) The use of real property or interests in property as security 
for a loan or investment, including mortgage-backed securities.
    (i) State-certified appraiser means any individual who has satisfied 
the requirements for certification in a state or territory whose 
criteria for certification as a real estate appraiser currently meet the 
minimum criteria for certification issued by the Appraiser Qualification 
Board of the Appraisal Foundation. No individual shall be a state-
certified appraiser unless such individual has achieved a passing grade 
upon a suitable examination administered by a state or territory that is 
consistent with and eqivalent to the Uniform State Certification 
Examination issued or endorsed by the Appraiser Qualification Board. In 
addition, the Appraisal Subcommittee must not have issued a finding that 
the policies, practices, or procedures of a state or territory are 
inconsistent with title XI of FIRREA. The National Credit Union 
Administration may, from time to time, impose additional qualification 
criteria for certified appraisers

[[Page 487]]

performing appraisals in connection with federally related transactions 
within its jurisdiction.
    (j) State-licensed appraiser means any individual who has satisfied 
the requirements for licensing in a state or territory where the 
licensing procedures comply with title XI of FIRREA and where the 
Appraisal Subcommittee has not issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI. The NCUA may, from time to time, impose additional 
qualification criteria for licensed appraisers performing appraisals in 
connection with federally related transactions within its jurisdiction.
    (k) Tract development means a project of five units or more that is 
constructed or is to be constructed as a single development.
    (l) Transaction value means: (1) For loans or other extensions of 
credit, the amount of the loan or extension of credit; and
    (2) For sales, leases, purchases, and investments in or exchanges of 
real property, the market value of the real property interest involved; 
and
    (3) For the pooling of loans or interests in real property for 
resale or purchase, the amount of the loan or market value of the real 
property calculated with respect to each such loan or interest in real 
property.

[55 FR 30207, July 25, 1990, as amended at 57 FR 28998, June 30, 1992]



Sec. 722.3  Appraisals required; transactions requiring a State certified or licensed appraiser.

    (a) Appraisals required. An appraisal performed by a State certified 
or licensed appraiser is required for all real estate-related financial 
transactions except those in which:
    (1) The transaction value is $100,000 or less except if it is a 
business loan and then the transaction value is $50,000 or less;
    (2) A lien on real property has been taken as collateral through an 
abundance of caution and where the terms of the transaction as a 
consequence have not been made more favorable than they would have been 
in the absence of a lien;
    (3) A lien on real estate has been taken for purposes other than the 
real estate's value;
    (4) A lease of real estate is entered into, unless the lease is the 
economic equivalent of a purchase or sale of the leased real estate;
    (5) The transaction involves an existing extension of credit at the 
credit union, provided that:
    (i) There is no advancement of new monies, other than funds 
necessary to cover reasonable closing costs; and
    (ii) There has been no obvious and material change in market 
conditions or physical aspects of the property that threatens the 
adequacy of the credit union's real estate collateral protection after 
the transaction;
    (6) The transaction involves the purchase, sale, investment in, 
exchange of, or extension of credit secured by, a loan or interest in a 
loan, pooled loans, or interests in real property, including mortgage-
backed securities, and each loan or interest in a loan, pooled loan, or 
real property interest met the requirements of this regulation, if 
applicable, at the time of origination;
    (7) The transaction is wholly or partially insured or guaranteed by 
a United States government agency or United States government sponsored 
agency;
    (8) The transaction either:
    (i) Qualifies for sale to a United States government agency or 
United States government sponsored agency; or
    (ii) Involves a residential real estate transaction in which the 
appraisal conforms to the Federal National Mortgage Association or 
Federal Home Loan Mortgage Corporation appraisal standards applicable to 
that category of real estate; or
    (9) The regional director has granted a waiver from the appraisal 
requirement for a category of loans meeting the definition of a member 
business loan.
    (b) Transactions requiring a State-certified appraiser. (1) (All 
transactions of $1,000,000 or more) All federally related transactions 
having a transaction value of $1,000,000 or more shall require an 
appraisal prepared by a state-certified appraiser.

[[Page 488]]

    (2) (Nonresidential transactions) All federally related transactions 
having a transaction value of more than $50,000, other than those 
involving appraisals of 1- to 4-family residential properties, shall 
require an appraisal prepared by a state-certified appraiser.
    (3) (Complex residential transactions of $250,000 or more) All 
complex 1- to 4-family residential property appraisals rendered in 
connection with federally related transactions shall require a state-
certified appraiser if the transaction value is $250,000 or more. A 
regulated institution may presume that appraisals of 1- to 4-family 
residential properties are not complex unless the institution has 
readily available information that a given appraisal will be complex. 
The regulated institution shall be responsible for making the final 
determination of whether the appraisal is complex. If, during the course 
of the appraisal, a licensed appraiser identifies factors that would 
result in the property, form of ownership, or market conditions being 
considered atypical, then either:
    (i) The regulated institution may ask the licensed appraiser to 
complete the appraisal and have a certified appraiser approve and cosign 
the appraisal; or
    (ii) The institution may engage a certified appraiser to complete 
the appraisal.
    (c) Transactions requiring either a State-certified or -licensed 
appraiser. All appraisals for federally related transactions not 
requiring the services of a state-certified appraiser shall be prepared 
by either a state-certified appraiser or a state-licensed appraiser.
    (d) Valuation requirement. Secured transactions exempted from 
appraisal requirements pursuant to paragraphs (a)(1) of this section and 
not otherwise exempted from this regulation or fully insured shall be 
supported by a written estimate of market value, as defined in this 
regulation, performed by an individual having no direct or indirect 
interest in the property, and qualified and experienced to perform such 
estimates of value for the type and amount of credit being considered.
    (e) Appraisals to address safety and soundness concerns. NCUA 
reserves the right to require an appraisal under this subpart whenever 
the agency believes it is necessary to address safety and soundness 
concerns.

[55 FR 30207, July 25, 1990, as amended at 60 FR 51894, Oct. 4, 1995; 63 
FR 51799, Sept. 29, 1998]



Sec. 722.4  Minimum appraisal standards.

    For federally related transactions, all appraisals shall, at a 
minimum:
    (a) Conform to generally accepted appraisal standards as evidenced 
by the Uniform Standards of Professional Appraisal Practice (USPAP) 
promulgated by the Appraisal Standards Board of the Appraisal 
Foundation, 1029 Vermont Ave., NW., Washington, DC 20005;
    (b) Be written and contain sufficient information and analysis to 
support the institution's decision to engage in the transaction;
    (c) Analyze and report appropriate deductions and discounts for 
proposed construction or renovation, partially leased buildings, non-
market lease terms, and tract developments with unsold units;
    (d) Be based upon the definition of market value as set forth in 
Sec. 722.2(f); and
    (e) Be performed by State licensed or certified appraisers in 
accordance with requirements set forth in this subpart.

[60 FR 51894, Oct. 4, 1995]



Sec. 722.5  Appraiser independence.

    (a) Staff appraiser. If an appraisal is prepared by a staff 
appraiser, that appraiser must be independent of the lending, 
investment, and collection functions and not involved, except as an 
appraiser, in the federally related transaction, and have no direct or 
indirect interest, financial or otherwise, in the property. If the only 
qualified persons available to perform an appraisal are involved in the 
lending, investment, or collection functions of the credit union, the 
credit union shall take appropriate steps to ensure that the appraisers 
exercise independent judgment. Such steps include, but are not limited 
to, prohibiting an individual from performing an appraisal in connection 
with federally related transactions in which the appraiser is otherwise 
involved.

[[Page 489]]

    (b) Fee Appraisers. (1) If an appraisal is prepared by a fee 
appraiser, the appraiser shall be engaged directly by the credit union 
or its agent and have no direct or indirect interest, financial or 
otherwise, in the property or the transaction.
    (2) A credit union also may accept an appraisal that was prepared by 
an appraiser engaged directly by another financial services institution; 
if:
    (i) The appraiser has no direct or indirect interest, financial or 
otherwise, in the property or transaction; and
    (ii) The credit union determines that the appraisal conforms to the 
requirement of this regulation and is otherwise acceptable.

[55 FR 30207, July 25, 1990, as amended at 60 FR 51895, Oct. 4, 1995]



Sec. 722.6  Professional association membership; competency.

    (a) Membership in appraisal organization. A state-certified 
appraiser or a state-licensed appraiser may not be excluded from 
consideration for an assignment for a federally related transaction 
solely by virtue of membership or lack of membership in any particular 
appraisal organization.
    (b) Competency. All staff and fee appraisers performing appraisals 
in connection with federally related transactions must be state-
certified or -licensed as appropriate. However, a state-certified or -
licensed appraiser may not be considered competent solely by virtue of 
being certified or licensed. Any determination of competency shall be 
based upon the individual's experience and educational background as 
they relate to the particular appraisal assignment for which he or she 
is being considered.



Sec. 722.7  Enforcement.

    Credit unions and institution-affiliated parties, including staff 
appraisers and fee appraisers, may be subject to removal and/or 
prohibition orders, cease-and-desist orders, and the imposition of civil 
money penalties pursuant to section 1786 of the Federal Credit Union 
Act, or any other applicable law.



PART 723--MEMBER BUSINESS LOANS--Table of Contents




Sec.
723.1  What is a member business loan?
723.2  What are the prohibited activities?
723.3  What are the requirements for construction and development 
          lending?
723.4  What are the other applicable regulations?
723.5  How do you implement a member business loan program?
723.6  What must your member business loan policy address?
723.7  What are the collateral and security requirements?
723.8  How much may one member, or a group of associated members, 
          borrow?
723.9  How do you calculate the aggregate 15% limit?
723.10  What waivers are available?
723.11  How do you obtain a waiver?
723.12  What will NCUA do with my waiver request?
723.13  What options are available if the NCUA Regional Director denies 
          my waiver request, or a portion of it?
723.14  How do I classify loans so as to reserve for potential losses?
723.15  How much must I reserve for potential losses?
723.16  What is the aggregate member business loan limit for a credit 
          union?
723.17  Are there any exceptions to the aggregate loan limit?
723.18  How do I obtain an exception?
723.19  What are the recordkeeping requirements?
723.20  How can a state supervisory authority develop and enforce a 
          member business loan regulation?
723.21  Definitions.

    Authority: 12 U.S.C. 1756, 1757, 1757A, 1766, 1785, 1789.

    Source: 64 FR 28729, May 27, 1999, unless otherwise noted.



Sec. 723.1  What is a member business loan?

    (a) General rule. A member business loan includes any loan, line of 
credit, or letter of credit (including any unfunded commitments) where 
the borrower uses the proceeds for the following purposes:
    (1) Commercial;
    (2) Corporate;
    (3) Other business investment property or venture; or
    (4) Agricultural.
    (b) Exceptions to the general rule. The following are not member 
business loans:

[[Page 490]]

    (1) A loan fully secured by a lien on a 1 to 4 family dwelling that 
is the member's primary residence;
    (2) A loan fully secured by shares in the credit union making the 
extension of credit or deposits in other financial institutions;
    (3) Loan(s) to a member or an associated member which, when added 
together, are equal to less than $50,000;
    (4) A loan where a federal or state agency (or its political 
subdivision) fully insures repayment, or fully guarantees repayment, or 
provides an advance commitment to purchase in full; or
    (5) A loan granted by a corporate credit union to another credit 
union.

[64 FR 28729, May 27, 1999, as amended at 64 FR 57365, Oct. 25, 1999]



Sec. 723.2  What are the prohibited activities?

    (a) Who is ineligible to receive a member business loan? You may not 
grant a member business loan to the following:
    (1) Your chief executive officer (typically this individual holds 
the title of President or Treasurer/Manager);
    (2) Any assistant chief executive officers (e.g., Assistant 
President, Vice President, or Assistant Treasurer/Manager);
    (3) Your chief financial officer (Comptroller); or
    (4) Any associated member or immediate family member of anyone 
listed in paragraphs (a) (1) through (3) of this section.
    (b) Equity agreements/joint ventures. You may not grant a member 
business loan if any additional income received by the credit union or 
senior management employees is tied to the profit or sale of the 
business or commercial endeavor for which the loan is made.
    (c) Loans to compensated directors. A credit union may not grant a 
member business loan to a compensated director unless the board of 
directors approves granting the loan and the compensated director is 
recused from the decision making process.



Sec. 723.3  What are the requirements for construction and development lending?

    Unless the Regional Director grants a waiver, loans granted for the 
construction or development of commercial or residential property are 
subject to the following additional requirements.
    (a) The aggregate of all construction and development loans must not 
exceed 15% of net worth. To determine the aggregate, you may exclude any 
portion of a loan:
    (1) Secured by shares in the credit union;
    (2) Secured by deposits in another financial institution;
    (3) Fully or partially insured or guaranteed by any agency of the 
federal government, state, or its political subdivisions; or
    (4) Subject to an advance commitment to purchase by any agency of 
the federal government, state, or its political subdivisions;
    (b) The borrower must have a minimum of 35% equity interest in the 
project being financed; and
    (c) The funds may be released only after on-site, written 
inspections by qualified personnel and according to a preapproved draw 
schedule and any other conditions as set forth in the loan 
documentation.



Sec. 723.4  What are the other applicable regulations?

    The provisions of Sec. 701.21(a) through (g) of this chapter apply 
to member business loans granted by federal credit unions to the extent 
they are consistent with this part. Except as required by part 741 of 
NCUA's regulations, federally insured credit unions are not required to 
comply with the provisions of Sec. 701.21(a) through (g).



Sec. 723.5  How do you implement a member business loan program?

    The board of directors must adopt specific business loan policies 
and review them at least annually. The board must also utilize the 
services of an individual with at least two years direct experience with 
the type of lending the credit union will be engaging in. Credit unions 
do not have to hire staff to meet the requirements of this section; 
however, credit unions must ensure that the expertise is available. A 
credit union can meet the experience requirement through various 
approaches. For example, a credit union can use the

[[Page 491]]

services of a credit union service organization, an employee of another 
credit union, an independent contractor, or other third parties. 
However, the actual decision to grant a loan must reside with the credit 
union.



Sec. 723.6  What must your member business loan policy address?

    At a minimum, your policy must address the following:
    (a) The types of business loans you will make;
    (b) Your trade area;
    (c) The maximum amount of your assets, in relation to net worth, 
that you will invest in business loans;
    (d) The maximum amount of your assets, in relation to net worth, 
that you will invest in a given category or type of business loan;
    (e) The maximum amount of your assets, in relation to net worth, 
that you will loan to any one member or group of associated members, 
subject to Sec. 723.8;
    (f) The qualifications and experience of personnel (minimum of 2 
years) involved in making and administering business loans;
    (g) A requirement to analyze and document the ability of the 
borrower to repay the loan;
    (h) Receipt and periodic updating of financial statements and other 
documentation, including tax returns;
    (i) A requirement for sufficient documentation supporting each 
request to extend credit, or increase an existing loan or line of credit 
(except where the board of directors finds that the documentation 
requirements are not generally available for a particular type of 
business loan and states the reasons for those findings in the credit 
union's written policies). At a minimum, your documentation must include 
the following:
    (1) Balance sheet;
    (2) Cash flow analysis;
    (3) Income statement;
    (4) Tax data;
    (5) Analysis of leveraging; and
    (6) Comparison with industry average or similar analysis;
    (j) The collateral requirements must include:
    (1) Loan-to-value ratios;
    (2) Determination of value;
    (3) Determination of ownership;
    (4) Steps to secure various types of collateral; and
    (5) How often the credit union will reevaluate the value and 
marketability of collateral;
    (k) The interest rates and maturities of business loans;
    (l) General loan procedures which include:
    (1) Loan monitoring;
    (2) Servicing and follow-up; and
    (3) Collection;
    (m) Identification of those individuals prohibited from receiving 
member business loans.



Sec. 723.7  What are the collateral and security requirements?

    (a) Unless your Regional Director grants a waiver, all member 
business loans must be secured by collateral as follows:

------------------------------------------------------------------------
                                                Minimum loan to value
                   Lien                             requirements
------------------------------------------------------------------------
All.......................................  LTV ratios for all liens
                                             cannot exceed 80% unless
                                             the value in excess of 80%
                                             is covered through private
                                             mortgage or equivalent
                                             insurance but in no case
                                             can it exceed 95%.
First with PMI or similar type of insurer.  You may grant a LTV ratio in
                                             excess of 80% only where
                                             the value in excess of 80%
                                             is covered through:
                                             acquisition of private
                                             mortgage or equivalent type
                                             insurance provided by an
                                             insurer acceptable to the
                                             credit union (where
                                             available); insurance or
                                             guarantees by, or subject
                                             to advance commitment to
                                             purchase by, an agency of
                                             the federal government; or
                                             insurance or guarantees by,
                                             or subject to advance
                                             commitment to purchase by,
                                             an agency of a state or any
                                             of its political
                                             subdivisions.
First.....................................  LTV ratios up to 80%.
Second....................................  LTV ratios up to 80%.
------------------------------------------------------------------------

    (b) Principals, other than a not for profit organization as defined 
by the Internal Revenue Service Code (26 U.S.C. 501) or those where the 
Regional Director grants a waiver, must provide their personal liability 
and guarantee.
    (c) Federally insured credit unions are exempt from the provisions 
of paragraphs (a) and (b) of this section with

[[Page 492]]

respect to credit card line of credit programs offered to nonnatural 
person members that are limited to routine purposes normally made 
available under those programs.



Sec. 723.8  How much may one member, or a group of associated members, borrow?

    Unless your Regional Director grants a waiver for a higher amount 
the aggregate amount of outstanding member business loans (including any 
unfunded commitments) to any one member or group of associated members 
must not exceed the greater of:
    (a) 15% of the credit union's net worth; or
    (b) $100,000.



Sec. 723.9  How do you calculate the aggregate 15% limit?

    (a) Step 1. Calculate the numerator by adding together the total 
outstanding balance of member business loans to any one member, or group 
of associated members. From this amount, subtract any portion:
    (1) Secured by shares in the credit union;
    (2) Secured by deposits in another financial institution;
    (3) Fully or partially insured or guaranteed by any agency of the 
Federal government, state, or its political subdivisions;
    (4) Subject to an advance commitment to purchase by any agency of 
the Federal government, state, or its political subdivisions.
    (b) Step 2. Divide the numerator by net worth.



Sec. 723.10  What waivers are available?

    You may seek a waiver for a category of loans in the following 
areas:
    (a) Loan-to-value ratios under Sec. 723.7;
    (b) Maximum loan amount to one borrower or associated group of 
borrowers under Sec. 723.8;
    (c) Construction and development loan limits under Sec. 723.3;
    (d) Requirement for personal liability and guarantee under 
Sec. 723.7; and
    (e) Appraisal requirements under Sec. 722.3.



Sec. 723.11  How do you obtain a waiver?

    To obtain a waiver, a federal credit union must submit a request to 
the Regional Director (a corporate federal credit union submits the 
waiver request to the Director of the Office of Corporate Credit 
Unions). A state chartered federally insured credit union must submit 
the request to its state supervisory authority. If the state supervisory 
authority approves the request, the state regulator will forward the 
request to the Regional Director (or if appropriate the Director of the 
Office of Corporate Credit Unions). A waiver is not effective until it 
is approved by the Regional Director (or in the case of a corporate 
federal credit union the Director of the Office of Corporate Credit 
Unions). The waiver request must contain the following:
    (a) A copy of your business lending policy;
    (b) The higher limit sought (if applicable);
    (c) An explanation of the need to raise the limit (if applicable);
    (d) Documentation supporting your ability to manage this activity; 
and
    (e) An analysis of the credit union's prior experience making member 
business loans, including as a minimum:
    (1) The history of loan losses and loan delinquency;
    (2) Volume and cyclical or seasonal patterns;
    (3) Diversification;
    (4) Concentrations of credit to one borrower or group of associated 
borrowers in excess of 15% of net worth;
    (5) Underwriting standards and practices;
    (6) Types of loans grouped by purpose and collateral; and
    (7) The qualifications of personnel responsible for underwriting and 
administering member business loans.



Sec. 723.12  What will NCUA do with my waiver request?

    Your Regional Director (or the Director of the Office of Corporate 
Credit Unions) will:
    (a) Review the information you provided in your request;
    (b) Evaluate the level of risk to your credit union;

[[Page 493]]

    (c) Consider your credit union's historical CAMEL composite and 
component ratings when evaluating your request; and
    (d) Notify you whenever your waiver request is deemed complete. 
Notify you of the action taken within 45 calendar days of receiving a 
complete request from the federal credit union or the state supervisory 
authority. If you do not receive notification within 45 calendar days of 
the date the complete request was received by the regional office, the 
credit union may assume approval of the waiver request.



Sec. 723.13  What options are available if the NCUA Regional Director denies my waiver request, or a portion of it?

    You may appeal the Regional Director's (or the Director of the 
Office of Corporate Credit Unions) decision in writing to the NCUA 
Board. Your appeal must include all information requested in Sec. 723.11 
and why you disagree with your Regional Director's (or the Office of 
Corporate Credit Union Director's) decision.



Sec. 723.14  How do I classify loans so as to reserve for potential losses?

    Non-delinquent member business loans may be classified based on 
factors such as the adequacy of analysis and supporting documentation. 
You must classify potential loss loans as either substandard, doubtful, 
or loss. The criteria for determining the classification of loans are:
    (a) Substandard. Loan is inadequately protected by the current sound 
worth and paying capacity of the obligor or of the collateral pledged, 
if any. Loans classified must have a well-defined weakness or weaknesses 
that jeopardize the liquidation of debt. They are characterized by the 
distinct possibility that the credit union will sustain some loss if the 
deficiencies are not corrected. Loss potential, while existing in the 
aggregate amount of substandard loans, does not have to exist in 
individual loans classified substandard.
    (b) Doubtful. A loan classified doubtful has all the weaknesses 
inherent in one classified substandard, with the added characteristic 
that the weaknesses make collection or liquidation in full, on the basis 
of currently existing facts, conditions, and values, highly questionable 
and improbable. The possibility of loss is extremely high, but because 
of certain important and reasonably specific pending factors which may 
work to the advantage and strengthening of the loan, its classification 
as an estimated loss is deferred until its more exact status may be 
determined. Pending factors include: proposed merger, acquisition, or 
liquidation actions; capital injection; perfecting liens on collateral; 
and refinancing plans.
    (c) Loss. Loans classified loss are considered uncollectible and of 
such little value that their continuance as loans is not warranted. This 
classification does not necessarily mean that the loan has absolutely no 
recovery or salvage value, but rather, it is not practical or desirable 
to defer writing off this basically worthless asset even though partial 
recovery may occur in the future.



Sec. 723.15  How much must I reserve for potential losses?

    The following schedule sets the minimum amount you must reserve for 
classified loans:

 
------------------------------------------------------------------------
              Classification                       Amount Required
------------------------------------------------------------------------
Substandard...............................  10% of outstanding amount
                                             unless other factors (for
                                             example, history of such
                                             loans at the credit union)
                                             indicate a greater or
                                             lesser amount is
                                             appropriate.
Doubtful..................................  50% of the outstanding
                                             amount.
Loss......................................  100% of the outstanding
                                             amount.
------------------------------------------------------------------------



Sec. 723.16  What is the aggregate member business loan limit for a credit union?

    The aggregate limit on a credit union's outstanding member business 
loans (including any unfunded commitments) is the lesser of 1.75 times 
the credit union's net worth or 12.25% of the credit union's total 
assets. Net

[[Page 494]]

worth is all of the credit union's retained earnings. Retained earnings 
normally includes undivided earnings, regular reserves and any other 
appropriations designated by management or regulatory authorities. Loans 
that are exempt from the definition of member business loans are not 
counted for the purpose of the aggregate loan limit.



Sec. 723.17  Are there any exceptions to the aggregate loan limit?

    There are three circumstances where a credit union qualifies for an 
exception from the aggregate limit. Loans that are excepted from the 
definition of member business loans are not counted for the purpose of 
the exceptions. The three exceptions are:
    (a) Credit unions that have a low-income designation or participate 
in the Community Development Financial Institutions program;
    (b) Credit unions that were chartered for the purpose of making 
member business loans and can provide documentary evidence (such 
evidence includes but is not limited to the original charter, original 
bylaws, original business plan, original field of membership, board 
minutes and loan portfolio);
    (c) Credit unions that have a history of primarily making member 
business loans, meaning that either member business loans comprise at 
least 25% of the credit union's outstanding loans (as evidenced in any 
call report filed between January 1995 and September 1998 or any 
equivalent documentation including financial statements) or member 
business loans comprise the largest portion of the credit union's loan 
portfolio (as evidenced in any call report filed between January 1995 
and September 1998 or any equivalent documentation including financial 
statements). For example, if a credit union makes 23% member business 
loans, 22% first mortgage loans, 22% new automobile loans, 20% credit 
card loans, and 13% total other real estate loans, then the credit union 
meets this exception.



Sec. 723.18  How do I obtain an exception?

    To obtain the exception, a federal credit union must submit 
documentation to the Regional Director, demonstrating that it meets the 
criteria of one of the exceptions. A state chartered federally insured 
credit union must submit documentation to its state supervisory 
authority. The state supervisory authority will forward its decision to 
NCUA. The exception does not expire unless revoked by the state 
supervisory authority for a state chartered federally insured credit 
union or the Regional Director for a federal credit union. If an 
exception request is denied for a federal credit union, it may be 
appealed to the NCUA Board within 60 days of the denial by the Regional 
Director. Until the NCUA Board acts on the appeal, the credit union can 
continue to make new member business loans.



Sec. 723.19  What are the recordkeeping requirements?

    You must separately identify member business loans in your records 
and in the aggregate on your financial reports.



Sec. 723.20  How can a state supervisory authority develop and enforce a member business loan regulation?

    (a) The NCUA Board may exempt federally insured state chartered 
credit unions in a given state from NCUA's member business loan rule if 
NCUA approves the state's rule for use for state chartered federally 
insured credit unions. In making this determination, the Board is guided 
by safety and soundness considerations and reviews whether the state 
regulation minimizes the risk and accomplishes the overall objectives of 
NCUA's member business loan rule in this part. Specifically, the Board 
will focus its review on:
    (1) The definition of a member business loan;
    (2) Loan to one borrower limits;
    (3) Written loan policies;
    (4) Collateral and security requirements;
    (5) Construction and development lending; and
    (6) Loans to senior management.
    (b) To receive NCUA's approval of a state's members business loan 
rule, the state supervisory authority must submit its rule to the NCUA 
regional office. After reviewing the rule, the region will forward the 
request to the NCUA Board for a final determination.

[[Page 495]]



Sec. 723.21  Definitions.

    For purposes of this part, the following definitions apply:
    Associated member is any member with a shared ownership, investment, 
or other pecuniary interest in a business or commercial endeavor with 
the borrower.
    Construction or development loan is a financing arrangement for 
acquiring property or rights to property, including land or structures, 
with the intent to convert it to income-producing property such as 
residential housing for rental or sale; commercial use; industrial use; 
or similar uses.
    Immediate family member is a spouse or other family member living in 
the same household.
    Loan-to-value ratio is the aggregate amount of all sums borrowed 
including outstanding balances plus any unfunded commitment or line of 
credit from all sources on an item of collateral divided by the market 
value of the collateral used to secure the loan.
    Net worth is retained earnings as defined under Generally Accepted 
Accounting Principles. Retained earnings normally includes undivided 
earnings, regular reserves and any other appropriations designated by 
management or regulatory authorities.



PART 724--TRUSTEES AND CUSTODIANS OF PENSION PLANS--Table of Contents




Sec.
724.1  Federal credit unions acting as trustees and custodians of 
          pension and retirement plans.
724.2  Self-directed retirement plans.
724.3  Appointment of successor trustee or custodian.

    Authority: 12 U.S.C. 1757, 1765, 1766 and 1787.

    Source: 55 FR 30211, July 25, 1990, unless otherwise noted.



Sec. 724.1  Federal credit unions acting as trustees and custodians of pension and retirement plans.

    A federal credit union is authorized to act as trustee or custodian, 
and may receive reasonable compensation for so acting, under any written 
trust instrument or custodial agreement created or organized in the 
United States and forming part of a pension or profit-sharing plan which 
qualifies or qualified for specific tax treatment under sections 401(d), 
408, 408A and 530 of the Internal Revenue Code (26 U.S.C. 401(d), 408, 
408A and 530), for its members or groups of members, provided the funds 
of such plans are invested in share accounts or share certificate 
accounts of the federal credit union. Federal credit unions located in a 
territory, including the trust territories, or a possession of the 
United States, or the Commonwealth of Puerto Rico, are also authorized 
to act as trustee or custodian for such plans, if authorized under 
sections 401(d), 408, 408A and 530 of the Internal Revenue Code as 
applied to the territory or possession or under similar provisions of 
territorial law. All funds held in a trustee or custodial capacity must 
be maintained in accordance with applicable laws and rules and 
regulations as may be promulgated by the Secretary of Labor, the 
Secretary of the Treasury, or any other authority exercising 
jurisdiction over such trust or custodial accounts. The federal credit 
union shall maintain individual records for each participant which show 
in detail all transactions relating to the funds of each participant or 
beneficiary.

[55 FR 30211, July 25, 1990, as amended at 63 FR 14026, Mar. 24, 1998; 
65 FR 10934, Mar. 1, 2000]



Sec. 724.2  Self-directed retirement plans.

    A Federal credit union may act as trustee or custodian of individual 
retirement plans of its members established pursuant to section 401(d) 
or 408 of the Internal Revenue Code, and may facilitate transfers of 
plan funds to assets other than share and share certificates of the 
credit union, provided the conditions of Sec. 724.1 and the following 
additional conditions are met:
    (a) All contributions of funds are initially made to a share or 
share certificate account in the Federal credit union;
    (b) Any subsequent transfer of funds to other assets is solely at 
the direction of the member and the Federal credit union exercises no 
investment discretion and provides no investment advice with respect to 
plan assets (i.e., the credit union performs only custodial duties); and

[[Page 496]]

    (c) The member is clearly notified of the fact that National Credit 
Union Share Insurance Fund coverage is limited to funds held in share or 
share certificate accounts of NCUSIF-insured credit unions.



Sec. 724.3  Appointment of successor trustee or custodian.

    Any plan operated pursuant to this part shall provide for the 
appointment of a successor trustee or custodian by a person, committee, 
corporation or organization other than the Federal credit union or any 
person acting in his capacity as a director, employee or agent of the 
Federal credit union upon notice from the Federal credit union or the 
Board that the Federal credit union is unwilling or unable to continue 
to act as trustee or custodian.



PART 725--NATIONAL CREDIT UNION ADMINISTRATION CENTRAL LIQUIDITY FACILITY--Table of Contents




Sec.
725.1  Scope.
725.2  Definitions.
725.3  Regular membership.
725.4  Agent membership.
725.5  Capital stock.
725.6  Termination of membership.
725.7  Special share accounts in federally chartered agent members.
725.8-725.16  [Reserved]
725.17  Applications for extensions of credit.
725.18  Creditworthiness.
725.19  Collateral requirements.
725.20  Repayment, security and credit reporting agreements; other terms 
          and conditions.
725.21  Modification of agreements.
725.22  Advances to insurance organizations.
725.23  Other advances.

    Authority: Secs. 301-307 Federal Credit Union Act, 92 Stat. 3719-
3722 (12 U.S.C. 1795-1795f).

    Source: 44 FR 49437, Aug. 23, 1979, unless otherwise noted.



Sec. 725.1  Scope.

    This part contains the regulations implementing the National Credit 
Union Central Liquidity Facility Act, subchapter III of the Federal 
Credit Union Act. The National Credit Union Administration Central 
Liquidity Facility is a mixed-ownership Government corporation within 
the National Credit Union Administration. It is managed by the National 
Credit Union Administration Board and is owned by its member credit 
unions. The purpose of the Facility is to improve the general financial 
stability of credit unions by meeting their liquidity needs and thereby 
encourage savings, support consumer and mortgage lending and provide 
basic financial resources to all segments of the economy.



Sec. 725.2  Definitions.

    As used in this part:
    (a) Agent means an Agent member of the Facility.
    (b) Agent group means an Agent member of the Facility consisting of 
a group of central credit unions, one of which is designated as the 
group's Agent group representative and authorized to transact business 
with the Facility on behalf of the group or any member of the group.
    (c) Agent loan means an advance of funds by an Agent to a member 
natural person credit union to meet liquidity needs which have been the 
basis for a Facility advance.
    (d) Central credit union means a Federal or state-chartered credit 
union primarily serving other credit unions. A credit union is primarily 
serving other credit unions when the total dollar amount of the shares 
and deposits received from other credit unions plus loans to other 
credit unions exceeds 50 percent of the total dollar amount of all 
shares and deposits plus loans during the qualifying period, as defined 
in paragraph (o) of this section.
    (e) Facility or Central Liquidity Facility means the National Credit 
Union Administration Central Liquidity Facility.
    (f) Facility advance means an advance of funds by the Facility to a 
Regular or Agent member.
    (g) Facility lending officer means any employee of the Facility or 
the National Credit Union Administration who has been designated by the 
NCUA Board as a Facility lending officer.
    (h) Liquid assets means the following unpledged assets:
    (1) Cash on hand;
    (2) Share or deposit accounts with remaining maturities of one year 
or less maintained in central credit unions or

[[Page 497]]

institutions insured by the Federal Deposit Insurance Corporation or 
Federal Savings and Loan Insurance Corporation;
    (3) Investments in obligations of the United States or any agency 
thereof, or securities fully guaranteed as to principal and interest 
thereby, which are authorized under 12 U.S.C. 1757(7) and which have a 
remaining maturity of one year or less;
    (4) Common trust investments and similar investments in funds or 
securities authorized for Federal credit unions, the objectives of which 
are to provide daily liquidity for participating credit unions;
    (5) Shares in the National Credit Union Administration Central 
Liquidity Facility or in special share accounts authorized by Sec. 725.7 
of this part;
    (6) In the case of a federally-insured state-chartered credit union, 
any asset held in satisfaction of liquidity requirements imposed by 
applicable state law or regulation; and
    (7) Balances maintained by federally-insured credit unions in a 
Federal Reserve bank, or in a pass-through account to a Federal Reserve 
bank, pursuant to the requirements of section 19(b) of the Federal 
Reserve Act (12 U.S.C. 461(b)).
    (i) Liquidity needs means the needs of credit unions primarily 
serving natural persons for:
    (1) Short-term adjustment credit available to assist in meeting 
temporary requirements for funds or to cushion more persistent outflows 
of funds pending an orderly adjustment of credit union assets and 
liabilities;
    (2) Seasonal credit available for longer periods to assist in 
meeting seasonal needs for funds arising from a combination of expected 
patterns of movement in share and deposit accounts and loans; and
    (3) Protracted adjustment credit available in the event of unusual 
or emergency circumstances of a longer term nature resulting from 
national, regional or local difficulties.
    (j) Management policies means policies of a credit union with 
respect to membership, shares, deposits, dividends, interest rates, 
lending, investing, borrowing, safeguarding of assets, hiring, training 
and supervision of employees, and general operating and control 
practices and procedures.
    (k) Member means a Regular or Agent member of the Facility, unless 
the context indicates otherwise.
    (l) Member natural person credit union means a natural person credit 
union which is a member of an Agent or of any central credit union in an 
Agent group. Member natural person credit unions are not members of the 
Facility unless they are also Regular members of the Facility.
    (m) Natural person credit union means a Federal or state-chartered 
credit union primarily serving natural persons. A credit union is 
primarily serving natural persons if it is not a central credit union as 
defined in paragraph (d) of this section.
    (n) NCUA Board or Board means the National Credit Union 
Administration Board.
    (o) Paid-in and unimpaired capital and surplus means the balance of 
the paid-in share accounts and deposits as of a given date, less any 
loss that may have been incurred for which there is no reserve or which 
has not been charged against undivided earnings, plus the credit balance 
(or less the debit balance) of the undivided earnings account as of a 
given date, after all losses have been provided for and net earnings or 
net losses have been added thereto or deducted therefrom. Statutory 
reserves or special reserves required by regulation or special agreement 
between the credit union and its regulatory authority or between the 
credit union and its member account insurer shall not be considered as 
part of surplus.
    (p) Qualifying Period means:
    (1) For initial qualification, any 7 months out of the 12 months 
immediately preceding the month in which application is made to become a 
member of the Facility; and
    (2) For qualification during each subsequent calendar year, any 7 
months out of the previous calendar year.
    (q) Stock subscription means the stock subscription required for 
membership in the Facility. ``Total subscribed Facility stock'' is the 
sum of all members' stock subscriptions.

[44 FR 49437, Aug. 23, 1979, as amended at 53 FR 22472, June 16, 1988]

[[Page 498]]



Sec. 725.3  Regular membership.

    (a) A natural person credit union may become a Regular member of the 
Facility by:
    (1) Making application on a form approved by the Facility;
    (2) Subscribing to capital stock of the Facility in an amount equal 
to one-half of 1 percent of the credit union's paid-in and unimpaired 
capital and surplus, as determined in accordance with Sec. 725.5(b) of 
this part, and forwarding with its completed application funds equal to 
one-half of this stock subscription;\1\ and
---------------------------------------------------------------------------

    \1\ A credit union which submits its application for membership 
prior to October 1, 1979, is not required to forward these funds to the 
Facility until October 1, 1979.
---------------------------------------------------------------------------

    (3) Furnishing the following reports and documents with the 
completed membership application:
    (i) A copy of the credit union's financial and statistical report 
for the most recent calendar month; and
    (ii) Copies of the credit union's charter and bylaws, unless the 
credit union is federally chartered.
    (b) A credit union which becomes a Regular member of the Facility 
after February 23, 1980, may not receive Facility advances without 
approval of the NCUA Board for a period of six months after becoming a 
member. This subsection shall not apply to any credit union which 
becomes a Regular member of the Facility within six months after such 
credit union is chartered, or which has had access to Facility funds 
through an Agent member of the Facility at any time within six months 
prior to becoming a Regular member of the Facility.

[44 FR 49437, Aug. 23, 1979, as amended at 47 FR 1371, Jan. 13, 1982]



Sec. 725.4  Agent membership.

    (a) A central credit union or a group of central credit unions may 
become an Agent member of the Facility by (in the case of a group of 
central credit unions, each central credit union in the group must do 
each of the following except for paragraph (a)(2) of this section, which 
shall be done by the Agent group representative):
    (1) Making application on a form approved by the Facility;
    (2) Subscribing to the capital stock of the Facility in an amount 
equal to one-half of 1 percent of the paid-in and unimpaired capital and 
surplus (as determined in accordance with Sec. 725.5(b) of this part) of 
all the central credit union's or central credit union group's member 
natural person credit unions, except those which are Regular members of 
the Facility or which have access to the Facility through, and are 
included in the stock subscription of, another Agent.\2\ Upon approval 
of the application, the Agent shall forward funds equal to one-half of 
this initial stock subscription to the Facility.\3\
---------------------------------------------------------------------------

    \2\ A natural person credit union which is a member of more than one 
Agent member of the Facility must designate through which Agent it will 
deal with the Facility, and the designated Agent will be responsible for 
including the capital and surplus of such credit union in the 
calculation of its stock subscription.
    \3\ If the application is approved prior to October 1, 1979, these 
funds are not required to be forwarded to the Facility until October 1, 
1979.
---------------------------------------------------------------------------

    (3) Furnishing the following reports and documents with the 
completed membership application:
    (i) A copy of the central credit union's financial and statistical 
report for the most recent calendar month;
    (ii) Copies of the central credit union's charter and bylaws, unless 
such credit union is federally chartered; and
    (iii) A list of all the central credit union's member natural person 
credit unions.
    (4) Agreeing to submit to the supervision of the NCUA Board and to 
comply with all regulations and reporting requirements which the NCUA 
Board shall prescribe for Agent members;
    (5) Agreeing to submit to periodic unrestricted examinations by the 
NCUA Board or its designee; and
    (6) Obtaining the written approval of the NCUA Board.
    (b) The NCUA Board may approve a central credit union or group of 
central credit unions as an Agent member of the Facility, provided the 
NCUA Board is satisfied that such credit union or credit union group 
meets certain criteria, including but not limited to the following (in 
the case of a group of central credit unions, each central credit

[[Page 499]]

union in the group must meet these criteria):
    (1) The management policies are in writing, approved by the central 
credit union's board of directors, and reviewed annually by such board;
    (2) Adequate internal controls are in place to assure accurate and 
timely reporting of transactions and the safeguarding of assets;
    (3) The financial condition of the central credit union is sound 
with adequate reserves for losses;
    (4) Surety bond coverage provides protection for the central credit 
union while the central credit union is performing the duties of an 
Agent member of Facility;
    (5) Management has demonstrated its ability to use such techniques 
as cash flow analysis, budgeting, and projections of sources and uses of 
funds to manage the affairs of the central credit union efficiently and 
in conformity with sound business practices; and
    (6) There are no practices, procedures, policies, or other factors 
that would result in discrimination by the central credit union among 
natural person credit unions or inhibit its ability to act independently 
in its role as an Agent member of the Facility.
    (c) Each Agent, or in the case of an Agent group, each central 
credit union in the group, must:
    (1) Maintain records related to Facility activity in conformity with 
requirements prescribed by the NCUA Board from time to time; and
    (2) Submit such reports as may be required by the Facility to 
determine financial soundness, quality and level of service, and 
conformity with established guidelines and procedures.
    (d) Each Agent, or in the case of an Agent group, each central 
credit union in the group, must have on an annual basis a third party 
independent audit of its books and records and provide the Facility with 
copies of the report of such audit. The auditor selected must be 
recognized by a State or territorial licensing authority as possessing 
the requisite knowledge and experience to perform audits.
    (e) Within 30 days after a natural person credit union becomes a 
member of a central credit union which is an Agent or a member of an 
Agent group, the agent, or in the case of an Agent group, the Agent 
group representative, shall subscribe to additional capital stock of the 
Facility in an amount equal to one-half of 1 percent of such credit 
union's paid-in and unimpaired capital and surplus, and shall forward 
funds equal to one-half of this stock subscription to the Facility. This 
subsection shall not apply if the natural person credit union is a 
Regular member of the Facility or has access to the Facility through, 
and is included in the stock subscription of, another Agent.
    (f) A central credit union or group of central credit unions which 
becomes an Agent member of the Facility after February 23, 1980, may not 
receive a Facility advance without approval of the NCUA Board for a 
period of six months after becoming a member. This subsection shall not 
apply to any credit union which becomes an Agent member or a member of 
an Agent group within six months after such credit union is chartered 
within six months after such credit union has been an Agent or a member 
of another Agent group.
    (g) Agent members will be compensated for the services they perform 
for the Facility in a manner to be specified by the NCUA Board.



Sec. 725.5  Capital stock.

    (a) The capital stock of the Facility is divided into nonvoting 
shares having a par value of $50 each. The Facility issues whole and 
fractional shares. Shares are issued in book entry form upon receipt of 
payment for such shares, and cannot be transferred or hypothecated 
except to the Facility.
    (b) The capital stock subscriptions provided for in Secs. 725.3 and 
725.4 shall be:
    (1) Based on an arithmetic average of paid-in and unimpaired capital 
and surplus over the six months preceding application for membership, 
and
    (2) Adjusted at the close of each calendar year in accordance with 
an arithmetic average of paid-in and unimpaired capital and surplus over 
the twelve months in such calendar year. Payments for adjustments to the 
capital stock subscription must be received by the Facility no later 
than March 31 of the following year.

[[Page 500]]

    (c) That part of a member's stock subscription which is not paid-in 
shall be held by the member on call of the NCUA Board and shall be 
invested in liquid assets.
    (d) Any member may at any time purchase additional shares of capital 
stock in the Facility. Any shares in excess of the member's required 
paid-in portion of its stock subscription can be redeemed by the member 
as long as the member maintains investments in other assets sufficient 
to meet the requirement of paragraph (c) of this section. The member's 
required paid-in portion of its stock subscription includes one-half of 
its stock subscription plus any ``calls'' that may have been issued by 
the NCUA Board against the ``on-call'' portion of such stock 
subscription.
    (e) Dividends will be paid on capital stock at such times and rates 
as are determined by the NCUA Board. The NCUA Board shall declare such 
dividends no less frequently than annually. All issued (paid for) 
capital stock shall share in dividend distributions without preference. 
Payment of dividends will be made by the issuance of capital stock to 
the member in the amount of the dividend.

[44 FR 49437, Aug. 23, 1979, as amended at 45 FR 47122, July 14, 1980; 
47 FR 1371, Jan. 13, 1982; 53 FR 22472, June 16, 1988]



Sec. 725.6  Termination of membership.

    (a) A member of the Facility whose stock subscription constitutes 
less than 5 percent of total subscribed Facility stock may withdraw from 
membership in the Facility six months after notifying the NCUA Board in 
writing of its intention to do so.
    (b) A member of the Facility whose stock subscription constitutes 5 
percent or more of total subscribed Facility stock may withdraw from 
membership in the Facility twenty-four months after notifying the NCUA 
Board in writing of its intention to do so.
    (c) The NCUA Board may terminate membership in the Facility if, 
after the opportunity for a hearing, the NCUA Board determines the 
member has failed to comply with any provision of the National Credit 
Union Central Liquidity Facility Act or any regulation issued pursuant 
thereto. If membership is terminated under this subsection, the credit 
union will be required to obtain the approval of the NCUA Board before 
becoming a member of the Facility again. Such approval will be granted 
only if the NCUA Board is satisfied that the credit union will comply 
with such Act and regulations.
    (d)(1) If membership is terminated under any provision of this 
section, the terminated member's stock shall be redeemed upon 
termination. In such event, the Facility may retain any amount owed to 
the Facility by the member.
    (2) When a member natural person credit union withdraws from 
membership in a central credit union which is an Agent or a member of an 
Agent group, the stock subscription of the Agent, or in the case of an 
Agent group, the stock subscription of the Agent group representative, 
will be adjusted after the waiting period which would apply under 
paragraph (a) or (b) of this section if the withdrawing credit union 
were a member of the Facility.



Sec. 725.7  Special share accounts in federally chartered agent members.

    (a) A federally chartered Agent member of the Facility may require 
its member natural person credit unions to establish and maintain 
special share accounts in the Agent member to reimburse it for the 
portion of the Agent's Facility stock subscription which is attributable 
to the paid-in and unimpaired capital and surplus of each such natural 
person credit union.
    (b) The amount which the Agent member requires each member natural 
person credit union to maintain in such special share accounts shall be 
based on a uniform percentage of the paid-in and unimpaired capital and 
surplus of such credit unions, and shall not exceed the amount of the 
Agent's stock subscription which is attributable to the capital and 
surplus of each such credit union. An Agent shall not permit a member to 
maintain in a special share account any amounts in excess of the 
required amount.
    (c) A natural person credit union that withdraws from membership in 
an Agent member or that becomes a Regular member of the Facility, shall 
be

[[Page 501]]

entitled to the return of all amounts in its special share account upon 
withdrawal from membership in the Agent or upon becoming a Regular 
member, as applicable.

[45 FR 47122, July 14, 1980]



Secs. 725.8-725.16  [Reserved]



Sec. 725.17  Applications for extensions of credit.

    (a) A Regular member may apply for a Facility advance to meet its 
liquidity needs by filing an application on a Facility-approved form, or 
by any other method approved by the Facility.
    (b)(1) An Agent member may apply for a Facility advance by filing an 
application on a Facility-approved form, or by any other method approved 
by the Facility.\4\
---------------------------------------------------------------------------

    \4\ If the Agent is an Agent group, the application must be filed by 
the Agent group representative, and any Facility advance will be made to 
the Agent group representative.
---------------------------------------------------------------------------

    (2) The Agent's application shall be based on the following:
    (i) Approved applications to the Agent by its member natural person 
credit unions for pending loans to meet liquidity needs; or
    (ii) Outstanding loans previously made by the Agent to meet 
liquidity needs of its member natural person credit unions; or
    (iii) Such other demonstrable liquidity needs as the NCUA Board may 
specify.
    (3) An Agent shall not submit an application to the Facility based 
on the liquidity needs of any member natural person credit union which 
has not agreed to the repayment, security and credit reporting terms 
prescribed by the Facility for Agent loans;
    (4) Any loan to meet liquidity needs which have been or will be the 
basis for an application by the Agent for a Facility advance must be 
applied for on an application form approved by the Facility.
    (5) Unless approved by the Facility, an Agent shall not submit an 
application to the Facility based on the liquidity needs of any credit 
union which became a member natural person credit union of the Agent 
after February 2, 1980, unless such credit union has been a member 
natural person credit union of the Agent for six months, was chartered 
within six months before becoming a member natural person credit union 
of the Agent, or had access to the Facility either as a Regular member 
or through another Agent within six months before becoming a member 
natural person credit union of the Agent.
    (c) In emergency circumstances, the applications for extensions of 
credit required under paragraph (a) and paragraphs (b)(1) and (b)(4) of 
this section may be verbal, but must be confirmed within five working 
days by an application as required by such subsection or paragraphs.
    (d) Applications of Regular and Agent members shall be filed with a 
Facility lending officer. Each application for credit which is completed 
and properly filed will be approved or denied within five working days 
after the day of receipt.

[44 FR 49437, Aug. 23, 1979, as amended at 47 FR 1371, Jan. 13, 1982]



Sec. 725.18  Creditworthiness.

    (a) Prior to Facility approval of each application of a Regular 
member for a Facility advance, the Facility shall consider the 
creditworthiness of such member.
    (b) Prior to an Agent's approval of each application of a member 
natural person credit union for an extension of credit on which an 
application by the Agent to the Facility will be based, an Agent shall 
consider the creditworthiness of such member natural person credit 
union.
    (c) Specific characteristics of an uncreditworthy credit union 
include, but are not limited to, insolvency as defined by Sec. 700.1(k) 
of this chapter, unsatisfactory practices in extending credit, lower 
than desirable reserve levels, high expense ratio, failure to repay 
previous Facility advances as agreed, excessive dependence on borrowed 
funds, inadequate cash management policies and planning, or any other 
relevant characteristics creating a less than satisfactory condition. 
The presence of one or more of these characteristics will not 
necessarily mean that a credit union will be considered uncreditworthy.

[[Page 502]]

    (d) A natural person credit union (whether a Regular member of the 
Facility or a member natural person credit union) which does not meet 
the Facility's creditworthiness standards may be limited in or denied 
the use of advances for its liquidity needs.



Sec. 725.19  Collateral requirements.

    (a) Each Facility advance and each Agent loan shall be secured by a 
first priority security interest in collateral of the credit union with 
a net book value at least equal to 110% of all amounts due under the 
applicable Facility advance or Agent loan, or by guarantee of the 
National Credit Union Share Insurance Fund.
    (b) The Facility may accept as collateral for each Facility advance 
to a Regular member, a security interest in all assets of the Regular 
member; provided however, that the value of any assets in which any 
third party has a perfected security interest that is superior to the 
security interest of the Facility shall be excluded for purposes of 
complying with the requirements of paragraph (a) of this section.
    (c) The Facility may accept as collateral for each Facility advance 
to an Agent member, a security interest in the Agent loans for which the 
Facility advance was made; provided however, that the collateral for 
such Agent loan meets the requirements of paragraph (a) of this section.

[62 FR 67550, Dec. 29, 1997]



Sec. 725.20  Repayment, security and credit reporting agreements; other terms and conditions.

    (a) Regular and Agent members, or in the case of an Agent group, the 
Agent group representative, shall sign the repayment, security and 
credit reporting agreements prescribed by the Facility, and all Facility 
advances to Regular and Agent members shall be governed by the terms and 
conditions of such agreements.
    (b) All Agent loans shall be made subject to the repayment, security 
and credit reporting terms prescribed by the Facility for Agent loans.
    (c) Other terms and conditions applicable to Facility advances and 
Agent loans will be specified in confirmations of credit provided in 
connection with such advances and loans, and/or in operating circulars 
of the Facility.



Sec. 725.21  Modification of agreements.

    The repayment, security, and credit reporting terms under which 
Facility advances and Agent loans will be made, as provided in 
Sec. 725.20 of this part, shall be subject to modification from time to 
time as the NCUA Board may determine. Any change in such terms shall be 
published in the Federal Register and shall apply to all advances 
disbursed by the Facility after the effective date of the change.



Sec. 725.22  Advances to insurance organizations.

    (a) In accordance with policies established by the NCUA Board, the 
Facility may advance funds to a State credit union share or deposit 
insurance corporation, guaranty credit union, guaranty association, or 
similar organization. Requests for such advances shall be supported by 
an application which sets forth and supports the need for the advance.
    (b) Advances under paragraph (a) shall be subject to the approval of 
the NCUA Board and shall be made subject to the following terms:
    (1) The advance shall be fully secured,
    (2) The maturity of the advance shall not exceed 12 months,
    (3) The advance shall not be renewable at maturity, and
    (4) The funds advanced shall not be relent at an interest rate 
exceeding that imposed by the Facility.



Sec. 725.23  Other advances.

    (a) The NCUA Board may authorize extensions of credit to members of 
the Facility for purposes other than liquidity needs if the NCUA Board, 
the Board of Governors of the Federal Reserve System, and the Secretary 
of the Treasury concur in a determination that such extensions of credit 
are in the national economic interest.
    (b) Extensions of credit approved under the conditions of paragraph 
(a) of this section shall be subject to such terms and conditions as 
shall be established by the NCUA Board.

[[Page 503]]



PART 740--ADVERTISING--Table of Contents




Sec.
740.0  Scope.
740.1  Definitions.
740.2  Accuracy of advertising.
740.3  Mandatory requirements with regard to the official sign and its 
          display.
740.4  Mandatory requirements with regard to the official advertising 
          statement and manner of use.

    Authority: 12 U.S.C. 1766, 1781, 1789 and 4311.

    Source: 51 FR 37556, Oct. 23, 1986, unless otherwise noted.



Sec. 740.0  Scope.

    This part applies to all federally-insured credit unions. It 
prescribes the requirements with regard to the official sign insured 
credit unions must display and the requirements with regard to the 
official advertising statement insured credit unions must include in 
their advertisements. It also prescribes a general requirement that all 
other kinds of advertisements must be accurate.



Sec. 740.1  Definitions.

    (a) Account or accounts as used in this part means share, share 
certificate or share draft accounts (or their equivalent under state 
law, as determined by the Board in the case of insured state credit 
unions) of a member (which includes other credit unions, public units, 
and nonmembers where permitted under the Act) in a credit union of a 
type approved by the Board which evidences money or its equivalent 
received or held by a credit union in the usual course of business and 
for which it has given or is obligated to give credit to the account of 
the member.
    (b) Insured credit union as used in this part means a credit union 
insured by the National Credit Union Administration (NCUA).



Sec. 740.2  Accuracy of advertising.

    No insured credit union shall use any advertising (which includes 
print or broadcast media, displays and signs, stationery, and all other 
promotional material) or make any representation which is inaccurate or 
deceptive in any particular, or which in any way misrepresents its 
services, contracts, or financial condition, or which violates the 
requirements of Sec. 707.8 of this subchapter, if applicable. Any 
advertising that mentions share or savings account insurance provided by 
a party other than the NCUA must clearly explain the type and amount of 
such insurance and the identity of the carrier, and must avoid any 
statement or implication that the carrier is affiliated with the NCUA or 
the Federal government.

[51 FR 37556, Oct. 23, 1986, as amended at 58 FR 50461, Sept. 27, 1993]



Sec. 740.3  Mandatory requirements with regard to the official sign and its display.

    (a) Each insured credit union shall continuously display the 
official sign described in paragraph (b) of this section at each station 
or window where insured account funds or deposits are usually and 
normally received in its principal place of business and in all its 
branches 30 days after its first day of operation as an insured credit 
union.
    (b) The official sign shall be as depicted below, having a blue 
background with white lettering:

[[Page 504]]

[GRAPHIC] [TIFF OMITTED] TC21SE91.003

    (1) All insured credit unions will automatically be furnished an 
initial supply of official signs, at no cost, from the Administration 
for compliance with paragraph (a) of this section. If the initial supply 
is not adequate, an immediate request for additional signs must be made. 
Any credit union that does not have an adequate supply but requests 
additional signs from NCUA shall not be deemed to have violated 
paragraph (a) of this section unless the credit union shall omit to 
display the signs after receipt thereof.
    (2) Additional signs reflecting variations in color, materials and 
size, for use other than as prescribed in paragraph (a) of this section 
may be procured by insured credit unions from commercial suppliers.
    (c) An insured credit union shall not receive account funds at any 
teller's station or window where any noninsured credit union or 
institution receives deposits. Excepted from this prohibition are credit 
union centers, service centers, or branches servicing more than one 
credit union where only some of the credit unions are insured by the 
NCUA. In such instances there must be placed immediately above or beside 
each official sign another sign stating ``Only the following credit 
unions serviced by this facility are federally insured by the NCUA 
______'' (the full name of each credit union insured will follow the 
word NCUA). The lettering will be of such size and print to be clearly 
legible to all members conducting share or share deposit transactions.
    (d) The Board may require any insured credit union, upon at least 30 
days' written notice, to change the wording of its official signs in a 
manner deemed necessary for the protection of shareholders or others.
    (e) For purposes of this section, the terms ``branch,'' ``station,'' 
``teller station,'' and ``window'' do not include automated teller 
machines or point of sale terminals.



Sec. 740.4  Mandatory requirements with regard to the official advertising statement and manner of use.

    (a) Each insured credit union shall include the official advertising 
statement, prescribed in paragraph (b) of this section, in all of its 
advertisements except as provided in paragraph (c) of this section.
    (1) An insured credit union must include the official advertising 
statement in its advertisements thirty (30) days after its first day of 
operations as an insured credit union unless it has been granted an 
extension by the Regional Director.
    (2) In cases where advertising copy not including the official 
advertising statement is on hand on the date the requirements of this 
section become operative, the insured credit union may cause the 
official advertising statement to be included by use of an overstamp or 
by other means until the supplies are exhausted.
    (b) The official advertising statement shall be in substance as 
follows:

    This credit union is federally insured by the National Credit Union 
Administration.


The short title ``Federally insured by NCUA'' and a reproduction of the 
official sign may be used by insured credit

[[Page 505]]

unions at their option as the official advertising statement. The 
official advertising statement shall be of such size and print to be 
clearly legible.
    (c) The following advertisements need not include the official 
advertising statement:
    (1) Statements of condition and reports of condition of an insured 
credit union which are required to be published by State and Federal law 
or regulation;
    (2) Credit union supplies such as stationery (except when used for 
circular letters), envelopes, deposit slips, checks, drafts, signature 
cards, account passbooks, and noninsurable certificates, etc;
    (3) Signs or plates in the credit union office or attached to the 
building or buildings in which the offices are located;
    (4) Listings in directories;
    (5) Advertisements not setting forth the name of the insured credit 
union;
    (6) Display advertisements in credit union directories, provided the 
name of the credit union is listed on any page in the directory with a 
symbol or other descriptive matter indicating it is insured;
    (7) Joint or group advertisements of credit union services where the 
names of insured credit unions and noninsured credit unions are listed 
and form a part of such advertisement;
    (8) Advertisements by radio which do not exceed thirty (30) seconds 
in time;
    (9) Advertisements by television, other than display advertisement, 
which do not exceed thirty (30) seconds in time;
    (10) Advertisements which are of the type or character making it 
impractical to include thereon the official advertising statement, 
including but not limited to, promotional items such as calendars, 
matchbooks, pens, pencils, and key chains;
    (11) Advertisements which contain a statement to the effect that the 
credit union is insured by the National Credit Union Administration, or 
that its accounts and shares or members are insured by the 
Administration to the maximum of $100,000 for each member or 
shareholder;
    (12) Advertisements which do not relate to member accounts, 
including but not limited to:
    (i) Advertisements relating specifically and only to the making of 
loans by the credit union or loan services;
    (ii) Advertisements relating specifically and only to safekeeping 
box business or services;
    (iii) Advertisements relating specifically and only to traveler's 
checks on which the credit union issuing or causing to be issued the 
advertisement is not primarily liable; and
    (iv) Advertisements relating specifically and only to loan life 
insurance.
    (d) The non-English equivalent of the official advertising statement 
may be used in any advertisement: Provided, That the translation has had 
the prior written approval of the Regional Director.



PART 741--REQUIREMENTS FOR INSURANCE--Table of Contents




Sec.
741.0  Scope.

  Subpart A--Regulations That Apply to Both Federal Credit Unions and 
    Federally Insured State-Chartered Credit Unions and That Are Not 
                Codified Elsewhere in NCUA's Regulations

741.1  Examination.
741.2  Maximum borrowing authority.
741.3  Criteria.
741.4  Insurance premium and one percent deposit.
741.5  Notice of termination of excess insurance coverage.
741.6  Financial and statistical and other reports.
741.7  Conversion to a state-chartered credit union.
741.8  Purchase of assets and assumption of liabilities.
741.9  Uninsured membership shares.
741.10  Disclosure of share insurance.

   Subpart B--Regulations Codified Elsewhere in NCUA's Regulations as 
 Applying to Federal Credit Unions That Also Apply to Federally Insured 
                      State-Chartered Credit Unions

741.201  Minimum fidelity bond requirements.
741.202  Audit and verification requirements.
741.203  Minimum loan policy requirements.

[[Page 506]]

741.204  Maximum public unit and nonmember accounts, and low-income 
          designation.
741.205  Reporting requirements for credit unions that are newly 
          chartered or in troubled condition.
741.206  Corporate credit unions.
741.207  Community development revolving loan program for credit unions.
741.208  Mergers of federally insured credit unions: voluntary 
          termination or conversion of insured status.
741.209  Management official interlocks.
741.210  Central liquidity facility.
741.211  Advertising.
741.212  Share insurance.
741.213  Administrative actions, adjudicative hearings, rules of 
          practice and procedure.
741.214  Report of crime or catastrophic act and Bank Secrecy Act 
          compliance.
741.215  Records preservation program.
741.216  Flood insurance.
741.217  Truth in savings.
741.218  Involuntary liquidation and creditor claims.
741.219  Investment requirements.
741.220  Privacy of consumer financial information.

    Authority: 12 U.S.C. 1757, 1766, 1781-1790, and 1790d.
     Section 741.4 is also authorized by 31 U.S.C. 3717.

    Source: 60 FR 58504, Nov. 28, 1995, unless otherwise noted.



Sec. 741.0  Scope.

    The provisions of this part apply to federal credit unions, 
federally insured state-chartered credit unions, and credit unions 
making application for insurance of accounts pursuant to Title II of the 
Act, unless the context of a provision indicates its application is 
otherwise limited. This part prescribes various requirements for 
obtaining and maintaining federal insurance and the payment of insurance 
premiums and capitalization deposit. Subpart A of this part contains 
substantive requirements that are not codified elsewhere in this 
chapter. Subpart B of this part lists additional regulations, set forth 
elsewhere in this chapter as applying to federal credit unions, that 
also apply to federally insured state-chartered credit unions. As used 
in this part, ``insured credit union'' means a credit union whose 
accounts are insured by the National Credit Union Share Insurance Fund 
(NCUSIF).



  Subpart A--Regulations That Apply to Both Federal Credit Unions and 
    Federally Insured State-Chartered Credit Unions and That Are Not 
                Codified Elsewhere in NCUA's Regulations



Sec. 741.1  Examination.

    As provided in Sections 201 and 204 of the Act (12 U.S.C. 1781 and 
1784), the NCUA Board is authorized to examine any insured credit union 
or any credit union making application for insurance of its accounts. 
Such examination may require access to all records, reports, contracts 
to which the credit union is a party, and information concerning the 
affairs of the credit union. Upon request, such documentation must be 
provided to the NCUA Board or its representative. Any credit union which 
makes application for insurance will be required to pay the cost of such 
examination and processing. To the maximum extent feasible, the NCUA 
Board will utilize examinations conducted by state regulatory agencies.



Sec. 741.2  Maximum borrowing authority.

    Any credit union which makes application for insurance of its 
accounts pursuant to Title II of the Act, or any insured credit union, 
must not borrow, from any source, an aggregate amount in excess of 50 
per centum of its paid-in and unimpaired capital and surplus (shares and 
undivided earnings, plus net income or minus net loss).



Sec. 741.3  Criteria.

    In determining the insurability of a credit union which makes 
application for insurance and in continuing the insurability of its 
accounts pursuant to Title II of the Act, the following criteria shall 
be applied:
    (a) Adequacy of reserves--(1) General rule. State-chartered credit 
unions are subject to section 216 of the Act, 12 U.S.C. 1790d, and to 
part 702 and subpart L of part 747 of this chapter.
    (2) Charges against reserves. State-chartered credit unions may 
charge losses, including losses other than loan losses, against the 
regular reserve in accordance with either state law or

[[Page 507]]

procedures established by the appropriate State official. The board of 
directors of a credit union may authorize charges to the regular reserve 
for losses, provided that the authorization states the amount and 
provides an explanation of the need for the charge, and either--
    (i) The charge will not cause the credit union's net worth 
classification to fall below ``well capitalized'' under subparts B or C 
of part 702; or
    (ii) The appropriate State official has given written approval for 
the charge.
    (3) Special reserve for nonconforming investments. State-chartered 
credit unions (except state-chartered corporate credit unions) are 
required to establish an additional special reserve for investments if 
those credit unions are permitted by their respective state laws to make 
investments beyond those authorized in the Act or the NCUA Rules and 
Regulations. For any investment other than loans to members and 
obligations or securities expressly authorized in Title I of the Act and 
part 703 of this chapter, as amended, state-chartered credit unions 
(except state-chartered corporate credit unions) are required to 
establish and maintain at the end of each accounting period and prior to 
payment of any dividend, an Appropriation for Non-conforming Investments 
in an amount at least equal to the net excess of book value over current 
market value of the investments. If the market value cannot be 
determined, an amount equal to the full book value will be established. 
When at the end of any dividend period, the amount in the Appropriation 
for Non-conforming Investments exceeds the difference between book value 
and market value, the board of directors may authorize the transfer of 
the excess to Undivided Earnings.
    (b) Financial condition and policies. The following factors are to 
be considered in determining whether the credit union's financial 
condition and policies are both safe and sound:
    (1) The existence of unfavorable trends which may include excessive 
losses on loans (i.e., losses which exceed the regular reserve or its 
equivalent [in the case of state-chartered credit unions] plus other 
irrevocable reserves established as a contingency against losses on 
loans), the presence of special reserve accounts used specifically for 
charging off loan balances of deceased borrowers, and an expense ratio 
so high that the required transfers to reserves create a net operating 
loss for the period or that the net gain after these transfers is not 
sufficient to permit the payment of a nominal dividend;
    (2) The existence of written lending policies, including adequate 
documentation of secured loans and the protection of security interests 
by recording, bond, insurance, or other adequate means, adequate 
determination of the financial capacity of borrowers and co-makers for 
repayment of the loan, and adequate determination of value of security 
on loans to ascertain that said security is adequate to repay the loan 
in the event of default;
    (3) Investment policies which are within the provisions of 
applicable law and regulations, i.e., the Act and part 703 of this 
chapter for federal credit unions and the laws of the state in which the 
credit union operates for state-chartered credit unions, except state-
chartered corporate credit unions. State-chartered corporate credit 
unions are permitted to make only those investments that are in 
conformance with part 704 of this chapter and applicable state laws and 
regulations;
    (4) The presence of any account or security, the form of which has 
not been approved by the Board, except for accounts authorized by state 
law for state-chartered credit unions.
    (c) Fitness of management. The officers, directors, and committee 
members of the credit union must have conducted its operations in 
accordance with provisions of applicable law, regulations, its charter 
and bylaws. No person shall serve as a director, officer, committee 
member, or employee of an insured credit union who has been convicted of 
any criminal offense involving dishonesty or breach of trust, except 
with the written consent of the Board.
    (d) Insurance of member accounts would not otherwise involve undue 
risk to the NCUSIF. The credit union must maintain adequate fidelity 
bond coverage as specified in Sec. 741.201. Any circumstances which may 
be unique to

[[Page 508]]

the particular credit union concerned shall also be considered in 
arriving at the determination of whether or not an undue risk to the 
NCUSIF is or may be present. For purposes of this section, the term 
``undue risk to the NCUSIF'' is defined as a condition which creates a 
probability of loss in excess of that normally found in a credit union 
and which indicates a reasonably foreseeable probability of the credit 
union becoming insolvent because of such condition, with a resultant 
claim against the NCUSIF.
    (e) Powers and purposes. The credit union must not perform services 
other than those which are consistent with the promotion of thrift and 
the creation of a source of credit for its members, except as otherwise 
permitted by law or regulation.
    (f) Letter of disapproval. A credit union whose application for 
share insurance is disapproved shall receive a letter indicating the 
reasons for such disapproval, a citation of the authority for such 
disapproval, and suggested methods by which the applying credit union 
may correct its deficiencies and thereby qualify for share insurance.
    (g) Nothing in this section shall preclude the NCUA Board from 
imposing additional terms or conditions pursuant to the insurance 
agreement.

[60 FR 58504, Nov. 28, 1995, as amended at 64 FR 41040, July 29, 1999; 
65 FR 8593, Feb. 18, 2000]



Sec. 741.4  Insurance premium and one percent deposit.

    (a) Scope. This section implements the requirements of Section 202 
of the Act (12 U.S.C. 1782) providing for capitalization of the NCUSIF 
through the maintenance of a deposit by each insured credit union in an 
amount equaling one percent of its insured shares and payment of an 
insurance premium.
    (b) Definitions. For purposes of this section:
    (1) Available assets ratio means the ratio of:
    (i) The amount determined by subtracting all liabilities of the 
NCUSIF, including contingent liabilities for which no provision for 
losses has been made, from the sum of cash and the market value of 
unencumbered investments authorized under 12 U.S.C. 1783(c), to:
    (ii) The aggregate amount of the insured shares in all insured 
credit unions.
    (iii) Shown as an abbreviated mathematical formula, the available 
assets ratio is:
[GRAPHIC] [TIFF OMITTED] TR18OC99.001

    (2) Equity ratio means the ratio of:
    (i) The amount of NCUSIF's capitalization, meaning insured credit 
unions' one percent capitalization deposits plus the retained earnings 
balance of the NCUSIF (less contingent liabilities for which no 
provision for losses has been made) to:
    (ii) The aggregate amount of the insured shares in all insured 
credit unions.
    (iii) Shown as an abbreviated mathematical formula, the equity ratio 
is:
[GRAPHIC] [TIFF OMITTED] TR18OC99.002


[[Page 509]]


    (3) Insured shares means the total amount of a credit union's share, 
share draft and share certificate accounts, or their equivalent under 
state law (which may include deposit accounts), authorized to be issued 
to members, other credit unions, public units, or nonmembers (where 
permitted under the Act or equivalent state law). ``Insured shares'' 
does not include amounts in excess of insurance coverage as provided in 
part 745 of this chapter; and
    (4) Normal operating level means an equity ratio not less than 1.2 
percent and not more than 1.5 percent, as established by action of the 
NCUA Board.
    (5) Reporting period means calendar year for credit unions with 
total assets of less than $50,000,000 and means semiannual period for 
credit union with total assets of $50,000,000 or more.
    (c) One percent deposit. Each insured credit union shall maintain 
with the NCUSIF during each reporting period a deposit in an amount 
equaling one percent of the total of the credit union's insured shares 
at the close of the preceding reporting period. For credit unions with 
total assets of less than $50,000,000, insured shares will be measured 
and adjusted annually based on the insured shares reported in the credit 
union's semiannual 5300 report due in January of each year. For credit 
unions with total assets of $50,000,000 or more, insured shares will be 
measured and adjusted semiannually based on the insured shares reported 
in the credit union's quarterly 5300 reports due in January and July of 
each year.
    (d) Insurance premium charges. (1) In general. Each insured credit 
union will pay to the NCUSIF, on dates the NCUA Board determines, but 
not more than twice in any calendar year, an insurance premium in an 
amount stated as a percentage of insured shares, which will be the same 
for all insured credit unions.
    (2) Relation of premium charge to equity ratio of NCUSIF. (i) The 
NCUA Board may assess a premium charge only if the NCUSIF's equity ratio 
is less than 1.3 percent and the premium charge does not exceed the 
amount necessary to restore the equity ratio to 1.3 percent.
    (ii) If the equity ratio of NCUSIF falls below 1.2 percent, the NCUA 
Board is required to assess a premium in an amount it determines is 
necessary to restore the equity ratio to, and maintain that ratio at, 
1.2 percent.
    (e) Distribution of NCUSIF equity. If, as of the end of a calendar 
year, the NCUSIF exceeds its normal operating level and its available 
assets ratio exceeds 1.0 percent, the NCUA Board will make a 
proportionate distribution of NCUSIF equity to insured credit unions. 
The distribution will be the maximum amount possible that does not 
reduce the NCUSIF's equity ratio below its normal operating level and 
does not reduce its available assets ratio below 1.0 percent. The 
distribution will be after the calendar year and in the form determined 
by the NCUA Board. The form of the distribution may include a waiver of 
insurance premiums, premium rebates, or distributions from NCUSIF equity 
in the form of dividends. The NCUA Board will use the aggregate amount 
of the insured shares from all insured credit unions from the final 
reporting period of the calendar year in calculating the NCUSIF's equity 
ratio and available assets ratio for purposes of this paragraph.
    (f) Invoices. The NCUA provides invoices to all federally insured 
credit unions stating any change in the amount of a credit union's one 
percent deposit and the computation and funding of any premium payment 
due. Invoices for federal credit unions also include any annual 
operating fees that are due. Invoices are calculated based on a credit 
union's insured shares as of the most recently ended reporting period. 
The invoices may also provide for any distribution the NCUA Board 
declares in accordance with paragraph (e) of this section, resulting in 
a single net transfer of funds between a credit union and the NCUA.
    (g) New charters. A newly-chartered credit union that obtains share 
insurance coverage from the NCUSIF during the calendar year in which it 
has obtained its charter shall not be required to pay an insurance 
premium for that calendar year. The credit union shall fund its one 
percent deposit on a date to be determined by the NCUA Board in the 
following calendar year, but

[[Page 510]]

shall not participate in any distribution from NCUSIF equity related to 
the period prior to the credit union's funding of its deposit.
    (h) Conversion to Federal insurance. An existing credit union that 
converts to insurance coverage with the NCUSIF shall immediately fund 
its one percent deposit based on the total of its insured shares as of 
the close of the month prior to conversion and, if any premiums have 
been assessed in that calendar year, will pay a prorated premium amount 
to reflect the remaining number of months in that calendar year. The 
credit union will be entitled to a prorated share of any distribution 
from NCUSIF equity declared subsequent to the credit union's conversion.
    (i) Mergers of nonfederally insured credit unions. Where a 
nonfederally insured credit union merges into a federally insured credit 
union, the continuing federally insured credit union shall immediately 
pay to the NCUSIF a prorated insurance premium (unless waived in whole 
or in part for all federally insured credit unions), and an additional 
one percent deposit based upon the increase in insured shares resulting 
from the merger.
    (j) Return of deposit. Any insolvent credit union that is closed for 
involuntary liquidation will not be entitled to a return of its deposit. 
Any solvent credit union that is closed due to involuntary liquidation 
shall be entitled to a return of its deposit prior to final distribution 
of member shares. Any other credit union whose insurance coverage with 
the NCUSIF terminates will be entitled to a return of the full amount of 
its deposit immediately after the final date on which any shares of the 
credit union are insured, except that the NCUA Board reserves the right 
to delay payment by up to one year if it determines that immediate 
payment would jeopardize the financial condition of the NCUSIF. This 
includes termination of insurance due to mergers and consolidations. A 
credit union that receives a return of its deposit during an calendar 
year shall have the option of leaving a nominal sum on deposit with the 
NCUSIF until the next distribution from NCUSIF equity and will thus 
qualify for a prorated share of the distribution.
    (k) Assessment of administrative fee and interest for delinquent 
payment. Each federally insured credit union shall pay to the NCUA an 
administrative fee, the costs of collection, and interest on any 
delinquent payment of its capitalization deposit or insurance premium. A 
payment will be considered delinquent if it is postmarked later than the 
date stated in the invoice provided to the credit union. The NCUA may 
waive or abate charges or collection of interest, if circumstances 
warrant.
    (1) The administrative fee for a delinquent payment shall be an 
amount as fixed from time to time by the NCUA Board based upon the 
administrative costs of such delinquent payments to the NCUA in the 
preceding year.
    (2) The costs of collection shall be calculated as the actual hours 
expended by NCUA personnel multiplied by the average hourly cost of the 
salaries and benefits of such personnel.
    (3) The interest rate charged on any delinquent payment shall be the 
U.S. Department of the Treasury Tax and Loan Rate in effect on the date 
when the payment is due as provided in 31 U.S.C. 3717.

[60 FR 58504, Nov. 28, 1995, as amended at 64 FR 56150, Oct. 18, 1999]



Sec. 741.5  Notice of termination of excess insurance coverage.

    In the event of a credit union's termination of share insurance 
coverage other than that provided by the NCUSIF, the credit union must 
notify all members in writing of such termination at least thirty days 
prior to the effective date of termination.



Sec. 741.6  Financial and statistical and other reports.

    (a) Each operating insured credit union with assets in excess of 
$50,000,000 shall file with the NCUA a quarterly Financial and 
Statistical Report on Form NCUA 5300, on or before January 22 (as of the 
previous December 31), April 22 (as of the previous March 31), July 22 
(as of the previous June 30) and October 22 (as of the previous 
September 30) of each year. All other operating insured credit unions 
shall file with the NCUA on or before January 22 and on or before July 
22 of each year a semiannual Financial and

[[Page 511]]

Statistical Report on Form NCUA 5300, as of the previous December 31 (in 
the case of the January filing) or June 30 (in the case of the July 
filing).
    (b) Consistency with GAAP. The accounts of financial statements and 
reports required to be filed quarterly or semiannually under paragraph 
(a) of this section must reflect GAAP if the credit union has total 
assets of $10 million or greater, but may reflect regulatory accounting 
principles other than GAAP if the credit union has total assets of less 
than $10 million (except that a Federally-insured State-chartered credit 
union may be required by its state credit union supervisor to follow 
GAAP regardless of asset size).
    (c) GAAP sources. GAAP means generally accepted accounting 
principles, as defined in Sec. 715.2(e) of this chapter. GAAP is 
distinct from GAAS, which means generally accepted auditing standards, 
as defined in Sec. 715.2(f) of this chapter. Authoritative sources of 
GAAP include, but are not limited to, pronouncements of the Financial 
Accounting Standards Board (FASB) and its predecessor organizations, the 
Accounting Standards Executive Committee (AcSEC) of the American 
Institute of Certified Public Accountants (AICPA), the FASB's Emerging 
Issues Task Force (EITF), and the applicable AICPA Audit and Accounting 
Guide.
    (d) Insured credit unions shall, upon written notice from the NCUA 
Board or Regional Director, file such financial or other reports in 
accordance with instructions contained in such notice.

[60 FR 58504, Nov. 28, 1995, as amended at 64 FR 41040, July 29, 1999]



Sec. 741.7  Conversion to a state-chartered credit union.

    Any federal credit union that petitions to convert to a state-
chartered federally insured credit union is required to apply to the 
Regional Director for continued insurance of its accounts and meet the 
requirements as stated in the Act and this part. If the application for 
continued insurance is not approved, such insurance will terminate 
subject to the conditions set forth in section 206(d) of the Act.



Sec. 741.8  Purchase of assets and assumption of liabilities.

    (a) Any credit union insured pursuant to Title II of the Act must 
apply for and receive approval from the NCUA Board before either 
purchasing or acquiring loans or assuming or receiving an assignment of 
deposits, shares, or liabilities from:
    (1) Any credit union that is not insured pursuant to Title II of the 
Act;
    (2) Any other financial-type institution (including depository 
institutions, mortgage banks, consumer finance companies, insurance 
companies, loan brokers, and other loan sellers or liability traders); 
or
    (3) Any successor in interest to any institution identified in 
paragraph (a)(1) or (a)(2) of this section.
    (b) Approval is not required for:
    (1) Purchases of student loans or real estate secured loans to 
facilitate the packaging of a pool of loans to be sold or pledged on the 
secondary market under Sec. 701.23(b)(1) (iii) or (iv) of this chapter 
or comparable state law for state-chartered credit unions, or purchases 
of member loans under Sec. 701.23(b)(1)(i) of this chapter or comparable 
state law for state-chartered credit unions; or
    (2) Assumptions or receipt of deposits, shares or liabilities as 
rollovers or transfers of member retirement accounts or in which an 
NCUSIF-insured credit union perfects a security interest in connection 
with an extension of credit to any member.



Sec. 741.9  Uninsured membership shares.

    Any credit union that is insured pursuant to Title II of the Act may 
not offer membership shares that, due to the terms and conditions of the 
account, are not eligible for insurance coverage. This prohibition does 
not apply to shares that are uninsured solely because the amount is in 
excess of the maximum insurance coverage provided pursuant to part 745 
of this chapter.



Sec. 741.10  Disclosure of share insurance.

    Any credit union which is insured pursuant to Title II of the Act 
and is permitted by state law to accept nonmember shares or deposits 
from sources other than other credit unions

[[Page 512]]

and public units (or, for low-income designated credit unions, any 
nonmembers), shall identify such nonmember accounts as nonmember shares 
or deposits on any statement or report required by the NCUA Board for 
insurance purposes. Immediately after a state-chartered credit union 
receives notice from NCUA that its member accounts are federally 
insured, the credit union shall advise any present nonmember share and 
deposit holders by letter that their accounts are not insured by the 
NCUSIF. Also, future nonmember share and deposit fund holders will be so 
advised by letter as they open accounts.



   Subpart B--Regulations Codified Elsewhere in NCUA's Regulations as 
 Applying to Federal Credit Unions That Also Apply to Federally Insured 
                      State-Chartered Credit Unions



Sec. 741.201  Minimum fidelity bond requirements.

    (a) Any credit union which makes application for insurance of its 
accounts pursuant to Title II of the Act must possess the minimum 
fidelity bond coverage stated in part 713 of this chapter in order for 
its application for such insurance to be approved and for such insurance 
coverage to continue. A federally insured credit union whose fidelity 
bond coverage is terminated shall mail notice of such termination to the 
Regional Director not less than 35 days prior to the effective date of 
such termination.
    (b) Corporate credit unions must comply with Sec. 704.17 of this 
chapter in lieu of part 713 of this chapter.

[60 FR 58504, Nov. 28, 1995, as amended at 64 FR 28721, May 27, 1999]



Sec. 741.202  Audit and verification requirements.

    (a) The supervisory committee of each credit union insured pursuant 
to Title II of the Act shall make or cause to be made an audit of the 
credit union at least once every calendar year covering the period 
elapsed since the last audit. The audit must fully meet the applicable 
requirements set forth in part 715 of this chapter or applicable state 
law, whichever requirement is more stringent.
    (b) Each credit union which is insured pursuant to Title II of the 
Act shall verify or cause to be verified, under controlled conditions, 
all passbooks and accounts with the records of the financial officer not 
less frequently than once every 2 years. The verification must fully 
meet the requirements set forth in Sec. 715.8 of this chapter.

[60 FR 58504, Nov. 28, 1995, as amended at 64 FR 41040, July 29, 1999]



Sec. 741.203  Minimum loan policy requirements.

    Any credit union which is insured pursuant to Title II of the Act 
must:
    (a) Adhere to the requirements stated in part 723 of this chapter 
concerning member business loans, Sec. 701.21(c)(8) of this chapter 
concerning prohibited fees, and Sec. 701.21(d)(5) of this chapter 
concerning nonpreferential loans. State-chartered, NCUSIF-insured credit 
unions in a given state are exempt from these requirements if the state 
supervisory authority for that state adopts substantially equivalent 
regulations as determined by the NCUA Board or, in the case of the 
member business loan requirements, if the state supervisory authority 
adopts member business loan regulations that are approved by the NCUA 
Board pursuant to Sec. 723.20. In nonexempt states, all required NCUA 
reviews and approvals will be handled in coordination with the state 
credit union supervisory authority; and
    (b) Adhere to the requirements stated in part 722 of this chapter 
concerning appraisals.

[60 FR 58504, Nov. 28, 1995, as amended at 63 FR 51802, Sept. 29, 1998; 
64 FR 28733, May 27, 1999]



Sec. 741.204  Maximum public unit and nonmember accounts, and low-income designation.

    Any credit union that is insured, or that makes application for 
insurance, pursuant to Title II of the Act must:
    (a) Adhere to the requirements of Sec. 701.32 of this chapter 
regarding public unit and nonmember accounts, provided it has the 
authority to accept such accounts. Requests by federally

[[Page 513]]

insured state-chartered credit unions for an exemption from the 
limitation of Sec. 701.32 of this chapter will be made and reviewed on 
the same basis as that provided in Sec. 701.32 of this chapter for 
federal credit unions, provided, however that NCUA will not grant an 
exemption without the concurrence of the appropriate state regulator.
    (b) Obtain a low-income designation in order to accept nonmember 
accounts, other than from public units or other credit unions, provided 
it has the authority to accept such accounts under state law. The state 
regulator shall make the low-income designation with the concurrence of 
the appropriate regional director. The designation will be made and 
reviewed by the state regulator on the same basis as that provided in 
Sec. 701.34(a) of this chapter for federal credit unions. Removal of the 
designation by the state regulator for such credit unions shall be with 
the concurrence of NCUA.
    (c) Receive secondary capital accounts only if the credit has a low-
income designation pursuant to paragraph (b) of this section, and then 
only in accordance with the terms and conditions authorized for Federal 
credit unions pursuant to Sec. 701.34 of this chapter and to the extent 
not inconsistent with applicable state law and regulation. State 
chartered federally insured credit unions offering secondary capital 
accounts must submit the plan required by Sec. 701.34 to both the state 
supervisory authority and the NCUA Regional Director.

[60 FR 58504, Nov. 28, 1995, as amended at 61 FR 3792, Feb. 2, 1996]



Sec. 741.205  Reporting requirements for credit unions that are newly chartered or in troubled condition.

    Any federally insured credit union chartered for less than 2 years 
or any credit union defined to be in troubled condition as set forth in 
Sec. 701.14(b)(3) of this chapter must adhere to the requirements stated 
in Sec. 701.14(c) of this chapter concerning the prior notice and NCUA 
review. Federally insured state-chartered credit unions must submit 
required information to both the appropriate NCUA Regional Director and 
their state supervisor. NCUA will consult with the state supervisor 
before making its determination pursuant to Sec. 701.14 (d)(2) and (f) 
of this chapter. NCUA will notify the state supervisor of its approval/
disapproval no later than the time that it notifies the affected 
individual pursuant to Sec. 701.14(d)(1) of this chapter.



Sec. 741.206  Corporate credit unions.

    Any corporate credit union insured pursuant to Title II of the Act 
shall adhere to the requirements of part 704 of this chapter.



Sec. 741.207  Community development revolving loan program for credit unions.

    Any credit union which is insured pursuant to Title II of the Act 
and is a ``participating credit union,'' as defined in Sec. 705.3 of 
this chapter, shall adhere to the requirements stated in part 705 of 
this chapter.



Sec. 741.208  Mergers of federally insured credit unions: voluntary termination or conversion of insured status.

    Any credit union which is insured pursuant to Title II of the Act 
and which merges with another credit union or non-credit union 
institution, and any state-chartered credit union which voluntarily 
terminates its status as a federally-insured credit union, or converts 
from federal insurance to other insurance from a government or private 
source authorized to insure member accounts, shall adhere to the 
applicable requirements stated in section 206 of the Act and parts 708a 
and 708b of this chapter concerning mergers and voluntary termination or 
conversion of insured status.



Sec. 741.209  Management official interlocks.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the requirements stated in part 711 of this chapter 
concerning management official interlocks, issued under the provisions 
of the Depository Institution Management Interlocks Act (12 U.S.C. 3201 
et seq.).



Sec. 741.210  Central liquidity facility.

    Any credit union which is insured pursuant to Title II of the Act 
and is a

[[Page 514]]

member of the Central Liquidity Facility, shall adhere to the 
requirements stated in part 725 of this chapter.



Sec. 741.211  Advertising.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the requirements prescribed by part 740 of this chapter.



Sec. 741.212  Share insurance.

    (a) Member share accounts received by any credit union which is 
insured pursuant to Title II of the Act in its usual course of business, 
including regular shares, share certificates, and share draft accounts, 
are insured subject to the limitations and rules in subpart A of part 
745 of this chapter.
    (b) The payment of share insurance and the appeal process applicable 
to any credit union which is insured pursuant to Title II of the Act are 
addressed in subpart B of part 745 of this chapter.



Sec. 741.213  Administrative actions, adjudicative hearings, rules of practice and procedure.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the applicable rules of practice and procedures for 
administrative actions and adjudicative hearings prescribed by part 747 
of this chapter. Subpart E of part 747 of this chapter applies only to 
federal credit unions.



Sec. 741.214  Report of crime or catastrophic act and Bank Secrecy Act compliance.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the requirements stated in part 748 of this chapter.



Sec. 741.215  Records preservation program.

    Any credit union which is insured pursuant to Title II of the Act 
shall maintain a records preservation program as prescribed by part 749 
of this chapter.



Sec. 741.216  Flood insurance.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the requirements stated in part 760 of this chapter.



Sec. 741.217  Truth in savings.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the requirements stated in part 707 of this chapter.



Sec. 741.218  Involuntary liquidation and creditor claims.

    Any credit union which is insured pursuant to Title II of the Act 
shall adhere to the applicable provisions in part 709 of this chapter. 
Section 709.3 of this chapter applies only to federal credit unions.



Sec. 741.219  Investment requirements.

    Any credit union which is insured pursuant to Title II of the Act 
must adhere to the requirements stated in part 703 of this chapter 
concerning transacting business with corporate credit unions.

[62 FR 12949, Mar. 19, 1997]



Sec. 741.220  Privacy of consumer financial information.

    Any credit union which is insured pursuant to Title II of the Act 
must adhere to the requirements stated in part 716 of this chapter.

[65 FR 31750, May 18, 2000]



PART 745--SHARE INSURANCE AND APPENDIX--Table of Contents




  Subpart A--Clarification and Definition of Account Insurance Coverage

Sec.
745.0  Scope.
745.1  Definitions.
745.2  General principles applicable in determining insurance of 
          accounts.
745.3  Single ownership accounts.
745.4  Revocable trust accounts.
745.5  Accounts held by executors or administrators.
745.6  Accounts held by a corporation, partnership, or unincorporated 
          association.
745.7  [Reserved]
745.8  Joint ownership accounts.
745.9-1  Trust accounts.
745.9-2  IRA/Keogh accounts.
745.9-3  Deferred compensation accounts.
745.10  Public unit accounts.
745.11  Accounts evidenced by negotiable instruments.
745.12  Account obligations for payment of items forwarded for 
          collection by depository institution acting as agent.

[[Page 515]]

745.13  Notification to members/shareholders.

            Subpart B--Payment of Share Insurance and Appeals

745.200  General.
745.201  Processing of insurance claims.
745.202  Appeal.
745.203  Judicial review.

Appendix to Part 745--Examples of Insurance Coverage Afforded Accounts 
          in Credit Unions Insured by the National Credit Union Share 
          Insurance Fund

    Authority: 12 U.S.C 1752(5), 1757, 1765, 1766, 1781, 1782, 1787, 
1789.

    Source: 51 FR 37560, Oct. 23, 1986, unless otherwise noted.



  Subpart A--Clarification and Definition of Account Insurance Coverage



Sec. 745.0  Scope.

    The regulation and appendix contained in this part describe the 
insurance coverage of various types of member accounts. In general, all 
types of member share accounts received by the credit union in its usual 
course of business, including regular shares, share certificates, and 
share draft accounts, represent equity and are insured. For the purposes 
of applying the rules in this part, it is presumed that the owner of 
funds in an account is an insured credit union member or otherwise 
eligible to maintain an insured account in a credit union. These rules 
do not extend insurance coverage to persons not entitled to maintain an 
insured account or to account relationships that have not been approved 
by the Board as an insured account. Where there are multiple owners of a 
single account, generally only that part which is allocable to the 
member(s) is insured.



Sec. 745.1  Definitions.

    (a) The terms account or accounts as used in this part mean share, 
share certificate or share draft accounts (or their equivalent under 
state law, as determined by the Board in the case of insured state 
credit unions) of a member (which includes other credit unions, public 
units and nonmembers where permitted under the Act) in a credit union of 
a type approved by the Board which evidences money or its equivalent 
received or held by a credit union in the usual course of business and 
for which it has given or is obligated to give credit to the account of 
the member.
    (b) The terms member or members as used in this part mean those 
persons enumerated in the credit union's field of membership who have 
been elected to membership in accordance with the Act or state law in 
the case of state credit unions. It also includes those nonmembers 
permitted under the Act to maintain accounts in an insured credit union, 
including nonmember credit unions and nonmember public units and 
political subdivisions.
    (c) The term public unit means the United States, any state of the 
United States, the District of Columbia, the Commonwealth of Puerto 
Rico, the Panama Canal Zone, any territory or possession of the United 
States, any county, municipality, or political subdivision thereof, or 
any Indian tribe as defined in section 3(c) of the Indian Financing Act 
of 1974.
    (d) The term political subdivision includes any subdivision of a 
public unit, as defined in paragraph (c) of this section, or any 
principal department of such public unit, (1) the creation of which 
subdivision or department has been expressly authorized by state 
statute, (2) to which some functions of government have been delegated 
by state statute, and (3) to which funds have been allocated by statute 
or ordinance for its exclusive use and control. It also includes 
drainage, irrigation, navigation improvement, levee, sanitary, school or 
power districts and bridge or port authorities, and other special 
districts created by state statute or compacts between the states. 
Excluded from the term are subordinate or nonautonomous divisions, 
agencies, or boards within principal departments.



Sec. 745.2  General principles applicable in determining insurance of accounts.

    (a) General. This part provides for determination by the Board of 
the amount of members' insured accounts. The rules for determining the 
insurance coverage of accounts maintained by members in the same or 
different

[[Page 516]]

rights and capacities in the same insured credit union are set forth in 
the following provisions of this part. The appendix provides examples of 
the application of these rules to various factual situations. While the 
provisions of this part govern in determining share insurance coverage, 
to the extent local law enters into a share insurance determination, the 
local law of the jurisdiction in which the insured credit union's 
principal office is located will control over the local law of other 
jurisdictions where the insured credit union has offices or service 
facilities.
    (b) The regulations in this part in no way are to be interpreted to 
authorize any type of account that is not authorized by Federal law or 
regulation or State law or regulation or by the bylaws of a particular 
credit union. The purpose is to be as inclusive as possible of all 
situations.
    (c) Records. (1) The account records of the insured credit union 
shall be conclusive as to the existence of any relationship pursuant to 
which the funds in the account are deposited and on which a claim for 
insurance coverage is founded. Examples would be trustee, agent, 
custodian, or executor. No claim for insurance based on such a 
relationship will be recognized in the absence of such disclosure.
    (2) If the account records of an insured credit union disclose the 
existence of a relationship which may provide a basis for additional 
insurance, the details of the relationship and the interest of other 
parties in the account must be ascertainable either from the records of 
the credit union or the records of the member maintained in good faith 
and in the regular course of business.
    (3) The account records of an insured credit union in connection 
with a trust account shall disclose the name of both the settlor 
(grantor) and the trustee of the trust and shall contain an account 
signature card executed by the trustee.
    (4) The interests of the co-owners of a joint account shall be 
deemed equal, unless otherwise stated on the insured credit union's 
records in the case of a tenancy in common.
    (d) Valuation of trust interests. (1) Trust interests in the same 
trust deposited in the same account will be separately insured if the 
value of the trust interest is capable of determination, without 
evaluation of contingencies, except for those covered by the present 
worth tables and rules of calculation for their use set forth in 
Sec. 20.2031-7 of the Federal Estate Tax Regulations (26 CFR 20.2031-7).
    (2) In connection with any trust in which certain trust interests 
are not capable of evaluation in accordance with the foregoing rule, 
payment by the Board to the trustee with respect to all such trust 
interests shall not exceed the basic insured amount of $100,000.
    (3) Each trust interest in any trust established by two or more 
settlors shall be deemed to be derived from each settlor pro rata to his 
contribution to the trust.
    (4) The term ``trust interest'' means the interest of a beneficiary 
in an irrevocable express trust, whether created by trust instrument or 
statute, but does not include any interest retained by the settlor.

[51 FR 37560, Oct. 23, 1986, as amended at 65 FR 34924, June 1, 2000]



Sec. 745.3  Single ownership accounts.

    (a) Funds owned by an individual and deposited in the manner set 
forth below shall be added together and insured up to $100,000 in the 
aggregate.
    (1) Individual accounts. Funds owned by an individual (or by the 
husband-wife community of which the individual is a member) and 
deposited in one or more accounts in the individual's own name shall be 
insured up to $100,000 in the aggregate.
    (2) Accounts held by agents or nominees. Funds owned by a principal 
and deposited in one or more accounts in the name or names of agents or 
nominees shall be added to any individual account of the principal and 
insured up to $100,000 in the aggregate.
    (3) Custodial loan accounts. Loan payments received by a Federal 
credit union prior to remittance to other parties to whom the loan was 
sold pursuant to section 107(13) of the Federal Credit Union Act and 
Sec. 701.23 of NCUA's Regulations shall be considered to be funds owned 
by the borrower and shall be added to any individual accounts of

[[Page 517]]

the borrower and insured up to $100,000 in the aggregate.
    (b) Funds held by a guardian, custodian, or conservator for the 
benefit of his ward or for the benefit of a minor under a Uniform Gifts 
to Minors Act and deposited in one or more accounts in the name of the 
guardian, custodian, or conservator are insured up to $100,000 in the 
aggregate, separately from any other accounts of the guardian, 
custodian, conservator, ward, or minor.



Sec. 745.4  Revocable trust accounts.

    (a) For purposes of this part, the term ``revocable trust account'' 
includes a testamentary account, tentative or ``Totten'' trust account, 
``payable-on-death'' account, or any similar account which evidences an 
intention that the funds shall pass on the death of the owner of the 
funds to a named beneficiary.
    (b) If the named beneficiary of a revocable trust account is a 
spouse, child, grandchild, parent, brother or sister of the account 
owner, the account shall be insured up to $100,000 in the aggregate as 
to each such beneficiary, separately from any other accounts of the 
owner or beneficiary, regardless of the membership status of the 
beneficiary.
    (c) If the named beneficiary of a revocable trust account is other 
than the spouse, child, grandchild, parent, brother or sister of the 
account owner, the funds in such account shall be added to any 
individual accounts of the owner and insured up to $100,000 in the 
aggregate.
    (d) For purposes of this section, the term ``child'' includes the 
biological, adopted or step-child of the owner; the term ``grandchild'' 
includes the biological, adopted or step-child of any of the owner's 
children; the term ``parent'' includes the biological, adoptive or step-
parent of the owner; the term ``brother'' includes a full brother, half 
brother, brother through adoption or step-brother; and the term 
``sister'' includes a full sister, half sister, sister through adoption 
or step-sister.
    (e) Living trusts. Insurance treatment under this section also 
applies to revocable trust accounts held in connection with a so-called 
``living trust,'' meaning a formal trust that an owner creates and 
retains control over during his or her lifetime. If a named beneficiary 
in a living trust is a qualifying beneficiary under this section, then 
the share account held in connection with the living trust may be 
eligible for share insurance under this section, assuming compliance 
with all the provisions of this part. If the living trust includes a 
defeating contingency that relates to a beneficiary's interest in the 
trust assets, then insurance coverage under this section will not be 
provided. For purposes of this section, a defeating contingency is 
defined as a condition that would prevent the beneficiary from acquiring 
a vested and non-contingent interest in the funds in the share account 
upon the owner's death.
    (f) Joint revocable trust accounts. Where an account described in 
paragraph (a) of this section is established by more than one owner and 
held for the benefit of others, some or all of whom are within the 
qualifying degree of kinship, the respective interests of each owner 
held for the benefit of each qualifying beneficiary will be separately 
insured up to $100,000. The interest of each co-owner will be deemed 
equal unless otherwise stated in the share account records of the 
federally-insured credit union. Interests held for non-qualifying 
beneficiaries will be added to the individual accounts of the owners. 
Where a husband and a wife establish a revocable trust account naming 
themselves as the sole beneficiaries, the account will not be insured 
according to the provisions of this section, but will instead be insured 
in accordance with the joint account provisions of Sec. 745.8.

[64 FR 19687, Apr. 22, 1999, as amended at 65 FR 34924, June 1, 2000]



Sec. 745.5  Accounts held by executors or administrators.

    Funds of a decedent held in the name of the decedent or in the name 
of the executor or administrator of the decedent's estate and deposited 
in one or more accounts shall be insured up to $100,000 in the aggregate 
for all such accounts, separately from the individual accounts of the 
beneficiaries of the estate or of the executor or administrator.

[[Page 518]]



Sec. 745.6  Accounts held by a corporation, partnership, or unincorporated association.

    Accounts of a corporation, partnership, or unincorporated 
association engaged in any independent activity shall be insured up to 
$100,000 in the aggregate. The account of a corporation, partnership, or 
unincorporated association not engaged in an independent activity shall 
be deemed to be owned by the person or persons owning such corporation 
or comprising such partnership or unincorporated association and, for 
account insurance purposes, the interest of each person in such an 
account shall be added to any other account individually owned by such 
person and insured up to $100,000 in the aggregate. For purposes of this 
section, ``independent activity'' means an activity other than one 
directed solely at increasing insurance coverage.



Sec. 745.7  [Reserved]



Sec. 745.8  Joint ownership accounts.

    (a) Separate insurance coverage. Qualifying joint accounts, whether 
owned as joint tenants with right of survivorship, as tenants by the 
entireties, as tenants in common, or by husband and wife as community 
property, shall be insured separately from accounts individually owned 
by any of the co-owners. The interest of a co-owner in all qualifying 
joint accounts shall be added together and the total for that co-owner 
shall be insured up to $100,000.
    (b) Qualifying joint accounts. A joint account is a qualifying joint 
account if each of the co-owners has personally signed a membership or 
account signature card and has a right of withdrawal on the same basis 
as the other co-owners. The signature requirement does not apply to 
share certificates, or to any accounts maintained by an agent, nominee, 
guardian, custodian or conservator on behalf of two or more persons if 
the records of the credit union properly reflect that the account is so 
maintained.
    (c) Failure to qualify. A joint account that does not meet the 
requirements for a qualifying joint account shall be treated as owned by 
the named persons as individuals and the actual ownership interest of 
each such person in such account shall be added to any other accounts 
individually owned by such person and insured up to $100,000 in the 
aggregate. An account will not fail to qualify as a joint account if a 
joint owner is a minor and applicable state law limits or restricts a 
minor's withdrawal rights.
    (d) Nonmember joint owners. A nonmember may become a joint owner 
with a member on a joint account with right of survivorship. The 
nonmember's interest in such accounts will be insured in the same manner 
as the member joint-owner's interest.

[64 FR 19687, Apr. 22, 1999]



Sec. 745.9-1  Trust accounts.

    (a) For purposes of this section, ``trust'' refers to an irrevocable 
trust.
    (b) All trust interests (as defined in Sec. 745.2(d)(4)), for the 
same beneficiary, deposited in an account and established pursuant to 
valid trust agreements created by the same settlor (grantor) shall be 
added together and insured up to $100,000 in the aggregate, separately 
from other accounts of the trustee of such trust funds or the settlor or 
beneficiary of such trust arrangements.
    (c) This section applies to trust interests created in Education 
IRAs established in connection with section 530 of the Internal Revenue 
Code (26 U.S.C. 530).

[51 FR 37560, Oct. 23, 1986, as amended at 65 FR 34924, June 1, 2000]



Sec. 745.9-2  IRA/Keogh accounts.

    (a) The present vested ascertainable interest of a participant or 
designated beneficiary in a trust or custodial account maintained 
pursuant to a pension or profit-sharing plan described under section 
401(d) (Keogh account), section 408(a) (IRA) and section 408A (Roth IRA) 
of the Internal Revenue Code (26 U.S.C. 401(d), 408(a) and 408A) will be 
insured up to $100,000 separately from other accounts of the participant 
or designated beneficiary. For insurance purposes, IRA and Roth IRA 
accounts will be combined together and insured in the aggregate up to 
$100,000. A Keogh account will be separately insured from an IRA 
account, Roth IRA account or, where applicable, aggregated IRA and Roth 
IRA accounts.

[[Page 519]]

    (b) Upon liquidation of the credit union, any share insurance 
payment shall be made by the NCUA Board to the trustee or custodian, or 
the successor trustee or custodian, unless otherwise directed in writing 
by the plan participant or beneficiary.

[51 FR 37560, Oct. 23, 1986, as amended at 65 FR 10934, Mar. 1, 2000; 65 
FR 34924, June 1, 2000]



Sec. 745.9-3  Deferred compensation accounts.

    Funds deposited by an employer pursuant to a deferred compensation 
plan (including section 401(K) of the Internal Revenue Code) shall be 
insured up to $100,000 as to the interest of each plan participant who 
is a member, separately from other accounts of the participant or 
employer.



Sec. 745.10  Public unit accounts.

    (a) Public funds invested in Federal credit unions and federally-
insured state credit unions authorized to accept such investments shall 
be insured as follows:
    (1) Each official custodian of funds of the United States lawfully 
investing the same in a federally-insured credit union will be 
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (2) Each official custodian of funds of any state of the United 
States or any county, municipality, or political subdivision thereof 
lawfully investing the same in a federally-insured credit union in the 
same state will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (3) Each official custodian of funds of the District of Columbia 
lawfully investing the same in a federally-insured credit union in the 
District of Columbia will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (4) Each official custodian of funds of the Commonwealth of Puerto 
Rico, the Panama Canal Zone, or any territory or possession of the 
United States, or any county, municipality, or political subdivision 
thereof lawfully investing the same in a federally-insured credit union 
in Puerto Rico, the Panama Canal Zone, or any such territory or 
possession, respectively, will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (5) Each official custodian of tribal funds of any Indian tribe (as 
defined in section 3(c) of the Indian Financing Act of 1974) or agency 
thereof lawfully investing the same in a federally-insured credit union 
will be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all share draft accounts; 
and
    (ii) Up to $100,000 in the aggregate for all share certificate and 
regular share accounts;
    (b) Each official custodian referred to in paragraphs (a)(2), (3), 
and (4) of this section lawfully investing such funds in share accounts 
in a federally-insured credit union outside of their respective 
jurisdictions shall be separately insured up to $100,000 in the 
aggregate for all such accounts regardless of whether they are share 
draft, share certificate or regular share accounts.
    (c) For purposes of this section, if the same person is an official 
custodian of more than one public unit, he shall be separately insured 
with respect to the public funds held by him for each such unit, but he 
shall not be separately insured with respect to all public funds of the 
same public unit by virtue of holding different offices in such unit or 
by holding such funds for different purposes. Where an officer, agent or 
employee of a public unit has custody of certain funds which by law or 
under a bond indenture are required to be set aside to discharge a debt 
owed to the holders of notes or bonds issued by the public unit, any 
investment of such

[[Page 520]]

funds in an account in a federally-insured credit union will be deemed 
to be a share account established by a trustee of trust funds of which 
the noteholders or bondholders are pro rata beneficiaries, and the 
beneficial interest of each noteholder or bondholder in the share 
account will be separately insured up to $100,000.
    (d) For purposes of this section, ``lawfully investing'' means 
pursuant to the statutory or regulatory authority of the custodian or 
public unit.

[51 FR 37560, Oct. 23, 1986, as amended at 65 FR 34925, June 1, 2000]



Sec. 745.11  Accounts evidenced by negotiable instruments.

    If any insured account obligation of a credit union is evidenced by 
a negotiable certificate account, negotiable draft, negotiable cashier's 
or officer's check, negotiable certified check, or negotiable traveler's 
check or letter of credit, the owner of such account obligation will be 
recognized for all purposes of a claim for insured accounts to the same 
extent as if his name and interest were disclosed on the records of the 
credit union provided the instrument was in fact negotiated to such 
owner prior to the date of the closing of the credit union. Affirmative 
proof of such negotiation must be offered in all cases to substantiate 
the claim.



Sec. 745.12  Account obligations for payment of items forwarded for collection by depository institution acting as agent.

    Where a closed credit union has become obligated for the payment of 
items forwarded for collection by a depository institution acting solely 
as agent, the owner of such items will be recognized for all purposes of 
a claim for insured accounts to the same extent as if his name and 
interest were disclosed on the records of the credit union when such 
claim for insured accounts, if otherwise payable, has been established 
by the execution and delivery of prescribed forms. Such depository 
institution forwarding such items for the owners thereof will be 
recognized as agent for such owners for the purpose of making an 
assignment of the rights of such owners against the closed insured 
credit union to the Board and for the purpose of receiving payment on 
behalf of such owners.



Sec. 745.13  Notification to members/shareholders.

    Each insured credit union shall provide notice to its members 
concerning NCUA insurance coverage of member accounts. This may be 
accomplished by placing either a copy of part 745 of these rules, the 
appendix, or one or more copies of the NCUA brochure ``Your Insured 
Funds'' in each branch office and main office of the credit union. 
Copies of these materials shall also be made available to members upon 
request. For purposes of this section, an automated teller machine or 
point of sale terminal is not a branch office.



            Subpart B--Payment of Share Insurance and Appeals

    Source: 55 FR 5586, Feb. 16, 1990, unless otherwise noted.



Sec. 745.200  General.

    (a) Payment. In the event of the liquidation of an insured credit 
union, the Board will promptly determine the insured accountholders 
thereof and the amount of the insured account or accounts of each such 
accountholder. Payment may be in cash, or its equivalent, or may be made 
by making available to each accountholder a transferred account in a new 
federally-insured credit union in the same community or in another 
federally-insured credit union or institution in an amount equal to the 
accountholder's insured account. Notwithstanding the foregoing, the 
Board may withhold payment of such portion of the insured account of any 
member as may be required to provide for payment of any direct or 
indirect liability to the closed credit union or the liquidating agent, 
which is not offset against a claim due from such credit union, pending 
the determination and payment of such liability by the member of or any 
person liable therefor.
    (b) Amount of insurance. The amount of insurance on an insured 
account shall be determined in accordance with the provisions of Subpart 
A of this part and the Federal Credit Union Act. For

[[Page 521]]

the purpose of determining insurance coverage, dividends earned in the 
ordinary course of business and posted to share accounts for any prior 
accounting or dividend period shall be deemed to be principal under this 
part. Dividends earned or accrued in the ordinary course of business, 
but not posted to share accounts, may be paid at the discretion of the 
liquidating agent. In making such determination, the liquidating agent 
will take into consideration whether the failure to post dividends 
earned or accrued was due to the fraud, embezzlement or accounting 
errors of credit union personnel. The liquidating agent may require an 
accountholder to submit documentation supporting any claim for unposted 
dividends not otherwise evidenced in the credit union records. However, 
in no event will dividend amounts be considered as principal for 
insurance purposes pursuant to this section if not consistent with the 
amounts paid on similar classes of shares.
    (c) Multiple accounts. In the event an insured member holds more 
than one insured account in the same capacity, and the aggregate amount 
of such accounts (including share draft accounts held in such capacity) 
exceeds the amount of insurance afforded thereon, the insurance coverage 
will be prorated among the member's interest in all accounts held in the 
same capacity. In the case of individual accounts, the insurance 
proceeds shall be paid to the holder of the account, whether or not the 
holder is the beneficial owner. In the case of accounts which are owned 
jointly, the insurance proceeds shall be paid to the owners jointly. In 
the case of trust estates, the insurance proceeds shall be paid to the 
indicated trustee unless otherwise provided for in the trust instrument 
or under state law. In the case of corporations, partnerships and 
unincorporated associations engaged in an independent activity, the 
insurance proceeds shall be paid to the indicated holder of the account. 
Where insurance payment is in the form of a transferred account to 
another insured institution, the same rules shall be applied.
    (d) Computing time. In computing any period of time prescribed by 
this subpart, the provisions of Sec. 747.12(a) shall apply.

[55 FR 5586, Feb. 16, 1990, as amended at 61 FR 60186, Nov. 27, 1996]



Sec. 745.201  Processing of insurance claims.

    (a) Delegations of authority. The Agent for the Liquidating Agent 
(``Liquidating Agent'') or his or her designee is authorized to make 
initial determinations with respect to insurance claims pursuant to the 
principles set forth in this part, and to act on requests for 
reconsideration of the initial determination.
    (b) Initial determination. In the event the Liquidating Agent 
determines that all or a portion of an accountholder's account is 
uninsured, the Liquidating Agent shall so notify the accountholder in 
writing, stating the reason(s) for such initial determination, and shall 
provide the accountholder with a certificate of claim in liquidation in 
the amount of the uninsured account from the Board in its capacity as 
Liquidating Agent for the insured credit union to enable the 
accountholder to share in the proceeds of the liquidation of the credit 
union, if any, up to the amount of the uninsured account.
    (c) Request for reconsideration. An accountholder may, at his or her 
option, request reconsideration from the Liquidating Agent of the 
initial determination within 30 days of the date of the initial 
determination, or directly appeal the initial determination to the Board 
pursuant to Sec. 745.202 of this subpart. The Liquidating Agent shall 
act on the request for reconsideration within 30 days from its receipt.



Sec. 745.202  Appeal.

    (a) Time for filing. Within 60 days after issuance of an initial 
determination, or of the determination on a request for reconsideration 
by the liquidating agent, the accountholder may appeal by filing with 
the Board a written request for appeal. The appeal may be filed with the 
Secretary of the Board, National Credit Union Administration, 1775 Duke 
Street, Alexandria, VA 22314-3428.
    (b) Content of request. Any appeal must include:

[[Page 522]]

    (1) A statement of the facts on which the claim for insurance is 
based;
    (2) A statement of the basis for the initial determination or 
determination on the request for reconsideration to which the 
accountholder objects and the alleged error in such determination, 
including citations to applicable statutes and regulations;
    (3) Any other evidence relied upon by the accountholder which was 
not previously provided to the Liquidating Agent.
    (c) Procedures for review of request. (1) Within 60 days of the date 
of the Board's receipt of an appeal, the Board may request in writing 
that the accountholder submit additional facts and records in support of 
its request. The accountholder shall have 45 days from the date of 
issuance of such written request to provide such additional information. 
Failure by the accountholder to provide additional information may, as 
determined solely by the Board, result in denial of the accountholder's 
appeal.
    (2) Within 60 days from the date of the Board's receipt of an 
appeal, the accountholder may amend or supplement the request in 
writing. In the event that the accountholder does amend or supplement 
the request, the provisons of paragraph (c)(1) of this section with 
respect to requests for additional information and responses to such 
requests shall apply with equal force to any such amendment or 
supplement to a request.
    (d) Determination on appeal. (1) Within 180 days from the date of 
the receipt of an appeal by the Board, the Board shall issue a decision 
determining the extent of the accountholder's insurance pursuant to the 
rules of this part.
    (2) The determination by the Board on appeal shall be provided to 
the accountholder in writing, stating the reason(s) for the 
determination, and shall constitute a final Agency order regarding the 
accountholder's claim for insurance.
    (3) If the Board determines that the accountholder is entitled to 
the amount of insurance claimed or a portion thereof, upon payment of 
such insurance the accountholder shall promptly surrender to the Board 
the certificate of claim in liquidation provided in connection with the 
initial determination. In the event that the Board determines that the 
accountholder is only entitled to a portion of the amount of insurance 
claimed, upon the accountholder's surrender of such certificate a new 
certificate of claim in liquidation will be provided which reflects the 
revised amount of the uninsured account.
    (4) Failure by the Board to issue a determination on appeal of the 
accountholder's claim for insurance within the 180-day period provided 
for under paragraph (d)(1) of this section, shall be deemed to be a 
denial of such claim for purposes of Sec. 745.203 of this subpart.

[55 FR 5586, Feb. 16, 1990, as amended at 59 FR 36041, July 15, 1994]



Sec. 745.203  Judicial review.

    (a) For purposes of seeking judicial review of actions taken 
pursuant to this subpart, only a determination on appeal issued by the 
Board pursuant to Sec. 745.202 of this subpart shall constitute a final 
determination regarding an accountholder's claim for insurance.
    (b) Failure to file an appeal with regard to an initial 
determination, or a decision rendered on a request for reconsideration 
with the applicable time periods shall constitute a failure by the 
accountholder to exhaust available administrative remedies and, due to 
such failure, any objections to the initial determination or request for 
reconsideration shall be deemed to be waived and such determination 
shall be deemed to have been accepted by, and binding upon, the 
accountholder.
    (c) Final determination by the Board is reviewable in accordance 
with the provisions of chapter 7, title 5, United States Code, by the 
United States Court of Appeals for the District of Columbia or the court 
of appeals for the Federal judicial circuit where the credit union's 
principal place of business is located. Such action must be filed not 
later than 60 days after such final determination is ordered.

[[Page 523]]

 Appendix to Part 745--Examples of Insurance Coverage Afforded Accounts 
 in Credit Unions Insured by the National Credit Union Share Insurance 
                                  Fund

                  What Is the Purpose of This Appendix?

    The following examples illustrate insurance coverage on accounts 
maintained in the same federally-insured credit union. They are intended 
to cover various types of ownership interests and combinations of 
accounts which may occur in connection with funds invested in insured 
credit unions. These examples interpret the rules for insurance of 
accounts contained in 12 CFR part 745.
    The examples, as well as the rules which they interpret, are 
predicated upon the assumption that: (1) Invested funds are actually 
owned in the manner indicated on the credit union's records and (2) the 
owner of funds in an account is a credit union member or otherwise 
eligible to maintain an insured account in a credit union. If available 
evidence shows that ownership is different from that on the 
institution's records, the National Credit Union Share Insurance Fund 
may pay claims for insured accounts on the basis of actual rather than 
ostensible ownership. Further, the examples and the rules which they 
interpret do not extend insurance coverage to persons otherwise not 
entitled to maintain an insured account or to account relationships that 
have not been approved by the Board as an insured account.

              A. How Are Single Ownership Accounts Insured?

    All funds owned by an individual member (or, in a community property 
state, by the husband-wife community of which the individual is a 
member) and invested in one or more individual accounts are added 
together and insured to the $100,000 maximum. This is true whether the 
accounts are maintained in the name of the individual member owning the 
funds, in the name of the member's agent or nominee, or in a custodial 
loan account on behalf of the member as a borrower. (Sec. 745.3(a) (1), 
(2) and (3).) All such accounts are added together and insured as one 
individual account. Funds held in one or more accounts in the name of a 
guardian, custodian, or conservator for the benefit of a ward or minor 
are added together and insured up to $100,000. However, such an account 
or accounts will not be added to any other individual accounts of the 
guardian, custodian, conservator, ward, or minor for purposes of 
determining insurance coverage. (Sec. 745.3(b).)

                                Example 1

    Question: Members A and B, husband and wife, each maintain an 
individual account containing $100,000. In addition, they hold a joint 
account containing $100,000. What is the insurance coverage?
    Answer: Each account is separately insured up to $100,000, for a 
total coverage of $300,000. The coverage would be the same whether the 
individual accounts contain funds owned as community property or as 
individual property of the spouses (Sec. 745.3(a)(1) and Sec. 745.8(a)).

                                Example 2

    Question: Members H and W, husband and wife, reside in a community 
property state. H maintains a $100,000 account consisting of his 
separately-owned funds and invests $100,000 of community property funds 
in another account, both of which are in his name alone. What is the 
insurance coverage?
    Answer: The two accounts are added together and insured to a total 
of $100,000. $100,000 is uninsured (Sec. 745.3(a)(1)).

                                Example 3

    Question: Member A has $92,500 invested in an individual account, 
and his agent, Member B, invests $25,000 of A's funds in a properly 
designated agency account. B also holds a $100,000 individual account. 
What is the insurance coverage?
    Answer: A's individual account and the agency account are added 
together and insured to the $100,000 maximum, leaving $17,500 uninsured. 
The investment of funds through an agent does not result in additional 
insurance coverage for the principal (Sec. 745.3(a)(2)). B's individual 
account is insured separately from the agency account 
(Sec. 745.3(a)(1)). However, if the account records of the credit union 
do not show the agency relationship under which the funds in the $25,000 
account are held, the $25,000 in B's name could, at the option of the 
NCUSIF, be added to his individual account and insured to $100,000 in 
the aggregate, leaving $25,000 uninsured (Sec. 745.2(c)).

                                Example 4

    Question: Member A holds a $100,000 individual account. Member B 
holds two accounts in his own name, the first containing $25,000 and the 
second containing $92,500. In processing the claims for payment of 
insurance on these accounts, the NCUSIF discovers that the funds in the 
$25,000 account actually belong to A and that B had invested these funds 
as agent for A, his undisclosed principal. What is the insurance 
coverage?
    Answer: Since the available evidence shows that A is the actual 
owner of the funds in the $25,000 account, those funds would be added to 
the $100,000 individual account held by A (rather than to B's $92,500 
account) and insured to the $100,000 maximum, leaving $25,000 uninsured. 
(Sec. 745.3(a)(2).) B's $92,500 individual account would be separately 
insured.

[[Page 524]]

                                Example 5

    Question: Member C, a minor, maintains an individual account of 
$750. C's grandfather makes a gift to him of $100,000, which is invested 
in another account by C's father, designated on the credit union's 
records as custodian under a Uniform Gift to Minors Act. C's father, 
also a member, maintains an individual account of $100,000. What is the 
insurance coverage?
    Answer: C's individual account and the custodian account held for 
him by his father are each separately insured: The $100,000 maximum on 
the custodian account, and $750 on his individual account. The 
individual account held by C's father is also separately insured to the 
$100,000 maximum. (Sec. 745.3 (a)(1) and (b).)

                                Example 6

    Question: Member G, a court-appointed guardian, invests in a 
properly designated account $100,000 of funds in his custody which 
belong to member W, his ward. W and G each maintain $25,000 individual 
accounts. What is the insurance coverage?
    Answer: W's individual account and the guardianship account in G's 
name are each insured to $100,000 providing W with $125,000 in insured 
funds. G's individual account is also separately insured. (Sec. 745.3 
(a)(1) and (b).)

                                Example 7

    Question: X Credit Union acts as a servicer of FHA, VA, and 
conventional mortgage loans made to its members but sold to other 
parties. Each month X receives loan payments, for remittance to the 
other parties, from approximately 2,000 member mortgagors. The monies 
received each month total $1,000,000 and are maintained in a custodial 
loan account. What is the insurance coverage?
    Answer: X Credit Union acts as custodian for the 2,000 individual 
mortgagors. The interest of each mortgagor is separately insured as his 
individual account (but added to any other individual accounts which the 
mortgagor holds in the Credit Union) (Sec. 745.3(a)(3)).

              B. How Are Revocable Trust Accounts Insured?

    The term ``revocable trust account'' includes a testamentary 
account, tentative or ``Totten'' trust account, ``payable-on-death'' 
account, or any similar account which evidences an intention that the 
funds shall pass on the death of the owner of the funds to a named 
beneficiary. If the named beneficiary is a spouse, child, grandchild, 
parent, brother or sister (as defined in subsection 745.4(d)) of the 
owner, the funds in all such accounts are insured for the owner up to 
$100,000 in the aggregate as to each such beneficiary. If the 
beneficiary of such an account is other than the spouse, child, 
grandchild, parent, brother or sister of the owner, the funds in the 
account are, for insurance purposes, added to any other individual 
(single ownership) accounts of the owner and insured up to $100,000 in 
the aggregate. If a revocable trust account is held in the name of a 
fiduciary other than the owner of the funds, any other accounts held by 
the fiduciary are insured separately from such revocable trust account.

                                Example 1

    Question: Member H invests $200,000 in a revocable trust account 
with his son, S, and his daughter, D, as named beneficiaries. What is 
the insurance coverage?
    Answer: Since S and D are children of H, the owner of the account, 
the funds are insured up to $100,000 as to each beneficiary 
(Sec. 745.4(b)). Assuming that S and D have equal beneficial interests 
($100,000 each), H is fully insured for this account.

                                Example 2

    Question: Member H invests $100,000 in each of four ``payable-on-
death'' accounts. Under the terms of each account contract, H has the 
right to withdraw any or all of the funds in the account at any time. 
Any funds remaining in the account at the time of H's death are to be 
paid to a named beneficiary. The respective beneficiaries of the four 
accounts are H's wife, his mother, his brother, and his nephew. H also 
holds an individual account containing $100,000. What is the insurance 
coverage?
    Answer: The accounts payable on death to H's wife, mother and 
brother are each separately insured to the $100,000 maximum (Sec. 
745.4(b)). The account payable to H's nephew is added to H's individual 
account and insured to $100,000 in the aggregate, leaving $100,000 
uninsured (Sec. 745.4(c)).

                                Example 3

    Question: Member H and W jointly invest in a ``payable-on-death'' 
account for the benefit of their son, S, and daughter, D. The account is 
held by H and W with right of survivorship. What is the maximum 
insurance coverage available on the account?
    Answer: Since S and D are the children of H and W, the account will 
be insured up to $100,000 as to each beneficiary separately from any 
accounts of the owner, H and W (Sec. 745.4(b)). H would be entitled to 
$100,000 insurance for S and $100,000 for D. W would be entitled to the 
same coverage for a total of $400,000 on the account. However, upon the 
death of either H or W, insurance coverage would be reduced to $200,000.

                                Example 4

    Question: Member H invests $200,000 in a revocable trust account 
held in connection with a living trust with his son, S, and his

[[Page 525]]

daughter, D, as named beneficiaries. What is the insurance coverage?
    Answer: Since S and D are children of H, the owner of the account, 
the funds would normally be insured under the rules governing revocable 
trust accounts up to $100,000 as to each beneficiary (Sec. 745.4(b)). 
However, because this account is held in connection with a living trust 
whose named beneficiaries are qualifying beneficiaries under Sec. 745.4, 
it must be scrutinized to determine whether the account complies with 
all other provisions of this part and whether the living trust contains 
any defeating contingencies. Assuming there are no defeating 
contingencies and that the account complies with all other requirements 
of this part, then it will be treated as any other revocable trust. In 
this instance, it will be insured up to $100,000 as to each beneficiary 
(Sec. 745.4(e)). Assuming that S and D have equal beneficial interests 
($100,000 each), H is fully insured for this account.

    C. How Are Accounts Held by Executors or Administrators Insured?

    All funds belonging to a decedent and invested in one or more 
accounts, whether held in the name of the decedent or in the name of his 
executor or administrator, are added together and insured to the 
$100,000 maximum. Such funds are insured separately from the individual 
accounts of any of the beneficiaries of the estate or of the executor or 
administrator.

                                Example 1

    Question: Member A, administrator of Member D's estate, sells D's 
automobile and invests the proceeds of $12,500 in an account entitled 
``A Administrator of the estate of D.'' A has an individual account in 
that same credit union containing $100,000. Prior to his death, D had 
opened an individual account of $100,000. What is the insurance 
coverage?
    Answer: The $12,500 is added to D's individual account and insured 
to $100,000, leaving $12,500 uninsured. A's individual account is 
separately insured for $100,000 (Sec. 745.5).

D. How Are Accounts Held by a Corporation, Partnership or Unincorporated 
                          Association Insured?

    All funds invested in an account or accounts by a corporation, a 
partnership or an unincorporated association engaged in any independent 
activity are added together and insured to the $100,000 maximum. The 
term ``independent activity'' means any activity other than the one 
directed solely at increasing coverage. If the corporation, partnership 
or unincorporated association is not engaged in an independent activity, 
any account held by the entity is insured as if owned by the persons 
owning or comprising the entity, and the imputed interest of each such 
person is added for insurance purposes to any individual account which 
he maintains.

                                Example 1

    Question: Member X Corporation maintains a $100,000 account. The 
stock of the corporation is owned by members A, B, C, and D in equal 
shares. Each of these stockholders also maintains an individual account 
of $100,000 with the same credit union. What is the insurance coverage?
    Answer: Each of the five accounts would be separately insured to 
$100,000 if the corporation is engaged in an independent activity and 
has not been established merely for the purpose of increasing insurance 
coverage. The same would be true if the business were operated as a bona 
fide partnership instead of as a corporation (Sec. 745.6). However, if X 
corporation was not engaged in an independent activity, then $25,000 
(\1/4\ interest) would be added to each account of A, B, C, and D. The 
accounts of A, B, C, and D would then each be insured to $100,000, 
leaving $25,000 in each account uninsured.

                                Example 2

    Question: Member C College maintains three separate accounts with 
the same credit union under the titles: ``General Operating Fund,'' 
``Teachers Salaries,'' and ``Building Fund.'' What is the insurance 
coverage?
    Answer: Since all of the funds are the property of the college, the 
three accounts are added together and insured only to the $100,000 
maximum (Sec. 745.6).

                                Example 3

    Question: The men's club of X Church carries on various social 
activities in addition to holding several fund-raising campaigns for the 
church each year. The club is supported by membership dues. Both the 
club and X Church maintain member accounts in the same credit union. 
What is the insurance coverage?
    Answer: The men's club is an unincorporated association engaged in 
an independent activity. If the club funds are, in fact, legally owned 
by the club itself and not the church, each account is separately 
insured to the $100,000 maximum (Sec. 745.6).

                                Example 4

    Question: The PQR Union, a member of the ABC Federal Credit Union, 
has three locals in a certain city. Each of the locals maintains an 
account containing funds belonging to the parent organization. All three 
accounts are in the same insured credit union. What is the insurance 
coverage?
    Answer: The three accounts are added together and insured up to the 
$100,000 maximum (Sec. 745.6).

[[Page 526]]

                E. How Are Public Unit Accounts Insured?

    For insurance purposes, the official custodian of funds belonging to 
a public unit, rather than the public unit itself, is insured as the 
account holder. All funds belonging to a public unit and invested by the 
same custodian in a federally-insured credit union are categorized as 
either share draft accounts or share certificate and regular share 
accounts. If these accounts are invested in a federally-insured credit 
union located in the jurisdiction from which the official custodian 
derives his authority, then the share draft accounts will be insured 
separately from the share certificate and regular share accounts. Under 
this circumstance, all share draft accounts are added together and 
insured to the $100,000 maximum and all share certificate and regular 
share accounts are also added together and separately insured up to the 
$100,000 maximum. If, however, these accounts are invested in a 
federally-insured credit union located outside of the jurisdiction from 
which the official custodian derives his authority, then insurance 
coverage is limited to $100,000 for all accounts regardless of whether 
they are share draft, share certificate or regular share accounts. If 
there is more than one official custodian for the same public unit, the 
funds invested by each custodian are separately insured. If the same 
person is custodian of funds for more than one public unit, he is 
separately insured with respect to the funds of each unit held by him in 
properly designated accounts.
    For insurance purposes, a ``political subdivision'' is entitled to 
the same insurance coverage as any other public unit. ``Political 
subdivision'' includes any subdivision of a public unit or any principal 
department of such unit: (1) The creation of which has been expressly 
authorized by state statute, (2) to which some functions of government 
have been allocated by state statute, and (3) to which funds have been 
allocated by statute or ordinance for its exclusive use and control.

                                Example 1

    Question: As Comptroller of Y Consolidated School District, A 
maintains a $125,000 account in the credit union containing school 
district funds. He also maintains his own $100,000 member account in the 
same credit union. What is the insurance coverage?
    Answer: The two accounts will be separately insured, assuming the 
credit union's records indicate that the account containing the school 
district funds is held by A in a fiduciary capacity. Thus, $100,000 of 
the school's funds and the entire $100,000 in A's personal account will 
be insured (Sec. 745.10(a)(2) and Sec. 745.3).

                                Example 2

    Question: A, as city treasurer, and B, as chief of the city police 
department, each have $100,000 in city funds invested in custodial 
accounts. What is the insurance coverage?
    Answer: Assuming that both A and B have offical custody of the city 
funds, each account is separately insured to the $100,000 maximum 
(Sec. 745.10(a)(2)).

                                Example 3

    Question: A is Treasurer of X County and collects certain tax 
assessments, a portion of which must be paid to the state under 
statutory requirement. A maintains an account for general funds of the 
county and establishes a separate account for the funds which belong to 
the State Treasurer. The credit union's records indicate that the 
separate account contains funds held for the State. What is the 
insurance coverage?
    Answer: Since two public units own the funds held by A, the accounts 
would each be separately insured to the $100,000 maximum 
(Sec. 745.10(a)(2)).

                                Example 4

    Question: A city treasurer invests city funds in each of the 
following accounts: ``General Operating Account,'' ``School 
Transportation Fund,'' ``Local Maintenance Fund,'' and ``Payroll Fund.'' 
Each account is available to the custodian upon demand. By 
administrative direction, the city treasurer has allocated the funds for 
the use of and control by separate departments of the city. What is the 
insurance coverage?
    Answer: All of the accounts are added together and insured in the 
aggregate to $100,000. Because the allocation of the city's funds is not 
by statute or ordinance for the specific use of and control by separate 
departments of the city, separate insurance coverage to the maximum of 
$100,000 is not afforded to each account (Secs. 745.1(d) and 
745.10(a)(2)).

                                Example 5

    Question: A, the custodian of retirement funds of a military 
exchange, invests $1,000,000 in an account in an insured credit union. 
The military exchange, a non-appropriated fund instrumentally of the 
United States, is deemed to be a public unit. The employees of the 
exchange are the beneficiaries of the retirement funds but are not 
members of the credit union. What is the insurance coverage?
    Answer: Because A invested the funds on behalf of a public unit, in 
his capacity as custodian, those funds qualify for $100,000 share 
insurance even though A and the public unit are not within the credit 
union's field of membership. Since the beneficiaries are neither public 
units nor members of the

[[Page 527]]

credit union they are not entitled to separate share insurance. 
Therefore, $900,000 is uninsured (Sec. 745.10(a)(1)).

                                Example 6

    Question: A is the custodian of the County's employee retirement 
funds. He deposits $1,000,000 in retirement funds in an account in an 
insured credit union. The ``beneficiaries'' of the retirement fund are 
not themselves public units nor are they within the credit union's field 
of membership. What is the insurance coverage?
    Answer: Because A invested the funds on behalf of a public unit, in 
his capacity as custodian, those funds qualify for $100,000 share 
insurance even though A and the public unit are not within the credit 
union's field of membership. Since the beneficiaries are neither public 
units nor members of the credit union they are not entitled to separate 
share insurance. Therefore, $900,000 is uninsured (Sec. 745.10(a)(2)).

                                Example 7

    Question: A county treasurer establishes the following share draft 
accounts in an insured credit union each with $100,000:

    ``General Operating Fund''
    ``County Roads Department Fund''
    ``County Water District Fund''
    ``County Public Improvement District Fund''
    ``County Emergency Fund''
What is the insurance coverage?
    Answer: The ``County Roads Department,'' ``County Water District'' 
and ``County Public Improvement District'' accounts would each be 
separately insured to $100,000 if the funds in each such account have 
been allocated by law for the exclusive use of a separate county 
department or subdivision expressly authorized by State statute. Funds 
in the ``General Operating'' and ``Emergency Fund'' accounts would be 
added together and insured in the aggregate to $100,000, if such funds 
are for countywide use and not for the exclusive use of any subdivision 
or principal department of the county, expressly authorized by State 
statute (Secs. 745.1(d) and 745.10(a)(2)).

                                Example 8

    Question: A, the custodian of Indian tribal funds, lawfully invests 
$1,000,000 in an account in an insured credit union on behalf of 15 
different tribes; the records of the credit union show that no tribe's 
interest exceeds $100,000. A, as official custodian, also invests 
$1,000,000 in the same credit union on behalf of 100 individual Indians, 
who are not members; each Indian's interest is $10,000. What is the 
insurance coverage?
    Answer: Because each tribe is considered a separate public unit, the 
custodian of each tribe, even though the same person, is entitled to 
separate insurance for each tribe (Sec. 745.10(a)(5)). Since the credit 
union's records indicate no tribe has more than $100,000 in the account, 
the $1,000,000 would be fully insured as 15 separate tribal accounts. If 
any one tribe had more than a $100,000 interest in the funds, it would 
be insured only to $100,000 and any excess would be uninsured.
    However, the $1,000,000 invested on behalf of the individual indians 
would not be insured since the individual indians are neither public 
units nor, in the example, members of the credit union. If A is the 
custodian of the funds in his capacity as an official of a governmental 
body that qualified as a public unit, then the account would be insured 
for $100,000, leaving $900,000 uninsured.

                                Example 9

    Question: A, an official custodian of funds of a state of the United 
States, lawfully invests $250,000 of state funds in a federally-insured 
credit union located in the state from which he derives his authority as 
an official custodian. What is the insurance coverage?
    Answer: If A invested the entire $250,000 in a share draft account, 
then $100,000 would be insured and $150,000 would be uninsured. If A 
invested $125,000 in share draft accounts and another $125,000 in share 
certificate and regular share accounts, then A would be insured for 
$100,000 for the share draft accounts and $100,000 for the share 
certificate and regular share accounts leaving $50,000 uninsured 
(Sec. 745.10(a)(2)). If A had invested the $250,000 in a federally-
insured credit union located outside the state from which he derives his 
authority as an official custodian, then $100,000 would be insured for 
all accounts regardless of whether they were share draft, share 
certificate or regular share accounts, leaving $150,000 uninsured 
(Sec. 745.10(b)).

                   F. How Are Joint Accounts Insured?

    The interest of a co-owner in all accounts held under any form of 
joint ownership valid under state law (whether as joint tenants with 
right of survivorship, tenants by the entireties, tenants in common, or 
by husband and wife as community property) is insured up to $100,000. 
This insurance is separate from that afforded individual accounts held 
by any of the co-owners.
    An account is insured as a joint account only if each of the co-
owners has personally signed a membership card or an account signature 
card and possesses the same withdrawal rights as the other co-owners. 
(The signature requirement does not apply to share certificates, or to 
any accounts maintained by an agent, nominee, guardian, custodian or 
conservator on behalf of two or more persons. However, the records of 
the credit union must show that the account is being maintained for 
joint owners. There is

[[Page 528]]

also another exception in the case of a minor discussed below.) An 
account owned jointly which does not qualify as a joint account for 
insurance purposes is insured as if owned by the named persons as 
individuals. In that case, the actual ownership interest in the account 
of each person is added to any other accounts individually owned by such 
person and insured up to $100,000 in the aggregate.
    Any individual, including a minor, may be a co-owner of a joint 
account. Although, generally, each co-owner must have signed an account 
signature card and must have the same rights of withdrawal as other co-
owners in order for the account to qualify for separate joint account 
insurance, there is an exception for minors. If state law limits or 
restricts a minor's withdrawal rights--for example, a minimum age 
requirement to make a withdrawal--the account will still be insured as a 
joint account.
    The interests of a co-owner in all joint accounts that qualify for 
separate insurance coverage are insured up to the $100,000 maximum. For 
insurance purposes, the co-owners of any joint account are deemed to 
have equal interests in the account, except in the case of a tenancy in 
common. With a tenancy in common, equal interests are presumed unless 
otherwise stated on the records of the credit union.

                                Example 1

    Question: Members A and B maintain an account as joint tenants with 
right of survivorship and, in addition, each holds an individual 
account. Is each account separately insured?
    Answer: If both A and B have signed the membership or signature card 
and possess equal withdrawal rights with respect to the joint funds, 
their interests in the joint account are separately insured from their 
interests in the individual accounts. (Sec. 745.8 (a) and (b).) If the 
joint account is represented by a share certificate, their individual 
signatures are not required for that account.

                                Example 2

    Question: Members H and W, husband and wife, reside in a community 
property state. Each holds an individual account and, in addition, they 
hold a qualifying joint account. The funds in all three accounts consist 
of community property. Is each account separately insured?
    Answer: Yes. An account in the individual name of a spouse will be 
insured up to $100,000 whether the funds consist of community property 
or separate property of the spouse. A joint account containing community 
property is separately insured. Thus, community property can be used for 
individual accounts in the name of each spouse and for a joint account 
in the name of both spouses. In this example, each individual account is 
insured up to $100,000 (Sec. 745.3(a)(1)), and the interests of both the 
husband and wife in the joint account are each insured up to $100,000 
(Sec. 745.8(a)).

                                Example 3

    Question: Two accounts of $100,000 each are held by a member husband 
and his wife under the following names: John Doe and Mary Doe, husband 
and wife, as joint tenants with right of survivorship. Mrs. John Doe and 
John Q. Doe (community property). How much insurance do the husband and 
wife have?
    Answer: They have $200,000 of insurance. Both the husband and wife 
are deemed to have a one half interest ($50,000) in each account. 
(Sec. 745.2(c)(4).) The husband's interest in both accounts would be 
added together and insured for $100,000. The wife's insurance coverage 
would be determined the same way. (Sec. 745.8(a).)

                                Example 4

    Question: The following accounts are held by members A, B and C, 
each of whom has personally executed signature cards for the accounts in 
which he has an interest. Each co-owner of a joint account possesses the 
necessary withdrawals rights.

1. A, as an individual--$100,000.
2. B, as an individual--$100,000.
3. C, as an individual--$100,000.
4. A and B, as joint tenants w/r/o survivorship--$90,000.
5. A and C, as joint tenants w/r/o survivorship--$90,000.
6. B and C, as joint tenants w/r/o survivorship--$90,000.
7. A, B and C, as joint tenants w/r/o survivorship--$90,000.

    What is the insurance coverage?
    Answer: Accounts numbered 1, 2 and 3 are each separately insured for 
$100,000 as individual accounts held by A, B and C, respectively 
(Sec. 745.3(a)(1)). The interest of the co-owners of each joint account 
are deemed equal for insurance purposes (Sec. 745.2(c)(4)). A's interest 
in accounts numbered 4, 5, and 7 are added together for insurance 
purposes (Sec. 745.8(e)). Thus, A has an interest of $45,000 in account 
No. 4, $45,000 in account No. 5 and $30,000 in account No. 7, for a 
total joint account interest of $120,000, of which $100,000 is insured. 
The interest of B and C are similarly insured.

                              Example 5(a)

    Question: A, B and C hold accounts as set forth in Example 4. 
Members A and B are husband and wife; C, their minor child, has failed 
to sign the signature card for Account No. 7. In Account No. 5, 
according to the terms of the account, C cannot make a withdrawal 
without A's written consent. (This is not a limitation imposed under 
state law.) In

[[Page 529]]

Account No. 6, the signatures of both B and C are required for 
withdrawal. A has provided all of the funds for Accounts numbered 5 and 
7 and under state law has the entire actual ownership interest in these 
two accounts. What is the insurance coverage?
    Answer: If any of the co-owners of a joint account have failed to 
meet any of the joint account requirements, the account is not a 
qualifying joint account. Instead, the account is treated as if it 
consisted of commingled individual accounts of each of the co-owners in 
accordance with his or her actual ownership interest in the funds, as 
determined under applicable state law. (Sec. 745.8(c).)
    Account No. 5 is not a qualifying joint account because C does not 
have equal withdrawal rights with A. Based on the terms of the account, 
C can only make a withdrawal if he has A's written consent. Account No. 
7 is not a qualifying joint account because C did not personally sign 
the signature card. Therefore, all of the funds in Accounts 5 and 7 are 
treated as individually owned by A and added to A's individual account, 
Account No. 1. For insurance purposes then, A has $280,000 in one 
individual account that is insured for $100,000, leaving $180,000 
uninsured.
    Account 6 is a qualifying joint account for insurance purposes since 
each co-owner has the right to withdraw funds on the same basis. Account 
4 is also a qualifying joint account. A's interest in Account 4 is 
insured for $45,000. B's interest of $45,000 in Account 4 is added to 
her interest of $45,000 in Account 6 and insured for $90,000. C's 
interest in Account 6 is insured for $45,000.

                              Example 5(b)

    Question: Assume the same accounts as Example 5(a) except that, on 
Account No. 5, C's right to make a withdrawal is limited by state law 
which precludes a minor from making a withdrawal without the co-owner's 
written consent. What is the insurance coverage?
    Answer: In this situation, Accounts 4, 5, and 6 all qualify as joint 
accounts. A, B, and C will each have $90,000 of insured funds based on: 
A's interest in Account 4 ($45,000) and 5 ($45,000), B's interest in 
Accounts 4 ($45,000) and 6 ($45,000), and C's interest in Accounts 5 
($45,000) and 6 ($45,000). As in Example 5(a), Account No. 7 does not 
qualify as a joint account and would be added to A's individual account 
for insurance purposes.

       G. How Are Trust Accounts and Retirement Accounts Insured?

    A trust estate is the interest of a beneficiary in an irrevocable 
express trust, whether created by trust instrument or statute, that is 
valid under state law. Thus, funds invested in an account by a trustee 
under an irrevocable express trust are insured on the basis of the 
beneficial interests under such trust. The interest of each beneficiary 
in an account (or accounts) established under such a trust arrangement 
is insured to $100,000 separately from other accounts held by the 
trustee, the settlor (grantor), or the beneficiary. However, in cases 
where a beneficiary has an interest in more than one trust arrangement 
created by the same settlor, the interests of the beneficiary in all 
accounts established under such trusts are added together for insurance 
purposes, and the beneficiary's aggregate interest derived from the same 
settlor is separately insured to the $100,000 maximum.
    A beneficiary's interest in an account established pursuant to an 
irrevocable express trust arrangement is insured separately from other 
beneficial interests (trust estates) invested in the same account if the 
value of the beneficiary's interest (trust estate) can be determined (as 
of the date of a credit union's insolvency) without evaluation of 
contingencies except for those covered by the present worth tables and 
rules of calculation for their use set forth in Sec. 20.2031-10 of the 
Federal Estate Tax Regulations (26 CFR 20.2031-10). If any trust estates 
in such an account cannot be so determined, the insurance with respect 
to all such trust estates together shall not exceed the basic insured 
amount of $100,000.
    In order for insurance coverage of trust accounts to be effective in 
accordance with the foregoing rules, certain recordkeeping requirements 
must be met. In connection with each trust account, the credit union's 
records must indicate the name of both the settlor and the trustee of 
the trust and must contain an account signature card executed by the 
trustee indicating the fiduciary capacity of the trustee. In addition, 
the interests of the beneficiaries under the trust must be ascertainable 
from the records of either the credit union or the trustee, and the 
settlor or beneficiary must be a member of the credit union. If there 
are two or more settlors or beneficiaries, then either all the settlors 
or all the beneficiaries must be members of the credit union.
    Although each ascertainable trust estate is separately insured, it 
should be noted that in short-term trusts the insurable interest or 
interests may be very small, since the interests are computed only for 
the duration of the trust. Thus, if a trust is made irrevocable for a 
specified period of time, the beneficial interest will be calculated in 
terms of the length of time stated. A reversionary interest retained by 
the settlor is treated in the same manner as an individual account of 
the settlor.
    As stated, the trust must be valid under local law. A trust which 
does not meet local requirements, such as one imposing no duties on the 
trustee or conveying no interest to the beneficiary, is of no effect for 
insurance purposes. An account in which such

[[Page 530]]

funds are invested is considered to be an individual account.
    An account established pursuant to a revocable trust arrangement is 
insured as a form of individual account and is treated under section B, 
supra, dealing with Testamentary Accounts.
    IRA and Keogh accounts are separately insured, each up to $100,000. 
Although credit unions may serve as trustees or custodians for self-
directed IRA, Roth IRA and Keogh accounts, once the funds in those 
accounts are taken out of the credit union, they are no longer insured.
    In the case of an employee retirement fund where only a portion of 
the fund is placed in a credit union account, the amount of insurance 
available to an individual member/beneficiary on his interest in the 
account will be in proportion to his interest in the entire employee 
retirement fund. If, for example, the member's interest represents 10% 
of the entire plan funds, then he is presumed to have only a 10% 
interest in the plan account. Said another way, if a member has a vested 
interest of $10,000 in a municipal employees retirement plan and the 
trustee invests 25% of the total plan funds in a credit union, the 
member would be insured for only $2,500 on that credit union account. 
There is an exception, however. The member would be insured for $10,000 
if the trustee can document, through records maintained in the ordinary 
course of business, that individual beneficiary's interests are 
segregated and the total vested interest of the member was, in fact, 
invested in that account.

                                Example 1

    Question: Member S invests $45,000 in trust for B, the beneficiary. 
S also has an individual account containing $90,000 in the same credit 
union. What is the insurance coverage?
    Answer: Both accounts are fully insured. The trust account is 
separately insured from the individual account of S (Secs. 745.3(a)(1) 
and 745.9-1).

                                Example 2

    Question: S invests funds in trust for A, B, C, D, and E. A, B, and 
C are members of the credit union, D, E and S are not. What is the 
insurance coverage?
    Answer: This is an uninsurable account. Where there is more than one 
settlor or more than one beneficiary, all the settlors or all the 
beneficiaries must be members to establish this type of account. Since 
D, E and S are not members, this account cannot legally be established 
or insured.

                              Example 3(a)

    Question: Member S invests $500,000 in trust for ABC Employees 
Retirement Fund. Some of the beneficiaries are members and some are not. 
What is the insurance coverage?
    Answer: The account is insured as to the determinable interests of 
each member beneficiary to a maximum of $100,000 per member. Member 
interests not capable of evaluation and nonmember interests shall be 
added together and insured to a maximum of $100,000 in the aggregate 
(Sec. 745.9-1).

                              Example 3(b)

    Question: Member S is trustee for the ABC Employees Retirement Fund 
containing $1,000,000. Member A has a determinable interest of $90,000 
in the Fund (9% of the total). S invests $500,000 of the Fund in trust 
in an insured credit union and the remaining $500,000 elsewhere. Some of 
the beneficiaries of the Fund are members of the credit union and some 
are not. S does not segregate each employee's interest in the Fund. What 
is the insurance coverage?
    Answer: The account is insured as to determinable interest of each 
member beneficiary, adjusted in proportion to the Fund's investment in 
the credit union. A's insured interest in the account is $45,000, or 9% 
of $500,000. This reflects the fact that only 50% of the Fund is in the 
account and A's interest in the account is in the same proportion as his 
interest in the overall plan. Each beneficiary who is a member would be 
similarly insured. Members' interests not capable of evaluation and 
nonmembers' interests are added together and insured to a maximum of 
$100,000 in the aggregate. (Sec. 745.9-1.)

                                Example 4

    Question: Member A has an individual account of $100,000 and 
establishes an IRA and accumulates $50,000 in that account. Subsequently 
A becomes self employed and establishes a Keogh account in the same 
credit union and accumulates $100,000 in that account. What is the 
insurance coverage?
    Answer: Each of A's accounts would be separately insured for up to 
$100,000. In the example, A would be fully insured for $250,000 
(Sec. 745.3(a)(1) and Sec. 745.9-2).

                                Example 5

    Question: Member A has a self-directed IRA account with $70,000 in 
it. The FCU is the trustee of the account. Member transfers $40,000 into 
a blue chip stock; $30,000 remains in the FCU. What is the insurance 
coverage?
    Answer: Originally, the full $70,000 in A's IRA account is insured. 
The $40,000 is no longer insured once it is moved out of the FCU. The 
$30,000 remaining in the FCU is insured (Sec. 745.9-2).

[51 FR 37560, Oct. 23, 1986, as amended at 53 FR 22473, June 16, 1988; 
55 FR 47455, Nov. 14, 1990; 64 FR 19687, 19688, Apr. 22, 1999; 65 FR 
34925, June 1, 2000]

[[Page 531]]



PART 747--ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF PRACTICE AND PROCEDURE, AND INVESTIGATIONS--Table of Contents




Sec.
747.0  Scope of part 747.

           Subpart A--Uniform Rules of Practice and Procedure

747.1  Scope.
747.2  Rules of construction.
747.3  Definitions.
747.4  Authority of NCUA Board.
747.5  Authority of the administrative law judge.
747.6  Appearance and practice in adjudicatory proceedings.
747.7  Good faith certification.
747.8  Conflicts of interest.
747.9  Ex parte communications.
747.10  Filing of papers.
747.11  Service of papers.
747.12  Construction of time limits.
747.13  Change of time limits.
747.14  Witness fees and expenses.
747.15  Opportunity for informal settlement.
747.16  NCUA's right to conduct examination.
747.17  Collateral attacks on adjudicatory proceeding.
747.18  Commencement of proceeding and contents of notice.
747.19  Answer.
747.20  Amended pleadings.
747.21  Failure to appear.
747.22  Consolidation and severance of actions.
747.23  Motions.
747.24  Scope of document discovery.
747.25  Request for document discovery from parties.
747.26  Document subpoenas to nonparties.
747.27  Deposition of witness unavailable for hearing.
747.28  Interlocutory review.
747.29  Summary disposition.
747.30  Partial summary disposition.
747.31  Scheduling and prehearing conferences.
747.32  Prehearing submissions.
747.33  Public hearings.
747.34  Hearing subpoenas.
747.35  Conduct of hearings.
747.36  Evidence.
747.37  Post-hearing filings.
747.38  Recommended decision and filing of record.
747.39  Exceptions to recommended decision.
747.40  Review by the NCUA Board.
747.41  Stays pending judicial review.

            Subpart B--Local Rules of Practice and Procedure

747.100  Discovery limitations.

Subpart C--Local Rules and Procedures Applicable to Proceedings for the 
                Involuntary Termination of Insured Status

747.201  Scope.
747.202  Grounds for termination of insurance.
747.203  Notice of charges.
747.204  Notice of intention to terminate insured status.
747.205  Order terminating insured status.
747.206  Consent to termination of insured status.
747.207  Notice of termination of insured status.
747.208  Duties after termination.

  Subpart D--Local Rules and Procedures Applicable to Suspensions and 
                    Prohibitions Where Felony Charged

747.301  Scope.
747.302  Rules of practice; remainder of board of directors.
747.303  Notice of suspension or prohibition.
747.304  Removal or permanent prohibition.
747.305  Effectiveness of suspension or removal until completion of 
          hearing.
747.306  Notice of opportunity for hearing.
747.307  Hearing.
747.308  Waiver of hearing; failure to request hearing or review based 
          on written submissions; failure to appear.
747.309  Decision of the NCUA Board.
747.310  Reconsideration by the NCUA Board.
747.311  Relevant considerations.

Subpart E--Local Rules and Procedures Applicable to Proceedings Relating 
     to the Suspension or Revocation of Charters and to Involuntary 
                       Liquidations Under Title I

747.401  Scope.
747.402  Grounds for suspension or revocation of charter and for 
          involuntary liquidation.
747.403  Notice of intent to suspend or revoke charter; notice of 
          suspension.
747.404  Notice of hearing.
747.405  Issuance of order.
747.406  Cancellation of charter.

Subpart F--Local Rules and Procedures Applicable to Proceedings Relating to 
the Termination of Membership in the Central Liquidity Facility [Reserved]

[[Page 532]]

    Subpart G--Local Rules and Procedures Applicable to Recovery of 
Attorneys Fees and Other Expenses Under the Equal Access to Justice Act 
                       in NCUA Board Adjudications

747.601  Purpose and scope.
747.602  Eligibility of applicants.
747.603  Prevailing party.
747.604  Standards for award.
747.605  Allowable fees and expenses.
747.606  Contents of application.
747.607  Statement of net worth.
747.608  Documentation of fees and expenses.
747.609  Filing and service of applications.
747.610  Answer to application.
747.611  Comments by other parties.
747.612  Settlement.
747.613  Further proceedings.
747.614  Recommended decision.
747.615  Decision of the NCUA Board.
747.616  Payment of award

   Subpart H--Local Rules and Procedures Applicable to Investigations

747.701  Applicability.
747.702  Information obtained in investigations.
747.703  Authority to conduct investigations.

  Subpart I--Local Rules Applicable to Formal Investigative Proceedings

747.801  Applicability.
747.802  Non-public formal investigative proceedings.
747.803  Subpoenas.
747.804  Oath; false statements.
747.805  Self-incrimination; immunity.
747.806  Transcripts.
747.807  Rights of witnesses.

  Subpart J--Local Procedures and Standards Applicable to a Notice of 
  Change in Senior Executive Officers, Directors of Committee Members 
                   Pursuant to Section 212 of the Act

747.901  Scope.
747.902  Grounds for disapproval of notice.
747.903  Procedures where notice of disapproval issued; reconsideration.
747.904  Appeal.
747.905  Judicial review.

       Subpart K--Inflation Adjustment of Civil Monetary Penalties

747.1001  Adjustment of civil money penalties by the rate of inflation 
          pursuant to section 31001(s) of the Debt Collection 
          Improvement Act of 1996 (Public Law 14-134, 110 Stat. 1321-358 
          (28 U.S.C. 2461 note)).

 Subpart L--Issuance, Review and Enforcement of Orders Imposing Prompt 
                            Corrective Action

747.2001  Scope.
747.2002  Review of order imposing discretionary supervisory action.
747.2003  Review of order reclassifying a credit union on safety and 
          soundness criteria.
747.2004  Review of order to dismiss a director or senior executive 
          officer.
747.2005  Enforcement of orders.

    Authority: 12 U.S.C. 1766, 1782, 1784, 1785, 1786, 1787; 42 U.S.C. 
4012a; Pub. L. 101-410; Pub. L. 104- 134..

    Source: 56 FR 37767, Aug. 8, 1991, unless otherwise noted.



Sec. 747.0  Scope of part 747.

    (a) This part describes the various formal and informal adjudicative 
actions and non-adjudicative proceedings available to the National 
Credit Union Administration Board (``NCUA Board''), the grounds for 
those actions and proceedings, and the procedures used in formal and 
informal hearings related to each available action. As mandated by 
section 916 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 1818 note), this part 
incorporates uniform rules of practice and procedure governing formal 
adjudications generally, as well as proceedings involving cease-and-
desist actions, assessment of civil money penalties, and removal, 
prohibition and suspension actions. In addition, the Uniform Rules are 
incorporated in other subparts of this part which provide for formal 
adjudications. The administrative actions and proceedings described 
herein, as well as the grounds and hearing procedures for each, are 
controlled by sections 120(b) (except where the Federal credit union is 
closed due to insolvency), 202(a)(3) and 206 of the Federal Credit Union 
Act (``the Act''), 12 U.S.C. 1766(b), 1782(a)(3), 1786. Should any 
provision of this part be inconsistent with these or any other 
provisions of the Act, as amended, the Act shall control. Judicial 
enforcement of any action or order described in this part, as well as 
judicial review thereof, shall be as prescribed under the Act (12 U.S.C. 
1751 et seq.) and the Administrative Procedure Act (5 U.S.C. 500 et 
seq.).

[[Page 533]]

    (b) As used in this part, the term insured credit union means any 
Federal credit union or any state chartered credit union insured under 
subchapter II of the Act unless the context indicates otherwise.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



           Subpart A--Uniform Rules of Practice and Procedure



Sec. 747.1  Scope.

    This subpart prescribes uniform rules of practice and procedure 
applicable to adjudicatory proceedings required to be conducted on the 
record after opportunity for a hearing under the following statutory 
provisions:
    (a) Cease-and-desist proceedings under section 206(e) of the Act (12 
U.S.C. 1786(e));
    (b) Removal and prohibition proceedings under section 206(g) of the 
Act (12 U.S.C. 1786(g));
    (c) Assessment of civil money penalties by the NCUA Board against 
institutions and institution-affiliated parties for any violation of:
    (1) Section 202 of the Act (12 U.S.C. 1782);
    (2) Section 1120 of FIRREA (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (3) The terms of any final or temporary order issued under section 
206 of the Act or any written agreement executed by the National Credit 
Union Administration (``NCUA''), any condition imposed in writing by the 
NCUA in connection with the grant of an application or request, certain 
unsafe or unsound practices or breaches of fiduciary duty, or any law or 
regulation not otherwise provided herein, pursuant to 12 U.S.C. 1786(k); 
and
    (4) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder;
    (d) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g)); and
    (e) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in subparts B 
through J of this part.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 61 FR 
28025, June 4, 1996]



Sec. 747.2  Rules of construction.

    For purposes of this subpart:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate;
    (c) The term counsel includes a non-attorney representative; and
    (d) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.



Sec. 747.3  Definitions.

    For purposes of this subpart, unless explicitly stated to the 
contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
this subpart and leading to the formulation of a final order other than 
a regulation.
    (c) Decisional employee means any member of the NCUA's or 
administrative law judge's staff who has not engaged in an investigative 
or prosecutorial role in a proceeding and who may assist the Agency or 
the administrative law judge, respectively, in preparing orders, 
recommended decisions, decisions, and other documents under the Uniform 
Rules.
    (d) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the NCUA in an adjudicatory 
proceeding.
    (e) Final order means an order issued by the NCUA with or without 
the consent of the affected institution or the institution-affiliated 
party, that has become final, without regard to the pendency of any 
petition for reconsideration or review.
    (f) Institution includes: (1) Any Federal credit union as that term 
is defined in section 101(1) of the Act (12 U.S.C. 1752(1)); and

[[Page 534]]

    (2) Any insured state credit union as that term is defined in 
section 101(7) of the FCUA (12 U.S.C. 1752(7)).
    (g) Institution-affiliated party means any institution-affiliated 
party as that term is defined in section 206(r) of the Act (12 U.S.C. 
1786(r)).
    (h) Local Rules means those rules promulgated by the NCUA in the 
subparts of this part other than subpart A of this part.
    (i) OFIA means the Office of Financial Institution Adjudication, 
which is the executive body charged with overseeing the administration 
of administrative enforcement proceedings for the NCUA, the Office of 
the Comptroller of the Currency (``OCC''), the Board of Governors of the 
Federal Reserve System (``Board''), the Federal Deposit Insurance 
Corporation (``FDIC''), and the Office of Thrift Supervision (``OTS'').
    (j) Party means the NCUA and any person named as a party in any 
notice.
    (k) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (f) of this section.
    (l) Respondent means any party other than the NCUA.
    (m) Uniform Rules means those rules in subpart A of this part that 
are common to the NCUA, the OCC, the Board, the FDIC and the OTS.
    (n) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.4  Authority of the NCUA Board.

    The NCUA Board may, at any time during the pendency of a proceeding 
perform, direct the performance of, or waive performance of, any act 
which could be done or ordered by the administrative law judge.



Sec. 747.5  Authority of the administrative law judge.

    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of 
the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec. 747.31;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the NCUA 
Board shall have the power to grant any motion to dismiss the proceeding 
or to decide any other motion that results in a final determination of 
the merits of the proceeding;
    (8) To prepare and present to the NCUA Board a recommended decision 
as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.



Sec. 747.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the NCUA or an administrative law judge. (1) 
By attorneys. Any member in good standing of the bar of the highest 
court of any

[[Page 535]]

state, commonwealth, possession, territory of the United States, or the 
District of Columbia may represent others before the NCUA if such 
attorney is not currently suspended or debarred from practice before the 
NCUA.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer, director, 
or employee is not currently suspended or debarred from practice before 
the NCUA.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the NCUA Board, shall file a notice of appearance 
with OFIA at or before the time that the individual submits papers or 
otherwise appears on behalf of a party in the adjudicatory proceeding. 
The notice of appearance must include a written declaration that the 
individual is currently qualified as provided in paragraph (a)(1) or 
(a)(2) of this section and is authorized to represent the particular 
party. By filing a notice of appearance on behalf of a party in an 
adjudicatory proceeding, the counsel agrees and represents that he or 
she is authorized to accept service on behalf of the represented party 
and that, in the event of withdrawal from representation, he or she 
will, if required by the administrative law judge, continue to accept 
service until new counsel has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28025, June 4, 1996]



Sec. 747.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel sign his or her individual name and state his or her address 
and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: the counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.



Sec. 747.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of

[[Page 536]]

an order limiting the scope of representation or disqualifying an 
individual from appearing in a representative capacity for the duration 
of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec. 747.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28025, June 4, 1996]



Sec. 747.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between--
    (i) An interested person outside the NCUA (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the NCUA 
Board, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the NCUA Board until the date that the NCUA Board issues 
its final decision pursuant to Sec. 747.40(c):
    (1) No interested person outside the NCUA shall make or knowingly 
cause to be made an ex parte communication to any member of the NCUA 
Board, the administrative law judge, or a decisional employee; and
    (2) No member of the NCUA Board, administrative law judge, or 
decisional employee shall make or knowingly cause to be made to any 
interested person outside the NCUA any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, a 
member of the NCUA Board or any other person identified in paragraph (a) 
of this section, that person shall cause all such written communications 
(or, if the communication is oral, a memorandum stating the substance of 
the communication) to be placed on the record of the proceeding and 
served on all parties. All other parties to the proceeding shall have an 
opportunity, within ten days of receipt of service of the ex parte 
communication, to file responses thereto and to recommend any sanctions, 
in accordance with paragraph (d) of this section, that they believe to 
be appropriate under the circumstances.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the NCUA Board or the administrative 
law judge including, but not limited to, exclusion from the proceedings 
and an adverse ruling on the issue which is the subject of the 
prohibited communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the NCUA in a case may 
not, in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under section 747.40, except as witness or counsel in public 
proceedings.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 61 FR 
28025, June 4, 1996]



Sec. 747.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in

[[Page 537]]

response to a discovery request pursuant to Secs. 747.25 and 747.26, 
shall be filed with the OFIA, except as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the NCUA Board 
or the administrative law judge, filing may be accomplished by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the NCUA Board or the 
administative law judge. All papers filed by electronic media shall also 
concurrently be filed in accordance with paragraph (c) of this section.
    (c) Formal requirements as to papers filed. (1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 747.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the NCUA and of the filing party, the title 
and docket number of the processing, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the NCUA Board, 
or the administrative law judge, an original and one copy of all 
documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.



Sec. 747.11  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec. 747.10(c).
    (c) By the NCUA Board or the administrative law judge. (1) All 
papers required to be served by the NCUA Board or the administrative law 
judge upon a party who has appeared in the proceeding in accordance with 
Sec. 747.6, shall be served by any means specified in paragraph (b) of 
this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec. 747.6, the NCUA Board or the administrative law judge shall make 
service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;

[[Page 538]]

    (3) By delivery to an agent, which, in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28025, June 4, 1996]



Sec. 747.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in Sec. 747.12(c), intermediate Saturdays, Sundays, and 
Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the NCUA Board or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the NCUA Board or the administrative law judge in the case of filing, or 
by agreement among the parties in the case of service.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28026, June 4, 1996]



Sec. 747.13  Change of time limits.

    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or by any notice or order issued in the proceedings. After 
the referral of the case to the NCUA Board pursuant to Sec. 747.38, the 
NCUA Board may grant extensions of the time limits for good cause shown. 
Extensions may be granted upon the motion of a party after notice and 
opportunity to respond is afforded all non-moving parties, or upon

[[Page 539]]

the NCUA Board's or the administrative law judge's own motion.



Sec. 747.14  Witness fees and expenses.

    Witnesses subpoenaed for testimony or depositions shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the NCUA is the 
party requesting the subpoena. The NCUA shall not be required to pay any 
fees to, or expenses of, any witness not subpoenaed by the NCUA.



Sec. 747.15  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any NCUA representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.



Sec. 747.16  NCUA's right to conduct examination.

    Nothing contained in this subpart limits in any manner the right of 
the NCUA to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the NCUA to 
conduct or continue any form of investigation authorized by law.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.17  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.



Sec. 747.18  Commencement of proceeding and contents of notice.

    (a) Commencement of proceeding. (1) A proceeding governed by this 
subpart is commenced by issuance of a notice by the NCUA Board.
    (2) The notice must be served by the NCUA Board upon the respondent 
and given to any other appropriate financial institution supervisory 
authority where required by law.
    (3) The notice must be filed with the OFIA.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the NCUA's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the NCUA 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) That the answer and/or request for a hearing shall be filed with 
OFIA.



Sec. 747.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state

[[Page 540]]

that the party lacks sufficient information to admit or deny each 
allegation of fact. A statement of lack of information has the effect of 
a denial. Denials must fairly meet the substance of each allegation of 
fact denied; general denials are not permitted. When a respondent denies 
part of an allegation, that part must be denied and the remainder 
specifically admitted. Any allegation of fact in the notice which is not 
denied in the answer must be deemed admitted for purposes of the 
proceeding. A respondent is not required to respond to the portion of a 
notice that constitutes the prayer for relief or proposed order. The 
answer must set forth affirmative defenses, if any, asserted by the 
respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, the 
administrative law judge, upon motion of the Enforcement Counsel, shall 
file with the NCUA Board a recommended decision containing the findings 
and the relief sought in the notice. Any final order issued by the NCUA 
Board based upon a respondent's failure to answer is deemed to be an 
order issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.



Sec. 747.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the NCUA Board or administrative law 
judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.

[61 FR 28026, June 4, 1996]



Sec. 747.21  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the NCUA Board a recommended decision containing the findings and the 
relief sought in the notice.



Sec. 747.22  Consolidation and severance of actions.

    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the matter as 
to any

[[Page 541]]

respondent only if the administrative law judge finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.



Sec. 747.23  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memorandum, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, except that upon the filing of the recommended decision, 
motions must be filed with the NCUA Board.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the NCUA 
Board, any party may file a written response to a motion. The 
administrative law judge shall not rule on any oral or written motion 
before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Secs. 747.29 and 747.30.



Sec. 747.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requester's written agreement 
to pay in advance for the copying, in accordance with Sec. 747.25.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative-process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.

[[Page 542]]

    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing, except as provided in the 
Local Rules. No exceptions to this time limit shall be permitted, unless 
the administrative law judge finds on the record that good cause exists 
for waiving the requirements of this paragraph.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28026, June 4, 1996]



Sec. 747.25  Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages is 
requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests 250 pages or 
more of copying, the requesting party shall pay for the copying and 
shipping charges. Copying charges are the current per-page copying rate 
imposed by 12 CFR 792.5(b) implementing the Freedom of Information Act 
(5 U.S.C. 552). The party to whom the request is addressed may require 
payment in advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec. 747.23 
to strike or otherwise limit the request. If an objection is made to 
only a portion of an item or category in a request, the portion objected 
to shall be specified. Any objections not made in accordance with this 
paragraph and Sec. 747.23 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec. 747.23 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.

[[Page 543]]

    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may deny or 
modify the request, and may issue appropriate protective orders, upon 
such conditions as justice may require. The pendency of a motion to 
strike or limit discovery or to compel production is not a basis for 
staying or continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative law 
judge against a party who fails to produce subpoenaed documents.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28026, June 4, 1996; 61 
FR 45876, Aug. 30, 1996]



Sec. 747.26  Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec. 747.24(d). The party obtaining the document 
subpoena is responsible for serving it on the subpoenaed person and for 
serving copies on all parties. Document subpoenas may be served in any 
state, territory, or possession of the United States, the District of 
Columbia, or as otherwise provided by law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec. 747.25(d), and 
during the same time limits during which such an objection could be 
filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party

[[Page 544]]

or any other aggrieved party may, to the extent authorized by applicable 
law, apply to an appropriate United States district court for an order 
requiring compliance with so much of the document subpoena as the 
administrative law judge has not quashed or modified. A party's right to 
seek court enforcement of a document subpoena shall in no way limit the 
sanctions that may be imposed by the administrative law judge on a party 
who induces a failure to comply with subpoenas issued under this 
section.



Sec. 747.27  Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring that witness' testimony for the record may 
apply in accordance with the procedures set forth in paragraph (a)(2) of 
this section, to the administrative law judge for the issuance of a 
subpoena, including a subpoena duces tecum, requiring the attendance of 
the witness at a deposition. The administrative law judge may issue a 
deposition subpoena under this section upon showing that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to

[[Page 545]]

answer or submit any evidence the witness has refused to submit during 
the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena under paragraph (b) or 
(c)(3) of this section, the subpoenaing party or other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
portions of the subpoena that the administrative law judge has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
administrative law judge on a party who fails to comply with, or 
procures a failure to comply with, a subpoena issued under this section.



Sec. 747.28  Interlocutory review.

    (a) General rule. The NCUA Board may review a ruling of the 
administrative law judge prior to the certification of the record to the 
NCUA Board only in accordance with the procedures set forth in this 
section and Sec. 747.23.
    (b) Scope of review. The NCUA Board may exercise interlocutory 
review of a ruling of the administrative law judge if the NCUA Board 
finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec. 747.23. Any party may 
file a response to a request for interlocutory review in accordance with 
Sec. 747.23(d). Upon the expiration of the time for filing all 
responses, the administrative law judge shall refer the matter to the 
NCUA Board for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the NCUA Board under 
this section suspends or stays the proceeding unless otherwise ordered 
by the administrative law judge or the NCUA Board.



Sec. 747.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the NCUA Board issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving part is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes that 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the administrative law judge, may 
file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may

[[Page 546]]

take the form of admissions in pleadings, stipulations, depositions, 
investigatory depositions, transcripts, affidavits and any other 
evidentiary materials that the moving party contends support his or her 
position. The motion must also be accompanied by a brief containing the 
points and authorities in support of the contention of the moving party. 
Any party opposing a motion for summary disposition must file a 
statement setting forth those material facts as to which he or she 
contends a genuine dispute exists. Such opposition must be supported by 
evidence of the same type as that submitted with the motion for summary 
disposition and a brief containing the points and authorities in support 
of the contention that summary disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the NCUA Board. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.



Sec. 747.30  Partial summary disposition.

    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.



Sec. 747.31  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such order time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
recourse and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at its expense.

[[Page 547]]

    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.



Sec. 747.32  Prehearing submissions.

    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec. 747.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the NCUA Board, in its discretion, determines that holding an open 
hearing would be contrary to the public interest. Within 20 days of 
service of the notice, any respondent may file with the NCUA Board a 
request for a private hearing, and any party may file a reply to such a 
request. A party must serve on the administrative law judge a copy of 
any request or reply the party files with the NCUA Board. The form of, 
and procedure for, these requests and replies are governed by 
Sec. 747.23. A party's failure to file a request or a reply constitutes 
a waiver of any objections regarding whether the hearing will be public 
or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 61 FR 
28027, June 4, 1996]



Sec. 747.34  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the administrative law judge may issue a subpoena or a subpoena 
duces tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at the hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena,

[[Page 548]]

accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant must serve the motion on each party and on the 
person named in the subpoena. Any party may respond to the motion within 
ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek enforcement of the subpoena pursuant to 
Sec. 747.26(c).

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28027, June 4, 1996]



Sec. 747.35  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree the administrative 
law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28027, June 4, 1996]



Sec. 747.36  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or NCUA Board shall appear on the record.

[[Page 549]]

    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by an appropriate Federal financial 
institution regulatory agency or by a state regulatory agency, is 
admissible either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness, either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the NCUA Board.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing, and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec. 747.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant portions of the record. A post-hearing brief may be 
filed in support of proposed findings and conclusions, either as part of 
the same document or in a separate document. Any party who fails to file 
timely with the administrative law judge any proposed finding or 
conclusion is deemed to have waived the right to raise in any subsequent 
filing or submission any issue not addressed in such party's proposed 
finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply

[[Page 550]]

briefs must be strictly limited to responding to new matters, issues, or 
arguments raised in another party's papers. A party who has not filed 
proposed findings of fact and conclusions of law or a post-hearing brief 
may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.

[56 FR 37767, Aug. 8, 1991, as amended at 61 FR 28027, June 4, 1996]



Sec. 747.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under 
Sec. 747.37(b), the administrative law judge shall file with and certify 
to the NCUA Board, for decision, the record of the proceeding. The 
record must include the administrative law judge's recommended decision, 
recommended findings of fact, recommended conclusions of law, and 
proposed order; all prehearing and hearing transcripts, exhibits, and 
rulings; and the motions, briefs, memoranda, and other supporting papers 
filed in connection with the hearing. The administrative law judge shall 
serve upon each party the recommended decision, findings, conclusions, 
and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the NCUA Board for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the NCUA Board a certified index of the entire record of the proceeding. 
The certified index shall include, at a minimum, an entry for each 
paper, document or motion filed with the administrative law judge in the 
proceeding, the date of the filing, and the identity of the filer. The 
certified index shall also include an exhibit index containing, at a 
minimum, an entry consisting of exhibit number and title or description 
for: Each exhibit introduced and admitted into evidence at the hearing; 
each exhibit introduced but not admitted into evidence at the hearing; 
each exhibit introduced and admitted into evidence after the completion 
of the hearing; and each exhibit introduced but not admitted into 
evidence after the completion of the hearing.

[61 FR 28027, June 4, 1996]



Sec. 747.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec. 747.38, a party may file with the NCUA Board written exceptions to 
the administrative law judge's recommended decision, findings, 
conclusions or proposed order, to the admission or exclusion of 
evidence, or to the failure of the administrative law judge to make a 
ruling proposed by a party. A supporting brief may be filed at the time 
the exceptions are filed, either as part of the same document or in a 
separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the NCUA Board if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the administrative law judge and failure to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.



Sec. 747.40  Review by the NCUA Board.

    (a) Notice of submission to NCUA Board. When the NCUA Board 
determines that the record in the proceeding is complete, the NCUA Board 
shall serve notice upon the parties that the

[[Page 551]]

proceedings has been submitted to the NCUA Board for final decision.
    (b) Oral argument before NCUA Board. Upon the initiative of the NCUA 
Board or on the written request of any party filed with the NCUA Board 
within the time for filing exceptions, the NCUA Board may order and hear 
oral argument on the recommended findings, conclusions, decision, and 
order of the administrative law judge. A written request by a party must 
show good cause for oral argument and state reasons why arguments cannot 
be presented adequately in writing. A denial of a request for oral 
argument may be set forth in the NCUA Board's final decision. Oral 
argument before the NCUA Board must be on the record.
    (c) Final Decision of NCUA Board. (1) Decisional employees may 
advise and assist the NCUA Board in the consideration and disposition of 
the case. The final decision of the NCUA Board will be based upon review 
of the entire record of the proceeding, except that the NCUA Board may 
limit the issues to be reviewed to those findings and conclusions to 
which opposing arguments or exceptions have been filed by the parties.
    (2) The NCUA Board shall render a final decision within 90 days 
after notification of the parties that the case has been submitted for 
final decision, or 90 days after oral argument, whichever is later, 
unless the NCUA Board orders that the action or any aspect thereof be 
remanded to the administrative law judge for further proceedings. Copies 
of the final decision and order of the NCUA Board shall be served upon 
each party to the proceeding, upon other persons required by statute, 
and, if directed by the NCUA Board or required by statute, upon any 
appropriate state or Federal supervisory authority.



Sec. 747.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the NCUA Board may not, unless specifically 
ordered by the NCUA Board or a reviewing court, operate as a stay of any 
order issued by the NCUA Board. The NCUA Board may, in its discretion, 
and on such terms as it finds just, stay the effectiveness of all or any 
part of its order pending a final decision on a petition for review of 
that order.



            Subpart B--Local Rules of Practice and Procedure



Sec. 747.100  Discovery limitations.

    (a) Parties to a proceeding set forth either at Sec. 747.1 of 
subpart A or in subpart C, E or G of this part may obtain discovery only 
through the production of documents. No other form of discovery shall be 
allowed.
    (b) In the event that a person producing documents pursuant to a 
document subpoena is permitted to be deposed, all questioning shall be 
strictly limited to the identification of documents produced by that 
person and a reasonable examination to determine whether the subpoenaed 
person made an adequate search for, and has produced, all subpoenaed 
documents.



Subpart C--Local Rules and Procedures Applicable to Proceedings for the 
                Involuntary Termination of Insured Status



Sec. 747.201  Scope.

    Under the authority of section 206(b) of the Act (12 U.S.C. 
1786(b)), the NCUA Board may terminate the insured status of an insured 
credit union upon the grounds set forth therein and enumerated in 
Sec. 747.202. The procedure for terminating the insured status of an 
insured credit union as therein prescribed will be followed and hearings 
required thereunder will be conducted in accordance with the rules and 
procedures set forth in this subpart and subpart A of this part. To the 
extent any rule or procedure of subpart A is inconsistent with a rule or 
procedure prescribed in this subpart C, subpart C shall control.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.202  Grounds for termination of insurance.

    The NCUA Board may institute proceedings to terminate the insured 
status of an insured credit union whenever it determines that an insured 
credit union is:

[[Page 552]]

    (a) Engaging or has engaged in unsafe or unsound practices in 
conducting its business;
    (b) In unsafe or unsound condition to continue as an insured credit 
union; or
    (c) Violating or has violated any applicable law, rule, regulation, 
order, written condition imposed by the NCUA Board in response to any 
application or request of the credit union, or any written agreement 
entered into with the NCUA Board.



Sec. 747.203  Notice of charges.

    (a) Whenever the NCUA Board determines that grounds for termination 
of insured status exists, it will, for the purpose of securing 
correction of errant or illegal conditions, serve a notice of charges 
upon the concerned credit union. This notice will contain a statement 
describing the unsafe or unsound practices, condition or the relevant 
violations.
    (b) In the case of an insured State-chartered credit union, the NCUA 
Board shall send a copy of the Notice of Charges to the appropriate 
State authority, if any, having supervision over the credit union.



Sec. 747.204  Notice of intention to terminate insured status.

    Unless correction of the practices, condition, or violations set 
forth in the Notice of Charges is made within 120 days after service of 
such statement, or within a shorter period of not less than 20 days 
after such service as the NCUA Board may require in any case where it 
determines that the insurance risk with respect to such credit union 
could be unduly jeopardized by further delay or as the appropriate State 
supervisory authority shall require in the case of an insured State-
chartered credit union, the Board, if it determines to proceed further, 
shall give to the credit union not less than 30 days written notice of 
its intent to terminate the status of the credit union as an insured 
credit union. The notice shall contain a statement of the facts 
constituting the alleged unsafe or unsound practices or conditions or 
violations on which a hearing will be held. Such hearing shall commence 
not earlier than 30 days nor later than 60 days after the date of 
service of such notice upon the credit union, unless an earlier or later 
date is set by the NCUA Board at the request of the credit union.



Sec. 747.205  Order terminating insured status.

    If, upon the record of the hearing held pursuant to Sec. 747.204, 
the NCUA Board finds that any unsafe or unsound practice or condition or 
violation specified in the notice has been established and has not been 
corrected within the time prescribed under Sec. 747.204, the NCUA Board 
may issue and serve upon the credit union an order terminating its 
status as an insured credit union on a date subsequent to the date of 
such finding and subsequent to the expiration of the time specified in 
the Notice.



Sec. 747.206  Consent to termination of insured status.

    Unless the credit union appears at the hearing designated in the 
notice of hearing by a duly authorized representative, it will be deemed 
to have consented to the termination of its status as an insured credit 
union. In the event the credit union fails to so appear at such hearing, 
the administrative law judge shall forthwith report the matter to the 
NCUA Board and the NCUA Board may thereupon issue an order terminating 
the credit union's insured status.



Sec. 747.207  Notice of termination of insured status.

    Prior to the effective date of the termination of the insured status 
of an insured credit union under section 206(b) of the Act (12 U.S.C. 
1786(b)) and at such time as the Board shall specify, the credit union 
shall mail to each member at his or her last address of record on the 
books of the credit union, and publish in not less than two issues of a 
local newspaper of general circulation, notices of the termination of 
its insured status, and the credit union shall furnish the NCUA Board 
with proof of publication of such notice. The notice shall be as 
follows:

                                 NOTICE

(Date)

    1. The status of the ______ as an insured credit union under the 
provisions of the Federal Credit Union Act, will terminate as of the 
close of business on the ____ day of ____;

[[Page 553]]

    2. Any deposits made by you after that date, either new deposits or 
additions to existing accounts, will not be insured by the National 
Credit Union Administration;
    3. Accounts in the credit union on the ____ day of ____, ____ up to 
a maximum of $100,000 for each member, will continue to be insured, as 
provided by the Federal Credit Union Act, for one (1) years after the 
close of business on the ____ day of ____, ____: Provided, however, That 
any withdrawals after the close of business on the day of ____, ____; 
will reduce the insurance coverage by the amount of such withdrawals.

(Name of Credit Union)

(Address)

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.208  Duties after termination.

    (a) After the termination of the insured status of any credit union 
under section 206(b) of the Act (12 U.S.C. 1786(b)), insurance of its 
member accounts to the extent they were insured on the effective date of 
such termination, less any amounts thereafter withdrawn which reduce the 
accounts below the amount covered by insurance on the effective date of 
such termination, shall continue for a period of one year, but no shares 
issued by the credit union or deposits made after the date of such 
termination shall be insured by the NCUA Board.
    (b) The credit union shall continue to pay premiums to the NCUA 
Board during such period and the Board shall have the right to examine 
the credit union from time to time during the period. The credit union 
shall, in all other respects, be subject to the duties and obligations 
of an insured credit union during the one year period. If the credit 
union is closed for liquidation within this period, the Board shall have 
the same powers and rights with respect to such credit union as in the 
case of an insured credit union.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



  Subpart D--Local Rules and Procedures Applicable to Suspensions and 
                    Prohibitions Where Felony Charged



Sec. 747.301  Scope.

    The rules and procedures set forth in this subpart are applicable to 
informal proceedings conducted by the NCUA Board, or a Presiding Officer 
designated by the Board, pursuant to section 206(i) of the Act (12 
U.S.C. 1786(i)), to suspend, remove and/or prohibit from office or from 
further participation any institution-affiliated party of an insured 
credit union who:
    (a) Is charged in a state, Federal or territorial information or 
indictment or complaint with committing or participating in a crime 
involving dishonesty or breach of trust, which crime is punishable by 
imprisonment for a term exceeding one year under state or Federal law; 
or
    (b) Enters a pretrial diversion or other similar program as result 
of being charged in such information or indictment or complaint with 
participating or committing such crime; or
    (c) Is convicted of such crime.

Subpart A of this part does not apply to proceedings under this subpart.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.302  Rules of practice; remainder of board of directors.

    Except as otherwise specifically provided in this subpart, the 
following provisions shall apply to proceedings conducted under this 
subpart:
    (a)(1) Power of attorney and notice of appearance. Any person who is 
a member in good standing of the bar of the highest court of any State, 
possession, territory, Commonwealth, or the District of Columbia may 
represent others before the NCUA Board or Presiding Officer designated 
by the NCUA Board upon filing with the NCUA Board a written declaration 
that he or she is currently qualified as provided by this

[[Page 554]]

paragraph, and is authorized to represent the particular party or whose 
behalf he acts. Any other person desiring to appear before or transact 
business with the NCUA Board in a representative capacity may be 
required to file with the NCUA Board a power of attorney showing his or 
her authority to act in such capacity, and he or she may be required to 
show to the satisfaction of the NCUA Board the he or she has the 
requisite qualifications. Attorneys and representatives of parties to 
proceedings shall file a written notice of appearance with the NCUA 
Board or with the Presiding Officer designated by the NCUA Board.
    (2) Summary suspension. Contemptuous conduct by any person at an 
argument before the NCUA Board or at the hearing before a Presiding 
Officer shall be grounds for exclusion therefrom and suspension for the 
duration of the argument or hearing.
    (b)(1) Notice of hearing. Whenever a hearing within the scope of 
this subpart is ordered by the NCUA Board, a notice of hearing shall be 
given by the NCUA Board to the party afforded the hearing and to any 
appropriate state supervisory authority. The notice shall state the 
time, place, and nature of the hearing and the legal authority and 
jurisdiction under which the hearing is to be held, and shall contain a 
statement of the matters of fact or law constituting the grounds for the 
hearing. It shall be delivered by personal service, by registered or 
certified mail to the last known address, or by other appropriate means, 
not later than 30 nor earlier than 60 days before the hearing.
    (2) Party. The term ``party'' means a person or agency named or 
admitted as a party, or any person or agency who has filed a written 
request and is entitled as of right to be admitted as a party; but a 
person or agency may be admitted for a limited purpose.
    (c)(1) Computation of time. In computing any period of time 
prescribed or allowed by this subpart, the date of the act, event or 
default from which the designated period of time begins to run is not to 
be included. The last day so computed shall be included, unless it is a 
Saturday, Sunday or legal holiday in the District of Columbia, in which 
event the period shall run until the end of the next day which is 
neither a Saturday, Sunday, nor such legal holiday. Intermediate 
Saturdays, Sundays, and legal holidays shall be included in the 
computation unless the time within which the act is to be performed is 
ten days or less in which event Saturdays, Sundays, and legal holidays 
shall not be included.
    (2) Service by mail. Whenever any party has the right or is required 
to do some act or take some proceeding, within a period of time 
prescribed in this subpart, after the service upon him of any document 
or other paper of any kind, and such service is made by mail, three days 
shall be added to the prescribed period from the date when the matter 
served is deposited in the U.S. mail.
    (d) Nonpublication of submissions. Unless and until otherwise 
ordered by the NCUA Board, the notice of hearing, the transcript, 
written materials submitted during the hearing, the Presiding Officer's 
recommendation to the NCUA Board and any other papers filed in 
connection with a hearing under this subpart, shall not be made public, 
and shall be for the confidential use only of the NCUA Board, the 
Presiding Officer, the parties and appropriate authorities.
    (e) Remainder of board of directors. (1) If at any time, because of 
the suspension of one or more directors pursuant to this subpart, there 
shall be on the board of directors of an insured credit union less than 
a quorum of directors not so suspended, all powers and functions vested 
in or exercisable by such board shall vest in and be exercisable by the 
director or directors on the board not so suspended, until such time as 
there shall be a quorum on the board of directors.
    (2) In the event all of the directors of an insured credit union are 
suspended pursuant to this subpart, the NCUA Board shall appoint persons 
to serve temporarily as directors in their place pending the termination 
of such suspensions, or until such time as those who have been suspended 
cease to be directors of the credit union and their respective 
successors have been elected by the members at an annual or special 
meeting and have taken office.

[[Page 555]]

    (3) Directors appointed temporarily by the NCUA Board pursuant to 
paragraph (e)(2) of this section, shall, within 30 days following their 
appointment, call a special meeting for the election of new directors, 
unless during such 30-day period--
    (i) The regular annual meeting is convened; or
    (ii) The suspensions giving rise to the appointment of temporary 
directors are terminated.



Sec. 747.303  Notice of suspension or prohibition.

    Whenever an institution-affiliated party of an insured credit union 
is charged in any state, Federal or territorial information or 
indictment or complaint with the commission of or participation in a 
crime involving dishonesty or breach of trust, which crime is punishable 
by imprisonment for a term exceeding one year under state or Federal 
law, the NCUA Board may, if continued service or participation by the 
concerned party may pose a threat to the interests of the credit union's 
members or may threaten to impair public confidence in the credit union, 
by written notice served upon such party, suspend him or her from 
office, or prohibit him or her from further participation in any manner 
in the affairs of the credit union, or both. A copy of the notice of 
suspension or prohibition shall also be served upon the credit union. 
This suspension or prohibition shall remain in effect until such 
information, indictment, or complaint is finally disposed of, or until 
such suspension or prohibition is terminated by the NCUA Board.



Sec. 747.304  Removal or permanent prohibition.

    In the event that a judgment of conviction or an agreement to enter 
a pretrial diversion or other similar program is entered against the 
institution-affiliated party, and at such time as the judgment, if any, 
is not subject to further appellate review, the NCUA Board may, if 
continued service or participation by such party may pose a threat to 
the interests of the credit union's members or may threaten to impair 
public confidence in the credit union, issue and serve upon the 
individual an order removing him or her from office or prohibiting him 
or her from further participation in any manner in the conduct of the 
affairs of the credit union except with the consent of the NCUA Board. A 
copy of such order will also be served upon such credit union. A finding 
of not guilty or other disposition of the charge will not preclude the 
NCUA Board from thereafter instituting proceedings, pursuant to the 
provisions of section 206(g) of the Act (12 U.S.C. 1786(g)) and subpart 
A of this part, to remove such director, committee member, officer, or 
other person from office or to prohibit his or her further participation 
in the affairs of the credit union.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.305  Effectiveness of suspension or removal until completion of hearing.

    Any notice of suspension or prohibition issued under Sec. 747.303 
and any order of removal or prohibition issued under Sec. 747.304 will 
be effective upon service on the concerned party and will remain 
effective and outstanding until the completion of any hearing or appeal 
authorized under section 206(i) of the Act (12 U.S.C. 1786(i)) and this 
subpart, unless such notice of suspension or order of removal is 
terminated by the NCUA Board.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.306  Notice of opportunity for hearing.

    (a) Any notice of suspension or prohibition issued pursuant to 
Sec. 747.303, and any order of removal or prohibition issued pursuant to 
Sec. 747.304, shall be accompanied by a further notice to the concerned 
individual that he or she may, within 30 says of service of such notice, 
request in writing an informal hearing at which he or she may present 
evidence and argument that his or her continued service to or 
participation in the conduct of the affairs of the credit union does 
not, or is not likely to, pose a threat to the interests of the credit 
union's members or threaten to impair

[[Page 556]]

confidence in the credit union. Any notice of the opportunity for such a 
hearing shall be accompanied by a description of the hearing procedure 
and the criteria to be considered.
    (b) A request for a hearing filed pursuant to paragraph (a) of this 
section shall state with particularly the relief desired, the grounds 
thereof, and shall include, when available, supporting evidence. The 
request and supporting evidence shall be filed in writing with the 
Secretary of the Board, National Credit Union Administration, 1775 Duke 
Street, Alexandria, VA 22314-3428.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 59 FR 
36041, July 15, 1994]



Sec. 747.307  Hearing.

    (a) Upon receipt of a request for a hearing which complies with 
Sec. 747.306, the NCUA Board will order an informal hearing to commence 
within the following 30 days in the Washington, DC metropolitan area or 
at such other place as the NCUA Board designates before a Presiding 
Officer designated by the NCUA Board to conduct the hearing. At the 
request of the concerned party, the NCUA Board may order the hearing to 
commence at a time more than 30 days after the receipt of the request 
for such hearing.
    (b) The notice of hearing shall be served by the NCUA Board upon the 
party or parties afforded the hearing and shall set forth the time and 
place of the hearing and the name and address of the Presiding Officer.
    (c) The subject individual may appear at the hearing personally, 
through counsel, or personally with counsel. The individual shall have 
the right to introduce relevant and material written materials (or, at 
the discretion of the NCUA Board, oral testimony), and to present an 
oral argument before the Presiding Officer. A member of the enforcement 
staff of the Office of General Counsel of the NCUA may attend the 
hearing and may participate as a party. Neither the formal rules of 
evidence nor the adjudicative procedures of the Administrative Procedure 
Act (5 U.S.C. 554-557), nor subpart A of this part shall apply to the 
hearing. The proceedings shall be recorded and a transcript furnished to 
the individual upon request and after the payment of the cost thereof. 
The NCUA Board shall have the discretion to permit the presentation of 
witnesses, within specified time limits, so long as a list of such 
witnesses is furnished to the Presiding Officer at least ten days prior 
to the hearing. Witnesses shall not be sworn, unless specifically 
requested by either party or directed by the Presiding Officer. The 
Presiding Officer may examine any witnesses and each party shall have 
the opportunity to cross-examine any witness presented by an opposing 
party. Upon the request of either the subject individual or the 
representative of the Office of General Counsel, the record shall remain 
open for a period of five business days following the hearing, during 
which time the parties may make any additional submissions to the 
record. Thereafter, the record shall be closed.
    (d) In the course of or in connection with any proceeding under this 
subpart, the NCUA Board and the Presiding Officer will have the power to 
administer oaths and affirmations, to take or cause depositions to be 
taken, and to issue, revoke, quash, or modify subpoenas and subpoenas 
duces tecum. If the NCUA Board permits the presentation of witnesses, 
the NCUA Board or the Presiding Officer may require the attendance of 
witnesses from any place in any state or in any territory or other place 
subject to the jurisdiction of the United States at any designated place 
where such proceeding is being conducted. Witnesses subpoenaed shall be 
paid the same fees and mileage as are paid witnesses in the District 
Courts of the United States. The NCUA Board or the Presiding Officer may 
require the production of documents from any place in any such state, 
territory, or other place.
    (e) The Presiding Officer will make his or her recommendations to 
the Board, where possible, within ten business days following the close 
of the record.

[56 FR 37767, Aug. 8, 1991, as amended at 59 FR 36042, July 15, 1994]

[[Page 557]]



Sec. 747.308  Waiver of hearing; failure to request hearing or review based on written submissions; failure to appear.

    (a) The subject individual may, in writing, waive an oral hearing 
and instead elect to have the matter determined by the NCUA Board on the 
basis of written submissions alone.
    (b) Should any concerned party fail to request in writing an oral 
hearing or consideration based on written submissions alone within 30 
days of service of the notice described in Sec. 747.306, he or she will 
be deemed to have consented to the NCUA Board's action.
    (c) Unless the concerned party appears at the hearing personally or 
by duly appointed representative, he or she will be deemed to have 
consented to the NCUA Board's action.



Sec. 747.309  Decision of the NCUA Board.

    Within 60 days following the hearing, or receipt of the subject 
individual's written submissions where hearing has been waived pursuant 
to Sec. 747.308, the NCUA Board shall notify the institution-affiliated 
party whether the suspension or prohibition will be continued, 
terminated, or otherwise modified, or whether the order of removal or 
prohibition will be rescinded or otherwise modified. Such notification 
shall contain a statement of the basis for the decision of the NCUA 
Board, if that decision is adverse to the respondent party. In the case 
of a decision favorable to the respondent on the subject of a prior 
order of removal or prohibition, the NCUA Board shall take prompt action 
to rescind or otherwise modify the order of removal or prohibition.



Sec. 747.310  Reconsideration by the NCUA Board.

    (a) The subject individual shall have ten business days following 
receipt of the decision of the NCUA Board in which to petition the NCUA 
Board for initial reconsideration.
    (b) The subject individual also shall be entitled to petition the 
NCUA Board for reconsideration of its decision any time after the 
expiration of a 12-month period from the date of the NCUA Board's 
decision, but no petition for reconsideration may be made within 12 
months of a previous petition.
    (c) Any petition shall state with particularity the basis for 
reconsideration, the relief sought, and any exceptions the individual 
has to the NCUA Board's findings. An individual's petition may be 
accompanied by a memorandum of points and authorities in support of his 
or her petition and any supporting documentation the individual may wish 
to have considered.
    (d) No hearing need be granted on such petition for reconsideration. 
Promptly following receipt of the petition, the Board shall render its 
decision.



Sec. 747.311  Relevant considerations.

    In deciding the question of suspension, prohibition, or removal 
under this subpart, the NCUA Board will consider the following:
    (a) Whether the alleged offense is a crime which is punishable by 
imprisonment for a term exceeding one year under state or Federal law, 
and which involves dishonesty or breach of trust;
    (b) Whether the continued presence of the subject individual in his 
or her position may pose a threat to the interests of the credit union's 
members because of the nature and extent of the individual's 
participation in the affairs of the insured credit union and/or the 
nature of the offense with the commission of or participation in which 
the individual has been charged;
    (c) Whether there is cause to believe that there may be an erosion 
of public confidence in the integrity, safety, or soundness of a 
particular credit union (either generally or in the particular locality 
in which the credit union is situated) if the subject individual is 
permitted to remain in his or her position in an insured credit union;
    (d) Whether the individual is covered by the credit union's fidelity 
bond and, if so, whether the bond is likely to be revoked, or whether 
coverage under the bond will be affected adversely as a result of the 
information, indictment, complaint, judgment of conviction or entry into 
a pretrial diversion or other similar program; and
    (e) The NCUA Board may consider any other factors which, in the 
specific case, appear relevant to the decision to continue in effect, 
rescind, terminate, or modify a suspension, prohibition, or

[[Page 558]]

removal order, except that it shall not consider the ultimate question 
of the guilt or innocence of the subject individual with regard to the 
crime with which he or she has been charged.



Subpart E--Local Rules and Procedures Applicable to Proceedings Relating 
     to the Suspension or Revocation of Charters and to Involuntary 
                       Liquidations Under Title I



Sec. 747.401  Scope.

    The rules and procedures set forth in this subpart and subpart A of 
this part are applicable to proceedings by the NCUA Board pursuant to 
section 120(b)(1) of the Act (12 U.S.C. 1766(b)(1)) to suspend or revoke 
the charter of a solvent Federal credit union, and to place a solvent 
Federal credit union into involuntary liquidation. To the extent a rule 
or procedure set forth in subpart A of this part is inconsistent with a 
rule or procedure set forth in this subpart E, subpart E shall control.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.402  Grounds for suspension or revocation of charter and for involuntary liquidation.

    (a) Grounds in general. The NCUA Board may suspend or revoke the 
charter of any Federal credit union, and place such credit union into 
involuntary liquidation and appoint a liquidating agent therefor, upon 
its finding that the credit union has violated any provision of its 
charter or bylaws or of the FCUA or regulations issued thereunder.
    (b) Immediate suspension. In any case where the Board determines 
that the grounds set forth in paragraph (a) of this section exist and 
that immediate action is necessary in order to prevent further 
dissipation or credit union assets or earnings, or further weakening of 
the credit union's condition, or to otherwise protect the interest of 
the credit union's insured members or the National Credit Union Share 
Insurance Fund, it may order without prior notice the immediate 
suspension of the charter of such credit union, and if the circumstances 
so warrant, may take possession of all books, records, assets, and 
property of every description of such credit union.



Sec. 747.403  Notice of intent to suspend or revoke charter; notice of suspension.

    (a) Upon its determination that one or more of the grounds listed in 
Sec. 747.402(a) exists, or that because of conditions described in 
Sec. 747.402(b) immediate suspension of charter is necessary, the NCUA 
Board shall cause to be served upon that credit union a notice of intent 
to suspend or revoke charter and of intent to place into involuntary 
liquidation, or a notice of suspension. Such notice shall contain a 
statement of the facts which constitute the grounds for this action, a 
recitation of the options available to the credit union under paragraph 
(b) of this section, and an explanation of the results that will occur 
if the credit union fails to exercise said options.
    (b) Not later than 40 days after the receipt of the notice provided 
for in paragraph (a) of this section, the Federal credit union may file 
with the NCUA Board a statement in writing setting forth the grounds and 
reasons why its charter should not be suspended or revoked and why it 
should not be placed into involuntary liquidation; or in lieu of a 
written statement, request an oral hearing which shall be conducted in 
accordance with the procedures set forth in this subpart. This statement 
or request shall be accompanied by a certified copy of a resolution of 
the board of directors of the Federal credit union concerned authorizing 
such statement or request, such certification to be made by the 
president and secretary of the board of directors.
    (c) If the Federal credit union concerned does not exercise either 
alternative available in paragraph (b) of this section within the time 
required, it shall be deemed to have admitted the facts alleged in the 
notice and may be deemed to have consented to the relief sought.



Sec. 747.404  Notice of hearing.

    (a) Upon receipt of a request for hearing which complies with 
Sec. 747.403(b), the NCUA Board shall transmit the request

[[Page 559]]

to the Office of Financial Institution Adjudication (``OFIA''). Such 
hearing shall commence no earlier than 30 days nor later than 60 days 
after the date the OFIA receives the request for a hearing, unless an 
earlier or later date is requested by the Federal credit union concerned 
and is granted by the NCUA Board in its discretion.
    (b) Except as provided in Sec. 747.405(b), the procedures of the 
Administrative Procedure Act (5 U.S.C. 554-557) and subpart A of this 
part will apply to the hearing.
    (c) Unless the Federal credit union shall appear at such hearing by 
a duly authorized representative it shall be deemed to have consented to 
the suspension or revocation of its charter and to the placing of said 
credit union into involuntary liquidation.



Sec. 747.405  Issuance of order.

    (a) In the event of such consent as referred to in Sec. 747.403(c) 
or Sec. 747.404(c), or if upon the record made at any such hearing as 
referred to in Sec. 747.403(b), the NCUA Board finds that the charter of 
the Federal credit union concerned should be suspended or revoked and 
the credit union closed and placed into involuntary liquidation, it 
shall cause to be served on such credit union an order directing the 
suspension or revocation of its charter and directing that it be closed 
and placed into involuntary liquidation. Such order shall contain a 
statement of the findings upon which the order is based. Additionally, 
the NCUA Board shall appoint a liquidating agent or agents.
    (b) The NCUA Board shall render its decision and cause such order to 
be served not later than 45 days after receipt of consent, or written 
submissions as the case may be, or in the case of a formal hearing after 
service or the notice of submission referred to in Sec. 747.40(a).
    (c) Upon the receipt of a copy of the order which provides that the 
Federal credit union concerned be placed into involuntary liquidation, 
the officers and directors of that Federal credit union shall 
immediately deliver to the agent for the liquidating agent possession 
and control of all books, records, assets, and property of every 
description of the Federal credit union, and the agent for the 
liquidating agent shall proceed to convert said assets to cash, collect 
all debts due to said Federal credit union and to wind up its affairs in 
accordance with the provisions of the Act.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.406  Cancellation of charter.

    Upon the completion of the liquidation and certification by the 
agent for the liquidating agent that the distribution of the assets of 
the Federal credit union has been completed, the NCUA Board shall cancel 
the charter of the Federal credit union concerned.

Subpart F--Local Rules and Procedures Applicable to Proceedings Relating to 
the Termination of Membership in the Central Liquidity Facility [Reserved]



    Subpart G--Local Rules and Procedures Applicable to Recovery of 
Attorneys Fees and Other Expenses Under the Equal Access To Justice Act 
                       in NCUA Board Adjudications



Sec. 747.601  Purpose and scope.

    This subpart contains the regulations of the NCUA implementing the 
Equal Access to Justice Act (5 U.S.C. 504), as amended (``EAJA''). The 
EAJA provides for the award of attorneys fees and other expenses to 
eligible individuals and entities who are parties to proceedings 
conducted under this part. An eligible party may receive an award when 
it prevails over NCUA in a proceeding, or in a significant and discrete 
substantive portion of the proceeding, unless the position of the NCUA 
was substantially justified or special circumstances make an award 
unjust. The rules in this subpart describe the parties eligible for fee 
awards, explain how to apply for awards and the procedures and standards 
that NCUA will use to make them. To the extent a rule or procedure set 
forth in subpart A of this part is inconsistent with a rule or procedure 
set forth in this subpart G, subpart G will control.

[[Page 560]]



Sec. 747.602  Eligibility of applicants.

    (a) To be eligible for an award of attorneys fees and expenses, an 
applicant must be a prevailing party in the proceeding for which it 
seeks an award and must be:
    (1) An individual with a net worth of not more than $2 million;
    (2) The sole owner of an unincorporated business who has a net worth 
of not more than $7 million, including both personal and business 
interests and not more than 500 employees at the time the proceeding was 
commenced (an applicant who owns an unincorporated business will be 
considered as an ``individual'' rather than a ``sole owner of an 
unincorporated business'' if the issues on which the applicant prevails 
are related primarily to personal interests rather than to business 
interests);
    (3) A charitable or other tax-exempt organization described in 
section 501(c)(3) of the Internal Revenue Code (26 U.S.C. 501(c)(3)) 
with not more than 500 employees;
    (4) A cooperative association as defined in section 15(a) of the 
Agricultural Marketing Act (12 U.S.C. 1141j(a)) with not more than 500 
employees; or
    (5) Any other partnership, corporation, association, or public or 
private organization with a net worth of not more than $7 million and 
not more than 500 employees.
    (b) For the purpose of determining eligibility, the net worth of an 
applicant and the number of employees of an applicant shall be 
determined as of the date the proceeding was initiated.
    (c) The applicant's net worth includes the value of any assets 
disposed of for the purpose of meeting an eligibility standard and 
excludes any obligations incurred for this purpose. Transfers of assets 
or obligations incurred for less than reasonably equivalent value will 
be presumed to have been made for this purpose.
    (d) The employees of an applicant include all persons who regularly 
perform services for remuneration for the applicant, under the 
applicant's direction and control; part-time employees shall be included 
on a proportional basis.
    (e) The net worth and number of employees of the applicant and all 
of its affiliates shall be aggregated to determine eligibility. Any 
individual, corporation or other entity that directly or indirectly 
controls or owns a majority of the voting shares or other interest of 
the applicant, or any corporation or other entity of which the applicant 
directly or indirectly owns or controls a majority of the voting shares 
or other interest, will be considered an affiliate for purposes of this 
subpart, unless the NCUA Board determines that such treatment would be 
unjust and contrary to the purposes of the EAJA in light of the actual 
relationship between the affiliated entities. In addition, the NCUA 
board may determine that financial relationships of the applicant other 
than those described in this paragraph constitute special circumstances 
that would make an award unjust.
    (f) An applicant that participates in a proceeding primarily on 
behalf of one or more other persons or entities that would be ineligible 
is not itself eligible for an award.



Sec. 747.603  Prevailing party.

    An eligible applicant may be a ``prevailing party'' if the applicant 
wins an action after a full hearing or trial on the merits, if a 
settlement of the proceeding was effected on terms favorable to it, or 
if the proceeding against it has been dismissed. In appropriate 
situations an applicant may also have prevailed if the outcome of the 
proceeding has substantially vindicated the applicant's position on the 
significant substantive matters at issue, even though the applicant has 
not totally avoided adverse final action.



Sec. 747.604  Standards for award.

    (a) A prevailing party may receive an award for fees and expenses 
incurred in connection with a proceeding, or in a significant and 
discrete substantive portion of the proceeding, by or against NCUA 
unless the position of NCUA during the proceeding was substantially 
justified. The burden of proving that an award should not be made is on 
counsel for NCUA. To avoid an award, counsel for NCUA must show that its 
position was reasonable in law and in fact.

[[Page 561]]

    (b) An award will be reduced or denied if the applicant has unduly 
or unreasonably protracted the proceeding or if special circumstances 
make the award sought unjust.
    (c) Where an applicant has prevailed on one or more discrete 
substantive issues in a proceeding, even though all the issues were not 
resolved in its favor, any award shall be based on the fees and expenses 
incurred in connection with the discrete significant substantive issue 
or issues on which the applicant's position has been upheld. If such 
segregation of costs is not practicable, the award may be based on a 
fair proration of those fees and expenses incurred in the entire 
proceeding which would be recoverable under this section if proration 
were not performed.
    (d) Whether separate or prorated treatment under the preceding 
paragraph, including the applicable proration percentage, is appropriate 
shall be determined on the facts of the particular case. Attention shall 
be given to the significance and nature of the respective issues and 
their separability and interrelationship.



Sec. 747.605  Allowable fees and expenses.

    (a) Except as provided by Sec. 747.604(b), awards will be based on 
rates customarily charged by persons engaged in the business of acting 
as attorneys, agents and expert witnesses, even if the services were 
made available without charge or at a reduced rate.
    (b) No award under this subpart for the fee of an attorney or agent 
may exceed $75.00 per hour. No award to compensate an expert witness may 
exceed the highest rate at which NCUA is permitted to pay expert 
witnesses. However, an award may also include the reasonable expenses of 
the attorney, agent or witness as a separate item, if the attorney, 
agent or witness ordinarily charges clients separately for such 
expenses.
    (c) In determining the reasonableness of the fee sought for an 
attorney, agent, or expert witness, the NCUA Board shall consider the 
following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fee for like services, or, if he or she 
is an employee of the applicant, the fully allocated cost of the 
services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;
    (3) The time actually spent in the representation of the applicant;
    (4) Such other factors as may bear on the value of the services 
provided.
    (d) The reasonable cost of any study, analysis, report, test, 
project, or similar matter prepared on behalf of the party may be 
awarded to the extent that the charge for the service does not exceed 
the prevailing rate for similar services, and the study or other matter 
was necessary for preparation of the applicant's case.



Sec. 747.606  Contents of application.

    (a) A prevailing eligible party, as defined in Secs. 747.602, 
747.603, and 747.604, seeking an award under this section, must file an 
application for an award of fees and expenses with the Secretary of the 
NCUA Board. The application shall include the following information:
    (1) The identity of the applicant and the proceeding for which an 
award is sought;
    (2) A showing that the applicant has prevailed and an identification 
of the issues in the proceeding on which the applicant believes that the 
position of NCUA was not substantially justified;
    (3) A statement, with supporting documentation, that the applicant 
is an eligible party, as defined by Sec. 747.602. If the applicant is an 
individual, he or she must state that his or her net worth does not 
exceed $2 million. If the applicant is not an individual, it shall state 
the number of its employees and that its net worth does not exceed $7 
million as of the date the proceeding was initiated. However, an 
applicant may omit a statement of net worth if:
    (i) It attaches a copy of a ruling by the Internal Revenue Service 
that it qualifies as an organization described in section 501(c)(3) of 
the Internal Revenue Code (26 U.S.C. 501(c)(3)) or, in the case of a 
tax-exempt organization not required to obtain a ruling from the 
Internal Revenue Service on its exempt status, a statement that 
describes the basis for the applicant's belief that it qualifies under 
such section; or

[[Page 562]]

    (ii) It states that it is a cooperative association as defined in 
section 15(a) of the Agricultural Marketing Act (12 U.S.C. 1141j(a));
    (4) A Statement of the amount of fees and expenses for which an 
award is sought; and
    (5) Any other matters that the applicant believes may assist or 
wishes the NCUA Board to consider in determining whether and in what 
amount an award should be made.
    (b) The application shall be signed by the applicant or an 
authorized officer or attorney of the applicant. It shall also contain 
or be accompanied by a written verification under oath or under penalty 
of perjury that the information provided in the application is true and 
correct.
    (c) The application and documentation requirements of this subpart 
are required by law as a prerequisite to obtaining a benefit under the 
EAJA and this subpart.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.607  Statement of net worth.

    (a) Each applicant (other than a qualified tax exempt organization 
or cooperative association) must provide a detailed statement showing 
the net worth of the applicant and any affiliates, as defined in 
Sec. 747.602(a), when the proceeding was initiated. The exhibit may be 
in any form convenient to the applicant that provides full disclosure of 
the applicant's and its affiliates' assets and liabilities and is 
sufficient to determine whether the applicant is an eligible party. The 
administrative law judge or the NCUA Board may require additional 
information from the applicant to determine eligibility. Unless 
otherwise ordered by the Board or required by law, the statement shall 
be kept confidential and used by the NCUA Board only in making its 
determination of an award.
    (b) If the applicant or any of its affiliates is a Federal credit 
union, the portion of the statement of net worth which relates to the 
Federal credit union shall consist of a copy of the Federal credit 
union's last Statement of Financial Condition filed before the 
initiation of the underlying proceeding.
    (c) All statements of net worth shall describe any transfers of 
assets from or obligations incurred by the applicant or any affiliate, 
occurring in the six-month period prior to the date on which the 
proceeding was initiated, which reduced the net worth of the applicant 
and its affiliates below the applicable net-worth ceiling. If there were 
none, the applicant shall so state.



Sec. 747.608  Documentation of fees and expenses.

    The application shall be accompanied by full documentation of the 
fees and expenses, including the cost of any study, analysis, audit, 
test, project or similar matter, for which an award is sought. A 
separate itemized statement shall be submitted for each professional 
firm or individual whose services are covered by the application, 
showing hours spent in connection with the proceeding by each 
individual, a description of the specific services performed, the rate 
at which each fee has been computed, any expenses for which 
reimbursement is sought, the total amount claimed, and the total amount 
paid or payable by the applicant or by any other person or entity for 
the services provided. The administrative law judge or the NCUA Board 
may require the applicant to provide vouchers, receipts, or other 
substantiation for any expenses claimed.



Sec. 747.609  Filing and service of applications.

    (a) An application may be filed whenever the applicant has prevailed 
in the proceeding or in a significant and discrete substantive portion 
of the proceeding, but in no case later than 30 days after the Board's 
final disposition of the proceeding.
    (b) If review or reconsideration is sought or taken of a decision on 
which an applicant believes it has prevailed, proceedings for the award 
of fees shall be stayed pending final disposition of the underlying 
controversy.
    (c) As used in this subpart, final disposition means the issuance of 
a final order or any other final resolution of a proceeding, such as a 
settlement or voluntary dismissal.
    (d) Any application for an award of fees and expenses shall be filed 
with

[[Page 563]]

the Secretary of the Board, National Credit Union Administration, 1775 
Duke Street, Alexandria, VA 22314-3428. Any application for an award and 
any other pleading or document related to an application, shall be filed 
and served on all parties to the proceeding in the same manner as other 
pleadings in the proceeding, except as provided in Sec. 747.607(a) for 
statements of net worth.

[56 FR 37767, Aug. 8, 1991, as amended at 59 FR 36041, July 15, 1994]



Sec. 747.610  Answer to application.

    (a) Within 30 days after service of an application, counsel for NCUA 
may file an answer to the application. Unless counsel for NCUA requests 
and is granted an extension of time for filing or files a statement of 
intent to negotiate under paragraph (b) of this section, failure to file 
an answer within the 30-day period will be treated as a consent to the 
award requested.
    (b) If counsel for NCUA and the applicant believe that the issues in 
the fee application can be settled, they may jointly file a statement of 
their intent to negotiate a settlement. The filing of this statement 
shall extend the time for filing an answer for an additional 30 days, 
and further extensions may be granted by the NCUA Board upon the joint 
request of counsel for NCUA and the applicant.
    (c) The answer shall explain in detail any objections to the award 
requested and identify the facts relied on in support of counsel's 
position. If the answer is based on any alleged facts not already in the 
record of the proceeding, counsel shall include with the answer a 
request for further proceedings under Sec. 747.613.
    (d)(1) The applicant may file a reply if counsel for NCUA has 
addressed in his or her answer any of the following issues:
    (i) That the position of NCUA in the proceeding was substantially 
justified;
    (ii) That the applicant unduly protracted the proceedings; or
    (iii) That special circumstances make an award unjust.
    (2) The reply shall be filed within 15 days after service of the 
answer. If the reply is based on any alleged facts not already in the 
record of the proceeding, the applicant shall include with the reply a 
request for further proceedings under Sec. 747.613.



Sec. 747.611  Comments by other parties.

    Any party to a proceeding other than the applicant and counsel for 
NCUA may file comments on an application within 30 days after service of 
the application or on an answer within 15 days after service of the 
answer. A commenting party may not participate further in proceedings on 
the application unless the administrative law judge or the NCUA Board 
determines that the public interest requires such participation in order 
to permit full exploration of matters raised in the comment.



Sec. 747.612  Settlement.

    The applicant and counsel for NCUA may agree on a proposed 
settlement of the award before final action on the application, either 
in connection with a settlement of the underlying proceeding, or after 
the underlying proceeding has been concluded, in accordance with NCUA's 
standard settlement procedure. If a prevailing party and counsel for 
NCUA agree on a proposed settlement of an award before an application 
has been filed, the application shall be filed with the proposed 
settlement.



Sec. 747.613  Further proceedings.

    (a) After the expiration of the time allowed for the filing of all 
documents necessary for the determination of a recommended fee award, 
the NCUA Board shall transmit the entire record to the administrative 
law judge who presided at the underlying proceeding. Ordinarily, the 
determination of an award will be made on the basis of the written 
record. However, on request of either the applicant or counsel for NCUA, 
or on its own initiative, the administrative law judge or the NCUA Board 
may order further proceedings, such as an informal conference, oral 
argument, additional written submissions or an evidentiary hearing. Such 
further proceedings shall be held only when necessary for full and fair 
resolution of the issues arising from the application, and shall be 
conducted as promptly as possible.

[[Page 564]]

    (b) A request that the administrative law judge or the NCUA Board 
order further proceedings under this section shall specifically identify 
the information sought or the disputed issues and shall explain why the 
additional proceedings are necessary to resolve the issues.



Sec. 747.614  Recommended decision.

    The administrative law judge shall file a recommended decision on 
the application with the NCUA Board within 60 days after completion of 
the proceedings on the application. The recommended decision shall 
include written findings and conclusions on the applicant's eligibility 
and status as a prevailing party, and an explanation of the reasons for 
any difference between the amount requested and the amount awarded. The 
recommended decision shall also include, if at issue, findings on 
whether NCUA's position was substantially justified, whether the 
applicant unduly protracted the proceedings, or whether special 
circumstances make an award unjust. If the applicant has sought an award 
against more than one agency, the recommended decision shall allocate 
responsibility for payment of any award made among the agencies, and 
shall explain the reasons for the allocation made. The administrative 
law judge shall file with and certify to the NCUA Board the record of 
the proceeding on the fee application, the recommended decision and 
proposed order. Promptly upon such filing, the NCUA Board shall serve 
upon each party to the proceeding a copy of the administrative law 
judge's recommended decision, findings, conclusions and proposed order. 
The provisions of this section and Sec. 747.613 shall not apply, 
however, in any case where the hearing was held before the NCUA Board.



Sec. 747.615  Decision of the NCUA Board.

    Within 15 days after service of the recommended decision, findings, 
conclusions, and proposed order, the applicant or counsel for NCUA may 
file with the NCUA Board written exceptions thereto. A supporting brief 
may also be filed. The NCUA Board shall render its decision within 60 
days after the matter is submitted to it. The NCUA Board shall furnish 
copies of its decision and order to the parties. Judicial review of the 
NCUA Board's final decision and order may be obtained as provided in 5 
U.S.C. 504(c)(2).



Sec. 747.616  Payment of award.

    An applicant seeking payment of an award granted by the NCUA Board 
shall submit to the NCUA's Office of the Controller a copy of the NCUA 
Board's Final Decision and Order granting the award, accompanied by a 
statement that it will not seek review of the decision and order in the 
United States court. All submissions shall be addressed to the Office of 
the Controller, National Credit Union Administration, 1775 Duke Street, 
Alexandria, VA 22314-3428. The NCUA will pay the amount awarded within 
60 days after receiving the applicant's statement, unless judicial 
review of the award or of the underlying decision of the adversary 
adjudication has been sought by the applicant or any other party to the 
proceeding.

[56 FR 37767, Aug. 8, 1991, as amended at 59 FR 36041, July 15, 1994]



   Subpart H--Local Rules and Procedures Applicable to Investigations



Sec. 747.701  Applicability.

    The rules in this subpart apply only to informal and formal 
investigations conducted by the NCUA Board itself or its delegates. They 
do not apply to adjudicative or rulemaking proceedings or to routine, 
periodic or special examinations conducted by the NCUA Board's staff.



Sec. 747.702  Information obtained in investigations.

    Information and documents obtained by the Board in the course of any 
investigation, unless made a matter of public record by the NCUA Board, 
shall be deemed non-public, but the NCUA Board approves the practice 
whereby the General Counsel may engage in, and may authorize any person 
acting on his or her behalf or at his or her direction to engage in, 
discussions with representatives of domestic or foreign

[[Page 565]]

governmental authorities, self-regulatory organizations, and with 
receivers, trustees, masters and special counsels or special agents 
appointed by and subject to the supervision of the courts of the United 
States, concerning information obtained in individual investigations, 
including investigations conducted pursuant to any order entered by the 
NCUA Board or its General Counsel pursuant to delegated authority.



Sec. 747.703  Authority to conduct investigations.

    (a) The General Counsel and persons acting on his or her behalf and 
at his or her direction may conduct such investigations into the affairs 
of any insured credit union or institution-affiliated parties as deemed 
appropriate to determine whether such credit union or party has 
violated, is violating or is about to violate any provision of the Act, 
the NCUA Board's regulations or other relevant statutes or regulations 
that may bear on a party's fitness to participate in the affairs of a 
credit union. The General Counsel and persons acting on his or her 
behalf may investigate whether any party is unfit to participate in the 
affairs of a credit union, whether formal enforcement proceedings are 
warranted, or such other matters as the General Counsel or his or her 
designee, in his or her discretion, shall deem appropriate. Such 
investigations may be conducted either informally or formally.
    (b) Formal investigations involve the exercise of the NCUA Board's 
subpoena power and are referred to here as formal investigative 
proceedings. In formal investigative proceedings, the General Counsel 
and those to whom he or she delegates authority to act on his or her 
behalf and at his or her direction have augmented investigatory powers 
and need not rely on the powers available to them in informal 
investigations, and they may gather evidence through the issuance of 
subpoenas compelling the production of documents or testimony as well. 
In informal investigations evidence may be gathered ordinarily through 
the use of investigatory procedures or credit union examinations and 
through voluntary statements and submissions.
    (c) The NCUA Board has delegated authority to the General Counsel, 
or designee thereof, to institute formal investigative proceedings by 
the entry of an order indicating the purpose of the investigation and 
the designation of persons to conduct that investigation on his or her 
behalf and at his or her direction. This delegation also extends to the 
NCUA Board's role as liquidator and conservator of insured credit 
unions. The power to issue a subpoena may not be delegated outside the 
agency. The General Counsel may amend such order as he deems 
appropriate.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



  Subpart I--Local Rules Applicable to Formal Investigative Proceedings



Sec. 747.801  Applicability.

    The rules in this subpart are applicable to a witness who is sworn 
in a formal investigative proceeding. Formal investigative proceedings 
may be held before the NCUA Board, before one or more of its members, or 
before any officer designated by the NCUA Board or its General Counsel, 
as described in subpart H of this part, and with or without the 
assistance of such other counsel as the NCUA Board deems appropriate, 
for the purpose of taking testimony of witnesses, conducting an 
investigation and receiving other evidence. The term ``officer 
conducting the investigation'' shall mean any of the foregoing.



Sec. 747.802  Non-public formal investigative proceedings.

    Unless otherwise ordered by the NCUA Board, all formal investigative 
proceedings shall be non-public.



Sec. 747.803  Subpoenas.

    (a) Issuance. In the course of a formal investigative proceeding the 
officer conducting the investigation may issue a subpoena directing the 
party named therein to appear before the officer conducting the 
investigation at a specified time and place to testify or to produce 
documentary evidence, or

[[Page 566]]

both, relating to any matter under investigation.
    (b) Service. Service of subpoenas shall be effected in the following 
manner:
    (1) Service upon a natural party. Delivery of a copy of a subpoena 
to a natural person may be effected by--
    (i) Handling it to the person;
    (ii) Leaving it at his or her office with the person in charge 
thereof or, if there is no one in charge, by leaving it at a conspicuous 
place there;
    (iii) Leaving it at his or her dwelling place or usual place of 
abode with some person of suitable age and discretion who is found 
there; or
    (iv) Mailing it be registered or certified mail to him or her at his 
or her last known address. In the event that personal service as 
described in this paragraph is impracticable, any other method whereby 
actual notice is given to the respondent may be employed.
    (2) Service upon other persons. When the person to be served is not 
a natural person, delivery of a copy of the subpoena may be effected 
by--
    (i) Handing it to a registered agent for service, or to any officer, 
director, or agent in charge of any office of such person;
    (ii) Mailing it by registered or certified mail to any such 
representative at his or her last known address; or
    (iii) Any other method whereby actual notice is given to any such 
representative.
    (c) Witness fees and mileage. Witnesses appearing pursuant to 
subpoena shall be paid the same fees and mileage that are paid to 
witnesses in the United States district courts. Any such fees and 
mileage payments need be paid only upon submission of a properly 
completed application for reimbursement and in no event need they be 
paid sooner than 30 days after the appearance of the witness pursuant to 
subpoena.
    (d) Enforcement. Whenever it appears to the General Counsel that any 
person upon whom a subpoena was properly served pursuant to these Rules 
is refusing to fully comply with the terms of that subpoena, then the 
General Counsel, in his or her discretion, may apply to the courts of 
the United States for enforcement of such subpoena.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.804  Oath; false statements.

    At the discretion of the officer conducting the investigation, 
testimony of a witness may be taken under oath and administered by the 
officer. Any person making false statements under oath during the course 
of a formal investigative proceeding is subject to the criminal 
penalties for perjury in 18 U.S.C. 1621. Any person who knowingly and 
willfully makes false and fraudulent statements, whether under oath or 
otherwise, or who falsifies, conceals or covers up any material fact, or 
submits any false, fictitious or fraudulent information in connection 
with such a proceeding, is subject to the criminal penalties set forth 
in 18 U.S.C. 1001.



Sec. 747.805  Self-incrimination; immunity.

    (a) Self-incrimination. Except as provided in paragraph (b) of this 
section, a witness testifying or otherwise giving information in a 
formal investigative proceeding may refuse to answer questions on the 
basis of his or her right against self-incrimination granted by the 
Fifth Amendment of the Constitution of the United States.
    (b) Immunity. (1) No officer conducting any formal investigative 
proceeding (or any other informal investigation or examination) shall 
have the power to grant or promise any party any immunity from criminal 
prosecution under the laws of the United States or of any other 
jurisdiction.
    (2) If the NCUA Board believes that the testimony or other 
information sought to be obtained from any party may be necessary to the 
public interest and that party has refused or is likely to refuse to 
testify or provide other information on the basis of his or her 
privilege against self-incrimination, the NCUA Board, with the approval 
of the Attorney General, may issue an order requiring the party to give 
testimony or provide other information that he or she has previously 
refused to provide on the basis of self-incrimination.
    (3) Whenever a witness refuses, on the basis of his privilege 
against self-

[[Page 567]]

incrimination, to testify or provide other information in a formal 
investigative proceeding, and the officer conducting the investigation 
communicates to that person an order of the NCUA Board requiring him or 
her to testify or provide other information, the witness may not refuse 
to comply with the order on the basis of his or her privilege against 
self-incrimination; but no testimony or other information compelled 
under the order (or any information directly or indirectly derived from 
such testimony or other information) may be used against the witness in 
any criminal case, except a prosecution for perjury, giving a false 
statement, or otherwise failing to comply with the order.



Sec. 747.806  Transcripts.

    Transcripts, if any, of formal investigative proceedings shall be 
recorded solely by the official reporter, or by any other person or 
means designated by the officer conducting the investigation. A party 
who has submitted documentary evidence or testimony in a formal 
investigative proceeding shall be entitled, upon written request, to 
procure a copy of his or her documentary evidence or a transcript of his 
or her testimony on payment of the appropriate fees; provided, however, 
that in a non-public formal investigative proceeding the NCUA Board may 
for good cause deny such request or the NCUA Board may place reasonable 
limitations upon the use of the documentary evidence and transcript. In 
any event, any witness, upon proper identification, shall have the right 
to inspect the official transcript of the witness's own testimony.



Sec. 747.807  Rights of witnesses.

    (a) In the event that a formal investigative proceeding is conducted 
pursuant to a specific order entered by the NCUA Board or by its General 
Counsel, then any party who is compelled or requested to provide 
documentary evidence or testimony as part of such proceeding shall, upon 
request, be shown a copy of the NCUA Board's or its delegate's order. 
Copies of such orders shall not be provided for their retention to such 
persons requesting same except in the sole discretion of the General 
Counsel or his designee.
    (b) Any party compelled to appear, or who appears by request or 
permission of the officer conducting the investigation, in person at a 
formal investigative proceeding may be accompanied, represented and 
advised by counsel who is a member of the bar of the highest court of 
any state; provided however, that all witnesses in such proceeding shall 
be sequestered, and unless permitted in the discretion of the officer 
conducting the investigation, no witness or the counsel accompanying any 
such witness shall be permitted to be present during the examination of 
any other witness called in such proceeding.
    (c)(1) The right of a witness to be accompanied, represented and 
advised by counsel shall mean the right to have an attorney present 
during any formal investigative proceeding and to have the attorney--
    (i) Advise such person before, during and after such testimony;
    (ii) Question such person briefly at the conclusion of his testimony 
to clarify any answers such person has given; and
    (iii) Make summary notes during such testimony solely for the use of 
such person.
    (2) From time to time, in the discretion of the officer, it shall be 
necessary for persons other than the witness and his or her counsel to 
attend non-public investigative proceedings. For example, the officer 
may deem it appropriate that outside counsel to the NCUA Board attend 
and advise him or her concerning the proceeding including the 
examination of a particular witness. In these circumstances, outside 
counsel would not be an officer as that term is used. In other 
circumstances, it may be appropriate that a technical expert (such as an 
accountant) accompany the witness and his or her counsel in order to 
assist counsel in understanding technical issues. These latter 
circumstances should be rare, are left to the discretion of the officer 
conducting the investigation, and shall not in any event be allowed to 
serve as a ruse to coordinate testimony between witnesses, to oversee or 
supervise the testimony of any witnesses, or

[[Page 568]]

otherwise defeat the beneficial effects of the witness sequestration 
rule.
    (d) The officer conducting the investigation may report to the NCUA 
Board any instances where any witness or counsel has been guilty of 
dilatory, obstructionist or contumacious conduct during the course of a 
formal investigative proceeding or any other instance of violations of 
these rules. The NCUA Board will thereupon take such further action as 
the circumstance may warrant including barring the offending person from 
further participation in the particular formal investigative proceeding 
or even from further practice before the Board.



  Subpart J--Local Procedures and Standards Applicable to a Notice of 
  Change in Senior Executive Officers, Directors of Committee Members 
                   Pursuant to Section 212 of the Act



Sec. 747.901  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the notice filed by a credit union pursuant to section 212 of the Act 
(12 U.S.C. 1790a) and Sec. 701.14 of this chapter, for the consent of 
the NCUA to add to or replace an individual on the board of directors or 
supervisory or credit committee, or to employ any individual as a senior 
executive officer or change the responsibilities of any individual to a 
position of senior executive officer where the credit union either has 
been chartered less than 2 years; or is in ``troubled condition,'' as 
defined in Sec. 701.14 of this chapter. Subpart A of this part shall not 
apply to any proceeding under this subpart.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 60 FR 
31911, June 19, 1995]



Sec. 747.902  Grounds for disapproval of notice.

    The NCUA Board or its designee may issue a notice of disapproval 
with respect to a notice submitted by a credit union pursuant to section 
212 of the Act (12 U.S.C. 1790a) and Sec. 701.14 of this chapter, where 
the competence, experience character or integrity of the individual with 
respect to whom such notice is submitted indicates that it would not be 
in the best interest of the members of the credit union or the public to 
permit the individual to be employed by or associated with, such credit 
union.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 60 FR 
31911, June 19, 1995]



Sec. 747.903  Procedures where notice of disapproval issued; reconsideration.

    (a) The notice of disapproval shall be served upon the federally 
insured credit union and the candidate for director, committee member or 
senior executive officer. The notice of disapproval shall:
    (1) Summarize or cite the relevant consideration specified in 
Sec. 747.902;
    (2) Inform the individual and the credit union that, within 15 days 
of receipt of the notice of disapproval, they can request 
reconsideration by the Regional Director of the initial determination, 
or can appeal the determination directly to the NCUA Board;
    (3) Specify what additional information, if any, must be considered 
in the reconsideration.
    (b) The request for reconsideration by the Regional Director must be 
filed at the appropriate Regional Office.
    (c) The Regional Director shall act on a request for reconsideration 
within 30 days of its receipt.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992]



Sec. 747.904  Appeal.

    (a) Time for filing. Within 15 days after issuance of a Notice of 
Disapproval or a determination on a request for reconsideration by the 
Regional Director, the individual or credit union (henceforth 
petitioner) may appeal by filing with the NCUA Board a written request 
for appeal.
    (b) Contents of request. Any appeal must be in writing and include:
    (1) The reasons why the NCUA Board should review the disapproval; 
and
    (2) Relevant, substantive and material facts that for good cause 
were not previously set forth in the notice required to be filed 
pursuant to section 212 of the Act (12 U.S.C. 1790a) and Sec. 701.14 of 
this chapter.
    (c) Procedures for review of request. Within 30 days of the NCUA 
Board's receipt of an appeal, the NCUA Board

[[Page 569]]

may request in writing that the petitioner submit additional facts and 
records to support the appeal. The petitioner shall have 15 days from 
the date of issuance of such written request to provide such additional 
information. Failure by the petitioner to provide additional information 
may, as determined solely by the NCUA Board or its designee, result in 
denial of the petitioner's appeal.
    (d) Determination on appeal by NCUA Board or its designee. (1) 
Within 90 days from the date of the receipt of an appeal by the NCUA 
Board or its designee or of its receipt of additional information 
requested under paragraph (c) of this section, the NCUA Board or its 
designee shall notify the petitioner whether the disapproval will be 
continued, terminated, or otherwise modified. The NCUA Board or its 
designee shall promptly rescind or modify the notice of disapproval 
where the decision is favorable to the petitioner.
    (2) The determination by the NCUA Board on the appeal shall be 
provided to the petitioner in writing, stating the basis for any 
decision of the NCUA Board or its designee that is adverse to the 
petitioner, and shall constitute a final order of the NCUA Board.
    (3) Failure by the NCUA Board to issue a determination on the 
petitioner's appeal within the 90-day period prescribed under paragraph 
(d)(1) of this section shall be deemed a denial of the appeal for 
purpose of Sec. 747.905.

[56 FR 37767, Aug. 8, 1991; 57 FR 523, Jan. 7, 1992, as amended at 60 FR 
31911, June 19, 1995]



Sec. 747.905  Judicial review.

    (a) Failure to file an appeal within the applicable time periods, 
either to the initial determination or to the decision on a request for 
reconsideration, shall constitute a failure by the petitioner to exhaust 
available administrative remedies and, due to such failure, any 
objections to the initial determination or request for reconsideration 
shall be deemed to be waived and such determination shall be deemed to 
have been accepted by, and shall be binding upon, the petitioner.
    (b) For purposes of seeking judicial review of actions taken 
pursuant to this section, suit may be filed in the United States 
District Court for the district where the requester resides, for the 
district where the credit union's principal place of business is 
located, or for the District of Columbia.

[56 FR 37767, Aug. 8, 1991; 57 FR 524, Jan. 7, 1992]



       Subpart K--Inflation Adjustment of Civil Monetary Penalties



Sec. 747.1001  Adjustment of civil money penalties by the rate of inflation.

    (a) NCUA is required by the Federal Civil Penalties Inflation 
Adjustment Act of 1990 (Public Law 101-410, 104 Stat. 890, as amended 
(28 U.S.C. 2461 note)) to adjust the maximum amount of each civil money 
penalty within its jurisdiction by the rate of inflation. The following 
chart displays those adjustments, as calculated pursuant to the statute:

------------------------------------------------------------------------
       U.S. Code citation           CMP description   New maximum amount
------------------------------------------------------------------------
(1) 12 U.S.C. 1782(a)(3)........  Inadvertent         $2,200
                                   failure to submit
                                   a report or the
                                   inadvertent
                                   submission of a
                                   false or
                                   misleading report.
(2) 12 U.S.C. 1782(a)(3)........  Non-inadvertent     $22,000
                                   failure to submit
                                   a report or the
                                   non-inadvertent
                                   submission of a
                                   false or
                                   misleading report.
(3) 12 U.S.C. 1782(a)(3)........  Failure to submit   $1,100,000 or 1
                                   a report or the     percent of the
                                   submission of a     total assets of
                                   false or            the credit union,
                                   misleading report   whichever is less
                                   done knowingly or
                                   with reckless
                                   disregard.
(4) 12 U.S.C. 1782(d)(2)(A).....  First tier........  $2,200
(5) 12 U.S.C. 1782(d)(2)(B).....  Second tier.......  $22,000
(6) 12 U.S.C. 1782(d)(2)(C).....  Third tier........  $1,100,000 or 1
                                                       percent of the
                                                       total assets of
                                                       the credit union,
                                                       whichever is less
(7) 12 U.S.C. 1785(e)(3)........  Non-compliance      $110
                                   with NCUA
                                   security
                                   regulations.
(8) 12 U.S.C. 1786(k)(2)(A).....  First tier........  $5,500
(9) 12 U.S.C. 1786(k)(2)(B).....  Second tier.......  $27,500

[[Page 570]]

 
(10) 12 U.S.C. 1786(k)(2)(C)....  Third tier........  For a person other
                                                       than an insured
                                                       credit union:
                                                       $1,175,000;
                                                      For an insured
                                                       credit union:
                                                       $1,175,000 or 1
                                                       percent of the
                                                       total assets of
                                                       the credit union,
                                                       whichever is less
(11) 42 U.S.C. 4012a(f).........  Per violation.....  $385
                                  Per calendar year.  $110,000
------------------------------------------------------------------------

    (b) The adjustments displayed in paragraph (a) of this section apply 
to acts occurring beginning on October 23, 2000.

[65 FR 57280, Sept. 22, 2000]



 Subpart L--Issuance, Review and Enforcement of Orders Imposing Prompt 
                            Corrective Action

    Source:  65 FR 8594, Feb. 18, 2000, unless otherwise noted.



Sec. 747.2001  Scope.

    (a) Independent review process. The rules and procedures set forth 
in this subpart apply to federally-insured credit unions, whether 
federally- or state-chartered (other than corporate credit unions), 
which are subject to discretionary supervisory actions under part 702 of 
this chapter, and to reclassification under Secs. 702.102(b) and 
702.302(d) of this chapter, to facilitate prompt corrective action under 
section 216 of the Federal Credit Union Act, 12 U.S.C. 1790d; and to 
senior executive officers and directors of such credit unions who are 
dismissed pursuant to a discretionary supervisory action imposed under 
part 702. NCUA staff decisions to impose discretionary supervisory 
actions under part 702 shall be considered material supervisory 
determinations for purposes of 12 U.S.C. 1790d(k). Section 747.2002 of 
this subpart provides an independent appellate process to challenge such 
decisions.
    (b) Notice to State officials. With respect to a federally-insured 
State-chartered credit union under Secs. 747.2002, 747.2003 and 747.2004 
of this subpart, notices, directives and decisions on appeal served upon 
a credit union, or a dismissed director or officer thereof, by the NCUA 
Board shall also be served upon the appropriate State official. 
Responses, requests for a hearing and to present witnesses, requests to 
modify or rescind a discretionary supervisory action and requests for 
reinstatement served upon the NCUA Board by a credit union, or dismissed 
director or officer thereof, shall also be served upon the appropriate 
State official.



Sec. 747.2002  Review of orders imposing discretionary supervisory action.

    (a) Notice of intent to issue directive--(1) Generally. Whenever the 
NCUA Board intends to issue a directive imposing a discretionary 
supervisory action under Secs. 702.202(b), 702.203(b) and 702.204(b) of 
this chapter on a credit union classified ``undercapitalized'' or lower, 
or under Secs. 702.304(b) or 702.305(b) of this chapter on a new credit 
union classified ``moderately capitalized'' or lower, it must give the 
credit union prior notice of the proposed action and an opportunity to 
respond.
    (2) Immediate issuance of directive without notice. The NCUA Board 
may issue a directive to take effect immediately under paragraph (a)(1) 
of this section without notice to the credit union if the NCUA Board 
finds it necessary in order to carry out the purposes of part 702 of 
this chapter. A credit union that is subject to a directive which takes 
effect immediately may appeal the directive in writing to the NCUA 
Board. Such an appeal must be received by the NCUA Board within 14 
calendar days after the directive was issued, unless the NCUA Board 
permits a longer period. Unless ordered by the NCUA Board, the directive 
shall remain in effect pending a decision on the appeal. The NCUA Board 
shall consider any such appeal, if timely filed, within 60 calendar days 
of receiving it.
    (b) Contents of notice. The NCUA Board's notice to a credit union of 
its intention to issue a directive imposing a discretionary supervisory 
action must state:

[[Page 571]]

    (1) The credit union's net worth ratio and net worth category 
classification;
    (2) The specific restrictions or requirements that the NCUA Board 
intends to impose, and the reasons therefor;
    (3) The proposed date when the discretionary supervisory action 
would take effect and the proposed date for completing the required 
action or terminating the action; and
    (4) That a credit union must file a written response to a notice 
within 14 calendar days from the date of the notice, or within such 
shorter period as the NCUA Board determines is appropriate in light of 
the financial condition of the credit union or other relevant 
circumstances.
    (c) Contents of response to notice. A credit union's response to a 
notice under paragraph (b) of this section must:
    (1) Explain why it contends that the proposed discretionary 
supervisory action is not an appropriate exercise of discretion under 
this part;
    (2) Request the NCUA Board to modify or to not issue the proposed 
directive;
    (3) Include other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the credit union's 
position regarding the proposed directive; and
    (4) If desired, request the recommendation of NCUA's ombudsman 
pursuant to paragraph (g) of this section.
    (d) NCUA Board consideration of response. The NCUA Board, or an 
independent person designated by the NCUA Board to act on its behalf, 
after considering a response under paragraph (c) of this section, may:
    (1) Issue the directive as originally proposed or as modified;
    (2) Determine not to issue the directive and to so notify the credit 
union; or
    (3) Seek additional information or clarification from the credit 
union or any other relevant source.
    (e) Failure to file response. A credit union which fails to file a 
written response to a notice of the NCUA Board's intention to issue a 
directive imposing a discretionary supervisory action, within the 
specified time period, shall be deemed to have waived the opportunity to 
respond, and to have consented to the issuance of the directive.
    (f) Request to modify or rescind directive. A credit union that is 
subject to an existing directive imposing a discretionary supervisory 
action may request in writing that the NCUA Board reconsider the terms 
of the directive, or rescind or modify it, due to changed circumstances. 
Unless otherwise ordered by the NCUA Board, the directive shall remain 
in effect while such request is pending. A request under this paragraph 
which remains pending 60 days following receipt by the NCUA Board is 
deemed granted.
    (g) Ombudsman. A credit union may request in writing the 
recommendation of NCUA's ombudsman to modify or to not issue a proposed 
directive under paragraph (b) of this section, or to modify or rescind 
an existing directive due to changed circumstances under paragraph (f) 
of this section. A credit union which fails to request the ombudsman's 
recommendation in a response under paragraph (c) of this section, or in 
a request under paragraph (f) of this section, shall be deemed to have 
waived the opportunity to do so. The ombudsman shall promptly notify the 
credit union and the NCUA Board of his or her recommendation.



Sec. 747.2003  Review of order reclassifying a credit union on safety and soundness criteria.

    (a) Notice of proposed reclassification based on unsafe or unsound 
condition or practice. When the NCUA Board proposes to reclassify a 
credit union or subject it to the supervisory actions applicable to the 
next lower net worth category pursuant to Secs. 702.102(b) and 
702.302(d) of this chapter (each such action hereinafter referred to as 
``reclassification''), the NCUA Board shall issue and serve on the 
credit union reasonable prior notice of the proposed reclassification.
    (b) Contents of notice. A notice of intention to reclassify a credit 
union based on unsafe or unsound condition or practice shall state:
    (1) The credit union's net worth ratio, current net worth category 
classification, and the net worth category

[[Page 572]]

to which the credit union would be reclassified;
    (2) The unsafe or unsound practice(s) and/or condition(s) justifying 
reasons for reclassification of the credit union;
    (3) The date by which the credit union must file a written response 
to the notice (including a request for a hearing), which date shall be 
no less than 14 calendar days from the date of service of the notice 
unless the NCUA Board determines that a shorter period is appropriate in 
light of the financial condition of the credit union or other relevant 
circumstances; and
    (4) That a credit union which fails to--
    (i) File a written response to the notice of reclassification, 
within the specified time period, shall be deemed to have waived the 
opportunity to respond, and to have consented to reclassification;
    (ii) Request a hearing shall be deemed to have waived any right to a 
hearing; and
    (iii) Request the opportunity to present witness testimony shall be 
deemed have waived any right to present such testimony.
    (c) Contents of response to notice. A credit union's response to a 
notice under paragraph (b) of this section must:
    (1) Explain why it contends that the credit union should not be 
reclassified;
    (2) Include any relevant information, mitigating circumstances, 
documentation, or other evidence in support of the credit union's 
position;
    (3) If desired, request an informal hearing before the NCUA Board 
under this section; and
    (4) If a hearing is requested, identify any witness whose testimony 
the credit union wishes to present and the general nature of each 
witness's expected testimony.
    (d) Order to hold informal hearing. Upon timely receipt of a written 
response that includes a request for a hearing, the NCUA Board shall 
issue an order commencing an informal hearing no later than 30 days 
after receipt of the request, unless the credit union requests a later 
date. The hearing shall be held in Alexandria, Virginia, or at such 
other place as may be designated by the NCUA Board, before a presiding 
officer designated by the NCUA Board to conduct the hearing and to 
recommend a decision.
    (e) Procedures for informal hearing. (1) The credit union may appear 
at the hearing through a representative or through counsel. The credit 
union shall have the right to introduce relevant documents and to 
present oral argument at the hearing. The credit union may introduce 
witness testimony only if expressly authorized by the NCUA Board or the 
presiding officer. Neither the provisions of the Administrative 
Procedure Act (5 U.S.C. 554-557) governing adjudications required by 
statute to be determined on the record nor the Uniform Rules of Practice 
and Procedure (12 CFR part 747) shall apply to an informal hearing under 
this section unless the NCUA Board orders otherwise.
    (2) The informal hearing shall be recorded, and a transcript shall 
be furnished to the credit union upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or by the presiding officer. The presiding officer may ask 
questions of any witness.
    (3) The presiding officer may order that the hearing be continued 
for a reasonable period following completion of witness testimony or 
oral argument to allow additional written submissions to the hearing 
record.
    (4) Within 20 calendar days following the closing of the hearing and 
the record, the presiding officer shall make a recommendation to the 
NCUA Board on the proposed reclassification.
    (f) Time for final decision. Not later than 60 calendar days after 
the date the record is closed, or the date of receipt of the credit 
union's response in a case where no hearing was requested, the NCUA 
Board will decide whether to reclassify the credit union, and will 
notify the credit union of its decision. The decision of the NCUA Board 
shall be final.
    (g) Request to rescind reclassification. Any credit union that has 
been reclassified under this section may file a written request to the 
NCUA Board to reconsider or rescind the reclassification, or to modify, 
rescind or remove any directives issued as a result of the

[[Page 573]]

reclassification. Unless otherwise ordered by the NCUA Board, the credit 
union shall remain reclassified, and subject to any directives issued as 
a result, while such request is pending.
    (h) Non-delegation. The NCUA Board may not delegate its authority to 
reclassify a credit union into a lower net worth category or to treat a 
credit union as if it were in a lower net worth category pursuant to 
Secs. 702.102(b) or 702.302(d) of this chapter.



Sec. 747.2004  Review of order to dismiss a director or senior executive officer.

    (a) Service of directive to dismiss and notice. When the NCUA Board 
issues and serves a directive on a credit union requiring it to dismiss 
from office any director or senior executive officer under 
Secs. 702.202(b)(7), 702.203(b)(8), 702.204(b)(8), 702.304(b) or 
702.305(b) of this chapter, the NCUA Board shall also serve upon the 
person the credit union is directed to dismiss (Respondent) a copy of 
the directive (or the relevant portions, where appropriate) and notice 
of the Respondent's right to seek reinstatement.
    (b) Contents of notice of right to seek reinstatement. A notice of a 
Respondent's right to seek reinstatement shall state:
    (1) That a request for reinstatement (including a request for a 
hearing) shall be filed with the NCUA Board within 14 calendar days 
after the Respondent receives the directive and notice under paragraph 
(a) of this section, unless the NCUA Board grants the Respondent's 
request for further time;
    (2) The reasons for dismissal of the Respondent; and
    (3) That the Respondent's failure to--
    (i) Request reinstatement shall be deemed a waiver of any right to 
seek reinstatement;
    (ii) Request a hearing shall be deemed a waiver of any right to a 
hearing; and
    (iii) Request the opportunity to present witness testimony shall be 
deemed a waiver of the right to present such testimony.
    (c) Contents of request for reinstatement. A request for 
reinstatement in response to a notice under paragraph (b) of this 
section must:
    (1) Explain why the Respondent should be reinstated;
    (2) Include any relevant information, mitigating circumstances, 
documentation, or other evidence in support of the Respondent's 
position;
    (3) If desired, request an informal hearing before the NCUA Board 
under this section; and
    (4) If a hearing is requested, identify any witness whose testimony 
the Respondent wishes to present and the general nature of each 
witness's expected testimony.
    (d) Order to hold informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a credit union to dismiss from office any director 
or senior executive officer, the NCUA Board shall issue an order 
directing an informal hearing to commence no later than 30 days after 
receipt of the request, unless the Respondent requests a later date. The 
hearing shall be held in Alexandria, Virginia, or at such other place as 
may be designated by the NCUA Board, before a presiding officer 
designated by the NCUA Board to conduct the hearing and recommend a 
decision.
    (e) Procedures for informal hearing. (1) A Respondent may appear at 
the hearing personally or through counsel. A Respondent shall have the 
right to introduce relevant documents and to present oral argument at 
the hearing. A Respondent may introduce witness testimony only if 
expressly authorized by the NCUA Board or by the presiding officer. 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules of Practice and Procedure (12 CFR part 
747) apply to an informal hearing under this section unless the NCUA 
Board orders otherwise.
    (2) The informal hearing shall be recorded, and a transcript shall 
be furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer. The presiding officer may ask questions 
of any witness.

[[Page 574]]

    (3) The presiding officer may order that the hearing be continued 
for a reasonable period following completion of witness testimony or 
oral argument to allow additional written submissions to the hearing 
record.
    (4) A Respondent shall bear the burden of demonstrating that his or 
her continued employment by or service with the credit union would 
materially strengthen the credit union's ability to--
    (i) Become ``adequately capitalized,'' to the extent that the 
directive was issued as a result of the credit union's net worth 
category classification or its failure to submit or implement a net 
worth restoration plan or revised business plan; and
    (ii) Correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
reclassification of the credit union pursuant to Secs. 702.102(b) and 
702.302(d) of this chapter.
    (5) Within 20 calendar days following the date of closing of the 
hearing and the record, the presiding officer shall make a 
recommendation to the NCUA Board concerning the Respondent's request for 
reinstatement with the credit union.
    (f) Time for final decision. Not later than 60 calendar days after 
the date the record is closed, or the date of the response in a case 
where no hearing was requested, the NCUA Board shall grant or deny the 
request for reinstatement and shall notify the Respondent of its 
decision. If the NCUA Board denies the request for reinstatement, it 
shall set forth in the notification the reasons for its decision. The 
decision of the NCUA Board shall be final.
    (g) Effective date. Unless otherwise ordered by the NCUA Board, the 
Respondent's dismissal shall take and remain in effect pending a final 
decision on the request for reinstatement.



Sec. 747.2005  Enforcement of orders.

    (a) Judicial remedies. Whenever a credit union fails to comply with 
a directive imposing a discretionary supervisory action, or enforcing a 
mandatory supervisory action under part 702 of this chapter, the NCUA 
Board may seek enforcement of the directive in the appropriate United 
States District Court pursuant to 12 U.S.C. 1786(k)(1).
    (b) Administrative remedies--(1) Failure to comply with directive. 
Pursuant to 12 U.S.C. 1786(k)(2)(A), the NCUA Board may assess a civil 
money penalty against any credit union that violates or otherwise fails 
to comply with any final directive issued under part 702 of this 
chapter, or against any institution-affiliated party of a credit union 
(per 12 U.S.C. 1786(r)) who participates in such violation or 
noncompliance.
    (2) Failure to implement plan. Pursuant to 12 U.S.C. 1786(k)(2)(A), 
the NCUA Board may assess a civil money penalty against a credit union 
which fails to implement a net worth restoration plan under subpart B of 
part 702 or a revised business plan under subpart C of part 702.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the NCUA Board may seek 
enforcement of the directives issued under part 702 of this chapter 
through any other judicial or administrative proceeding authorized by 
law.



PART 748--SUSPICIOUS ACTIVITY REPORT; REPORT OF CATASTROPHIC ACT AND BANK SECRECY ACT COMPLIANCE--Table of Contents




Sec.
748.0  Security program.
748.1  Filing of reports.
748.2  Bank Secrecy Act compliance programs and procedures.

    Authority: 12 U.S.C. 1766(a), 1786(q); 31 U.S.C. 5311.



Sec. 748.0  Security program.

    (a) Each federally insured credit union will develop a written 
security program within 90 days of the effective date of insurance.
    (b) The security program will be designed to protect each credit 
union office from robberies, burglaries, larcenies and embezzlement; to 
prevent destruction of vital records as defined in the Accounting Manual 
for Federal

[[Page 575]]

Credit Unions; and to assist in the identification of persons who commit 
or attempt such crimes.

[50 FR 53295, Dec. 31, 1985, as amended at 53 FR 4845, Feb. 18, 1988]



Sec. 748.1  Filing of reports.

    (a) Compliance report. Each federally insured credit union shall 
file with the regional director an annual statement certifying its 
compliance with the requirements of this part. The statement shall be 
dated and signed by the president or other managing officer of the 
credit union. The statement is contained on the Report of Officials 
which is submitted annually by federally insured credit unions after the 
election of officials. In the case of federally insured state-chartered 
credit unions, this statement can be mailed to the regional director via 
the state supervisory authority, if desired. In any event, a copy of the 
statement shall always be sent to the appropriate state supervisory 
authority.
    (b) Catastrophic act report. Each federally insured credit union 
will notify the regional director within 5 business days of any 
catastrophic act that occurs at its office(s). A catastrophic act is any 
natural disaster such as a flood, tornado, earthquake, etc., or major 
fire or other disaster resulting in some physical destruction or damage 
to the credit union. Within a reasonable time after a catastrophic act 
occurs, the credit union shall ensure that a record of the incident is 
prepared and filed at its main office. In the preparation of such 
record, the credit union should include information sufficient to 
indicate the office where the catastrophic act occurred; when it took 
place; the amount of the loss, if any; whether any operational or 
mechanical deficiency(ies) might have contributed to the catastrophic 
act; and what has been done or is planned to be done to correct the 
deficiency(ies).
    (c) Suspicious Activity Report. (1) Each federally-insured credit 
union will report any crime or suspected crime that occurs at its 
office(s), utilizing NCUA Form 2362, Suspicious Activity Report (SAR), 
within thirty calendar days after discovery. Each federally-insured 
credit union must follow the instructions and reporting requirements 
accompanying the SAR. Copies of the SAR may be obtained from the 
appropriate NCUA Regional Office.
    (2) Each federally-insured credit union shall maintain a copy of any 
SAR that it files and the original of all attachments to the report for 
a period of five years from the date of the report, unless the credit 
union is informed in writing by the National Credit Union Administration 
that the materials may be discarded sooner.
    (3) Failure to file a SAR in accordance with the instructions 
accompanying the report may subject the federally-insured credit union, 
its officers, directors, agents or other institution-affiliated parties 
to the assessment of civil money penalties or other administrative 
actions.
    (4) Filing of Suspicious Activity Reports will ensure that law 
enforcement agencies and NCUA are promptly notified of actual or 
suspected crimes. Information contained on SARs' will be entered into an 
interagency database and will assist the federal government in taking 
appropriate action.

[50 FR 53295, Dec. 31, 1985, as amended at 53 FR 26232, July 12, 1988; 
58 FR 17492, Apr. 5, 1993; 61 FR 11527, Mar. 21, 1996]



Sec. 748.2  Bank Secrecy Act compliance programs and procedures.

    (a) Purpose. This section is issued to ensure that all federally-
insured credit unions establish and maintain procedures reasonably 
designed to assure and monitor compliance with the requirements of 
subchapter II of chapter 53 of title 31, United States Code, the 
Financial Recordkeeping and Reporting of Currency and Foreign 
Transactions Act, and the implementing regulations promulgated 
thereunder by the Department of Treasury, 31 CFR part 103.
    (b) Compliance Procedures. On or before August 1, 1987, each 
federally-insured credit union shall develop and provide for the 
continued administration of a program reasonably designed to assure and 
monitor compliance with recordkeeping and reporting requirements set 
forth in subchapter II of chapter 53 of title 31, United States Code, 
the Financial Recordkeeping and Reporting of Currency and Foreign

[[Page 576]]

Transactions Act and the implementing regulations promulgated thereunder 
by the Department of Treasury, 31 CFR part 103. This program shall be 
reduced to writing, approved by the board of directors of the 
institution, and noted in the minutes.
    (c) Contents of compliance program. Such compliance program shall at 
a minimum--
    (1) Provide for a system of internal controls to assure ongoing 
compliance;
    (2) Provide for independent testing for compliance to be conducted 
by credit union personnel or outside parties;
    (3) Designate an individual responsible for coordinating and 
monitoring day-to-day compliance; and
    (4) Provide training for appropriate personnel.

(Approved by the Office of Management and Budget under control number 
3133-0094)

[52 FR 2861, Jan. 27, 1987, as amended at 52 FR 8062, Mar. 16, 1987]



PART 749--RECORDS PRESERVATION PROGRAM--Table of Contents




Sec.
749.0  Records preservation.
749.1  Implementation.
749.2  Vital records to be stored.

    Authority: 12 U.S.C. 1766, 1783 and 1789.

    Source: 55 FR 30212, July 25, 1990, unless otherwise noted.



Sec. 749.0  Records preservation.

    All federally insured credit unions must maintain a records 
preservation program to identify, store and reconstruct vital records in 
the event that the credit union's records are destroyed.



Sec. 749.1  Implementation.

    The financial officer of the credit union is responsible for storing 
duplicate vital records at a vital records center. This responsibility 
may be delegated.
    (a) The Records Preservation Program must be operational within 6 
months after the credit union's insurance certificate is issued.
    (b) The vital records center is defined as any location far enough 
from the credit union's offices to avoid the simultaneous loss of both 
sets of records in the event of disaster.
    (c) Records must be stored every 3 months, within 30 days after the 
end of the 3-month period. Previously stored records may be destroyed 
when the current records are stored.
    (d) A records preservation log will be maintained showing what 
records were stored, where the records were stored, when the records 
were stored, and who sent the records for storage.
    (e) Stored records may be in any format which can be used to 
reconstruct the credit union's records. Formats include paper originals, 
machine copies, micro film or fiche, magnetic tape, etc.
    (f) Credit unions which have some or all of their records maintained 
by an off-site data processor are considered to be in compliance for the 
storage of those records.



Sec. 749.2  Vital records to be stored.

    At least the following records, as of the most recent month-end, 
must be stored:
    (a) A list of share and/or deposit and loan balances for each 
member's account.
    (1) The list of balances will be individually identified by a name 
or number.
    (2) Multiple loans of one account will be listed separately.
    (3) Information sufficient to enable the credit union to locate each 
member, such as address and telephone number, shall also be included, 
unless the board of directors determines that such information is 
readily available from another source.
    (b) A financial report which lists all of the credit union's asset 
and liability accounts.
    (c) A list of the credit union's banks, insurance policies, and 
investments. This information may be marked ``permanent''and be updated 
only when changes are made.



PART 760--LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS--Table of Contents




Sec.
760.1  Authority, purpose, and scope.
760.2  Definitions.
760.3  Requirement to purchase flood insurance where available.

[[Page 577]]

760.4  Exemptions.
760.5  Escrow requirement.
760.6  Required use of standard flood hazard determination form.
760.7  Forced placement of flood insurance.
760.8  Determination fees.
760.9  Notice of special flood hazards and availability of Federal 
          disaster relief assistance.
760.10  Notice of servicer's identity.

    Appendix to Part 760--Sample Form of Notice of Special Flood Hazards 
and Availability of Federal Disaster Relief Assistance

    Authority: 12 U.S.C. 1757, 1789; 42 U.S.C. 4012a, 4104a, 4104b, 
4106, and 4128.

    Source: 61 FR 45713, Aug. 29, 1996, unless otherwise noted.



Sec. 760.1  Authority, purpose, and scope.

    (a) Authority. This part is issued pursuant to 12 U.S.C. 1757, 1789 
and 42 U.S.C. 4012a, 4104a, 4104b, 4106, 4128.
    (b) Purpose. The purpose of this part is to implement the 
requirements of the National Flood Insurance Act of 1968 and the Flood 
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
    (c) Scope. This part, except for Secs. 760.6 and 760.8, applies to 
loans secured by buildings or mobile homes located or to be located in 
areas determined by the Director of the Federal Emergency Management 
Agency to have special flood hazards. Sections 760.6 and 760.8 apply to 
loans secured by buildings or mobile homes, regardless of location.



Sec. 760.2  Definitions.

    (a) Act means the National Flood Insurance Act of 1968, as amended 
(42 U.S.C. 4001-4129).
    (b) Credit union means a Federal or State-chartered credit union 
that is insured by the National Credit Union Share Insurance Fund.
    (c) Building means a walled and roofed structure, other than a gas 
or liquid storage tank, that is principally above ground and affixed to 
a permanent site, and a walled and roofed structure while in the course 
of construction, alteration, or repair.
    (d) Community means a State or a political subdivision of a State 
that has zoning and building code jurisdiction over a particular area 
having special flood hazards.
    (e) Designated loan means a loan secured by a building or mobile 
home that is located or to be located in a special flood hazard area in 
which flood insurance is available under the Act.
    (f) Director of FEMA means the Director of the Federal Emergency 
Management Agency.
    (g) Mobile home means a structure, transportable in one or more 
sections, that is built on a permanent chassis and designed for use with 
or without a permanent foundation when attached to the required 
utilities. The term mobile home does not include a recreational vehicle. 
For purposes of this part, the term mobile home means a mobile home on a 
permanent foundation. The term mobile home means a manufactured home as 
that term is used in the NFIP.
    (h) NFIP means the National Flood Insurance Program authorized under 
the Act.
    (i) Residential improved real estate means real estate upon which a 
home or other residential building is located or to be located.
    (j) Servicer means the person responsible for:
    (1) Receiving any scheduled, periodic payments from a borrower under 
the terms of a loan, including amounts for taxes, insurance premiums, 
and other charges with respect to the property securing the loan; and
    (2) Making payments of principal and interest and any other payments 
from the amounts received from the borrower as may be required under the 
terms of the loan.
    (k) Special flood hazard area means the land in the flood plain 
within a community having at least a one percent chance of flooding in 
any given year, as designated by the Director of FEMA.
    (l) Table funding means a settlement at which a loan is funded by a 
contemporaneous advance of loan funds and an assignment of the loan to 
the person advancing the funds.



Sec. 760.3  Requirement to purchase flood insurance where available.

    (a) In general. A credit union shall not make, increase, extend, or 
renew any designated loan unless the building

[[Page 578]]

or mobile home and any personal property securing the loan is covered by 
flood insurance for the term of the loan. The amount of insurance must 
be at least equal to the lesser of the outstanding principal balance of 
the designated loan or the maximum limit of coverage available for the 
particular type of property under the Act. Flood insurance coverage 
under the Act is limited to the overall value of the property securing 
the designated loan minus the value of the land on which the property is 
located.
    (b) Table funded loan. A credit union that acquires a loan from a 
mortgage broker or other entity through table funding shall be 
considered to be making a loan for the purposes of this part.



Sec. 760.4  Exemptions.

    The flood insurance requirement prescribed by Sec. 760.3 does not 
apply with respect to:
    (a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and 
periodically revises the list of States falling within this exemption; 
or
    (b) Property securing any loan with an original principal balance of 
$5,000 or less and a repayment term of one year or less.



Sec. 760.5  Escrow requirement.

    If a credit union requires the escrow of taxes, insurance premiums, 
fees, or any other charges for a loan secured by residential improved 
real estate or a mobile home that is made, increased, extended, or 
renewed on or after November 1, 1996, the credit union shall also 
require the escrow of all premiums and fees for any flood insurance 
required under Sec. 760.3. The credit union, or a servicer acting on 
behalf of the credit union, shall deposit the flood insurance premiums 
on behalf of the borrower in an escrow account. This escrow account will 
be subject to escrow requirements adopted pursuant to section 10 of the 
Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), 
which generally limits the amount that may be maintained in escrow 
accounts for certain types of loans and requires escrow account 
statements for those accounts, only if the loan is otherwise subject to 
RESPA. Following receipt of a notice from the Director of FEMA or other 
provider of flood insurance that premiums are due, the credit union, or 
a servicer acting on behalf of the credit union, shall pay the amount 
owed to the insurance provider from the escrow account by the date when 
such premiums are due.



Sec. 760.6  Required use of standard flood hazard determination form.

    (a) Use of form. A credit union shall use the standard flood hazard 
determination form developed by the Director when determining whether 
the building or mobile home offered as collateral security for a loan is 
or will be located in a special flood hazard area in which flood 
insurance is available under the Act. The standard flood hazard 
determination form may be used in a printed, computerized, or electronic 
manner. A credit union may obtain the standard flood hazard 
determination form from FEMA, P.O. Box 2012, Jessup, MD 20794-2012.
    (b) Retention of form. A credit union shall retain a copy of the 
completed standard flood hazard determination form, in either hard copy 
or electronic form, for the period of time the credit union owns the 
loan.

[61 FR 45713, Aug. 29, 1996, as amended at 64 FR 71274, Dec. 21, 1999]



Sec. 760.7  Forced placement of flood insurance.

    If a credit union, or a servicer acting on behalf of the credit 
union, determines, at any time during the term of a designated loan that 
the building or mobile home and any personal property securing the 
designated loan is not covered by flood insurance or is covered by flood 
insurance in an amount less than the amount required under Sec. 760.3, 
then the credit union or its servicer shall notify the borrower that the 
borrower should obtain flood insurance, at the borrower's expense, in an 
amount at least equal to the amount required under Sec. 760.3, for the 
remaining term of the loan. If the borrower fails to obtain flood 
insurance within 45 days after notification, then the credit union or 
its servicer shall purchase insurance on the borrower's behalf. The 
credit union

[[Page 579]]

or its servicer may charge the borrower for the cost of premiums and 
fees incurred in purchasing the insurance.



Sec. 760.8  Determination fees.

    (a) General. Notwithstanding any Federal or State law other than the 
Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129), 
any credit union, or a servicer acting on behalf of the credit union, 
may charge a reasonable fee for determining whether the building or 
mobile home securing the loan is located or will be located in a special 
flood hazard area. A determination fee may also include, but is not 
limited to, a fee for life-of-loan monitoring.
    (b) Borrower fee. The determination fee authorized by paragraph (a) 
of this section may be charged to the borrower if the determination:
    (1) Is made in connection with a making, increasing, extending, or 
renewing of the loan that is initiated by the borrower;
    (2) Reflects the Director of FEMA's revision or updating of 
floodplain areas or flood-risk zones;
    (3) Reflects the Director of FEMA's publication of a notice or 
compendium that:
    (i) Affects the area in which the building or mobile home securing 
the loan is located; or
    (ii) By determination of the Director of FEMA, may reasonably 
require a determination whether the building or mobile home securing the 
loan is located in a special flood hazard area; or
    (4) Results in the purchase of flood insurance coverage by the 
credit union or its servicer on behalf of the borrower under Sec. 760.7.
    (c) Purchaser or transferee fee. The determination fee authorized by 
paragraph (a) of this section may be charged to the purchaser or 
transferee of a loan in the case of the sale or transfer of the loan.



Sec. 760.9  Notice of special flood hazards and availability of Federal disaster relief assistance.

    (a) Notice requirement. When a credit union makes, increases, 
extends, or renews a loan secured by a building or a mobile home located 
or to be located in a special flood hazard area, the credit union shall 
mail or deliver a written notice to the borrower and to the servicer in 
all cases whether or not flood insurance is available under the Act for 
the collateral securing the loan.
    (b) Contents of notice. The written notice must include the 
following information:
    (1) A warning, in a form approved by the Director of FEMA, that the 
building or the mobile home is or will be located in a special flood 
hazard area;
    (2) A description of the flood insurance purchase requirements set 
forth in section 102(b) of the Flood Disaster Protection Act of 1973, as 
amended (42 U.S.C. 4012a(b));
    (3) A statement, where applicable, that flood insurance coverage is 
available under the NFIP and may also be available from private 
insurers; and
    (4) A statement whether Federal disaster relief assistance may be 
available in the event of damage to the building or mobile home caused 
by flooding in a Federally-declared disaster.
    (c) Timing of notice. The credit union shall provide the notice 
required by paragraph (a) of this section to the borrower within a 
reasonable time before the completion of the transaction and to the 
servicer as promptly as practicable after the credit union provides 
notice to the borrower and in any event no later than the time the 
credit union provides other similar notices to the servicer concerning 
hazard insurance and taxes. Notice to the servicer may be made 
electronically or may take the form of a copy of the notice to the 
borrower.
    (d) Record of receipt. The credit union shall retain a record of the 
receipt of the notices by the borrower and the servicer for the period 
of time the credit union owns the loan.
    (e) Alternate method of notice. Instead of providing the notice to 
the borrower required by paragraph (a) of this section, a credit union 
may obtain satisfactory written assurance from a seller or lessor that, 
within a reasonable time before the completion of the sale or lease 
transaction, the seller or lessor has provided such notice to the 
purchaser or lessee. The credit union shall retain a record of the 
written assurance from the seller or lessor for the

[[Page 580]]

period of time the credit union owns the loan.
    (f) Use of prescribed form of notice. A credit union will be 
considered to be in compliance with the requirement for notice to the 
borrower of this section providing written notice to the borrower 
containing the language presented in the appendix to this part within a 
reasonable time before the completion of the transaction. The notice 
presented in the appendix to this part satisfies the borrower notice 
requirements of the Act.



Sec. 760.10  Notice of servicer's identity.

    (a) Notice requirement. When a credit union makes, increases, 
extends, renews, sells, or transfers a loan secured by a building or 
mobile home located or to be located in a special flood hazard area, the 
credit union shall notify the Director of FEMA (or the Director's 
designee) in writing of the identity of the servicer of the loan. The 
Director of FEMA has designated the insurance provider to receive the 
credit union's notice of the servicer's identity. This notice may be 
provided electronically if electronic transmission is satisfactory to 
the Director of FEMA's designee.
    (b) Transfer of servicing rights. The credit union shall notify the 
Director of FEMA (or the Director's designee) of any change in the 
servicer of a loan described in paragraph (a) of this section within 60 
days after the effective date of the change. This notice may be provided 
electronically if electronic transmission is satisfactory to the 
Director of FEMA's designee. Upon any change in the servicing of a loan 
described in paragraph (a) of this section, the duty to provide notice 
under this paragraph (b) shall transfer to the transferee servicer.

Appendix to Part 760--Sample Form of Notice of Special Flood Hazards and 
           Availability of Federal Disaster Relief Assistance

    We are giving you this notice to inform you that:
    The building or mobile home securing the loan for which you have 
applied is or will be located in an area with special flood hazards.
    The area has been identified by the Director of the Federal 
Emergency Management Agency (FEMA) as a special flood hazard area using 
FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary Map for the 
following community: ______________. This area has at least a one 
percent (1%) chance of a flood equal to or exceeding the base flood 
elevation (a 100-year flood) in any given year. During the life of a 30-
year mortgage loan, the risk of a 100-year flood in a special flood 
hazard area is 26 percent (26%).
    Federal law allows a lender and borrower jointly to request the 
Director of FEMA to review the determination of whether the property 
securing the loan is located in a special flood hazard area. If you 
would like to make such a request, please contact us for further 
information.
    ______ The community in which the property securing the loan is 
located participates in the National Flood Insurance Program (NFIP). 
Federal law will not allow us to make you the loan that you have applied 
for if you do not purchase flood insurance. The flood insurance must be 
maintained for the life of the loan. If you fail to purchase or renew 
flood insurance on the property, Federal law authorizes and requires us 
to purchase the flood insurance for you at your expense.
     Flood insurance coverage under the NFIP may be purchased 
through an insurance agent who will obtain the policy either directly 
through the NFIP or through an insurance company that participates in 
the NFIP. Flood insurance also may be available from private insurers 
that do not participate in the NFIP.
     At a minimum, flood insurance purchased must cover the 
lesser of:
    (1) the outstanding principal balance of the loan; or
    (2) the maximum amount of coverage allowed for the type of property 
under the NFIP.
    Flood insurance coverage under the NFIP is limited to the overall 
value of the property securing the loan minus the value of the land on 
which the property is located.
     Federal disaster relief assistance (usually in the form of 
a low-interest loan) may be available for damages incurred in excess of 
your flood insurance if your community's participation in the NFIP is in 
accordance with NFIP requirements.
    ______ Flood insurance coverage under the NFIP is not available for 
the property securing the loan because the community in which the 
property is located does not participate in the NFIP. In addition, if 
the non-participating community has been identified for at least one 
year as containing a special flood hazard area, properties located in 
the community will not be eligible for Federal disaster relief 
assistance in the event of a Federally-declared flood disaster.

[[Page 581]]





   SUBCHAPTER B--REGULATIONS AFFECTING THE OPERATIONS OF THE NATIONAL 
                       CREDIT UNION ADMINISTRATION



PART 790--DESCRIPTION OF NCUA; REQUESTS FOR AGENCY ACTION--Table of Contents




Sec.
790.1  Scope.
790.2  Central and regional office organization.
790.3  Requests for action.

    Authority: 12 U.S.C. 1766, 1789, 1795f.

    Source: 58 FR 45431, Aug. 30, 1993, unless otherwise noted.



Sec. 790.1  Scope.

    This part contains a description of NCUA's organization and the 
procedures for public requests for action by the Board. Part 790 
pertains to the practices of the National Credit Union Administration 
(NCUA) only and does not apply to credit union operations.



Sec. 790.2  Central and regional office organization.

    (a) General organization. NCUA is composed of the Board with a 
Central Office in Alexandria, Virginia, six Regional Offices, the Asset 
Management and Assistance Center, the Community Development Revolving 
Loan Program, and the NCUA Central Liquidity Facility (CLF).
    (b) Central Office. The Central Office address is NCUA, 1775 Duke 
St., Alexandria, Virginia 22314-3428.
    (1) The NCUA Board. NCUA is managed by its Board. The Board consists 
of three members appointed by the President, with the advice and consent 
of the Senate, for six-year terms. One Board member is designated by the 
President to be Chairman of the Board. The Chairman shall be the 
spokesman for the Board and shall represent the Board and the NCUA in 
its official relations with other branches of the government. A second 
member is designated by the Board to be Vice-Chairman. The Board is also 
responsible for management of the National Credit Union Share Insurance 
Fund (NCUSIF) and serves as the Board of Directors of the CLF.
    (2) Secretary of the Board. The Secretary of the Board is 
responsible for the secretarial functions of the Board. The Secretary's 
responsibilities include preparing agendas for meetings of the Board, 
preparing and maintaining the minutes for all official actions taken by 
the Board, and executing and maintaining all documents adopted by the 
Board or under its direction. The Secretary also serves as the Secretary 
of the CLF.
    (3) Office of Administration. The Director of the Office of 
Administration is responsible for providing NCUA's executive offices and 
Regional Directors with administrative services generally, including: 
Agency security; information resources management; contracting and 
procurement; contract management; management of equipment and supplies; 
acquisition; records management; printing and graphics; and warehousing 
and distribution. The Director is also responsible for carrying out the 
Board's responsibilities under the Privacy Act, the Paperwork Reduction 
Act, and in directing NCUA responses to reporting requirements.
    (4) Asset Management and Assistance Center. The President of the 
Asset Management and Assistance Center (AMAC) is responsible for 
monitoring, evaluating, disposing, and/or managing major assets acquired 
by NCUA; responsible for managing involuntary liquidations for all 
federally insured credit unions placed into involuntary liquidation 
including the orderly processing of payments of share insurance, sale 
and/or collection of loan portfolios, liquidation of other assets and 
achieving other recoveries, payments to creditors, and distributions to 
any uninsured shareholders. The President, AMAC, serves as a primary 
consultant with regional offices on asset sales or purchases to 
restructure problem case credit unions, as technical expert to evaluate 
specific areas of credit union operations, and as instructor in training 
classes; responsible to prepare and negotiate bond claims; responsible 
to

[[Page 582]]

manage or assist in the management of conservatorships. The address of 
AMAC is 4807 Spicewood Springs Road, Suite 5100, Austin, Texas 78759-
8490.
    (5) Office of Chief Financial Officer. NCUA's chief financial 
officer is in charge of budgetary, accounting and financial matters for 
the NCUA, including responsibility for submitting annual budget and 
staffing requests for approval by the Board and, as required, by the 
Office of Management and Budget; for managing NCUA's budgetary 
resources; for managing the operations of the National Credit Union 
Share Insurance Fund (NCUSIF) to include accounting, financial reporting 
and the collection and payment of capitalization deposits, insurance 
premiums and insurance dividends; for collecting annual operating fees 
from federal credit unions, for maintaining NCUA's accounting system and 
accounting records; for processing payroll, travel, and accounts payable 
disbursements; and for preparing internal and external financial 
reports.
    (6) Office of Examination and Insurance. (i) The Director of the 
Office of Examination and Insurance: Formulates standards and procedures 
for examination and supervision of the community of federally insured 
credit unions, and reports to the Board on the performance of the 
examination program; manages the risk to the NCUSIF, to include 
overseeing the NCUSIF Investment Committee, monitoring the adequacy of 
NCUSIF reserves, analyzing the reasons for NCUSIF losses, formulating 
policies and procedures regarding the supervision of financially 
troubled credit unions, and evaluating certain requests for special 
assistance pursuant to Section 208 of the Federal Credit Union Act and 
for certain proposed administrative actions regarding federally-insured 
credit unions; serves as the Board expert on accounting principles and 
standards and on auditing standards; represents NCUA at meetings with 
the American Institute of Certified Public Accountants (AICPA), Federal 
Financial Institutions Examination Council (FFIEC) and General 
Accounting Office (GAO); and collects data and provides statistical 
reports. The Director is also responsible for developing and conducting 
research in support of NCUA programs, and for preparing reports on 
research activities for the information and use of agency staff, credit 
union officials, state credit union supervisory authorities, and other 
governmental and private groups.
    (ii) NCUA Central Liquidity Facility (CLF). The CLF was created to 
improve general financial stability by providing funds to meet the 
liquidity needs of credit unions. It is a mixed-ownership government 
corporation under the Government Corporation Control Act (31 U.S.C. 9101 
et seq.). The CLF is managed by the President, under the general 
supervision of the NCUA Board which serves as the CLF Board of 
Directors. The Chairman of the NCUA Board serves as the Chairman of the 
CLF Board of Directors. The Secretary of the NCUA Board serves as the 
Secretary of the CLF Board of Directors. The NCUA Board shall appoint 
the CLF President and Vice President.
    (7) Office of the Executive Director. The Executive Director reports 
to the entire NCUA Board. The Executive Director translates NCUA Board 
policy decisions into workable programs, delegates responsibility for 
these programs to appropriate staff members, and coordinates the 
activities of the senior executive staff, which includes: The General 
Counsel; the Regional Directors; and the Office Directors for 
Administration, Chief Financial Officer, Examination and Insurance, 
Human Resources, Chief Information Officer, and Public and Congressional 
Affairs. Because of the nature of the attorney/client relationship 
between the Board and General Counsel, the General Counsel may be 
directed by the Board not to disclose discussions and/or assignments 
with anyone, including the Executive Director. The Executive Director is 
otherwise to be privy to all matters within senior executive staff's 
responsibility.
    (8) Office of General Counsel. The General Counsel reports to the 
entire NCUA Board. The General Counsel has overall responsibility for 
all legal matters affecting NCUA and for liaison with the Department of 
Justice. The General Counsel represents NCUA in

[[Page 583]]

all litigation and administrative hearings when such direct 
representation is permitted by law and, in other instances, assists the 
attorneys responsible for the conduct of such litigation. The General 
Counsel also provides NCUA with legal advice and opinions on all matters 
of law, and the public with interpretations of the Federal Credit Union 
Act, the NCUA Rules and Regulations, and other NCUA Board directives. 
The Office has responsibility for processing Freedom of Information Act 
requests and appeals. The General Counsel has responsibility for the 
drafting, reviewing, and publication of all items which appear in the 
Federal Register, including rules, regulations, and notices required by 
law.
    (9) The Office of Human Resources. The Office of Human Resources 
provides a comprehensive program for the management of NCUA's human 
resources. This is done in support of NCUA's goal to recruit, develop, 
and retain a quality and representative workforce. The Director is 
responsible for managing NCUA's compensation program, for facilitating 
good organization design, for staffing positions through recruitment and 
merit promotion programs, and for maintaining an automated personnel 
records system. The Director is also responsible for the Board's 
performance management, incentive awards, employee assistance, and 
benefit programs. These programs are geared to foster healthy employee/
management relations and to provide employees with good working 
conditions.
    (10) Office of the Chief Information Officer. The Chief Information 
Officer has responsibility for the management and administration of 
NCUA's information resources. This includes the development, 
maintenance, operation, and support of information systems which 
directly support the Agency's mission, maintaining and operating the 
Agency's information processing infrastructure, responding to requests 
for releasable Agency information, and insuring all related material 
security and integrity risks are recognized and controlled as much as 
possible.
    (11) Office of the Inspector General. The Inspector General reports 
directly to the Board and provides semi-annual reports regarding audit 
and investigation activities to the Board and the Congress. The 
Inspector General is responsible for: (a) Conducting independent audits 
and investigations of all NCUA programs and functions to promote 
efficiency; (b) reviewing policies and procedures to evaluate controls 
to prevent fraud, waste, and abuse; and (c) reviewing existing and 
proposed legislation and regulations to evaluate their impact on the 
economic and efficient administration of the Agency.
    (12) Office of Public and Congressional Affairs. The Director of the 
Office of Public Congressional Affairs is responsible for maintaining 
NCUA's relationship with the public and the media; for liaison with the 
U.S. Congress, and with other Executive Branch agencies concerning 
legislative matters; and for the analysis and development of legislative 
proposals and public affairs programs.
    (13) Office of Community Development Credit Unions. This Office is 
responsible for coordinating NCUA policy as it relates to community 
development credit unions, including those credit unions designated as 
``low-income.'' The Office administers the Community Development 
Revolving Loan Program for Credit Unions (Program). This Program was 
funded from a congressional appropriation and serves as a loan and 
technical assistance vehicle for low-income credit unions. The Office 
Director serves as Program Chairman and authorizes loans and technical 
assistance to participating credit unions. The Program is governed by 
part 705 of subchapter A of this chapter.
    (14) Office of Investment Services. The Office of Investment 
Services is responsible for providing investment expertise and advice to 
the Board and agency staff. A working relationship is maintained with 
the financial marketplace to develop resources available to the NCUA and 
keep abreast of product initiatives. The NCUA Investment Hotline housed 
in this Office is a toll-free number that is available to examiners, 
credit unions, and financial product vendors to ask investment related 
questions. The Hotline provides NCUA an opportunity to be aware of 
current investment issues as they arise in credit unions and has 
permitted NCUA to

[[Page 584]]

become proactive, rather than reactive, to such issues. In addition, 
investment officers advise agency management on the purchase of 
authorized investments for the NCUSIF and the CLF.
    (15) Office of Training and Development. This Office provides a 
comprehensive program for the training and development of NCUA's staff. 
The Office is responsible for developing policy, consistent with the 
Government Employees Training Act, related to its training program; for 
providing training opportunities equitably so that all employees have 
the skills necessary to help meet the agency's mission; for evaluating 
the agency's training and development efforts; and for ensuring that the 
agency's training monies are spent in a cost efficient manner and in 
accordance with the law.
    (16) Office of Corporate Credit Unions. The Director, Office of 
Corporate Credit Unions, manages NCUA's corporate credit union program 
in accordance with established policies and the corporate regulation. 
The Director's duties include directing chartering, examination and 
supervision programs to promote and assure safety and soundness; 
managing NCUA's corporate resources to meet program objectives in the 
most economical and practical manner; and maintaining good public 
relations with public, private and governmental organizations, corporate 
credit union officials, credit union organizations, and other groups 
which have an interest in corporate credit union matters.
    (c) Regional offices. (1) NCUA's programs are conducted through six 
regional offices:

------------------------------------------------------------------------
      Region No.           Area within region          Office address
------------------------------------------------------------------------
I....................  Connecticut, Maine,         9 Washington Square,
                        Massachusetts, New          Washington Avenue
                        Hampshire, New York,        Extension, Albany,
                        Rhode Island, Vermont.      NY 12205.
II...................  Delaware, District of       1775 Duke Street,
                        Columbia, Maryland, New     suite 4206,
                        Jersey, Pennsylvania,       Alexandria, VA 22314-
                        Virginia, West Virginia.    3437.
III..................  Alabama, Arkansas,          7000 Central Parkway,
                        Florida, Georgia,           Suite 1600, Atlanta,
                        Kentucky, Louisiana,        GA 30328.
                        Mississippi, North
                        Carolina, Puerto Rico,
                        South Carolina,
                        Tennessee, Virgin Islands.
IV...................  Illinois, Indiana,          4225 Naperville Rd.,
                        Michigan, Missouri, Ohio,   suite 125, Lisle, IL
                        Wisconsin.                  60532.
V....................  Arizona, Colorado, Iowa,    4807 Spicewood
                        Kansas, Minnesota,          Springs Road, suite
                        Nebraska, New Mexico,       5200, Austin, TX
                        North Dakota, South         78759.
                        Dakota, Oklahoma, Texas,
                        Utah, Wyoming.
VI...................  Alaska, American Samoa,     2300 Clayton Road,
                        California, Guam, Hawaii,   suite 1350, Concord,
                        Idaho, Montana, Nevada,     CA 94520.
                        Oregon, Washington.
------------------------------------------------------------------------

    (2) A Regional Director is in charge of each Regional Office. The 
Regional Director manages NCUA's programs in the Region assigned in 
accordance with established policies. This person's duties include: 
Directing chartering, insurance, examination, and supervision programs 
to promote and assure safety and soundness; managing regional resources 
to meet program objectives in the most economical and practical manner; 
and maintaining good public relations with public, private, and 
governmental organizations, Federal credit union officials, credit union 
organizations, and other groups which have an interest in credit union 
matters in the assigned Region. The Director maintains liaison and 
cooperation with other regional offices of Federal departments and 
agencies, state agencies, city and county officials, and other 
governmental units that affect credit unions. The Regional Director is 
aided by an Associate Regional Director for Operations and Associate 
Regional Director for Programs. Staff working in the Regional Office 
report to the Associate Regional Director for Operations. Each region is 
divided into examiner districts, each assigned to a Supervisory Credit 
Union Examiner; groups of examiners are directed by a Supervisory Credit 
Union Examiner, each of whom in turn reports directly to the

[[Page 585]]

Associate Regional Director for Programs. Special Actions staff also 
report to the Associate Regional Director.

[58 FR 45431, Aug. 30, 1993, as amended at 59 FR 36042, July 15, 1994; 
59 FR 47072, Sept. 14, 1994; 60 FR 31911, June 19, 1995; 61 FR 45876, 
Aug. 30, 1996; 62 FR 8155, Feb. 24, 1997; 62 FR 37126, July 11, 1997; 62 
FR 65197, Dec. 11, 1997; 64 FR 17086, Apr. 8, 1999; 64 FR 57365, Oct. 
25, 1999; 65 FR 25267, May 1, 2000]



Sec. 790.3  Requests for action.

    Except as otherwise provided by NCUA regulation, all applications, 
requests, and submittals for action by the NCUA shall be in writing and 
addressed to the appropriate office described in Sec. 790.2. This will 
usually be one of the Regional Offices. In instances where the 
appropriate office cannot be determined, requests should be sent to the 
Office of Public and Congressional Affairs.



PART 791--RULES OF NCUA BOARD PROCEDURE; PROMULGATION OF NCUA RULES AND REGULATIONS; PUBLIC OBSERVATION OF NCUA BOARD MEETINGS--Table of Contents




                Subpart A--Rules of NCUA Board Procedure

Sec.
791.1  Scope.
791.2  Number of votes required for board action.
791.3  Voting by proxy.
791.4  Methods of acting.
791.5  Scheduling of board meetings.
791.6  Subject matter of a meeting.

          Subpart B--Promulgation of NCUA Rules and Regulations

791.7  Scope.
791.8  Promulgation of NCUA rules and regulations.

Subpart C--Public Observation of NCUA Board Meetings Under the Sunshine 
                                   Act

791.9  Scope.
791.10  Definitions.
791.11  Open meetings.
791.12  Exemptions.
791.13  Public announcement of meetings.
791.14  Regular procedure for closing meeting discussions or limiting 
          the disclosure of information.
791.15  Requests for open meeting.
791.16  General counsel certification.
791.17  Maintenance of meeting records.
791.18  Public availability of meeting records and other documents.

    Authority: 12 U.S.C. 1766, 1789 and 5 U.S.C. 552b.

    Source: 53 FR 29647, Aug. 8, 1988, unless otherwise noted.



                Subpart A--Rules of NCUA Board Procedure



Sec. 791.1  Scope.

    The rules contained in this subpart are the rules of procedure 
governing how the Board conducts its business. These rules concern the 
Board's exercise of its authority to act on behalf of NCUA; the conduct, 
scheduling and subject matter of Board meetings; and the recording of 
Board action.



Sec. 791.2  Number of votes required for board action.

    The agreement of at least two of the three Board members is required 
for any action by the Board.



Sec. 791.3  Voting by proxy.

    Proxy voting shall not be allowed for any action by the Board.



Sec. 791.4  Methods of acting.

    (a) Board meetings--(1) Applicability of the Sunshine Act. The 
Government in the Sunshine Act (5 U.S.C. 552b, ``Sunshine Act'') 
requires that joint deliberations of the Board be held in accordance 
with its open meetings provisions (5 U.S.C. 552b (b) through (f)). 
(Subpart C of this part contains NCUA's regulations implementing the 
Sunshine Act.)
    (2) Presiding officer. The Chairman is the presiding officer, and in 
the Chairman's absence, the designated Vice Chairman shall preside. The 
presiding officer shall make procedural rulings. Any Board member may 
appeal a ruling made by the presiding officer. The appeal of a 
procedural ruling by the presiding officer shall be immediately 
considered by the Board, and a majority decision by the Board shall 
decide the procedural ruling.
    (b) Notation voting. Notation voting is the circulation of written 
memoranda and voting sheets to the office of each Board member 
simultaneously and the tabulation of responses.

[[Page 586]]

    (1) Matters that may be decided by notation voting. Notation voting 
may be used only for routine matters.
    (2) Notation vote sheets. Notation vote sheets will be used to 
record the vote tally on a notation vote. The Secretary of the Board has 
administrative responsibility over notation voting, including the 
authority to establish deadlines for voting, receive notation vote 
sheets, count votes, and determine whether further action is required.
    (3) Veto of notation voting. In view of public policy for openness 
reflected in the Sunshine Act, each Board member is authorized to veto 
the use of notation voting for the consideration of any particular 
matter, and thus requires that the matter be placed on the agenda of the 
next regularly scheduled Board meeting that is held at least ten days 
after the date of the veto.
    (4) Disclosure of result. A record is to be maintained of Board 
transactions by use of the notation voting procedure. Public disclosure 
of this record is determined by the provisions of the Freedom of 
Information Act (5 U.S.C. 552).

[53 FR 29647, Aug. 8, 1988, as amended at 62 FR 64267, Dec. 5, 1997]



Sec. 791.5  Scheduling of board meetings.

    (a) Meeting calls--(1) Regular meetings. The Board will hold regular 
meetings each month unless there is no business or a quorum is not 
available. The Secretary of the Board will coordinate the dates for 
meetings.
    (2) Special meetings. The Chairman shall call special meetings 
either on the Chairman's own initiative or within fourteen days of a 
request from two Board members that is accompanied by an NCUA B-1 form 
and a Board Action Memorandum that states the specific issue(s) or 
action(s) to be considered by the Board.
    (b) Notice of meetings--(1) Notifying the public. The Sunshine Act 
and subpart C set forth the procedures for notifying the public of Board 
meetings.
    (2) Notifying board members--(i) Special meetings. Except in cases 
of emergency as determined by a majority of the Board, each Board member 
is entitled to receive notice of any special meeting at least twenty-
four hours in advance of such meeting. The notice shall set forth the 
place, day, hour, and nature of business to be transacted at the 
meeting. In cases of emergency a record of the vote, including a 
statement explaining the decision that an emergency exists, will be 
maintained.
    (ii) Regular meetings. Each Board member is entitled to receive 
notice of the agenda and/or notice of any changes in the subject matter 
of such meetings concurrent with the public release of such notices 
under the Sunshine Act. Each Board member shall be entitled to at least 
twenty-four hours advance notice of the consideration of a particular 
subject matter, except in cases of emergency as determined by a majority 
of the Board. In cases of emergency, a record of the vote, including a 
statement explaining the decision that an emergency exists, will be 
maintained.

[53 FR 29647, Aug. 8, 1988, as amended at 62 FR 64267, Dec. 5, 1997; 63 
FR 5859, Feb. 5, 1998]



Sec. 791.6  Subject matter of a meeting.

    (a) Agenda. The Chairman is responsible for the final order of each 
meeting agenda. Items shall be placed on the agenda by determination of 
the Chairman or, at the request of any Board Member, an item will be 
placed on the agenda of the next regularly scheduled meeting provided 
that the request is submitted at least ten days in advance of the next 
regularly scheduled meeting and is accompanied by an NCUA B-1 form and a 
Board Action Memorandum that states the specific issue(s) or action(s) 
to be considered by the Board.
    (b) Submission of recommended agenda items. Recommended agenda items 
may be submitted to the Secretary of the Board by Board members, the 
Executive Staff (which includes all Office Directors and President of 
the Central Liquidity Facility), and Regional Directors.

[61 FR 55208, Oct. 25, 1996, as amended at 62 FR 64267, Dec. 5, 1997; 63 
FR 5859, Feb. 5, 1998]



          Subpart B--Promulgation of NCUA Rules and Regulations



Sec. 791.7  Scope.

    The rules contained in this subpart B pertain to the promulgation of 
NCUA rules and regulations.

[[Page 587]]



Sec. 791.8  Promulgation of NCUA rules and regulations.

    (a) NCUA's procedures for developing regulations are governed by the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), the Paperwork Reduction Act (44 
U.S.C. 3501 et seq.), and NCUA's policies for the promulgation of rules 
and regulations as set forth in its Interpretive Ruling and Policy 
Statement 87-2.
    (b) Proposed rulemaking. Notices of proposed rulemaking are 
published in the Federal Register except as specified in paragraph (d) 
of this section or as otherwise provided by law. A notice of proposed 
rulemaking may also be identified as a ``request for comments'' or as a 
``proposed rule.'' The notice will include:
    (1) A statement of the nature of the rulemaking proceedings;
    (2) Reference to the authority under which the rule is proposed;
    (3) Either the terms or substance of the proposed rule or a 
description of the subjects and issues involved; and
    (4) A statement of the effect of the proposed rule on state-
chartered federally-insured credit unions.
    (c) Public participation. After publication of notice of proposed 
rulemaking, interested persons will be afforded the opportunity to 
participate in the making of the rule through the submission of written 
data, views, or arguments, delivered within the time prescribed in the 
notice of proposed rulemaking, to the Secretary, NCUA Board, 1775 Duke 
Street, Alexandria, VA 22314-3428. Interested persons may also petition 
the Board for the issuance, amendment, or repeal of any rule by mailing 
such petition to the Secretary of the Board at the address given in this 
section.
    (d) Exceptions to notice. The following are not subject to the 
notice requirement contained in paragraph (b) of this section:
    (1) Matters relating to agency management or personnel or to public 
property, loans, grants, benefits, or contracts;
    (2) When persons subject to the proposed rule are named and either 
personally served or otherwise have actual notice thereof in accordance 
with law;
    (3) Interpretive rules, general statements of policy, or rules of 
agency organization, procedure or practice, unless notice or hearing is 
required by statute; and
    (4) If the Board, for good cause, finds (and incorporates the 
finding and a brief statement therefor in the rules issued) that notice 
and public procedure thereon are impracticable, unnecessary, or contrary 
to the public interest, unless notice or hearing is required by statute.
    (e) Effective dates. No substantive rule issued by NCUA shall be 
effective less than 30 days after its publication in the Federal 
Register, except that this requirement may not apply to:
    (1) Rules which grant or recognize an exemption or relieve a 
restriction;
    (2) Interpretive rules and statements of policy; or
    (3) Any substantive rule which the Board makes effective at an 
earlier date upon good cause found and published with such rule.

[53 FR 29647, Aug. 8, 1988, as amended at 59 FR 36041, July 15, 1994]



Subpart C--Public Observation of NCUA Board Meetings Under the Sunshine 
                                   Act



Sec. 791.9  Scope.

    This subpart contains regulations implementing subsections (b) 
through (f) of the ``Government in the Sunshine Act'' (5 U.S.C. 552b). 
The primary purpose of these regulations is to provide the public with 
the fullest access authorized by law to the deliberations and decisions 
of the Board, while protecting the rights of individuals and preserving 
the ability of the agency to carry out its responsibilities.



Sec. 791.10  Definitions.

    For the purpose of this subpart:
    (a) Agency means the National Credit Union Administration;
    (b) Board means the National Credit Union Administration Board, 
whose members were appointed by the President with the advice and 
consent of the Senate;
    (c) Subdivision of the Board means a group composed of two Board 
members

[[Page 588]]

authorized by the Board to act on behalf of the agency;
    (d) Meeting means any deliberations by two or more members of the 
Board or any subdivision of the Board that determine or result in the 
joint conduct or disposition of official agency business with the 
exception of: (1) Deliberations to determine whether a meeting or a 
portion thereof will be open or closed to public observation and whether 
information regarding closed meetings will be withheld from public 
disclosure; (2) deliberations to determine whether or when to schedule a 
meeting; and (3) infrequent dispositions of official agency business by 
sequential circulation of written recommendations to individual Board 
members (``notation voting procedure''), provided the votes of each 
Board member and the action taken are recorded for each matter and are 
publicly available, unless exempted from disclosure pursuant to 5 U.S.C. 
552 (the Freedom of Information Act);
    (e) Public observation means that a member or group of the public 
may listen to and observe any open meeting and may record in an 
unobtrusive manner any portion of that meeting by use of a camera or any 
other electronic device, but shall not participate in any meeting unless 
authorized by the Board;
    (f) Public announcement or publicly announce means making reasonable 
efforts under the particular circumstances to fully inform the public, 
especially those individuals who have expressed interest in the subject 
matters to be discussed or the decisions of the agency;
    (g) Sunshine Act means the open meeting provisions of the 
``Government in the Sunshine Act'' (5 U.S.C. 552b.)



Sec. 791.11  Open meetings.

    Except as provided in Sec. 791.12(a), any portion of any meeting of 
the Board shall be open to public observation. The Board, and any 
subdivision of the Board, shall jointly conduct official agency business 
only in accordance with this subpart.



Sec. 791.12  Exemptions.

    (a) Under the procedures specified in Sec. 791.14, the Board may 
close a meeting or any portion of a meeting from public observation or 
may withhold information pertaining to such meetings provided the Board 
has properly determined that the public interest does not require 
otherwise and that the meeting (or any portion thereof) or the 
disclosure of meeting information is likely to:
    (1) Disclose matters that are:
    (i) Specifically authorized under criteria established by an 
Executive Order to be kept secret in the interests of national defense 
or foreign policy, and
    (ii) In fact properly classified pursuant to such Executive Order;
    (2) Relate solely to internal personnel rules and practices;
    (3) Disclose matters specifically exempted from disclosure by 
statute (other than section 552 of title 5 of the United States Code, 
the Freedom of Information Act), provided that such statute:
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue, or
    (ii) Establishes particular criteria for withholding or refers to 
particular types of matters to be withheld;
    (4) Disclose trade secrets and commercial or financial information 
obtained from a person and privileged or confidential;
    (5) Involve accusing any person of a crime, or formally censuring 
any person;
    (6) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Disclose investigatory records compiled for enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would:
    (i) Interfere with enforcement proceedings,
    (ii) Deprive a person of a right to a fair trial or an impartial 
adjudication,
    (iii) Constitute an unwarranted invasion of personal privacy,
    (iv) Disclose the identity of a confidential source and, in the case 
of a record compiled by a criminal law enforcement authority in the 
course of a criminal investigation, or by a Federal

[[Page 589]]

agency conducting a lawful national security intelligence investigation, 
confidential information furnished only by the confidential source,
    (v) Disclose investigative techniques and procedures, or
    (vi) Endanger the life or physical safety of law enforcement 
personnel;
    (8) Disclose information contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of Federal agencies responsible for the regulation or supervision of 
financial institutions;
    (9) Disclose information the premature disclosure of which would be 
likely to (i)(A) lead to significant speculation in currencies, 
securities, or commodities, or (B) significantly endanger the stability 
of any financial institution, or (ii) be likely to significantly 
frustrate implementation of a proposed action,

except that this paragraph (a)(9) shall not apply in any instance where 
the Board has already disclosed to the public the content or nature of 
its proposed action, or where the Board is required by law to make such 
disclosure on its own initiative prior to taking final action on such 
proposal; or
    (10) Specifically concern the issuance of a subpoena, participation 
in a civil action or proceeding, an action in a foreign court or 
international tribunal, or an arbitration, or the initiation, conduct or 
disposition of a particular case of formal agency adjudication pursuant 
to the procedures in section 554 of title 5 of the United States Code or 
otherwise involving a determination on the record after opportunity for 
a hearing.
    (b) Prior to closing a meeting whose discussions are likely to fall 
within the exemptions stated in paragraph (a) of this section, the Board 
will balance the public interest in observing the deliberations of an 
exemptible matter and the agency need for confidentiality of the 
exemptible matter. In weighing these interests, the Board is assisted by 
the General Counsel as provided in Sec. 791.16, by expressions of the 
public interest set forth in requests for open meetings as provided by 
Sec. 791.15(b), and by the brief staff analysis of public interest which 
will accompany each staff recommendation that an agenda item be 
considered in a closed meeting.



Sec. 791.13  Public announcement of meetings.

    (a) Except as otherwise provided in this section, the Board shall, 
for each meeting, make a public announcement, at least one week in 
advance of the meeting, of the time, place and subject matter of the 
meeting, whether it will be open or closed to public observation, and 
the name and telephone number of the Secretary of the Board or the 
person designated by the Board to respond to requests for information 
about the meeting.
    (b) Advance notice is required unless a majority of the members of 
the Board determine by a recorded vote that agency business requires 
that a meeting be called at an earlier date, in which case, the 
information to be announced in paragraph (a) of this section shall be 
publicly announced at the earliest practicable time.
    (c) A change, including a postponement or a cancellation, in the 
time or place of a meeting after a published announcement may be made 
only if announced at the earliest practicable time.
    (d) A change in or deletion of the subject matter of a meeting or 
any portion of a meeting or a redetermination to open or close a meeting 
or any portion of a meeting after a published announcement may be made 
only if:
    (1) A majority of the Board determines by recorded vote that agency 
business so requires and that no earlier announcement of the change was 
possible and
    (2) Public announcement of the change and of the vote of each member 
on such change shall be made at the earliest practicable time.
    (e) Each meeting announcement or amendment thereof shall be posted 
on the Public Notice Bulletin Board in the reception area of the agency 
headquarters and may be made available by other means deemed desirable 
by the Board. Immediately following each public announcement required by 
this section, the stated information shall be submitted to the Federal 
Register for publication.

[[Page 590]]

    (f) No announcement shall contain information which is determined to 
be exempt from disclosure under Sec. 791.12(a).
    (g) The agency shall maintain a mailing list of names and addresses 
of all persons who wish to receive copies of agency announcements of 
meetings open to public observation and amendments to such 
announcements. Requests to be placed on the mailing list should be made 
by telephoning or by writing to the Secretary of the Board.



Sec. 791.14  Regular procedure for closing meeting discussions or limiting the disclosure of information.

    (a) A decision to close any portion of a meeting and to withhold 
information about any portion of a meeting closed pursuant to 
Sec. 791.12(a) will be taken only when a majority of the entire Board 
votes to take such action. In deciding whether to close a meeting or any 
portion of a meeting or to withhold information, the Board shall 
independently consider whether the public interest requires an open 
meeting. A separate vote of the Board will be taken and recorded for 
each portion of a meeting to be closed to public observation pursuant to 
Sec. 791.12(a) or to withhold information from the public pursuant to 
Sec. 791.12(a). A single vote may be taken and recorded with respect to 
a series of meetings, or any portions of meetings which are proposed to 
be closed to the public, or with respect to any information concerning 
the series of meetings, so long as each meeting in the series involves 
the same particular matters and is scheduled to be held no more than 
thirty days after the initial meeting in such series. No proxies shall 
be allowed.
    (b) Any person whose interests may be directly affected by any 
portion of a meeting for any of the reasons stated in Sec. 791.12(a) 
(5), (6) or (7) may request that the Board close such portion of the 
meeting. After receiving notice of a person's desire for any specified 
portion of a meeting to be closed, the Board, upon a request by one 
member, will decide by recorded vote whether to close the relevant 
portion or portions of the meeting. This procedure applies to requests 
received either prior or subsequent to the announcement of a decision to 
hold an open meeting.
    (c) Within one day after any vote is taken pursuant to paragraph (a) 
or (b) of this section, the Board shall make publicly available a 
written copy of the vote taken indicating the vote of each Board member. 
Except to the extent that such information is withheld and exempt from 
disclosure, for each meeting or any portion of a meeting closed to the 
public, the Board shall make publicly available within one day after the 
required vote, a written explanation of its action, together with a list 
of all persons expected to attend the closed meeting and their 
affiliation. The list of persons to attend need not include the names of 
individual staff, but shall state the offices of the agency expected to 
participate in the meeting discussions.



Sec. 791.15  Requests for open meeting.

    (a) Following any announcement that the Board intends to close a 
meeting or any portion of any meeting, any person may make a written 
request to the Secretary of the Board that the meeting or a portion of 
the meeting be open. The request shall be circulated to the members of 
the Board, and the Board, upon the request of one member, shall 
reconsider its action under Sec. 791.14 before the meeting or before 
discussion of the matter at the meeting. If the Board decides to open a 
portion of a meeting proposed to be closed, the Board shall publicly 
announce its decision in accordance with Sec. 791.13(e). If no request 
is received from a Board member to reconsider the decision to close a 
meeting or portion thereof prior to the meeting discussion, the Chairman 
of the Board shall certify that the Board did not receive a request to 
reconsider its decision to close the discussion of the matter.
    (b) The request to open a portion of a meeting shall be submitted to 
the Secretary of the Board in advance of the meeting in question. The 
request shall set forth the requestor's interest in the matter to be 
discussed and the reasons why the requestor believes that the public 
interest requires that the meeting or portions thereof be open to public 
observation.

[[Page 591]]

    (c) The submission of a request to open a portion of a meeting shall 
not act to stay the effectiveness of Board action or to postpone or 
delay the meeting unless the Board decides otherwise.
    (d) The Secretary of the Board shall advise the requestor of the 
Board's consideration of the request to open a portion of the meeting as 
soon as practicable.



Sec. 791.16  General counsel certification.

    For each meeting or any portion of a meeting closed to public 
observation under Sec. 791.14, the General Counsel shall publicly 
certify, whether in his or her opinion, the meeting or portion thereof 
may be closed to public observation and shall state each relevant 
exemption provision of law. A copy of the certification, together with a 
statement from the presiding officer of the meeting setting forth the 
time and place of the meeting and the persons present, shall be retained 
as a part of the permanent meeting records. As part of the 
certification, the General Counsel shall recommend to the Board whether 
the public interest requires that the meeting or portions thereof 
proposed to be closed to public observation be held in the open.



Sec. 791.17  Maintenance of meeting records.

    (a) Except in those circumstances which are beyond the control of 
the agency, the Board shall maintain a complete transcript or electronic 
recording adequate to record fully the proceedings of each meeting, or 
any portion thereof, closed to public observation. However, for meetings 
closed under Sec. 791.12(a) (8), (9)(i) or (10), the Board shall 
maintain either a transcript, a recording or a set of minutes. The Board 
shall maintain a complete electronic recording for each open meeting or 
any portion thereof. All records shall clearly identify each speaker.
    (b) A set of minutes shall fully and clearly describe all matters 
discussed and shall provide a full and accurate summary of any actions 
taken, and the reasons for taking such action. Minutes shall also 
include a description of each of the views expressed by each person in 
attendance on any item and the record of any roll call vote, reflecting 
the vote of each member. All documents considered in connection with any 
action shall be identified in the minutes.
    (c) The agency shall maintain a complete verbatim copy of the 
transcript, a complete copy of the minutes or a complete electronic 
recording of each meeting, or any portion of a meeting, closed to public 
observation, for at least two years after such meeting or for one year 
after the conclusion of any agency proceeding with respect to which the 
meeting or any portion was held, whichever occurs later. The agency 
shall maintain a complete electronic recording of each open meeting for 
at least three months after the meeting date. A complete set of minutes 
shall be maintained on a permanent basis for all meetings.



Sec. 791.18  Public availability of meeting records and other documents.

    (a) The agency shall make promptly available to the public, in the 
Public Reference Room, the transcript, electronic recording, or minutes 
of any meeting, deleting any agenda item or any item of the testimony of 
a witness received at a closed meeting which the Board determined, 
pursuant to paragraph (c) of this section, was exempt from disclosure 
under Sec. 791.12(a). The exemption or exemptions relied upon for any 
deleted information shall be reflected on any record or recording.
    (b) Copies of any transcript, minutes or transcription of a 
recording, disclosing the identity of each speaker, shall be furnished 
to any person requesting such information in the form specified in 
paragraph (a) of this section. Copies shall be furnished at the actual 
cost of duplication or transcription unless waived by the Secretary of 
the Board.
    (c) Following each meeting or any portion of a meeting closed 
pursuant to Sec. 791.12(a), the General Counsel or his designee, after 
consultation with the Secretary of the Board, shall determine which, if 
any, portions of the meeting transcript, electronic recording or minutes 
not otherwise available under 5 U.S.C. 552a (the Privacy Act) contain 
information which should be withheld

[[Page 592]]

pursuant to Sec. 791.12(a). If, at a later time, the Board determines 
that there is no further justification for withholding any meeting 
record or other item of information from the public which has previously 
been withheld, then such information shall be made available to the 
public.
    (d) Except for information determined by the Board to be exempt from 
disclosure pursuant to paragraph (c) of this section, meeting records 
shall be promptly available to the public in the Public Reference Room. 
Meeting records include but are not limited to: The transcript, 
electronic recording or minutes of each meeting, as required by 
Sec. 791.17(a); the notice requirements of Secs. 791.13 and 791.14(c); 
and the General Counsel Certification along with the presiding officer's 
statement, as required by Sec. 791.16.
    (e) These provisions do not affect the procedures set forth in part 
792, subpart A, governing the inspection and copying of agency records, 
except that the exemptions set forth in Sec. 791.12(a) of this subpart 
and in 5 U.S.C. 552b(c) shall govern in the case of a request made 
pursuant to part 792, subpart A, to copy or inspect the meeting records 
described in this section. Any documents considered or mentioned at 
Board meetings may be obtained subject to the procedures set forth in 
part 792, subpart A.

[53 FR 29647, Aug. 8, 1988, as amended at 58 FR 17493, Apr. 5, 1993; 64 
FR 57365, Oct. 25, 1999]



PART 792--REQUESTS FOR INFORMATION UNDER THE FREEDOM OF INFORMATION ACT AND PRIVACY ACT, AND BY SUBPOENA; SECURITY PROCEDURES FOR CLASSIFIED INFORMATION--Table of Contents




                Subpart A--The Freedom of Information Act

                             General Purpose

Sec.
792.01  What is the purpose of this subpart?

                       Records Publicly Available

792.02  What records does NCUA make available to the public for 
          inspection and copying?
792.03  How will I know which records to request?
792.04  How can I obtain these records?
792.05  What is the significance of records made available and indexed?

                     Records Available Upon Request

792.06  Can I obtain other records?
792.07  Where do I send my request?
792.08  What must I include in my request?
792.09  What if my request does not meet the requirements of this 
          subpart?
792.10  What will NCUA do with my request?
792.11  What kind of records are exempt from public disclosure?
792.12  How will I know what records NCUA has determined to be exempt?
792.13  Can I get the records in different forms or formats?
792.14  Who is responsible for responding to my request?
792.15  How long will it take to process my request?
792.16  What unusual circumstances can delay NCUA's response?
792.17  What can I do if the time limit passes and I still have not 
          received a response?

                          Expedited Processing

792.18  What if my request is urgent and I cannot wait for the records?

                                  Fees

792.19  How does NCUA calculate the fees for processing my request?
792.20  What are the charges for each fee category?
792.21  Will NCUA provide a fee estimate?
792.22  What will NCUA charge for other services?
792.23  Can I avoid charges by sending multiple, small requests?
792.24  Can NCUA charge me interest if I fail to pay my bill?
792.25  Will NCUA charge me if the records are not found or are 
          determined to be exempt?
792.26  Will I be asked to pay fees in advance?

                         Fee Waiver or Reduction

792.27  Can fees be reduced or waived?

                                 Appeals

792.28  What if I am not satisfied with the response I receive?

                            Submitter Notice

792.29  If I send NCUA confidential commercial information, can it be 
          disclosed under FOIA?

                        Release of Exempt Records

792.30  Is there a prohibition against disclosure of exempt records?

[[Page 593]]

792.31  Can exempt records be disclosed to credit unions, financial 
          institutions and state or federal agencies?
792.32  Can exempt records be disclosed to investigatory agencies?

Subpart B  [Reserved]

    Subpart C--Production of Nonpublic Records and Testimony of NCUA 
                     Employees in Legal Proceedings

792.40  What does this subpart prohibit?
792.41  When does this supart apply?
792.42  How do I request nonpublic records or testimony?
792.43  What must my written request contain?
792.44  When should I make a request?
792.45  Where do I send my request?
792.46  What will the NCUA do with my request?
792.47  If my request is granted, what fees apply?
792.48  If my request is granted, what restrictions apply?
792.49  Definitions.

        Subpart D--Security Procedures for Classified Information

792.50  Program.
792.51  Procedures.

                       Subpart E--The Privacy Act

792.52  Scope.
792.53  Definitions.
792.54  Procedures for requests pertaining to individual records in a 
          system of records.
792.55  Times, places, and requirements for identification of 
          individuals making requests and identification of records 
          requested.
792.56  Notice of existence of records, access decisions and disclosure 
          of requested information; time limits.
792.57  Special procedures: Information furnished by other agencies; 
          medical records.
792.58  Requests for correction or amendment to a record; administrative 
          review of requests.
792.59  Appeal of initial determination.
792.60  Disclosure of record to person other than the individual to whom 
          it pertains.
792.61  Accounting for disclosures.
792.62  Requests for accounting for disclosures.
792.63  Collection of information from individuals; information forms.
792.64  Contracting for the operation of a system of records.
792.65  Fees.
792.66  Exemptions.
792.67  Security of systems of records.
792.68  Use and collection of Social Security numbers.
792.69  Training and employee standards of conduct with regard to 
          privacy.

    Authority: 5 U.S.C. 301, 552, 552a, 552b; 12 U.S.C. 1752a(d), 1766, 
1789, 1795f; E.O. 12600, 52 FR 23781, 3 CFR, 1987 Comp., p. 235; E.O. 
12958, 60 FR 19825, 3 CFR, 1995 Comp., p.333.

    Source: 54 FR 18476, May 1, 1989, unless otherwise noted.



                Subpart A--The Freedom of Information Act

    Source: 63 FR 14338, Mar. 25, 1998, unless otherwise noted.

                             General Purpose



Sec. 792.01  What is the purpose of this subpart?

    This subpart describes the procedures you must follow to obtain 
records from NCUA under the Freedom of Information Act (FOIA), (5 U.S.C. 
552).

                       Records Publicly Available



Sec. 792.02  What records does NCUA make available to the public for inspection and copying?

    Except for records that are exempt from public disclosure under FOIA 
as amended (5 U.S.C. 552) or are promptly published and copies are 
available for purchase, NCUA routinely makes the following five types of 
records available for you to inspect and copy:
    (a) Final opinions, including concurring and dissenting opinions, 
and orders made in the adjudication of cases;
    (b) Statements of policy and interpretations which have been adopted 
by the agency but not published in the Federal Register;
    (c) Administrative staff manuals and instructions to staff that 
affect a member of the public;
    (d) Copies of all records, regardless of form or format, which have 
been released after March 31, 1997, in response to a FOIA request and 
which, because of the nature of their subject matter, NCUA determines 
have been or are likely to become the subject of subsequent requests; 
and
    (e) Indices of the documents referred to in this paragraph.

[[Page 594]]



Sec. 792.03  How will I know which records to request?

    NCUA maintains current indices providing identifying information for 
the public for any matter referred to in Sec. 792.02, issued, adopted, 
or promulgated after July 4, 1967. The listing of material in an index 
is for the convenience of possible users and does not constitute a 
determination that all of the items listed will be disclosed. NCUA has 
determined that publication of the indices is unnecessary and 
impractical. You may obtain copies of indices by making a request to the 
Office of Administration, at NCUA, 1775 Duke Street, Alexandria, VA 
22314-2387 or, as indicated, on the NCUA web site. The indices are 
available for public inspection and copying and are provided at their 
duplication cost. The indices are:
    (a) NCUA Publications List: Manuals relating to general and 
technical information, booklets published by NCUA, and the Credit Union 
Directory. The NCUA Publications list is available on the NCUA web site.
    (b) Directives Control Index: A list of statements of policy, NCUA 
Instructions, Bulletins, Letters to Credit Unions, and certain internal 
manuals.
    (c) Popular FOIA Index: Records released in response to a FOIA 
request, that NCUA determines are likely to be the subject of subsequent 
requests because of the nature of their subject matter. The Popular FOIA 
Index will be available on the NCUA web site on or before December 31, 
1999.



Sec. 792.04  How can I obtain these records?

    You may obtain these types of records or information in the 
following ways:
    (a) You may obtain copies of the records referenced in Sec. 792.02 
by obtaining the index referred to in Sec. 792.03 and following the 
ordering instructions it contains, or by making a request to the FOIA 
Officer, NCUA, Office of General Counsel at 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
    (b) If they were created by NCUA on or after November 1, 1996, 
records referenced in Sec. 792.02 are available on the NCUA web site, 
found at http://www.ncua.gov.



Sec. 792.05  What is the significance of records made available and indexed?

    The records referred to in Sec. 792.02 may be relied on, used, or 
cited as precedent by NCUA against a party, provided:
    (a) The materials have been indexed and either made available or 
published; or
    (b) The party has actual and timely notice of the materials' 
contents.

                     Records Available Upon Request



Sec. 792.06  Can I obtain other records?

    Except with respect to records routinely made available under 
Sec. 792.02 or published in the Federal Register, or to the extent that 
records are exempt under the FOIA, if you make a request for records in 
accordance with this subpart, NCUA will make such records available to 
you, including records maintained in electronic format, as long as you 
agree to pay the actual, direct costs.



Sec. 792.07  Where do I send my request?

    (a) You must send your request to one of NCUA's Information Centers. 
The Central Office, Regional Offices, Office of Inspector General and 
the Asset Management and Assistance Center are designated as Information 
Centers for the NCUA. The Freedom of Information Officer of the Office 
of General Counsel is responsible for the operations of the Information 
Center maintained at the Central Office. The Regional Directors are 
responsible for the operation of the Information Centers in their 
Regional Offices. The Inspector General is responsible for the operation 
of the Office of Inspector General Information Center.
    (b) If you think that the records are located at one of NCUA's 
Regional Offices, then you should send your request to the appropriate 
Regional Director, whose address can be found in Sec. 790.2(c) of this 
chapter.
    (c) If you think that the records are located at the Asset 
Management and Assistance Center, then you should send your request to 
the President, Asset Management and Assistance Center, 4807 Spicewood 
Springs Road, Suite 5100, Austin, Texas 78759-8490.

[[Page 595]]

    (d) If you think that the records you want are in the files of the 
Office of Inspector General, then you should send your request to the 
Inspector General, NCUA, 1775 Duke Street, Alexandria, Virginia 22314-
3428.
    (e) When you are not sure of the location of records, or if you 
think that the records you want are located in the Central Office, you 
should send your request to the Freedom of Information Officer at NCUA, 
Office of the General Counsel, 1775 Duke Street, Alexandria, Virginia 
22314-3428. You may also send your request by electronic mail to 
[email protected].



Sec. 792.08  What must I include in my request?

    Your request must include the following:
    (a) Your name, address and a telephone number where you can be 
reached during normal business hours.
    (b) A reasonable description of the records you seek. A reasonable 
description is one that enables an NCUA employee, who is familiar with 
the subject area of the request, to locate the record with a reasonable 
amount of effort.
    (c) A statement agreeing to pay all applicable fees or to pay fees 
up to a certain maximum amount, or requesting a fee reduction or waiver 
in accordance with Sec. 792.27. If the actual fees are expected to 
exceed the maximum amount you indicate in your request, NCUA will 
contact you to see if you are willing to pay the estimated fees. If you 
do not want to pay the estimated fees, your request will be closed and 
no bill will be sent.
    (d) If other than paper copy, you must identify the form and format 
of responsive information you are requesting.



Sec. 792.09  What if my request does not meet the requirements of this subpart?

    NCUA need not accept or process your request if it does not comply 
with the requirements of this subpart. NCUA may return such a request to 
you with an explanation of the deficiency. You may then submit a 
corrected request, which will be treated as a new request.



Sec. 792.10  What will NCUA do with my request?

    (a) On receipt of any request, the Information Center assigns it to 
the appropriate processing schedule, pursuant to paragraph (b) of this 
section. The date of receipt for any request, including one that is 
addressed incorrectly or that is referred to NCUA by another agency, is 
the date the appropriate Information Center actually receives the 
request.
    (b) NCUA has a multi-track processing system. Requests for records 
that are readily identifiable by the Information Center and have already 
been cleared for public release may qualify for fast track processing. 
Requests which meets the requirements of Sec. 792.18 will be processed 
on the expedited track. All other requests will be handled under normal 
processing procedures.
    (c) The Information Center will make the determination whether a 
request qualifies for fast track processing or expedited track 
processing. You may contact the Information Center to learn to which 
track your request has been assigned. If your request has not qualified 
for fast track processing, you will have an opportunity to limit the 
scope of material requested to qualify for fast track processing. 
Limitations of requests must be in writing. If your request for 
expedited processing is not granted, you will be advised of your right 
to appeal.
    (d) The Information Center will normally process requests in the 
order they are received in the separate processing tracks. However, in 
NCUA's discretion, a particular request may be processed out of turn.
    (e) Upon a determination by the appropriate Information Center to 
comply with your initial request for records, the records will be made 
promptly available to you. If we notify you of a denial of your request, 
we will include the names and titles or positions of each person 
responsible for the denial.



Sec. 792.11  What kind of records are exempt from public disclosure?

    (a) All records of NCUA or any officer, employee, or agent thereof, 
are confidential, privileged and exempt

[[Page 596]]

from disclosure, except as otherwise provided in this subpart, if they 
are:
    (1) Records specifically authorized under criteria established by an 
Executive Order to be kept secret in the interest of national defense or 
foreign policy and are in fact properly classified pursuant to an 
Executive Order.
    (2) Records related solely to NCUA internal personnel rules and 
practices. This exemption applies to internal rules or instructions 
which must be kept confidential in order to assure effective performance 
of the functions and activities for which NCUA is responsible and which 
do not materially affect members of the public. This exemption also 
applies to manuals and instructions to the extent that release of the 
information would permit circumvention of laws or regulations.
    (3) Specifically exempted from disclosure by statute, where the 
statute either makes nondisclosure mandatory or establishes particular 
criteria for withholding information.
    (4) Records which contain trade secrets and commercial or financial 
information which relate to the business, personal or financial affairs 
of any person or organization, are furnished to NCUA, and are 
confidential or privileged. This exemption includes, but is not limited 
to, various types of confidential sales and cost statistics, trade 
secrets, and names of key customers and personnel. Assurances of 
confidentiality given by staff are not binding on NCUA.
    (5) Inter-agency or intra-agency memoranda or letters which would 
not be available by law to a private party in litigation with NCUA. This 
exemption preserves the existing freedom of NCUA officials and employees 
to engage in full and frank written or taped communications with each 
other and with officials and employees of other agencies. It includes, 
but is not limited to, inter-agency and intra-agency reports, memoranda, 
letters, correspondence, work papers, and minutes of meetings, as well 
as staff papers prepared for use within NCUA or in concert with other 
governmental agencies.
    (6) Personnel, medical, and similar files (including financial 
files), the disclosure of which without written permission would 
constitute a clearly unwarranted invasion of personal privacy. Files 
exempt from disclosure include, but are not limited to:
    (i) The personnel records of the NCUA;
    (ii) The personnel records voluntarily submitted by private parties 
in response to NCUA's requests for proposals; and
    (iii) Files containing reports, records or other material pertaining 
to individual cases in which disciplinary or other administrative action 
has been or may be taken.
    (7) Records or information compiled for law enforcement purposes, 
but only to the extent that the production of such law enforcement 
records or information:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trial or an 
impartial adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a state, local, or foreign agency or 
authority or any private institution which furnished information on a 
confidential basis, and, in the case of a record or information compiled 
by a criminal law enforcement authority in the course of a criminal 
investigation on or by an agency conducting a lawful national security 
intelligence investigation, information furnished by the confidential 
source;
    (v) Would disclose techniques and procedures for law enforcement 
investigation or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual. This includes, but is not limited to, 
information relating to enforcement proceedings upon which NCUA has 
acted or will act in the future.
    (8) Contained in or related to examination, operating or condition 
reports

[[Page 597]]

prepared by, or on behalf of, or for the use of NCUA or any agency 
responsible for the regulation or supervision of financial institutions. 
This includes all information, whether in formal or informal report 
form, the disclosure of which would harm the financial security of 
credit unions or would interfere with the relationship between NCUA and 
credit unions.
    (b) We will provide any reasonably segregable portion of a requested 
record after deleting those portions that are exempt from disclosure 
under this section.



Sec. 792.12  How will I know what records NCUA has determined to be exempt?

    As long as it is technically feasible and does not threaten an 
interest protected by the FOIA, we will:
    (a) Mark the place where we redacted information from documents 
released to you and note the exemption that protects the information 
from public disclosure; or
    (b) Make reasonable efforts to include with our response to you an 
estimate of the volume of information withheld.



Sec. 792.13  Can I get the records in different forms or formats?

    NCUA will provide a copy of the record in any form or format 
requested, such as computer disk, if the record is readily reproducible 
by us in that form or format, but we will not provide more than one copy 
of any record.



Sec. 792.14  Who is responsible for responding to my request?

    The appropriate Regional Director, the Inspector General, the 
President of the Asset Management and Assistance Center, or the Freedom 
of Information Officer, or, in their absence, their designee, is 
responsible for making the initial determination on whether to grant or 
deny a request for information. This official may refer a request to an 
NCUA employee who is familiar with the subject area of the request. 
Other NCUA staff members may aid the official by providing information, 
advice, recommending a decision, or implementing a decision, but no NCUA 
employee other than an authorized official may make the initial 
determination. Referral of a request by the official to an employee will 
not affect the time limitation imposed in Sec. 792.15 unless the request 
involves an unusual circumstance as provided in Sec. 792.16.



Sec. 792.15  How long will it take to process my request?

    NCUA will respond to requests within 20 working days, except:
    (a) Where the running of such time is suspended for payment of fees 
pursuant to Sec. 792.26;
    (b) In unusual circumstances, as defined in 5 U.S.C. 552(a)(6)(B) 
and Sec. 792.16, the time limit may be extended for:
    (1) An additional 10 working days as provided by written notice to 
you, stating the reasons for the extension and the date on which a 
determination will be sent; or
    (2) Such alternative time period as mutually agreed by you and the 
Information Office, when NCUA notifies you that the request cannot be 
processed in the specified time limit.



Sec. 792.16  What unusual circumstances can delay NCUA's response?

    (a) In unusual circumstances, the time limits for responding to your 
request (or your appeal) may be extended by NCUA. If NCUA extends the 
time it will provide you with written notice, setting forth the reasons 
for such extension and the date on which a determination is expected to 
be dispatched. Our notice will not specify a date that would result in 
an extension for more than 10 working days, except as set forth in 
paragraph (c) of this section. The unusual circumstances that can delay 
NCUA's response to your request are:
    (1) The need to search for, and collect the requested records from 
field facilities or other establishments that are separate from the 
office processing the request;
    (2) The need to search for, collect, and appropriately examine a 
voluminous amount of separate and distinct records which are demanded in 
a single request; or
    (3) The need for consultation, which will be conducted with all 
practicable

[[Page 598]]

speed, with another agency having substantial interest in the 
determination of the request or among two or more components of NCUA 
having a substantial interest in the subject matter.
    (b) If you, or you and a group of others acting in concert, submit 
multiple requests that NCUA believes actually constitute a single 
request, which would otherwise satisfy the unusual circumstances 
criteria specified in this section, and the requests involve related 
matters, then NCUA may aggregate those requests and the provisions of 
Sec. 792.15(b) will apply.
    (c) If NCUA sends you an extension notice, it will also advise you 
that you can either limit the scope of your request so that it can be 
processed within the statutory time limit or agree to an alternative 
time frame for processing your request.



Sec. 792.17  What can I do if the time limit passes and I still have not received a response?

    You can file suit against NCUA because you will be deemed to have 
exhausted your administrative remedies if NCUA fails to comply with the 
time limit provisions of this subpart. If NCUA can show that exceptional 
circumstances exist and that it is exercising due diligence in 
responding to your request, the court may retain jurisdiction and allow 
NCUA to complete its review of the records. In determining whether 
exceptional circumstances exist, the court may consider your refusal to 
modify the scope of your request or arrange an alternative time frame 
for processing after being given the opportunity to do so by NCUA, when 
it notifies you of the existence of unusual circumstances as set forth 
in Sec. 792.16.

                          Expedited Processing



Sec. 792.18  What if my request is urgent and I cannot wait for the records?

    You may request expedited processing of your request if you can show 
a compelling need for the records. In cases where your request for 
expedited processing is granted or if NCUA has determined to expedite 
the response, it will be processed as soon as practicable.
    (a) To demonstrate a compelling need for expedited processing, you 
must provide a certified statement. The statement, certified by you to 
be true and correct to the best of your knowledge and belief, must 
demonstrate that:
    (1) The failure to obtain the records on an expedited basis could 
reasonably be expected to pose an imminent threat to the life or 
physical safety of an individual; or
    (2) The requester is a representative of the news media, as defined 
in Sec. 792.20, and there is urgency to inform the public concerning 
actual or alleged NCUA activity.
    (b) In response to a request for expedited processing, the 
Information Center will notify you of the determination within ten days 
of receipt of the request. If the Information Center denies your request 
for expedited processing, you may file an appeal pursuant to the 
procedures set forth in Sec. 792.28, and NCUA will expeditiously respond 
to the appeal.
    (c) The Information Center will normally process requests in the 
order they are received in the separate processing tracks. However, in 
NCUA's discretion, a particular request may be processed out of turn.

                                  Fees



Sec. 792.19  How does NCUA calculate the fees for processing my request?

    We will charge you our allowable direct costs, unless they are less 
than the cost of billing you. Direct costs means those expenditures that 
NCUA actually incurs in searching for, duplicating and reviewing 
documents to respond to a FOIA request. Search means all time spent 
looking for material that is responsive to a request, including page-by-
page or line-by-line identification of material within documents. 
Searches may be done manually or by computer. Search does not include 
modification of an existing program or system that would significantly 
interfere with the operation of an automated information system. Review 
means examining documents to determine whether any portion should be 
withheld and preparing documents for disclosure. Fees are subject to 
change as costs increase. The current rate schedule is available on

[[Page 599]]

our web site at http://www.ncua.gov. We may contract with the private 
sector to locate, reproduce or disseminate records. NCUA will not 
contract out responsibilities that FOIA requires it to discharge, such 
as determining the applicability of an exemption, or determining whether 
to waive or reduce fees. The following labor and duplication rate 
calculations apply:
    (a) NCUA will charge fees at the following rates for manual searches 
for and review of records:
    (1) If search/review is done by clerical staff, the hourly rate for 
CU-5, plus 16% of that rate to cover benefits;
    (2) If search/review is done by professional staff, the hourly rate 
for CU-13, plus 16% of that rate to cover benefits.
    (b) NCUA will charge fees at the hourly rate for CU-13, plus 16% of 
that rate to cover benefits, plus the hourly cost of operating the 
computer for computer searches for records.
    (c) NCUA will charge the following duplication fees:
    (1) The per-page fee for paper copy reproduction of a document is 
$.05;
    (2) The fee for documents generated by computer is the hourly fee 
for the computer operator, plus the cost of materials (computer paper, 
tapes, labels, etc.);
    (3) If any other method of duplication is used, NCUA will charge the 
actual direct cost of duplication.



Sec. 792.20  What are the charges for each fee category?

    The fee category definitions are:
    (a) Commercial use request means a request from or on behalf of one 
who seeks information for a use or purpose that furthers the commercial, 
trade, or profit interests of the requester or the person on whose 
behalf the request is made.
    (b) Educational institution means a preschool, an elementary or 
secondary school, an institution of undergraduate higher education, an 
institution of graduate higher education, an institution of professional 
education, and an institution of vocational education operating a 
program or programs of scholarly research.
    (c) Noncommercial scientific institution means an institution that 
is not operated for a ``commercial'' purpose as that term is used in 
paragraph (a) of this section and is operated solely for the purpose of 
conducting scientific research, the results of which are not intended to 
promote any particular product or industry.
    (d) Representative of the news media means any person actively 
gathering news for an entity that is organized and operated to publish 
or broadcast news to the public. Included within the meaning of public 
is the credit union community. The term news means information that is 
about current events or that would be of current interest to the public. 
You may consult the following chart to find the fees applicable to your 
request:

----------------------------------------------------------------------------------------------------------------
      If your fee category is              You'll receive                     And you'll be charged
----------------------------------------------------------------------------------------------------------------
Commercial use.....................  0 hours free search.......  search time
                                     0 hours free review.......  review time
                                     0 free pages..............  duplication
Educational institution,             Unlimited free search       duplication
 noncommercial scientific             hours.
 institution, newsmedia.             Unlimited free review
                                      hours.
                                     100 free pages............
All others.........................  2 hours free search.......  search time
                                     Unlimited free review
                                      hours.
                                     100 free pages............  duplication
----------------------------------------------------------------------------------------------------------------



Sec. 792.21  Will NCUA provide a fee estimate?

    NCUA will notify you of the estimated amount if fees are likely to 
exceed $25, unless you have indicated in advance a willingness to pay 
fees as high as those anticipated. You will then have the opportunity to 
confer with NCUA personnel to reformulate the request to meet your needs 
at a lower cost.

[[Page 600]]



Sec. 792.22  What will NCUA charge for other services?

    Complying with requests for special services is entirely at the 
discretion of NCUA. NCUA will recover the full costs of providing such 
services to the extent it elects to provide them.



Sec. 792.23  Can I avoid charges by sending multiple, small requests?

    You may not file multiple requests, each seeking portions of a 
document or similar documents, solely to avoid payment of fees. If this 
is done, NCUA may aggregate any such requests and charge you 
accordingly.



Sec. 792.24  Can NCUA charge me interest if I fail to pay my bill?

    NCUA can assess interest charges on an unpaid bill starting on the 
31st day following the date of the bill. If you fail to pay your bill 
within 30 days, interest will be at the rate prescribed in 31 U.S.C. 
3717, and will accrue from the date of the billing.



Sec. 792.25  Will NCUA charge me if the records are not found or are determined to be exempt?

    NCUA may assess fees for time spent searching and reviewing, even if 
it fails to locate the records or if records located are determined to 
be exempt from disclosure.



Sec. 792.26  Will I be asked to pay fees in advance?

    NCUA will require you to give an assurance of payment or an advance 
payment only when:
    (a) NCUA estimates or determines that allowable charges that you may 
be required to pay are likely to exceed $250. NCUA will notify you of 
the likely cost and obtain satisfactory assurance of full payment where 
you have a history of prompt payment of FOIA fees, or require an advance 
payment of an amount up to the full estimated charges in the case where 
you have no history of payment; or
    (b) You have previously failed to pay a fee charged in a timely 
fashion. NCUA may require you to pay the full amount owed, plus any 
applicable interest, or demonstrate that you have, in fact, paid the 
fee, and to make an advance payment of the full amount of the estimated 
fee before we begin to process a new request or a pending request from 
you.
    (c) If you are required to make an advance payment of fees, then the 
administrative time limits prescribed in Sec. 792.16 will begin only 
after NCUA has received the fee payments described.

                         Fee Waiver or Reduction



Sec. 792.27  Can fees be reduced or waived?

    You may request that NCUA waive or reduce fees if disclosure of the 
information you request is in the public interest because it is likely 
to contribute significantly to public understanding of the operations or 
activities of the government, and is not primarily in your commercial 
interest.
    (a) NCUA will make a determination of whether the public interest 
requirement above is met based on the following factors:
    (1) Whether the subject of the requested records concerns the 
operations or activities of the government;
    (2) Whether the disclosure is likely to contribute to an 
understanding of government operations or activities;
    (3) Whether disclosure of the requested information will contribute 
to public understanding; and
    (4) Whether the disclosure is likely to contribute significantly to 
public understanding of government operations or activities,
    (b) If the public interest requirement is met, NCUA will make a 
determination on the commercial interest requirement based upon the 
following factors:
    (1) Whether you have a commercial interest that would be furthered 
by the requested disclosure; and if so
    (2) Whether the magnitude of your commercial interest is 
sufficiently large in comparison with the public interest in disclosure, 
that disclosure is primarily in your commercial interest.
    (c) If the required public interest exists and your commercial 
interest is not primary in comparison, NCUA will waive or reduce fees.
    (d) If you are not satisfied with our determination on your fee 
waiver or reduction request, you may submit an appeal to the General 
Counsel in accordance with Sec. 792.28.

[[Page 601]]

                                 Appeals



Sec. 792.28  What if I am not satisfied with the response I receive?

    If you are not satisfied with NCUA's response to your request, you 
can file an administrative appeal. Your appeal must be in writing and 
must be filed within 30 days from receipt of the initial determination 
(in cases of denials of an entire request, or denial of a request for 
fee waiver or reduction), or from receipt of any records being made 
available pursuant to the initial determination (in cases of partial 
denials.) In its response to your initial request, the Freedom of 
Information Act Officer, Inspector General, President of the Asset 
Management and Assistance Center, or responsible Regional Director, (or 
designee,) will notify you that you may appeal any adverse determination 
to the Office of General Counsel. The General Counsel, or designee, as 
set forth in this paragraph, will:
    (a) Make a determination with respect to any appeal within 20 days 
(excepting Saturdays, Sundays, and legal public holidays) after the 
receipt of such appeal. If, on appeal, the denial of the request for 
records is, in whole or in part, upheld, the Office of General Counsel 
will notify you of the provisions for judicial review of that 
determination under FOIA. Where you do not address your request or 
appeal to the proper official, the time limitations stated above will be 
computed from the receipt of the request or appeal by the proper 
official.
    (b) The General Counsel is the official responsible for determining 
all appeals from initial determinations. In case of this person's 
absence, the appropriate officer acting in the General Counsel's stead 
will make the appellate determination, unless such officer was 
responsible for the initial determination, in which case the Vice-
Chairman of the NCUA Board will make the appellate determination.
    (c) All appeals should be addressed to the General Counsel in the 
Central Office and should be clearly identified as such on the envelope 
and in the letter of appeal by using the indicator ``FOIA-APPEAL.'' 
Failure to address an appeal properly may delay commencement of the time 
limitation stated in paragraph (a)(1) of this section, to take account 
of the time reasonably required to forward the appeal to the Office of 
General Counsel.

                            Submitter Notice



Sec. 792.29  If I send NCUA confidential commercial information, can it be disclosed under FOIA?

    (a) If you submit confidential commercial information to NCUA, it 
may be disclosed in response to a FOIA request in accordance with this 
section.
    (b) For purposes of this section:
    (1) Confidential commercial information means commercial or 
financial information provided to NCUA by a submitter that arguably is 
protected from disclosure under Sec. 792.11(a)(4) because disclosure 
could reasonably be expected to cause substantial competitive harm.
    (2) Submitter means any person or entity who provides business 
information, directly or indirectly, to NCUA.
    (c) Submitters of business information must use good faith efforts 
to designate, by appropriate markings, either at the time of submission 
or at a reasonable time thereafter, those portions of their submissions 
deemed to be protected from disclosure under Sec. 792.11(a)(4). Such a 
designation shall expire ten years after the date of submission.
    (d) We will provide a submitter with written notice of a FOIA 
request or administrative appeal encompassing designated business 
information when:
    (1) The information has been designated in good faith by the 
submitter as confidential commercial information deemed protected from 
disclosure under Sec. 792.11(a)(4); or
    (2) NCUA has reason to believe that the information may be protected 
from disclosure under Sec. 792.11(a)(4).
    (e) A copy of the notice to the submitter will also be provided to 
the FOIA requester.
    (f) Through the notice described in paragraph (d) of this section, 
NCUA will afford the submitter a reasonable period of time within which 
to provide a detailed written statement of any objection to disclosure. 
The statement must describe why the information is confidential 
commercial information and why it should not be disclosed.

[[Page 602]]

    (g) Whenever we decide that we must disclose confidential commercial 
information over the objection of the submitter, we will send both the 
submitter and the FOIA requester, within a reasonable number of days 
prior to the specified disclosure date, a written notice which will 
include:
    (1) A statement of the reasons for which the submitter's disclosure 
objection was not sustained; and
    (2) A description of the information to be disclosed; and
    (3) A specified disclosure date.
    (h) If a requester brings suit to compel disclosure of confidential 
commercial information, we will promptly notify the submitter.
    (i) The notice requirements of paragraph (d) of this section do not 
apply if:
    (1) We determine that the information should not be disclosed;
    (2) The information has been lawfully published or has been 
officially made available to the public;
    (3) Disclosure of the information is required by law; or
    (4) The designation made by the submitter in accordance with 
paragraph (c) of this section appears obviously frivolous; except that 
in such case, NCUA will provide the submitter with written notice of any 
final administrative decision to disclose the information within a 
reasonable number of days prior to the specified disclosure date.

                      Release of Exempt Information



Sec. 792.30  Is there a prohibition against disclosure of exempt records?

    Except those authorized officials listed in Sec. 792.14, or as 
provided in Secs. 792.31-792.32, and subpart C of this part, no officer, 
employee, or agent of NCUA or of any federally-insured credit union 
shall disclose or permit the disclosure of any exempt records of NCUA to 
any person other than those NCUA or credit union officers, employees, or 
agents properly entitled to such information for the performance of 
their official duties.



Sec. 792.31  Can exempt records be disclosed to credit unions, financial institutions and state or federal agencies?

    The NCUA Board, in its sole discretion, or any person designated by 
it in writing, may make available to certain governmental agencies and 
insured financial institutions copies of reports of examination and 
other documents, papers or information for their use, when necessary, in 
the performance of their official duties or functions. All reports, 
documents and papers made available pursuant to this paragraph shall 
remain the property of NCUA. No person, agency or employee shall 
disclose the reports or exempt records without NCUA's express written 
authorization.



Sec. 792.32  Can exempt records be disclosed to investigatory agencies?

    The NCUA Board, or any person designated by it in writing, in its 
discretion and in appropriate circumstances, may disclose to proper 
federal or state authorities copies of exempt records pertaining to 
irregularities discovered in credit unions which may constitute either 
unsafe or unsound practices or violations of federal or state, civil or 
criminal law.

Subpart B  [Reserved]



    Subpart C--Production of Nonpublic Records and Testimony of NCUA 
                     Employees in Legal Proceedings

    Source: 62 FR 56054, Oct. 29, 1997, unless otherwise noted.



Sec. 792.40  What does this subpart prohibit?

    This subpart prohibits the release of nonpublic records or the 
appearance of an NCUA employee to testify in legal proceedings except as 
provided in this subpart. Any person possessing nonpublic records may 
release them or permit their disclosure only as provided in this 
subpart.
    (a) Duty of NCUA employees. (1) If an NCUA employee is served with a 
subpoena requiring him or her to appear as a witness or produce records, 
the employee must promptly notify the Office of General Counsel. The 
General Counsel has the authority to instruct NCUA employees to refuse 
appearing as a witness or to withhold nonpublic records. The General 
Counsel may let an NCUA employee provide testimony, including

[[Page 603]]

expert or opinion testimony, if the General Counsel determines that the 
need for the testimony clearly outweighs contrary considerations.
    (2) If a court or other appropriate authority orders or demands 
expert or opinion testimony or testimony beyond authorized subjects 
contrary to the General Counsel's instructions, an NCUA employee must 
immediately notify the General Counsel of the order and respectfully 
decline to comply. An NCUA employee must decline to answer questions on 
the grounds that this subpart forbids such disclosure and should produce 
a copy of this subpart, request an opportunity to consult with the 
Office of General Counsel, and explain that providing such testimony 
without approval may expose him or her to disciplinary or other adverse 
action.
    (b) Duty of persons who are not NCUA employees. (1) If you are not 
an NCUA employee but have custody of nonpublic records and are served 
with a subpoena requiring you to appear as a witness or produce records, 
you must promptly notify the NCUA about the subpoena. Also, you must 
notify the issuing court or authority and the person or entity for whom 
the subpoena was issued of the contents of this subpart. Notice to the 
NCUA is made by sending a copy of the subpoena to the General Counsel of 
the NCUA, Office of General Counsel, 1775 Duke Street, Alexandria, 
Virginia 22314-3428. After receiving notice, the NCUA may advise the 
issuing court or authority and the person or entity for whom the 
subpoena was issued that this subpart applies and, in addition, may 
intervene, attempt to have the subpoena quashed or withdrawn, or 
register appropriate objections.
    (2) After notifying the Office of General Counsel, you should 
respond to a subpoena by appearing at the time and place stated in the 
subpoena. Unless authorized by the General Counsel, you should decline 
to produce any records or give any testimony, basing your refusal on 
this subpart. If the issuing court or authority orders the disclosure of 
records or orders you to testify, you should continue to decline to 
produce records or testify and should advise the Office of General 
Counsel.
    (c) Penalties. Anyone who discloses nonpublic records or gives 
testimony related to those records, except as expressly authorized by 
the NCUA or as ordered by a federal court after NCUA has had the 
opportunity to be heard, may face the penalties provided in 18 U.S.C. 
641 and other applicable laws. Also, former NCUA employees, in addition 
to the prohibition contained in this subpart, are subject to the 
restrictions and penalties of 18 U.S.C. 207.



Sec. 792.41  When does this subpart apply?

    This subpart applies if you want to obtain nonpublic records or 
testimony of an NCUA employee for legal proceedings. It doesn't apply to 
the release of records under the Freedom of Information Act (FOIA), 5 
U.S.C. 552, or the Privacy Act, 5 U.S.C. 552a, or the release of records 
to federal or state investigatory agencies under Sec. 792.32.

[62 FR 56054, Oct. 29, 1997, as amended at 65 FR 63789, Oct. 25, 2000]



Sec. 792.42  How do I request nonpublic records or testimony?

    (a) To request nonpublic records or the testimony of an NCUA 
employee, you must submit a written request to the General Counsel of 
the NCUA. If you serve a subpoena on the NCUA or an NCUA employee before 
submitting a written request and receiving a final determination, the 
NCUA will oppose the subpoena on the grounds that you failed to follow 
the requirements of this subpart. You may serve a subpoena as long as it 
is accompanied by a written request that complies with this subpart.
    (b) To request nonpublic records that are part of the records of the 
Office of the Inspector General or the testimony of an NCUA employee on 
matters within the knowledge of the NCUA employee as a result of his or 
her employment with the Office of the Inspector General, you must submit 
a written request to the Office of the Inspector General. Your request 
will be handled in accordance with the provisions of this subpart except 
that the Inspector General will be responsible for those determinations 
that would otherwise be made by the General Counsel.

[[Page 604]]



Sec. 792.43  What must my written request contain?

    Your written request for records or testimony must include:
    (a) The caption of the legal proceeding, docket number, and name of 
the court or other authority involved.
    (b) A copy of the complaint or equivalent document setting forth the 
assertions in the case and any other pleading or document necessary to 
show relevance.
    (c) A list of categories of records sought, a detailed description 
of how the information sought is relevant to the issues in the legal 
proceeding, and a specific description of the substance of the testimony 
or records sought.
    (d) A statement as to how the need for the information outweighs the 
need to maintain the confidentiality of the information and outweighs 
the burden on the NCUA to produce the records or provide testimony.
    (e) A statement indicating that the information sought is not 
available from another source, such as a credit union's own books and 
records, other persons or entities, or the testimony of someone other 
than an NCUA employee, for example, retained experts.
    (f) A description of all prior decisions, orders, or pending motions 
in the case that bear upon the relevance of the records or testimony you 
want.
    (g) The name, address, and telephone number of counsel to each party 
in the case.
    (h) An estimate of the amount of time you anticipate that you and 
other parties will need with each NCUA employee for interviews, 
depositions, or testifying.



Sec. 792.44  When should I make a request?

    You should submit your request at least 45 days before the date that 
you need the records or testimony. If you want to have your request 
processed in less time, you must explain why you couldn't submit the 
request earlier and why you need expedited processing. If you are 
requesting the testimony of an NCUA employee, the NCUA expects you to 
anticipate your need for the testimony in sufficient time to obtain it 
by a deposition. The General Counsel may deny a request for testimony at 
a legal proceeding unless you explain why you could not use deposition 
testimony. The General Counsel will determine the location of a 
deposition taking into consideration the NCUA's interest in minimizing 
the disruption for an NCUA employee's work schedule and the costs and 
convenience of other persons attending the deposition.



Sec. 792.45  Where do I send my request?

    You must send your request or subpoena for records or testimony to 
the attention of the General Counsel for the NCUA, Office of General 
Counsel, 1775 Duke Street, Alexandria, Virginia 22314-3428. You must 
send your request or subpoena for records or testimony from the Office 
of the Inspector General to the attention of the NCUA Inspector General, 
1775 Duke Street, Alexandria, Virginia 22314-3428.



Sec. 792.46  What will the NCUA do with my request?

    (a) Factors the NCUA will consider. The NCUA may consider various 
factors in reviewing a request for nonpublic records or testimony of 
NCUA employees, including:
    (1) Whether disclosure would assist or hinder the NCUA in performing 
its statutory duties or use NCUA resources unreasonably, including 
whether responding to the request will interfere with NCUA employees' 
ability to do their work.
    (2) Whether disclosure is necessary to prevent the perpetration of a 
fraud or other injustice in the matter or if you can get the records or 
testimony you want from sources other than the NCUA.
    (3) Whether the request is unduly burdensome.
    (4) Whether disclosure would violate a statute, executive order, or 
regulation, for example, the Privacy Act, 5 U.S.C. 552a.
    (5) Whether disclosure would reveal confidential, sensitive or 
privileged information, trade secrets or similar, confidential 
commercial or financial information, or would otherwise be inappropriate 
for release and, if so, whether a confidentiality agreement or 
protective order as provided in Sec. 792.48(a) can adequately limit the 
disclosure.

[[Page 605]]

    (6) Whether the disclosure would interfere with law enforcement 
proceedings, compromise constitutional rights, or hamper NCUA research 
or investigatory activities.
    (7) Whether the disclosure could result in NCUA appearing to favor 
one litigant over another.
    (8) Any other factors the NCUA determines to be relevant to the 
interests of the NCUA.
    (b) Review of your request. The NCUA will process your request in 
the order it is received. The NCUA will try to respond to your request 
within 45 days, but this may vary depending on the scope of your 
request.
    (c) Final determination. The General Counsel makes the final 
determination on requests for nonpublic records or NCUA employee 
testimony. All final determinations are in the sole discretion of the 
General Counsel. The General Counsel will notify you and the court or 
other authority of the final determination of your request. In 
considering your request, the General Counsel may contact you to inform 
you of the requirements of this subpart, ask that the request or 
subpoena be modified or withdrawn, or may try to resolve the request or 
subpoena informally without issuing a final determination. You may seek 
judicial review of the final determination under the Administrative 
Procedure Act. 5 U.S.C. 702.



Sec. 792.47  If my request is granted, what fees apply?

    (a) Generally. You must pay any fees associated with complying with 
your request, including copying fees for records and witness fees for 
testimony. The General Counsel may condition the production of records 
or appearance for testimony upon advance payment of a reasonable 
estimate of the fees.
    (b) Fees for records. You must pay all fees for searching, reviewing 
and duplicating records produced in response to your request. The fees 
will be the same as those charged by the NCUA under its Freedom of 
Information Act regulations, Sec. 792.19.
    (c) Witness fees. You must pay the fees, expenses, and allowances 
prescribed by the court's rules for attendance by a witness. If no such 
fees are prescribed, the local federal district court rule concerning 
witness fees, for the federal district court closest to where the 
witness appears, will apply. For testimony by current NCUA employees, 
you must pay witness fees, allowances, and expenses to the General 
Counsel by check made payable to the ``National Credit Union 
Administration'' within 30 days from receipt of NCUA's billing 
statement. For the testimony of a former NCUA employee, you must pay 
witness fees, allowances, and expenses directly to the former employee, 
in accordance with 28 U.S.C. 1821 or other applicable statutes.
    (d) Certification of records. The NCUA may authenticate or certify 
records to facilitate their use as evidence. If you require 
authenticated records, you must request certified copies at least 45 
days before the date they will be needed. The request should be sent to 
the General Counsel. You will be charged a certification fee of $5.00 
per document.
    (e) Waiver of fees. A waiver or reduction of any fees in connection 
with the testimony, production, or certification or authentication of 
records may be granted in the discretion of the General Counsel. Waivers 
will not be granted routinely. If you request a waiver, your request for 
records or testimony must state the reasons why a waiver should be 
granted.

[62 FR 56054, Oct. 29, 1997, as amended at 65 FR 63789, Oct. 25, 2000]



Sec. 792.48  If my request is granted, what restrictions apply?

    (a) Records. The General Counsel may impose conditions or 
restrictions on the release of nonpublic records, including a 
requirement that you obtain a protective order or execute a 
confidentiality agreement with the other parties in the legal proceeding 
that limits access to and any further disclosure of the nonpublic 
records. The terms of a confidentiality agreement or protective order 
must be acceptable to the General Counsel. In cases where protective 
orders or confidentiality agreements have already been executed, the 
NCUA may condition the release of nonpublic records on an amendment to 
the existing protective order or confidentiality agreement.

[[Page 606]]

    (b) Testimony. The General Counsel may impose conditions or 
restrictions on the testimony of NCUA employees, including, for example, 
limiting the areas of testimony or requiring you and the other parties 
to the legal proceeding to agree that the transcript of the testimony 
will be kept under seal or will only be used or made available in the 
particular legal proceeding for which you requested the testimony. The 
General Counsel may also require you to provide a copy of the transcript 
of the testimony to the NCUA at your expense.



Sec. 792.49  Definitions.

    Legal proceedings means any matter before any federal, state or 
foreign administrative or judicial authority, including courts, 
agencies, commissions, boards or other tribunals, involving such 
proceedings as lawsuits, licensing matters, hearings, trials, discovery, 
investigations, mediation or arbitration. When the NCUA is a party to a 
legal proceeding, it will be subject to the applicable rules of civil 
procedure governing production of documents and witnesses, however, this 
subpart will still apply to the testimony of former NCUA employees.
    NCUA employee means current and former officials, members of the 
Board, officers, directors, employees and agents of the National Credit 
Union Administration, including contract employees and consultants and 
their employees. This definition does not include persons who are no 
longer employed by the NCUA and are retained or hired as expert 
witnesses or agree to testify about general matters, matters available 
to the public, or matters with which they had no specific involvement or 
responsibility during their employment.
    Nonpublic records means any NCUA records that are exempt from 
disclosure under Sec. 792.11, the NCUA regulations implementing the 
provisions of the Freedom of Information Act. For example, this means 
records created in connection with NCUA's examination and supervision of 
insured credit unions, including examination reports, internal 
memoranda, and correspondence, and, also, records created in connection 
with NCUA's enforcement and investigatory responsibilities.
    Subpoena means any order, subpoena for records or other tangible 
things or for testimony, summons, notice or legal process issued in a 
legal proceeding.
    Testimony means any written or oral statements made by an individual 
in connection with a legal proceeding including personal appearances in 
court or at depositions, interviews in person or by telephone, responses 
to written interrogatories or other written statements such as reports, 
declarations, affidavits, or certifications or any response involving 
more than the delivery of records.

[62 FR 56054, Oct. 29, 1997, as amended at 65 FR 63789, Oct. 25, 2000]



        Subpart D--Security Procedures for Classified Information



Sec. 792.50  Program.

    (a) The Director of the Office of Administration (``Director'') is 
designated as the person responsible for implementation and oversight of 
NCUA's program for maintaining the security of confidential information 
regarding national defense and foreign relations. The Director receives 
questions, suggestions and complaints regarding all elements of this 
program. The Director is solely responsible for changes to the program 
and assures that the program is consistent with legal requirements.
    (b) The Director is the Agency's official contact for 
declassification requests regardless of the point of origin of such 
requests. The Director is also responsible for assuring that requests 
submitted under the Freedom of Information Act are handled in accordance 
with that Act and other applicable law.

[54 FR 18476, May 1, 1989, as amended at 59 FR 36042, July 15, 1994]



Sec. 792.51  Procedures.

    (a) Mandatory review. All declassification requests made by a member 
of the public, by a government employee or by an agency shall be handled 
by the Director or the Director's designee. Under no circumstances shall 
the Director refuse to confirm the existence or nonexistence of a 
document under

[[Page 607]]

the Freedom of Information Act or the mandatory review provisions of 
other applicable law, unless the fact of its existence or nonexistence 
would itself be classifiable under applicable law. Although NCUA has no 
authority to classify or declassify information, it occasionally handles 
information classified by another agency. The Director shall refer all 
declassification requests to the agency that originally classified the 
information. The Director or the Director's designee shall notify the 
requesting person or agency that the request has been referred to the 
originating agency and that all further inquiries and appeals must be 
made directly to the other agency.
    (b) Handling and safeguarding national security information. All 
information classified ``Top Secret,'' ``Secret,'' and ``Confidential'' 
shall be delivered to the Director or the Director's designee 
immediately upon receipt. The Director shall advise those who may come 
into possession of such information of the name of the current designee. 
If the Director is unavailable, the designee shall lock the documents, 
unopened, in the combination safe located in the Administrative Office. 
If the Director or the designee is unavailable to receive such 
documents, the documents shall be delivered to the Director of the 
Personnel Office who shall lock them, unopened, in the combination safe 
in the Personnel Office. Under no circumstances shall classified 
materials that cannot be delivered to the Director be stored other than 
in the two designated safes.
    (c) Storage. All classified documents shall be stored in the 
combination safe located in the Director's Office, except as provided in 
paragraph (b) of this section. The combination shall be known only to 
the Director and the Director's designee holding the proper security 
clearance.
    (d) Employee education. The Director shall send a memo to every NCUA 
employee who:
    (1) Has a security clearance and
    (2) May handle classified materials.

This memo shall describe NCUA procedures for handling, reproducing and 
storing classified documents. The Director shall require each such 
employee to review Executive Order 12356.
    (e) Agency terminology. The National Credit Union Administration's 
Central Office shall use the terms ``Top Secret,'' ``Secret'' or 
``Confidential'' only in relation to materials classified for national 
security purposes.



                       Subpart E--The Privacy Act

    Source: 54 FR 18476, May 1, 1989. Redesignated at 63 FR 14338, Mar. 
25, 1998.



Sec. 792.52  Scope.

    This subpart governs requests made of NCUA under the Privacy Act (5 
U.S.C. 552a). The regulation applies to all records maintained by NCUA 
which contain personal information about an individual and some means of 
identifying the individual, and which are contained in a system of 
records from which information may be retrieved by use of an identifying 
particular; sets forth procedures whereby individuals may seek and gain 
access to records concerning themselves and request amendments of those 
records; and sets forth requirements applicable to NCUA employees' 
maintaining, collecting, using, or disseminating such records.



Sec. 792.53  Definitions.

    For purposes of this subpart:
    (a) Individual means a citizen of the United States or an alien 
lawfully admitted for permanent residence.
    (b) Maintain includes maintain, collect, use, or disseminate.
    (c) Record means any item, collection, or grouping of information 
about an individual that is maintained by NCUA, and that contains the 
name, or an identifying number, symbol, or other identifying particular 
assigned to the individual.
    (d) System of records means a group of any records under NCUA's 
control from which information is retrieved by the name of the 
individual or by some identifying number, symbol, or other identifying 
particular assigned to the individual.
    (e) Routine use means, with respect to the disclosure of a record, 
the use of such record for a purpose which is compatible with the 
purpose for which it was collected.

[[Page 608]]

    (f) Statistical record means a record in a system of records 
maintained for statistical research or reporting purposes only and not 
used in whole or in part in making any determination about an 
identifiable individual, except as provided by section 8 of title 13 of 
the United States Code.



Sec. 792.54  Procedures for requests pertaining to individual records in a system of records.

    (a) An individual seeking notification of whether a system of 
records contains a record pertaining to that individual, or an 
individual seeking access to information or records pertaining to that 
individual which are available under the Privacy Act shall present a 
request to the NCUA official identified in the access procedure section 
of the ``Notice of Systems of Records'' published in the Federal 
Register which describes the system of records to which the individual's 
request relates. An individual who does not have access to the Federal 
Register and who is unable to determine the appropriate official to whom 
a request should be submitted may submit a request to the Director of 
the Administrative Office, National Credit Union Administration, 1775 
Duke Street, Alexandria, VA 22314-3428, in which case the request will 
then be referred to the appropriate NCUA official and the date of 
receipt of the request will be determined as the date of receipt by the 
official.
    (b) In addition to meeting the identification requirements set forth 
in Sec. 792.55, an individual seeking notification or access, either in 
person or by mail, shall describe the nature of the record sought, the 
approximate dates covered by the record, and the system in which it is 
thought to be included, as described in the ``Notice of Systems of 
Records'' published in the Federal Register.

[54 FR 18476, May 1, 1989, as amended at 59 FR 36041, July 15, 1994; 64 
FR 57365, Oct. 25, 1999]



Sec. 792.55  Times, places, and requirements for identification of individuals making requests and identification of records requested.

    (a) The following standards are applicable to an individual 
submitting requests either in person or by mail under Sec. 792.54:
    (1) If not personally known to the NCUA official responding to the 
request, an individual seeking access to records about that individual 
in person shall establish identity by the presentation of a single 
document bearing a photograph (such as a passport or identification 
badge) or by the presentation of two items of identification which do 
not bear a photograph but do bear both a name and address (such as a 
driver's license or credit card);
    (2) An individual seeking access to records about that individual by 
mail may establish identity by a signature, address, date of birth, 
employee identification number if any, and one other identifier such as 
a photocopy of driver's license or other document. If less than all of 
this requisite identifying information is provided, the NCUA official 
responding to the request may require further identifying information 
prior to any notification or responsive disclosure.
    (3) An individual seeking access to records about himself by mail or 
in person, who cannot provide the required documentation or 
identification, may provide an unsworn declaration subscribed to as true 
under penalty of perjury.
    (b) The parent or guardian of a minor or a person judicially 
determined to be incompetent shall, in addition to establishing identity 
of the minor or other person as required in paragraph (a) of this 
section, furnish a copy of a birth certificate showing parentage or a 
court order establishing guardianship.
    (c) An individual may request by telephone notification of the 
existence of and access to records about that individual and contained 
in a system of records. In such a case, the NCUA official responding to 
the request shall require, for the purpose of comparison and 
verification of identity, at least two items of identifying information 
(such as date of birth, home address, social security number) already 
possessed by the NCUA. If the requisite identifying information is not 
provided, or otherwise at the discretion of the responsible NCUA 
official, an individual may be required to submit the

[[Page 609]]

request by mail or in person in accordance with paragraph (a) of this 
section.
    (d) An individual seeking to review records about that individual 
may be accompanied by another person of their own choosing. In such 
cases, the individual seeking access shall be required to furnish a 
written statement authorizing discussion of that individual's records in 
the accompanying person's presence.
    (e) In addition to the requirements set forth in paragraphs (a), (b) 
and (c) of this section, the published ``Notice of System of Records'' 
for individual systems may include further requirements of 
identification where necessary to retrieve the individual records from 
the system.

[54 FR 18476, May 1, 1989. Redesignated at 63 FR 14338, Mar. 25, 1998, 
as amended at 64 FR 57365, Oct. 25, 1999; 65 FR 63790, Oct. 25, 2000]



Sec. 792.56  Notice of existence of records, access decisions and disclosure of requested information; time limits.

    (a) The NCUA official identified in the record access procedure 
section of the ``Notice of Systems of Records'' and identified in 
accordance with Sec. 792.54(a), by an individual seeking notification 
of, or access to, a record, shall be responsible:
    (1) For determining whether access is available under the Privacy 
Act; (2) for notifying the requesting individual of that determination; 
and (3) for providing access to information determined to be available. 
In the case of an individual access request made in person, information 
determined to be available shall be provided by allowing a personal 
review of the record or portion of a record containing the information 
requested and determined to be available, and the individual shall be 
allowed to have a copy of all or any portion of available information 
made in a form comprehensible to him. In the case of an individual 
access request made by mail, information determined to be available 
shall be provided by mail, unless the individual has requested 
otherwise.
    (b) The following time limits shall be applicable to the required 
determinations, notification and provisions of access set forth in 
paragraph (a) of this section:
    (1) A request concerning a single system of records which does not 
require consultation with or requisition of records from another agency 
will be responded to within 20 working days after receipt of the 
request.
    (2) A request requiring requisition of records from or consultation 
with another agency will be responded to within 30 working days of 
receipt of the request.
    (3) If a request under paragraphs (b)(1) or (2) of this section 
presents unusual difficulties in determining whether the records 
involved are exempt from disclosure, the Privacy Act Officer, in the 
Office of General Counsel, may extend the time period established by the 
regulations by 10 working days.
    (c) Nothing in this section shall be construed to allow an 
individual access to any information compiled in reasonable anticipation 
of a civil action or proceeding, or any information exempted from the 
access provisions of the Privacy Act.

[54 FR 18476, May 1, 1989, as amended at 59 FR 36042, July 15, 1994; 64 
FR 57365, Oct. 25, 1999; 65 FR 63790, Oct. 25, 2000]



Sec. 792.57  Special procedures: Information furnished by other agencies; medical records.

    (a) When a request for records or information from NCUA includes 
information furnished by other Federal agencies, the NCUA official 
responsible for action on the request shall consult with the appropriate 
agency prior to making a decision to disclose or refuse access to the 
record, but the decision whether to disclose the record shall be made in 
the first instance by the NCUA official.
    (b) When an individual requests medical records concerning himself, 
the NCUA official responsible for action on the request may advise the 
individual that the records to be released will be provided first to a 
physician designated in writing by the individual. The physician will 
provide the records to the individual.

[54 FR 18476, May 1, 1989. Redesignated at 63 FR 14338, Mar. 25, 1998, 
as amended at 65 FR 63790, Oct. 25, 2000]

[[Page 610]]



Sec. 792.58  Requests for correction or amendment to a record; administrative review of requests.

    (a) An individual may request amendment of a record concerning that 
individual by addressing a request, either in person or by mail, to the 
NCUA official identified in the ``contesting record procedures'' section 
of the ``Notice of Systems of Records'' published in the Federal 
Register and describing the system of records which contains the record 
sought to be amended. The request must indicate the particular record 
involved, the nature of the correction sought, and the justification for 
the correction or amendment. Requests made by mail should be addressed 
to the responsible NCUA official at the address specified in the 
``Notice of Systems of Records'' describing the system of records which 
contains the contested record. An individual who does not have access to 
NCUA's ``Notice of Systems of Records,'' and to whom the appropriate 
address is otherwise unavailable, may submit a request to the Privacy 
Act Officer, Office of General Counsel, National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia, 22314-3428, in 
which case the request will then be referred to the appropriate NCUA 
official. The date of receipt of the request will be determined as of 
the date of receipt by that official.
    (b) Within 10 working days of receipt of the request, the 
appropriate NCUA official shall advise the individual that the request 
has been received. The appropriate NCUA official shall then promptly 
(under normal circumstances, not later than 30 working days after 
receipt of the request) advise the individual that the record is to be 
amended or corrected, or inform the individual of rejection of the 
request to amend the record, the reason for the rejection, and the 
procedures established by Sec. 792.27 for the individual to request a 
review of that rejection.

[54 FR 18476, May 1, 1989, as amended at 59 FR 36041, 36042, July 15, 
1994; 65 FR 63790, Oct. 25, 2000]



Sec. 792.59  Appeal of initial determination.

    (a) A rejection, in whole or in part, of a request to amend or 
correct a record may be appealed to the General Counsel within 30 
working days of receipt of notice of the rejection. Appeals shall be in 
writing, and shall set forth the specific item of information sought to 
be corrected and the documentation justifying the correction. Appeals 
shall be addressed to the Office of General Counsel, National Credit 
Union Administration, 1775 Duke Street, Alexandria, VA 22314-3428. 
Appeals shall be decided within 30 working days of receipt unless the 
General Counsel, for good cause, extends such period for an additional 
30 working days.
    (b) Within the time limits set forth in paragraph (a) of this 
section, the General Counsel shall either advise the individual of a 
decision to amend or correct the record, or advise the individual of a 
determination that an amendment or correction is not warranted on the 
facts, in which case the individual shall be advised of the right to 
provide for the record a ``Statement of Disagreement'' and of the right 
to further appeal pursuant to the Privacy Act. For records under the 
jurisdiction of the Office of Personnel Management, appeals will be made 
pursuant to that agency's regulations.
    (c) A statement of disagreement may be furnished by the individual. 
The statement must be sent, within 30 days of the date of receipt of the 
notice of General Counsel refusal to authorize correction, to the 
General Counsel, National Credit Union Administration, 1775 Duke Street, 
Alexandria, VA 22314-3428. Upon receipt of a statement of disagreement 
in accordance with this section, the General Counsel shall take steps to 
ensure that the statement is included in the system of records 
containing the disputed item and that the original item is so marked to 
indicate that there is a statement of dispute and where, within the 
system of records, that statement may be found.
    (d) When a record has been amended or corrected or a statement of 
disagreement has been furnished, the system manger for the system of 
records containing the record shall, within 30 days thereof, advise all 
prior recipients of information to which the amendment or statement of 
disagreement relates whose identity can be determined by an accounting 
made as required by the

[[Page 611]]

Privacy Act of 1974 or any other accounting previously made, of the 
amendment or statement of disagreement. When a statement of disagreement 
has been furnished, the system manager shall also provide any subsequent 
recipient of a disclosure containing information to which the statement 
relates with a copy of the statement and note the disputed portion of 
the information disclosed. A concise statement of the reasons for not 
making the requested amendment may also be provided if deemed 
appropriate.
    (e) If access is denied because of an exemption, the individual will 
be notified of the right to appeal that determination to the General 
Counsel within 30 days after receipt. Appeals will be determined within 
20 working days.

[54 FR 18476, May 1, 1989, as amended at 59 FR 36041, July 15, 1994; 65 
FR 63790, Oct. 25, 2000]



Sec. 792.60  Disclosure of record to person other than the individual to whom it pertains.

    No record or item of information concerning an individual which is 
contained in a system of records maintained by NCUA shall be disclosed 
by any means of communication to any person, or to another agency, 
without the prior written consent of the individual to whom the record 
or item of information pertains, unless the disclosure would be--
    (a) To an employee of the NCUA who has need for the record in the 
performance of duty;
    (b) Required by the Freedom of Information Act;
    (c) For a routine use as described in the ``Notice of Systems of 
Records,'' published in the Federal Register, which describes the system 
of records in which the record or item of information is contained;
    (d) To the Bureau of the Census for purposes of planning or carrying 
out a census or survey or related activity pursuant to the provisions of 
title 13 of the United States Code;
    (e) To a recipient who has provided the NCUA with advance adequate 
written assurance that the record or item will be used soley as a 
statistical research or reporting record, and the record is to be 
transferred in a form that is not individually identifiable;
    (f) To the National Archives and Records Administration as a record 
or item which has sufficient historical or other value to warrant its 
continued preservation by the United States Government, or for 
evaluation by the Archivist of the United States or the designee of the 
Archivist to determine whether the record has such value;
    (g) To another agency or to an instrumentality of any governmental 
jurisdiction within or under the control of the United States for a 
civil or criminal law enforcement activity if the activity is authorized 
by law, and if the head of the agency or instrumentality has made a 
written request to NCUA specifying the particular portion desired and 
the law enforcement activity for which the record or item is sought;
    (h) To a person pursuant to a showing of compelling circumstances 
affecting the health or safety of an individual if, upon such 
disclosure, notification is transmitted to the last known address of 
such individual;
    (i) To either House of Congress, or, to the extent of matter within 
its jurisdiction, any committee or subcommittee thereof, any joint 
committee of Congress or subcommittee of any such joint committee;
    (j) To the Comptroller General, or any of his authorized 
representatives, in the course of the performance of the duties of the 
General Accounting Office; or
    (k) Pursuant to the order of a court of competent jurisdiction; or
    (l) To a consumer reporting agency in accordance with section 
3711(f) of title 31 of the United States Code (31 U.S.C. 3711(f)).



Sec. 792.61  Accounting for disclosures.

    (a) Each system manager identified in the ``Notice of Systems of 
Records'' as published in the Federal Register for each system of 
records maintained by the NCUA, shall establish a system of accounting 
for all disclosures of information or records concerning individuals and 
contained in the system of records, made outside NCUA. Accounting 
procedures may be established in

[[Page 612]]

the least expensive and most convenient form that will permit the system 
manager to advise individuals, promptly upon request, of the persons or 
agencies to which records concerning them have been disclosed.
    (b) Accounting records, at a minimum, shall include the information 
disclosed, the name and address of the person or agency to whom 
disclosure was made, and the date of disclosure. When records are 
transferred to the National Archives and Records Administration for 
storage in records centers, the accounting pertaining to those records 
shall be transferred with the records themselves.
    (c) Any accounting made under this section shall be retained for at 
least five years or the life of the record, whichever is longer, after 
the disclosure for which the accounting is made.



Sec. 792.62  Requests for accounting for disclosures.

    At the time of the request for access or correction or at any other 
time, an individual may request an accounting of disclosures made of the 
individual's record outside the NCUA. Request for accounting shall be 
directed to the system manager. Any available accounting, whether kept 
in accordance with the requirements of the Privacy Act or under 
procedures established prior to September 27, 1975, shall be made 
available to the individual, except that an accounting need not be made 
available if it relates to:
    (a) A disclosure made pursuant to the Freedom of Information Act (5 
U.S.C. 552);
    (b) A disclosure made within the NCUA;
    (c) A disclosure made to a law enforcement agency pursuant to 5 
U.S.C. 552a(b)(7);
    (d) A disclosure which has been exempted from the provisions of 5 
U.S.C. 552a(c)(3) pursuant to 5 U.S.C. 552a (j) or (k).



Sec. 792.63  Collection of information from individuals; information forms.

    (a) The system manager, as identified in the ``Notice of Systems of 
Records'' published in the Federal Register for each system of records 
maintained by the Administration, shall be responsible for reviewing all 
forms developed and used to collect information from or about 
individuals for incorporation into the system of records.
    (b) The purpose of the review shall be to eliminate any requirement 
for information that is not relevant and necessary to carry out an NCUA 
function and to accomplish the following objectives:
    (1) To ensure that no information concerning religion, political 
beliefs or activities, association memberships (other than those 
required for a professional license), or the exercise of other First 
Amendment rights is required to be disclosed unless such requirement of 
disclosure is expressly authorized by statute or is pertinent to and 
within the scope of any authorized law enforcement activity;
    (2) To ensure that the form or accompanying statement makes clear to 
the individual which information by law must be disclosed and the 
authority for that requirement, and which information is voluntary;
    (3) To ensure that the form or accompanying statement makes clear 
the principal purpose or purposes for which the information is being 
collected, and states concisely the routine uses that will be made of 
the information;
    (4) To ensure that the form or accompanying statement clearly 
indicates to the individual the existing rights, benefits or privileges 
not to provide all or part of the requested information; and
    (5) To ensure that any form requesting disclosure of a social 
security number, or an accompanying statement, clearly advises the 
individual of the statute or regulation requiring disclosure of the 
number, or clearly advises the individual that disclosure is voluntary 
and that no consequence will flow from a refusal to disclose it, and the 
uses that will be made of the number whether disclosed mandatorily or 
voluntarily.
    (c) Any form which does not meet the objectives specified in the 
Privacy Act and this section shall be revised to conform thereto.



Sec. 792.64  Contracting for the operation of a system of records.

    (a) No NCUA component shall contract for the operation of a system 
of

[[Page 613]]

records by or on behalf of the Agency without the express approval of 
the NCUA Board.
    (b) Any contract which is approved shall continue to ensure 
compliance with the requirements of the Privacy Act. The contracting 
component shall have the responsibility for ensuring that the contractor 
complies with the contract requirements relating to the Privacy Act.



Sec. 792.65  Fees.

    (a) Fees pursuant to 5 U.S.C. 552a(f)(5) shall be assessed for 
actual copies of records provided to individuals on the following basis, 
unless the NCUA official determining access waives the fee because of 
the inability of the individual to pay or the cost of collecting the fee 
exceeds the fee:
    (1) For copies of documents provided, copy fees as stated in NCUA's 
current FOIA fee schedule; and
    (2) For copying information, if any, maintained in nondocument form, 
the direct cost to NCUA may be assessed.
    (b) If it is determined that access fees chargeable under this 
section will amount to more than $25, and the individual has not 
indicated in advance willingness to pay fees as high as are anticipated, 
the individual shall be notified of the amount of the anticipated fees 
before copies are made, and the individual's access request shall not be 
considered to have been received until receipt by NCUA of written 
agreement to pay.

[54 FR 18476, May 1, 1989. Redesignated at 63 FR 14338, Mar. 25, 1998, 
as amended at 65 FR 63790, Oct. 25, 2000]



Sec. 792.66  Exemptions.

    (a) NCUA maintains four systems of records that are exempted from 
some provisions of the Privacy Act. In paragraph (b) of this section, 
those systems of records are identified by System Name and System 
Number, as stated in the NCUA's ``Notice of Systems of Records,'' 
published in the Federal Register. The provisions from which each system 
is exempted and the reasons therefor are also set forth.
    (b)(1) System NCUA-1, entitled ``Employee Suitability Security 
Investigations Containing Adverse Information,'' consists of adverse 
information about NCUA employees that had been obtained as a result of 
routine U.S. Office of Personnel Management (OPM) security 
Investigations. To the extent that NCUA maintains records in this system 
pursuant to OPM guidelines that may require retrieval of information by 
use of individual identifiers, those records are encompassed by and 
included in the OPM Central system of records number Central-9 entitled, 
``Personnel Investigations Records,'' and thus are subject to the 
exemptions promulgated by OPM. Additionally, in order to ensure the 
protection of properly confidential sources, particularly as to those 
records which are not maintained pursuant to such Office of Personnel 
Management requirements, the records in these systems of records are 
exempted, pursuant to section k(5) of the Privacy Act (5 U.S.C. 
552a(k)(5)), from section (d) of the Act (5 U.S.C. 552a(d)). To the 
extent that disclosure of a record would reveal the identity of a 
confidential source, NCUA need not grant access to that record by its 
subject. Information which would reveal a confidential source shall, 
however, whenever possible, be extracted or summarized in a manner which 
protects the source and the summary or extract shall be provided to the 
requesting individual.
    (2) System NCUA-8, entitled, ``Investigative Reports Involving Any 
Crime or Suspicious Activity Against a Credit Union, NCUA,'' consists of 
investigatory or enforcement records about individuals suspected of 
involvement in violations of laws or regulations, whether criminal or 
administrative. These records are maintained in an overall context of 
general investigative information concerning crimes against credit 
unions. To the extent that individually identifiable information is 
maintained, however, for purposes of protecting the security of any 
investigations by appropriate law enforcement authorities and promoting 
the successful prosecution of all actual criminal activity, the records 
in this system are exempted, pursuant to section k(2) of the Privacy Act 
(5 U.S.C. 552a(k)(2)), from sections (c)(3), and (d)). NCUA need not 
make an accounting of previous disclosures of a record in this system of 
records available to

[[Page 614]]

its subject, the NCUA need not grant access to any records in this 
system of records by their subject. Further, whenever individuals 
request records about themselves and maintained in this system of 
records, the NCUA shall, to the extent necessary to realize the above-
stated purposes, neither confirm nor deny the existence of the records 
but shall advise the individuals only that no records available to them 
pursuant to the Privacy Act of 1974 have been identified. However, 
should review of the record reveal that the information contained 
therein has been used or is being used to deny the individuals any 
right, privilege or benefit for which they are eligible or to which they 
would otherwise be entitled under Federal law, the individuals shall be 
advised of the existence of the information and shall be provided the 
information, except to the extent disclosure would identify a 
confidential source. Information which would identify a confidential 
source shall, if possible, be extracted or summarized in a manner which 
protects the source and the summary or extract shall be provided to the 
requesting individual.
    (3) System NCUA-20, entitled, ``Office of Inspector General (OIG) 
Investigative Records,'' consists of OIG records of closed and pending 
investigations of individuals alleged to have been involved in criminal 
violations. The records in this system are exempted pursuant to Sections 
(k)(2) of the Privacy Act, 5 U.S.C. 552a(k)(2), from sections (c)(3); 
(d); (e)(1); (e)(4)(G); (e)(4)(H); (e)(4)(I); and (f). The records in 
this system are also exempted pursuant to Section (j)(2) of the Privacy 
Act, 5 U.S.C. 552a(j)(2), from sections (c)(3); (c)(4); (d); (e)(1); 
(e)(2); (e)(3); and (g).
    (4) System NCUA-13, entitled, ``Litigation Case Files,'' consists of 
investigatory materials compiled for law enforcement purposes. Records 
in the Litigation Case Files system are used in connection with the 
execution of NCUA's legal and enforcement responsibilities. Because the 
system covers investigatory materials compiled for law enforcement 
purposes, it is eligible for exemption under subsection (k)(2) of the 
Privacy Act. 5 U.S.C. 552a(k)(2). The Litigation Case Files system is 
exempt from subsections (c)(3), (d), (e)(1), (e)(4)(G), (H), (I) and (f) 
of the Privacy Act. 5 U.S.C. 552a (c)(3), (d), (e)(1), (e)(4)(G), (H), 
(I) and (f). However, if an individual is denied any right, privilege, 
or benefit to which he would otherwise be entitled by federal law, or 
for which he otherwise would be eligible, as a result of the maintenance 
of such records, the records or information will be made available to 
him, provided the identity of a confidential source is not disclosed.
    (c) For purposes of this section, a ``confidential source'' means a 
source who furnished information to the Government under an express 
promise that the identity of the source would remain confidential, or, 
prior to September 27, 1976, under an implied promise that the identity 
of the source would be held in confidence.

[54 FR 18476, May 1, 1989, as amended at 60 FR 31912, June 19, 1995; 64 
FR 57365, Oct. 25, 1999; 65 FR 63790, Oct. 25, 2000]



Sec. 792.67  Security of systems of records.

    (a) Each system manager, with the approval of the head of that 
Office, shall establish administrative and physical controls to insure 
the protection of a system of records from unauthorized access or 
disclosure and from physical damage or destruction. The controls 
instituted shall be proportional to the degree of sensitivity of the 
records, but at a minimum must insure: that records are enclosed in a 
manner to protect them from public view; that the area in which the 
records are stored is supervised during all business hours to prevent 
unauthorized personnel from entering the area or obtaining access to the 
records; and that the records are inaccessible during nonbusiness hours.
    (b) Each system manager, with the approval of the head of that 
Office, shall adopt access restriction to insure that only those 
individuals within the agency who have a need to have access to the 
records for the performance of duty have access. Procedures shall also 
be adopted to prevent accidental access to or dissemination of records.

[[Page 615]]



Sec. 792.68  Use and collection of Social Security numbers.

    The head of each NCUA Office shall take such measures as are 
necessary to ensure that employees authorized to collect information 
from individuals are advised that individuals may not be required 
without statutory or regulatory authorization to furnish Social Security 
numbers, and that individuals who are requested to provide Social 
Security numbers voluntarily must be advised that furnishing the number 
is not required and that no penalty or denial of benefits will flow from 
the refusal to provide it.



Sec. 792.69  Training and employee standards of conduct with regard to privacy.

    (a) The Director of the Office of Training and Development, with 
advice from the General Counsel, is responsible for training NCUA 
employees in the obligations imposed by the Privacy Act and this 
subpart.
    (b) The head of each NCUA Office shall be responsible for assuring 
that employees subject to that person's supervision are advised of the 
provisions of the Privacy Act, including the criminal penalties and 
civil liabilities provided therein, and that such employees are made 
aware of their responsibilities to protect the security of personal 
information, to assure its accuracy, relevance, timeliness, and 
completeness, to avoid unauthorized disclosure either orally or in 
writing, and to insure that no information system concerning 
individuals, no matter how small or specialized, is maintained without 
public notice.
    (c) With respect to each system of records maintained by NCUA, 
Agency employees shall:
    (1) Collect no information of a personal nature from individuals 
unless authorized to collect it to achieve a function or carry out an 
NCUA responsibility;
    (2) Collect from individuals only that information which is 
necessary to NCUA functions or responsibilities;
    (3) Collect information, wherever possible, directly from the 
individual to whom it relates;
    (4) Inform individuals from whom information is collected of the 
authority for collection, the purposes thereof, the routine uses that 
will be made of the information, and the effects, both legal and 
practical of not furnishing the information;
    (5) Not collect, maintain, use, or disseminate information 
concerning an individual's religious or political beliefs or activities 
or his membership in associations or organizations, unless:
    (i) The individual has volunteered such information for his own 
benefit;
    (ii) The information is expressly authorized by statute to be 
collected, maintained, used, or disseminated; or
    (iii) Activities involved are pertinent to and within the scope of 
an authorized investigation or adjudication.
    (6) Advise their supervisors of the existence or contemplated 
development of any record system which retrieves information about 
individuals by individual identifier.
    (7) Maintain an accounting, in the prescribed form, of all 
dissemination of personal information outside NCUA, whether made orally 
or in writing;
    (8) Disseminate no information concerning individuals outside NCUA 
except when authorized by 5 U.S.C. 552a or pursuant to a routine use as 
set forth in the ``routine use'' section of the ``Notice of Systems of 
Records'' published in the Federal Register.
    (9) Maintain and process information concerning individuals with 
care in order to ensure that no inadvertent disclosure of the 
information is made either within or outside NCUA; and
    (10) Call to the attention of the proper NCUA authorities any 
information in a system maintained by NCUA which is not authorized to be 
maintained under the provisions of the Privacy Act, including 
information on First Amendment activities, information that is 
inaccurate, irrelevant or so incomplete as to risk unfairness to the 
individuals concerned.
    (c) Heads of offices within NCUA shall, at least annually, review 
the record systems subject to their supervision to ensure compliance 
with the provisions of the Privacy Act.

[54 FR 18476, May 1, 1989, as amended at 59 FR 36042, July 15, 1994; 65 
FR 63790, Oct. 25, 2000]

[[Page 616]]



PART 793--TORT CLAIMS AGAINST THE GOVERNMENT--Table of Contents




                           Subpart A--General

Sec.
793.1  Scope of regulations.

                          Subpart B--Procedures

793.2  Administrative claim; when presented; place of filing.
793.3  Administrative claim; who may file.
793.4  Administrative claims; evidence and information to be submitted.
793.5  Investigation, examination, and determination of claims.
793.6  Final denial of claim.
793.7  Payment of approved claims.
793.8  Release.
793.9  Penalties.
793.10  Limitation of National Credit Union Administration's authority.

    Authority: 12 U.S.C. 1766.

    Source: 37 FR 5928, Mar. 23, 1972, unless otherwise noted. 
Redesignated at 49 FR 559, Jan. 5, 1984.



                           Subpart A--General



Sec. 793.1  Scope of regulations.

    The regulation in this part shall apply only to claims asserted 
under the Federal Tort Claims Act, as amended, 28 U.S.C. 2671-2680, 
accruing on or after January 18, 1967, for money damages against the 
United States for damage to or loss of property or personal injury or 
death caused by the negligent or wrongful act or omission of any 
employee of the National Credit Union Administration while acting within 
the scope of his office of employment.



                          Subpart B--Procedures



Sec. 793.2  Administrative claim; when presented; place of filing.

    (a) For purposes of the regulations in this part, a claim shall be 
deemed to have been presented when the National Credit Union 
Administration receives, at a place designated in paragraph (b) of this 
section, an executed Standard Form 95 or other written notification of 
an incident accompanied by a claim for money damages in a sum certain 
for damage to or loss of property, for personal injury, or for death, 
alleged to have occurred by reason of the incident. A claim which should 
have been presented to the National Credit Union Administration but 
which was mistakenly addressed to or filed with another Federal agency, 
shall be deemed to be presented to the National Credit Union 
Administration as of the date that the claim is received by the National 
Credit Union Administration. A claim mistakenly addressed to or filed 
with the National Credit Union Administration shall forthwith be 
transferred to the appropriate Federal agency, if ascertainable, or 
returned to the claimant.
    (b) A claim presented in compliance with paragraph (a) of this 
section may be amended by the claimant at any time prior to final action 
by the Office of General Counsel, National Credit Union Administration 
or prior to the exercise of the claimant's option to bring suit under 28 
U.S.C. 2675(a). Amendments shall be submitted in writing and signed by 
the claimant or his duly authorized agent or legal representative. Upon 
the timely filing of an amendment to a pending claim, the National 
Credit Union Administration shall have 6 months in which to make a final 
disposition of the claim as amended and the claimant's option under 28 
U.S.C. 2675(a) shall not accrue until 6 months after the filing of an 
amendment.
    (c) Forms may be obtained and claims may be filed with the regional 
office of the National Credit Union Administration having jurisdiction 
over the employee involved in the accident or incident, or with the 
Office of General Counsel, National Credit Union Administration, 1775 
Duke Street, Alexandria, VA 22314-3428.

[37 FR 5928, Mar. 23, 1972. Redesignated at 49 FR 559, Jan. 5, 1984, and 
amended at 59 FR 36041, July 15, 1994]



Sec. 793.3  Administrative claim; who may file.

    (a) A claim for injury to or loss of property may be presented by 
the owner of the property interest which is the subject matter of the 
claim, his duly authorized agent, or his legal representative.
    (b) A claim for personal injury may be presented by the injured 
person, his duly authorized agent, or his legal representative.

[[Page 617]]

    (c) A claim based on death may be presented by the executor or 
administrator of the decedent's estate or by any other person legally 
entitled to assert such a claim under applicable State law.
    (d) A claim for loss wholly compensated by an insurer with the 
rights of a subrogee may be presented by the insurer. A claim for loss 
partially compensated by an insurer with the rights of a subrogee may be 
presented by the insurer or the insured individually, as their 
respective interests appear, or jointly. Whenever an insurer presents a 
claim asserting the rights of a subrogee, he shall present with his 
claim appropriate evidence that he has the rights of a subrogee.
    (e) A claim presented by an agent or legal representative shall be 
presented in the name of the claimant, be signed by the agent or legal 
representative, show the title or legal capacity of the person signing, 
and be accompanied by evidence of his authority to present a claim on 
behalf of the claimant as agent, executor, administrator, parent, 
guardian, or other representative.



Sec. 793.4  Administrative claims; evidence and information to be submitted.

    (a) Death. In support of a claim based on death, the claimant may be 
required to submit the following evidence or information:
    (1) An authenticated death certificate or other competent evidence 
showing the cause of death, date of death, and age of the decedent.
    (2) Decedent's employment or occupation at the time of death, 
including his monthly or yearly salary or earnings (if any), and the 
duration of his last employment or occupation.
    (3) Full names, addresses, birthdates, kinship, and marital status 
of the decedent's survivors, including those survivors who were 
dependent for support upon the decedent at the time of his death.
    (4) Degree of support afforded by the decedent to each survivor 
dependent upon him for support at the time of his death.
    (5) Decedent's general physical and mental condition before death.
    (6) Itemized bills for medical and burial expenses incurred by 
reason of the incident causing death, or itemized receipts or payments 
for such expenses.
    (7) If damages for pain and suffering before death are claimed, a 
physician's detailed statement specifying the injuries suffered, 
duration of pain and suffering, any drugs administered for pain and the 
decedent's physical condition in the interval between injury and death.
    (8) Any other evidence or information which may have a bearing on 
the responsibility of the United States for the death or the damages 
claimed.
    (b) Personal injury. (1) A written report by his attending physician 
or dentist setting forth the nature and extent of the injury, nature and 
extent of the treatment, any degree of temporary or permanent 
disability, the prognosis, period of hospitalization, and any diminished 
earning capacity. In addition, the claimant may be required to submit to 
a physical and/or mental examination by a physician employed or 
designated by the National Credit Union Administration. A copy or report 
of the examining physician shall be made available to the claimant upon 
the claimant's written request provided that claimant has, upon request, 
furnished the report referred to in the first sentence of this paragraph 
and has made or agrees to make available to the National Credit Union 
Administration any other physician's reports previously or thereafter 
made of the physical or mental condition which is the subject of his 
claim.
    (2) Itemized bills for medical, dental, and hospital expenses 
incurred, or itemized receipts of payment for such expenses.
    (3) If the prognosis reveals the necessity for future treatment, a 
statement of expected duration of and expenses for such treatment.
    (4) If a claim is made for loss of time from employment, a written 
statement from his employer showing actual time lost from his 
employment, whether he is a full or part time employee, and wages or 
salary actually lost.
    (5) If a claim is made for loss of income and the claimant is self-
employed, documentary evidence showing the amount of earnings actually 
lost.

[[Page 618]]

    (6) Any other evidence or information which may have a bearing on 
the responsibility of the United States for the personal injury or the 
damages claimed.
    (c) Property damage. In support of a claim for damages to or loss of 
property, real or personal, the claimant may be required to submit the 
following information or evidence:
    (1) Proof of ownership.
    (2) A detailed statement of the amount claimed with respect to each 
item of property.
    (3) An itemized receipt of payment for necessary repairs or itemized 
written estimates of the cost of such repairs.
    (4) A statement listing date of purchase, purchase price, market 
value of the property as of date of damage, and salvage value, where 
repair is not economical.
    (5) Any other evidence or information which may have a bearing on 
the responsibility of the United States for the injury to or loss of 
property or the damages claimed.
    (d) Time limit. All evidence required to be submitted by this 
section shall be furnished by the claimant within a reasonable time. 
Failure of a claimant to furnish evidence necessary for a determination 
of his claim within 3 months after a request therefor has been mailed to 
his last known address may be deemed an abandonment of the claim. The 
claim may be thereupon disallowed.



Sec. 793.5  Investigation, examination, and determination of claims.

    When a claim is received, the constituent agency out of whose 
activities the claim arose shall make such investigation as may be 
necessary or appropriate for a determination of the validity of the 
claim and thereafter shall forward the claim, together with all 
pertinent material, and a recommendation based on the merits of the 
case, with regard to the allowance or disallowance of the claim, to the 
Office of General Counsel, National Credit Union Administration to whom 
authority has been delegated to adjust, determine, compromise and settle 
all claims hereunder.



Sec. 793.6  Final denial of claim.

    (a) Final denial of an administrative claim shall be in writing and 
sent to the claimant, his attorney, or legal representative by certified 
or registered mail. The notification of final denial may include a 
statement of the reasons for the denial and shall include a statement 
that, if the claimant is dissatisfied with the action of the National 
Credit Union Administration, he may file suit in an appropriate U.S. 
District Court not later than 6 months after the date of mailing the 
notification.
    (b) Prior to the commencement of suit and prior to the expiration of 
the 6-month period after the date of mailing, by certified or registered 
mail of notice of final denial of the claim as provided in 28 U.S.C. 
2401(b), a claimant, his duly authorized agent, or legal representative, 
may file a written request with the National Credit Union Administration 
for reconsideration of a final denial of a claim under paragraph (a) of 
this section. Upon the timely filing of a request for reconsideration 
the National Credit Union Administration shall have 6 months from the 
date of filing in which to make a final disposition of the claim and the 
claimant's option under 28 U.S.C. 2675(a) to bring suit shall not accrue 
until 6 months after the filing of a request for reconsideration. Final 
National Credit Union Administration action on a request for 
reconsideration shall be effected in accordance with the provisions of 
paragraph (a) of this section.



Sec. 793.7  Payment of approved claims.

    (a) Upon allowance of his claim, claimant or his duly authorized 
agent shall sign the voucher for payment, Standard Form 1145, before 
payment is made.
    (b) When the claimant is represented by an attorney, the voucher for 
payment (S.F. 1145) shall designate both the claimant and his attorney 
as ``payees.'' The check shall be delivered to the attorney whose 
address shall appear on the voucher.



Sec. 793.8  Release.

    Acceptance by the claimant, his agent or legal representative, of 
any award, compromise or settlement made

[[Page 619]]

hereunder, shall be final and conclusive on the claimant, his agent or 
legal representative and any other person on whose behalf or for whose 
benefit the claim has been presented, and shall constitute a complete 
release of any claim against the United States and any employee of the 
Government whose act or omission gave rise to the claim, by reason of 
the same subject matter.



Sec. 793.9  Penalties.

    A person who files a false claim or makes a false or fraudulent 
statement in a claim against the United States may be liable to a fine 
of not more than $10,000 or to imprisonment of not more than 5 years, or 
both (18 U.S.C. 287-1001), and, in addition, to a forfeiture of $2,000 
and a penalty of double the loss or damage sustained by the United 
States (31 U.S.C. 231).



Sec. 793.10  Limitation on National Credit Union Administration's authority.

    (a) An award, compromise or settlement of a claim hereunder in 
excess of $25,000 shall be effected only with the prior written approval 
of the Attorney General or his designee. For purposes of this paragraph, 
a principal claim and any derivative or subrogated claim shall be 
treated as a single claim.
    (b) An administrative claim may be adjusted, determined, compromised 
or settled hereunder only after consultation with the Department of 
Justice when, in the opinion of the National Credit Union 
Administration:
    (1) A new precedent or a new point of law is involved; or
    (2) A question of policy is or may be involved; or
    (3) The United States is or may be entitled to indemnity or 
contribution from a third party and the National Credit Union 
Administration is unable to adjust the third party claim; or
    (4) The compromise of a particular claim, as a practical matter, 
will or may control the disposition of a related claim in which the 
amount to be paid may exceed $25,000.
    (c) An administrative claim may be adjusted, determined, compromised 
or settled only after consultation with the Department of Justice when 
it is learned that the United States or any employee, agent or cost-plus 
contractor of the United States is involved in litigation based on a 
claim arising out of the same incident or transaction.



PART 794--ENFORCEMENT OF NONDISCRIMINATION ON THE BASIS OF HANDICAP IN PROGRAMS OR ACTIVITIES CONDUCTED BY THE NATIONAL CREDIT UNION ADMINISTRATION--Table of Contents




Sec.
794.101  Purpose.
794.102  Application.
794.103  Definitions.
794.104-794.109  [Reserved]
794.110  Self-evaluation.
794.111  Notice.
794.112-794.129  [Reserved]
794.130  General prohibitions against discrimination.
794.131-794.139  [Reserved]
794.140  Employment.
794.141-794.148  [Reserved]
794.149  Program accessibility: Discrimination prohibited.
794.150  Program accessibility: Existing facilities.
794.151  Program accessibility: New construction and alterations.
794.152-794.159  [Reserved]
794.160  Communications.
794.161-794.169  [Reserved]
794.170  Compliance procedures.
794.171-794.999  [Reserved]

    Authority: 29 U.S.C. 794.

    Source: 51 FR 22889, 22896, June 23, 1986, unless otherwise noted.



Sec. 794.101  Purpose.

    This part effectuates section 119 of the Rehabilitation, 
Comprehensive Services, and Developmental Disabilities Amendments of 
1978, which amended section 504 of the Rehabilitation Act of 1973 to 
prohibit discrimination on the basis of handicap in programs or 
activities conducted by Executive agencies or the United States Postal 
Service.



Sec. 794.102  Application.

    This part applies to all programs or activities conducted by the 
agency.



Sec. 794.103  Definitions.

    For purposes of this part, the term--

[[Page 620]]

    Assistant Attorney General means the Assistant Attorney General, 
Civil Rights Division, United States Department of Justice.
    Auxiliary aids means services or devices that enable persons with 
impaired sensory, manual, or speaking skills to have an equal 
opportunity to participate in, and enjoy the benefits of, programs or 
activities conducted by the agency. For example, auxiliary aids useful 
for persons with impaired vision include readers, brailled materials, 
audio recordings, telecommunications devices and other similar services 
and devices. Auxiliary aids useful for persons with impaired hearing 
include telephone handset amplifiers, telephones compatible with hearing 
aids, telecommunication devices for deaf persons (TDD's), interpreters, 
notetakers, written materials, and other similar services and devices.
    Complete complaint means a written statement that contains the 
complainant's name and address and describes the agency's alleged 
discriminatory action in sufficient detail to inform the agency of the 
nature and date of the alleged violation of section 504. It shall be 
signed by the complainant or by someone authorized to do so on his or 
her behalf. Complaints filed on behalf of classes or third parties shall 
describe or identify (by name, if possible) the alleged victims of 
discrimination.
    Facility means all or any portion of buildings, structures, 
equipment, roads, walks, parking lots, rolling stock or other 
conveyances, or other real or personal property.
    Handicapped person means any person who has a physical or mental 
impairment that substantially limits one or more major life activities, 
has a record of such an impairment, or is regarded as having such an 
impairment.
    As used in this definition, the phrase:
    (1) Physical or mental impairment includes--
    (i) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more of the following body systems: 
Neurological; musculoskeletal; special sense organs; respiratory, 
including speech organs; cardiovascular; reproductive; digestive; 
genitourinary; hemic and lymphatic; skin; and endocrine; or
    (ii) Any mental or psychological disorder, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities. The term physical or mental impairment 
includes, but is not limited to, such diseases and conditions as 
orthopedic, visual, speech, and hearing impairments, cerebral palsy, 
epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, 
diabetes, mental retardation, emotional illness, and drug addiction and 
alocoholism.
    (2) Major life activities includes functions such as caring for 
one's self, performing manual tasks, walking, seeing, hearing, speaking, 
breathing, learning, and working.
    (3) Has a record of such an impairment means has a history of, or 
has been misclassified as having, a mental or physical impairment that 
substantially limits one or more major life activities.
    (4) Is regarded as having an impairment means--
    (i) Has a physical or mental impairment that does not substantially 
limit major life activities but is treated by the agency as constituting 
such a limitation;
    (ii) Has a physical or mental impairment that substantially limits 
major life activities only as a result of the attitudes of others toward 
such impairment; or
    (iii) Has none of the impairments defined in paragraph (1) of this 
definition but is treated by the agency as having such an impairment.
    Historic preservation programs means programs conducted by the 
agency that have preservation of historic properties as a primary 
purpose.
    Historic properties means those properties that are listed or 
eligible for listing in the National Register of Historic Places or 
properties designated as historic under a statute of the appropriate 
State or local government body.
    Qualified handicapped person means--
    (1) With respect to preschool, elementary, or secondary education 
services provided by the agency, a handicapped person who is a member of 
a class of persons otherwise entitled by statute, regulation, or agency 
policy to receive education services from the agency.

[[Page 621]]

    (2) With respect to any other agency program or activity under which 
a person is required to perform services or to achieve a level of 
accomplishment, a handicapped person who meets the essential eligibility 
requirements and who can acheive the purpose of the program or activity 
without modifications in the program or activity that the agency can 
demonstrate would result in a fundamental alteration in its nature;
    (3) With respect to any other program or activity, a handicapped 
person who meets the essential eligibility requirements for 
participation in, or receipt of benefits from, that program or activity; 
and
    (4) Qualified handicapped person is defined for purposes of 
employment in 29 CFR 1613.702(f), which is made applicable to this part 
by Sec. 794.140.
    Section 504 means section 504 of the Rehabilitation Act of 1973 
(Pub. L. 93-112, 87 Stat. 394 (29 U.S.C. 794)), as amended by the 
Rehabilitation Act Amendments of 1974 (Pub. L. 93-516, 88 Stat. 1617), 
and the Rehabilitation, Comprehensive Services, and Developmental 
Disabilities Amendments of 1978 (Pub. L. 95-602, 92 Stat. 2955). As used 
in this part, section 504 applies only to programs or activities 
conducted by Executive agencies and not to federally assisted programs.
    Substantial impairment means a significant loss of the integrity of 
finished materials, design quality, or special character resulting from 
a permanent alteration.



Secs. 794.104-794.109  [Reserved]



Sec. 794.110  Self-evaluation.

    (a) The agency shall, by August 24, 1987, evaluate its current 
policies and practices, and the effects thereof, that do not or may not 
meet the requirements of this part, and, to the extent modification of 
any such policies and practices is required, the agency shall proceed to 
make the necessary modifications.
    (b) The agency shall provide an opportunity to interested persons, 
including handicapped persons or organizations representing handicapped 
persons, to participate in the self-evaluation process by submitting 
comments (both oral and written).
    (c) The agency shall, until three years following the completion of 
the self-evaluation, maintain on file and make available for public 
inspection:
    (1) A description of areas examined and any problems identified, and
    (2) A description of any modifications made.



Sec. 794.111  Notice.

    The agency shall make available to employees, applicants, 
participants, beneficiaries, and other interested persons such 
information regarding the provisions of this part and its applicability 
to the programs or activities conducted by the agency, and make such 
information available to them in such manner as the head of the agency 
finds necessary to apprise such persons of the protections against 
discrimination assured them by section 504 and this regulation.



Secs. 794.112-794.129  [Reserved]



Sec. 794.130  General prohibitions against discrimination.

    (a) No qualified handicapped person shall, on the basis of handicap, 
be excluded from participation in, be denied the benefits of, or 
otherwise be subjected to discrimination under any program or activity 
conducted by the agency.
    (b)(1) The agency, in providing any aid, benefit, or service, may 
not, directly or through contractual, licensing, or other arrangements, 
on the basis of handicap--
    (i) Deny a qualified handicapped person the opportunity to 
participate in or benefit from the aid, benefit, or service;
    (ii) Afford a qualified handicapped person an opportunity to 
participate in or benefit from the aid, benefit, or service that is not 
equal to that afforded others;
    (iii) Provide a qualified handicapped person with an aid, benefit, 
or service that is not as effective in affording equal opportunity to 
obtain the same result, to gain the same benefit, or to reach the same 
level of achievement as that provided to others;

[[Page 622]]

    (iv) Provide different or separate aid, benefits, or services to 
handicapped persons or to any class of handicapped persons than is 
provided to others unless such action is necessary to provide qualified 
handicapped persons with aid, benefits, or services that are as 
effective as those provided to others;
    (v) Deny a qualified handicapped person the opportunity to 
participate as a member of planning or advisory boards; or
    (vi) Otherwise limit a qualified handicapped person in the enjoyment 
of any right, privilege, advantage, or opportunity enjoyed by others 
receiving the aid, benefit, or service.
    (2) The agency may not deny a qualified handicapped person the 
opportunity to participate in programs or activities that are not 
separate or different, despite the existence of permissibly separate or 
different programs or activities.
    (3) The agency may not, directly or through contractual or other 
arrangments, utilize criteria or methods of administration the purpose 
or effect of which would--
    (i) Subject qualified handicapped persons to discrimination on the 
basis of handicap; or
    (ii) Defeat or substantially impair accomplishment of the objectives 
of a program activity with respect to handicapped persons.
    (4) The agency may not, in determining the site or location of a 
facility, make selections the purpose or effect of which would--
    (i) Exclude handicapped persons from, deny them the benefits of, or 
otherwise subject them to discrimination under any program or activity 
conducted by the agency; or
    (ii) Defeat or substantially impair the accomplishment of the 
objectives of a program or activity with respect to handicapped persons.
    (5) The agency, in the selection of procurement contractors, may not 
use criteria that subject qualified handicapped persons to 
discrimination on the basis of handicap.
    (6) The agency may not administer a licensing or certification 
program in a manner that subjects qualified handicapped persons to 
discrimination on the basis of handicap, nor may the agency establish 
requirements for the programs or activities of licensees or certified 
entities that subject qualified handicapped persons to discrimination on 
the basis of handicap. However, the programs or activities of entities 
that are licensed or certified by the agency are not, themselves, 
covered by this part.
    (c) The exclusion of nonhandicapped persons from the benefits of a 
program limited by Federal statute or Executive order to handicapped 
persons or the exclusion of a specific class of handicapped persons from 
a program limited by Federal statute or Executive order to a different 
class of handicapped persons is not prohibited by this part.
    (d) The agency shall administer programs and activities in the most 
integrated setting appropriate to the needs of qualified handicapped 
persons.



Secs. 794.131-794.139  [Reserved]



Sec. 794.140  Employment.

    No qualified handicapped person shall, on the basis of handicap, be 
subjected to discrimination in employment under any program or activity 
conducted by the agency. The definitions, requirements, and procedures 
of section 501 of the Rehabilitation Act of 1973 (29 U.S.C. 791), as 
established by the Equal Employment Opportunity Commission in 29 CFR 
part 1613, shall apply to employment in federally conducted programs or 
activities.



Secs. 794.141-794.148  [Reserved]



Sec. 794.149  Program accessibility: Discrimination prohibited.

    Except as otherwise provided in Sec. 794.150, no qualified 
handicapped person shall, because the agency's facilities are 
inaccessible to or unusable by handicapped persons, be denied the 
benefits of, be excluded from participation in, or otherwise be 
subjected to discrimination under any program or activity conducted by 
the agency.



Sec. 794.150  Program accessibility: Existing facilities.

    (a) General. The agency shall operate each program or activity so 
that the program or activity, when viewed in its entirety, is readily 
accessible to and

[[Page 623]]

usable by handicapped persons. This paragraph does not--
    (1) Necessarily require the agency to make each of its existing 
facilities accessible to and usable by handicapped persons;
    (2) In the case of historic preservation programs, require the 
agency to take any action that would result in a substantial impairment 
of significant historic features of an historic property; or
    (3) Require the agency to take any action that it can demonstrate 
would result in a fundamental alteration in the nature of a program or 
activity or in undue financial and administrative burdens. In those 
circumstances where agency personnel believe that the proposed action 
would fundamentally alter the program or activity or would result in 
undue financial and administrative burdens, the agency has the burden of 
proving that compliance with Sec. 794.150(a) would result in such 
alteration or burdens. The decision that compliance would result in such 
alteration or burdens must be made by the agency head or his or her 
designee after considering all agency resources available for use in the 
funding and operation of the conducted program or activity, and must be 
accompanied by a written statement of the reasons for reaching that 
conclusion. If an action would result in such an alteration or such 
burdens, the agency shall take any other action that would not result in 
such an alteration or such burdens but would nevertheless ensure that 
handicapped persons receive the benefits and services of the program or 
activity.
    (b) Methods--(1) General. The agency may comply with the 
requirements of this section through such means as redesign of 
equipment, reassignment of services to accessible buildings, assignment 
of aides to beneficiaries, home visits, delivery of services at 
alternate accessible sites, alteration of existing facilities and 
construction of new facilities, use of accessible rolling stock, or any 
other methods that result in making its programs or activities readily 
accessible to and usable by handicapped persons. The agency is not 
required to make structural changes in existing facilities where other 
methods are effective in achieving compliance with this section. The 
agency, in making alterations to existing buildings, shall meet 
accessibility requirements to the extent compelled by the Architectural 
Barriers Act of 1968, as amended (42 U.S.C. 4151-4157), and any 
regulations implementing it. In choosing among available methods for 
meeting the requirements of this section, the agency shall give priority 
to those methods that offer programs and activities to qualified 
handicapped persons in the most integrated setting appropriate.
    (2) Historic preservation programs. In meeting the requirements of 
Sec. 794.150(a) in historic preservation programs, the agency shall give 
priority to methods that provide physical access to handicapped persons. 
In cases where a physical alteration to an historic property is not 
required because of Sec. 794.150(a)(2) or (a)(3), alternative methods of 
achieving program accessibility include--
    (i) Using audio-visual materials and devices to depict those 
portions of an historic property that cannot otherwise be made 
accessible;
    (ii) Assigning persons to guide handicapped persons into or through 
portions of historic properties that cannot otherwise be made 
accessible; or
    (iii) Adopting other innovative methods.
    (c) Time period for compliance. The agency shall comply with the 
obligations established under this section by October 21, 1986, except 
that where structural changes in facilities are undertaken, such changes 
shall be made by August 22, 1989, but in any event as expeditiously as 
possible.
    (d) Transition plan. In the event that structural changes to 
facilities will be undertaken to achieve program accessibility, the 
agency shall develop, by February 23, 1987, a transition plan setting 
forth the steps necessary to complete such changes. The agency shall 
provide an opportunity to interested persons, including handicapped 
persons or organizations representing handicapped persons, to 
participate in the development of the transition plan by submitting 
comments (both oral and written). A copy of the transition plan

[[Page 624]]

shall be made available for public inspection. The plan shall, at a 
minimum--
    (1) Identify physical obstacles in the agency's facilities that 
limit the accessibility of its programs or activities to handicapped 
persons;
    (2) Describe in detail the methods that will be used to make the 
facilities accessible;
    (3) Specify the schedule for taking the steps necessary to achieve 
compliance with this section and, if the time period of the transition 
plan is longer than one year, identify steps that will be taken during 
each year of the transition period; and
    (4) Indicate the official responsible for implementation of the 
plan.



Sec. 794.151  Program accessibility: New construction and alterations.

    Each building or part of a building that is constructed or altered 
by, on behalf of, or for the use of the agency shall be designed, 
constructed, or altered so as to be readily accessible to and usable by 
handicapped persons. The definitions, requirements, and standards of the 
Architectural Barriers Act (42 U.S.C. 4151-4157), as established in 41 
CFR 101-19.600 to 101-19.607, apply to buildings covered by this 
section.



Secs. 794.152-794.159  [Reserved]



Sec. 794.160  Communications.

    (a) The agency shall take appropriate steps to ensure effective 
communication with applicants, participants, personnel of other Federal 
entities, and members of the public.
    (1) The agency shall furnish appropriate auxiliary aids where 
necessary to afford a handicapped person an equal opportunity to 
participate in, and enjoy the benefits of, a program or activity 
conducted by the agency.
    (i) In determining what type of auxiliary aid is necessary, the 
agency shall give primary consideration to the requests of the 
handicapped person.
    (ii) The agency need not provide individually prescribed devices, 
readers for personal use or study, or other devices of a personal 
nature.
    (2) Where the agency communicates with applicants and beneficiaries 
by telephone, telecommunication devices for deaf person (TDD's) or 
equally effective telecommunication systems shall be used.
    (b) The agency shall ensure that interested persons, including 
persons with impaired vision or hearing, can obtain information as to 
the existence and location of accessible services, activities, and 
facilities.
    (c) The agency shall provide signage at a primary entrance to each 
of its inaccessible facilities, directing users to a location at which 
they can obtain information about accessible facilities. The 
international symbol for accessibility shall be used at each primary 
entrance of an accessible facility.
    (d) This section does not require the agency to take any action that 
it can demonstrate would result in a fundamental alteration in the 
nature of a program or activity or in undue financial and adminstrative 
burdens. In those circumstances where agency personnel believe that the 
proposed action would fundamentally alter the program or activity or 
would result in undue financial and administrative burdens, the agency 
has the burden of proving that compliance with Sec. 794.160 would result 
in such alteration or burdens. The decision that compliance would result 
in such alteration or burdens must be made by the agency head or his or 
her designee after considering all agency resources available for use in 
the funding and operation of the conducted program or activity, and must 
be accompanied by a written statement of the reasons for reaching that 
conclusion. If an action required to comply with this section would 
result in such an alteration or such burdens, the agency shall take any 
other action that would not result in such an alteration or such burdens 
but would nevertheless ensure that, to the maximum extent possible, 
handicapped persons receive the benefits and services of the program or 
activity.



Secs. 794.161-794.169  [Reserved]



Sec. 794.170  Compliance procedures.

    (a) Except as provided in paragraph (b) of this section, this 
section applies to all allegations of discrimination on the basis of 
handicap in programs or activities conducted by the agency.

[[Page 625]]

    (b) The agency shall process complaints alleging violations of 
section 504 with respect to employment according to the procedures 
established by the Equal Employment Opportunity Commission in 29 CFR 
part 1613 pursuant to section 501 of the Rehabilitation Act of 1973 (29 
U.S.C. 791).
    (c) The Director, Office of Administration, shall be responsible for 
coordinating implementation of this section. Complaints may be sent to 
NCUA, 1776 G Street NW., Room 7261, Washington, DC 20456.
    (d) The agency shall accept and investigate all complete complaints 
for which it has jurisdiction. All complete complaints must be filed 
within 180 days of the alleged act of discrimination. The agency may 
extend this time period for good cause.
    (e) If the agency receives a complaint over which it does not have 
jurisdiction, it shall promptly notify the complainant and shall make 
reasonable efforts to refer the complaint to the appropriate government 
entity.
    (f) The agency shall notify the Architectural and Transportation 
Barriers Compliance Board upon receipt of any complaint alleging that a 
building or facility that is subject to the Architectural Barriers Act 
of 1968, as amended (42 U.S.C. 4151-4157), or section 502 of the 
Rehabilitation Act of 1973, as amended (29 U.S.C. 792), is not readily 
accessible to and usable by handicapped persons.
    (g) Within 180 days of the receipt of a complete complaint for which 
it has jurisdiction, the agency shall notify the complainant of the 
results of the investigation in a letter containing--
    (1) Findings of fact and conclusions of law;
    (2) A description of a remedy for each violation found; and
    (3) A notice of the right to appeal.
    (h) Appeals of the findings of fact and conclusions of law or 
remedies must be filed by the complainant within 90 days of receipt from 
the agency of the letter required by Sec. 794.170(g). The agency may 
extend this time for good cause.
    (i) Timely appeals shall be accepted and processed by the head of 
the agency.
    (j) The head of the agency shall notify the complainant of the 
results of the appeal within 60 days of the receipt of the request. If 
the head of the agency determines that additional information is needed 
from the complainant, he or she shall have 60 days from the date of 
receipt of the additional information to make his or her determination 
on the appeal.
    (k) The time limits cited in paragraphs (g) and (j) of this section 
may be extended with the permission of the Assistant Attorney General.
    (l) The agency may delegate its authority for conducting complaint 
investigations to other Federal agencies, except that the authority for 
making the final determination may not be delegated to another agency.

[51 FR 22889, 22896, June 23, 1986, as amended at 51 FR 22889, June 23, 
1986; 59 FR 36042, July 15, 1994]



Secs. 794.171-794.999  [Reserved]



PART 795--OMB CONTROL NUMBERS ASSIGNED PURSUANT TO THE PAPERWORK REDUCTION ACT--Table of Contents




    Authority: 12 U.S.C. 1766(a) and 5 U.S.C. 3507(f).



Sec. 795.1  OMB control numbers.

    (a) Purpose. This subpart collects and displays the control numbers 
assigned to information collection requirements of the NCUA by the 
Office of Management and Budget (OMB) pursuant to the Paperwork 
Reduction Act of 1980, Pub. L. 96-511. The NCUA intends to comply with 
the requirements of section 3507(f) of the Paperwork Reduction Act, 
which requires that agencies display a current control number assigned 
by the Director of OMB for each agency information collection 
requirement.
    (b) Display.

------------------------------------------------------------------------
                                                             Current OMB
   12 CFR part or section where identified and described     control No.
------------------------------------------------------------------------
701.1......................................................    3133-0015
701.6......................................................    3133-0142
701.12.....................................................    3133-0059
701.13.....................................................    3133-0059
701.14.....................................................    3133-0121
701.21.....................................................    3133-0139
701.22.....................................................    3133-0141
701.26.....................................................    3133-0149
701.31.....................................................    3133-0068
701.32.....................................................    3133-0114

[[Page 626]]

 
701.33.....................................................    3133-0130
701.34.....................................................    3133-0117
703........................................................    3133-0133
704........................................................    3133-0129
704.11.....................................................    3133-0149
705........................................................    3133-0137
                                                               3133-0138
708a.......................................................    3133-0153
708b.......................................................    3133-0024
711........................................................    3133-0152
712........................................................    3133-0149
714........................................................    3133-0151
723........................................................    3133-0101
724........................................................    3133-0035
725........................................................    3133-0061
                                                               3133-0063
                                                               3133-0064
                                                               3133-0136
                                                               3133-0155
                                                               3133-0156
                                                               3133-0157
                                                               3133-0158
                                                               3133-0159
741........................................................    3133-0067
741.6......................................................    3133-0004
748........................................................    3133-0108
                                                               3133-0121
749........................................................    3133-0032
760........................................................    3133-0143
792........................................................    3133-0146
------------------------------------------------------------------------


[53 FR 29652, Aug. 8, 1988, as amended at 64 FR 49080, Sept. 10, 1999]

[[Page 627]]



                  CHAPTER VIII--FEDERAL FINANCING BANK




  --------------------------------------------------------------------
Part                                                                Page
810             Federal financing bank bills................         629
811             Book-entry procedure for Federal financing 
                    bank securities.........................         630

[[Page 629]]



PART 810--FEDERAL FINANCING BANK BILLS--Table of Contents




Sec.
810.0  Authority for issue and sale.
810.1  Description of Federal Financing Bank bills.
810.2  Public notice of offering.
810.3  Payment at maturity.
810.4  Acceptance of FFB bills for various purposes.
810.5  Taxation.
810.6  Exemption.
810.7  Federal Reserve Banks as fiscal agents.
810.8  Reservations as to terms of circular.

    Authority: Secs. 9-11, 87 Stat. 939, 940; (12 U.S.C. 2288, 2289, 
2290).

    Source: 39 FR 26397, July 19, 1974, unless otherwise noted.



Sec. 810.0  Authority for issue and sale.

    The Federal Financing Bank is authorized under the Federal Financing 
Bank Act of 1973, to issue publicly, with the approval of the Secretary 
of the Treasury, obligations having such maturities and bearing such 
rate or rates of interest as may be determined by the Bank. Pursuant to 
this authority, Federal Financing Bank bills, referred to herein as 
``FFB bills,'' are offered for sale from time to time and tenders 
invited therefor, through the Federal Reserve Banks. The FFB bills so 
offered, the tenders made, and all subsequent transactions therein are 
subject to the terms and conditions of the public notice offering the 
bills for sale, this circular, and to the extent not inconsistent with 
such notice and circular, to Department of the Treasury Circular No. 
418, current revision, the regulations governing United States Treasury 
bills, and all other regulations governing United States securities.



Sec. 810.1  Description of Federal Financing Bank bills.

    (a) General. Federal Financing Bank bills are bearer obligations of 
the Federal Financing Bank, the terms of which provide for payment of a 
specified amount on a specified date. They are issued only by Federal 
Reserve Banks and Branches, pursuant to tenders accepted by the Federal 
Financing Bank, and are available in both definitive and book-entry 
form. Where issued as a definitive security, it shall not be valid 
unless the issue date, the maturity date and the CUSIP number are 
imprinted thereon.
    (b) Denominations. Federal Financing Bank bills will be issued in 
denominations of $10,000, $15,000, $50,000, $100,000, $500,000 and 
$1,000,000 (maturity value).



Sec. 810.2  Public notice of offering.

    On the occasion of an offering of FFB bills, tenders therefor will 
be invited through public notices issued by the Federal Financing Bank. 
Each notice will set forth the amount offered, the issue date, the date 
they will be due and payable, the place and the date of the closing hour 
for the receipt of tenders and the date on which payment for accepted 
tenders must be made or completed.



Sec. 810.3  Payment at maturity.

    Each FFB bill will be paid in its face amount at maturity upon 
presentation and surrender to any Federal Reserve Bank or Branch or to 
the Department of the Treasury, Bureau of the Public Debt, Securities 
Transaction Branch, Washington, DC 20226. If a FFB bill is presented and 
surrendered for redemption after it has become overdue, the Federal 
Financing Bank may require satisfactory proof of ownership, as provided 
in Sec. 306.25 of Department of the Treasury Circular No. 300, current 
revision.



Sec. 810.4  Acceptance of FFB bills for various purposes.

    Federal Financing Bank bills are lawful investments and may be 
accepted as security for all fiduciary, trust, and public funds, the 
investment or deposit of which shall be under the authority or control 
of the United States, the District of Columbia, the Commonwealth of 
Puerto Rico or any territory or possession of the United States. They 
are eligible for purchase by national banks, and will be accepted at 
maturity value to secure public moneys.



Sec. 810.5  Taxation.

    All FFB bills shall be subject to Federal taxation to the same 
extent as obligations of private corporations are taxed.

[[Page 630]]



Sec. 810.6  Exemption.

    Obligations of the Federal Financing Bank are deemed to be exempted 
securities within the meaning of section 3(a)(2) of the Securities Act 
of 1933 (15 U.S.C. 77c(a)(2), of section 3(a)(12) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78(a)(12)), and of section 304(a)(4) of 
the Trust Indenture Act of 1939 (15 U.S.C. 77ddd(a)(4)).



Sec. 810.7  Federal Reserve Banks as fiscal agents.

    The Federal Reserve Banks, as fiscal agents of the United States, 
have been authorized by the Department of the Treasury to perform all 
such acts as may be necessary to carry out the provisions of this and 
other circulars of the Department of the Treasury as may be applicable 
to FFB bills, and of any public notice or notices issued in connection 
with any offering of these securities.



Sec. 810.8  Reservations as to terms of circular.

    The Federal Financing Bank reserves the right to amend, supplement, 
revise or withdraw all or any of the provisions of this circular at any 
time or from time to time.



PART 811--BOOK-ENTRY PROCEDURE FOR FEDERAL FINANCING BANK SECURITIES--Table of Contents




Sec.
811.0  Definition of terms.
811.1  Authority of Reserve Banks.
811.2  Scope and effect of book-entry procedure.
811.3  Transfer or pledge.
811.4  Withdrawal of Federal Financing Bank securities.
811.5  Delivery of Federal Financing Bank securities.
811.6  Registered bonds and notes.
811.7  Servicing book-entry Federal Financing Bank securities; payment 
          of interest; payment at maturity or upon call.

    Authority: The Federal Financing Bank Act of 1973, sections 9-11, 87 
Stat. 939, 940; 12 U.S.C. 2288, 2289, 2290.

    Source: 40 FR 5532, Feb. 6, 1975, unless otherwise noted.



Sec. 811.0  Definition of terms.

    In this part, unless the context otherwise requires or indicates:
    (a) Reserve Bank means the Federal Reserve Bank of New York (and any 
other Federal Reserve Bank which agrees to issue Federal Financing Bank 
securities in book-entry form) as fiscal agent of the United States 
acting on behalf of the Federal Financing Bank and, when indicated, 
acting in its individual capacity.
    (b) Federal Financing Bank security means a Federal Financing Bank 
bond, note, certificate of indebtedness, or bill issued under the 
Federal Financing Bank Act of 1973, in the form of a definitive Federal 
Financing Bank security or a book-entry Federal Financing Bank security.
    (c) Definitive Federal Financing Bank security means a Federal 
Financing Bank bond, note, certificate of indebtedness, or bill issued 
under the Federal Financing Bank Act of 1973, in engraved or printed 
form.
    (d) Book-entry Federal Financing Bank security means a Federal 
Financing Bank bond, note, certificate of indebtedness, or bill issued 
under the Federal Financing Bank Act of 1973, in the form of an entry 
made as prescribed in this part on the records of a Reserve Bank.
    (e) Pledge includes a pledge of, or any other security interest in, 
Federal Financing Bank securities as collateral for loans or advances or 
to secure deposits of public monies or the performance of an obligation.
    (f) Date of call is the date fixed in the official notice of call 
published in the Federal Register on which the Federal Financing Bank 
will make payment of the security before maturity in accordance with its 
terms.
    (g) Member bank means any national bank, State bank or bank or trust 
company which is a member of a Reserve Bank.



Sec. 811.1  Authority of Reserve Banks.

    Each Reserve Bank is hereby authorized, in accordance with the 
provisions of this part, to: (a) Issue book-entry Federal Financing Bank 
securities by means of entries on its records which shall include the 
name of the depositor, the amount, the loan title (or series)

[[Page 631]]

and maturity date; (b) effect conversions between book-entry Federal 
Financing Bank securities and definitive Federal Financing Bank 
securities; (c) otherwise service and maintain book-entry Federal 
Financing Bank securities; and (d) issue a confirmation of transaction 
in the form of a written advice (serially numbered or otherwise) which 
specifies the amount and description of any securities, that is, loan 
title (or series) and maturity date, sold or transferred and the date of 
the transaction.



Sec. 811.2  Scope and effect of book-entry procedure.

    (a) A Reserve Bank, as fiscal agent of the United States acting on 
behalf of the Federal Financing Bank, may apply the book-entry procedure 
provided for in this part to any Federal Financing Bank securities which 
have been or are hereafter deposited for any purpose in accounts with it 
in its individual capacity under terms and conditions which indicate 
that the Reserve Bank will continue to maintain such deposit accounts in 
its individual capacity, notwithstanding application of the book-entry 
procedure to such securities. This paragraph is applicable, but not 
limited, to securities deposited:
    (1) As collateral pledged to a Reserve Bank (in its individual 
capacity) for advances by it;
    (2) By a member bank for its sole account;
    (3) By a member bank held for the account of its customers;
    (4) In connection with deposits in a member bank of funds of States, 
municipalities, or other political subdivisions; or,
    (5) In connection with the performance of an obligation or duty 
under Federal, State, municipal, or local law, or judgments or decrees 
of courts.

The application of the book-entry procedure under this paragraph shall 
not derogate from or adversely affect the relationship that would 
otherwise exist between a Reserve Bank in its individual capacity and 
its depositors covering any deposits under this paragraph. Whenever the 
book-entry procedure is applied to such Federal Financing Bank 
securities, the Reserve Bank is authorized to take all action necessary 
in respect of the book-entry procedure to enable such Reserve Bank in 
its individual capacity to perform its obligations as depositary with 
respect to such Federal Financing Bank securities.
    (b) A Reserve Bank, as fiscal agent of the United States acting on 
behalf of the Federal Financing Bank, shall apply the book-entry 
procedure to Federal Financing Bank securities deposited as collateral 
pledged to the United States under current revisions of Department of 
the Treasury Circulars Nos. 92 and 176 (31 CFR, parts 203 and 202), and 
may apply the book-entry procedure, with the approval of the Secretary 
of the Treasury, to any other Federal Financing Bank securities 
deposited with a Reserve Bank, as fiscal agent of the United States.
    (c) Any person having an interest in Federal Financing Bank 
securities which are deposited with a Reserve Bank (in either its 
individual capacity or as fiscal agent of the United States) for any 
purpose shall be deemed to have consented to their conversion to book-
entry Federal Financing Bank securities pursuant to the provisions of 
this part, and in the manner and under the procedures prescribed by the 
Reserve Bank.
    (d) No deposits shall be accepted under this section on or after the 
date of maturity or call of the securities.



Sec. 811.3  Transfer or pledge.

    (a) A transfer or a pledge of book-entry Federal Financing Bank 
securities to a Reserve Bank (in its individual capacity or as fiscal 
agent of the United States), or to the United States, or to any 
transferee or pledgee eligible to maintain an appropriate book-entry 
account in its name with a Reserve Bank under this part, is effected and 
perfected, notwithstanding any provision of law to the contrary, by a 
Reserve Bank making an appropriate entry in its records of the 
securities transferred or pledged. The making of such an entry in the 
records of a Reserve Bank shall:
    (1) Have the effect of a delivery in bearer form of definitive 
Federal Financing Bank securities; (2) have the effect of a taking of 
delivery by the transferee or pledgee; (3) constitute the

[[Page 632]]

transferee or pledgee a holder; and (4) if a pledge, effect a perfected 
security interest therein in favor of the pledgee. A transfer or pledge 
of book-entry Federal Financing Bank securities effected under this 
paragraph shall have priority over any transfer, pledge, or other 
interest, theretofore or thereafter effected or perfected under 
paragraph (b) of this section or in any other manner.
    (b) A transfer or a pledge of transferable Federal Financing Bank 
securities, or any interest therein, which is maintained by a Reserve 
Bank (in its individual capacity or as fiscal agent of the United 
States) in a book-entry account under this part, including securities in 
book-entry form under Sec. 811.2(a)(3), is effected, and a pledge is 
perfected, by any means that would be effective under applicable law to 
effect a transfer or to effect and perfect a pledge of the Federal 
Financing Bank securities, or any interest therein, if the securities 
were maintained by the Reserve Bank in bearer definitive form. For 
purposes of transfer or pledge hereunder, book-entry Federal Financing 
Bank securities maintained by a Reserve Bank shall, notwithstanding any 
provision of law to the contrary, be deemed to be maintained in bearer 
definitive form. A Reserve Bank maintaining book-entry Federal Financing 
Bank securities either in its individual capacity or as fiscal agent of 
the United States is not a bailee for purposes of notification of 
pledges of those securities under this subsection, or a third person in 
possession for purposes of acknowledgement of transfers thereof under 
this subsection. Where transferable Federal Financing Bank securities 
are recorded on the books of a depositary (a bank, banking institution, 
financial firm, or a similar party, which regularly accepts in the 
course of its business Federal Financing Bank securities as a custodial 
service for customers, and maintains accounts in the names of such 
customers reflecting ownership of or interest in such securities) for 
account of the pledgor or transferor thereof and such securities are on 
deposit with a Reserve Bank in a book-entry account hereunder, such 
depositary shall, for purposes of perfecting a pledge of such securities 
or effecting delivery of such securities to a purchaser under applicable 
provisions of law, be the bailee to which notification of the pledge of 
the securities may be given or the third person in possession from which 
acknowledgment of the holding of the securities for the purchaser may be 
obtained. A Reserve Bank will not accept notice or advice of a transfer 
or pledge effected or perfected under this subsection, and any such 
notice or advice shall have no effect. A Reserve Bank may continue to 
deal with its depositor in accordance with the provisions of this part, 
notwithstanding any transfer or pledge effected or perfected under this 
subsection.
    (c) No filing or recording with a public recording office or officer 
shall be necessary or effective with respect to any transfer or pledge 
of book-entry Federal Financing Bank securities or any interest therein.
    (d) A Reserve Bank shall, upon receipt of appropriate instructions, 
convert book-entry Federal Financing Bank securities into definitive 
Federal Financing Bank securities and deliver them in accordance with 
such instructions; no such conversion shall affect existing interests in 
such Federal Financing Bank securities.
    (e) A transfer of book-entry Federal Financing Bank securities 
within a Reserve Bank shall be made in accordance with procedures 
established by the Bank not inconsistent with this part. The transfer of 
book-entry Federal Financing Bank securities by a Reserve Bank may be 
made through a telegraphic transfer procedure.
    (f) All requests for transfer or withdrawal must be made prior to 
the maturity or date of call of the securities.



Sec. 811.4  Withdrawal of Federal Financing Bank securities.

    (a) A depositor of book-entry Federal Financing Bank securities may 
withdraw them from a Reserve Bank by requesting delivery of like 
definitive Federal Financing Bank securities to itself or on its order 
to a transferee.
    (b) Federal Financing Bank securities which are actually to be 
delivered upon withdrawal may be issued either in registered or in 
bearer form, except

[[Page 633]]

that Federal Financing Bank bills will be issued in bearer form only.



Sec. 811.5  Delivery of Federal Financing Bank securities.

    A Reserve Bank which has received Federal Financing Bank securities 
and effected pledges, made entries regarding them, or transferred or 
delivered them according to the instructions of its depositor is not 
liable for conversion or for participation in breach of fiduciary duty 
even though the depositor had no right to dispose of or take other 
action in respect of the securities. A Reserve Bank shall be fully 
discharged of its obligations under this part by the delivery of Federal 
Financing Bank securities in definitive form to its depositor or upon 
the order of such depositor. Customers of a member bank or other 
depository (other than a Reserve Bank) may obtain Federal Financing Bank 
securities in definitive form only by causing the depositor of the 
Reserve Bank to order the withdrawal thereof from the Reserve Bank.



Sec. 811.6  Registered bonds and notes.

    Registered Federal Financing Bank securities deposited with a 
Reserve Bank for any purpose specified in Sec. 811.2 shall be assigned 
for conversion to book-entry Federal Financing Bank securities. The 
assignment, which shall be executed in accordance with the provisions of 
subpart F of 31 CFR, part 306, so far as applicable, shall be to--

    Federal Reserve Bank of ____________, as fiscal agent of the United 
States acting on behalf of the Federal Financing Bank for conversion to 
book-entry Federal Financing Bank securities.



Sec. 811.7  Servicing book-entry Federal Financing Bank securities; payment of interest; payment at maturity or upon call.

    Interest becoming due on book-entry Federal Financing Bank 
securities shall be charged against the special agent account maintained 
by the Department of the Treasury for the Federal Financing Bank on the 
interest due date and remitted or credited in accordance with the 
depositor's instructions. Such securities shall be redeemed and charged 
against the above said account on the date of maturity or call, and the 
redemption proceeds, principal and interest, shall be disposed of in 
accordance with the depositor's instructions.

[[Page 635]]



                CHAPTER IX--FEDERAL HOUSING FINANCE BOARD




  --------------------------------------------------------------------

                    SUBCHAPTER A--GENERAL DEFINITIONS
Part                                                                Page
900             General definitions.........................         637
 SUBCHAPTER B--FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
905             Description of organization and functions...         639
906             Operations..................................         645
907             Procedures..................................         648
910             Freedom of Information Act regulation.......         657
911             Availability of unpublished information.....         664
912             Information regarding meetings of the Board 
                    of Directors of the Federal Housing 
                    Finance Board...........................         669
913             Privacy Act Procedures......................         673
 SUBCHAPTER C--GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS
915             Bank director eligibility, appointment and 
                    elections...............................         680
917             Powers and responsibilities of Bank boards 
                    of directors and senior management......         696
918             Bank director compensation and expenses.....         702
   SUBCHAPTER D--FEDERAL HOME LOAN BANK MEMBERS AND HOUSING ASSOCIATES
925             Members of the Banks........................         705
926             Federal Home Loan Bank housing associates...         724
    SUBCHAPTER E--FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL 
                                STANDARDS
930

[Reserved]

              SUBCHAPTER F--FEDERAL HOME LOAN BANK MISSION
940             Core Mission Activities.....................         729

[[Page 636]]

944             Community support requirements..............         730
 SUBCHAPTER G--FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS
950             Advances....................................         736
951             Affordable Housing Program..................         747
952             Community Investment Cash Advance Programs..         768
955             Acquired Member Assets......................         772
956             Federal Home Loan Bank Investments..........         779
960

Off-balance sheet items [Reserved]

961             Standby letters of credit...................         780
            SUBCHAPTER H--FEDERAL HOME LOAN BANK LIABILITIES
965             Source of funds.............................         783
966             Consolidated obligations....................         783
969             Deposits....................................         787
   SUBCHAPTER I--MISCELLANEOUS FEDERAL HOME LOAN BANK OPERATIONS AND 
                               AUTHORITIES
975             Collection, settlement, and processing of 
                    payment instruments.....................         788
977             Miscellaneous bank authorities..............         790
978             Bank requests for information...............         790
           SUBCHAPTER J--NEW FEDERAL HOME LOAN BANK ACTIVITIES
980             New business activities.....................         793
                     SUBCHAPTER K--OFFICE OF FINANCE
985             The Office of Finance.......................         795
987             Book-entry procedure for consolidated 
                    obligations.............................         799
989             Financial statements of the Banks...........         804
                 SUBCHAPTER L--NON-BANK SYSTEM ENTITIES
995             Financing Corporation operations............         806
996             Authority for Bank assistance of the 
                    Resolution Funding Corporation..........         809
997             Resolution Funding Corporation obligations 
                    of the Banks............................         809

[[Page 637]]





                    SUBCHAPTER A--GENERAL DEFINITIONS



PART 900--GENERAL DEFINITIONS--Table of Contents




    Authority: 12 U.S.C. 1422, 1422b(a)(1).



Sec. 900.1  Definitions applying to all regulations.

    As used in this chapter:
    Acquired member assets or AMA means those assets that may be 
acquired by a Bank under part 955 of this chapter.
    Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 1421 
through 1449).
    Appropriate regulator means a regulatory entity listed in Sec. 925.8 
of this chapter, as applicable.
    Bank means a Federal Home Loan Bank established under the authority 
of the Act.
    Board of Directors means the Board of Directors of the Federal 
Housing Finance Board, unless otherwise indicated.
    Community financial institution or CFI means an institution--
    (1) The deposits of which are insured under the Federal Deposit 
Insurance Act; and
    (2) That has, as of the date of the transaction at issue, less than 
the community financial institution asset cap in total assets, based on 
an average of total assets over three years, which shall be calculated 
by the Bank as follows:
    (i) For purposes of determining eligibility for membership under 
part 925 of this chapter, based on the average of total assets drawn 
from the institution's regulatory financial reports filed with its 
appropriate regulator for the most recent calendar quarter and the 
immediately preceding 11 calendar quarters; and
    (ii) For purposes of making advances under part 950 of this chapter:
    (A) The calculation shall be based on the average of total assets 
drawn from the institution's regulatory financial reports filed with its 
appropriate regulator for the three most recent calendar year-ends; and
    (B) The calculation shall be made annually and shall be effective 
April 1 of each year.
    Community financial institution asset cap means, for 2000, $500 
million. Beginning in 2001 and for subsequent years, the cap shall be 
adjusted annually by the Finance Board to reflect any percentage 
increase in the preceding year's Consumer Price Index (CPI) for all 
urban consumers, as published by the U.S. Department of Labor. Each 
year, as soon as practicable after the publication of the previous 
year's CPI, the Finance Board shall publish notice by Federal Register 
of the CPI-adjusted cap.
    Community lending means providing financing for economic development 
projects for targeted beneficiaries, and, for community financial 
institutions, purchasing or funding small business loans, small farm 
loans or small agri-business loans, as defined in Sec. 950.1 of this 
chapter.
    Consolidated obligation or CO means any bond, debenture, or note 
authorized under part 966 of this chapter to be issued jointly by the 
Banks pursuant to section 11(a) of the Act, as amended (12 U.S.C. 
1431(a)), or any bond or note issued by the Finance Board on behalf of 
all Banks pursuant to section 11(c) of the Act (12 U.S.C. 1431(c)), on 
which the Banks are jointly and severally liable.
    Finance Board means the agency established by the Act as the Federal 
Housing Finance Board.
    Housing associate means an entity that has been approved as a 
nonmember mortgagee pursuant to subpart B of part 950 of this chapter.
    Member means an institution that has been approved for membership in 
a Bank and has purchased capital stock in the Bank in accordance with 
Secs. 925.20 or 925.25 of this chapter.
    NRSRO means a credit rating organization regarded as a Nationally 
Recognized Statistical Rating Organization by the Securities and 
Exchange Commission.
    Regulatory financial report means a financial report that an 
institution is required to file with its appropriate regulator on a 
specific periodic basis, including the quarterly call report for

[[Page 638]]

commercial banks, thrift financial report for savings associations, 
quarterly or semi-annual call report for credit unions, the National 
Association of Insurance Commissioners' annual or quarterly report for 
insurance companies, or other similar report, including such report 
maintained by the primary regulator on the computer on-line database.

[65 FR 8256, Feb. 18, 2000, as amended at 65 FR 25274, May 1, 2000; 65 
FR 36298, June 7, 2000; 65 FR 43981, July 17, 2000; 65 FR 44426, July 
18, 2000]

[[Page 639]]





 SUBCHAPTER B--FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS



PART 905--DESCRIPTION OF ORGANIZATION AND FUNCTIONS--Table of Contents




       Subpart A--Functions and Responsibilities of Finance Board

Sec.
905.1  Definitions.
905.2  General statement and statutory authority.
905.3  Location and business hours.
905.4  Federal Home Loan Bank System.
905.5  Financing Corporation.

Appendix A to Subpart A of Part 905--Federal Home Loan Banks

                     Subpart B--General Organization

905.10  Board of Directors.
905.11  Chairperson.
905.12  Office of the Managing Director.
905.13  Office of Policy.
905.14  Office of Supervision.
905.15  Office of General Counsel.
905.16  Office of Inspector General.
905.17  Office of Congressional Affairs.
905.18  Office of Public Affairs.
905.19  Office of Resource Management.

Subpart C [Reserved]

                          Subpart D--Procedures

905.50  General statement on procedures and forms.
905.51  Forms.
905.52  Submittal of requests for information.
905.53  Official Seal.
905.54  Official logo.

    Authority: 5 U.S.C. 552; 12 U.S.C. 1422b(a), 1423.

    Source: 56 FR 67155, Dec. 30, 1991, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



       Subpart A--Functions and Responsibilities of Finance Board



Sec. 905.1  Definitions.

    As used in this part:
    Bank System means the Federal Home Loan Bank System, consisting of 
the Federal Home Loan Banks.

[56 FR 67155, Dec. 30, 1991, as amended at 65 FR 8256, Feb. 18, 2000]



Sec. 905.2  General statement and statutory authority.

    (a) The Finance Board is an independent, executive agency in the 
Federal Government, responsible for regulating the Bank System. It is 
funded through assessments levied upon the Banks. These funds are not 
considered Government Funds or appropriated monies. The Finance Board is 
governed by a five-member Board of Directors and administered by a full-
time staff.
    (b) The members of the Board of Directors are individually referred 
to as Directors. The heads of the various administrative units, called 
offices or directorates, are also called Directors.
    (c) The Finance Board administers chapter 11 of the Act, as amended, 
and is authorized to issue rules, regulations and orders affecting the 
Banks. The Finance Board performs all such duties and responsibilities 
as may be required by statute. Under section 302(b)(2) of the Federal 
National Mortgage Association Charter Act, it also conducts a monthly 
survey of all major lenders to calculate a national average for interest 
rates on mortages for one-family homes, on behalf of the Federal 
National Mortgage Association. Under section 305(b) of the Federal Home 
Loan Mortgage Corporation Act, it conducts a similar survey for the 
Federal Home Loan Mortgage Corporation.

[56 FR 67155, Dec. 30, 1991, as amended at 65 FR 8256, Feb. 18, 2000]



Sec. 905.3  Location and business hours.

    (a) Location. All office units of the Finance Board are located at 
1777 F Street, NW., Washington, DC 20006.
    (b) Hours of operation. The regular hours of operation of the 
Finance Board are from 8:30 a.m. to 5:30 p.m., Monday through Friday.



Sec. 905.4  Federal Home Loan Bank System.

    (a) The Finance Board regulates the Banks, created under the Act. 
Specifically, its duties are:
    (1) To ensure that the Banks operate in a safe and sound manner;

[[Page 640]]

    (2) To supervise all lending and related operations of the Banks, 
which may include:
    (i) Prescribing conditions upon which Banks may advance funds to 
their member lending institutions;
    (ii) Prescribing rules and conditions under which a Bank may borrow 
funds, pay interest on those funds, or issue obligations;
    (iii) Requiring examinations of the Banks;
    (iv) Appointing the public members of the boards of directors of the 
Banks, conducting the elections of the members who are elected by the 
members of the Banks, and designating the Chairman and Vice-Chairman of 
the boards of directors of the Banks;
    (v) Approving dividends paid by the Banks on their capital stock;
    (vi) Approving applications for membership in a Bank; and
    (vii) Approving the Bank Presidents selected by the Banks' board of 
directors and approving the salaries of top level Bank officers;
    (3) To ensure that the Banks fulfill their mission of channeling 
funds to the housing finance industry by making long-term loans to 
financial lending institutions for use in mortgage lending;
    (4) To ensure that the Banks remain adequately capitalized; and
    (5) To ensure that the Banks are able to raise funds in the capital 
markets.
    (b) The Finance Board issues the consolidated obligations that are 
the joint and several obligations of the Banks. The Finance Board issues 
these obligations through the Office of Finance, which is a joint office 
of the Bank System.

[56 FR 67155, Dec. 30, 1991, as amended at 65 FR 8256, Feb. 18, 2000]



Sec. 905.5  Financing Corporation.

    The Finance Board oversees the operations of the Financing 
Corporation, including its issuance of obligations. The Financing 
Corporation is a mixed ownership government corporation chartered by the 
Finance Board under section 302 of the Competitive Equality Banking Act 
of 1987, 101 Stat. 552, 585 (1987) (12 U.S.C. 1441).

      Appendix A to Subpart A of Part 905--Federal Home Loan Banks

                    Federal Home Loan Bank District 1

(Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, 
Vermont)

                    Federal Home Loan Bank of Boston

One Financial Center, 20th Floor, Boston, MA 02111

                    Federal Home Loan Bank District 2

(New Jersey, New York, Puerto Rico, Virgin Islands)

                   Federal Home Loan Bank of New York

One World Trade Center, 103rd Floor, New York, NY 10048

                    Federal Home Loan Bank District 3

(Delaware, Pennsylvania, West Virginia)

                  Federal Home Loan Bank of Pittsburgh

One Riverfront Center, 20 Stanwix Street, Pittsburgh, PA 15222-4893

                    Federal Home Loan Bank District 4

(Alabama, District of Columbia, Florida, Georgia, Maryland, North 
Carolina, South Carolina, Virginia)

                    Federal Home Loan Bank of Atlanta

1475 Peachtree Street, NE., Atlanta, GA 30309

                    Federal Home Loan Bank District 5

(Kentucky, Ohio, Tennessee)

                  Federal Home Loan Bank of Cincinnati

2400 Atrium Two, 221 East Fourth Street, Cincinnati, OH 45202

                    Federal Home Loan Bank District 6

(Indiana, Michigan)

                 Federal Home Loan Bank of Indianapolis

8250 Woodfield Crossing Boulevard, Indianapolis, IN 46240

                    Federal Home Loan Bank District 7

(Illinois, Wisconsin)

                    Federal Home Loan Bank of Chicago

111 East Wacker Drive, Suite 700, Chicago, IL 60601

                    Federal Home Loan Bank District 8

(Iowa, Minnesota, Missouri, North Dakota, South Dakota)

                  Federal Home Loan Bank of Des Moines

907 Walnut Street, Des Moines, IA 50309

[[Page 641]]

                    Federal Home Loan Bank District 9

(Arkansas, Louisiana, Mississippi, New Mexico, Texas)

                    Federal Home Loan Bank of Dallas

5605 North MacArthur Boulevard, Irving, TX 75038

                   Federal Home Loan Bank District 10

(Colorado, Kansas, Nebraska, Oklahoma)

                    Federal Home Loan Bank of Topeka

Townsite Plaza Two, 120 East Sixth Street, Topeka, KS 66603

                   Federal Home Loan Bank District 11

(Arizona, California, Nevada)

                 Federal Home Loan Bank of San Francisco

600 California Street, San Francisco, CA 94108

                   Federal Home Loan Bank District 12

(Alaska, American Samoa, the Commonwealth of the Northern Mariana 
Islands, Guam, Hawaii, Idaho, Montana, Oregon, Utah, Washington, 
Wyoming)

                    Federal Home Loan Bank of Seattle

1501 Fourth Avenue, 19th Floor, Seattle, WA 98101-1693

[56 FR 67155, Dec. 30, 1991, as amended at 63 FR 3455, Jan. 23, 1998]



                     Subpart B--General Organization



Sec. 905.10  Board of Directors.

    The Board of Directors consists of five members (``Directors''). 
Four Directors are appointed by the President, with the advice and 
consent of the Senate, for seven-year terms. The fifth Director, the 
Secretary of Housing and Urban Development, is an ex officio Director. 
Not more than three Directors may belong to the same political party. By 
law, the four appointed Directors must have backgrounds in housing 
finance or a demonstrated commitment to providing specialized housing 
credit, and one such Director must have a background with an 
organization with a two-year record of representing consumer or 
community interests on either banking services, credit needs, financial 
consumer protection or housing. The Board of Directors sets agency 
policy and issues resolutions, rules, regulations and orders, as 
necessary.



Sec. 905.11  Chairperson.

    The President designates one appointed Director as Chairperson of 
the Board of Directors, who presides over the meetings of the Board of 
Directors. The Board of Directors has delegated, by resolution, the 
responsibility of overall management and organizational or personnel 
administration of the Finance Board to the Chairperson.



Sec. 905.12  Office of the Managing Director.

    (a) The Managing Director is the Finance Board's chief operating 
officer. By order of the Chairperson, the Managing Director has been 
delegated the authority and power necessary and convenient to effect the 
day-to-day management, functioning, and organization of the Finance 
Board, including the authority to appoint, remove, promote, direct, set 
compensation for, and pay Finance Board personnel. The Managing Director 
is authorized to execute documents on behalf of the Board of Directors, 
including regulations, resolutions, or orders duly passed by the Board 
of Directors. The Managing Director is also the Finance Board's Chief 
Information Officer.
    (b) The Executive Secretariat is a division within the Office of the 
Managing Director. The Executive Secretary is the recording officer for 
the Board of Directors and is responsible for maintaining the Finance 
Board's records, including copies of all resolutions and rules adopted 
by the Board of Directors and orders issued by the Chairperson. The 
Executive Secretary also is responsible for the preparation and 
maintenance of the minutes or other records of all official actions and 
proceedings of the Board of Directors, and is responsible for the 
official seals of the Finance Board. This division also is responsible 
for the agency's Freedom of Information Act, Privacy Act, and Records 
Management Programs. The Executive Secretary is the primary liaison with 
the Office of the Federal Register.
    (c) The District Banks Secretariat is a division within the Office 
of the Managing Director responsible for administering the election of 
directors of the Banks and for maintaining records on

[[Page 642]]

each of the Banks' policies and marketing activities.

[61 FR 68129, Dec. 27, 1996]



Sec. 905.13  Office of Policy.

    (a) The Office of Policy coordinates the Finance Board's policy 
development activities and provides advice to the Chairperson and the 
Board of Directors on the economic, financial, housing and community and 
economic development, and competitive environments in which the Bank 
System and its members operate. The responsibilities of the Office of 
Policy include:
    (1) Analysis and modeling of the financial performance of the Banks;
    (2) Collection and analysis of financial data in order to prepare 
the Bank System's annual combined financial reports and other periodic 
reports on Bank System operations;
    (3) Collection and analysis of data on the housing and community and 
economic development activities of the Banks;
    (4) Analysis of the Banks' performance under the Affordable Housing 
Program and the Community Investment Program;
    (5) Analysis of policy issues arising under the Affordable Housing 
Program and the Community Investment Program;
    (6) Preparation of the Monthly Survey of Rates and Terms of 
Conventional One-Family Nonfarm Mortgage Loans and determination of the 
conforming loan limit for Federal National Mortgage Association (Fannie 
Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) purchases 
and guarantees; and
    (7) Review of the Banks' quarterly dividend recommendations.
    (b) The Office of Policy is the Finance Board's primary liaison with 
the Banks' Chief Financial Officers concerning financial management 
issues, the Banks' Community Investment Officers concerning community 
and economic development, the Banks' Advisory Councils concerning Bank 
System support of affordable housing, and the Bank System's fiscal 
agent, the Office of Finance. It prepares the annual reports to Congress 
and to the Banks' Advisory Councils concerning Bank System support for 
low-income housing and community development.

[61 FR 68130, Dec. 27, 1996]



Sec. 905.14  Office of Supervision.

    The Office of Supervision oversees the Banks, the Office of Finance 
and the Financing Corporation to ensure that they operate in a 
financially safe and sound manner, that the Banks are carrying out their 
housing and community and economic development finance mission and are 
in compliance with applicable statutes and regulations, as well as 
Finance Board policies and orders. The responsibilities of the Office of 
Supervision include:
    (a) The conduct of examinations, at least annually, of the Banks, 
the Office of Finance and the Financing Corporation and the furnishing 
of reports thereon to the Chairpersons of their Boards of Directors;
    (b) The follow-up and resolution of outstanding examination issues;
    (c) Liaison with each Bank's audit committee and the review and 
evaluation of the work of each Bank's internal audit staff;
    (d) The monitoring of Bank and Bank System interest rate risk, 
financial trends and mission-related activities; and
    (e) The review of Community Support Statements of Bank System 
members.

[61 FR 68130, Dec. 27, 1996, as amended at 65 FR 8256, 8257, Feb. 18, 
2000]



Sec. 905.15  Office of General Counsel.

    The General Counsel is the chief legal officer of the Finance Board. 
The Office of General Counsel provides advice to the Board of Directors, 
the Chairperson, and other Finance Board officials, on interpretations 
of statutes and regulations. The Office of General Counsel prepares all 
legal documents on behalf of the Finance Board and prepares opinions, 
regulations, and memoranda of law. It represents the Finance Board in 
all administrative adjudicatory proceedings before the Board of 
Directors. The Chairman appoints the Finance Board's Designated Agency 
Ethics Official from the staff of the Office of General Counsel.

[61 FR 68130, Dec. 27, 1996]

[[Page 643]]



Sec. 905.16  Office of Inspector General.

    The Inspector General is subject to, and operates under, the 
provisions of the Inspector General Act of 1978, as amended (5 U.S.C. 
app. 3). The Inspector General reports to and is under the general 
supervision of the Chairperson. The Inspector General's responsibilities 
under the Inspector General Act include providing policy direction for, 
and conducting, supervising, and coordinating audits and investigations 
relating to the programs and operations of the Finance Board, and 
recommending policies for promoting economy and efficiency in the 
administration of, or preventing and detecting fraud and abuse in, the 
Finance Board's programs and operations. The Inspector General prepares 
and furnishes to the Chairman for transmittal to the Congress semiannual 
reports on the activities of the Office of Inspector General.

[61 FR 68130, Dec. 27, 1996]



Sec. 905.17  Office of Congressional Affairs.

    The Office of Congressional Affairs is responsible for ensuring the 
effective coordination and communication with the Congress and interest 
groups, and for briefing the Chairperson, the other Directors, and the 
Managing Director, on legislative issues before Congress pertaining to 
the Finance Board, the Bank System, and the Financing Corporation.

[61 FR 68130, Dec. 27, 1996]



Sec. 905.18  Office of Public Affairs.

    The Office of Public Affairs is responsible for the dissemination of 
information about the Finance Board to the public and the news media. 
The Office of Public Affairs is the Finance Board's primary liaison with 
news reporters. It also responds to general inquiries about the 
activities of the Finance Board.

[61 FR 68130, Dec. 27, 1996]



Sec. 905.19  Office of Resource Management.

    The Office of Resource Management advises the Chairperson and the 
Board of Directors on internal agency management and organization and 
provides support services to the agency and to individual employees. The 
responsibilities of the Office of Resource Management include:
    (a) Developing and managing agency policies and procedures governing 
employment and personnel action requirements, compensation and agency 
payroll requirements, travel, awards, insurance, retirement benefits, 
and other employee benefits;
    (b) Providing support for all facility and supply requirements;
    (c) Agency procurement and contracting programs;
    (d) Agency financial management, budgeting and accounting; and
    (e) Coordinating the design, programming, operation, and maintenance 
of the Finance Board's electronic data systems.

[61 FR 68130, Dec. 27, 1996]

Subpart C [Reserved]



                          Subpart D--Procedures



Sec. 905.50  General statement on procedures and forms.

    Regulations and rules of procedure of the Finance Board are 
published in chapter IX of title 12 of the Code of Federal Regulations 
and in supplementary material published in the Federal Register. The 
Finance Board will prescribe the procedures governing the course and 
conduct of proceedings before the Board of Directors in its General 
Regulations. When and wherever appropriate, the Finance Board may 
supplement its administrative procedures with informal procedures 
designed to aid the public or facilitate the proceedings, including the 
rendering of advice or assistance to persons dealing with the Finance 
Board or its Board of Directors.



Sec. 905.51  Forms.

    The following forms are available at the Finance Board headquarters 
facility (see Sec. 905.3) and shall be used for the purpose indicated:

                                  Form

10-91--Monthly Survey of Rates and Terms on Conventional 1 Family 
          Nonfarm Mortgage Loans.

[[Page 644]]

9102--Certificate of Nomination, Election of Federal Home Loan Bank 
          Directors.
9103--Election Ballot, Election of Federal Home Loan Bank Directors.
A-1--Appointive Director Candidates--Personal Certification and 
          Disclosure Form.
E-1--Elective Director Nominees--Personal Certification and Disclosure 
          Form.
90-T04--Local Travel Claim.

[60 FR 49199, Sept. 22, 1995, as amended at 63 FR 65687, Nov. 30, 1998; 
65 FR 8257, Feb. 18, 2000]



Sec. 905.52  Submittal of requests for information.

    Requests for general information concerning the Finance Board or the 
Bank System should be made in person at the headquarters facility, at 
the address listed in Sec. 905.3, or in writing addressed to the 
Executive Secretary at the same address.

[56 FR 67155, Dec. 30, 1991, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 905.53  Official Seal.

    This section describes and displays the official seals used by the 
Finance Board to certify and authenticate official documents of the 
Board of Directors:
    (a)(1) Description. A disc with the term ``SEAL'' in capital letters 
in its center, encircled by a designation scroll having an outer border 
with a roped edge and an inner border with a beaded edge, and containing 
the words ``FEDERAL HOUSING FINANCE BOARD'' in capital letters, in 
caslon type, with a mullet, in base.
    (2) Display.
    [GRAPHIC] [TIFF OMITTED] TC21SE91.004
    
    (b)(1) Description. A disc with a large mullet at its center and the 
term ``FEDERAL'' atop the term ``HOUSING'' in capital letters, in uncial 
type, arranged in a curved format on the upper part of the disc above 
the large mullet and the term ``FINANCE'' atop the term ``BOARD'' in 
capital letters, in uncial type, both terms arranged in a curved format 
on the lower part of the disc below the mullet, with two smaller mullets 
separating the two aforementioned terms ``HOUSING'' and ``FINANCE'', and 
with six mullets arranged three each in a vertical row on the left and 
right sides of the disc, and surrounded by a boarder consisting of two 
plain lines.
    (2) Display.
    [GRAPHIC] [TIFF OMITTED] TC21SE91.005
    

[[Page 645]]


    (c) Description. A disc having the same design and description as 
the official logo, contained in Sec. 900.54 and displayed in paragraph 
(b) of that section.

[56 FR 67155, Dec. 30, 1991; 57 FR 749, Jan. 8, 1992]



Sec. 905.54  Official logo.

    This section describes and displays the logo adopted by the Board of 
Directors as the official symbol representing the Finance Board. It is 
displayed on correspondence and selected documents.
    (a) Description. A disc with its center consisting of three polygons 
arranged in an irregular line partially overlapping--each polygon drawn 
in a manner resembling a silhouette of a pitched roof house and with 
distinctive eaves under its roof--encircled by a designation scroll 
having an outer and inner border of plain heavy lines and containing the 
words ``FEDERAL HOUSING FINANCE BOARD'' in capital letters, in sans 
serif type, with two mullets on the extreme left and right of the 
scroll.
    (b) Display.
    [GRAPHIC] [TIFF OMITTED] TC21SE91.006
    


PART 906--OPERATIONS--Table of Contents




Sec.
906.1  Definitions.
906.2  Assessments on the Banks.
906.3  Monthly interest rate survey.
906.4  Schedule of charges for agency services.
906.5  Minority Contractors Outreach Program.

    Authority: 12 U.S.C. 1422b and 1438(b).

    Source: 58 FR 19195, Apr. 13, 1993, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 906.1  Definitions.

    As used in this part:
    Bank System means the Federal Home Loan Bank System, consisting of 
all twelve Banks.
    Business means an enterprise, including a firm, corporation, joint 
stock company, partnership, joint venture or association that engages in 
commercial activity on a regular basis.
    Chairperson means the Chairperson of the Board of Directors.
    Minority means:
    (1) A male person or persons classified as either an African-
American, a Native-American, a Hispanic-American, or an Asian-American; 
or
    (2) A female person or persons regardless of ethnic or racial 
classification.
    Minority-owned entity means a business that is:
    (1) Owned or controlled by any combination of African-Americans, 
Native-Americans, Hispanic-Americans or Asian-Americans, regardless of 
gender, where such ownership or control includes the management of the 
daily business operations; or
    (2) Owned or controlled by female persons, regardless of ethnic 
origin, where such ownership or control includes the management of its 
daily business operations.

[58 FR 19195, Apr. 13, 1993, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 906.2  Assessments on the Banks.

    (a) Assessment authority. The Finance Board may impose a semiannual 
assessment on the Banks in an aggregate amount the Finance Board 
determines is sufficient to provide for the payment of its estimated 
expenses for the period for which it makes such assessment.
    (b) Assessment procedure. (1) At or near the end of each fiscal 
year, the Finance Board shall approve an annual budget of Finance Board 
expenses for the next fiscal year. The Finance Board shall promptly 
provide a copy of the approved budget to each Bank president.

[[Page 646]]

    (2) The Finance Board shall assess the Banks semiannually in an 
aggregate amount it determines is sufficient to pay the expenses 
approved under paragraph (b)(1) of this section. The Finance Board shall 
offset the amount of the semiannual assessments it imposes on the Banks 
by any amount it determines is remaining from previous semiannual 
assessments. The Finance Board shall promptly notify each Bank president 
in writing of the amount on any assessment.
    (3) Each Bank shall pay a pro rata share of the semiannual 
assessments imposed under paragraph (b)(2) of this section. The Finance 
Board shall calculate each Bank's pro rata share based on the ratio 
between the total paid-in value of the Bank's capital stock and the 
aggregate total paid-in value of the capital stock of every Bank. The 
Finance Board shall promptly notify each Bank in writing of the amount 
of its pro rate share of any semiannual assessment.
    (4) Unless otherwise instructed in writing by the Finance Board, 
each Bank shall pay to the Finance Board its pro rata share of an 
assessment in equal monthly installments during the semiannual period 
covered by the assessment.

[62 FR 35949, July 3, 1997]



Sec. 906.3  Monthly interest rate survey.

    The Finance Board conducts its Monthly Survey of Rates and Terms on 
Conventional One-Family Nonfarm Mortgage Loans in the following manner:
    (a) Initial survey. Each month, the Finance Board samples 
approximately 1,000 mortgage lenders (savings and loan associations, 
savings banks, commercial banks, and mortgage loan companies) and asks 
them to report the terms and conditions on all conventional mortgages 
(not federally insured or guaranteed) used to purchase single-family 
homes that each such lender closes during the last five working days of 
the month. In most cases, the information is reported electronically in 
a format similar to Finance Board Form FHFB 10-91. The data is weighted 
so that the pattern of weighted responses matches the actual pattern of 
mortgage originations by lender type and by region. The Finance Board 
tabulates the data and publishes standard data tables late in the 
following month.
    (b) Adjustable-rate mortgage index. The weighted data, tabulated and 
published pursuant to paragraph (a) of this section, is used to compile 
the Finance Board's adjustable-rate mortgage index, entitled the 
``National Average Contract Mortgage Rate for the Purchase of Previously 
Occupied Homes by Combined Lenders.'' This index is the successor to the 
index maintained by the former Federal Home Loan Bank Board and is used 
for determining the movement of the interest rate on the renegotiable-
rate mortgages and on some other adjustable-rate mortgages.
    (c) Means of survey. The Finance Board collects the data for the 
compilation of the indices described in this section by contract. 
Pursuant to such contract, a Finance Board form, entitled ``Monthly 
Survey of Rates and Terms on Conventional One-Family Nonfarm Mortgage 
Loans'' (FHFB Form 10-91), is distributed to selected lending 
institutions. The data is collected, compiled and processed, and the 
completed survey results are forwarded to the Finance Board for 
tabulation and distribution.

[58 FR 19195, Apr. 13, 1993, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 906.4  Schedule of charges for agency services.

    (a) Authority. Section 9701 of title 31, United States Code, directs 
government agencies to charge a fee for any special service provided to 
a selected segment of the public that makes use of such special service 
(31 U.S.C. 9701). The Office of Management and Budget's Circular A-25 
contains guidelines for agencies to follow when promulgating regulations 
for such user fee charges. This section implements that authority.
    (b) ARM Index special programming service. (1) The Finance Board 
develops and makes available special tabulations of its monthly interest 
rate survey data for individual users, upon request.

[[Page 647]]

    (2) Each request for a specialized interest rate survey will be made 
in writing to the Housing Finance Directorate.
    (3) The fee for such special service is a $100 per hour for the 
analyist's time, with a minimum charge of $100, prepaid, to accompany 
the written request.



Sec. 906.5  Minority Contractors Outreach Program.

    (a) Scope. (1) This section establishes the Finance Board's Minority 
Contractors Outreach Program and designates the officials responsible 
for implementing the Program and its oversight.
    (2) The Minority Contractor Outreach Program:
    (i) Seeks to encourage the maximum participation of minorities in 
all Finance Board procurement contracts for goods or services;
    (ii) Shall operate consistent with the principle of full and open 
competition and the concept of contracting for minimum agency needs at 
the lowest practical cost; and
    (iii) Shall not be construed to be a substitute means of procurement 
for the Finance Board's established procedural process for the 
procurement of goods or services.
    (b) Responsibilities. (1) The Director of Administration shall have 
general oversight of the Minority Contractors Outreach Program.
    (2) The Chairperson shall:
    (i) Appoint an Minority Contractors Advocate, who shall--
    (A) Have primary responsibility for furthering the purposes of the 
Minority Contractors Outreach Program;
    (B) Be responsible for challenging barriers to, and promoting 
maximum participation by, minorities or minority-owned entities in the 
Finance Board procurement process; and
    (C) Develop a manual describing the procedures by which the Finance 
Board will implement the Minority Contractors Outreach Program.
    (ii) Assign such Advocate only such duties or responsibilities, with 
respect to the Minority Contractors Outreach Program, as are consistent 
with this section, and shall not assign such Advocate any duties of a 
contracting officer or of a technical representative on a contract.
    (c) Program components. The Minority Contractors Outreach Program 
procedures shall include the following:
    (1) Contractor File. (i) The Minority Contractors Advocate shall 
compile and maintain an ongoing file consisting of minority-owned 
entities that are interested in contracting with the Finance Board for 
goods or services through the competitive bidding or negotiated 
procurement process.
    (ii) The information in such file shall list the current name and 
address of each such minority-owned entity and shall categorize each 
name and address as follows:
    (A) Accounting services;
    (B) Building support services;
    (C) Computer services;
    (D) Consulting services;
    (E) Legal services;
    (F) Office supplies and equipment; or
    (G) Other services.
    (2) Solicitation. The Minority Contractors Advocate shall implement 
a procedure for soliciting potential candidates for the contractor file 
provided for in paragraph (c)(1) of this section, by means of any of the 
following:
    (i) Referrals from executive departments, agencies or 
instrumentalities of the Federal Government;
    (ii) Direct solicitation of selected candidates;
    (iii) Advertising by direct mail or publications specifically 
directed to minorities, or minority-owned entities;
    (iv) Sponsoring Finance Board seminars designed to explain the 
Minority Contractors Outreach Program to minority contractors or 
minority-owned entities who have the potential of contracting with the 
Finance Board;
    (v) Attendance at conventions, seminars or other professional 
conferences of minorities or minority-owned entities located in the 
greater Washington metropolitan area.
    (3) Certification. (i) No minority-owned entity (whether solicited 
by the Minority Contractors Advocate or not) may participate in the 
Finance Board procurement process as a minority-owned entity unless 
certified as such by the Chairperson, or designee.

[[Page 648]]

    (ii) The certification shall be by a means and form approved by the 
Finance Board.
    (iii) Nothing in this section shall be deemed to prevent an non-
certified minority-owned entity from participating in the procurement 
process as an entity not designated or deemed a minority or minority-
owned entity.
    (4) Promotion. (i) The Minority Contractors Advocate shall maintain 
an ongoing campaign of promotion of the Minority Contractors Outreach 
Program with all certified minority-owned entities.
    (ii) This campaign shall include:
    (A) Ongoing dissemination of information about the Minority 
Contractors Outreach Program with certified minority-owned entities;
    (B) Alerting appropriate certified minority-owned entities when the 
Finance Board makes a solicitation for a bid or initiates the 
negotiation of a procurement contract for goods or services;
    (C) Acting as a liaison between the Finance Board contracting 
authorities and a particular minority-owned entity; and
    (D) Assisting any certified minority-owned entity to understand 
Finance Board contracting procedures or other information regarding a 
particular bid or contract.
    (iii) Nothing in this paragraph (c)(4) shall authorize the Minority 
Contractors Advocate to represent the interests of any minority-owned 
entity in any contract matter or bid before the Finance Board.
    (5) Contract award guidelines--(i) Contracts not exceeding $25,000. 
The Finance Board Contracting Officer shall, from time to time, award 
contracts for the procurement of goods or services, that do not exceed 
$25,000 in costs, to certified minority-owned entities listed in the 
contractor file provided for in paragraph (c)(1) of this section, to the 
extent not inconsistent with the principles of Federal Government 
procurement laws. Such awards shall be made after consultation with the 
Minority Contractors Advocate.
    (ii) Contracts exceeding $25,000. Contracts for goods or services 
that exceed $25,000 will be awarded on the basis and consistent with the 
principles of the Federal Government procurement laws. The Finance Board 
Contracting Officer and the Minority Contractors Advocate shall work to 
ensure, promote and facilitate the maximum participation of minority-
owned entities in the Finance Board's procurement of goods or services 
that exceed $25,000.



PART 907--PROCEDURES--Table of Contents




                         Subpart A--Definitions

Sec.
907.1  Definitions.

    Subpart B--Waivers, Approvals, No-Action Letters, and Regulatory 
                             Interpretations

907.2  Waivers.
907.3  Approvals.
907.4  No-Action Letters.
907.5  Regulatory Interpretations.
907.6  Submission requirements.
907.7  Issuance of Waivers, Approvals, No-Action Letters, and Regulatory 
          Interpretations.

 Subpart C--Case-by-Case Determinations; Review of Disputed Supervisory 
                             Determinations

907.8  Case-by-Case Determinations.
907.9  Review of Disputed Supervisory Determinations.
907.10  Petitions.
907.11  Requests to Intervene.
907.12  Finance Board procedures.
907.13  Consideration and Final Decisions.
907.14  Meetings of the Board of Directors to consider Petitions.
907.15  General provisions.

    Authority: 12 U.S.C. 1422b(a)(1).

    Source: 64 FR 30883, June 9, 1999, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



                         Subpart A--Definitions



Sec. 907.1  Definitions.

    For purposes of this part:
    Approval means a written statement issued to a Bank or the Office of 
Finance approving a transaction, activity, or item that requires Finance 
Board approval under the Act or a Finance Board rule, regulation, 
policy, or order.
    Board of Directors means the Board of Directors of the Finance 
Board.
    Case-by-Case Determination means a Final Decision concerning any 
matter

[[Page 649]]

that requires a determination, finding, or approval by the Board of 
Directors under the Act or Finance Board regulations, for which no 
controlling statutory, regulatory, or other Finance Board standard 
previously has been established, and that, in the judgment of the Board 
of Directors, is best resolved on a case-by-case basis by a ruling 
applicable only to the Petitioner and any Intervener, and not by 
adoption of a rule of general applicability.
    Chairperson means the Chairperson of the Board of Directors of the 
Finance Board.
    Final Decision means a decision rendered by the Board of Directors 
on issues raised in a Petition or Request to Intervene that have been 
accepted for consideration.
    Intervener means a Bank, Member, or other entity that has been 
granted leave to intervene in the consideration of a Petition by the 
Board of Directors.
    Managing Director means the Managing Director of the Finance Board.
    No-Action Letter means a written statement issued to a Bank or the 
Office of Finance providing that Finance Board staff will not recommend 
supervisory or other action to the Board of Directors for failure to 
comply with a specific provision of the Act or a Finance Board rule, 
regulation, policy, or order, if a requester undertakes a proposed 
transaction or activity.
    Party means a Petitioner, an Intervener, or the Finance Board.
    Petition means a Petition for Case-by-Case Determination or a 
Petition for Review of a Disputed Supervisory Determination.
    Petitioner means the Office of Finance or a Bank that has filed a 
Petition.
    Regulatory Interpretation means written guidance issued by Finance 
Board staff with respect to application of the Act or a Finance Board 
rule, regulation, policy, or order to a proposed transaction or 
activity.
    Requester means an entity or person that has submitted an 
application for a Waiver or Approval or a request for a No-Action Letter 
or Regulatory Interpretation.
    Secretary to the Board means the Secretary to the Board of Directors 
of the Finance Board.
    Supervisory determination means a Finance Board finding in a report 
of examination, order, or directive, or a Finance Board order or 
directive concerning safety and soundness or compliance matters that 
requires mandatory action by a Bank or the Office of Finance.
    Waiver means a written statement issued to a Bank, a Member, or the 
Office of Finance that waives a provision, restriction, or requirement 
of a Finance Board rule, regulation, policy, or order, or a required 
submission of information, not otherwise required by law, in connection 
with a particular transaction or activity.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



    Subpart B--Waivers, Approvals, No-Action Letters, and Regulatory 
                             Interpretations



Sec. 907.2  Waivers.

    (a) Authority. The Board of Directors reserves the right, in its 
discretion and in connection with a particular transaction or activity, 
to waive any provision, restriction, or requirement of this chapter, or 
any required submission of information, not otherwise required by law, 
if such waiver is not inconsistent with the law and does not adversely 
affect any substantial existing rights, upon a determination that 
application of the provision, restriction, or requirement would 
adversely affect achievement of the purposes of the Act, or upon a 
showing of good cause.
    (b) Application. A Bank, a Member, or the Office of Finance may 
apply for a Waiver in accordance with Sec. 907.6.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.3  Approvals.

    (a) Application. A Bank or the Office of Finance may apply for an 
Approval of any transaction, activity, or item that requires Finance 
Board approval under the Act or a Finance Board rule, regulation, 
policy, or order in accordance with Sec. 907.6, unless alternative 
application procedures are prescribed by the Act or a Finance Board 
rule, regulation, policy, or order for the transaction, activity, or 
item at issue.

[[Page 650]]

    (b) Reservation. The Finance Board reserves the right, in its 
discretion, to prescribe additional or alternative procedures for any 
application for Approval of a transaction, activity, or item.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.4  No-Action Letters.

    (a) Authority. Finance Board staff, in its discretion, may issue a 
No-Action Letter to a Bank or the Office of Finance stating that staff 
will not recommend supervisory or other action to the Board of Directors 
for failure to comply with a specific provision of the Act or a Finance 
Board rule, regulation, policy, or order, if a requester undertakes a 
proposed transaction or activity. The Board of Directors may modify or 
supersede a No-Action Letter.
    (b) Requests. A Bank or the Office of Finance may request a No-
Action Letter in accordance with Sec. 907.6.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.5  Regulatory Interpretations.

    (a) Authority. Finance Board staff, in its discretion, may issue a 
Regulatory Interpretation to a Bank, a Member, an official of a Bank or 
Member, the Office of Finance, or any other entity or person, providing 
guidance with respect to application of the Act or a Finance Board rule, 
regulation, policy, or order to a proposed transaction or activity. The 
Board of Directors may modify or supersede a Regulatory Interpretation.
    (b) Requests. A Bank, a Member, an official of a Bank or Member, the 
Office of Finance, or any other entity or person may request a 
Regulatory Interpretation in accordance with Sec. 907.6.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.6  Submission requirements.

    Applications for a Waiver or Approval and requests for a No-Action 
Letter or Regulatory Interpretation shall comply with the following 
requirements:
    (a) Filing. Each application or request shall be in writing. The 
original and three copies shall be filed with the Secretary to the 
Board, Federal Housing Finance Board, 1777 F Street NW., Washington, DC 
20006.
    (b) Authorization--(1) Waivers and Approvals. Applications for 
Waivers and Approvals shall be signed by an official with authority to 
sign such applications on behalf of the requester. Applications for 
Waivers and Approvals from a Bank or the Office of Finance shall be 
accompanied by a resolution of the board of directors of the Bank or the 
Office of Finance concurring in the substance and authorizing the filing 
of the application.
    (2) Requests for No-Action Letters. The president of the Bank making 
a Request for a No-Action Letter shall sign the Request. Requests for a 
No-Action Letter from the Office of Finance shall be signed by the 
chairperson of the Board of Directors of the Office of Finance.
    (3) Requests for Regulatory Interpretations. The requester or an 
authorized representative of the requester shall sign a request for a 
Regulatory Interpretation.
    (c) Information requirements. Each application or request shall 
contain:
    (1) The name of the requester, and the name, title, address, 
telephone number, and electronic mail address, if any, of the official 
filing the application or request on its behalf;
    (2) The name, address, telephone number, and electronic mail 
address, if any, of a contact person from whom Finance Board staff may 
seek additional information if necessary;
    (3) The section numbers of the particular provisions of the Act or 
Finance Board rules, regulations, policies, or orders to which the 
application or request relates;
    (4) Identification of the determination or relief requested, 
including any alternative relief requested if the primary relief is 
denied, and a clear statement of why such relief is needed;
    (5) A statement of the particular facts and circumstances giving 
rise to the application or request and identifying all relevant legal 
and factual issues;
    (6) References to all relevant authorities, including the Act, 
Finance Board rules, regulations, policies, and orders,

[[Page 651]]

judicial decisions, administrative decisions, relevant statutory 
interpretations, and policy statements;
    (7) References to any Waivers, No-Action Letters, Approvals, or 
Regulatory Interpretations issued to the requester in the past in 
response to circumstances similar to those surrounding the request or 
application;
    (8) For any application or request involving interpretation of the 
Act or Finance Board regulations, a reasoned opinion of counsel 
supporting the relief or interpretation sought and distinguishing any 
adverse authority;
    (9) Any non-duplicative, relevant supporting documentation; and
    (10) A certification by a person with knowledge of the facts that 
the representations made in the application or request are accurate and 
complete. The following form of certification is sufficient for this 
purpose: ``I hereby certify that the statements contained in the 
submission are true and complete to the best of my knowledge. [Name and 
Title].''
    (d) Waiver of requirements. The Managing Director may waive any 
requirement of this section for good cause. The Managing Director shall 
provide prompt notice of any such waiver to the Board of Directors. The 
Board of Directors may overrule any waiver granted by the Managing 
Director under this paragraph.
    (e) Withdrawal. Once filed, an application or request may be 
withdrawn only upon written request. The Finance Board will not consider 
a request for withdrawal after transmission by the Secretary to the 
Board to the requester of a response in final form.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.7  Issuance of Waivers, Approvals, No-Action Letters, and Regulatory Interpretations.

    (a) Board of Directors review. At least three business days prior to 
issuance to the requester, the Secretary to the Board shall transmit 
each Approval, No-Action Letter, or Regulatory Interpretation issued by 
the Chairperson or Finance Board staff to the Board of Directors for 
review.
    (b) Issuance and effectiveness. A Waiver, Approval, No-Action 
Letter, or Regulatory Interpretation is not effective until the 
Secretary to the Board has transmitted it in final form to the 
requester.
    (c) Abbreviated form. The Finance Board may respond to an 
application or request in an abbreviated form, consisting of a concise 
statement of the nature of the response, without restatement of the 
underlying facts.



 Subpart C--Case-by-Case Determinations; Review of Disputed Supervisory 
                             Determinations



Sec. 907.8  Case-by-Case Determinations.

    (a) Petition for Case-by-Case Determination. A Bank or the Office of 
Finance may seek a Case-by-Case Determination concerning any matter that 
may require a determination, finding or approval under the Act or 
Finance Board regulations by the Board of Directors, and for which no 
controlling statutory, regulatory or other Finance Board standard 
previously has been established. The Office of Finance or a Bank seeking 
a Case-by-Case Determination shall file a Petition for Case-by-Case 
Determination in accordance with Sec. 907.10.
    (b) Intervention. A Member, a Bank, or the Office of Finance may 
file a Request to Intervene in the consideration of the Petition in 
accordance with Sec. 907.11 if it believes its rights may be affected.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.9  Review of Disputed Supervisory Determinations.

    (a) Petition for Review of a Disputed Supervisory Determination. A 
Bank or the Office of Finance may seek review by the Board of Directors 
of a Finance Board finding in a report of examination, order, or 
directive, or a Finance Board order or directive concerning safety and 
soundness or compliance matters requiring mandatory action by the Bank 
or Office of Finance. The Office of Finance or a Bank seeking review of 
a disputed Supervisory Determination shall file a Petition for Review of 
a Disputed Supervisory Determination within 60 calendar days from the 
date of the disputed Supervisory

[[Page 652]]

Determination in accordance with Sec. 907.10.
    (b) No stay while Petition is pending. All Supervisory 
Determinations directed to a Bank or the Office of Finance shall remain 
in full force and effect while a Petition is pending. That a Petition is 
pending shall not operate or be deemed to operate as a suspension of the 
obligation of a Bank or the Office of Finance to take corrective action 
as required by a Supervisory Determination, except as the Bank or the 
Office of Finance may be otherwise directed by order of the Board of 
Directors.
    (c) Notice to affected entities. With the approval of the Managing 
Director, a Petitioner may, pursuant to 12 CFR 951.12(d) or otherwise, 
provide notice of the issuance of a Supervisory Determination or the 
filing of a Petition for Review of a Disputed Supervisory Determination, 
to another Bank, the Office of Finance, or a Member or other entity 
named in 12 CFR 951.12(d), if the Petitioner believes the entity's 
rights may be affected by the Supervisory Determination or the Petition.
    (d) Intervention. A Bank, the Office of Finance, a Member, or other 
entity named in 12 CFR 951.12(d) may file a Request to Intervene in the 
consideration of a Petition in accordance with Sec. 907.11 if it 
believes its rights may be adversely affected by a Final Decision on the 
Petition.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.10  Petitions.

    Each Petition brought pursuant to this subpart shall comply with the 
following requirements:
    (a) Filing. The Petition shall be in writing. The original and three 
copies shall be filed with the Secretary to the Board, Federal Housing 
Finance Board, 1777 F Street NW., Washington, DC 20006.
    (b) Information requirements. Each Petition shall contain:
    (1) The name of the Petitioner, and the name, title, address, 
telephone number, and electronic mail address, if any, of the official 
filing the Petition on its behalf;
    (2) The name, address, telephone number, and electronic mail 
address, if any, of a contact person from whom Finance Board staff may 
seek additional information if necessary;
    (3) The section numbers of the particular provisions of the Act or 
Finance Board rules, regulations, policies, or orders to which the 
Petition relates, and, if the Petition is for Review of a Disputed 
Supervisory Determination, identification of the disputed Supervisory 
Determination;
    (4) Identification of the determination or relief requested, 
including any alternative relief requested if the primary relief is 
denied, and a clear statement of why such relief is needed;
    (5) A statement of the particular facts and circumstances giving 
rise to the Petition and identifying all relevant legal and factual 
issues;
    (6) A summary of any steps taken to date by the Petitioner to 
address or resolve the dispute or issue; or, in cases involving safety 
and soundness or compliance issues, a summary of any actions taken by 
the Petitioner in the interim to implement corrective action;
    (7) The Petitioner's argument in support of its position, including 
citation to any supporting legal opinions, policy statements, or other 
relevant precedent and supporting documentation, if any;
    (8) References to all relevant authorities, including the Act, 
Finance Board rules, regulations, policies, and orders, judicial 
decisions, administrative decisions, relevant statutory interpretations, 
and policy statements;
    (9) A reasoned opinion of counsel supporting the relief or 
interpretation sought and distinguishing any adverse authority;
    (10) Any non-duplicative, relevant supporting documentation; and
    (11) A certification by a person with knowledge of the facts that 
the representations made in the Petition are accurate and complete. The 
following form of certification is sufficient for this purpose: ``I 
hereby certify that the statements contained in the Petition are true 
and complete to the best of my knowledge. [Name and Title].''
    (c) Authorization. Each Petition shall be accompanied by a 
resolution of the Petitioner's board of directors concurring in the 
substance and authorizing the filing of the Petition.

[[Page 653]]

    (d) Request to Appear. The Petition may contain a request that staff 
or an agent of the Petitioner be permitted to make a personal appearance 
before the Board of Directors at any meeting convened to consider the 
Petition pursuant to these procedures. A statement of the reasons a 
written presentation would not suffice shall accompany a Request to 
Appear. The statement shall specifically:
    (1) Identify any questions of fact that are in dispute;
    (2) Summarize the evidence that would be presented at the meeting; 
and
    (3) Identify any proposed witnesses, and state the substance of 
their anticipated testimony.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.11  Requests to Intervene.

    (a) Filing--(1) Date. Any Request to Intervene in consideration of a 
Petition under this subpart shall be in writing and shall be filed with 
the Secretary to the Board within 45 days from the date the Petition is 
filed.
    (2) Information requirements. A Request to Intervene shall include 
the information required by Sec. 907.10(b), where applicable, and a 
concise statement of the position and interest of the Intervener and the 
grounds for the proposed intervention.
    (3) Authorization. If the entity requesting intervention is a Bank 
or the Office of Finance, the Request to Intervene shall be accompanied 
by a resolution of the Petitioner's board of directors concurring in the 
substance and authorizing the filing of the Request. If the entity 
requesting intervention is not a Bank or the Office of Finance, the 
Request to Intervene shall be signed by an official of the entity with 
authority to authorize the filing of the Request, and shall include a 
statement describing such authority.
    (4) Request to Appear. A Request to Intervene may include a Request 
to Appear before the Board of Directors in any meeting conducted under 
these procedures to consider a Petition. A Request to Appear shall be 
accompanied by a statement containing the information required by 
Sec. 907.10(d), and, in addition, setting forth the likely impact that 
intervention will have on the expeditious progress of the meeting. A 
Request to Appear shall be filed with the Secretary to the Board either 
with the Request to Intervene or at least 20 days prior to the meeting 
scheduled to consider the Petition.
    (5) Intervener is bound. Any Request to Intervene shall include a 
statement that, if such leave to intervene is granted, the Intervener 
shall be bound expressly by the Final Decision of the Board of 
Directors, as described in Sec. 907.13(b), subject only to judicial 
review or as otherwise provided by law.
    (b) Grounds for approval. The Managing Director may grant leave to 
intervene if the entity requesting intervention has complied with 
paragraph (a) of this section and, in the judgment of Managing Director:
    (1) The presence of the entity requesting intervention would not 
unduly prolong or otherwise prejudice the adjudication of the rights of 
the original parties; and
    (2) The entity requesting intervention may be adversely affected by 
a Final Decision on the Petition.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.12  Finance Board procedures.

    (a) Notice of Receipt of Petition or Request to Intervene. No later 
than three business days following receipt of a Petition or Request to 
Intervene, the Secretary to the Board shall transmit a written Notice of 
Receipt to the Petitioner or Intervener. In the case of a Petition for 
Case-by-Case Determination, the Finance Board shall promptly publish a 
notice of receipt of Petition, including a brief summary of the issue(s) 
involved, in the Federal Register.
    (b) Transmittal of filings. The Secretary to the Board shall 
promptly transmit copies of any Petition, Request to Intervene, or other 
filing under this subpart to the Board of Directors and all other 
parties to the filing.
    (c) Opportunity to cure defects. The Managing Director shall afford 
the Petitioner or Intervener a reasonable opportunity to cure any 
failure to comply with the requirements of Sec. 907.10.

[[Page 654]]

    (d) Information request. The Managing Director may request 
additional information from the Petitioner or Intervener. No later than 
20 calendar days after the date of a request under this paragraph, the 
Petitioner shall provide to the Secretary to the Board all information 
requested.
    (e) Supplemental information. Upon good cause shown, the Managing 
Director may grant permission to a Petitioner or Intervener to submit 
supplemental written information pertaining to the Petition or Request 
to Intervene.
    (f) Consolidation and severance--(1) Consolidation. The Managing 
Director may consolidate any or all matters at issue in two or more 
meetings on Petitions where:
    (i) There exist common parties or common questions of fact or law;
    (ii) Consolidation would expedite and simplify consideration of the 
issues; and
    (iii) Consolidation would not adversely affect the rights of parties 
engaged in otherwise separate proceedings.
    (2) Severance. The Managing Director may order any meetings and 
issues severed with respect to any or all parties or issues.
    (g) Notice of Board Consideration. Within 30 calendar days of 
receipt of a Petition deemed by the Managing Director to be in 
compliance with the requirements of Sec. 907.10, or, if the Petition has 
been the subject of a request under paragraph (d) of this section, 
within 30 calendar days of receipt of a response from the Petitioner 
deemed by the Managing Director to complete the information necessary 
for the Board of Directors to consider the Petition, the Managing 
Director, after consultation with the Board of Directors, through the 
Secretary to the Board, shall provide all parties with a Notice of Board 
Consideration containing the following information:
    (1) Identification of the issues accepted for consideration;
    (2) Any decision to consolidate or sever pursuant to paragraph (f) 
of this section;
    (3) Whether the Petition will be considered by the Board of 
Directors on the written record pursuant to Sec. 907.13(a)(1), or at a 
meeting pursuant to Sec. 907.13(a)(2); and
    (4) If the Petition will be considered by the Board of Directors at 
a meeting:
    (i) The date, time and place of the meeting; and
    (ii) A decision as to any Request to Appear filed pursuant to 
Secs. 907.10(d) or 907.11(a)(4).

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.13  Consideration and Final Decisions.

    (a) Consideration by Board of Directors. The Board of Directors may 
consider a Petition and render a decision:
    (1) Solely on the basis of the written record; or
    (2) At a regularly scheduled meeting or a meeting convened 
specifically for the purpose of considering the Petition. Consideration 
of a Petition at a meeting shall be governed by the procedures described 
in Sec. 907.14.
    (b) Final Decision. The Board of Directors shall render a Final 
Decision on the issue(s) presented in a Petition or Request to Intervene 
that has been accepted for consideration, based upon consideration of 
the entire record of the proceeding. The terms and conditions of the 
Final Decision shall bind the parties as to any issue(s) presented in 
the Petition or Request to Intervene and decided by the Board of 
Directors. The decision of the Board of Directors is a final decision 
for purposes of obtaining judicial review or as otherwise provided by 
law.
    (c) Time periods. Subject to extension by such additional time as 
may reasonably be required, the Board of Directors shall render a Final 
Decision within 120 calendar days of the date the Petition is received 
in a form deemed by the Managing Director to be in compliance with the 
requirements of Sec. 907.10 or, if the Petition has been the subject of 
a request under Sec. 907.12(d), within 120 calendar days of receipt of a 
response from the Petitioner deemed by the Managing Director to complete 
the information necessary for the Board of Directors to consider the 
Petition.
    (d) Transmittal of Final Decision. The Secretary to the Board shall 
transmit

[[Page 655]]

the Final Decision of the Board of Directors to all parties to the 
submission.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.14  Meetings of the Board of Directors to consider Petitions.

    (a) Full and fair opportunity to be heard. Any meeting of the Board 
of Directors to consider a Petition shall be conducted in a manner that 
provides the parties a full and fair opportunity to be heard on the 
issues accepted for consideration. Any such meeting shall be conducted 
so as to permit an expeditious presentation of such issues.
    (b) Participation in meeting. (1) The presence of a quorum of the 
Board if Directors is required to conduct a meeting under this section. 
Members of the Board of Directors are deemed present if they appear in 
person or by telephone.
    (2) An act of the Board of Directors requires the vote of a majority 
of the members of the Board of Directors voting at a meeting at which a 
quorum of the Board of Directors is present.
    (3) A Final Decision may be reached by a vote of the Board of 
Directors after the meeting at which the Petition has been considered. 
Only those members of the Board of Directors present at the meeting at 
which the Petition was considered may vote on issues presented in the 
Petition and accepted for consideration. A vote of the majority of the 
members of the Board of Directors eligible to vote and voting shall be 
an act of the Board of Directors.
    (c) Chairperson--(1) Presiding officer. The Chairperson, or a member 
of the Board of Directors designated by the Chairperson, shall preside 
over a meeting of the Board of Directors convened under this section.
    (2) Authority of the Chairperson. The Chairperson shall have all 
powers and discretion necessary to conduct the meeting in a fair and 
impartial manner, to avoid unnecessary delay, to regulate the course of 
the meeting and the conduct of the parties and their counsel, and to 
discharge the duties of a presiding officer.
    (3) Board of Directors may overrule the Chairperson. Any member of 
the Board of Directors may, by motion, challenge any action, finding, or 
determination made by the Chairperson in the course of the meeting, and 
the Board of Directors, by majority vote, may overrule any action, 
finding or determination of the Chairperson.
    (d) Meeting may be closed. A party may request that the meeting, or 
portion thereof, be closed to public observation. A request to close a 
meeting shall be processed in accordance with the requirements of the 
Government in the Sunshine Act (5 U.S.C. 552b) and the Finance Board's 
implementing regulation (12 CFR part 912).
    (e) Location of meeting. Unless otherwise specified, all meetings of 
the Board of Directors will be held in the Board Room of the Finance 
Board at 1777 F Street, NW., Washington, DC, at the time specified in 
the notice of meeting issued pursuant to 12 CFR 912.6.
    (f) Presentation of issues--(1) Stipulations. Subject to the 
Chairperson's discretion, the parties may agree to stipulations of law 
or fact, including stipulations as to the admissibility of exhibits, and 
present such stipulations at the meeting. Stipulations shall be made a 
part of the record of the proceeding.
    (2) Order of presentation. The Chairperson shall determine the order 
of presentation of the issues, testimony of any witnesses, presentation 
of any other information or document, and all other procedural matters 
at the meeting.
    (g) Record. The meeting shall be recorded and transcribed. 
Transcripts of the proceedings shall be governed by 12 CFR 912.5(c). The 
Petition and all supporting documentation shall be made a part of the 
record, unless otherwise determined by the Chairperson. The Chairperson 
may order the record corrected, upon motion to correct, upon stipulation 
of the parties, or at the Chairperson's discretion.
    (h) Admissibility of documents and testimony. (1) The Chairperson 
has discretion to admit and make a part of the record documents and 
testimony that are relevant, material, and reliable, and may elect not 
to admit documents and testimony that are privileged, unduly 
repetitious, or of little probative value.

[[Page 656]]

    (2) The Board of Directors shall give such weight to documents and 
testimony admitted and made part of the record as it may deem reasonable 
and appropriate.
    (3) The Chairperson may admit and make a part of the record, in lieu 
of oral testimony, statements of fact or opinion prepared by a witness. 
The admissibility of the information contained in the statement shall be 
subject to the same rules as if the testimony were provided orally.
    (i) Official notice. All matters officially noticed by the 
Chairperson shall appear on the record.
    (j) Exhibits and documents--(1) Copies. A legible duplicate copy of 
a document shall be admissible to the same extent as the original.
    (2) Exhibits. Witnesses may use existing or newly created charts, 
exhibits, calendars, calculations, outlines, or other graphic materials 
to summarize, illustrate, or simplify the presentation of testimony. 
Subject to the Chairperson's discretion, such materials may be used with 
or without being admitted into the record.
    (3) Identification. All exhibits offered into the record shall be 
numbered sequentially and marked with a designation identifying the 
sponsor. The original of each exhibit offered into the record or marked 
for identification shall be retained in the record of the meeting, 
unless the Chairperson permits substitution of a copy for the original.
    (4) Exchange of Exhibits. One copy of each exhibit offered into the 
record shall be furnished to each of the parties and to each member of 
the Board of Directors. If the Chairperson does not fix a time for the 
exchange of exhibits, the parties shall exchange copies of proposed 
exhibits at the earliest practicable time before the commencement of the 
meeting to consider the Petition. Parties are not required to exchange 
exhibits submitted as rebuttal information before the meeting commences 
if submission of the exhibits is not reasonably certain at that time.
    (5) Authenticity. The authenticity of all documents submitted or 
exchanged as proposed exhibits prior to the meeting shall be admitted 
unless written objection is filed before the commencement of the 
meeting, or unless good cause is shown for failing to file such a 
written objection.
    (k) Sanction for obstruction of the proceedings. The Board of 
Directors may impose sanctions it deems appropriate for violation of any 
applicable provision of this subpart or any applicable law, rule, 
regulation, or order, or any dilatory, frivolous, or obstructionist 
conduct by any witness or counsel during the course of a meeting.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 907.15  General provisions.

    (a) Waiver of requirements. The Managing Director may waive any 
filing requirement or deadline in this subpart for good cause shown. The 
Managing Director shall provide prompt notice of any such waiver to the 
Board of Directors.
    (b) Actions of the Managing Director subject to the authority of the 
Board of Directors. The Board of Directors may overrule any action by 
the Managing Director under this subpart.
    (c) Withdrawal. At any time prior to the issuance by the Managing 
Director of a Notice of Board Consideration pursuant to Sec. 907.12(g), 
an authorized representative of a Petitioner may withdraw the Petition, 
or an authorized representative of an Intervener may withdraw the 
Request to Intervene, by filing a written request to withdraw with the 
Secretary to the Board. Only the Board of Directors may grant a request 
to withdraw after issuance by the Managing Director of a Notice of Board 
Consideration pursuant to Sec. 907.12(g). Unless otherwise agreed, 
withdrawal of a Petition or Request to Intervene shall not foreclose a 
Petitioner from resubmitting a Petition, or an Intervener from 
submitting a Request to Intervene, on the same or similar issues.
    (d) Settlement agreement. (1) At any time during the course of 
proceedings pursuant to this subpart, the Finance Board shall give 
Petitioners and Interveners the opportunity to submit offers of 
settlement when the nature of the proceedings and the public interest

[[Page 657]]

permit. With the approval of the Managing Director, an authorized 
representative of a Petitioner or Intervener may enter into a proposed 
settlement agreement with the Finance Board disposing of some or all of 
the issues presented in a Petition or Request to Intervene.
    (2) No proposed settlement agreement shall be final until approved 
by the Board of Directors. The Board of Directors shall consider any 
proposed settlement agreement within 30 calendar days of receiving a 
notice of the proposed settlement agreement. If the Board of Directors 
disapproves or fails to approve a proposed settlement agreement within 
30 days, the proposed settlement agreement shall be null and void and 
the previously filed Petition or Request to Intervene shall be 
considered in accordance with this subpart.
    (3) A settlement agreement approved by the Board of Directors shall 
be deemed final and binding on all parties to the agreement. At the time 
a proposed settlement agreement becomes final, a Petition or Request to 
Intervene previously filed by a party to the agreement shall be deemed 
withdrawn as to all issues resolved in the agreement, and the parties to 
the agreement shall be estopped from raising objection to those issues 
or to the terms of the settlement agreement.
    (e) No rights created; Finance Board not prohibited. Nothing in this 
subpart shall be deemed to create any substantive or discovery right in 
any party. Nothing in this subpart shall limit in any manner the right 
of the Finance Board to conduct any examination or inspection of any 
Bank or the Office of Finance, or to take any action with respect to a 
Bank or the Office of Finance, or its directors, officers, employees or 
agents, otherwise authorized by law.
    (f) Exhaustion requirement. When seeking a Case-by-Case 
Determination of any matter or review by the Board of Directors of any 
Supervisory Determination, a Bank or the Office of Finance shall follow 
the procedures in this subpart as a prerequisite to seeking judicial 
review. Failure to do so shall be deemed to be a failure to exhaust all 
available administrative remedies.
    (g) Improper conduct prohibited. No party shall, by act or omission, 
unduly burden or frustrate the efforts of the Board of Directors to 
carry out its duties under the laws and regulations of the Finance 
Board. A Petitioner or Intervener shall confine its communications with 
the Board of Directors, or any individual member thereof, concerning 
issues raised in a pending Petition, to written communications for 
inclusion in the record of the proceeding, filed with the Secretary to 
the Board.
    (h) Costs. Petitioners are encouraged to contain costs associated 
with the preparation and filing of Petitions and related personal 
appearances, if any, at any meeting held by the Board of Directors under 
this subpart. The Petitioner shall be solely responsible for all costs 
associated with any such Petitions and appearances.
    (i) Procedures are exclusive. All Case-by-Case Determinations by the 
Board of Directors and all Reviews of Disputed Supervisory 
Determinations shall be considered exclusively pursuant to the 
procedures described in this subpart.

[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]



PART 910--FREEDOM OF INFORMATION ACT REGULATION--Table of Contents




Sec.
910.1  Definitions.
910.2  Records available to the public.
910.3  Requests for records.
910.4  Finance Board response to requests for records.
910.5  Records not disclosed.
910.6  Disclosure of Federal Home Loan Bank examination reports.
910.7  Records of financial regulatory agencies held by the Finance 
          Board.
910.8  Appeals.
910.9  Fees.

    Authority: 5 U.S.C. 552; 52 FR 10012 (Mar. 27, 1987).

    Source: 63 FR 37485, July 13, 1998, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.

    Editorial Note: Nomenclature changes for part 910 appear at 65 FR 
20346, Apr. 17, 2000.

[[Page 658]]



Sec. 910.1  Definitions.

    For purposes of this part:
    Agency has the same meaning as in 5 U.S.C. 552(f)(1).
    Duplication means the process of making a copy of a record in order 
to respond to a FOIA request, including paper copies, microfilm, audio-
video materials, and computer diskettes or other electronic copies.
    Financial regulatory agency means the Board of Governors of the 
Federal Reserve System, Office of the Comptroller of the Currency, 
Federal Deposit Insurance Corporation, Office of Thrift Supervision, 
National Credit Union Administration, Farm Credit Administration, or a 
state officer, agency, supervisor, or other entity that has regulatory 
authority over, or is empowered to institute enforcement action against, 
a financial institution, including an insurance company.
    FOIA means the Freedom of Information Act, as amended (5 U.S.C. 
552).
    FOIA Officer means the Finance Board employee who is authorized to 
make determinations as provided in this part. The mailing address for 
the FOIA Officer is Federal Housing Finance Board, 1777 F Street, NW, 
Washington, DC 20006.
    Record means information or documentary material the Finance Board 
maintains in any form or format, including an electronic form or format, 
which the Finance Board:
    (1) Made or received under federal law or in connection with the 
transaction of public business;
    (2) Preserved or determined is appropriate for preservation as 
evidence of Finance Board operations or activities or because of the 
value the information it contains; and
    (3) Controls at the time it receives a request.
    Requester means any person, including an individual, corporation, 
firm, organization, or other entity, who makes a request to the Finance 
Board under FOIA for records.
    Review means the process of examining a record to determine whether 
all or part of the record may be withheld, and includes redacting or 
otherwise processing the record for disclosure to a requester. It does 
not include time spent:
    (1) Resolving legal or policy issues regarding the application of 
exemptions to a record; or
    (2) At the administrative appeal level, unless the Finance Board 
determines that the exemption under which it withheld records does not 
apply and the records are reviewed again to determine whether a 
different exemption may apply.
    Search means the time spent locating records responsive to a 
request, manually or by electronic means, including page-by-page or 
line-by-line identification of responsive material within a record.
    Unusual circumstances means the need to:
    (1)Search for and collect records from establishments that are 
separate from the office processing the request;
    (2) Search, review, and duplicate a voluminous amount of separate 
and distinct records in order to process a single request; or
    (3) Consult with another agency or among two or more components of 
the Finance Board that have a substantial interest in the determination 
of a request.
    Working days do not include Saturdays, Sundays, and legal public 
holidays.

[63 FR 37485, July 13, 1998, as amended at 65 FR 8257, 8258, Feb. 18, 
2000; 65 FR 20346, Apr. 17, 2000]



Sec. 910.2  Records available to the public.

    (a) General. (1) It is the policy of the Finance Board to respond 
promptly to all FOIA requests.
    (2) The Finance Board may disclose records that were previously 
published or disclosed or are customarily furnished to the public in the 
course of the performance of official duties without complying with this 
part. These records include, but are not limited to, the annual report 
the Finance Board submits to Congress pursuant to section 2B(d) of the 
Act (12 U.S.C. 1422b(d)), press releases, Finance Board forms, and 
materials published in the Federal Register.
    (3) Except as provided in the Privacy Act (5 U.S.C. 552a), the 
Finance Board's Privacy Act regulation (12 CFR part 913), or paragraph 
(a)(2) of this section, the Finance Board shall not disclose

[[Page 659]]

records except in accordance with the requirements of this part.
    (b) Reading room. (1) Subject to Secs. 910.5 through 910.7, the 
following records shall be available for public inspection and copying 
in the Finance Board reading room from 9:00 a.m. to 4:00 p.m. each 
working day:
    (i) Final opinions or orders of the Finance Board in the 
adjudication of cases.
    (ii) A record of the final votes of each member of the Board of 
Directors in every Finance Board proceeding.
    (iii) Statements of policy and interpretations adopted by the 
Finance Board that are not published in the Federal Register.
    (iv) Administrative staff manuals and instructions to staff that 
affect a member of the public.
    (v) Records previously disclosed to any requester pursuant to this 
part which, because of the nature of their subject matter, the Finance 
Board has determined will likely be the subject of subsequent requests 
for substantially the same records, and a general index thereof.
    (vi) Current indices that provide identifying information about all 
matters issued, adopted, or promulgated by the Finance Board.
    (vii) The report the Finance Board submits to the Attorney General 
pursuant to 5 U.S.C. 552(e).
    (2) The Finance Board shall make each reading room record created on 
or after November 1, 1996 available by computer telecommunications or 
other electronic means, such as on computer diskettes or on the Finance 
Board's Internet Web site, found at http://www.fhfb.gov.
    (3) The Finance Board shall assess fees for searching, reviewing, or 
duplicating reading room records in accordance with Sec. 910.9.

[63 FR 37485, July 13, 1998, as amended at 65 FR 8257, 8258, Feb. 18, 
2000]



Sec. 910.3  Requests for records.

    (a) Request requirements. Requests for access to, or copies of, 
Finance Board records shall be in writing and addressed to the FOIA 
Officer. Each request shall include the following:
    (1) A description of the requested record that provides sufficient 
detail to enable the Finance Board to locate the record with a 
reasonable amount of effort;
    (2) The requester's full name, mailing address, and a telephone 
number where the requester can be reached during normal business hours;
    (3) A statement that the request is made pursuant to FOIA; and
    (4) At the discretion of the requester, a dollar limit on the fees 
the Finance Board may incur to respond to the request for records. The 
Finance Board shall not exceed such limit.
    (b) Incomplete requests. If a request does not meet all of the 
requirements of paragraph (a) of this section, the FOIA Officer may 
advise the requester that additional information is needed. If the 
requester submits a corrected request, the FOIA Officer shall treat the 
corrected request as a new request.

[63 FR 37485, July 13, 1998, as amended at 65 FR 20346, Apr. 17, 2000]



Sec. 910.4  Finance Board response to requests for records.

    (a) Response deadline. Subject to Sec. 910.9(f), within 20 working 
days of receipt of a request meeting the requirements of Sec. 910.3(a) 
and any extensions of time under paragraph (c) of this section, the FOIA 
Officer shall:
    (1) Determine whether to grant or deny the request in whole or in 
part;
    (2) Notify the requester in writing of the determination and the 
reasons therefor; and
    (3) Make the records, if any, available to the requester.
    (b) Denials. If the FOIA Officer denies the request in whole or in 
part, the notice required under paragraph (a)(2) of this section shall 
state that the FOIA Officer is the person responsible for the denial, 
the denial is not a final agency action, and the requester may appeal 
the denial under Sec. 910.8.
    (c) Extensions of time. In unusual circumstances, the FOIA Officer 
may extend the time limit in paragraph (a) of this section for a period 
not to exceed 10 working days by notifying the requester in writing of:
    (1) The reasons for the extension;
    (2) The date on which a determination is expected; and
    (3) The opportunity for the requester to either limit the scope of 
the request

[[Page 660]]

so that the FOIA Officer may process it in accordance with paragraph (a) 
of this section, or arrange an alternative time frame for processing the 
request or a modified request.
    (d) Expedited processing. (1) The FOIA Officer shall process a 
request for records as soon as practicable if it is determined that 
expedited processing is appropriate or the requester demonstrates a 
compelling need. To demonstrate a compelling need, a requester shall 
submit a written application certified to be true and correct to the 
best of the requester's knowledge and belief to the FOIA Officer. The 
application shall state that:
    (i) The failure to obtain the records on an expedited basis could 
reasonably be expected to pose an imminent threat to the life or 
physical safety of an individual; or
    (ii) With respect to a requester who is primarily engaged in 
disseminating information, such as a representative of the news media as 
defined in Sec. 910.9(a)(4)(iv), there is urgency to inform the public 
concerning actual or alleged Finance Board activity.
    (2) Within 10 working days of receipt of an application for 
expedited processing that meets the requirements of paragraph (c)(1) of 
this section, the FOIA Officer shall determine whether to grant or deny 
the application and notify the requester in writing of the 
determination.
    (3) A requester may appeal the denial of an application for 
expedited processing by submitting a written application stating the 
grounds for the appeal to the FOIA Officer. The Finance Board shall 
expeditiously determine whether to grant or deny the appeal and shall 
notify the requester in writing of the determination, the name and title 
or position of the person responsible for the determination, and of the 
provisions for judicial review of this final action under 5 U.S.C. 
552(a) (4) and (6).
    (e) Providing responsive records. The FOIA Officer shall provide one 
copy of a record to a requester in any form or format requested if the 
record is readily reproducible by the Finance Board in that form or 
format by regular U.S. mail to the address indicated in the request 
unless other arrangements are made, such as taking delivery of the 
document at the Finance Board. At the option of the requester and upon 
the requester's agreement to pay fees in accordance with Sec. 910.9, the 
FOIA Officer shall provide copies by facsimile transmission or other 
express delivery methods.

[63 FR 37485, July 13, 1998, as amended at 65 FR 8257, 8258, Feb. 18, 
2000; 65 FR 20346, Apr. 17, 2000]



Sec. 910.5  Records not disclosed.

    (a) Records exempt from disclosure. Except as otherwise provided in 
this part, the Finance Board shall not disclose records that are:
    (1) Specifically authorized under criteria established by an 
Executive order to be kept secret in the interest of national defense or 
foreign policy and are in fact properly classified pursuant to such 
Executive order.
    (2) Related solely to the Finance Board's internal personnel rules 
and practices.
    (3) Specifically exempted from disclosure by a statute other than 
FOIA if such statute requires the record to be withheld from the public 
in such a manner as to leave no discretion on the issue, establishes 
particular criteria for withholding, or refers to particular types of 
records to be withheld.
    (4) Trade secrets and commercial or financial information obtained 
from a person and privileged or confidential.
    (5) Inter- or intra-agency memorandums or letters that would not be 
available by law to a party other than an agency in litigation with the 
Finance Board.
    (6) Personnel, medical, or similar files the disclosure of which 
would constitute a clearly unwarranted invasion of personal privacy.
    (7) Compiled for law enforcement purposes, but only to the extent 
that the production of such law enforcement records or information:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trial or an 
impartial adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;

[[Page 661]]

    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a State, local, or foreign agency or 
authority, any private institution, or a Bank, which furnished 
information on a confidential basis, and, in the case of a record 
compiled by criminal law enforcement authority in the course of a 
criminal investigation or by an agency conducting a lawful national 
security investigation, information furnished by a confidential source;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual.
    (8) Contained in or related to examination, operating, or condition 
reports prepared by, on behalf of, or for the use of the Finance Board, 
a Bank, or a financial regulatory agency.
    (9) Geological and geophysical information and data, including maps, 
concerning wells.
    (b) Reasonably segregable portions. (1) The Finance Board shall 
provide a requester with any reasonably segregable portion of a record 
after redacting the portion that is exempt from disclosure under 
paragraph (a) of this section.
    (2) The Finance Board shall make a reasonable effort to estimate the 
volume of redacted information and provide that information to the 
requester unless providing the estimate would harm an interest protected 
by the exemption under which the redaction is made.
    (3) The Finance Board shall indicate the estimated volume of 
redacted information on the released portion of the record unless 
providing the estimate would harm an interest protected by the exemption 
under which the redaction is made. If technically feasible, the Finance 
Board shall make the indication at the place in the record where the 
redaction is made.
    (c) Public interest. The Finance Board may disclose records it has 
authority to withhold under paragraph (a) of this section upon a 
determination that disclosure would be in the public interest.

[63 FR 37485, July 13, 1998, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 910.6  Disclosure of Federal Home Loan Bank examination reports.

    The Finance Board may disclose an examination, operating, or 
condition report of a Bank or a related record to a financial regulatory 
agency upon a determination that:
    (a) The person requesting the record on behalf of the financial 
regulatory agency has the authority to make such request;
    (b) The financial regulatory agency is requesting the record for a 
legitimate regulatory purpose; and
    (c) The financial regulatory agency making the request agrees that 
it shall not disclose the record pursuant to FOIA, the agency's 
regulations, or any other authority.

[63 FR 37485, July 13, 1998, as amended at 65 FR 8257, Feb. 18, 2000]



Sec. 910.7  Records of financial regulatory agencies held by the Finance Board.

    The Finance Board shall not disclose an examination, operating, or 
condition report, or other record prepared by, on behalf of, or for the 
use of a financial regulatory agency. Upon a receipt of a request for 
such records, the FOIA Officer shall promptly refer the request to the 
appropriate agency and notify the requester of the referral.

[65 FR 20346, Apr. 17, 2000]



Sec. 910.8  Appeals.

    (a) Procedure. (1) If the FOIA Officer has denied a request in whole 
or in part, the requester may appeal the denial by submitting a written 
application to the FOIA Officer stating the grounds for the appeal 
within 30 working days of the date of the determination under 
Sec. 910.4.
    (2) Subject to Sec. 910.9(f), within 20 working days of receipt of 
an application for appeal meeting the requirements of paragraph (a)(1) 
of this section and any extensions of time under paragraph (a)(3) of 
this section, the Finance Board shall determine whether to grant or deny 
the appeal and notify

[[Page 662]]

the requester in writing of the determination, the name and title or 
position of the person responsible for the determination, and the 
provisions for judicial review of this final action under 5 U.S.C. 
552(a)(4).
    (3) In unusual circumstances, the FOIA Officer may extend the time 
limit in paragraph (a)(2) of this section for a period not to exceed 10 
working days by notifying the requester in writing of the reasons for 
the extension and the date on which a determination is expected.
    (b) Appeal during pendency of judicial review. If a requester files 
an action in a United States district court under 5 U.S.C. 552(a)(4) 
concerning a request for Finance Board records before exhausting the 
administrative appeals process for that request under paragraph (a) of 
this section, the Finance Board may:
    (1) Initiate and process an administrative appeal; or
    (2) Continue to process an administrative appeal previously filed 
under paragraph (a) of this section.

[63 FR 37485, July 13, 1998, as amended at 65 FR 8257, 8258, Feb. 18, 
2000; 65 FR 20346, Apr. 17, 2000]



Sec. 910.9  Fees.

    (a) Fees. Except as otherwise provided in a statute specifically 
providing for setting fees for particular types of records or in this 
section, the Finance Board shall assess against each requester the 
direct costs of responding to a request for records.
    (1) If the records are requested for a commercial use, the direct 
costs are limited to the reasonable operating costs the Finance Board 
incurs to search, review, and duplicate records.
    (2) If the records are not requested for a commercial use and the 
requester is an educational institution, non-commercial scientific 
institution, or representative of the news media, the direct costs are 
limited to the reasonable operating costs the Finance Board incurs to 
duplicate records in excess of 100 pages.
    (3) If neither the request nor the requester is described in 
paragraphs (a) (1) or (2) of this section, the direct costs are limited 
to the reasonable operating costs the Finance Board incurs to search in 
excess of two hours and duplicate records in excess of 100 pages.
    (4) For purposes of this section, the term:
    (i) Commercial use request means a request from, or on behalf of, a 
person who seeks records for a use or purpose that furthers the 
commercial, trade, or profit interests of the requester or the person on 
whose behalf the request is made.
    (ii) Educational institution means a preschool, public or private 
elementary or secondary school, or institution of undergraduate, 
graduate, professional, or vocational higher education that operates a 
program of scholarly research.
    (iii) Non-commercial scientific institution means a nonprofit 
institution operated solely for the purpose of conducting scientific 
research the results of which are not intended to promote any particular 
product or industry.
    (iv) Representative of the news media means a requester who is 
actively gathering information that is about current events or would be 
of current interest to the public for an entity that is organized and 
operated to publish or broadcast news to the public.
    (b) Fees when no records are provided. The Finance Board may assess 
a fee for the direct costs of searching for a requested record the 
Finance Board cannot locate or if located, determines to be exempt from 
disclosure under Sec. 910.5.
    (c) Interest. The Finance Board may assess interest at the rate 
prescribed in 31 U.S.C. 3717 on any unpaid fees beginning 31 days after 
the earlier of the date of the determination under Sec. 910.4 or the 
date a fee statement is mailed to a requester. Interest shall accrue 
from such date.
    (d) Exceptions. Notwithstanding paragraphs (a) or (b) of this 
section, the FOIA Officer may determine not to assess a fee or to reduce 
a fee if:
    (1) The routine cost of collecting and processing the fee is likely 
to equal or exceed the amount of the fee.
    (2) The fee is equal to or less than 10 dollars.
    (3) Disclosure of the record is in the public interest because it is 
likely to

[[Page 663]]

contribute significantly to public understanding of the operations or 
activities of the government and is not primarily in the commercial 
interest of the requester.
    (i) A requester may apply in writing to the FOIA Officer for a 
waiver of fees under this paragraph (b)(3). A fee waiver request shall 
include the following:
    (A) The requester's interest in and proposed use of the record;
    (B) Whether the requester will derive income or other benefit from 
the record;
    (C) An explanation of how the public will benefit from disclosure, 
including the requester's ability and intention to disseminate the 
information to the public; and
    (D) The requester's expertise in the subject area of the record.
    (ii) In determining whether disclosure of a record is in the public 
interest, the FOIA Officer shall consider whether the record:
    (A) Concerns identifiable operations or activities of the Finance 
Board;
    (B) Is meaningfully informative in relation to the subject matter of 
the request;
    (C) Contributes to an understanding of the subject matter by the 
public at large, and the significance of that contribution; and
    (D) Furthers, or is primarily in, the requester's commercial 
interest.
    (e) Aggregating requests. If the FOIA Officer reasonably believes 
that a requester or a group of requesters acting in concert is 
attempting to break a request down into a series of requests for the 
purpose of evading the assessment of fees, the FOIA Officer may 
aggregate such requests and assess fees in accordance with this section.
    (f) Collecting fees. (1) The Finance Board shall deem any request 
for Finance Board records as an agreement by the requester to pay fees 
and interest assessed in accordance with this section.
    (2) To pay fees and interest assessed under this section, a 
requester shall deliver to the Office of Resource Management, located at 
the Federal Housing Finance Board, 1777 F Street NW., Washington, DC 
20006, a check or money order made payable to the ``Federal Housing 
Finance Board.''
    (3) Prior to disclosing any record, the FOIA Officer may require a 
requester to agree in writing to pay actual fees and interest incurred 
in accordance with this section if the estimated fee will likely exceed 
$25 but not $250.
    (4) The FOIA Officer may require a requester to pay an estimated fee 
in advance if:
    (i) It is determined that the fee will likely exceed $250; or
    (ii) The requester has previously failed to pay a fee assessed under 
this section within 30 days of the earlier of the date of the 
determination under Sec. 910.4 or the date a fee statement was mailed to 
a requester.
    (5) The Finance Board shall promptly refund to a requester any 
estimated advance fee paid under paragraph (f)(4) of this section that 
exceeds the actual fee. The FOIA Officer shall assess the requester for 
the amount by which the actual fee exceeds the estimated advance fee 
payment.
    (g) Fee schedule. The FOIA Officer shall assess fees in accordance 
with the following schedule:

Search:
    Manual: Supervisory/Professional       $34.00 per hour.
     Staff.
    Manual: Clerical Staff...............  $17.00 per hour.
    Computer: Operator...................  $34.00 per hour.
    Computer output (PC).................  actual cost.
    Diskettes (3\1/2\  x  5\1/4\)........  $5.00 per diskette.
    Review...............................  $34.00 per hour.
Duplication:
    Photocopy............................  $.10 per page.
    Computer generated...................  $.76 per 1000 lines.
    Copy of microfiche...................  $.30 per page.
    Transcription of audio tape..........  $4.50 per page.
    Certification, seal and attestation    $5.00 per document.
     by the FOIA Officer.
Delivery:
    Facsimile transmission (long           Long distance charges plus
     distance).                             $.25 per page.
    Facsimile transmission (local).......  $.25 per call plus $.25 per
                                            page.
    Express delivery service.............  Actual cost.
 


[[Page 664]]


[63 FR 37485, July 13, 1998, as amended at 64 FR 5930, Feb. 8, 1999, as 
amended at 65 FR 8257, 8258, Feb. 18, 2000; 65 FR 20346, Apr. 17, 2000]



PART 911--AVAILABILITY OF UNPUBLISHED INFORMATION--Table of Contents




Sec.
911.1  Definitions.
911.2  Purpose and scope.
911.3  Prohibition on unauthorized use and disclosure of unpublished 
          information.
911.4  Requests for unpublished information by document or testimony.
911.5  Consideration of requests.
911.6  Persons and entities with access to unpublished information.
911.7  Availability of unpublished information by testimony.
911.8  Availability of unpublished information by document.
911.9  Fees.

    Authority: 5 U.S.C. 301; 12 U.S.C. 1422b(a)(1).

    Source: 64 FR 44106, Aug. 13, 1999, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 911.1  Definitions.

    For purposes of this part:
    Legal proceeding means any administrative, civil, or criminal 
proceeding, including a grand jury or discovery proceeding, in which 
neither the Finance Board nor the United States is a party.
    Supervised entity means a Bank, the Office of Finance, and the 
Financing Corporation.
    Unpublished information means information and documents created or 
obtained by the Finance Board in connection with the performance of 
official duties, whether the information or documents are in the 
possession of the Finance Board, a current or former Finance Board 
employee or agent, a supervised entity, a Bank member, government 
agency, or some other person or entity; and information and documents 
created or obtained by, or in the memory of, a current or former Finance 
Board employee or agent, that was acquired in the person's official 
capacity or in the course of performing official duties. It does not 
include information or documents the Finance Board must disclose under 
the Freedom of Information Act (5 U.S.C. 552), Privacy Act (5 U.S.C. 
552a), or the Finance Board's implementing regulations (12 CFR parts 910 
and 913, respectively). It also does not include information or 
documents that were previously published or disclosed or are customarily 
furnished to the public in the course of the performance of official 
duties such as the annual report the Finance Board submits to Congress 
pursuant to section 2B(d) of the Act (12 U.S.C. 1422b(d)), press 
releases, Finance Board forms, and materials published in the Federal 
Register.

[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 911.2  Purpose and scope.

    (a) Purpose. The purposes of this part are to:
    (1) Maintain the confidentiality and control the dissemination of 
unpublished information;
    (2) Conserve the time of employees for official duties and ensure 
that Finance Board resources are used in the most efficient manner;
    (3) Maintain the Finance Board's impartiality among private 
litigants; and
    (4) Establish an orderly mechanism for the Finance Board to process 
expeditiously and respond appropriately to requests for unpublished 
information.
    (b) Scope. (1) This part applies to a request for and use and 
disclosure of unpublished information, including a request for 
unpublished information by document or testimony arising out of a legal 
proceeding in which neither the Finance Board nor the United States is a 
party. It does not apply to a request for unpublished information in a 
legal proceeding in which the Finance Board or the United States is a 
party or a request for information or records the Finance Board must 
disclose under the Freedom of Information Act, Privacy Act, or the 
Finance Board's implementing regulations.
    (2) This part does not, and may not be relied upon to create any 
substantive or procedural right or benefit enforceable against the 
Finance Board.



Sec. 911.3  Prohibition on unauthorized use and disclosure of unpublished information.

    (a) In general. Possession or control by any person, supervised 
entity, Bank member, government agency, or other

[[Page 665]]

entity of unpublished information does not constitute a waiver by the 
Finance Board of any privilege or its right to control, supervise, or 
impose limitations on, the subsequent use and disclosure of the 
information.
    (b) Current and former employees and agents. Except as authorized by 
this part or otherwise by the Finance Board, no current or former 
Finance Board employee or agent may disclose or permit the disclosure in 
any manner of any unpublished information to anyone other than a Finance 
Board employee or agent for use in the performance of official duties.
    (c) Other persons or entities possessing unpublished information. 
(1) Except as authorized in writing by the Finance Board, no person, 
supervised entity, Bank member, government agency, or other entity in 
possession or control of unpublished information may disclose or permit 
the use or disclosure of such information in any manner or for any 
purpose.
    (2) All unpublished information made available under this part 
remains the property of the Finance Board and may not be used or 
disclosed for any purpose other than that authorized under this part 
without the prior written permission of the Finance Board.
    (3) Reports of examination, supervisory correspondence, and other 
unpublished information lawfully in the possession of a supervised 
entity, Bank member, or government agency remains the property of the 
Finance Board and may not be used or disclosed for any purpose other 
than that authorized under this part without the prior written 
permission of the Finance Board.
    (4) Any person or entity that discloses or uses unpublished 
information except as expressly authorized under this part may be 
subject to the penalties provided in 18 U.S.C. 641 and other applicable 
laws. A current Finance Board, Bank, or Office of Finance employee also 
may be subject to administrative or disciplinary proceedings.
    (d) Exception for supervised entities and Bank members. When 
necessary or appropriate for business purposes, a supervised entity, 
Bank member, or any director, officer, employee, or agent thereof, may 
disclose unpublished information, including information contained in, or 
related to, supervisory correspondence or reports of examination, to a 
person or entity officially connected with the supervised entity or 
Federal Home Loan Bank member as officer, director, employee, attorney, 
agent, auditor, or independent auditor. A supervised entity, Federal 
Home Loan Bank member, or a director, officer, employee, or agent 
thereof, also may disclose unpublished information to a consultant under 
this paragraph if the consultant is under a written contract to provide 
services to the supervised entity or Federal Home Loan Bank member and 
the consultant has agreed in writing:
    (1) To abide by the prohibition on the disclosure of unpublished 
information contained in this section; and
    (2) That it will not to use the unpublished information for any 
purposes other than those stated in its contract to provide services to 
the supervised entity or Bank member.
    (e) Government agencies. The Finance Board may make reports of 
examination, supervisory correspondence, and other unpublished 
information available to another federal agency or a state agency for 
use where necessary in the performance of the agency's official duties. 
As used in this paragraph, the term agency does not include a grand 
jury.

[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 911.4  Requests for unpublished information by document or testimony.

    (a) Form of requests. A request for unpublished information must be 
submitted to the Finance Board in writing and include a detailed 
description of the basis for the request. At a minimum, the request must 
demonstrate that:
    (1) The requested information is highly relevant to the purpose for 
which it is sought;
    (2) The requested information is not available from any other 
source;
    (3) The need for the information clearly outweighs the need to 
maintain its confidentiality; and

[[Page 666]]

    (4) The need for the information clearly outweighs the burden on the 
Finance Board to produce it.
    (b) Requests for documents. If the request is for unpublished 
information by document, the request must include the elements in 
paragraph (a) of this section and also must adequately describe the 
record or records sought by type and date.
    (c) Requests for testimony. (1) If the request is for unpublished 
information by testimony, the request must include the elements in 
paragraph (a) of this section and also must set forth the intended use 
of the testimony, a summary of the scope of the testimony requested, and 
a showing that no document or the testimony of other non-Finance Board 
persons, including retained experts, could be provided and used in lieu 
of the testimony.
    (2) Upon submitting a request to the Finance Board for unpublished 
information by testimony, the requester must notify all other parties to 
the matter at issue of the request.
    (3) After receipt of a request for unpublished information by 
testimony but before the requested testimony occurs, a party to the 
matter at issue who did not join in the request and who wishes to 
question the witness beyond the scope of the testimony sought by the 
request, must timely submit its own request for unpublished information 
pursuant to this part.
    (d) Requests in connection with legal proceedings. If the request 
for unpublished information arises out of a legal proceeding, the 
Finance Board generally will require that the legal proceeding already 
be filed before it will consider the request. In addition to the 
elements in paragraph (a) of this section, requests in connection with 
legal proceedings must include the caption and docket number of the 
case; the forum; the name, address, phone number, and electronic mail 
address, if available, of counsel to all other parties to the legal 
proceeding; the requester's interest in the case; a summary of the 
issues in litigation; and the reasons for the request, including the 
relevance of the unpublished information and how the requested 
information will contribute substantially to the resolution of one or 
more specifically identified issues in the legal proceeding.
    (e) Expedited requests. If a requester seeks a response in less than 
60 days, the request must explain why the request was not submitted 
earlier and why the Finance Board should expedite the request.
    (f) Where to submit requests. Send requests for unpublished 
information to the Office of General Counsel, Federal Housing Finance 
Board, 1777 F Street, NW., Washington, DC 20006.
    (g) Additional information. (1) From the requester. The Office of 
General Counsel may consult with the requester to refine and limit the 
scope of the request to make compliance less burdensome or to obtain 
information necessary to make an informed determination on the request. 
A requester's failure to cooperate in good faith with the Office of 
General Counsel may serve as the basis for a determination not to grant 
the request.
    (2) From others. The Office of General Counsel may inquire into the 
facts and circumstances underlying a request for unpublished information 
and rely on sources of information other than the requester, including 
other parties to the matter at issue.



Sec. 911.5  Consideration of requests.

    (a) Discretion. Each decision concerning the availability of 
unpublished information is at the sole discretion of the Finance Board 
based on a weighing of all appropriate factors. The decision is a final 
agency action that exhausts administrative remedies for disclosure of 
the information.
    (b) Time to respond. The Finance Board generally will respond in 
writing to a request for unpublished information within 60 days of 
receipt absent exigent or unusual circumstances and dependent upon the 
scope and completeness of the request.
    (c) Factors the Finance Board may consider. The factors the Finance 
Board may consider in making a determination regarding the availability 
of unpublished information include:
    (1) Whether and how the requested information is relevant to the 
purpose for which it is sought;
    (2) Whether information reasonably suited to the requester's needs 
other

[[Page 667]]

than the requested information is available from another source;
    (3) Whether the requested information is privileged;
    (4) If the request is in connection with a legal proceeding, whether 
the proceeding has been filed;
    (5) The burden placed on the Finance Board to respond to the 
request;
    (6) Whether production of the information would be contrary to the 
public interest; and
    (7) Whether the need for the information clearly outweighs the need 
to maintain the confidentiality of the information.
    (d) Disclosure of unpublished information by others. When a person 
or entity other than the Finance Board has a claim of privilege 
regarding unpublished information and the information is in the 
possession or control of that person or entity, the Finance Board, at 
its sole discretion, may respond to a request for the information by 
authorizing the person or entity to disclose the information to the 
requester pursuant to an appropriate confidentiality order. Finance 
Board authorization to disclose information under this paragraph does 
not preclude the person or entity in possession of the unpublished 
information from asserting its own privilege, arguing that the 
information is not relevant, or asserting any other argument to protect 
the information from disclosure.
    (e) Notice to supervised entities and Bank members. The Finance 
Board generally will notify a supervised entity or Bank member that it 
is the subject of a request, unless the Finance Board, in its sole 
discretion, determines that to do so would advantage or prejudice any of 
the parties to the matter at issue.

[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 911.6  Persons and entities with access to unpublished information.

    (a) Notice to Finance Board. Any person, including a current or 
former Finance Board employee or agent, or any entity, including a 
supervised entity, Bank member, or government agency that receives a 
request for, or is served with a subpoena, order, or other legal process 
to disclose unpublished information by document or testimony, must 
immediately notify the Office of General Counsel.
    (b) Response of person or entity served with request. Unless the 
Finance Board has authorized in writing disclosure of the requested 
information:
    (1) A current or former Finance Board employee or agent or a 
supervised entity that must respond to a subpoena, order, or other legal 
process, must decline to disclose the requested information, citing this 
part as authority.
    (2) A non-Finance Board person or entity may not disclose 
unpublished information unless:
    (i) The requester has sought the information from the Finance Board 
under this part; and
    (ii) After the Finance Board or the Department of Justice has had 
the opportunity to appear and oppose disclosure, a Federal court has 
ordered the person or entity to disclose the information.
    (c) Finance Board response. If the Finance Board does not authorize 
in writing disclosure of the requested information, the Finance Board 
will provide a copy of this part to the person or entity at whose 
instance the process was issued and advise that person or entity or the 
court or other body that the Finance Board has prohibited disclosure of 
the information under this part. The Finance Board or the Department of 
Justice may intervene in the matter at issue, attempt to have the 
compulsory process withdrawn, or register other appropriate objections.

[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 911.7  Availability of unpublished information by testimony.

    (a) Scope. (1) The scope of permissible testimony is limited to that 
set forth in the written authorization granted by the Finance Board. The 
Finance Board may act to ensure that the scope of testimony provided is 
consistent with the written authorization.
    (2) A party to the matter at issue that did not join in a request 
for unpublished information who wishes to

[[Page 668]]

question a witness beyond the authorized scope must request expanded 
authorization under this part. The Finance Board will attempt to render 
decisions on such requests in an expedited manner.
    (3) The Finance Board generally will not authorize a current 
employee or agent to provide expert or opinion testimony for a private 
party.
    (b) Manner in which testimony is given. (1) The Finance Board 
ordinarily will make the authorized testimony of a former or current 
employee or agent available only through written interrogatories or 
deposition. The Finance Board will not authorize testimony at a trial or 
hearing unless the requester shows that properly developed deposition 
testimony could not be used or would be inadequate at the trial or 
hearing.
    (2) If the Finance Board has authorized testimony in connection with 
a legal proceeding, the requester must cause a subpoena to be served on 
the employee in accordance with applicable rules of procedure, with a 
copy by registered or certified mail to the Office of General Counsel.
    (3) If the authorized testimony is through deposition, the 
deposition ordinarily will take place at the Finance Board's offices at 
a time that will avoid substantial interference with the performance of 
the employee's official duties.
    (4) The requester is responsible for all costs associated with an 
employee's appearance, including provision of a copy of a transcript of 
the deposition at the request of the Office of General Counsel. The 
person whose deposition was transcribed does not waive his or her right 
to review the transcript and note errors.
    (c) Restrictions on use and disclosure. The Finance Board may 
condition its authorization of deposition testimony on an agreement of 
the parties to appropriate limitations, such as an agreement to keep the 
transcript of the testimony under seal or to make the transcript 
available only to the parties, the court or other body, or the jury. 
Upon request made pursuant to this part or on its own initiative, the 
Finance Board may authorize use of a deposition transcript in another 
legal proceeding or non-adversarial matter.
    (d) Responsibility of litigants. If the testimony is disclosed in 
connection with a legal proceeding, the requester is responsible for:
    (1) Promptly notifying all other parties to the legal proceeding of 
the disclosure, and, after entry of a protective order, providing copies 
of the testimony to the other parties who are signatories and subject to 
the protective order; and
    (2) At the conclusion of the legal proceeding, retrieving the 
testimony from the court or other body's file as soon as it is no longer 
required and certifying to the Finance Board that every party covered by 
the protective order has destroyed the unpublished information.



Sec. 911.8  Availability of unpublished information by document.

    (a) Scope. The scope of permissible document disclosure is limited 
to that set forth in the written authorization granted by the Finance 
Board. The Finance Board may act to ensure that the scope of documents 
provided is consistent with the written authorization.
    (b) Restrictions on use and disclosure. The Finance Board may 
condition a decision to disclose unpublished information by document on 
entry of a protective order satisfactory to the Finance Board by the 
court or other body presiding in a legal proceeding or, in non-
adversarial matters, on a written agreement of confidentiality that 
limits access of third parties to the unpublished information. In a 
legal proceeding in which a protective order already has been entered, 
the Finance Board may condition a decision to disclose unpublished 
information upon inclusion of additional or amended provisions in the 
protective order. Upon request made pursuant to this part or on its own 
initiative, the Finance Board may authorize use of the documents in 
another legal proceeding or non-adversarial matter.
    (c) Responsibility of litigants. If the documents are disclosed in 
connection with a legal proceeding, the requester is responsible for:
    (1) Promptly notifying all other parties to the legal proceeding of 
the disclosure, and, after entry of a protective

[[Page 669]]

order, providing copies of the documents to the other parties that are 
signatories and subject to the protective order; and
    (2) At the conclusion of the legal proceeding, retrieving the 
documents from the court or other body's file as soon as they are no 
longer required and certifying to the Finance Board that every party 
covered by the protective order has destroyed the unpublished 
information.
    (d) Certification or authentication. If the Finance Board has 
authorized disclosure of unpublished information by document, it will 
provide certified or authenticated copies of the document upon request.



Sec. 911.9  Fees.

    (a) Fees for records search, copying, and certification. Unless 
waived or reduced, a requester must pay a fee to the Finance Board for 
the costs of searching, copying, authenticating, or certifying 
unpublished information in accordance with 12 CFR 910.9. The Office of 
Resource Management generally will bill a requester upon completion of 
the production, but, in certain instances, may require a requester to 
remit payment prior to providing the requested information. To pay fees 
assessed under this section, a requester must deliver to the Office of 
Resource Management, located at the Federal Housing Finance Board, 1777 
F Street, NW., Washington, DC 20006, a check or money order made payable 
to the ``Federal Housing Finance Board.''
    (b) Witness fees and mileage. (1) Current Finance Board or federal 
employees. If the Finance Board authorizes disclosure of unpublished 
information by testimony of a current Finance Board employee or agent or 
a former Finance Board employee or agent who is still in the employ of 
the United States, upon completion of the testimonial appearance the 
requester must remit promptly to the Office of Resource Management 
payment for witness fees and mileage computed in accordance with 28 
U.S.C. 1821.
    (2) Former employees or agents. If the Finance Board authorizes 
disclosure of unpublished information by testimony of a former Finance 
Board employee or agent who is not currently employed by the United 
States, upon completion of the testimonial appearance the requester must 
remit promptly to the witness any witness fees or mileage due in 
accordance with 28 U.S.C. 1821.

[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]



PART 912--INFORMATION REGARDING MEETINGS OF THE BOARD OF DIRECTORS OF THE FEDERAL HOUSING FINANCE BOARD--Table of Contents




Sec.
912.1  Purpose and scope.
912.2  Definitions.
912.3  Open meetings.
912.4  Closed meetings.
912.5  Procedures for closing meetings.
912.6  Notice of meetings.

    Authority: 5 U.S.C. 552b.

    Source: 58 FR 19202, Apr. 13, 1993, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 912.1  Purpose and scope.

    (a) This part is issued by the Finance Board pursuant to the 
Government in the Sunshine Act (5 U.S.C. 552b), that requires Federal 
agencies, headed by collegial bodies, to promulgate regulations to 
implement its provisions. The purpose of these regulations is to provide 
the public with access to information regarding the decisionmaking 
processes of the Board of Directors of the Finance Board, while 
protecting the privacy rights of individuals and the ability of the 
Board of Directors to carry out its responsibilities.
    (b) The Board of Directors shall not jointly conduct or dispose of 
official Finance Board business other than in accordance with this part.

[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 912.2  Definitions.

    For the purpose of this part:
    Board Director or Director means a member of the Board of Directors.
    Chairperson means the Chairperson of the Board of Directors and 
includes the Acting Chairperson.
    Executive Secretary means the Executive Secretary to the Board of 
Directors, and includes the Acting Secretary

[[Page 670]]

in the event the Executive Secretary position is vacant.
    Meeting means any deliberations of three or more Directors of the 
Board of Directors, that determines or results in the joint conduct or 
disposition of official Finance Board business, but does not include:
    (1) Discussions to determine whether meetings will be open or closed 
or whether information pertaining to closed meetings will be disclosed;
    (2) Discussions to determine whether to schedule a meeting with less 
than seven days notice, or to change the time, place or subject matter 
of a scheduled meeting; and
    (3) Disposition of Finance Board business by circulation of written 
materials on proposed actions to individual Directors for proposed 
actions, and notational voting by the individual Directors on such 
proposed actions.
    Public observation means the right of the general public to attend 
open meetings of the Board of Directors, but does not include the right 
to participate therein unless invited to do so by the Chairperson.
    Sunshine Act means the Government in the Sunshine Act.

[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 912.3  Open meetings.

    (a) Except as provided in Sec. 912.4, every portion of every meeting 
of the Board of Directors shall be open to public observation.
    (b) Unless otherwise specified in the public notice, open meetings 
of the Board of Directors shall be held in the Board Room of the Finance 
Board at 1777 F Street, NW., Washington, DC, at the time specified in 
the public notice.

[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 912.4  Closed meetings.

    (a) The Board of Directors may close a meeting, or portion thereof, 
to public observation, or withhold information from the public 
pertaining to a meeting, when it determines that opening the meeting, or 
a portion thereof, or the public disclosure of information pertaining to 
such meeting, or portion thereof, is likely to:
    (1) Disclose matters that are:
    (i) Specifically authorized under criteria established by an 
Executive Order to be kept secret in the interests of national defense 
or foreign policy; and
    (ii) Are, in fact, properly classified pursuant to such Executive 
Order;
    (2) Relate solely to the internal personnel rules and practices of 
the Finance Board;
    (3) Disclose matters specifically exempt from disclosure by statute 
(other than the Freedom of Information Act (5 U.S.C. 552)), Provided 
that such statute:
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue; or
    (ii) Establishes particular criteria for withholding matters from 
the public or refers to particular types of matters to be withheld;
    (4) Disclose trade secrets or commercial or financial information 
that is obtained from a person and is privileged or confidential;
    (5) Involve accusing any person of a crime, or formally censuring 
any person;
    (6) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Disclose investigatory records compiled for law enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would:
    (i) Interfere with enforcement proceedings;
    (ii) Deprive a person of a right to a fair trial or an impartial 
adjudication;
    (iii) Constitute an unwarranted invasion of personal privacy;
    (iv) Disclose the identity of a confidential source and, in the case 
of a record compiled by a criminal law enforcement authority in the 
course of a criminal investigation or by an agency conducting a lawful 
national security intelligence investigation, confidential information 
furnished only by the confidential source;
    (v) Disclose investigative techniques and procedures; or
    (vi) Endanger the life or physical safety of law enforcement 
personnel;

[[Page 671]]

    (8) Disclose information contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the Finance Board or another agency responsible for the 
regulation or supervision of Banks or other financial institutions.
    (9) Disclose information the premature disclosure of which would be 
likely to:
    (i) (A) Lead to significant financial speculation in currencies, 
securities, or commodities;
    (B) Significantly endanger the stability of any of the Banks or any 
other financial institution; or
    (ii) Significantly frustrate implementation of a proposed Finance 
Board action, except that this paragraph shall not apply in any instance 
where the Finance Board has already disclosed to the public the content 
or nature of its proposed action, or where the Finance Board is required 
by law to make such disclosure on its own initiative prior to taking 
final action on such proposal; or
    (10) Specifically concern the issuance of a subpoena by the Board of 
Directors, or the Finance Board's participation in a civil action or 
proceeding, an action in a foreign court or international tribunal, or 
an arbitration, or the initiation, conduct or disposition of a 
particular case of formal adjudication pursuant to the procedures in 5 
U.S.C. 554 or otherwise involving a determination on the record after 
opportunity for a hearing.
    (b) A meeting or portions of a meeting shall not be closed nor 
information withheld pursuant to paragraph (a) of this section if the 
Board of Directors finds that the public interest requires otherwise.



Sec. 912.5  Procedures for closing meetings.

    (a) Regular procedures. (1) Except as provided in paragraph (b) of 
this section, a meeting of the Board of Directors, or portion thereof, 
will be closed to public observation, and information pertaining to such 
meeting, or portion thereof, will be withheld from the public, when a 
majority of the Board of Directors determines by recorded vote that such 
meeting, or portion thereof, or the withholding of information qualifies 
for exemption under Sec. 912.4, and the Board of Directors does not find 
that the public interest requires otherwise.
    (2) Except as provided in paragraph (a)(3) of this section, a 
separate vote of the Board Directors will be taken with respect to the 
closing or the withholding of information as to each meeting or portion 
thereof that is proposed to be closed to public observation, or with 
respect to information that is proposed to be withheld pursuant to 
paragraph (a) of this section.
    (3) A single vote may be taken with respect to a series of meetings, 
a portion or portions of which are proposed to be closed to public 
observation, or with respect to any information concerning such series 
of meetings proposed to be withheld, so long as each meeting in such 
series involves the same particular matters and is scheduled to be held 
no more than thirty days after the initial meeting in such series.
    (4) The vote of each Board Director taken pursuant to paragraph (a) 
of this section shall be recorded, and no proxies shall be allowed.
    (5) Whenever any person's interests may be directly affected by any 
portion of a meeting for any of the reasons referred to in paragraphs 
(a) (5), (6), or (7) of Sec. 912.4, such person may send a written 
request to the Executive Secretary asking that such portion of the 
meeting be closed to public observation. The Executive Secretary will 
transmit the request to each Board Director, and upon the request of a 
Director, a recorded vote will be taken of the Board of Directors 
whether to close the meeting to public observation.
    (6)(i) Within one day of any vote taken pursuant to paragraph (a) of 
this section, the Finance Board will make publicly available through the 
Executive Secretary a written copy of such vote reflecting the vote of 
each Board Director.
    (ii) If a meeting or portion thereof is to be closed to public 
observation, the Finance Board within one day of the vote taken pursuant 
to paragraph (a) of this section will make publicly available through 
the Executive Secretary a full, written explanation of its action 
closing the meeting, or portion thereof,

[[Page 672]]

together with a list of all persons expected to attend the meeting and 
their affiliation, except to the extent such information is determined 
by the Board to be exempt from disclosure under paragraph (a) of 
Sec. 912.4.
    (7) Any person may request in writing to the Executive Secretary 
that an announced closed meeting, or portion thereof, be open to public 
observation. The Executive Secretary will transmit the request to each 
Board Director, and upon the request of a Director, a recorded vote will 
be taken of the Board of Directors on whether to open the meeting to 
public observation.
    (b) Expedited procedures. (1) Since a majority of the meetings, of 
the Board of Directors may be closed pursuant to paragraphs (a) (4), 
(8), (9)(i) or (10) of Sec. 912.4, 5 U.S.C. 552b(d)(4) allows the 
Finance Board to use expedited procedures in closing such meetings. The 
following are examples of meetings of the Board of Directors, or 
portions thereof, that may be closed to the public under these expedited 
procedures: sale of consolidated obligations, and review of examination, 
operating or condition reports of Banks.
    (2) A decision to close a meeting, or portion thereof, under 
paragraph (b) of this section shall be made at the beginning of the 
meeting, or portion thereof, by majority vote of the Directors.
    (3)(i) The Finance Board shall maintain a record of each of the 
votes taken by its Board of Directors to close a meeting, or portion 
thereof, or to withhold public access to information thereof, under 
paragraph (b) of this section.
    (ii) A copy of such record, reflecting the vote of each Board 
Director on the question of closing a meeting, or portion thereof, or 
withhholding public access to information thereof, under this paragraph 
(b) of this section, shall be made available to any member of the public 
upon request to the Executive Secretary.
    (4) Public announcement of the time, place and subject matter of 
meetings, or portions thereof, closed under this paragraph (b) of this 
section shall be made at the earliest practical time.
    (c) Records of closed proceedings--(1) Transcripts or electronic 
recording. Except as provided in paragraph (c)(2) of this section, the 
Finance Board shall make and maintain a complete transcript or verbatim 
electronic recording of the proceedings at each meeting, or portion 
thereof, closed to public observation under paragraph (a) or (b) of this 
section.
    (2) Minutes. The Finance Board may make and maintain a set of 
complete minutes, in lieu of such transcript or electronic recording, 
with respect to meetings, or portions thereof, closed or information 
withheld under paragraphs (a) (8), (9)(i) or (10) of Sec. 912.4. Such 
set of minutes shall fully and clearly describe all matters discussed 
and provide a full and accurate summary of any action taken, and the 
reasons therefor, including a description of each of the views expressed 
on any item and the record of any roll call vote (reflecting the vote of 
each Board Director on the question). All documents considered in 
connection with any action shall be identified in such set of minutes.
    (3) Availability of Records. (i) The transcript, electronic 
recording or set of minutes of an item discussed, or of testimony 
received, at a meeting, shall be made available promptly to the public 
through the Executive Secretary except in cases where the Board of 
Directors determines that the item or testimony contains information 
which may be withheld under Sec. 912.4(a).
    (ii) Copies of such transcript, electronic recording or set of 
minutes, disclosing the identity of each speaker, shall be furnished to 
any person at the actual cost of duplication or transcription.
    (iii) The Finance Board shall maintain a complete copy of the 
transcript, verbatim electronic recording or complete set of minutes of 
each meeting, or portion thereof closed to the public, for at least two 
years after such meeting, or until one year after the conclusion of any 
proceeding of the Board of Directors with respect to which the meeting 
or portion thereof was held, whichever occurs later.
    (d) Legal certification for closing meeting. (1) For every meeting, 
or portion thereof, of the Board of Directors closed pursuant to 
paragraphs (a) or (b) of this section, the General Counsel (or

[[Page 673]]

in the General Counsel's absence or incapacity the senior legal officer 
available) shall publicly certify that the meeting or portion thereof 
may be closed to the public pursuant to the Sunshine Act and this part, 
and specifically state the relevant exemption in support thereof.
    (2) A copy of the certification, together with a statement from the 
Chairperson or, when appropriate, the Acting Chairperson or designee, 
setting forth the time and place of the meeting and the persons present, 
shall be retained in the permanent files of the Finance Board.

[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]



Sec. 912.6  Notice of meetings.

    (a) Scope of notice. (1) Except as provided in paragraph (a) of 
Sec. 912.4 that such information is determined to be exempt from 
disclosure, each open meeting of the Board of Directors, or each meeting 
closed under the regular procedures in paragraph (a) of Sec. 912.5, will 
be preceded by public notice as described in this section.
    (2) The notices for meetings of the Board of Directors closed under 
the expedited procedures pursuant to paragraph (b) of Sec. 912.5 will be 
made in accordance with Sec. 912.5(b)(4).
    (b) Content of notice. A notice of an open meeting or a meeting 
closed under the regular procedures in paragraph (a) of Sec. 912.5 will 
state the time, place, and subject matter of the meeting, whether it is 
to be open or closed to the public, and the name and telephone number of 
the Executive Secretary for information about the meeting. Each such 
notice shall be posted in the lobby of the Finance Board offices, and 
may be made available in addition by other means or at other locations 
as deemed desirable. Immediately following the posting of each such 
notice, the Finance Board will publish the notice in the Federal 
Register.
    (c) Time--(1) Seven days notice. Except as provided in paragraph 
(c)(2) of this section, a public notice of open meetings or meetings 
closed under paragraph (a) of Sec. 912.5 will be made at least seven 
days in advance of each meeting.
    (2) Less than seven days notice. When a majority of the Board of 
Directors determine by recorded vote that Finance Board business 
requires a meeting to be called at any earlier date, the seven-day prior 
notice rule may be suspended and notice shall be made at the earliest 
practicable time.
    (d) Amendment of notice--(1) Time and place. A change in the time or 
place of a meeting following public notice may be made only if announced 
at the earliest practicable time.
    (2) Subject matter. A change in the subject matter of a meeting or a 
re-determination to open or close a meeting, or portions thereof, may be 
made, after public notice, only if:
    (i) At least a majority of the Board Directors determines by 
recorded vote that Finance Board business so requires and that no 
earlier notice of the change was possible; and
    (ii) The Finance Board publicly announces the change and the vote of 
each Board Director by posting a notice thereof in the lobby of the 
Finance Board offices at the earliest practicable time.
    (3) Timing of amendment. A public announcement of a change in either 
the time, place or subject matter of a meeting may be made after the 
commencement of the meeting affected.
    (4) Publication of amendment. Each change to a notice of a meeting 
will be published in the Federal Register, following the Finance Board's 
public announcement of the change.

[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]



PART 913--PRIVACY ACT PROCEDURES--Table of Contents




Sec.
913.1  General.
913.2  Definitions.
913.3  Procedures for requesting individual records in a system of 
          records; appeal of denials.
913.4  Time, place and identification requirements for requests.
913.5  Disclosure of requested records.
913.6  Procedures for requesting amendment to a record in a system of 
          records; appeal of denials.
913.7  Fees.
913.8  Penalties.
913.9  Exemptions.

    Authority: 5 U.S.C. 552a.

[[Page 674]]


    Source: 58 FR 19205, Apr. 13, 1993, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 913.1  General.

    (a) Purpose. This part implements the provisions of the Privacy Act, 
5 U.S.C. 552a, which require each executive agency to promulgate 
regulations for the protection of the privacy of individuals on whom the 
agency maintains information that is retrieved by reference to an 
individual's name or an identifying particular assigned to the 
individual.
    (b) Scope. These regulations establish procedures by which: an 
individual may seek access under the Privacy Act to records pertaining 
to him or her, may request correction or amendment of such records, or 
may seek an accounting of disclosures of such records maintained by the 
agency.



Sec. 913.2  Definitions.

    As used in this part:
    Amendment means any correction, addition or deletion of information 
contained in a record, as defined in this section.
    Business days means all days except Saturdays, Sundays, or Federal 
Government holidays.
    Designated system of records means a system of records, as defined 
in this section, that has been listed in the Federal Register as 
required by 5 U.S.C. 552a(e).
    Individual means a natural person who is either a citizen of the 
United States of America or an alien lawfully admitted to the United 
States for permanent residence. The term includes the parent(s) having 
custody of any minor or the legal guardian of any individual who has 
been declared to be incompetent due to physical or mental incapacity or 
age by a court of competent jurisdiction.
    Maintain means to keep or hold and preserve in an existing state, 
and includes the terms ``collect,'' ``use,'' ``disseminate'' and 
``control.''
    Record means any item, collection, or grouping of information about 
an individual that is maintained by the Finance Board within a system of 
records, and that contains such individual's name, or identifying 
number, symbol, or other identifying particular assigned to the 
individual, including a fingerprint, voice print or photograph.
    Records systems manager means the employee responsible for 
maintaining a designated system of records at the Finance Board, as such 
official or employee may be identified through public notice in the 
Federal Register from time to time by the Finance Board entitled: 
``Privacy Act of 1974: Systems of Records.''
    Routine use means the use of a record for a purpose compatible with 
the purpose for which it was originally created.
    System of records means a group of records maintained or controlled 
by the Finance Board from which information is or may be retrieved by 
the name of an individual or some identifying number, symbol or other 
identifying particular assigned to the individual.

[58 FR 19205, Apr. 13, 1993, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 913.3  Procedures for requesting individual records in a system of records; appeal of denials.

    (a) Current or former employees. Any current or former Finance Board 
employee seeking access to such employee's official personnel record 
maintained by the Finance Board shall submit a request to the Finance 
Board in the manner prescribed by regulations of the Office of Personnel 
Management, at title 5, Code of Federal Regulations.
    (b) Other requests. Other requests for access to a record that 
contains information on the requesting individual and is maintained in a 
Finance Board designated system of records shall be writing, shall 
contain a reasonable, succinct description of the record sought, and 
shall identify the particular designated system of records in which the 
record may be maintained, as identified in a notice published by the 
Finance Board from time to time in the Federal Register.
    (c) Accounting for previous disclosures. An individual may use the 
procedures of this section to request an accounting from the Finance 
Board of previous disclosures of records pertaining to such individual 
in a designated system of records, pursuant to the Privacy Act, 5 U.S.C. 
552a(c).

[[Page 675]]

    (d) Medical records procedures. Information on an individual 
contained in medical records will be disclosed to a requesting 
individual in accordance with the procedures in paragraph (b) of this 
section and the requirements of this part, except, if in the judgment of 
the Finance Board the disclosure of such information could have an 
adverse effect on the individual, the Finance Board may withhold such 
information from the individual and transmit it to a licensed medical 
physician named by the requesting individual.
    (e) Response policy. The Finance Board will acknowledge, or 
substantially respond to if practicable, a request made under this 
section within ten (10) business days of its receipt.
    (f) Initial review. (1) The Executive Secretary will make the 
initial determination whether to grant or deny a request for records 
under this part, after consultation with the systems manager of the 
appropriate designated system of records.
    (2) The Executive Secretary will notify the requesting individual 
whether the Finance Board:
    (i) Has the requested record in a Finance Board designated system of 
records; and
    (ii) Will release the requested record or not.
    (3) If the request is denied, the Executive Secretary will inform 
the requesting individual of the reasons for nondisclosure, and describe 
the individual's right to appeal the determination.
    (g) Appeal process. (1) An individual who has been denied a request 
made pursuant to paragraph (b) of this section, may appeal to the Board 
of Directors, or designee, within 30 business days of being notified of 
the denial pursuant to paragraph (f) of this section.
    (2) The appeal shall be in writing, shall be mailed or delivered to 
the Executive Secretary, and shall give the reasons why the initial 
determination should be overturned.
    (3) The Board of Directors, or such official designated by the Board 
of Directors, shall decide on the appeal within 30 business days 
following receipt of the appeal by the Executive Secretary. The Board of 
Directors or designated official may extend the time period for good 
cause, after giving notice, and reason therefor, to the individual 
making the appeal.
    (4) If a decision is made to affirm the initial denial of a request 
for a record by an individual, the Board of Directors or designated 
official shall notify the individual making the appeal of the decision 
and the reason therefor, and shall inform the individual of the right of 
judicial review of the appeal.



Sec. 913.4  Time, place and identification requirements for requests.

    (a) Time. An individual may hand deliver a written request for 
access to or amendment of records, made under Sec. 913.3(b) or 
Sec. 913.6 of this part, to the Finance Board on any business day, 
between the hours of 8:30 a.m. and 5:30 p.m.
    (b) Place. All written requests for access to or amendment of 
records shall be mailed or hand delivered to the Executive Secretary, 
Federal Housing Finance Board, 1777 F Street, NW., Washington, DC 20006.
    (c) Identification--(1) Mailed requests. All requests for access to 
or amendment of records that are mailed to the Finance Board shall be 
signed by the individual who is the subject of the requested record and 
who is making the request. The validity of each such signature shall be 
attested to by a notary public.
    (2) Hand delivered requests. All requests for access to or amendment 
of records that are hand delivered to the Finance Board by the 
requesting individual shall be authenticated as to the identity of the 
requesting individual by two forms of identification with photographs, 
or by one such form of identification and a properly authenticated birth 
certificate.

[58 FR 19205, Apr. 13, 1993, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 913.5  Disclosure of requested record.

    (a) Requesting individual. Except to the extent that records 
pertaining to an individual are exempt from disclosure under Sec. 913.9 
of this part, or were compiled in reasonable anticipation of a civil 
action or proceedings, the Finance Board will make such records 
available upon request, pursuant to

[[Page 676]]

Sec. 913.3 of this part in either of the following methods, at the 
option of the requesting individual:
    (1) By mailing a copy of the record to the address of the requesting 
individual; or
    (2) By making the record available for inspection and copying by the 
requesting individual, as soon as practicable, at the offices of the 
Executive Secretary on regular business days, from 9:30 a.m. until 4:30 
p.m. The requesting individual may choose to be accompanied by another 
person during the inspection and copying by submitting a signed 
statement authorizing the presence of such person.
    (b) Other individuals. (1) The Finance Board will disclose a record 
to a person or entity other than the requesting individual, in the 
manner provided by paragraph (a) of this section, only when the Finance 
Board:
    (i) Receives a copy of a written authorization for disclosure to 
such person or entity signed by the requesting individual and attested 
to by a notary public; and
    (ii) Receives adequate identification from such person or entity.
    (2) The restrictions contained in paragraph (b)(1) of this section 
on disclosure of a record shall not apply to:
    (i) A disclosure to Finance Board officers or employees who have a 
need for the record in the performance of their duties;
    (ii) A disclosure otherwise required by the Freedom of Information 
Act (5 U.S.C. 552);
    (iii) A routine use listed with respect to a designated system of 
records;
    (iv) A disclosure to the Bureau of the Census for purposes of 
planning or carrying out a census or survey or related activity pursuant 
to the provisions of title 13 of the United States Code;
    (v) A disclosure to a recipient who has provided the Finance Board 
with advance written assurance that the record will be used solely as a 
statistical research or reporting record, and that the record is to be 
transferred in a form that is not individually identifiable;
    (vi) A disclosure to the National Archives and Records 
Administration as a record with sufficient historical or other value to 
warrant its continued preservation by the Federal Government or for 
evaluation by the Archivist of the United States to determine whether it 
has such value.
    (vii) A disclosure to another agency or to an instrumentality of any 
government jurisdiction within or under the control of the United States 
for civil or criminal law enforcement activity authorized by law if the 
head of such agency or instrumentality has made a written request to the 
Finance Board specifying the particular record requested and the law 
enforcement activity for which it is sought;
    (viii) A disclosure to any person pursuant to a showing of 
compelling circumstances affecting the health and safety of an 
individual if notification of the disclosure is transmitted to the last 
known address of the individual who is the subject of the disclosed 
record;
    (ix) A disclosure to a joint committee of Congress, or any 
subcommittee thereof, or to either House of Congress, or to any 
committee or joint committee, or subcommittee thereof, but only to the 
extent of matter within such joint committee's, committee's or 
subcommittee's jurisdiction;
    (x) A disclosure to the Comptroller General, or authorized 
representative, made in the course of performing the duties of the 
General Accounting Office.
    (xi) Pursuant to the order of a court of competent jurisdiction; or
    (xii) To a consumer reporting agency in accordance with 31 U.S.C. 
3711(f).
    (c) The Finance Board, with respect to each system of records under 
its control shall:
    (1) Except for disclosures made under paragraphs (b)(1) or (b)(2) of 
this section, keep an accurate accounting of:
    (i) The date, nature, and purpose of each disclosure of a record to 
any person or to another agency made under paragraph (b) of this 
section; and
    (ii) The name and address of the person or agency to whom the 
disclosure is made;
    (2) Retain the accounting made under paragraph (c)(1) of this 
section for at least five years or the life of the record, whichever is 
longer, after the disclosure for which the accounting is made; and

[[Page 677]]

    (3) Except for disclosures made under paragraph (b)(2)(vii) of this 
section, make the accounting made under paragraph (c)(1) of this section 
available to the individual named in the record at his or her request.
    (4) When a record has been amended or corrected or when a statement 
of disagreement has been filed, the Finance Board will advise all prior 
recipients of the affected record whose identities may be determined 
pursuant to the disclosure accountings required by the Privacy Act or 
any other accounting previously made, of the amendment or correction or 
the filing of the statement of disagreement. Any disclosure of disputed 
information occurring after a statement of disagreement has been filed 
will clearly identify the specific information disputed and be 
accompanied by a copy of the statement of disagreement and a copy of the 
statement of explanation, if any, as set forth in Sec. 913.6 of this 
part.

[58 FR 19205, Apr. 13, 1993, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 913.6  Procedures for requesting amendment to a record in a system of records; appeal of denials.

    (a) Scope. This section applies only to amendment of records on an 
individual maintained in a Finance Board system of records used in 
making a determination about such individual.
    (b) Individual request. (1) Any individual may request the Finance 
Board to amend any portion of a record in a designated system of records 
pertaining to that individual, where such portion of the record is not 
accurate, relevant, timely or complete.
    (2) A request to amend a record pursuant to this section shall be in 
writing, shall identify the particular designated system of records 
containing the record which the individual requests to amend and the 
portion of that record to be amended, and shall describe the reasons for 
the requested amendment.
    (c) Prior proceeding. Nothing in this section shall permit a 
collateral attack upon any matter decided in a prior judicial, quasi-
judicial or other proceeding.
    (d) Response policy. The Finance Board shall acknowledge, or 
substantially reply to, if practicable, a request for amendment of 
records under this section.
    (e) Initial review. (1) The Executive Secretary shall acknowledge 
all requests by individuals for amendment of records. The Executive 
Secretary shall refer all requests to the appropriate systems manager of 
the designated system of records containing the record to be reviewed, 
for disposition of the request within 10 business days of the referral. 
The systems manager shall promptly review the request and review the 
record for accuracy, relevance, timeliness, completeness or necessity.
    (2) The systems manager will promptly provide to the Executive 
Secretary a recommendation whether the record should be amended and 
shall state any reasons for denying the request in any part.
    (3) The Executive Secretary will promptly notify the requesting 
individual of his decision and reasons for any denial, and describe the 
individual's right to appeal any denial.
    (f) Appeal process. (1) An individual who has been denied a request 
made pursuant to this section may appeal to the Board of Directors, or 
an official designated by the Board of Directors, within 30 business 
days of being notified of the denial pursuant to paragraph (e)(3) of 
this section.
    (2) The appeal shall be in writing, shall be mailed to the Executive 
Secretary, and shall give the reasons why the initial determination 
should be overturned.
    (3) The Board of Directors, or designated official, shall decide the 
appeal within 30 business days of its receipt by the Executive 
Secretary. The Board of Directors or designated official may extend the 
30 day limit for good cause, after giving notice, and the reasons 
therefor, to the individual making the appeal.
    (4) If a decision is made to affirm the initial denial of a request 
for a record by an individual, the Board of Directors or designated 
official shall notify the individual making the appeal of the decision 
and the reason therefor, and shall inform the individual of the right of 
judicial review of the appeal.

[[Page 678]]

    (g) Statements. (1) Within 30 business days after being denied an 
appeal pursuant to paragraph (f) of this section, an individual may 
submit a concise written statement of disagreement setting forth the 
individual's reasons for disagreeing with the Finance Board's refusal to 
amend the record.
    (2) Such statement shall be provided to persons or other agencies or 
entities to whom the record is disclosed.
    (3) The Finance Board may, if deemed appropriate, prepare a concise 
statement of explanation of the reason(s) why the requested amendment or 
correction was not made. Any statement of explanation will be included 
in the system of records in the same manner as the statement of 
disagreement. A copy of the statement of explanation and of the notation 
of the dispute as marked on the original record will be provided to the 
individual who requested correction or amendment of the record.



Sec. 913.7  Fees.

    The Finance Board, upon a request for records disclosable pursuant 
to these regulations, shall charge a fee of $0.10 per page for 
duplicating, unless:
    (a) The Finance Board determines that it shall grant access to the 
record only by making a copy thereof;
    (b) The total fee will not exceed $2.00; or
    (c) The Finance Board determines, in its sole discretion, that a 
reduction or waiver of the fees is warranted for good cause.



Sec. 913.8  Penalties.

    Subsection (i)(3) of the Privacy Act of 1974 (5 U.S.C. 552a(i)(3)) 
imposes criminal penalties for obtaining Finance Board records on 
individuals under false pretenses. It provides as follows:

Any person who knowingly and willfully requests or obtains any record 
concerning an individual from an agency under false pretense shall be 
guilty of a misdemeanor and fined not more than $5,000.00.



Sec. 913.9  Exemptions.

    The following information is exempt from disclosure:
    (a) The Office of Inspector General Investigative Files system of 
records is exempt from all sections of the Privacy Act (5 U.S.C. 552a) 
except the following: (b) relating to conditions of disclosure; (c) (1) 
and (2) relating to keeping and maintaining a disclosure accounting; 
(e)(4) (A) through (F) relating to publishing a system notice setting 
forth name, location, categories of individuals and records, routing 
uses and policies regarding storage, retrievability, access controls, 
retention and disposal of the records; (e) (6), (7), (9), (10) and (11) 
relating to dissemination and maintenance of records, and relating to 
criminal penalties. This system of records is also exempt from 
Secs. 913.3, 913.4, 913.5 (a) and (c) (3) and (4), and 913.6 of this 
part. This exemption applies to those records and information contained 
in the system of records pertaining to the enforcement of criminal laws.
    (b) To the extent that there may exist within this system of records 
and investigative files compiled for law enforcement purposes, other 
than material within the scope of subsection (j)(2) of the Privacy Act, 
the Inspector General Investigative Case Files system of records is 
exempt from the following sections of the Privacy Act (5 U.S.C. 552(a)): 
(c)(3) relating to access to the disclosure accounting, (d) relating to 
access to records, (e)(1) relating to the type of information maintained 
in the records; (e)(4) (G), (H) and (I) relating to publishing the 
system notice information as to agency procedures of access and 
amendment and information as to the categories of sources or records, 
and (f) relating to developing agency rules for gaining access and 
making corrections. This system of records is also exempt from 
Secs. 913.3, 913.4, 913.5 (a) and (c)(3), and 913.6 of this part.
    (c) Reason for exemptions. (1) The Office of Inspector General is a 
component of the Finance Board which performs, as its principal 
function, activity pertaining to the enforcement of criminal laws, 
within the meaning of 5 U.S.C. 552a(j)(2). This exemption applies only 
to those records and information contained in the system of records 
pertaining to criminal investigations. This system of records is exempt 
for one or more of the following reasons:

[[Page 679]]

    (i) To prevent interference with law enforcement proceedings.
    (ii) To avoid unwarranted invasion of personal privacy by disclosure 
of information about third parties, including other subjects of 
investigation, investigators, and witnesses.
    (iii) To protect the identity of Federal employees who furnish a 
complaint or information to the Office of the Inspector General, 
consistent with section 7(b) of the Inspector General Act of 1978, as 
amended, 5 U.S.C. App. 3.
    (iv) To protect the confidentiality of non-Federal employee sources 
of information.
    (v) To assure access to sources of confidential information, 
including those contained in Federal, State and local criminal law 
enforcement information systems.
    (vi) To prevent disclosure of law enforcement techniques and 
procedures.
    (vii) To avoid endangering the life or physical safety of 
confidential sources and law enforcement personnel.
    (2) Investigative records within this system of records which are 
compiled for law enforcement purposes, other than material within the 
scope of subsection (j)(2), are exempt under the provisions of 5 U.S.C. 
552a(k)(2); provided, however, that if any individual is denied any 
right, privilege, or benefit that they would otherwise be entitled by 
Federal law, or for which they would otherwise be eligible, as a result 
of the maintenance of such material, such material shall be provided to 
such individual except to the extent that the disclosure of such 
material would reveal the identity of a source who furnished information 
to the Government under an express promise that the identity of the 
source would be held in confidence, or, prior to January 1, 1975, under 
an implied promise that the identity of the source would be held in 
confidence. This system of records is exempt for one or more of the 
following reasons:
    (i) To prevent interference with law enforcement proceedings.
    (ii) To protect investigatory material compiled for law enforcement 
purposes.
    (iii) To avoid unwarranted invasion of personal privacy, by 
disclosure of information about third parties, including other subjects 
of investigation, law enforcement personnel and sources of information.
    (iv) To fulfill commitments made to protect the confidentiality of 
sources.
    (v) To protect the identity of Federal employees who furnish a 
complaint or information of OIG, consistent with section 7(b) of the 
Inspector General Act of 1978, as amended, 5 U.S.C. App. 3.
    (vi) To assure access to sources of confidential information, 
including those contained in Federal, State and local criminal law 
enforcement systems.
    (vii) To prevent disclosure of law enforcement techniques and 
procedures.
    (viii) To avoid endangering the life or physical safety of 
confidential sources and law enforcement personnel.
    (d) Records within a Finance Board System of records comprised of 
investigatory material compiled solely for the purpose of determining 
suitability or eligibility for Federal civilian employment, Federal 
contractors, or access to classified information, are exempt under the 
provisions of 5 U.S.C. 552a(k)(5), but only to the extent that 
disclosure would reveal the identity of a source who furnished 
information to the Government under an express promise that the identity 
of the source would be held in confidence, or, prior to January 1, 1975, 
under an implied promise that the identity of the source would be held 
in confidence. This system of records is exempt for one or more of the 
following reasons:
    (1) To fulfill commitments made to protect the confidentiality of 
sources.
    (2) To assure access to sources of confidential information; 
including those contained in Federal, State, and local criminal law 
enforcement information systems.
    (e) Testing or examination material used solely to determine or 
assess individual qualifications for appointment to employment at the 
Finance Board, or promotion therein--the disclosure of which would 
compromise the objectivity or fairness of the testing, evaluation or 
examining process is exempt under 5 U.S.C. 552a(k)(6).

[58 FR 19205, Apr. 13, 1993, as amended at 65 FR 8259, Feb. 18, 2000]

[[Page 680]]





 SUBCHAPTER C--GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS



PART 915--BANK DIRECTOR ELIGIBILITY, APPOINTMENT AND ELECTIONS--Table of Contents




Sec.
915.1  Definitions.
915.2  Dates.
915.3  Director elections.
915.4  Capital stock report.
915.5  Determination of member votes.
915.6  Elective director nominations.
915.7  Eligibility requirements for elective directors.
915.8  Election process.
915.9  Prohibition on actions to influence director elections.
915.10  Selection of appointive directors.
915.11  Conflict of interests policy for Bank directors.
915.12  Reporting requirements for Bank directors
915.13  Ineligible Bank directors.
915.14  Vacant Bank directorships.
915.15  Minimum number of elective directorships.
915.16  1999 and 2000 Election of Directors.
915.17  Staggered directorships in the 2000 and 2001 elections.

Appendix A to part 915--Staggering for FHLBank Boards of Directors.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1427, and 1432.

    Source: 63 FR 65688, Nov. 30, 2000, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 915.1  Definitions.

    For purposes of this part:
    Bona fide resident of a Bank district means an individual who:
    (1) Maintains a principal residence within the Bank district; or
    (2) If serving as an appointive director, owns or leases in his or 
her own name a residence within the Bank district and is employed within 
a voting state within the Bank district.
    Discretionary directorship means an elective or appointive 
directorship created by the Finance Board pursuant to Section 7(a) of 
the Act for districts that include five or more states.
    Docket number means the number assigned to each member by the 
Finance Board and used by the Finance Board and the Banks to identify a 
particular member.
    Guaranteed directorship means an elective directorship that is 
required by Section 7(b) of the Act and Sec. 915.15 to be designated as 
representing Bank members that are located in a particular state.
    Non-guaranteed directorship means an elective directorship that is 
either a discretionary directorship or a stock directorship.
    Record date means December 31 of the calendar year immediately 
preceding the election year.
    Stock directorship means an elective directorship that is designated 
by the Finance Board as representing the members located in a particular 
state based on the amount of Bank stock held by the members in that 
state, and which is in excess of the number of guaranteed directorships 
allocated to that state.
    Voting state means the District of Columbia, Puerto Rico, or the 
state of the United States in which a member's principal place of 
business, as determined in accordance with part 933 of this chapter, is 
located as of the record date. The voting state of a member with a 
principal place of business located in the U.S. Virgin Islands as of the 
record date shall be Puerto Rico, and the voting state of a member with 
a principal place of business located in American Samoa, Guam, or the 
Commonwealth of the Northern Mariana Islands as of the record date shall 
be Hawaii.

[63 FR 65688, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000; 65 
FR 41568, July 6, 2000]



Sec. 915.2  Dates.

    If any date specified in this part, or specified by a Bank pursuant 
to this part, falls on a Saturday, Sunday, or Federal holiday, the 
relevant time period shall be deemed to include the next business day.

[63 FR 65688, Nov. 30, 1998]

[[Page 681]]



Sec. 915.3  Director elections.

    (a) Responsibilities of the Banks. Each Bank annually shall conduct 
an election the purpose of which is to fill all elective directorships 
designated by the Finance Board as commencing on January 1 of the 
calendar year immediately following the year of the election. Subject to 
the provisions of the Act and in accordance with the requirements of 
this part, the disinterested members of the board of directors of each 
Bank, or a committee of disinterested directors, shall administer and 
conduct the annual election of directors. In so doing, the disinterested 
directors may use Bank staff or independent contractors to perform 
ministerial and administrative functions concerning the elections 
process. The term of office of each elective director shall be three 
years, except as adjusted pursuant to Section 7(d) of the Act and 
Sec. 915.17 of this chapter to achieve a staggered board, and shall 
commence on January 1 of the calendar year immediately following the 
year in which the election is held. Each Bank shall complete the 
election in sufficient time to allow newly elected directors to assume 
their seats on January 1 of the year immediately following the election.
    (b) Designation of elective directorships. The Finance Board 
annually shall establish the number of elective directorships for each 
Bank, which are to be allocated as follows:
    (1) One elective directorship shall be allocated to each State 
within the Bank district;
    (2) If the total number of elective directorships allocated pursuant 
to paragraph (b)(1) of this section is less than eight, the Finance 
Board shall allocate additional elective directorships among the States, 
using the method of equal proportions, until the total allocated for the 
Bank equals eight;
    (3) If the number of elective directorships allocated to any State 
pursuant to paragraphs (b)(1) and (2) of this section is less than the 
number allocated to that State on December 31, 1960, as specified in 
Sec. 915.15, the Finance Board shall allocate such additional elective 
directorships to that State until the total allocated equals the number 
allocated to the Bank on December 31, 1960;
    (4) Pursuant to section 7(e) of the Act, the Federal Home Loan Bank 
of New York is hereby allocated one additional elective directorship, 
which is designated as representing the members in the Commonwealth of 
Puerto Rico;
    (5) Pursuant to section 7(a) of the Act, in any Bank district that 
includes five or more states, the Finance Board, after consultation with 
the affected Banks, may increase the number of elective directorships up 
to thirteen, and the number of appointive directorships up to three-
fourths of the number of elective directorships. In determining the 
number of appointive directorships, the Finance Board may round to the 
nearest whole number. The annual designation of directorships shall 
indicate the number of discretionary directorships, if any, to be 
authorized for the succeeding year. If the Finance Board eliminates an 
existing discretionary directorship, or designates such a directorship 
to another state, the term of any appointive or elective director 
affected by that action shall terminate after the close of business on 
the immediately following December 31.
    (c) Notification. On or before June 1 of each year, the Finance 
Board shall notify each Bank in writing of the total number of elective 
directorships established for the Bank and the number of elective 
directorships designated as representing the members in each voting 
State in the Bank district. If the annual designation of elective 
directorships results in an existing stock directorship being 
redesignated as representing members in a different state, the notice 
also shall state that the directorship must be filled by an officer or 
director of a member located in the newly designated state as of January 
1 of the immediately following year, regardless of whether the term for 
the incumbent director would have expired by that date.
    (d) In accordance with section 7(c) of the Act, unless otherwise 
designated by the Finance Board, for purposes of election of directors a 
member shall be deemed to be located in its voting State.

[[Page 682]]

    (e) 2000 designation. For any stock directorship with a term ending 
December 31, 2001 that is redesignated from one state to another state 
by the 2000 designation of directorships, the board of directors of the 
Bank shall determine which incumbent director from the former state 
shall become ineligible to serve as a result of the redesignation on the 
basis of the most recent election.

[63 FR 65688, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000; 65 
FR 41568, July 6, 2000]



Sec. 915.4  Capital stock report.

    (a) On or before April 10 of each year, each Bank shall submit to 
the Finance Board, for its use in designating the elective directorships 
a capital stock report that indicates, as of the record date, the number 
of members in each voting State in the Bank's district, and the number 
of shares of capital stock required to be held by each member 
(identified by docket number), and the aggregate total number of shares 
of capital stock required to be held by all members in each voting State 
in the Bank's district. The Bank shall certify to the Finance Board that 
to the best of its knowledge the information provided in the capital 
stock report is accurate and complete, and that it has notified each 
member of its minimum capital stock holdings pursuant to 
Sec. 925.22(b)(1) of this chapter.
    (b) A Bank shall determine the number of shares of capital stock 
each member is required to hold as of the record date in the following 
manner:
    (1) The number of shares of capital stock shall be equal to the 
greater of the advances-to-capital stock requirement under 
Sec. 950.15(a) of this chapter, or the minimum capital stock requirement 
under Sec. 925.20(a) of this chapter.
    (2) If a member has elected to purchase its minimum required capital 
stock in installments under Sec. 925.20(b)(2) of this chapter, the 
number of shares of capital stock required to be held as of the record 
date shall be the cumulative total of shares of capital stock actually 
purchased as of the record date.

[63 FR 65689, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.5  Determination of member votes.

    (a) Authority. The Bank shall determine, in accordance with this 
section, the number of votes each member of the Bank may cast in the 
election of directors.
    (b) Determination. The number of votes a member may cast for any 
elective director nominee shall be the lesser of the number of shares of 
capital stock the member was required to hold as of the record date, as 
determined in accordance with Sec. 915.4(b), or the average number of 
shares of capital stock required to be held by all of the members in its 
voting State as of the record date.

[63 FR 65689, Nov. 30, 19988, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.6  Elective director nominations.

    (a) Election announcement. Within a reasonable time in advance of an 
election, a Bank shall provide to each member in its district a written 
notice of the election that includes:
    (1) The number of elective directorships designated as representing 
the members in each voting State in the Bank district;
    (2) The name of each incumbent Bank director, the name and location 
of the member at which each elective director serves, and the name and 
location of the organization with which each appointive director is 
affiliated, if any, and the expiration date of each Bank director's term 
of office;
    (3) An attachment indicating the name, location, and docket number 
of every member in the member's voting State, and the number of votes 
each such member may cast in the election, as determined in accordance 
with Sec. 915.5(b); and (4) A nominating certificate.
    (b) Nominations. (1) Any member that is entitled to vote in the 
election may nominate an eligible individual to fill each available 
elective directorship for its voting State by submitting to its Bank, 
prior to a deadline to be established by the Bank, a nominating 
certificate duly adopted by the member's governing body or by an 
individual authorized to act on behalf of the member's governing body.

[[Page 683]]

    (2) The nominating certificate shall include the name of the nominee 
and the name, location, and docket number of the member at which the 
nominee serves as an officer or director.
    (3) The Bank shall establish a deadline for submitting nominating 
certificates, which shall be no earlier than 30 calendar days after the 
date on which the Bank mails the notice required by paragraph (a) of 
this section, and the Bank shall not accept certificates received after 
that deadline. The Bank shall retain all nominating certificates for at 
least two years after the date of the election.
    (c) Accepting nominations. A Bank shall notify in writing any person 
nominated for an elective directorship promptly upon receipt of the 
nominating certificate. A person may accept the nomination only by 
submitting an executed director eligibility certification, as prescribed 
by the Finance Board, to the Bank prior to the deadline established by 
the Bank. A Bank shall allow each nominee at least 30 calendar days 
after the date of the notice of nomination within which to submit the 
executed form. A nominee may decline the nomination by so advising the 
Bank in writing, or by failing to submit a properly executed director 
eligibility certification prior to the deadline. Each Bank shall retain 
all information received under this paragraph for at least two years 
after the date of the election.

[63 FR 65689, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.7  Eligibility requirements for elective directors.

    (a) Eligibility verification. Based on the information provided on 
the director eligibility certification form prescribed by the Finance 
Board, a Bank shall verify that each nominee meets all of the 
eligibility requirements for elective directors set forth in the Act and 
this part before placing that nominee on the ballot prepared by the Bank 
under Sec. 915.8(a). A Bank shall not declare elected a nominee that it 
has reason to know is ineligible to serve, nor shall it seat a director-
elect that it has reason to know is ineligible to serve.
    (b) Eligibility requirements. Each elective director, and each 
nominee, shall be:
    (1) A citizen of the United States;
    (2) A bona fide resident of the Bank district or an officer or 
director of a member that is located in the voting state to be 
represented by the elective directorship, that was a member of the Bank 
as of the record date, and that meets all minimum capital requirements 
established by its appropriate federal regulator or appropriate state 
regulator.
    (c) Restrictions. A nominee is not eligible if he or she:
    (1) Is an incumbent elective director, unless:
    (i) The incumbent director's term of office would expire before the 
new term of office would begin; and
    (ii) The new term of office would not be barred by the term limit 
provision of section 7(d) of the Act.
    (2) Is a former elective director whose service would be barred by 
the term limit provision of section 7(d) of the Act.
    (3) Is an incumbent appointive director.
    (4) For purposes of applying the term limit provision of Section 
7(d) of the Act, a term of office that has been adjusted to a period of 
less than three years in accordance with Sec. 915.17(a)(2) shall not be 
deemed to be a full term.
    (d) Loss of eligibility. (1) An elective director shall become 
ineligible to remain in office if, during his or her term of office, the 
stock directorship to which he or she has been elected is eliminated or 
is redesignated by the Finance Board as representing members located in 
another state, in accordance with Sec. 915.3(b). The incumbent director 
shall become ineligible after the close of business on December 31 of 
the year in which the directorship is redesignated or eliminated.
    (2) In the case of a redesignation to another state, the stock 
directorship shall become vacant after the close of business on December 
31 of the year in which the directorship is redesignated and the 
resulting vacancy shall be filled by the board of directors of the Bank 
for the remainder of the unexpired term with a person who is an officer 
or director of a member located in

[[Page 684]]

the newly designated state, pursuant to Section 7(f) of the Bank Act.

[63 FR 65689, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000; 65 
FR 41569, July 6, 2000]



Sec. 915.8  Election process.

    (a) Ballots. Promptly after verifying the eligibility of all 
nominees in accordance with Sec. 915.7(a), a Bank shall prepare a ballot 
for each voting State for which an elective directorship is to be filled 
and shall mail the ballot to all members within that State that were 
members as of the record date. A ballot shall include at least the 
following provisions:
    (1) An alphabetical listing of the names of each nominee for the 
member's voting State, the name, location, and docket number of the 
member at which each nominee serves, the nominee's title or position 
with the member, and the number of elective directorships to be filled 
by members in that voting State in the election;
    (2) A statement that write-in candidates are not permitted; and
    (3) A confidentiality statement prohibiting the Bank from disclosing 
how a member voted.
    (b) Lack of nominees. If, for any voting state, all directorships to 
be filled in an election are the same with regard to their respective 
terms and status as guaranteed or non-guaranteed directorships, and the 
number of nominees from that state is equal to or less than the number 
of such directorships, the Bank shall notify the members in the affected 
voting state in writing (in lieu of providing a ballot) that the 
directorships are to be filled without an election due to a lack of 
nominees. The Bank shall declare elected any eligible nominee, who shall 
be included as a director-elect in the report of election required under 
paragraph (e). If necessary, the Bank's board of directors shall fill 
any elective directorship that has become vacant due to a lack of a 
nominee in accordance with Sec. 915.14(a).
    (c) Voting. For each directorship to be filled, a member may cast 
the number of votes determined by the Bank pursuant to Sec. 915.5. A 
member may not split its votes among multiple nominees for a single 
directorship, nor, where there are multiple directorships to be filled 
for a voting State, may it cumulatively vote for a single nominee. Any 
ballots cast in violation of this subsection shall be void. To vote, a 
member shall:
    (1) Mark on the ballot the name of not more than one of the nominees 
for each elective directorship to be filled in the member's voting 
State. Each nominee so selected shall receive all of the votes that the 
member is entitled to cast.
    (2) Execute the ballot by resolution of the member's governing body, 
or by an appropriate writing signed by an individual authorized to act 
on behalf of the governing body.
    (3) Deliver the executed ballot to the Bank on or before the closing 
date that has been established by the Bank, which shall be no earlier 
than 30 calendar days after the date the ballots are mailed in 
accordance with paragraph (a) of this section. A member may not change a 
ballot after it has been delivered to the Bank.
    (d) Counting ballots. A Bank shall not open any ballot until after 
the closing date, and may not include in the election results any ballot 
received after the closing date. Promptly after the closing date, each 
Bank shall tabulate, by each voting State, the votes cast in accordance 
with paragraph (c) of this section, and shall declare elected the 
nominee receiving the highest number of votes.
    (1) If more than one elective directorship is to be filled in a 
voting State, the Bank shall declare elected each successive nominee 
receiving the next highest number of votes until all open elective 
directorships for that voting State are filled.
    (2) In the event of a tie for the last available seat, the incumbent 
board of directors of the Bank shall, by a majority vote, declare 
elected one of the nominees for whom the number of votes cast was tied.
    (3) The Bank shall retain all ballots it receives for at least two 
years after the date of the election, and shall not disclose how any 
member voted.
    (e) Report of election. Promptly following the election, each Bank 
shall provide written notice to its members, to each nominee, and to the 
Finance Board of the following:

[[Page 685]]

    (1) The name of each director-elect, the name and location of the 
member at which he or she serves, and his or her title or position at 
the member;
    (2) The voting State represented by each director-elect;
    (3) The expiration date of the term of office of each director-
elect;
    (4) The number of members voting in the election and the total 
number of votes cast, both reported by State; and
    (5) The number of votes cast for each nominee.

[63 FR 65690, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000; 65 
FR 41569, July 6, 2000]



Sec. 915.9  Prohibition on actions to influence director elections.

    (a) Prohibition. Except as provided in paragraph (b) of this 
section:
    (1) No director, officer, attorney, employee, or agent of the 
Finance Board or of a Bank may:
    (i) Communicate in any manner that a director, officer, attorney, 
employee, or agent of the Finance Board or of a Bank, directly or 
indirectly, supports the nomination or election of a particular 
individual for an elective directorship; or
    (ii) Take any other action to influence votes for a directorship.
    (2) No member may take any action prohibited by paragraph (a)(1)(i) 
of this section.
    (b) Exception for incumbent Bank directors. A Bank director acting 
in his or her personal capacity may support the nomination or election 
of any individual for an elective directorship, provided that no Bank 
director shall purport to represent the views of the Bank, the Finance 
Board, any other director, or any officer, attorney, employee, or agent 
of the Bank or of the Finance Board concerning the nomination or 
election of a particular individual for an elective directorship.

[63 FR 65690, Nov. 30, 1998]



Sec. 915.10  Selection of appointive directors.

    (a) Selection. In accordance with the Act, the Finance Board, in its 
sole discretion, shall select all appointive directors.
    (b) Term of office. The term of office of each appointive 
directorship shall be three years, except as adjusted pursuant to 
Section 7(d) of the Act to achieve a staggered board, and shall commence 
on January 1. In appointing directors for the terms commencing on 
January 1, 2001 and 2002, respectively, the Finance Board shall adjust 
the terms of any appointive directorships as necessary to achieve the 
one-third staggering of the board of directors required by Section 7(d) 
of the Act, in accordance with the requirements of this Part and the 
applicable matrix from the Appendix to this Part. In the case of a 
discretionary appointive directorship that is terminated pursuant to 
Sec. 915.3(b)(5), the term of office of the directorship shall end after 
the close of business on December 31 of that year.

[63 FR 65690, Nov. 30, 1998, as amended at 65 FR 41569, July 6, 2000]



Sec. 915.11  Conflict of interests policy for Bank directors.

    (a) Adoption of conflict of interests policy. Each Bank shall adopt 
a written conflict of interests policy that shall apply to all Bank 
directors. At a minimum, the conflict of interests policy of each Bank 
shall:
    (1) Require the directors to administer the affairs of the Bank 
fairly and impartially and without discrimination in favor of or against 
any member or nonmember borrower;
    (2) Prohibit appointed directors from serving as an officer of any 
Bank or as an officer or director of any member, and from owning any 
equity or debt security issued by a member or from having any other 
financial interest in a member;
    (3) Prohibit the use of a director's official position for personal 
gain;
    (4) Require directors to disclose actual or apparent conflict of 
interests and establish procedures for addressing such conflicts;
    (5) Provide internal controls to ensure that reports are filed and 
that conflicts are disclosed and resolved in accordance with this 
section; and
    (6) Establish procedures to monitor compliance with the conflict of 
interests policy.
    (b) Disclosure and recusal. A director shall disclose to the Bank's 
board of directors any personal financial interests he or she has, as 
well as any financial

[[Page 686]]

interests known to the director of any immediate family member or 
business associate of the director, in any matter to be considered by 
the Bank's board of directors and in any other matter in which another 
person or entity does, or proposes to do, business with the Bank. A 
director shall fully disclose the nature of his or her interest in the 
matter and shall provide to the Bank's board of directors any 
information requested to aid in its consideration of the director's 
interest. A director shall refrain from considering or voting on any 
issue in which the director, any immediate family member, or any 
business associate has a financial interest.
    (c) Confidential Information. Directors shall not disclose or use 
confidential information received by them solely by reason of their 
position with the Bank to obtain a financial interest for themselves or 
for any other person.
    (d) Gifts. Directors shall not accept, and shall discourage their 
immediate family members from accepting, any substantial gift where the 
director has reason to believe that the gift is given in order to 
influence the director's actions as a member of the Bank's board of 
directors, or where acceptance of such gift gives the appearance of 
influencing the director's actions as a member of the board.
    (e) Compensation. Directors shall not accept compensation for 
services performed for the Bank from any source other than the Bank for 
which the services are performed.
    (f) Definitions. For purposes of this section:
    (1) Immediate family member means parent, sibling, spouse, child, or 
dependent, or any relative sharing the same residence as the director.
    (2) Financial interest means a direct or indirect financial interest 
in any activity, transaction, property, or relationship that involves 
receiving or providing something of monetary value, and includes, but is 
not limited to any right, contractual or otherwise, to the payment of 
money, whether contingent or fixed. It does not include a deposit or 
savings account maintained with a member, nor does it include a loan or 
extension of credit obtained from a member in the normal course of 
business on terms that are generally available to the public.
    (3) Business associate means any individual or entity with whom a 
director has a business relationship, including, but not limited to:
    (i) Any corporation or organization of which the director is an 
officer or partner, or in which the director beneficially owns ten 
percent or more of any class of equity security, including subordinated 
debt;
    (ii) Any other partner, officer, or beneficial owner of ten percent 
or more of any class of equity security, including subordinated debt, of 
any such corporation or organization; and
    (iii) Any trust or other estate in which a director has a 
substantial beneficial interest or as to which the director serves as 
trustee or in a similar fiduciary capacity.
    (4) Substantial Gifts includes:
    (i) Gifts of more than token value;
    (ii) Entertainment or hospitality, the cost of which is in excess of 
what is considered reasonable, customary, and accepted business 
practices; or
    (iii) Any other items or services for which a director pays less 
than market value.

[63 FR 65690, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.12  Reporting requirements for Bank directors.

    (a) Annual reporting. On or before March 1 of each year, each 
director shall submit to his or her Bank the appropriate executed 
director eligibility certification, as prescribed by the Finance Board. 
(The forms are available pursuant to 12 CFR 905.51). The Bank shall 
promptly forward to the Finance Board a copy of the certification filed 
by each appointive director.
    (b) Report of noncompliance. If an elective or appointive director 
knows or has reason to believe that he or she no longer meets the 
eligibility requirements set forth in the Act or this part, the director 
shall so inform the Bank in writing within 30 calendar days of first 
learning of the facts causing the loss of eligibility. An appointive 
director also shall inform the Finance Board

[[Page 687]]

in writing at the same time that he or she informs the Bank.

[63 FR 65691, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.13  Ineligible Bank directors.

    (a) Elective directors. Upon a determination by the Finance Board or 
a Bank that an elective director no longer satisfies the eligibility 
requirements set forth in the Act or this part, or has failed to comply 
with the reporting requirements of Sec. 915.12, the elective 
directorship shall immediately become vacant. Any elective director that 
is determined to have failed to comply with the eligibility or reporting 
requirements shall not continue to act as a Bank director.
    (b) Appointive directors. Except as provided herein, upon a 
determination by the Finance Board that an appointive director no longer 
satisfies the eligibility requirements set forth in the Act, or has 
failed to comply with the reporting requirements of Sec. 915.12, the 
appointive directorship shall immediately become vacant. Notwithstanding 
the vacancy, an appointive director may continue to serve until a 
successor assumes the directorship or the term of office expires, 
whichever occurs first, and the Finance Board, in its sole discretion, 
may allow an appointive director up to 90 calendar days to comply with 
the eligibility or reporting requirements.

[63 FR 65691, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.14  Vacant Bank directorships.

    (a) Vacant elective directorships. (1) As soon as practicable after 
a vacancy occurs, a Bank shall fill the unexpired term of office of a 
vacant elective directorship by a majority vote of the remaining Bank 
directors regardless of whether the remaining Bank directors constitute 
a quorum of the Bank's board of directors.
    (2) An individual so selected to fill a vacant elective directorship 
shall satisfy all of the eligibility requirements for elective directors 
set forth in the Act and this part, and shall provide to the Bank an 
executed director eligibility certification. The Bank shall verify the 
individual's eligibility in accordance with Sec. 915.7(a) before 
allowing the individual to assume the directorship, and shall retain the 
information it receives in accordance with Sec. 915.6(c).
    (3) Promptly after verifying the individual's eligibility under 
paragraph (a)(2) of this section, a Bank shall notify the Finance Board 
and each member located in the Bank's district in writing of the 
following:
    (i) The name of the new elective director, the name, location and 
docket number of the member at which the new director serves, and the 
new director's title or position with the member;
    (ii) The voting State that the new elective director represents; and
    (iii) The expiration date of the new elective director's term of 
office.
    (b) Vacant appointive directorships. (1) As soon as practicable 
after a vacancy occurs, the Finance Board shall fill the unexpired term 
of office of a vacant appointive directorship.
    (2) Promptly after filling a vacant appointive directorship, the 
Finance Board shall notify the affected Bank in writing of the 
following:
    (i) The name of the new appointive director, the name and location 
of the organization with which the new director is affiliated, if any, 
and the new director's title or position with such organization; and
    (ii) The expiration date of the new appointive director's term of 
office.
    (3) Promptly after receiving the notice required by paragraph (b)(2) 
of this section, a Bank shall provide each of its members with the 
information described in paragraphs (b)(2)(i) and (ii) of this section.

[63 FR 65691, Nov. 30, 1998, as amended at 65 FR 8259, Feb. 18, 2000]



Sec. 915.15  Minimum number of elective directorships.

    Under section 7(c) of the Act, the number of elective directorships 
allocated to members located in each State cannot be less than the 
number of directorships that were filled by the members from that State 
on December 31, 1960. The following list sets forth the States whose 
members held more than one (1) seat on December 31, 1960:

[[Page 688]]



------------------------------------------------------------------------
                                                              No. of
                                                             elective
                          State                            directorships
                                                            on December
                                                             31, 1960
------------------------------------------------------------------------
California..............................................               3
Colorado................................................               2
Illinois................................................               4
Indiana.................................................               5
Iowa....................................................               2
Kansas..................................................               3
Kentucky................................................               2
Louisiana...............................................               2
Massachusetts...........................................               3
Michigan................................................               3
Minnesota...............................................               2
Missouri................................................               2
New Jersey..............................................               4
New York................................................               4
Ohio....................................................               4
Oklahoma................................................               2
Pennsylvania............................................               6
Tennessee...............................................               2
Texas...................................................               3
Wisconsin...............................................               4
------------------------------------------------------------------------


[55 FR 1399, Jan. 16, 1990, as amended at 56 FR 55221, Oct. 25, 1991. 
Redesignated and amended at 63 FR 65692, Nov. 30, 1998]



Sec. 915.16  1999 and 2000 Election of Directors.

    (a) In general. The annual designation of Bank directorships 
conducted by the Finance Board in 2000 pursuant to Sec. 915.3(b) shall 
control with respect to the number of elective directorships to be 
allocated to each state with terms commencing on January 1, 2001.
    (b) Conduct of 2000 elections. After assigning any adjusted terms 
that may be required by Sec. 915.17(a)(3), the board of directors of 
each Bank shall determine either:
    (1) To conduct new elections for every state in the district for 
which an elective directorship is to commence on January 1, 2001, or
    (2) To conduct new elections only in those states for which this 
section requires a new election to be held and, for all other states 
within the district, to use the results of the 1999 elections for the 
purpose of electing directors whose terms are to commence on January 1, 
2001.
    (c) 1999 election results. If the number of nominees from any state 
for the 1999 election of directors who remain eligible to serve as a 
Bank director equals or exceeds the number of directorships designated 
to that state with terms commencing on January 1, 2001, the board of 
directors of the Bank may declare elected the nominee receiving the most 
votes in the 1999 election and, if more than one directorship is to be 
filled for that state, shall also declare elected each successive 
nominee receiving the next greatest number of votes, until all 
directorships designated for that state are filled. Before declaring 
elected any such nominee, the board of directors of the Bank shall 
confirm that the nominee is eligible to serve as a director from that 
state.
    (d) 2000 elections. If the number of directorships designated to any 
state with terms commencing on January 1, 2001, exceeds the number of 
nominees from that state in the 1999 election who remain eligible to 
serve as a Bank director, then the board of directors of the Bank shall 
conduct a new election for that state for all of the directorships with 
terms commencing on January 1, 2001.
    (e) Report of election. If the board of directors of a Bank adopts 
the 1999 election results for any state, it shall provide written notice 
of its decision to the Finance Board, the directors-elect, and to each 
member in the affected state. The notice shall indicate the date on 
which the term of office of each director-elect shall expire, and shall 
indicate which terms have been adjusted in order to stagger the board of 
directors as required by Section 7(d) of the Bank Act. Any such 
adjustments shall be made in compliance with Sec. 915.17. Such notice 
shall be deemed to constitute the report of election for the 2000 
election required by Sec. 915.8(e).
    (f) Safe harbor. In determining whether to ratify the 1999 election 
results or to hold new elections in 2000, an individual director that 
would be affected by the decision of the board shall not be deemed to 
have violated any regulation or Bank policy pertaining to conflicts of 
interest solely by virtue of having participated in the deliberations or 
by having voted on the matter.

[65 FR 41569, July 6, 2000]



Sec. 915.17  Staggered directorships in the 2000 and 2001 elections.

    (a) In general. (1) In conjunction with the annual designations of 
directorships for elected directors with terms commencing on January 1, 
2001 and January 1, 2002, the Finance Board

[[Page 689]]

shall, in addition to allocating directorships among the states, 
indicate the term of each elective directorship and which directorships 
are to be designated as non-guaranteed directorships. A non-guaranteed 
directorship shall retain that designation in all subsequent elections, 
unless the directorship is eliminated by the Finance Board pursuant to 
Section 7(a) of the Bank Act or as a consequence of a change in the 
amount of Bank stock held by members located in that state. In such 
subsequent elections, any non-guaranteed directorships shall be assigned 
on the basis of votes received, with the directors-elect who received 
the fewest votes being assigned the non-guaranteed directorships.
    (2) The board of directors of each Bank shall adjust the terms of 
any directorships that are to commence on January 1, 2001 or January 1, 
2002, in accordance with this section and the matrix for that Bank set 
forth in the appendix to this part, and shall inform the Finance Board 
which directorships have been assigned adjusted terms.
    (3) Where the matrix for a Bank indicates that two or more 
guaranteed directorships are to be filled by persons elected from 
different states in the same year, and which are to have different 
terms, the board of directors of the Bank shall assign the shorter terms 
among the states on any reasonable basis, as determined by Bank's board, 
provided that:
    (i) It uses the same methodology in making all such adjustments; and
    (ii) It assigns the terms to the respective states before 
determining whether to adopt the 1999 election results, in accordance 
with Sec. 915.16(b).
    (b) Adjustment of terms. (1) Where the matrix for a Bank indicates 
that two or more guaranteed directorships are to be filled from the same 
state in the same year, but which are to have different terms, the board 
of directors of the Bank shall assign the terms among the eligible 
nominees who have received a sufficient number of votes to be elected, 
such that the nominees receiving the greater number of votes are 
assigned the longer terms and those nominees receiving the lesser number 
of votes are assigned the shorter terms. If the directors from any state 
have been declared elected without a vote, in accordance with 
Sec. 915.8(b) because the number of nominees from that state was less 
than or equal to the number of directorships to be filled, then the 
board of directors of Bank shall assign the terms on the basis of the 
most recent election.
    (2) In the elections occurring in 2000 and 2001, if the matrix for 
any Bank indicates that both guaranteed and non-guaranteed directorships 
are to be filled from the same state in the same year, the board of 
directors shall assign directorships among the eligible nominees who 
have received a sufficient number of votes to be elected, such that the 
nominees receiving the greatest number of votes are assigned the 
guaranteed directorships and those nominees receiving the fewest votes 
are assigned the non-guaranteed directorships. In the event that the 
matrix for a Bank assigns a guaranteed directorship for a particular 
state a shorter term than it assigns to a non-guaranteed directorship 
for the same state for that year, the board of directors shall assign 
the guaranteed directorship to the nominee receiving the greatest number 
of votes.
    (c) Safe harbor. In determining which directorships shall be 
assigned a reduced term, an individual director that could be affected 
by the decision of the board shall not be deemed to have violated any 
regulation or Bank policy pertaining to conflicts of interest solely by 
virtue of having participated in the deliberations or by having voted on 
the matter.
    (d) Other adjustments. The board of directors of the Bank may not 
adjust the term of any director other than as provided in this section.

[65 FR 41570, July 6, 2000]

[[Page 690]]

        Appendix A to Part 915--Staggering For FHLBank Boards of 
                               Directors

                                                     Table 1
----------------------------------------------------------------------------------------------------------------
     Boston FHLBank  (10 seats: 8                                                       Guaranteed staggering: 2-
   guaranteed by statute and 2 not               Term             Non-guaranteed seats  3-3  Total staggering: 4-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
6 Seats to be filled in 2000
 Election:
                                       * Board must allocate 1
                                        Seat to a 2-year term.
    Mass. Seat.......................  3/2 Years*.
    Conn. Seat.......................  3/2 Years*.
    Maine Seat.......................  3/2 Years*.
    R. I. Seat.......................  3/2 Years*.
    Mass. Seat.......................  2 Years.................
    Conn. Seat.......................  2 Years.................  Not Guaranteed
                                                                  (Discretionary
                                                                  Seat).
4 Seats to be filled in 2001
 Election:
    Mass. Seat.......................  3 Years.
    N.H. Seat........................  3 Years.
    Vermont Seat.....................  3 Years.
    Mass. Seat.......................  1 Year..................  Not Guaranteed
                                                                  (Discretionary
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (4 seats):
    Mass./Conn./Maine/Rhode Island Seat (board to pick 1 of 4)
    Mass. Seat
    Conn. Seat (not guaranteed by statute)
    Mass. Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    Mass./Conn./Maine/Rhode Island Seat (board to pick 3 of 4)
Class with Terms Expiring Dec. 31, 2004 (3 seats):
    Mass. Seat
    N.H. Seat
    Vermont Seat
----------------------------------------------------------------------------------------------------------------


                                                     Table 2
----------------------------------------------------------------------------------------------------------------
                                                                                        Guaranteed staggering: 3-
N.Y. FHLBank  (11 Seats: 9 Guaranteed            Term             Non-guaranteed seats  3-3  Total staggering: 3-
   by Statute and 2 Not Guaranteed)                                                                4-4
----------------------------------------------------------------------------------------------------------------
7 Seats to be filled in 2000
 election:
    New York Seat....................  3 Years.................
    New Jersey Seat..................  3 Years.................
    Puerto Rico Seat.................  3 Years.................
    New York Seat....................  3 Years.................  Not Guaranteed (Stock
                                                                  Seat).
    New York Seat....................  2 Years.................
    New York Seat....................  2 Years.................
    New Jersey Seat..................  2 Years.................
4 Seats to be filled in 2001
 election:
    New York Seat....................  3 Years.................
    New York Seat....................  3 Years.................  Not Guaranteed (Stock
                                                                  Seat).
    New Jersey Seat..................  3 Years.................
    New Jersey Seat..................  3 Years ................
Class with Terms Expiring Dec. 31, 2002 (3 seats):
  New York Seat
  New York Seat
  New Jersey Seat
Class with Terms Expiring Dec. 31, 2003 (4 seats):
  New York Seat
  New York Seat (not guaranteed by statute)
  New Jersey Seat
  Puerto Rico Seat
Class with Terms Expiring Dec. 31, 2004 (4 seats):
  New York Seat
  New York Seat (not guaranteed by statute)
  New Jersey Seat
  New Jersey Seat
----------------------------------------------------------------------------------------------------------------


[[Page 691]]


                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                                                                        Guaranteed staggering: 2-
    Pitts. FHLBank   (8 seats: all               Term             Non-guaranteed seats  3-3  Total staggering: 2-
        guaranteed by statute)                                                                     3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
    Penn. Seat.......................  3 Years.
    Penn. Seat.......................  3 Years.
    Penn. Seat.......................  3 Years.
    Penn. Seat.......................  2 Years.
4 Seats to be filled in 2001 Election
    West Va. Seat....................  3 Years.
    Delaware Seat....................  3 Years.
    Penn. Seat.......................  3 Years.
    Penn. Seat.......................  1 Year.
Class with Terms Expiring Dec. 31, 2002 (2 seats):
    Penn. Seat
    Penn Seat
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    Penn. Seat
    Penn. Seat
    Penn. Seat
Class with Terms Expiring Dec. 31, 2004 (3 seats):
    Penn. Seat
    Delaware Seat
    West Va. Seat
----------------------------------------------------------------------------------------------------------------


                                                     Table 4
----------------------------------------------------------------------------------------------------------------
     Atlanta FHLBank  (9 Seats: 8                                                       Guaranteed staggering: 2-
   guaranteed by statute and 1 not               Term             Non-guaranteed seats  3-3  Total staggering: 3-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
                                       * Board must allocate 1
                                        Seat to a 2-year term.
    D.C. Seat........................  3/2 Years*.
    Alabama Seat.....................  3/2 Years*.
    Virginia Seat....................  3/2 Years*.
    S. Carolina Seat.................  3/2 Years*.
5 Seats to be filled in 2001
 Election:
                                       * Board must allocate 1
                                        Seat to a 1-year term
    N. Carolina Seat.................  3/1 Years*.
    Georgia Seat.....................  3/1 Years*.
    Maryland Seat....................  3/1 Years*.
    Florida Seat.....................  3/1 Years*.
    N. Carolina Seat.................  1 Year*.................  Not Guaranteed
                                                                  (Discretionary
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (3 seats):
    North Carolina Seat (not guaranteed by statute)
    D.C./Alabama/Virginia/So. Carolina Seat (board to pick 1 of 4)
    No. Carolina/Georgia/Maryland/Florida Seat (board to pick 1 of 4)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    D.C./Alabama/Virginia/So. Carolina Seat (board to pick 3 of 4)
Class with Terms Expiring Dec. 31, 2004 (3 seats):
    No. Carolina/Georgia/Maryland/Florida Seat (board to pick 3 of 4)
----------------------------------------------------------------------------------------------------------------


                                                     Table 5
----------------------------------------------------------------------------------------------------------------
   Cincinnati FHLBank  (9 seats: 8                                                      Guaranteed staggering: 2-
   guaranteed by statute and 1 not               Term             Non-guaranteed seats  3-3  Total staggering: 3-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
                                       * Board must allocate 1
                                        Seat to a 2-year term.
    Kentucky Seat....................  3 Years.
    Ohio Seat........................  3 Years.

[[Page 692]]

 
    Kentucky Seat....................  3/2 Years *.
    Ohio Seat........................  3/2 Years *.
5 Seats to be filled in 2001
 Election:
                                       * Board must allocate 1
                                        Seat to a 1-year term.
    Ohio Seat........................  3 Years.
    Tennessee Seat...................  3 Years.
    Tennessee Seat...................  3/1 Years *.
    Ohio Seat........................  3/1 Years *.
    Ohio Seat........................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (3 seats):
 Kentucky or Ohio Seat (board to decide)
 Ohio Seat (not guaranteed by statute)
 Tennessee or Ohio Seat (board to decide)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
 Kentucky Seat
 Ohio Seat
 Kentucky or Ohio Seat (board to decide)
Class with Terms Expiring Dec. 31, 2004 (3 seats):
 Ohio Seat
 Tennessee Seat
     Tennessee or Ohio Seat (board to decide)
----------------------------------------------------------------------------------------------------------------


                                                     Table 6
----------------------------------------------------------------------------------------------------------------
  Indianapolis FHLBank  (10 seats: 8                                                    Guaranteed staggering: 2-
   guaranteed by statute and 2 not               Term             Non-guaranteed seats  3-3  Total staggering: 4-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
    Indiana Seat.....................  3 Years.
    Indiana Seat.....................  3 Years.
    Michigan Seat....................  3 Years.
    Indiana Seat.....................  2 Years.
6 Seats to be filled in 2001
 Election:
                                       * Board must allocate 1
                                        Seat to a 1-year term.
    Michigan Seat....................  3 Years.
    Indiana Seat.....................  3 Years.
    Michigan Seat....................  3/1 Years *.
    Indiana Seat.....................  3/1 Years *.
    Michigan Seat....................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
    Michigan Seat....................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (4 seats):
     Indiana Seat.
     Michigan or Indiana Seat (board to decide).
 Michigan Seat (not guaranteed by statute).
 Michigan Seat (not guaranteed by statute).
Class with Terms Expiring Dec. 31, 2003 (3 seats).
     Indiana Seat.
     Indiana Seat.
     Michigan Seat.
Class with Terms Expiring Dec. 31, 2004 (3 seats).
     Michigan Seat.
     Indiana Seat.
     Michigan or Indiana Seat (board to decide).
----------------------------------------------------------------------------------------------------------------


[[Page 693]]


                                                     Table 7
----------------------------------------------------------------------------------------------------------------
    Chicago FHLBank  (10 seats: 8                                                       Guaranteed staggering: 2-
   guaranteed by statute and 2 not               Term             Non-guaranteed seats  3-3  Total staggering: 4-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
    Illinois Seat....................  3 Years.
    Wisconsin Seat...................  3 Years.
    Wisconsin Seat...................  3 Years.
    Wisconsin Seat...................  2 Years.
6 Seats to be filled in 2001
 Election:
    Wisconsin Seat...................  3 Years.
    Illinois Seat....................  3 Years.
    Illinois Seat....................  3 Years.
    Illinois Seat....................  1 Year.
    Illinois Seat....................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
    Illinois Seat....................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (4 seats)
    Wisconsin Seat
    Illinois Seat
    Illinois Seat (not guaranteed by statute)
    Illinois Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats)
    Illinois Seat
    Wisconsin Seat
    Wisconsin Seat
Class with Terms Expiring Dec. 31, 2004 (3 seats)
    Wisconsin Seat
    Illinois Seat
    Illinois Seat
----------------------------------------------------------------------------------------------------------------


                                                     Table 8
----------------------------------------------------------------------------------------------------------------
    Des Moines Bank  (10 seats: 8                                                       Guaranteed staggering: 2-
   guaranteed by statute and 2 not               Term             Non-guaranteed seats  3-3  Total staggering: 4-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
6 Seats to be filled in 2000
 Election:
                                       * Board must allocate 1
                                        Seat to a 2-year term
    Missouri Seat....................  3/2 Years*.
    South Dakota Seat................  3/2 Years*.
    Iowa Seat........................  3/2 Years*.
    Minnesota Seat...................  3/2 Years*.
    Iowa Seat........................  2 Years.
    Minnesota Seat...................  2 Years.................  Not Guaranteed (Stock
                                                                  Seat).
4 Seats to be filled in 2001
 Election:
    Missouri Seat....................  3 Years.
    Minnesota Seat...................  3 Years.
    North Dakota Seat................  3 Years.
    Missouri Seat....................  1 Year..................  Not Guaranteed
                                                                  (Discretionary
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (4 seats):
  Iowa Seat
  Missouri/So.Dakota/Iowa/Minnesota Seat (board to pick 1 of 4)
  Minnesota Seat (not guaranteed by statute)
  Missouri Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
  Missouri/So. Dakota/Iowa/Minnesota Seat (board to pick 3 of 4)
Class with Terms Expiring Dec. 31, 2004 (3 seats):
  Missouri Seat
  Minnesota Seat
  North Dakota Seat
----------------------------------------------------------------------------------------------------------------


[[Page 694]]


                                                     Table 9
----------------------------------------------------------------------------------------------------------------
     Dallas FHLBank  (9 seats: 8                                                        Guaranteed staggering: 2-
   guaranteed by statute and 1 not               Term             Non-guaranteed seats  3-3  Total staggering: 3-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
    Texas Seat.......................  3 Years.
    Louisiana Seat...................  3 Years.
    Arkansas Seat....................  3 Years.
    Louisiana Seat...................  2 Years.
5 Seats to be filled in 2001
 Election:
    Texas Seat.......................  3 Years.
    Mississippi Seat.................  3 Years.
    New Mexico Seat..................  3 Years.
    Texas Seat.......................  1 Year.
    Texas Seat.......................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (3 seats):
    Louisiana Seat
    Texas Seat
    Texas Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    Texas Seat
    Louisiana Seat
    Arkansas Seat
Class with Terms Expiring Dec. 31, 2004 (3 seats):
    Texas Seat
    Mississippi Seat
    New Mexico Seat
----------------------------------------------------------------------------------------------------------------


                                                    Table 10
----------------------------------------------------------------------------------------------------------------
     Topeka FHLBank  (10 seats: 8                                                       Guaranteed staggering: 2-
   guaranteed by statute and 2 not               Term             Non-Guaranteed seats  3-3  Total staggering: 4-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
5 Seats to be filled in 2000
 Election:
    Colorado Seat....................  3 Years.
    Oklahoma Seat....................  3 Years.
    Kansas Seat......................  3 Years.
    Colorado Seat....................  2 Years.
    Kansas Seat......................  2 Years.
5 Seats to be filled in 2001
 Election:
    Kansas Seat......................  3 Years.
    Oklahoma Seat....................  3 Years.
    Nebraska Seat....................  3 Years.
    Nebraska Seat....................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
    Nebraska Seat....................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (4 seats):
    Colorado Seat
    Kansas Seat
    Nebraska Seat (not guaranteed by statute)
    Nebraska Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    Colorado Seat
    Oklahoma Seat
    Kansas Seat
Class with Terms Expiring Dec. 31, 2004 (3 seats):
    Kansas Seat
    Oklahoma Seat
    Nebraska Seat
----------------------------------------------------------------------------------------------------------------


[[Page 695]]


                                                    Table 11
----------------------------------------------------------------------------------------------------------------
  San Francisco FHLBank  (8 seats: 5                                                    Guaranteed staggering: 1-
   guaranteed by statute and 3 not               Terms            Non-guaranteed seats  2-2  Total staggering: 2-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
4 Seats to be filled in 2000
 Election:
    California Seat..................  3 Years.
    California Seat..................  3 Years.
    California Seat..................  3 Years.................  Not Guaranteed (Stock
                                                                  Seat).
    California Seat..................  2 Years.................  Not Guaranteed (Stock
                                                                  Seat).
4 Seats to be filled in 2001
 Election:
                                       *Board must allocate 1
                                        seat to a 1-year term
    California Seat..................  3/1 Years*.
    Nevada Seat......................  3/1 Years*.
    Arizona Seat.....................  3/1 Years*.
    California Seat..................  1 Year..................  Not Guaranteed (Stock
                                                                  Seat).
Class with Terms Expiring Dec. 31, 2002 (3 seats):
    California/Nevada/Arizona Seat (board to pick 1 of 3)
    California Seat (not guaranteed by statute)
    California Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    California Seat
    California Seat
    California Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2004 (2 seats):
    California/Nevada/Arizona Seat (board to pick 2 of 3)
----------------------------------------------------------------------------------------------------------------


                                                    Table 12
----------------------------------------------------------------------------------------------------------------
    Seattle FHLBank  (10 seats: 8                                                       Guaranteed staggering: 2-
   guaranteed by statute and 2 not               Term             Non-guaranteed seats  3-3  Total staggering: 4-
             guaranteed)                                                                           3-3
----------------------------------------------------------------------------------------------------------------
5 Seats to be filled in 2000
 Election:
    Hawaii Seat......................  3 Years.
    Utah Seat........................  3 Years.
    Alaska Seat......................  3 Years.
    Washington Seat..................  2 Years.................  Not Guaranteed
                                                                  (Discretionary
                                                                  Seat).
    Washington Seat..................  2 Years.................  Not Guaranteed
                                                                  (Discretionary
                                                                  Seat).
5 Seats to be filled in 2001
 Election:
                                       * Board must allocate 2
                                        seats to 1-year terms
    Montana Seat.....................  3/1 Years*.
    Oregon Seat......................  3/1 Years*.
    Washington Seat..................  3/1 Years*.
    Idaho Seat.......................  3/1 Years*.
    Wyoming Seat.....................  3/1 Years*.
Class with Terms Expiring Dec. 31, 2002 (4 seats):
    Montana/Oregon/Idaho/Wyoming/Washington Seat (board to pick 2 of 5)
    Washington Seat (not guaranteed by statute)
    Washington Seat (not guaranteed by statute)
Class with Terms Expiring Dec. 31, 2003 (3 seats):
    Hawaii Seat
    Utah Seat
    Alaska Seat
Class with Terms Expiring Dec. 31, 2004 (3 seats):
    Montana/Oregon/Idaho/Wyoming/Washington Seat (board to pick 3 of 5)
----------------------------------------------------------------------------------------------------------------

[65 FR 41570, July 6, 2000]

[[Page 696]]



PART 917--POWERS AND RESPONSIBILITIES OF BANK BOARDS OF DIRECTORS AND SENIOR MANAGEMENT--Table of Contents




Sec.
917.1  Definitions.
917.2  General authorities and duties of Bank boards of directors.
917.3  Risk management.
917.4  Bank Member Products Policy.
917.5  Strategic business plan.
917.6  Internal control system.
917.7  Audit committees.
917.8  Budget preparation.
917.9  Dividends.
917.10  Bank bylaws.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1427, 1432(a), 
1436(a), 1440.

    Source: 65 FR 25274, May 1, 2000, unless otherwise noted.



Sec. 917.1  Definitions.

    As used in this part:
    Business risk means the risk of an adverse impact on a Bank's 
profitability resulting from external factors as may occur in both the 
short and long run.
    Capital structure plan means the plan establishing and implementing 
a capital structure that each Bank is required to submit to the Finance 
Board under 12 U.S.C. 1426(b).
    Community financial institution has the meaning set forth in 
Sec. 925.1 of this chapter.
    Contingency liquidity means the sources of cash a Bank may use to 
meet its operational requirements when its access to the capital markets 
is impeded, and includes:
    (1) Marketable assets with a maturity of one year or less;
    (2) Self-liquidating assets with a maturity of seven days or less;
    (3) Assets that are generally accepted as collateral in the 
repurchase agreement market; and
    (4) Irrevocable lines of credit from financial institutions rated 
not lower than the second highest credit rating category by a credit 
rating organization regarded as a Nationally Recognized Statistical 
Rating Organization by the Securities and Exchange Commission.
    Credit risk means the risk that the market value, or estimated fair 
value if market value is not available, of an obligation will decline as 
a result of deterioration in creditworthiness.
    Immediate family member means a parent, sibling, spouse, child, 
dependent, or any relative sharing the same residence.
    Internal auditor means the individual responsible for the internal 
audit function at the Bank.
    Liquidity risk means the risk that a Bank will be unable to meet its 
obligations as they come due or meet the credit needs of its members and 
associates in a timely and cost-efficient manner.
    Market risk means the risk that the market value, or estimated fair 
value if market value is not available, of a Bank's portfolio will 
decline as a result of changes in interest rates, foreign exchange 
rates, equity and commodity prices.
    Operational liquidity means sources of cash from both a Bank's 
ongoing access to the capital markets and its holding of liquid assets 
to meet operational requirements in a Bank's normal course of business.
    Operations risk means the risk of an unexpected loss to a Bank 
resulting from human error, fraud, unenforceability of legal contracts, 
or deficiencies in internal controls or information systems.
    Reportable conditions means matters that represent significant 
deficiencies in the design or operation of the internal control system 
that could adversely affect a Bank's ability to record, process, 
summarize and report financial data consistent with the assertions of 
management.



Sec. 917.2  General authorities and duties of Bank boards of directors.

    (a) Management of a Bank. The management of each Bank shall be 
vested in its board of directors. While Bank boards of directors may 
delegate the execution of operational functions to Bank personnel, the 
ultimate responsibility of each Bank's board of directors for that 
Bank's management is non-delegable.
    (b) Duties of Bank directors. Each Bank director shall have the duty 
to:
    (1) Carry out his or her duties as director in good faith, in a 
manner such

[[Page 697]]

director believes to be in the best interests of the Bank, and with such 
care, including reasonable inquiry, as an ordinarily prudent person in a 
like position would use under similar circumstances;
    (2) Administer the affairs of the Bank fairly and impartially and 
without discrimination in favor of or against any member;
    (3) At the time of appointment or election, or within a reasonable 
time thereafter, have a working familiarity with basic finance and 
accounting practices, including the ability to read and understand the 
Bank's balance sheet and income statement and to ask substantive 
questions of management and the internal and external auditors; and
    (4) Direct the operations of the Bank in conformity with the 
requirements set forth in the Act and this chapter.
    (c) Authority regarding staff and outside consultants. (1) In 
carrying out its duties and responsibilities under the Act and this 
chapter, each Bank's board of directors and all committees thereof shall 
have authority to retain staff and outside counsel, independent 
accountants, or other outside consultants at the expense of the Bank.
    (2) Bank staff providing services to the board of directors or any 
committee of the board under paragraph (c)(1) of this section may be 
required by the board of directors or such committee to report directly 
to the board or such committee, as appropriate.



Sec. 917.3  Risk management.

    (a) Risk management policy. (1) Adoption. Beginning August 29, 2000, 
each Bank's board of directors shall have in effect at all times a risk 
management policy that addresses the Bank's exposure to credit risk, 
market risk, liquidity risk, business risk and operations risk and that 
conforms to the requirements of paragraph (b) of this section and to all 
applicable Finance Board regulations and policies.
    (2) Review and compliance. Each Bank's board of directors shall:
    (i) Review the Bank's risk management policy at least annually;
    (ii) Amend the risk management policy as appropriate;
    (iii) Re-adopt the Bank's risk management policy, including interim 
amendments, not less often than every three years; and
    (iv) Ensure that policies and procedures are in place that are 
reasonably designed to achieve continuing Bank compliance with the risk 
management policy.
    (b) Risk management policy requirements. In addition to meeting any 
other requirements set forth in this chapter, each Bank's risk 
management policy shall:
    (1) After the Bank's capital structure plan is approved by the 
Finance Board, describe how the Bank will comply with its capital 
structure plan;
    (2) Set forth the Bank's tolerance levels for the market and credit 
risk components; and
    (3) Set forth standards for the Bank's management of each risk 
component, including but not limited to:
    (i) Regarding credit risk arising from all secured and unsecured 
transactions, standards and criteria for, and timing of, periodic 
assessment of the creditworthiness of issuers, obligors, or other 
counterparties including identifying the criteria for selecting dealers, 
brokers and other securities firms with which the Bank may execute 
transactions; and
    (ii) Regarding market risk, standards for the methods and models 
used to measure and monitor such risk;
    (iii) Regarding day-to-day operational liquidity needs and 
contingency liquidity needs:
    (A) An enumeration of specific types of investments to be held for 
such liquidity purposes; and
    (B) The methodology to be used for determining the Bank's 
operational and contingency liquidity needs;
    (iv) Regarding operations risk, standards for an effective internal 
control system, including periodic testing and reporting; and
    (v) Regarding business risk, strategies for mitigating such risk, 
including contingency plans where appropriate.
    (c) Risk assessment. The senior management of each Bank shall 
perform, at least annually, a risk assessment that is reasonably 
designed to identify and evaluate all material risks, including

[[Page 698]]

both quantitative and qualitative aspects, that could adversely affect 
the achievement of the Bank's performance objectives and compliance 
requirements. The risk assessment shall be in written form and shall be 
reviewed by the Bank's board of directors promptly upon its completion.



Sec. 917.4  Bank Member Products Policy.

    (a) Adoption and review of member products policy--(1) Adoption. 
Beginning November 15, 2000, each Bank's board of directors shall have 
in effect at all times a policy that addresses the Bank's management of 
products offered by the Bank to members and housing associates, 
including but not limited to advances, letters of credit and acquired 
member assets, consistent with the requirements of the Act, paragraph 
(b) of this section, and all applicable Finance Board regulations and 
policies.
    (2) Review and compliance. Each Bank's board of directors shall:
    (i) Review the Bank's member products policy annually;
    (ii) Amend the member products policy as appropriate; and
    (iii) Re-adopt the member products policy, including interim 
amendments, not less often than every three years.
    (b) Member products policy requirements. In addition to meeting any 
other requirements set forth in this chapter, each Bank's member 
products policy shall:
    (1) Address credit underwriting criteria to be applied in evaluating 
applications for advances, standby letters of credit, and renewals;
    (2) Address appropriate levels of collateralization, valuation of 
collateral and discounts applied to collateral values for advances and 
standby letters of credit;
    (3) Address advances-related fees to be charged by each Bank, 
including any schedules or formulas pertaining to such fees;
    (4) Address standards and criteria for pricing member products, 
including differential pricing of advances pursuant to Sec. 950.5(b)(2) 
of this chapter, and criteria regarding the pricing of standby letters 
of credit, including any special pricing provisions for standby letters 
of credit that facilitate the financing of projects that are eligible 
for any of the Banks' CICA programs under part 952 of this chapter;
    (5) Provide that, for any draw made by a beneficiary under a standby 
letter of credit, the member will be charged a processing fee calculated 
in accordance with the requirements of Sec. 975.6(b) of this chapter;
    (6) Address the maintenance of appropriate systems, procedures and 
internal controls; and
    (7) Address the maintenance of appropriate operational and personnel 
capacity.

[65 FR 44426, July 18, 2000]



Sec. 917.5  Strategic business plan.

    (a) Adoption of strategic business plan. Beginning 90 days after the 
effective date of this section, each Bank's board of directors shall 
have in effect at all times a strategic business plan that describes how 
the business activities of the Bank will achieve the mission of the Bank 
consistent with part 940 of this chapter. Specifically, each Bank's 
strategic business plan shall:
    (1) Enumerate operating goals and objectives for each major business 
activity and for all new business activities, which must include plans 
for maximizing activities that enhance the carrying out of the mission 
of the Bank, consistent with part 940 of this chapter;
    (2) Discuss how the Bank will:
    (i) Address credit needs and market opportunities identified through 
ongoing market research and consultations with members, associates and 
public and private organizations; and
    (ii) Notify members and associates of relevant programs and 
initiatives;
    (3) Establish quantitative performance goals for Bank products 
related to multi-family housing, small business, small farm and small 
agri-business lending ;
    (4) Describe any proposed new business activities or enhancements of 
existing activities; and (5) Be supported by appropriate and timely 
research and analysis of relevant market developments and member and 
associate demand for Bank products and services.
    (b) Review and monitoring. Each Bank's board of directors shall:

[[Page 699]]

    (1) Review the Bank's strategic business plan at least annually;
    (2) Amend the strategic business plan as appropriate;
    (3) Re-adopt the Bank's strategic business plan, including interim 
amendments, not less often than every three years; and
    (4) Establish management reporting requirements and monitor 
implementation of the strategic business plan and the operating goals 
and objectives contained therein.
    (c) Report to Finance Board. Each Bank shall submit to the Finance 
Board annually a report analyzing and describing the Bank's performance 
in achieving the goals described in paragraph (a)(3) of this section.



Sec. 917.6  Internal control system.

    (a) Establishment and maintenance. (1) Each Bank shall establish and 
maintain an effective internal control system that addresses:
    (i) The efficiency and effectiveness of Bank activities;
    (ii) The safeguarding of Bank assets;
    (iii) The reliability, completeness and timely reporting of 
financial and management information and transparency of such 
information to the Bank's board of directors and to the Finance Board; 
and
    (iv) Compliance with applicable laws, regulations, policies, 
supervisory determinations and directives of the Bank's board of 
directors and senior management.
    (2) Ongoing internal control activities necessary to maintain the 
internal control system required under paragraph (a)(1) of this section 
shall include, but are not limited to:
    (i) Top level reviews by the Bank's board of directors and senior 
management, including review of financial presentations and performance 
reports;
    (ii) Activity controls, including review of standard performance and 
exception reports by department-level management on an appropriate 
periodic basis;
    (iii) Physical and procedural controls to safeguard, and prevent the 
unauthorized use of, assets;
    (iv) Monitoring for compliance with the risk tolerance limits set 
forth in the Bank's risk management policy;
    (v) Any required approvals and authorizations for specific 
activities; and
    (vi) Any required verifications and reconciliations for specific 
activities.
    (b) Internal control responsibilities of Banks' boards of directors. 
Each Bank's board of directors shall ensure that the internal control 
system required under paragraph (a)(1) of this section is established 
and maintained, and shall oversee senior management's implementation of 
such a system on an ongoing basis, by:
    (1) Conducting periodic discussions with senior management regarding 
the effectiveness of the internal control system;
    (2) Ensuring that an internal audit of the internal control system 
is performed annually and that such annual audit is reasonably designed 
to be effective and comprehensive;
    (3) Requiring that internal control deficiencies be reported to the 
Bank's board of directors in a timely manner and that such deficiencies 
are addressed promptly;
    (4) Conducting a timely review of evaluations of the effectiveness 
of the internal control system made by internal auditors, external 
auditors and Finance Board examiners;
    (5) Directing senior management to address promptly and effectively 
recommendations and concerns expressed by internal auditors, external 
auditors and Finance Board examiners regarding weaknesses in the 
internal control system;
    (6) Reporting any internal control deficiencies found, and the 
corrective action taken, to the Finance Board in a timely manner;
    (7) Establishing, documenting and communicating an organizational 
structure that clearly shows lines of authority within the Bank, 
provides for effective communication throughout the Bank, and ensures 
that there are no gaps in the lines of authority;
    (8) Reviewing all delegations of authority to specific personnel or 
committees and requiring that such delegations state the extent of the 
authority and responsibilities delegated; and
    (9) Establishing reporting requirements, including specifying the 
nature and frequency of reports it receives.

[[Page 700]]

    (c) Internal control responsibilities of Banks' senior management. 
Each Bank's senior management shall be responsible for carrying out the 
directives of the Bank's board of directors, including the 
establishment, implementation and maintenance of the internal control 
system required under paragraph (a)(1) of this section by:
    (1) Establishing, implementing and effectively communicating to Bank 
personnel policies and procedures that are adequate to ensure that 
internal control activities necessary to maintain an effective internal 
control system, including the activities enumerated in paragraph (a)(2) 
of this section, are an integral part of the daily functions of all Bank 
personnel;
    (2) Ensuring that all Bank personnel fully understand and comply 
with all policies, procedures and legal requirements applicable to their 
positions and responsibilities;
    (3) Ensuring that there is appropriate segregation of duties among 
Bank personnel and that personnel are not assigned conflicting 
responsibilities;
    (4) Establishing effective paths of communication upward, downward 
and across the organization in order to ensure that Bank personnel 
receive necessary and appropriate information, including:
    (i) Information relating to the operational policies and procedures 
of the Bank;
    (ii) Information relating to the actual operational performance of 
the Bank;
    (iii) Adequate and comprehensive internal financial, operational and 
compliance data; and
    (iv) External market information about events and conditions that 
are relevant to decision making;
    (5) Developing and implementing procedures that translate the major 
business strategies and policies established by the Bank's board of 
directors into operating standards;
    (6) Ensuring adherence to the lines of authority and responsibility 
established by the Bank's board of directors;
    (7) Overseeing the implementation and maintenance of management 
information and other systems;
    (8) Establishing and implementing an effective system to track 
internal control weaknesses and the actions taken to correct them; and
    (9) Monitoring and reporting to the Bank's board of directors the 
effectiveness of the internal control system on an ongoing basis.



Sec. 917.7  Audit committees.

    (a) Establishment. The board of directors of each Bank shall 
establish an audit committee, consistent with the requirements set forth 
in this section.
    (b) Composition. (1) The audit committee shall comprise five or more 
persons drawn from the Bank's board of directors, each of whom shall 
meet the criteria of independence set forth in paragraph (c) of this 
section.
    (2) The audit committee shall include a balance of representatives 
of:
    (i) Community financial institutions and other members; and
    (ii) Appointive and elective directors of the Bank.
    (3) The terms of audit committee members shall be appropriately 
staggered so as to provide for continuity of service.
    (4) At least one member of the audit committee shall have extensive 
accounting or related financial management experience.
    (c) Independence. Any member of the Bank's board of directors shall 
be considered to be sufficiently independent to serve as a member of the 
audit committee if that director does not have a disqualifying 
relationship with the Bank or its management that would interfere with 
the exercise of that director's independent judgment. Such disqualifying 
relationships include, but are not limited to:
    (1) Being employed by the Bank in the current year or any of the 
past five years;
    (2) Accepting any compensation from the Bank other than compensation 
for service as a board director;
    (3) Serving or having served in any of the past five years as a 
consultant, advisor, promoter, underwriter, or legal counsel of or to 
the Bank; or
    (4) Being an immediate family member of an individual who is, or has 
been in any of the past five years, employed by the Bank as an executive 
officer.
    (d) Charter. (1) The audit committee of each Bank shall adopt, and 
the

[[Page 701]]

Bank's board of directors shall approve, a formal written charter that 
specifies the scope of the audit committee's powers and 
responsibilities, as well as the audit committee's structure, processes 
and membership requirements.
    (2) The audit committee and the board of directors of each Bank 
shall:
    (i) Review, assess the adequacy of and, where appropriate, amend the 
Bank's audit committee charter on an annual basis;
    (ii) Amend the audit committee charter as appropriate; and
    (iii) Re-adopt and re-approve, respectively, the Bank's audit 
committee charter not less often than every three years.
    (3) Each Bank's audit committee charter shall:
    (i) Provide that the audit committee has the responsibility to 
select, evaluate and, where appropriate, replace the internal auditor 
and that the internal auditor may be removed only with the approval of 
the audit committee;
    (ii) Provide that the internal auditor shall report directly to the 
audit committee on substantive matters and that the internal auditor is 
ultimately accountable to the audit committee and board of directors; 
and
    (iii) Provide that both the internal auditor and the external 
auditor shall have unrestricted access to the audit committee without 
the need for any prior management knowledge or approval.
    (e) Duties. Each Bank's audit committee shall have the duty to:
    (1) Direct senior management to maintain the reliability and 
integrity of the accounting policies and financial reporting and 
disclosure practices of the Bank;
    (2) Review the basis for the Bank's financial statements and the 
external auditor's opinion rendered with respect to such financial 
statements (including the nature and extent of any significant changes 
in accounting principles or the application therein) and ensure that 
policies are in place that are reasonably designed to achieve disclosure 
and transparency regarding the Bank's true financial performance and 
governance practices;
    (3) Oversee the internal audit function by:
    (i) Reviewing the scope of audit services required, significant 
accounting policies, significant risks and exposures, audit activities 
and audit findings;
    (ii) Assessing the performance and determining the compensation of 
the internal auditor; and
    (iii) Reviewing and approving the internal auditor's work plan;
    (4) Oversee the external audit function by:
    (i) Approving the external auditor's annual engagement letter;
    (ii) Reviewing the performance of the external auditor; and
    (iii) Making recommendations to the Bank's board of directors 
regarding the appointment, renewal, or termination of the external 
auditor;
    (5) Provide an independent, direct channel of communication between 
the Bank's board of directors and the internal and external auditors;
    (6) Conduct or authorize investigations into any matters within the 
audit committee's scope of responsibilities;
    (7) Ensure that senior management has established and is maintaining 
an adequate internal control system within the Bank by:
    (i) Reviewing the Bank's internal control system and the resolution 
of identified material weaknesses and reportable conditions in the 
internal control system, including the prevention or detection of 
management override or compromise of the internal control system; and
    (ii) Reviewing the programs and policies of the Bank designed to 
ensure compliance with applicable laws, regulations and policies and 
monitoring the results of these compliance efforts;
    (8) Review the policies and procedures established by senior 
management to assess and monitor implementation of with the Bank's 
strategic business plan and the operating goals and objectives contained 
therein; and
    (9) Report periodically its findings to the Bank's board of 
directors.
    (f) Meetings. The audit committee shall prepare written minutes of 
each audit committee meeting.

[[Page 702]]



Sec. 917.8  Budget preparation.

    (a) Adoption of budgets. Each Bank's board of directors shall be 
responsible for the adoption of an annual operating expense budget and a 
capital expenditures budget for the Bank, and any subsequent amendments 
thereto, consistent with the requirements of the Act, this section, 
other regulations and policies of the Finance Board, and with the Bank's 
responsibility to protect both its members and the public interest by 
keeping its costs to an efficient and effective minimum.
    (b) No delegation of budget authority. A Bank's board of directors 
may not delegate the authority to approve the Bank's annual budgets, or 
any subsequent amendments thereto, to Bank officers or other Bank 
employees.
    (c) Interest rate scenario. A Bank's annual budgets shall be 
prepared based upon an interest rate scenario as determined by the Bank.
    (d) Board approval for deviations. A Bank may not exceed its total 
annual operating expense budget or its total annual capital expenditures 
budget without prior approval by the Bank's board of directors of an 
amendment to such budget.



Sec. 917.9  Dividends.

    A Bank's board of directors may declare and pay a dividend only from 
previously retained earnings or current net earnings and only if such 
payment will not result in a projected impairment of the par value of 
the capital stock of the Bank. Dividends on such capital stock shall be 
computed without preference.



Sec. 917.10  Bank bylaws.

    A Bank's board of directors shall have in effect at all times bylaws 
governing the manner in which the Bank administers its affairs and such 
bylaws shall be consistent with applicable laws and regulations as 
administered by the Finance Board.



PART 918--BANK DIRECTOR COMPENSATION AND EXPENSES--Table of Contents




Sec.
918.1  Definitions.
918.2  Annual directors' compensation policy.
918.3  Directors' compensation policy requirements.
918.4  Directors' expenses.
918.5  Approval by Finance Board.
918.6  Disclosure.
918.7  Maintenance of effort.
918.8  Site of board of directors and committee meetings.
918.9  Date of applicability of removal of requirements regarding 
          compensation of bank officers and employees.

    Authority: 12 U.S.C. 1422b(a), 1427.

    Source: 65 FR 8260, Feb. 18, 2000, unless otherwise indicated.



Sec. 918.1  Definitions.

    As used in this part:
    Compensation means any payment of money or provision of any other 
thing of value (or the accrual of a right to receive money or a thing of 
value in a subsequent year) in consideration of a director's performance 
of official duties for the Bank, including, without limitation, daily 
meeting fees, incentive payments and fringe benefits.



Sec. 918.2  Annual directors' compensation policy.

    Beginning in 2000 and annually thereafter, each Bank's board of 
directors shall adopt by resolution a written policy to provide for the 
payment to Bank directors of reasonable compensation for the performance 
of their duties as members of the Bank's board of directors, subject to 
the requirements set forth in Sec. 918.3. At a minimum, such policy 
shall address the activities or functions for which attendance is 
necessary and appropriate and may be compensated, and shall explain and 
justify the methodology for determining the amount of compensation to be 
paid to directors.

[65 FR 8260, Feb. 18, 2000]



Sec. 918.3  Compensation policy requirements.

    Payment to directors under each Bank's policy on director 
compensation may be based upon factors that the Bank determines to be 
appropriate, but each Bank's policy shall conform to the following 
requirements:
    (a)(1) Statutory limits on annual compensation. Pursuant to section 
7(i) of the Act, as amended, 12 U.S.C. 1427(i),

[[Page 703]]

for 2000, the following limits on compensation shall apply: for a 
Chairperson--$25,000; for a Vice Chairperson--$20,000; for any other 
member of the Bank's board of directors--$15,000. Beginning in 2001 and 
for subsequent years, these limits on annual compensation shall be 
adjusted annually by the Finance Board to reflect any percentage 
increase in the preceding year's Consumer Price Index (CPI) for all 
urban consumers, as published by the Department of Labor. Each year, as 
soon as practicable after the publication of the previous year's CPI, 
the Finance Board shall publish notice by Federal Register, distribution 
of a memorandum, or otherwise, of the CPI-adjusted limits on annual 
compensation.
    (2) Starting in 2000, the annual compensation limits set forth in 
paragraph (a)(1) of this section shall apply to the year in which any 
deferred compensation was accrued or earned by a director, and not to 
the year in which it is paid to the director.
    (b) Compensation permitted only for performance of official Bank 
business. The total compensation received by each director in a year 
shall reflect the amount of time spent on official Bank business, and 
greater or lesser attendance at board and committee meetings during a 
given year shall be reflected in the compensation received by the 
director for that year. A Bank shall not pay a director who regularly 
fails to attend board or committee meetings. A Bank shall not pay fees 
to a director, such as retainer fees, that do not reflect the director's 
performance of official Bank business conducted prior to the payment of 
such fees.

[65 FR 8260, Feb. 18, 2000, as amended at 65 FR 13666, Mar. 14, 2000]



Sec. 918.4  Directors' expenses.

    Each Bank may pay its directors for such necessary and reasonable 
travel, subsistence and other related expenses incurred in connection 
with the performance of their official duties as are payable to senior 
officers of the Bank under the Bank's travel policy, except that 
directors may not be paid for gift or entertainment expenses.

[65 FR 8260, Feb. 18, 2000]



Sec. 918.5  Approval by Finance Board.

    Payments made to directors in compliance with the limits on annual 
directors' compensation and the standards set forth in this section are 
deemed to be approved by the Finance Board for purposes of section 7(i) 
of the Act, as amended.



Sec. 918.6  Disclosure.

    Each Bank shall, in its annual report:
    (a) State the sum of the total actual compensation paid to its 
directors in that year;
    (b) State the sum of the total actual expenses paid to its directors 
in that year; and
    (c) Summarize its policy on director compensation.



Sec. 918.7  Maintenance of effort.

    (a) General. Notwithstanding the limits on annual directors' 
compensation established by section 7(i) of the Act, as amended, the 
board of directors of each Bank shall continue to maintain its level of 
oversight of the management of the Bank, and, except as provided in 
paragraph (b) of this section, the board of directors shall hold a 
minimum number of in-person meetings in any year equal to the lesser of:
    (1) 9; or
    (2) The number of in-person board of directors meetings held by the 
Bank on average over the immediately preceding three years (which 
number, if a fraction, may be rounded down to the nearest whole number, 
in the Bank's discretion).
    (b) Waiver of minimum meetings requirement. A Bank may apply to the 
Finance Board for a waiver of paragraph (a) of this section pursuant to 
the procedures set forth in part 907 of this chapter.

[65 FR 13666, Mar. 14, 2000]



Sec. 918.8  Site of board of directors and committee meetings.

    Meetings of a Bank's board of directors and committees thereof 
usually should be held within the district served by the Bank. No 
meetings of a Bank's board of directors and committees thereof may be 
held in any location that is not within the United

[[Page 704]]

States, including its possessions and territories.



Sec. 918.9  Date of applicability of removal of requirements regarding compensation of bank officers and employees.

    The removal of the requirements relating to compensation of Bank 
officers and employees in 12 CFR 932.19 (in the Code of Federal 
Regulations revised as of January 1, 1999), is applicable for all Bank 
officer and employee compensation years starting after December 21, 
1999.

[65 FR 13666, Mar. 14, 2000]

[[Page 705]]





   SUBCHAPTER D--FEDERAL HOME LOAN BANK MEMBERS AND HOUSING ASSOCIATES



PART 925--MEMBERS OF THE BANKS--Table of Contents




                         Subpart A--Definitions

Sec.
925.1  Definitions.

                Subpart B--Membership Application Process

925.2  Membership application requirements.
925.3  Decision on application.
925.4  Automatic membership.
925.5  Appeals.

                   Subpart C--Eligibility Requirements

925.6  General eligibility requirements.
925.7  Duly organized requirement.
925.8  Subject to inspection and regulation requirement.
925.9  Makes long-term home mortgage loans requirement.
925.10  10 percent requirement for certain insured depository 
          institution applicants.
925.11  Financial condition requirement for applicants other than 
          insurance companies.
925.12  Character of management requirement.
925.13  Home financing policy requirement.
925.14  De novo insured depository institution applicants.
925.15  Recent merger or acquisition applicants.
925.16  Financial condition requirement for insurance company 
          applicants.
925.17  Rebuttable presumptions.
925.18  Determination of appropriate Bank district for membership.

                      Subpart D--Stock Requirements

925.19  Par value and price of stock.
925.20  Stock purchase.
925.21  Issuance and form of stock.
925.22  Adjustments in stock holdings.
925.23  Purchase of excess stock.

               Subpart E--Consolidations Involving Members

925.24  Consolidations of members.
925.25  Consolidations involving nonmembers.

            Subpart F--Withdrawal and Removal From Membership

925.26  Procedure for withdrawal.
925.27  Procedure for removal.
925.28  Automatic termination of membership for institutions placed in 
          receivership.

   Subpart G--Orderly Liquidation of Advances and Redemption of Stock

925.29  Orderly liquidation of advances and redemption of stock.

                 Subpart H--Reacquisition of Membership

925.30  Readmission to membership.

                  Subpart I--Bank Access to Information

925.31  Reports and examinations.

                     Subpart J--Membership Insignia

925.32  Official membership insignia.

    Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430, 
1442.

    Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



                         Subpart A--Definitions



Sec. 925.1  Definitions.

    For purposes of this part:
    (a) [Reserved]
    (b) Adjusted net income means net income, excluding extraordinary 
items such as income received from or expense incurred in sales of 
securities or fixed assets, reported on a regulatory financial report.
    (c) Aggregate unpaid loan principal means the aggregate unpaid 
principal of a subscriber's or member's home mortgage loans, home-
purchase contracts, and similar obligations.
    (d) Allowance for loan and lease losses means a specified balance-
sheet account held to fund potential losses on loans or leases, that is 
reported on a regulatory financial report.
    (e) Appropriate Federal banking agency has the same meaning as used 
in 12 U.S.C. 1813(q) and, for federally insured credit unions, shall 
mean the National Credit Union Administration.
    (f) Appropriate state regulator means any state officer, agency, 
supervisor or

[[Page 706]]

other entity that has regulatory authority over, or is empowered to 
institute enforcement action against, an applicant for Bank membership.
    (g)-(h) [Reserved]
    (i) Combination business or farm property means real property for 
which the total appraised value is attributable to residential, and 
business or farm uses.
    (j) Composite regulatory examination rating means a composite rating 
assigned to an institution following the guidelines of the Uniform 
Financial Institutions Rating System (Issued by the Federal Financial 
Institutions Examination Council; for availability contact the Federal 
Housing Finance Board, FOIA Office, 1777 F Street, NW., Washington, DC 
20006.), including a CAMEL rating, a MACRO rating, or other similar 
rating, contained in a written regulatory examination report.
    (k) Dwelling unit means a single room or a unified combination of 
rooms designed for residential use.
    (l) Enforcement action means any written notice, directive, order or 
agreement initiated by an applicant for Bank membership or by its 
appropriate regulator to address any operational, financial, managerial 
or other deficiencies of the applicant identified by such regulator, but 
does not include a board of directors resolution adopted by the 
applicant in response to examination weaknesses identified by such 
regulator.
    (m) Funded residential construction loan means the portion of a loan 
secured by real property made to finance the on-site construction of 
dwelling units on one-to-four family property or multifamily property 
disbursed to the borrower.
    (n) Home mortgage loan means:
    (1) A loan, whether or not fully amortizing, or an interest in such 
a loan, which is secured by a mortgage, deed of trust, or other security 
agreement that creates a first lien on one of the following interests in 
property:
    (i) One-to-four family property or multifamily property, in fee 
simple;
    (ii) A leasehold on one-to-four family property or multifamily 
property under a lease of not less than 99 years that is renewable, or 
under a lease having a period of not less than 50 years to run from the 
date the mortgage was executed; or
    (iii) Combination business or farm property where at least 50 
percent of the total appraised value of the combined property is 
attributable to the residential portion of the property or, in the case 
of any community financial institution, combination business or farm 
property, on which is located a permanent structure actually used as a 
residence (other than for temporary or seasonal housing), where the 
residence constitutes an integral part of the property.
    (2) A mortgage pass-through security that represents an undivided 
ownership interest in:
    (i) Long-term loans, provided that, at the time of issuance of the 
security, all of the loans meet the requirements of paragraph (n)(1) of 
this section; or
    (ii) A security that represents an undivided ownership interest in 
long-term loans, provided that, at the time of issuance of the security, 
all of the loans meet the requirements of paragraph (n)(1) of this 
section.
    (o) Institutions which are eligible to make application to become 
members means, for purposes of 12 U.S.C. 1431(e)(2)(A), any building and 
loan association, savings and loan association, cooperative bank, 
homestead association, insurance company, savings bank, or any insured 
depository institution, regardless of whether the institution applies 
for or would be approved for membership.
    (p) Insured depository institution means an insured depository 
institution as defined in 12 U.S.C. 1422(12).
    (q) Long-term means a term to maturity of five years or greater.
    (r) Manufactured housing means a manufactured home as defined in 
section 603(6) of the Manufactured Home Construction and Safety 
Standards Act of 1974, as amended (42 U.S.C. 5402(6)).
    (s) [Reserved]
    (t) Multifamily property means:
    (1) Real property that is solely residential and includes five or 
more dwelling units; or
    (2) Real property that includes five or more dwelling units combined 
with commercial units, provided that the property is primarily 
residential; or

[[Page 707]]

    (3) Nursing homes, dormitories, or homes for the elderly.
    (u) Nonperforming loans and leases means the sum of the following, 
reported on a regulatory financial report: Loans and leases that have 
been past due for 90 days (60 days in the case of credit union 
applicants) or longer but are still accruing; loans and leases on a 
nonaccrual basis; and restructured loans and leases (not already 
reported as nonperforming).
    (v) Nonresidential real property means real property that is not 
used for residential purposes, including business or industrial 
property, hotels, motels, churches, hospitals, educational and 
charitable institution buildings or facilities, clubs, lodges, 
association buildings, golf courses, recreational facilities, farm 
property not containing a dwelling unit, or similar types of property.
    (w) One-to-four family property means:
    (1) Real property that is solely residential, including one-to-four 
family dwelling units or more than four family dwelling units if each 
dwelling unit is separated from the other dwelling units by dividing 
walls that extend from ground to roof, such as row houses, townhouses or 
similar types of property;
    (2) Manufactured housing if applicable state law defines the 
purchase or holding of manufactured housing as the purchase or holding 
of real property;
    (3) Individual condominium dwelling units or interests in individual 
cooperative housing dwelling units that are part of a condominium or 
cooperative building without regard to the number of total dwelling 
units therein; or
    (4) Real property which includes one-to-four family dwelling units 
combined with commercial units, provided the property is primarily 
residential.
    (x) Other real estate owned means all other real estate owned (i.e., 
foreclosed and repossessed real estate), reported on a regulatory 
financial report, and does not include direct and indirect investments 
in real estate ventures.
    (y) Appropriate regulator means a regulatory entity listed in 
Sec. 925.8, as applicable.
    (z) Regulatory examination report means a written report of 
examination prepared by the applicant's appropriate regulator, 
containing, in the case of insured depository institution applicants, a 
composite rating assigned to the institution following the guidelines of 
the Uniform Financial Institutions Rating System, including a CAMEL 
rating, a MACRO rating, or other similar rating.
    (aa) Regulatory financial report means a financial report that an 
applicant is required to file with its appropriate regulator on a 
specific periodic basis, including the quarterly call report for 
commercial banks, thrift financial report for savings associations, 
quarterly or semi-annual call report for credit unions, the National 
Association of Insurance Commissioners' annual or quarterly report for 
insurance companies, or other similar report, including such report 
maintained by the appropriate regulator on a computer on-line database.
    (bb) Residential mortgage loan means any one of the following types 
of loans, whether or not fully amortizing:
    (1) Home mortgage loans;
    (2) Funded residential construction loans;
    (3) Loans secured by manufactured housing whether or not defined by 
state law as secured by an interest in real property;
    (4) Loans secured by junior liens on one-to-four family property or 
multifamily property;
    (5) Mortgage pass-through securities representing an undivided 
ownership interest in:
    (i) Loans that meet the requirements of paragraphs (bb) (1) through 
(4) of this section at the time of issuance of the security;
    (ii) Securities representing an undivided ownership interest in 
loans, provided that, at the time of issuance of the security, all of 
the loans meet the requirements of paragraphs (bb) (1) through (4) of 
this section; or
    (iii) Mortgage debt securities as defined in paragraph (bb)(6) of 
this section;
    (6) Mortgage debt securities secured by:
    (i) Loans, provided that, at the time of issuance of the security, 
substantially all of the loans meet the requirements of paragraphs (bb) 
(1) through (4) of this section;

[[Page 708]]

    (ii) Securities that meet the requirements of paragraph (bb)(5) of 
this section; or
    (iii) Securities secured by assets, provided that, at the time of 
issuance of the security, all of the assets meet the requirements of 
paragraphs (bb) (1) through (5) of this section;
    (7) Home mortgage loans secured by a leasehold interest, as defined 
in paragraph (n)(1)(ii) of this section, except that the period of the 
lease term may be for any duration; or
    (8) Loans that finance properties or activities that, if made by a 
member, would satisfy the statutory requirements for the Community 
Investment Program established under section 10(i) of the Act, or the 
regulatory requirements established for any community investment cash 
advance program authorized by section 10(j)(10) of the Act.
    (cc) State includes a State of the United States, American Samoa, 
the Commonwealth of the Northern Mariana Islands, the District of 
Columbia, Guam, Puerto Rico, or the Virgin Islands of the United States.
    (dd) Total assets means the total assets reported on a regulatory 
financial report.
    (ee) Consolidation includes a consolidation, a merger, or a purchase 
of all of the assets and assumption of all of the liabilities of an 
entity by another entity.

[61 FR 42542, Aug. 16, 1996, as amended at 63 FR 3455, Jan. 23, 1998; 63 
FR 35127, June 29, 1998; 63 FR 40023, July 27, 1998; 65 FR 8261, Feb. 
18, 2000; 65 FR 13869, Mar. 15, 2000; 65 FR 40981, July 3, 2000]



                Subpart B--Membership Application Process

    Source: 61 FR 42543 Aug. 16, 1996, unless otherwise noted.



Sec. 925.2  Membership application requirements.

    (a) Application. An applicant for membership in a Bank shall submit 
to that Bank an application that satisfies the requirements of this 
part. The application shall include a written resolution or 
certification duly adopted by the applicant's board of directors, or by 
an individual with authority to act on behalf of the applicant's board 
of directors, of the following:
    (1) Applicant review. Applicant has reviewed the requirements of 
this part and, as required by this part, has provided to the best of 
applicant's knowledge the most recent, accurate and complete information 
available; and
    (2) Duty to supplement. Applicant will promptly supplement the 
application with any relevant information that comes to applicant's 
attention prior to the Bank's decision on whether to approve or deny the 
application, and if the Bank's decision is appealed pursuant to 
Sec. 925.5 of this part, prior to resolution of any appeal by the 
Finance Board.
    (b) Digest. The Bank shall prepare a written digest for each 
applicant stating whether or not the applicant meets each of the 
requirements in Secs. 925.6 to 925.18 of this part, the Bank's findings 
and the reasons therefor.
    (c) File. The Bank shall maintain a membership file for each 
applicant for at least three years after the Bank decides whether to 
approve or deny membership and the resolution of any appeal to the 
Finance Board. The membership file shall contain at a minimum:
    (1) Digest. The digest required by paragraph (b) of this section.
    (2) Required documents. All documents required by Secs. 925.6 to 
925.18 of this part, including those documents required to establish or 
rebut a presumption under this part, shall be described in and attached 
to the digest. The Bank may retain in the file only the relevant 
portions of the regulatory financial reports required by this part. If 
an applicant's appropriate regulator requires return or destruction of a 
regulatory examination report, the date that the report is returned or 
destroyed shall be noted in the file.
    (3) Additional documents. Any additional document submitted by the 
applicant, or otherwise obtained or generated by the Bank, concerning 
the applicant.

[[Page 709]]

    (4) Decision resolution. The decision resolution described in 
Sec. 925.3(b) of this part.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42543, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998; 
65 FR 8261, Feb. 18, 2000]



Sec. 925.3  Decision on application.

    (a) Authority. The Finance Board authorizes the Banks to approve or 
deny all applications for membership, subject to the requirements of 
this part. The Bank may delegate the authority to approve membership 
applications only to a committee of the Bank's board of directors, the 
Bank president, or a senior officer who reports directly to the Bank 
president other than an officer with responsibility for business 
development.
    (b) Decision resolution. For each applicant, the Bank shall prepare 
a written resolution duly adopted by the Bank's board of directors, by a 
committee of the board of directors, or by an officer with delegated 
authority to approve membership applications. The decision resolution 
shall state:
    (1) That the statements in the digest are accurate to the best of 
the Bank's knowledge, and are based on a diligent and comprehensive 
review of all available information identified in the digest; and
    (2) The Bank's decision and the reasons therefor. Decisions to 
approve an application should state specifically that: the applicant is 
authorized under the laws of the United States and the laws of the 
appropriate state to become a member of, purchase stock in, do business 
with, and maintain deposits in, the Bank to which the applicant has 
applied; and the applicant meets all of the membership eligibility 
criteria of the Act and this part.
    (c) Action on applications. The Bank shall act on an application 
within 60 calendar days of the date the Bank deems the application to be 
complete. An application is ``complete'' when a Bank has obtained all 
the information required by this part, and any other information the 
Bank deems necessary, to process the application. If an application that 
was deemed complete subsequently is deemed incomplete because the Bank 
determines during the review process that additional information is 
necessary to process the application, the Bank may stop the 60-day clock 
until the application again is deemed complete, and then resume the 
clock where it left off. The Bank shall notify an applicant in writing 
when its application is deemed by the Bank to be complete, and shall 
maintain a copy of such letter in the applicant's membership file. The 
Bank shall notify an applicant if the 60-day clock is stopped, and when 
the clock is resumed, and shall maintain a written record of such 
notifications in the applicant's membership file. Within 3 business days 
of a Bank's decision on an application, the Bank shall provide the 
applicant and the Finance Board's Executive Secretary with a copy of the 
Bank's decision resolution.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42543, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998; 
65 FR 8261, Feb. 18, 2000]



Sec. 925.4  Automatic membership.

    (a) Automatic membership for certain charter conversions. An insured 
depository institution member that converts from one charter type to 
another automatically shall become a member of the Bank of which the 
converting institution was a member on the effective date of such 
conversion, provided that the converting institution continues to be an 
insured depository institution and the assets of the institution 
immediately before and immediately after the conversion are not 
materially different. In such case, all relationships existing between 
the member and the Bank at the time of such conversion may continue.
    (b) Automatic membership for transfers. Any member whose membership 
is transferred pursuant to Sec. 925.18(d) of this part automatically 
shall become a member of the Bank to which it transfers.

[[Page 710]]

    (c) Automatic membership, in the Bank's discretion, for certain 
consolidations. (1) If a member institution (or institutions) and a 
nonmember institution are consolidated and the consolidated institution 
has its principal place of business in a state in the same Bank district 
as the disappearing institution (or institutions), and the consolidated 
institution will operate under the charter of the nonmember institution, 
on the effective date of the consolidation, the consolidated institution 
may, in the discretion of the Bank of which the disappearing institution 
(or institutions) was a member immediately prior to the effective date 
of the consolidation, automatically become a member of such Bank upon 
the purchase of stock in that Bank pursuant to Sec. 925.20, provided 
that:
    (i) 90 percent or more of the total assets of the consolidated 
institution are derived from the total assets of the disappearing member 
institution (or institutions); and
    (ii) The consolidated institution provides written notice to such 
Bank, within 60 calendar days after the effective date of the 
consolidation, that it desires to be a member of the Bank.
    (2) The provisions of Sec. 925.25(d)(1)(i) shall apply, and upon 
approval of automatic membership by the Bank, the provisions of 
Secs. 925.25(d)(2)(i), (e) and (f) shall apply.

[61 FR 42543, Aug. 16, 1996, as amended at 63 FR 40024, July 27, 1998; 
65 FR 8261, Feb. 18, 2000; 65 FR 13870, Mar. 15, 2000]



Sec. 925.5  Appeals.

    (a) Appeals by applicants--(1) Filing procedure. Within 90 calendar 
days of the date of a Bank's decision to deny an application for 
membership, the applicant may file a written appeal of the decision with 
the Finance Board.
    (2) Documents. The applicant's appeal shall be addressed to the 
Executive Secretary, Federal Housing Finance Board, 1777 F Street, NW., 
Washington, DC 20006, with a copy to the Bank, and shall include the 
following documents:
    (i) Bank's decision resolution. A copy of the Bank's decision 
resolution; and
    (ii) Basis for appeal. A statement of the basis for the appeal by 
the applicant with sufficient facts, information, analysis and 
explanation to rebut any applicable presumptions and otherwise support 
the applicant's position.
    (b) Record for appeal--(1) Copy of membership file. Upon receiving a 
copy of an appeal, the Bank whose action has been appealed (appellee 
Bank) shall provide the Finance Board with a copy of the applicant's 
complete membership file. Until the Finance Board resolves the appeal, 
the appellee Bank shall supplement the materials provided to the Finance 
Board as any new materials are received.
    (2) Additional information. The Finance Board may request additional 
information or further supporting arguments from the appellant, the 
appellee Bank or any other party that the Finance Board deems 
appropriate.
    (c) Deciding appeals. The Finance Board shall consider the record 
for appeal described in paragraph (b) of this section and shall resolve 
the appeal based on the requirements of the Act and this part within 90 
calendar days of the date the appeal is filed with the Finance Board. In 
deciding the appeal, the Finance Board shall apply the presumptions in 
this part, unless the appellant or appellee Bank presents evidence to 
rebut a presumption as provided in Sec. 925.17 of this part.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42543, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000]



                   Subpart C--Eligibility Requirements

    Source: 61 FR 42545, Aug. 16, 1996, unless otherwise noted.



Sec. 925.6  General eligibility requirements.

    (a) Requirements. Any building and loan association, savings and 
loan association, cooperative bank, homestead association, insurance 
company, savings bank, or insured depository institution, upon 
application satisfying all of the requirements of the Act and this part, 
shall be eligible to become a member of a Bank if:
    (1) It is duly organized under the laws of any State or of the 
United States;

[[Page 711]]

    (2) It is subject to inspection and regulation under the banking 
laws, or under similar laws, of any State or of the United States;
    (3) It makes long-term home mortgage loans;
    (4) Its financial condition is such that advances may be safely made 
to it;
    (5) The character of its management is consistent with sound and 
economical home financing; and
    (6) Its home financing policy is consistent with sound and 
economical home financing.
    (b) Additional eligibility requirement for insured depository 
institutions other than community financial institutions. In order to be 
eligible to become a member of a Bank, an insured depository institution 
applicant other than a community financial institution also must have at 
least 10 percent of its total assets in residential mortgage loans.
    (c) Additional eligibility requirement for applicants that are not 
insured depository institutions. In order to be eligible to become a 
member of a Bank, an applicant that is not an insured depository 
institution also must have mortgage-related assets that reflect a 
commitment to housing finance, as determined by the Bank in its 
discretion.
    (d) Ineligibility. Except as otherwise provided in this part, if an 
applicant does not satisfy the requirements of this part, the applicant 
is ineligible for membership.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 13870, Mar. 15, 2000]



Sec. 925.7  Duly organized requirement.

    An applicant shall be deemed to be duly organized as required by 
section 4(a)(1)(A) of the Act and Sec. 925.6(a)(1) of this part, if it 
is chartered by a state or federal agency as a building and loan 
association, savings and loan association, cooperative bank, homestead 
association, insurance company, savings bank or insured depository 
institution.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000]



Sec. 925.8  Subject to inspection and regulation requirement.

    An applicant shall be deemed to be subject to inspection and 
regulation as required by section 4(a)(1)(B) of the Act and 
Sec. 925.6(a)(2) of this part, if, in the case of a depository 
institution applicant, it is subject to inspection and regulation by the 
Federal Deposit Insurance Corporation, the Federal Reserve Board, the 
National Credit Union Administration, the Office of the Comptroller of 
the Currency, the Office of Thrift Supervision, or other appropriate 
state regulator, and, in the case of an insurance company applicant, it 
is subject to inspection and regulation by an appropriate state 
regulator accredited by the National Association of Insurance 
Commissioners.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000]



Sec. 925.9  Makes long-term home mortgage loans requirement.

    An applicant shall be deemed to make long-term home mortgage loans 
as required by section 4(a)(1)(C) of the Act and Sec. 925.6(a)(3) of 
this part, if, based on the applicant's most recent regulatory financial 
report filed with its appropriate regulator, the applicant originates or 
purchases long-term home mortgage loans.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998; 
65 FR 8261, Feb. 18, 2000]

[[Page 712]]



Sec. 925.10  10 percent requirement for certain insured depository institution applicants.

    An insured depository institution applicant that is subject to the 
10 percent requirement of section 4(a)(2)(A) of the Act and section 
925.6(b) of this part, shall be deemed to be in compliance with such 
requirement if, based on the applicant's most recent regulatory 
financial report filed with its appropriate regulator, the applicant has 
at least 10 percent of its total assets in residential mortgage loans, 
except that any assets used to secure mortgage debt securities as 
described in Sec. 925.1(bb)(6) of this part shall not be used to meet 
this requirement.

[65 FR 13870, Mar. 15, 2000]



Sec. 925.11  Financial condition requirement for applicants other than insurance companies.

    (a) Review requirement. In determining whether an applicant other 
than an insurance company has complied with the financial condition 
requirement of section 4(a)(2)(B) of the Act and Sec. 925.6(a)(4) of 
this part, the Bank shall obtain as a part of the membership application 
and review each of the following documents:
    (1) Regulatory financial reports. The regulatory financial reports 
filed by the applicant with its appropriate regulator for the last six 
calendar quarters and three year-ends preceding the date the Bank 
receives the application;
    (2) Financial statement. In order of preference: the most recent 
independent audit of the applicant conducted in accordance with 
generally accepted auditing standards by a certified public accounting 
firm which submits a report on the applicant; the most recent 
independent audit of the applicant's parent holding company conducted in 
accordance with generally accepted auditing standards by a certified 
public accounting firm which submits a report on the consolidated 
holding company but not on the applicant separately; the most recent 
Directors' examination of the applicant conducted in accordance with 
generally accepted auditing standards by a certified public accounting 
firm; the most recent Directors' examination of the applicant performed 
by other external auditors; the most recent review of the applicant's 
financial statements by external auditors; the most recent Compilation 
of the applicant's financial statements by external auditors; or the 
most recent audit of other procedures of the applicant;
    (3) Regulatory examination report. The applicant's most recent 
available regulatory examination report prepared by its appropriate 
regulator, a summary prepared by the Bank of the applicant's strengths 
and weaknesses as cited in the regulatory examination report, and a 
summary prepared by the Bank or applicant of actions taken by the 
applicant to respond to examination weaknesses;
    (4) Enforcement actions. A description prepared by the Bank or 
applicant of any outstanding enforcement actions against the applicant, 
responses by the applicant, reports as required by the enforcement 
action, and verbal or written indications, if available, from the 
appropriate regulator of how the applicant is complying with the terms 
of the enforcement action; and
    (5) Additional information. Any other relevant document or 
information concerning the applicant that comes to the Bank's attention 
in reviewing the applicant's financial condition.
    (b) Standards. An applicant other than an insurance company shall be 
deemed to be in compliance with the financial condition requirement of 
section 4(a)(2)(B) of the Act and Sec. 925.6(a)(4) of this part, if:
    (1) Recent composite regulatory examination rating. The applicant 
has received a composite regulatory examination rating from its 
appropriate regulator within two years preceding the date the Bank 
receives the application;
    (2) Capital requirement. The applicant meets all of its minimum 
statutory and regulatory capital requirements as reported in its most 
recent quarter-end regulatory financial report filed with its 
appropriate regulator; and
    (3) Minimum performance standard. (i) The applicant's most recent 
composite regulatory examination rating from its appropriate regulator 
within the past two years was ``1;'' or, was ``2'' or ``3'' and, based 
on the applicant's most recent regulatory financial report filed

[[Page 713]]

with its appropriate regulator, the applicant satisfied all of the 
following performance trend criteria:
    (A) Earnings. The applicant's adjusted net income was positive in 
four of the six most recent calendar quarters;
    (B) Nonperforming assets. The applicant's nonperforming loans and 
leases plus other real estate owned, did not exceed 10 percent of its 
total loans and leases plus other real estate owned, in the most recent 
calendar quarter; and
    (C) Allowance for loan and lease losses. The applicant's ratio of 
its allowance for loan and lease losses plus the allocated transfer risk 
reserve to nonperforming loans and leases was 60 percent or greater 
during 4 of the 6 most recent calendar quarters.
    (ii) For applicants that are not required to report financial data 
to their appropriate regulator on a quarterly basis, the information 
required in paragraph (b)(3)(i) of this section may be reported on a 
semiannual basis.
    (c) Eligible collateral not considered. The availability of 
sufficient eligible collateral to secure advances to the applicant is 
presumed and shall not be considered in determining whether an applicant 
is in the financial condition required by section 4(a)(2)(B) of the Act 
and Sec. 925.6(a)(4) of this part.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, 40024, July 27, 
1998; 65 FR 8261, Feb. 18, 2000]



Sec. 925.12  Character of management requirement.

    An applicant shall be deemed to be in compliance with the character 
of management requirement of section 4(a)(2)(C) of the Act and 
Sec. 925.6(a)(5) of this part, if the applicant provides to the Bank an 
unqualified written certification duly adopted by the applicant's board 
of directors, or by an individual with authority to act on behalf of the 
applicant's board of directors, that:
    (a) Enforcement actions. Neither the applicant nor any of its 
directors or senior officers is subject to, or operating under, any 
enforcement action instituted by its appropriate regulator;
    (b) Criminal, civil or administrative proceedings. Neither the 
applicant nor any of its directors or senior officers has been the 
subject of any criminal, civil or administrative proceedings reflecting 
upon creditworthiness, business judgment, or moral turpitude since the 
most recent regulatory examination report; and
    (c) Criminal, civil or administrative monetary liabilities, lawsuits 
or judgments. There are no known potential criminal, civil or 
administrative monetary liabilities, material pending lawsuits, or 
unsatisfied judgments against the applicant or any of its directors or 
senior officers since the most recent regulatory examination report, 
that are significant to the applicant's operations.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998; 
65 FR 8261, Feb. 18, 2000]



Sec. 925.13  Home financing policy requirement.

    (a) Standard. An applicant shall be deemed to be in compliance with 
the home financing policy requirement of section 4(a)(2)(C) of the Act 
and Sec. 925.6(a)(6) of this part, if the applicant has received a 
Community Reinvestment Act (CRA) rating of ``Satisfactory'' or better on 
its most recent formal, or if unavailable, informal or preliminary, CRA 
performance evaluation.
    (b) Written justification required. An applicant that is not subject 
to the CRA shall file as part of its application for membership a 
written justification acceptable to the Bank of how and why the 
applicant's home financing policy is consistent with the Bank System's 
housing finance mission.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000]

[[Page 714]]



Sec. 925.14  De novo insured depository institution applicants.

    (a)(1) Duly organized, subject to inspection and regulation, 
financial condition and character of management requirements. An insured 
depository institution applicant whose date of charter approval is 
within three years prior to the date the Bank receives the applicant's 
application for membership in the Bank, is deemed to meet the 
requirements of Secs. 925.7, 925.8, 925.11 and 925.12.
    (2) Makes long-term home mortgage loans requirement. The applicant 
shall be deemed to make long-term home mortgage loans as required by 
Sec. 925.9 of this part, if it has filed as part of its application for 
membership a written justification acceptable to the Bank of how its 
home financing credit policy and lending practices will include 
originating or purchasing long-term home mortgage loans.
    (3) 10 percent requirement--(i) One-year requirement. An applicant 
that is subject to the 10 percent requirement of section 4(a)(2)(A) of 
the Act and section 925.6(b) of this part, shall have until one year 
after commencing its initial business operations to meet the 10 percent 
requirement of Sec. 925.10 of this part.
    (ii) Conditional approval. The applicant shall be conditionally 
deemed to be in compliance with the 10 percent requirement of section 
4(a)(2)(A) of the Act and section 925.6(b) of this part. An applicant 
that receives such conditional membership approval is subject to the 
stock purchase requirements of Sec. 925.20 of this part and the advances 
provisions of part 950 of this chapter.
    (iii) Approval. The applicant shall be deemed to be in compliance 
with the 10 percent requirement of section 4(a)(2)(A) of the Bank Act 
and section 925.6(b) of this part upon receipt by the Bank from the 
applicant, within one year after commencement of the applicant's initial 
business operations, of evidence acceptable to the Bank that the 
applicant satisfies the 10 percent requirement.
    (iv) Conditional approval deemed null and void. If the requirements 
of paragraph (a)(3)(iii) of this section are not satisfied, the 
applicant shall be deemed to be in noncompliance with the 10 percent 
requirement of section 4(a)(2)(A) of the Act and Sec. 925.6(b) of this 
part, and its conditional membership approval is deemed null and void.
    (v) Treatment of outstanding advances and Bank stock. If the 
applicant's conditional membership approval is deemed null and void 
pursuant to paragraph (a)(3)(iv) of this section, the liquidation of any 
outstanding indebtedness owed by the applicant to the Bank and 
redemption of stock of such Bank shall be carried out in accordance with 
Sec. 925.29 of this part.
    (4) Home financing policy requirement--(i) Conditional approval. An 
applicant that has not received its first formal, or if unavailable, 
informal or preliminary, Community Reinvestment Act (CRA) performance 
evaluation, shall be conditionally deemed to be in compliance with the 
home financing policy requirement of section 4(a)(2)(C) of the Act and 
Sec. 925.6(a)(6) of this part, if the applicant has filed as part of its 
application for membership a written justification acceptable to the 
Bank of how and why its home financing credit policy and lending 
practices will meet the credit needs of its community. An applicant that 
receives such conditional membership approval is subject to the stock 
purchase requirements of Sec. 925.20 of this part and the advances 
provisions of 12 CFR part 950.
    (ii) Approval. The applicant shall be deemed to be in compliance 
with the home financing policy requirement of section 4(a)(2)(C) of the 
Act and Sec. 925.6(a)(6) of this part upon receipt by the Bank of 
evidence from the applicant that it received a CRA rating of 
``Satisfactory'' or better on its first formal, or if unavailable, 
informal or preliminary, CRA performance evaluation.
    (iii) Conditional approval deemed null and void. If the applicant's 
first such CRA rating is ``Needs to Improve'' or ``Substantial Non-
Compliance,'' the applicant shall be deemed to be in noncompliance with 
the home financing policy requirement of section 4(a)(2)(C) of the Act 
and Sec. 925.6(a)(6) of this part, subject to rebuttal by the applicant 
under Sec. 925.17(f) of this part, and its conditional membership 
approval is deemed null and void.

[[Page 715]]

    (iv) Treatment of outstanding advances and Bank stock. If the 
applicant's conditional membership approval is deemed null and void 
pursuant to paragraph (a)(4)(iii) of this section, the liquidation of 
any outstanding indebtedness owed by the applicant to the Bank and 
redemption of stock of such Bank shall be carried out in accordance with 
Sec. 933.29 of this part.
    (b) [Reserved]

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40024, July 27, 1998; 
65 FR 8261, Feb. 18, 2000; 65 FR 13870, Mar. 15, 2000]



Sec. 925.15  Recent merger or acquisition applicants.

    An applicant that merged with or acquired another institution prior 
to the date the Bank receives its application for membership is subject 
to the requirements of Secs. 925.7 to 925.13 of this part except as 
provided in this section.
    (a) Financial condition requirement--(1) Regulatory financial 
reports. For purposes of Sec. 925.11(a)(1) of this part, an applicant 
that, as a result of a merger or acquisition preceding the date the Bank 
receives its application for membership, has not yet filed regulatory 
financial reports with its appropriate regulator for the last six 
calendar quarters and three year-ends preceding such date, shall provide 
any regulatory financial reports that the applicant has filed with its 
appropriate regulator.
    (2) Performance trend criteria. For purposes of Sec. 925.11(b)(3)(i) 
(A) to (C) of this part, an applicant that, as a result of a merger or 
acquisition preceding the date the Bank receives its application for 
membership, has not yet filed combined regulatory financial reports with 
its appropriate regulator for the last six calendar quarters preceding 
such date, shall provide pro forma combined financial statements for 
those calendar quarters in which actual combined regulatory financial 
reports are unavailable.
    (b) Home financing policy requirement. For purposes of Sec. 925.13 
of this part, an applicant that, as a result of a merger or acquisition 
preceding the date the Bank receives its application for membership, has 
not received its first formal, or if unavailable, informal or 
preliminary, Community Reinvestment Act performance evaluation, shall 
file as part of its application a written justification acceptable to 
the Bank of how and why the applicant's home financing credit policy and 
lending practices will meet the credit needs of its community.
    (c) Makes long-term home mortgage loans requirement; 10 percent 
requirement. For purposes of determining compliance with Secs. 925.9 and 
925.10, a Bank may, in its discretion, permit an applicant that, as a 
result of a merger or acquisition preceding the date the Bank receives 
its application for membership, has not yet filed a consolidated 
regulatory financial report as a combined entity with its appropriate 
regulator, to provide the combined pro forma financial statement for the 
combined entity filed with the regulator that approved the merger or 
acquisition.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, 40024, July 27, 
1998; 65 FR 8261, Feb. 18, 2000]



Sec. 925.16  Financial condition requirement for insurance company applicants.

    An insurance company applicant shall be deemed to meet the financial 
condition requirement of section 4(a)(2)(B) of the Act and 
Sec. 925.6(a)(4) of this part, if, based on the information contained in 
the applicant's most recent regulatory financial report filed with its 
appropriate regulator, the applicant meets all of its minimum statutory 
and regulatory capital requirements and the capital standards 
established by the National Association of Insurance Commissioners.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998; 
65 FR 8261, Feb. 18, 2000]

[[Page 716]]



Sec. 925.17  Rebuttable presumptions.

    (a) Rebutting presumptive compliance. The presumption that an 
applicant meeting the requirements of Secs. 925.7 to 925.16 of this part 
is in compliance with section 4(a) of the Act and Sec. 925.6 (a) and (b) 
of this part, may be rebutted, and the Bank may deny membership to the 
applicant, if the Bank obtains substantial evidence to overcome the 
presumption of compliance.
    (b) Rebutting presumptive noncompliance. The presumption that an 
applicant not meeting a particular requirement of Secs. 925.8, 925.11, 
925.12, 925.13, or 925.16 of this part is in noncompliance with section 
4(a) of the Act and Sec. 925.6(a) (2), (4), (5), or (6) of this part, 
may be rebutted, and the applicant shall be deemed to meet such 
requirement, if the applicable requirements in this section are 
satisfied.
    (c) Presumptive noncompliance by insurance company applicant with 
``subject to inspection and regulation'' requirement of Sec. 925.8. If 
an insurance company applicant is not subject to inspection and 
regulation by an appropriate state regulator accredited by the National 
Association of Insurance Commissioners (NAIC), as required by Sec. 925.8 
of this part, the applicant or the Bank shall prepare a written 
justification that provides substantial evidence acceptable to the Bank 
that the applicant is subject to inspection and regulation as required 
by Sec. 925.6(a)(2) of this part, notwithstanding the lack of NAIC 
accreditation.
    (d) Presumptive noncompliance with financial condition requirements 
of Secs. 925.11 and 925.16--(1) Applicants other than insurance 
companies. For applicants other than insurance companies, in the case of 
an applicant's lack of a composite regulatory examination rating within 
the two-year period required by Sec. 925.11(b)(1) of this part, a 
variance from the rating required by Sec. 925.11(b)(3)(i) of this part, 
or a variance from a performance trend criterion required by 
Sec. 925.11(b)(3)(i) of this part, the applicant or the Bank shall 
prepare a written justification pertaining to such requirement that 
provides substantial evidence acceptable to the Bank that the applicant 
is in the financial condition required by Sec. 925.6(a)(4) of this part, 
notwithstanding the lack of rating or variance.
    (2) Insurance company applicants. In the case of an insurance 
company applicant's variance from a capital requirement or standard of 
Sec. 925.16 of this part, the applicant or the Bank shall prepare a 
written justification pertaining to such requirement or standard that 
provides substantial evidence acceptable to the Bank that the applicant 
is in the financial condition required by Sec. 925.6(a)(4) of this part, 
notwithstanding the variance.
    (e) Presumptive noncompliance with character of management 
requirement of Sec. 925.12--(1) Enforcement actions. If an applicant or 
any of its directors or senior officers is subject to, or operating 
under, any enforcement action instituted by its appropriate regulator, 
the applicant shall provide or the Bank shall obtain:
    (i) Regulator confirmation. Written or verbal confirmation from the 
applicant's appropriate regulator that the applicant or its directors or 
senior officers are in substantial compliance with all aspects of the 
enforcement action; or
    (ii) Written analysis. A written analysis acceptable to the Bank 
indicating that the applicant or its directors or senior officers are in 
substantial compliance with all aspects of the enforcement action. The 
written analysis shall state each action the applicant or its directors 
or senior officers are required to take by the enforcement action, the 
actions actually taken by the applicant or its directors or senior 
officers, and whether the applicant regards this as substantial 
compliance with all aspects of the enforcement action.
    (2) Criminal, civil or administrative proceedings. If an applicant 
or any of its directors or senior officers has been the subject of any 
criminal, civil or administrative proceedings reflecting upon 
creditworthiness, business judgment, or moral turpitude since the most 
recent regulatory examination report, the applicant shall provide or the 
Bank shall obtain:
    (i) Regulator confirmation. Written or verbal confirmation from the 
applicant's appropriate regulator that the proceedings will not likely 
result in enforcement action; or

[[Page 717]]

    (ii) Written analysis. A written analysis acceptable to the Bank 
indicating that the proceedings will not likely result in enforcement 
action. The written analysis shall state the severity of the charges, 
and any mitigating action taken by the applicant or its directors or 
senior officers.
    (3) Criminal, civil or administrative monetary liabilities, lawsuits 
or judgments. If there are any known potential criminal, civil or 
administrative monetary liabilities, material pending lawsuits, or 
unsatisfied judgments against the applicant or any of its directors or 
senior officers since the most recent regulatory examination report, 
that are significant to the applicant's operations, the applicant shall 
provide or the Bank shall obtain:
    (i) Regulator confirmation. Written or verbal confirmation from the 
applicant's appropriate regulator that the liabilities, lawsuits or 
judgments will not likely cause the applicant to fall below its 
applicable capital requirements set forth in Secs. 925.11(b)(2) and 
925.16 of this part; or
    (ii) Written analysis. A written analysis acceptable to the Bank 
indicating that the liabilities, lawsuits or judgments will not likely 
cause the applicant to fall below its applicable capital requirements 
set forth in Secs. 925.11(b)(2) and 925.16 of this part. The written 
analysis shall state the likelihood of the applicant or its directors or 
senior officers prevailing, and the financial consequences if the 
applicant or its directors or senior officers do not prevail.
    (f) Presumptive noncompliance with home financing policy 
requirements of Secs. 925.13, 925.14(a)(4), and 925.14(b)(3). If an 
applicant received a ``Substantial Non-Compliance'' rating on its most 
recent formal, or if unavailable, informal or preliminary, Community 
Reinvestment Act (CRA) performance evaluation, or a ``Needs to Improve'' 
CRA rating on its most recent formal, or if unavailable, informal or 
preliminary, CRA performance evaluation and a CRA rating of ``Needs to 
Improve'' or better on any immediately preceding CRA performance 
evaluation, the applicant shall provide or the Bank shall obtain:
    (1) Regulator confirmation. Written or verbal confirmation from the 
applicant's appropriate regulator of the applicant's recent satisfactory 
CRA performance, including any corrective action that substantially 
improved upon the deficiencies cited in the most recent CRA performance 
evaluation(s); or
    (2) Written analysis. A written analysis acceptable to the Bank 
demonstrating that the CRA rating is unrelated to home financing, and 
providing substantial evidence of how and why the applicant's home 
financing credit policy and lending practices meet the credit needs of 
its community.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998; 
65 FR 8261, Feb. 18, 2000]



Sec. 925.18  Determination of appropriate Bank district for membership.

    (a) Eligibility. (1) An institution eligible to become a member of a 
Bank under the Act and this part may become a member only of the Bank of 
the district in which the institution's principal place of business is 
located, except as provided in paragraph (a)(2) of this section. A 
member shall promptly notify its Bank in writing whenever it relocates 
its principal place of business to another state and the Bank shall 
inform the Finance Board in writing of any such relocation.
    (2) An institution eligible to become a member of a Bank under the 
Act and this part may become a member of the Bank of a district 
adjoining the district in which the institution's principal place of 
business is located, if demanded by convenience and then only with the 
approval of the Finance Board.
    (b) Principal place of business. Except as otherwise designated in 
accordance with this section, the principal place of business of an 
institution is the state in which the institution maintains its home 
office established as such in conformity with the laws under which the 
institution is organized.
    (c) Designation of principal place of business. (1) A member or an 
applicant for membership may request in writing

[[Page 718]]

to the Bank in the district where the institution maintains its home 
office that a state other than the state in which it maintains its home 
office be designated as its principal place of business. Within 90 
calendar days of receipt of such written request, the board of directors 
of the Bank in the district where the institution maintains its home 
office shall designate a state other than the state where the 
institution maintains its home office as the institution's principal 
place of business, provided all of the following criteria are satisfied:
    (i) At least 80 percent of the institution's accounting books, 
records and ledgers are maintained, located or held in such designated 
state;
    (ii) A majority of meetings of the institution's board of directors 
and constituent committees are conducted in such designated state; and
    (iii) A majority of the institution's five highest paid officers 
have their place of employment located in such designated state.
    (2) Written notice of a designation made pursuant to paragraph 
(c)(1) of this section shall be sent to the Bank in the district 
containing the designated state, the Finance Board and the institution.
    (3) The notice of designation made pursuant to paragraph (c)(1) of 
this section shall include the state designated as the principal place 
of business and the resulting Bank to which membership will be 
transferred.
    (4) If the board of directors of the Bank in the district where the 
institution maintains its home office fails to make the designation 
requested by the member or applicant pursuant to paragraph (c)(1) of 
this section, then the member or applicant may request in writing that 
the Finance Board make the designation.
    (d) Transfer of membership. (1) No transfer of membership from one 
Bank to another Bank shall take effect until the Banks involved reach 
agreement on a method of orderly transfer.
    (2) In the event that the Banks involved fail to agree on a method 
of orderly transfer, the Finance Board shall determine the conditions 
under which the transfer shall take place.
    (e) Effect of transfer. A transfer of membership pursuant to this 
section shall be effective for all purposes, but shall not affect voting 
rights in the year of the transfer and shall not be subject to the 
provisions on termination of membership set forth in section 6 of the 
Act or Secs. 925.26, 925.27, and 925.28, nor the restriction on 
reacquiring Bank membership set forth in Sec. 925.30.

(The information collection requirements contained in this section have 
been approved by the Office of Management and Budget under control 
number 3069-0004)

[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 65692, Nov. 30, 1998; 
65 FR 8261, Feb. 18, 2000; 65 FR 13870, Mar. 15, 2000]



                      Subpart D--Stock Requirements

    Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted. 
Redesignated at 61 FR 42542, Aug. 16, 1996.



Sec. 925.19  Par value and price of stock.

    The capital stock of each Bank shall be sold at par, unless the 
Board has fixed a higher price.



Sec. 925.20  Stock purchase.

    (a) Minimum stock purchase. Each member shall purchase stock in the 
Bank in which it is a member in an amount equal to the greater of:
    (1) $500;
    (2) 1 percent of the member's aggregate unpaid loan principal; or
    (3) 5 percent of the member's aggregate amount of outstanding 
advances.
    (b) Timing of minimum stock purchase. (1) Within 60 calendar days 
after an institution is approved for membership in a Bank pursuant to 
Sec. 925.3 of this part, or an institution is automatically approved for 
membership pursuant to Sec. 925.4(c) of this part, the institution shall 
purchase its minimum stock requirement as set forth in paragraph (a) of 
this section.
    (2) At the election of an institution approved for membership, 
including those automatically approved under Sec. 925.4(c) of this part, 
the institution may purchase its minimum stock requirement in 
installments, provided that not less than one-fourth of the total amount 
shall be purchased within 60 calendar days of the date of approval

[[Page 719]]

of membership, and that a further sum of not less than one-fourth of 
such total shall be purchased at the end of each succeeding period of 
four months from the date of approval of membership.
    (c) Commencement of membership. An institution that has been 
approved for membership shall become a member at the time it purchases 
its minimum stock requirement or the first installment thereof pursuant 
to this section.
    (d) Failure to purchase minimum stock requirement. If an institution 
that has submitted an application and been approved for membership fails 
to purchase its minimum stock requirement or its first installment 
within 60 calendar days of the date of its approval for membership, such 
approval shall be null and void and the institution, if it wants to be a 
member, shall be required to submit a new application for membership.
    (e) Reports. The Bank shall make quarterly reports to the Finance 
Board setting forth purchases by institutions approved for membership of 
their minimum stock requirement pursuant to this section.

[58 FR 43542, Aug. 17, 1993; 58 FR 47181, Sept. 7, 1993. Redesignated 
and amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 40024, July 27, 
1998; 63 FR 65692, Nov. 30, 1998; 65 FR 8261, Feb. 18, 2000; 65 FR 
13870, Mar. 15, 2000]



Sec. 925.21  Issuance and form of stock.

    (a) A Bank shall issue to each new member, as of the effective date 
of membership, stock in the member's name for the amount of stock 
purchased and paid for in full.
    (b) If the member purchases stock in installments, the stock shall 
be issued in installments with the appropriate number of shares issued 
after each payment is made.
    (c) Stock may be issued in certificated or uncertificated form at 
the discretion of the Bank.
    (d) A Bank may convert all outstanding certificated stock to 
uncertificated form at its discretion.



Sec. 925.22  Adjustments in stock holdings.

    (a) Adjustment in general. A Bank may from time to time increase or 
decrease the amount of stock any member is required to hold.
    (b)(1) Annual adjustment. A Bank shall calculate annually, in the 
manner set forth in Sec. 925.20(a) of this part, each member's required 
minimum holdings of stock in the Bank in which it is a member using 
calendar year-end financial data provided by the member to the Bank, 
pursuant to Sec. 925.31(d) of this part, and shall notify each member of 
the adjustment. The notice shall clearly state that the Bank's 
calculation of each member's minimum stock holdings is to be used to 
determine the number of votes that the member may cast in that year's 
election of directors and shall identify the state within the district 
in which the member will vote. A member that does not agree with the 
Bank's calculation of the minimum stock requirement or with the 
identification of its voting state may request the Finance Board to 
review the Bank's determination. The Finance Board shall promptly 
determine the member's minimum required holdings and its proper voting 
state, which determination shall be final.
    (2) Redemption of excess shares. If, after the annual adjustment 
required by paragraph (b)(1) of this section is made, the amount of 
stock that a member is required to hold is decreased, the Bank may, in 
its discretion and upon proper application of the member, retire such 
excess stock, and the Bank shall pay for each share upon surrender of 
the stock an amount equal to the par value thereof (except that if at 
any time the Board finds that the paid-in capital of a Bank is or is 
likely to be impaired as a result of losses in or depreciation of the 
assets held, the Bank shall on the order of the Board withhold from the 
amount to be paid in retirement of the stock a pro rata share of the 
amount of such impairment as determined by the Board) or, at its 
election, the Bank may credit any part of such payment against the 
member's debt to the Bank.
    (c) A member's stock holdings shall not be reduced under this 
section to an amount less than required by sections

[[Page 720]]

6(b), 10(c) and 10(e) of the Act, 12 U.S.C. 1426(b), 1430(c), 1430(e).

(The information collection requirements contained in this section have 
been approved where applicable by the Office of Management and Budget 
under control number 3069-0004)

[58 FR 43542, Aug. 17, 1993, as amended at 58 FR 50837, Sept. 29, 1993; 
58 FR 53023, Oct. 13, 1993; 58 FR 58231, Oct. 29, 1993. Redesignated and 
amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 65692, Nov. 30, 
1998; 65 FR 8261, Feb. 18, 2000]



Sec. 925.23  Purchase of excess stock.

    A member may purchase stock in excess of the minimum amount required 
by Sec. 925.20(a) of this part as long as such purchase is approved by 
the member's Bank and the laws under which the member operates permit 
such purchase.

[58 FR 43542, Aug. 17, 1993. Redesignated and amended at 61 FR 42542, 
42549, Aug. 16, 1996; 65 FR 8262, Feb. 18, 2000]



               Subpart E--Consolidations Involving Members

    Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted. 
Redesignated at 61 FR 42542, Aug. 16, 1996.



Sec. 925.24  Consolidations of members.

    (a) Consolidation of members in same district--(1) Upon 
consolidation of two or more member institutions which are all members 
of the same Bank district into one institution operating under the 
charter of one of the consolidating institutions, the transfer of the 
Bank stock held by the disappearing institution(s) to the consolidated 
institution shall be deemed approved by the Board pursuant to section 
6(f) of the Act, 12 U.S.C. 1426(f).
    (2) The stock of the disappearing institution(s) held by a 
consolidated institution under this section may be redeemed, provided 
that the consolidated institution holds the minimum amount of stock 
calculated in the manner set forth in Sec. 925.20(a) of this part based 
on the consolidated institution's total assets and the consolidated 
institution's stock holdings are not reduced to an amount less than 
required by sections 6(b), 10(c) and 10(e) of the Act, 12 U.S.C. 
1426(b), 1430(c), 1430(e).
    (b) Consolidation of members in different districts--(1) Termination 
of membership. Upon consolidation of two member institutions which are 
members of different Banks into one institution operating under the 
charter of one of the consolidating institutions, the disappearing 
institution's membership terminates upon cancellation of its charter, 
except that if more than 80 percent of the assets of the consolidated 
institution are derived from the assets of the disappearing institution, 
then the consolidated institution shall continue to be a member of the 
Bank of which the disappearing institution was a member prior to the 
consolidation and the membership of the other institution terminates 
upon consummation of the consolidation.
    (2) Treatment of outstanding advances and Bank stock. The 
liquidation of any outstanding indebtedness owed to the disappearing 
institution's Bank and redemption of stock of such Bank shall be carried 
out in accordance with Sec. 925.29 of this part.
    (3) Dividends on acquired Bank stock. The consolidated institution 
is entitled to receive dividends on outstanding Bank stock acquired in 
the consolidation from the disappearing institution in accordance with 
section 6(g) of the Act, 12 U.S.C. 1426(g), and Sec. 917.7 of this 
chapter.

[58 FR 43542, Aug. 17, 1993. Redesignated and amended at 61 FR 42542, 
42549, Aug. 16, 1996; 63 FR 65692, Nov. 30, 1998; 65 FR 8262, Feb. 18, 
2000]



Sec. 925.25  Consolidations involving nonmembers.

    (a) Termination of membership. If a member is consolidated into an 
institution that is not a member, its membership in the Bank terminates 
upon cancellation of its charter.
    (b) Notification of decision to seek membership. When a consolidated 
institution resulting from a consolidation described in paragraph (a) of 
this section has its principal place of business in a state in the same 
Bank district as the disappearing institution, the consolidated 
institution shall have 60 calendar days after the cancellation of the 
charter of the disappearing institution to notify the disappearing 
institution's

[[Page 721]]

Bank that it intends to apply for membership in such Bank.
    (c) Application for membership. If the consolidated institution has 
provided notification pursuant to paragraph (b) of this section, it must 
apply for membership pursuant to subpart B of this part within 60 
calendar days of the notification.
    (d) Treatment of outstanding advances, Bank stock and minimum stock 
requirements--(1) Prior to membership approval. The disappearing 
institution's Bank may permit the consolidated institution to continue 
to hold any outstanding Bank advances and stock, and the consolidated 
institution shall have the limited rights associated with such stock in 
accordance with paragraphs (e) and (f) of this section: (i) During the 
initial 60-day notification period; (ii) for 60 calendar days after 
receipt of notification that the consolidated institution intends to 
apply for membership; and (iii) during the processing of an application 
for membership.
    (2) Upon membership approval. (i) If the application of the 
consolidated institution for membership is approved, the transfer of the 
Bank stock held by the disappearing institution to the consolidated 
institution shall be deemed approved by the Finance Board pursuant to 
section 6(f) of the Act, 12 U.S.C. 1426(f).
    (ii) If the application of the consolidated institution for 
membership is approved:
    (A) The consolidated institution shall purchase any additional 
amount of stock required to meet the minimum stock requirement of 
Sec. 925.20(a) of this part, based on the consolidated institution's 
total assets, within 60 calendar days of the date of approval of 
membership; or
    (B) At the election of the consolidated institution, the amount of 
stock required to be purchased to meet the requirement of Sec. 925.20(a) 
of this part may be purchased in installments, provided that not less 
than one-fourth of such total additional amount shall be purchased 
within 60 calendar days of the date of approval of membership, and that 
a further sum of not less than one-fourth of such total additional 
amount shall be purchased at the end of each succeeding period of four 
months from the date of approval of membership.
    (iii) A consolidated institution that has been approved for 
membership shall become a member at the time it purchases the additional 
amount of stock required to meet the minimum stock requirement of 
Sec. 925.20(a) of this part or the first installment thereof.
    (3) Upon failure to apply for or be approved for membership. If the 
consolidated institution does not apply for membership, or if its 
application for membership is denied, then the liquidation of any 
outstanding indebtedness owed to the disappearing institution's Bank and 
redemption of stock of such Bank shall be carried out in accordance with 
Sec. 925.29 of this part, and the consolidated institution shall have 
the limited rights associated with such stock in accordance with 
paragraphs (e) and (f) of this section.
    (e) Dividends on acquired Bank stock. The consolidated institution 
is entitled to receive dividends on outstanding Bank stock acquired in 
the consolidation from the disappearing institution in accordance with 
section 6(g) of the Act, 12 U.S.C. 1426(g), and Sec. 934.17 of this 
chapter.

(The information collection requirements contained in this section have 
been approved where applicable by the Office of Management and Budget 
under control number 3069-0004)

[58 FR 43542, Aug. 17, 1993, as amended at 58 FR 50837, Sept. 29, 1993. 
Rdesignated and amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 
65692, Nov. 30, 1998; 65 FR 8261, Feb. 18, 2000]



            Subpart F--Withdrawal and Removal From Membership

    Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted. 
Redesignated at 61 FR 42542, Aug. 16, 1996.



Sec. 925.26  Procedure for withdrawal.

    (a) Notice of withdrawal. (1) Any member that is eligible under 
applicable law to withdraw from Bank membership may do so after 
providing the Finance Board and its Bank at least six months written 
notice of the member's intention to withdraw from membership.

[[Page 722]]

    (2) Federal savings association members may submit notices of 
intention to withdraw from Bank membership under paragraph (a)(1) of 
this section prior to May 13, 2000, but may not withdraw from membership 
prior to May 13, 2000.
    (b) Cancellation of notice of withdrawal. A member may cancel its 
notice of withdrawal by providing both the Board and its Bank written 
notice of cancellation any time before the effective date of the 
withdrawal.
    (c) Treatment of outstanding advances and Bank stock. The 
liquidation of any outstanding indebtedness owed to the Bank in which 
membership has been terminated and redemption of stock of such Bank 
shall be carried out in accordance with Sec. 925.29 of this part.
    (d) Dividends on Bank stock. An institution that has withdrawn from 
Bank membership pursuant to this section is entitled to receive 
dividends on outstanding stock of the Bank in which membership has been 
terminated in accordance with section 6(g) of the Act, 12 U.S.C. 
1426(g), and Sec. 917.7 of this chapter.

(The information collection requirements contained in this section have 
been approved where applicable by the Office of Management and Budget 
under control number 3069-0004)

[58 FR 43542, Aug. 17, 1993, as amended at 58 FR 50837, Sept. 29, 1993. 
Redesignated and amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 
65692, Nov. 30, 1998; 65 FR 8262, Feb. 18, 2000; 65 FR 13870, Mar. 15, 
2000]



Sec. 925.27  Procedure for removal.

    (a) Bank request for removal. If a Bank believes that any of the 
grounds for removal of a member from membership contained in paragraph 
(b) of this section exists, the Bank may submit a written request to the 
Finance Board stating the grounds for removal and recommending removal 
of the member from membership.
    (b) Grounds. The following are grounds for removing a member from 
membership in a Bank:
    (1) Failure by the member to comply with any provision of the Act or 
any regulation of the Finance Board adopted under the Act;
    (2) Insolvency of the member. A member is deemed insolvent if its 
assets are less than its liabilities;
    (3) The member's management or home-financing policies are 
inconsistent with sound and economical home financing or with the 
purposes of the Act; or
    (4) Any other condition exists with respect to the member that the 
Finance Board believes would jeopardize the safety and soundness of the 
member's Bank.
    (c) Procedure. (1) If the Finance Board believes that any of the 
grounds for removal contained in paragraph (b) of this section exist, 
and it believes that the member should be removed from membership, it 
shall provide the member with at least 30 calendar days written notice 
of its intention to remove the member from membership.
    (2) Such notice shall be served as determined by the Finance Board 
and shall state the grounds for such removal action and the time and 
place of a hearing at which the member may be heard.
    (3) A hearing on such removal action shall be conducted in 
accordance with procedures established by the Finance Board.
    (d) Removal by Finance Board. If the Finance Board determines, in 
its sole discretion and after complying with the requirements of 
paragraph (c) of this section, that any of the grounds for removal of a 
member contained in paragraph (b) of this section exists, it may remove 
the member from membership.
    (e) Treatment of outstanding advances and Bank stock. The 
liquidation of any outstanding indebtedness owed to the Bank in which 
membership has been terminated and redemption of stock of such Bank 
shall be carried out in accordance with Sec. 925.29 of this part.
    (f) Dividends on Bank stock. An institution that has been removed 
from Bank membership pursuant to this section is entitled to receive 
dividends on outstanding stock of the Bank in which membership has been 
terminated in accordance with section 6(g) of the Act,

[[Page 723]]

12 U.S.C. 1426(g), and Sec. 917.7 of this chapter.

[58 FR 43542, Aug. 17, 1993; 58 FR 47181, Sept. 7, 1993. Redesignated 
and amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 65692, Nov. 30, 
1998; 65 FR 8261-8262, Feb. 18, 2000]



Sec. 925.28  Automatic termination of membership for institutions placed in receivership.

    (a) Automatic termination. As of the effective date of being placed 
in receivership, an institution's Bank membership automatically 
terminates.
    (b) Treatment of outstanding advances and Bank stock. The 
liquidation of any outstanding indebtedness owed to the Bank in which 
membership has been terminated and redemption of stock of such Bank 
shall be carried out in accordance with Sec. 925.29 of this part.
    (c) Dividends on Bank stock. The receiver is entitled to receive 
dividends on outstanding Bank stock of the institution placed in 
receivership in accordance with section 6(g) of the Act, 12 U.S.C. 
1426(g), and Sec. 917.7 of this chapter.

[58 FR 43542, Aug. 17, 1993. Redesignated and amended at 61 FR 42542, 
42549, Aug. 16, 1996; 63 FR 65692, Nov. 30, 1998; 65 FR 8262, Feb. 18, 
2000]



   Subpart G--Orderly Liquidation of Advances and Redemption of Stock



Sec. 925.29  Orderly liquidation of advances and redemption of stock.

    (a)(1) If an institution ceases to be a member of a Bank pursuant to 
Secs. 925.14(a)(3), 925.14(a)(4), 925.26, 925.27 or 925.28 of this part, 
the institution, or its receiver under Sec. 925.28 of this part, may 
continue to hold the stock of the Bank of which such institution is no 
longer a member so long as the Bank requires that the stock be held as 
collateral for any outstanding indebtedness owed to the Bank. If an 
institution ceases to be a member of a Bank pursuant to Secs. 925.24(b) 
or 925.25(d)(3) of this part, the consolidated institution may continue 
to hold the stock of the disappearing institution's Bank so long as such 
Bank requires that the stock be held as collateral for any outstanding 
indebtedness owed to the Bank.
    (2) The indebtedness of the institution that has ceased to be a 
member of a Bank owed to such Bank shall be liquidated in an orderly 
manner as determined by the Bank in accordance with Sec. 950.19 of this 
chapter, and upon completion of such liquidation, such institution's 
remaining stock in the Bank shall be surrendered and canceled.
    (b) If an institution that has ceased to be a member of a Bank has 
no outstanding indebtedness owed to the Bank, such institution's stock 
in the Bank shall be surrendered and canceled.
    (c) An institution that has ceased to be a member shall receive for 
stock redeemed under paragraphs (a)(2) or (b) of this section a sum 
equal to the original amount paid for the stock redeemed, except that if 
at any time the Board finds that the paid-in capital of the Bank is or 
is likely to be impaired as a result of losses in or depreciation of the 
assets held by the Bank, the Bank shall on the order of the Board 
withhold from the amount to be paid in retirement of the stock a pro 
rata share of the amount of such impairment as determined by the Board.

[58 FR 43542, Aug. 17, 1993; 58 FR 53023, Oct. 13, 1993. Redesignated 
and amended at 61 FR 42542, 42549, Aug. 16, 1996; 65 FR 8262, Feb. 18, 
2000; 65 FR 13870, Mar. 15, 2000]



                 Subpart H--Reacquisition of Membership



Sec. 925.30  Readmission to membership.

    (a) In general. An institution that has withdrawn from membership, 
or otherwise terminated its membership, may not be readmitted to 
membership in any Bank for a period of 5 years from the date on which 
its membership terminated.
    (b) Exceptions. An institution that transfers membership between two 
Banks without interruption shall not be deemed to have withdrawn from 
Bank membership. Any institution that withdrew from Bank membership 
prior to December 31, 1997, and for which the 5-year period has not 
expired, may apply for membership in a

[[Page 724]]

Bank at any time, subject to the approval of the Finance Board and the 
requirements of 12 CFR part 925.

[65 FR 40981, July 3, 2000]



                  Subpart I--Bank Access to Information



Sec. 925.31  Reports and examinations.

    As a condition precedent to Bank membership, each member:
    (a) Consents to such examinations as the Bank or the Board may 
require for purposes of the Act;
    (b) Agrees that reports of examinations by local, state or federal 
agencies or institutions may be furnished by such authorities to the 
Bank or the Board upon request;
    (c) Agrees to give the Bank or the appropriate Federal banking 
agency, upon request, such information as the Bank or the appropriate 
Federal banking agency may need to compile and publish cost of funds 
indices and to publish other reports or statistical summaries pertaining 
to the activities of Bank members;
    (d) Agrees to provide the Bank with calendar year-end financial data 
each year, for purposes of making the calculation described in 
Sec. 925.22(b)(1) of this part; and
    (e) Agrees to provide the Bank with copies of reports of condition 
and operations required to be filed with the member's appropriate 
Federal banking agency, if applicable, within 20 calendar days of 
filing, as well as copies of any annual report of condition and 
operations required to be filed.

(The information collection requirements contained in this section have 
been approved where applicable by the Office of Management and Budget 
under control number 3069-0004)

[58 FR 43542, Aug. 17, 1993; 58 FR 50837, Sept. 29, 1993; 58 FR 53023, 
Oct. 13, 1993. Redesignated and amended at 61 FR 42542, 42549, Aug. 16, 
1996; 65 FR 8262, Feb. 18, 2000]



                     Subpart J--Membership Insignia



Sec. 925.32  Official membership insignia.

    Members may display the approved insignia of membership on their 
documents, advertising and quarters, and likewise use the words ``Member 
Federal Home Loan Bank System.''

[58 FR 43542, Aug. 17, 1993. Redesignated at 61 FR 42542, Aug. 16, 1996]



PART 926--FEDERAL HOME LOAN BANK HOUSING ASSOCIATES--Table of Contents




Sec.
926.1  Definitions.
926.2  Bank authority to make advances to housing associates.
926.3  Housing associate eligibility requirements.
926.4  Satisfaction of eligibility requirements.
926.5  Housing associate application process.
926.6  Appeals.

    Authority: 12 U.S.C. 1422b(a), 1430b.

    Source: 65 FR 44426, July 18, 2000, unless otherwise noted.



Sec. 926.1  Definitions.

    As used in this part:
    Advance has the meaning set forth in Sec. 950.1 of this chapter.
    Governmental agency means the governor, legislature, and any other 
component of a federal, state, local, tribal, or Alaskan native village 
government with authority to act for or on behalf of that government.
    HUD means the Department of Housing and Urban Development.
    State housing finance agency or SHFA means:
    (1) A public agency, authority, or publicly sponsored corporation 
that serves as an instrumentality of any state or political subdivision 
of any state, and functions as a source of residential mortgage loan 
financing in that state; or
    (2) A legally established agency, authority, corporation, or 
organization that serves as an instrumentality of any Indian tribe, 
band, group, nation, community, or Alaskan Native village recognized by 
the United States or any state, and functions as a source of residential 
mortgage loan financing for the Indian or Alaskan Native community.



Sec. 926.2  Bank authority to make advances to housing associates.

    Subject to the provisions of the Act and part 950 of this chapter, a 
Bank may make advances to an entity that is not a member of the Bank if 
the

[[Page 725]]

Bank has certified the entity as a housing associate under the 
provisions of this part.



Sec. 926.3  Housing associate eligibility requirements.

    (a) General. A Bank may certify as a housing associate any applicant 
that meets the following requirements, as determined using the criteria 
set forth in Sec. 926.4:
    (1) The applicant is approved under title II of the National Housing 
Act (12 U.S.C. 1707, et seq.);
    (2) The applicant is a chartered institution having succession;
    (3) The applicant is subject to the inspection and supervision of 
some governmental agency;
    (4) The principal activity of the applicant in the mortgage field 
consists of lending its own funds; and
    (5) The financial condition of the applicant is such that advances 
may be safely made to it.
    (b) State housing finance agencies. In addition to meeting the 
requirements in paragraph (a) of this section, any applicant seeking 
access to advances as a SHFA pursuant to Sec. 950.17(b)(2) of this 
chapter shall provide evidence satisfactory to the Bank, such as a copy 
of, or a citation to, the statutes and/or regulations describing the 
applicant's structure and responsibilities, that the applicant is a 
state housing finance agency as defined in Sec. 926.1.



Sec. 926.4  Satisfaction of eligibility requirements.

    (a) HUD approval requirement. An applicant shall be deemed to meet 
the requirement in section 10b(a) of the Act and Sec. 926.3(a)(1) that 
it be approved under title II of the National Housing Act if it submits 
a current HUD Yearly Verification Report or other documentation issued 
by HUD stating that the Federal Housing Administration of HUD has 
approved the applicant as a mortgagee.
    (b) Charter requirement. An applicant shall be deemed to meet the 
requirement in section 10b(a) of the Act and Sec. 926.3(a)(2) that it be 
a chartered institution having succession if it provides evidence 
satisfactory to the Bank, such as a copy of, or a citation to, the 
statutes and/or regulations under which the applicant was created, that:
    (1) The applicant is a government agency; or
    (2) The applicant is chartered under state, federal, local, tribal, 
or Alaskan Native village law as a corporation or other entity that has 
rights, characteristics, and powers under applicable law similar to 
those granted a corporation.
    (c) Inspection and supervision requirement. (1) An applicant shall 
be deemed to meet the inspection and supervision requirement in section 
10b(a) of the Act and Sec. 926.3(a)(3) if it provides evidence 
satisfactory to the Bank, such as a copy of, or a citation to, relevant 
statutes and/or regulations, that, pursuant to statute or regulation, 
the applicant is subject to the inspection and supervision of a federal, 
state, local, tribal, or Alaskan native village governmental agency.
    (2) An applicant shall be deemed to meet the inspection requirement 
if there is a statutory or regulatory requirement that the applicant be 
audited or examined periodically by a governmental agency or by an 
external auditor.
    (3) An applicant shall be deemed to meet the supervision requirement 
if the governmental agency has statutory or regulatory authority to 
remove an applicant's officers or directors for cause or otherwise 
exercise enforcement or administrative control over actions of the 
applicant.
    (d) Mortgage activity requirement. An applicant shall be deemed to 
meet the mortgage activity requirement in section 10b(a) of the Act and 
Sec. 926.3(a)(4) if it provides documentary evidence satisfactory to the 
Bank, such as a financial statement or other financial documents that 
include the applicant's mortgage loan assets and their funding 
liabilities, that it lends its own funds as its principal activity in 
the mortgage field. For purposes of this paragraph, lending funds 
includes, but is not limited to, the purchase of whole mortgage loans. 
In the case of a federal, state, local, tribal, or Alaskan Native 
village government agency, appropriated funds shall be considered an 
applicant's own funds. An applicant shall be deemed to satisfy this 
requirement notwithstanding that the majority of

[[Page 726]]

its operations are unrelated to mortgage lending if its mortgage 
activity conforms to this requirement. An applicant that acts 
principally as a broker for others making mortgage loans, or whose 
principal activity is to make mortgage loans for the account of others, 
does not meet this requirement.
    (e) Financial condition requirement. An applicant shall be deemed to 
meet the financial condition requirement in Sec. 926.3(a)(5) if the Bank 
determines that advances may be safely made to the applicant. The 
applicant shall submit to the Bank copies of its most recent regulatory 
audit or examination report, or external audit report, and any other 
documentary evidence, such as financial or other information, that the 
Bank may require to make the determination.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0005 with an expiration date of November 30, 2002.)



Sec. 926.5  Housing associate application process.

    (a) Authority. The Banks are authorized to approve or deny all 
applications for certification as a housing associate, subject to the 
requirements of the Act and this part. A Bank may delegate the authority 
to approve applications for certification as a housing associate only to 
a committee of the Bank's board of directors, the Bank president, or a 
senior officer who reports directly to the Bank president other than an 
officer with responsibility for business development.
    (b) Application requirements. An applicant for certification as a 
housing associate shall submit an application that satisfies the 
requirements of the Act and this part to the Bank of the district in 
which the applicant's principal place of business, as determined in 
accordance with part 925 of this chapter, is located.
    (c) Bank decision process--(1) Action on applications. A Bank shall 
approve or deny an application for certification as a housing associate 
within 60 calendar days of the date the Bank deems the application to be 
complete. A Bank shall deem an application complete, and so notify the 
applicant in writing, when it has obtained all of the information 
required by this part and any other information it deems necessary to 
process the application. If a Bank determines during the review process 
that additional information is necessary to process the application, the 
Bank may deem the application incomplete and stop the 60-day time period 
by providing written notice to the applicant. When the Bank receives the 
additional information, it shall again deem the application complete, so 
notify the applicant in writing, and resume the 60-day time period where 
it stopped.
    (2) Decision on applications. The Bank or a duly delegated committee 
of the Bank's board of directors, the Bank president, or a senior 
officer who reports directly to the Bank president other than an officer 
with responsibility for business development shall approve, or the board 
of directors of a Bank shall deny, each application for certification as 
a housing associate by a written decision resolution stating the grounds 
for the decision. Within three business days of a Bank's decision on an 
application, the Bank shall provide the applicant and the Finance Board 
with a copy of the Bank's decision resolution.
    (3) File. The Bank shall maintain a certification file for each 
applicant for at least three years after the date the Bank decides 
whether to approve or deny certification or the date the Finance Board 
resolves any appeal, whichever is later. At a minimum, the certification 
file shall include all documents submitted by the applicant or otherwise 
obtained or generated by the Bank concerning the applicant, all 
documents the Bank relied upon in making its determination regarding 
certification, including copies of statutes and regulations, and the 
decision resolution.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0005 with an expiration date of November 30, 2002.)



Sec. 926.6  Appeals.

    (a) General. Within 90 calendar days of the date of a Bank's 
decision to deny

[[Page 727]]

an application for certification as a housing associate, the applicant 
may submit a written appeal to the Finance Board that includes the 
Bank's decision resolution and a statement of the basis for the appeal 
with sufficient facts, information, analysis, and explanation to support 
the applicant's position. Appeals shall be sent to the Federal Housing 
Finance Board, 1777 F Street, NW, Washington, DC 20006, with a copy to 
the Bank.
    (b) Record for appeal. Upon receiving a copy of an appeal, the Bank 
whose action has been appealed shall provide to the Finance Board a 
complete copy of the applicant's certification file maintained by the 
Bank under Sec. 926.5(c)(3). Until the Finance Board resolves the 
appeal, the Bank shall promptly provide to the Finance Board any 
relevant new materials it receives. The Finance Board may request 
additional information or further supporting arguments from the 
applicant, the Bank, or any other party that the Finance Board deems 
appropriate.
    (c) Deciding appeals. Within 90 calendar days of the date an 
applicant files an appeal with the Finance Board, the Finance Board 
shall consider the record for appeal described in paragraph (b) of this 
section and resolve the appeal based on the requirements of the Act and 
this part.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0005 with an expiration date of November 30, 2002.)

[[Page 728]]





    SUBCHAPTER E--FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL 
                                STANDARDS



                           PART 930 [RESERVED]

[[Page 729]]





              SUBCHAPTER F--FEDERAL HOME LOAN BANK MISSION



PART 940--CORE MISSION ACTIVITIES--Table of Contents




Sec.
940.1  Definitions.
940.2  Mission of the Banks.
940.3  Core mission activities.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, 1431.

    Source: 65 FR 25278, May 1, 2000, unless otherwise noted.



Sec. 940.1  Definitions.

    Community lending has the meaning set forth in Sec. 952.3 of this 
chapter.
    Financial Management Policy (FMP) has the meaning set forth in 
Sec. 956.1 of this chapter.
    SBIC means a small business investment company formed pursuant to 15 
U.S.C. 681(d).
    Targeted income level has the meaning set forth in paragraphs (1) 
and (2) of the definition of ``targeted income level'' in Sec. 952.3 of 
this chapter.

[65 FR 25278, May 1, 2000, as amended at 65 FR 43981, July 17, 2000]



Sec. 940.2  Mission of the Banks.

    The mission of the Banks is to provide to their members and 
associates financial products and services, including but not limited to 
advances, that assist and enhance such members' and associates' 
financing of:
    (a) Housing, including single-family and multi-family housing 
serving consumers at all income levels; and
    (b) Community lending.



Sec. 940.3  Core mission activities.

    The following Bank activities qualify as core mission activities:
    (a) Advances;
    (b) Acquired member assets (AMA), except that United States 
government-insured or guaranteed whole single-family residential 
mortgage loans acquired under a commitment entered into after April 12, 
2000 shall qualify only in a cumulative dollar amount up to 33 percent 
of: The cumulative total dollar amount of AMA acquired by a Bank after 
April 12, 2000, less the cumulative dollar amount of United States 
government-insured or guaranteed whole single-family residential 
mortgage loans acquired after April 12, 2000 under commitments entered 
into on or before April 12, 2000 (which calculation, at the discretion 
of two or more Banks, may be made based on aggregate transactions among 
those Banks);
    (c) Standby letters of credit;
    (d) Intermediary derivative contracts;
    (e) Debt or equity investments:
    (1) That primarily benefit households having a targeted income 
level, a significant proportion of which must benefit households with 
incomes at or below 80 percent of area median income, or areas targeted 
for redevelopment by local, state, tribal or Federal government 
(including Federal Empowerment Zones and Enterprise and Champion 
Communities), by providing or supporting one or more of the following 
activities:
    (i) Housing;
    (ii) Economic development;
    (iii) Community services;
    (iv) Permanent jobs; or
    (v) Area revitalization or stabilization;
    (2) In the case of mortgage- or asset-backed securities, the 
acquisition of which would expand liquidity for loans that are not 
otherwise adequately provided by the private sector and do not have a 
readily available or well established secondary market; and
    (3) That involve one or more members or housing associates in a 
manner, financial or otherwise, and to a degree to be determined by the 
Bank;
    (f) Investments in SBICs, where one or more members or housing 
associates of the Bank also make a material investment in the same 
activity;
    (g) SBIC debentures, the short term tranche of SBIC securities, ore 
other debentures that are guaranteed by the Small Business 
Administration under title III of the Small Business Investment Act of 
1958, as amended (15 U.S.C. 681 et seq.);
    (h) Section 108 Interim Notes and Participation Certificates 
guaranteed by the Department of Housing and

[[Page 730]]

Urban Development under section 108 of the Housing and Community 
Development Act of 1974, as amended (42 U.S.C. 5308); and
    (i) Investments and obligations issued or guaranteed under the 
Native American Housing Assistance and Self-Determination Act of 1996 
(25 U.S.C. 4101 et seq.).

[65 FR 43981, July 17, 2000]



PART 944--COMMUNITY SUPPORT REQUIREMENTS--Table of Contents




Sec.
944.1  Definitions.
944.2  Community support requirement.
944.3  Community support standards.
944.4  Decision on community support statements.
944.5  Restrictions on access to long-term advances.
944.6  Bank community support programs.
944.7  Reports.

    Authority: 12 U.S.C. 1422a(a)(3)(B), 1422b(a)(1), and 1430(g).

    Source: 62 FR 28988, May 29, 1997, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 944.1  Definitions.

    For purposes of this part:
    Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 
1421, et seq.).
    Advance has the same meaning as in Sec. 935.1 of this chapter.
    Advisory Council means the Advisory Council each Bank is required to 
establish pursuant to section 10(j)(11) of the Act and part 960 of this 
chapter.
    Affordable Housing Program or AHP means the program each Bank is 
required to establish pursuant to section 10(j) of the Act and part 960 
of this chapter.
    Appropriate federal financial supervisory agency means the Office of 
the Comptroller of the Currency for national banks; the Board of 
Governors of the Federal Reserve System for state chartered banks that 
are members of the Federal Reserve System and bank holding companies; 
the Federal Deposit Insurance Corporation for state chartered banks and 
savings banks that are not members of the Federal Reserve System and the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation; and the Office of Thrift Supervision for savings 
associations the deposits of which are insured by the Federal Deposit 
Insurance Corporation and savings and loan holding companies.
    CICA or Community Investment Cash Advance has the same meaning as in 
Sec. 950.1 of this chapter.
    Targeted community lending has the same meaning as in Sec. 952.3 of 
this chapter.
    CRA means the Community Reinvestment Act of 1977, as amended (12 
U.S.C. 2901, et seq.).
    CRA evaluation means the public disclosure portion of the CRA 
performance evaluation provided by a member's appropriate federal 
financial supervisory agency.
    First-time homebuyer means:
    (1) An individual and his or her spouse, if any, who has had no 
present ownership interest in a principal residence during the three-
year period prior to purchase of a principal residence.
    (2) A displaced homemaker who, except for owning a residence with 
his or her spouse or residing in a residence owned by his or her spouse, 
meets the requirements of paragraph (1) of this definition. For purposes 
of this paragraph (2) of this definition, the term displaced homemaker 
means an adult who has not worked full-time, full-year in the labor 
force for a number of years and, during that period, worked primarily 
without remuneration to care for a home and family, and currently is 
unemployed or underemployed and is experiencing difficulty in obtaining 
or upgrading employment.
    (3) A single parent who, except for owning a residence with his or 
her spouse or residing in a residence owned by his or her spouse, meets 
the requirements of paragraph (1) of this definition. For purposes of 
this paragraph (3) of this definition, the term single parent means an 
individual who is unmarried or legally separated from a spouse and has 
custody or joint custody of one or more minor children or is pregnant.
    Long-term advance means an advance with a term to maturity greater 
than one year.

[[Page 731]]

    Restriction on access to long-term advances means a member may not 
borrow long-term advances or renew any maturing advance for a term to 
maturity greater than one year.

[62 FR 28988, May 29, 1997, as amended at 63 FR 65545, Nov. 27, 1998; 65 
FR 8262, Feb. 18, 2000; 65 FR 44428, July 18, 2000]



Sec. 944.2  Community support requirement.

    (a) Selection for community support review. The Finance Board shall 
select a member for community support review approximately once every 
two years.
    (b) Notice--(1) By the Finance Board. The Finance Board concurrently 
shall:
    (i) Notify each Bank of the members within its district that are 
required to submit community support statements during the calendar 
quarter; and
    (ii) Publish a notice in the Federal Register that includes the name 
and address of each member required to submit a community support 
statement during the calendar quarter, and the deadline for submission 
of the community support statement to the Finance Board. The deadline 
for submission of a community support statement shall be no earlier than 
45 calendar days after the date of publication of the notice in the 
Federal Register.
    (2) By the Banks. Within 15 calendar days of the date of publication 
in the Federal Register of the notice required by paragraph (b)(1)(ii) 
of this section, a Bank shall provide written notice:
    (i) To each member within its district that is named in the Federal 
Register notice, that the member is required to submit a community 
support statement to the Finance Board by the deadline stated in the 
Federal Register notice; and
    (ii) Its Advisory Council and nonprofit housing developers, 
community groups, and other interested parties in its district of the 
name and address of each member within its district that is required to 
submit a community support statement during the calendar quarter.
    (c) Required documents. Each member selected for community support 
review shall submit a completed Community Support Statement Form 
executed by an appropriate senior officer to the Finance Board and any 
other information the Finance Board may require to determine whether a 
member meets the community support standards.
    (d) Public comments. In reviewing a member for compliance with the 
community support requirement, the Finance Board shall take into 
consideration any public comments it has received concerning the member.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0003 with an expiration date of January 31, 2003.)

[62 FR 28988, May 29, 1997, as amended at 65 FR 5739, Feb. 7, 2000]



Sec. 944.3  Community support standards.

    (a) In general. In reviewing a community support statement, the 
Finance Board shall take into account a member's performance under the 
CRA if the member is subject to the requirements of the CRA, and the 
member's record of lending to first-time homebuyers.
    (b) CRA standard--(1) Adequate performance. A member that is subject 
to the requirements of the CRA shall be deemed to meet the CRA standard 
if the rating in the member's most recent CRA evaluation is 
``outstanding'' or ``satisfactory.''
    (2) Probationary performance. A member that is subject to the 
requirements of the CRA shall be subject to a probationary period if the 
rating in the member's most recent CRA evaluation is ``needs to 
improve.'' The probationary period shall extend until the member's 
appropriate federal financial supervisory agency completes its next CRA 
evaluation and issues a rating. The member will be eligible to receive 
long-term advances during the probationary period. If the member does 
not meet the CRA standard at the end of the probationary period, the 
Finance Board shall restrict the member's access to long-term advances 
in accordance with Sec. 944.5.
    (3) Inadequate performance. A member's access to long-term advances 
shall be restricted in accordance with Sec. 944.5 if the rating in the 
member's most recent CRA evaluation is ``substantial noncompliance.''
    (c) First-time homebuyer standard--(1) Adequate performance. In the 
absence of

[[Page 732]]

public comments or other information to the contrary, a member shall be 
presumed to meet the first-time homebuyer standard if the member is 
subject to the requirements of the CRA and the rating in the member's 
most recent CRA evaluation is ``outstanding.'' In determining whether 
other members meet the first-time homebuyer standard, the Finance Board 
shall consider a member's description of its efforts to assist first-
time or potential first-time homebuyers or its explanation of factors 
that affect its ability to assist first-time or potential first-time 
homebuyers. A member shall be deemed to meet the first-time homebuyer 
standard if the member otherwise demonstrates to the satisfaction of the 
Finance Board that it:
    (i) Has an established record of lending to first-time homebuyers; 
or
    (ii) Has a program whereby it actively seeks to lend or support 
lending to first-time homebuyers, including, but not limited to, the 
following:
    (A) Providing special credit products with flexible underwriting 
standards for first-time homebuyers;
    (B) Participating in federal, state, or local government, or 
nationwide homeownership lending programs that benefit, serve, or are 
targeted to, first-time homebuyers;
    (C) Participating in loan consortia for first-time homebuyer loans 
or loans that serve predominantly low- or moderate-income borrowers; or
    (iii) Has a program whereby it actively seeks to assist or support 
organizations that assist potential first-time homebuyers to qualify for 
mortgage loans, including, but not limited to, the following:
    (A) Providing, participating in, or supporting special counseling 
programs or other homeownership education activities that benefit, 
serve, or are targeted to, first-time homebuyers;
    (B) Providing or participating in marketing plans and related 
outreach programs targeted to first-time homebuyers;
    (C) Providing technical assistance of financial support to 
organizations that assist first-time homebuyers;
    (D) Participating with or financially supporting community or 
nonprofit groups that assist first-time homebuyers;
    (E) Holding investments or making loans that support first-time 
homebuyer programs;
    (F) Holding mortgage-backed securities that may include a pool of 
loans to low- and moderate-income homebuyers;
    (G) Participating or investing in service organizations that assist 
credit unions in providing mortgages; or
    (H) Participating in Bank targeted community lending programs; or
    (iv) Has any combination of the elements described in paragraphs 
(c)(1)(i), (ii), or (iii) of this section.
    (2) Probationary performance. If the evidence of first-time 
homebuyer performance is deemed to be unsatisfactory by the Finance 
Board, the member shall be subject to a one-year probationary period. 
The member will be eligible to receive long-term advances during the 
probationary period. If the member does not demonstrate compliance with 
the first-time homebuyer standard before the probationary period ends, 
the Finance Board shall restrict the member's access to long-term 
advances in accordance with Sec. 936.5.
    (3) Inadequate performance. A member's access to long-term advances 
shall be restricted in accordance with Sec. 944.5 if the member provides 
no evidence of first-time homebuyer performance.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0003 with an expiration date of January 31, 2003.)

[62 FR 28988, May 29, 1997, as amended at 65 FR 5739, Feb. 7, 2000; 65 
FR 8262, Feb. 18, 2000; 65 FR 44428, July 18, 2000]



Sec. 944.4  Decision on community support statements.

    (a) Action on community support statements. The Finance Board shall 
act on each community support statement in accordance with the 
requirements of Sec. 944.3 within 75 calendar days of the date the 
Finance Board deems the community support statement to be complete. The 
Finance Board shall deem a

[[Page 733]]

community support statement complete when it has obtained all of the 
information required by this part and any other information it deems 
necessary to process the community support statement. If the Finance 
Board determines during the review process that additional information 
is necessary to process the community support statement, the Finance 
Board may deem the community support statement incomplete and stop the 
75-day time period by providing written notice to the member. When the 
Finance Board receives the additional information, it shall again deem 
the community support statement complete and resume the 75-day time 
period where it stopped. The Finance Board shall have 10 calendar days 
in addition to the 75-day time period to act on a community support 
statement if the Finance Board receives the additional information on or 
after the seventieth day of the 75-day time period.
    (b) Decision on community support statements. The Finance Board 
shall provide written notice to the member and the member's Bank of its 
determination regarding the community support statement submitted by the 
member. The notice shall identify the reasons for the Finance Board's 
determination.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0003 with an expiration date of January 31, 2003.)

[62 FR 28988, May 29, 1997, as amended at 65 FR 5739, Feb. 7, 2000; 65 
FR 8262, Feb. 18, 2000]



Sec. 944.5  Restrictions on access to long-term advances.

    (a) Requirement. The Finance Board shall restrict a member's access 
to long-term advances if the member:
    (1) Failed to comply with the requirements of this part;
    (2) Submitted a community support statement that was not approved by 
the Finance Board;
    (3) Did not receive a rating in a CRA evaluation of ``outstanding'' 
or ``satisfactory'' at the end of the probationary period described in 
Sec. 944.3(b)(2); or
    (4) Failed to provide evidence satisfactory to the Finance Board of 
its first-time homebuyer performance before the end of the probationary 
period described in Sec. 944.3(c)(2).
    (b) Notice. The Finance Board shall provide written notice to a 
member and the member's Bank of its determination to restrict the 
member's access to long-term advances, the member by certified mail, 
return receipt requested, and the member's Bank by facsimile and by 
regular mail.
    (c) Effective date. Restrictions on access to long-term advances 
shall take effect 30 days after the date the notices required under 
paragraph (b) of this section are mailed unless the member complies with 
the requirements of this part before the end of the 30-day period.
    (d) Removing restrictions. (1) The Finance Board may remove 
restrictions on a member's access to long-term advances imposed under 
this section:
    (i) If the Finance Board determines that application of the 
restriction may adversely affect the safety and soundness of the member. 
A member may submit a written request to the Finance Board to remove a 
restriction on access to long-term advances under this paragraph 
(d)(1)(i). Such written request shall contain a clear and concise 
statement of the basis for the request, and a statement that application 
of the restriction may adversely affect the safety and soundness of the 
member from the member's appropriate federal financial supervisory 
agency, or the National Credit Union Administration for a federally 
insured credit union member, or the member's appropriate state regulator 
for a member that is not subject to regulation or supervision by a 
federal regulator. The Finance Board shall consider each written request 
within 30 calendar days of receipt. For purposes of this paragraph 
(d)(1)(i), the term appropriate state regulator means any state officer, 
agency, supervisor, or other entity that has regulatory authority over, 
or is empowered to institute enforcement action against, a member.
    (ii) If the Finance Board determines that the member subsequently 
has complied with the requirements of this part. A member may submit a 
written request to the Finance Board to remove a restriction on access 
to long-term advances under this paragraph

[[Page 734]]

(d)(1)(ii). Such written request shall state with specificity how the 
member has complied with the requirements of this part. The Finance 
Board shall consider each written request within 30 calendar days of 
receipt.
    (2) The Finance Board shall place a member on probation in 
accordance with Sec. 944.3(b)(2), if:
    (i) The member's access to long-term advances was restricted on the 
basis of the member's inadequate performance under the CRA standard, as 
described in Sec. 944.3(b)(3);
    (ii) The rating in the member's subsequent CRA evaluation is ``needs 
to improve;'' and
    (iii) The member did not receive either a ``substantial 
noncompliance'' CRA rating or a ``needs to improve'' CRA rating 
immediately preceding the CRA rating on which the member's inadequate 
performance under the CRA standard was based.
    (3) The Finance Board shall provide written notice to the member and 
the member's Bank of its determination under this paragraph (d), the 
member by certified mail, return receipt requested, and the member's 
Bank by facsimile and by regular mail. The Finance Board's determination 
shall take effect on the date the notices are mailed.
    (e) CICA. A member that is subject to a restriction on access to 
long-term advances under this part shall not be eligible to participate 
in a CICA program offered under parts 951 and 952 of this chapter. The 
restriction in this paragraph (e) shall not apply to CICA applications 
or funding approved before the date the restriction is imposed.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0003 with an expiration date of January 31, 2003.)

[62 FR 28988, May 29, 1997, as amended at 62 FR 46872, Sept. 5, 1997; 63 
FR 65545, Nov. 27, 1998; 65 FR 5739, Feb. 7, 2000; 65 FR 8262, Feb. 18, 
2000]



Sec. 944.6  Bank community support programs.

    (a) Requirement. Consistent with the safe and sound operation of the 
Bank, each Bank shall establish and maintain a community support 
program. A Bank's community support program shall:
    (1) Provide technical assistance to members;
    (2) Promote and expand affordable housing finance;
    (3) Identify opportunities for members to expand financial and 
credit services in underserved neighborhoods and communities; and
    (4) Encourage members to increase their targeted community lending 
and affordable housing finance activities by providing incentives such 
as awards or technical assistance to nonprofit housing developers or 
community groups with outstanding records of participation in targeted 
community lending or affordable housing finance partnerships with 
members;
    (5) Include an annual Targeted Community Lending Plan, approved by 
the Bank's board of directors and subject to modification, which shall 
require the Bank to:
    (i) Conduct market research in the Bank's district;
    (ii) Describe how the Bank will address identified credit needs and 
market opportunities in the Bank's district for targeted community 
lending;
    (iii) Consult with its Advisory Council and with members, nonmember 
borrowers, and public and private economic development organizations in 
the Bank's district in developing and implementing its Targeted 
Community Lending Plan; and
    (iv) Establish quantitative targeted community lending performance 
goals.
    (b) Notice. A Bank shall provide annually to each of its members a 
written notice:
    (1) Identifying CICA programs and other Bank activities that may 
provide opportunities for a member to meet the community support 
requirements and to engage in targeted community lending; and
    (2) Summarizing targeted community lending and affordable housing 
activities undertaken by members, housing associates, nonprofit housing 
developers, community groups, or other entities in the Bank's district, 
that may provide opportunities for a member to

[[Page 735]]

meet the community support requirements and to engage in targeted 
community lending.

[62 FR 28988, May 29, 1997, as amended at 63 FR 65545, Nov. 27, 1998; 65 
FR 44428, July 18, 2000]



Sec. 944.7  Reports.

    Each Advisory Council annual report required to be submitted to the 
Finance Board pursuant to section 10(j)(11) of the Act shall include an 
analysis of the Bank's targeted community lending and affordable housing 
activities.

[63 FR 65545, Nov. 27, 1998, as amended at 65 FR 44428, July 18, 2000]

[[Page 736]]





 SUBCHAPTER G--FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS



PART 950--ADVANCES--Table of Contents




                     Subpart A--Advances to Members

Sec.
950.1  Definitions.
950.2  Authorization and application for advances; obligation to repay 
          advances.
950.3  Purpose of long-term advances; Proxy text.
950.4  Limitations on access to advances.
950.5  Terms and conditions for advances.
950.6  Fees.
950.7  Collateral.
950.8  Banks as secured creditors.
950.9  Pledged collateral; verification.
950.10  Collateral valuation; appraisals.
950.11  Capital stock requirements; unilateral redemption of excess 
          stock.
950.12  Intradistrict transfer of advances.
950.13  Special advances to savings associations.
950.14  Advances to the Savings Association Insurance Fund.
950.15  Liquidation of advances upon termination of membership.

                Subpart B--Advances to Housing Associates

950.16  Scope.
950.17  Advances to housing associates.

  Subpart C--Advances to Out-of-District Members and Housing Associates

950.25  Advances to out-of-district members and housing associates.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1429, 1430, 
1430b and 1431.

    Source: 58 FR 29469, May 20, 1993, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



                     Subpart A--Advances to Members



Sec. 950.1  Definitions.

    As used in this part:
    Advance means a loan from a Bank that is:
    (1) Provided pursuant to a written agreement;
    (2) Supported by a note or other written evidence of the borrower's 
obligation; and
    (3) Fully secured by collateral in accordance with the Act and this 
part.
    Affiliate means any business entity that controls, is controlled by, 
or is under common control with, a member.
    Affordable Housing Program or AHP means the program described in 
section 10(j) of the Act (12 U.S.C. 1430(j)) and part 951 of the Finance 
Board's regulations.
    Appropriate Federal banking agency. The term appropriate Federal 
banking agency has the same meaning as used in 12 U.S.C. 1813(q) and for 
federally insured credit unions shall mean the National Credit Union 
Administration.
    Capital deficient member means a member that fails to meet its 
minimum regulatory capital requirements as defined or otherwise required 
by the member's appropriate federal banking agency, insurer or, in the 
case of members that are not federally insured depository institutions, 
state regulator.
    Cash equivalents means investments that--
    (1) Are readily convertible into known amounts of cash;
    (2) Have a remaining maturity of 90 days or less at the acquisition 
date; and
    (3) Are held for liquidity purposes.
    Community Investment Cash Advance or CICA means any advance made 
through a program offered by a Bank under section 10 of the Act and 
parts 951 and 952 of this chapter to provide advances for targeted 
community lending and affordable housing, including advances made under: 
A Bank's Rural Development Advance (RDA) program, offered under section 
10(j)(10) of the Act; a Bank's Urban Development Advance (UDA) program, 
offered under section 10(j)(10) of the Act; a Bank's Affordable Housing 
Program (AHP), offered under section 10(j) of the Act; a Bank's 
Community Investment Program (CIP), offered under section 10(i) of the 
Act; or any other program offered by a Bank that meets the requirements 
of part 952 of this chapter.
    Depository institution means a bank or savings association, as 
defined in 12 U.S.C. 1813, or a credit union, as defined in 12 U.S.C. 
1752.

[[Page 737]]

    Dwelling unit means, for purposes of this part, a single room or a 
unified combination of rooms designed for residential use by one 
household.
    FDIC means the Federal Deposit Insurance Corporation.
    GAAP means Generally Accepted Accounting Principles.
    HUD means the Department of Housing and Urban Development.
    Improved residential real property means residential real property 
excluding real property to be improved, or in the process of being 
improved, by the construction of dwelling units.
    Insurer means the Federal Deposit Insurance Corporation for 
``insured depository institutions'' as defined in 12 U.S.C. 1813(c)(2) 
and the National Credit Union Administration for federally insured 
credit unions.
    Long-term advance means, for the purposes of this part, an advance 
with an original term to maturity greater than five years.
    Manufactured housing means a manufactured home as defined in section 
603(6) of the Manufactured Home Construction and Safety Standards Act of 
1974, as amended (42 U.S.C. 5402(6)).
    Mortgage-backed security means:
    (1) An equity security representing an ownership interest in:
    (i) Fully disbursed, whole first mortgage loans on improved 
residential real property; or
    (ii) Mortgage pass-through or participation securities which are 
themselves backed entirely by fully disbursed, whole first mortgage 
loans on improved residential real property; or
    (2) An obligation, bond, or other debt security backed entirely by 
the assets described in paragraph (1)(i) or (ii) of this definition.
    Multifamily property means, for purposes of this part:
    (1)(i) Real property that is solely residential and which includes 
five or more dwelling units; or
    (ii) Real property which includes five or more dwelling units with 
commercial units combined, provided the property is primarily 
residential.
    (2) Multifamily property as defined in this section includes nursing 
homes, dormitories and homes for the elderly.
    Nonresidential real property means, for purposes of this part, real 
property not used for residential purposes, including business or 
industrial property, hotels, motels, churches, hospitals, educational 
and charitable institutions, clubs, lodges, association buildings, golf 
courses, recreational facilities, farm property not containing a 
dwelling unit, or similar types of property, except as otherwise 
determined by the Finance Board in its discretion.
    OCC means the Office of the Comptroller of the Currency.
    One-to-four family property means any of the following:
    (1) Real property containing:
    (i) One-to-four dwelling units; or
    (ii) More than four dwelling units if each unit is separated from 
the other units by dividing walls that extend from ground to roof, 
including row houses, townhouses or similar types of property;
    (2) Manufactured housing if:
    (i) Applicable state law defines the purchase or holding of 
manufactured housing as the purchase or holding of real property; and
    (ii) The loan to purchase the manufactured housing is secured by 
that manufactured housing;
    (3) Individual condominium dwelling units or interests in individual 
cooperative housing dwelling units that are part of a condominium or 
cooperative building without regard to the number of total dwelling 
units therein; or
    (4) Real property containing one-to-four dwelling units with 
commercial units combined, provided the property is primarily 
residential.
    OTS means the Office of Thrift Supervision.
    Residential housing finance assets means any of the following:
    (1) Loans secured by residential real property;
    (2) Mortgage-backed securities;
    (3) Participations in loans secured by residential real property;
    (4) Loans or investments qualifying under the definition of 
``community lending'' in Sec. 900.1 of this chapter;
    (5) Loans secured by manufactured housing, regardless of whether 
such housing qualifies as residential real property; or
    (6) Any loans or investments which the Finance Board, in its 
discretion,

[[Page 738]]

otherwise determines to be residential housing finance assets.
    Residential real property means:
    (1) Any of the following:
    (i) One-to-four family property;
    (ii) Multifamily property;
    (iii) Real property to be improved by the construction of dwelling 
units;
    (iv) Real property in the process of being improved by the 
construction of dwelling units;
    (2) The term residential real property does not include 
nonresidential real property as defined in this section.
    Savings association means a savings association as defined in 
section 3(b) of the Federal Deposit Insurance Act, as amended (12 U.S.C. 
1813(b)).
    Small agri-business loans means loans to finance agricultural 
production and other loans to farmers that are within the legal lending 
limit of the reporting CFI member, and that are reported on either: 
Schedule RC-C, Part I, item 3 of the Report of Condition and Income 
filed by insured commercial banks and FDIC-supervised savings banks; or 
Schedule SC300, SC303 or SC306 of the Thrift Financial Report filed by 
savings associations (or equivalent successor schedules).
    Small business loans means commercial and industrial loans that are 
within the legal lending limit of the reporting CFI member and that are 
reported on either: Schedule RC-C, Part I, item 1.e or Schedule RC-C, 
Part I, item 4 of the Report of Condition and Income filed by insured 
commercial banks and FDIC-supervised savings banks; or Schedule SC300, 
SC303 or SC306 of the Thrift Financial Report filed by savings 
associations (or equivalent successor schedules)
    Small farm loans means loans secured primarily by farmland that are 
within the legal lending limit of the reporting CFI member, and that are 
reported on either: Schedule RC-C, Part I, item 1.a. or 1.b. of the 
Report of Condition and Income filed by insured commercial banks and 
FDIC-supervised savings banks; or Schedule SC260 of the Thrift Financial 
Report filed by savings associations (or equivalent successor 
schedules).
    State means a state of the United States, the District of Columbia, 
Guam, Puerto Rico or the U.S. Virgin Islands.
    State housing finance agency or SHFA means:
    (1) A public agency, authority, or publicly sponsored corporation 
that serves as an instrumentality of any state or political subdivision 
of any state, and functions as a source of residential mortgage loan 
financing in that state; or
    (2) A legally established agency, authority, corporation, or 
organization that serves as an instrumentality of any Indian tribe, 
band, group, nation, community, or Alaskan Native village recognized by 
the United States or any state, and functions as a source of residential 
mortgage loan financing for the Indian or Alaskan Native community.
    State regulator means a state insurance commissioner or state 
regulatory entity with primary responsibility for supervising a member 
borrower that is not a federally insured depository institution.
    Tangible capital means:
    (1) Capital, calculated according to GAAP, less ``intangible 
assets'' except for purchased mortgage servicing rights to the extent 
such assets are included in a member's core or Tier 1 capital, as 
reported in the member's Thrift Financial Report for members whose 
primary federal regulator is the OTS, or as reported in the Report of 
Condition and Income for members whose primary federal regulator is the 
FDIC, the OCC, or the Board of Governors of the Federal Reserve System.
    (2) Capital calculated according to GAAP, less intangible assets, as 
defined by a Bank for members which are not regulated by the OTS, the 
FDIC, the OCC, or the Board of Governors of the Federal Reserve System; 
provided that a Bank shall include a member's purchased mortgage 
servicing rights to the extent such assets are included for the purpose 
of meeting regulatory capital requirements.

[58 FR 29469, May 20, 1993, as amended at 58 FR 29477, May 20, 1993; 59 
FR 2949, Jan. 20, 1994; 62 FR 8871, Feb. 27, 1997; 62 FR 12079, Mar. 14, 
1997; 63 FR 35128, June 29, 1998; 63 FR 65545, Nov. 27, 1998; 64 FR 
16621, Apr. 6, 1999; 65 FR 8262, Feb. 18, 2000; 65 FR 44428, July 18, 
2000]

[[Page 739]]



Sec. 950.2  Authorization and application for advances; obligation to repay advances.

    (a) Application for advances. A Bank may accept oral or written 
applications for advances from its members.
    (b) Obligation to repay advances. (1) A Bank shall require any 
member to which an advance is made to enter into a primary and 
unconditional obligation to repay such advance and all other 
indebtedness to the Bank, together with interest and any unpaid costs 
and expenses in connection therewith, according to the terms under which 
such advance was made or other indebtedness incurred.
    (2) Such obligations shall be evidenced by a written advances 
agreement that shall be reviewed by the Bank's legal counsel to ensure 
such agreement is in compliance with applicable law.
    (c) Secured advances. (1) Each Bank shall make only fully secured 
advances to its members as set forth in the Act, the provisions of this 
part and policy guidelines established by the Finance Board.
    (2) The Bank shall execute a written security agreement with each 
borrowing member which establishes the Bank's security interest in 
collateral securing advances.
    (3) Such written security agreement shall, at a minimum, describe 
the type of collateral securing the advances and give the Bank a 
perfectible security interest in the collateral.
    (d) Approval-- By the Bank's board of directors. Applications for 
advances, advances agreements and security agreements shall be in 
substantially such form as approved by the Bank's board of directors, or 
a committee thereof specifically authorized by the board of directors to 
approve such forms.

[58 FR 29469, May 20, 1993, as amended at 64 FR 71278, Dec. 21, 1999; 65 
FR 8262, Feb. 18, 2000. Redesignated at 65 FR 44429, July 18, 2000]



Sec. 950.3  Purpose of long-term advances; Proxy test.

    (a) A Bank shall make long-term advances only for the purpose of 
enabling any member to purchase or fund new or existing residential 
housing finance assets, which include, for CFI members, small business 
loans, small farm loans and small agri-business loans.
    (b)(1) Prior to approving an application for a long-term advance, a 
Bank shall determine that the principal amount of all long-term advances 
currently held by the member does not exceed the total book value of 
residential housing finance assets held by such member. The Bank shall 
determine the total book value of such residential housing finance 
assets, using the most recent Thrift Financial Report, Report of 
Condition and Income, financial statement or other reliable 
documentation made available by the member.
    (2) Applications for CICA advances are exempt from the requirements 
of paragraph (b)(1) of this section.

[58 FR 29469, May 20, 1993, as amended at 63 FR 65545, Nov. 27, 1998. 
Redesignated and amended at 65 FR 44429, July 18, 2000]



Sec. 950.4  Limitations on access to advances.

    (a) Credit underwriting. A Bank, in its discretion, may:
    (1) Limit or deny a member's application for an advance if, in the 
Bank's judgment, such member:
    (i) Is engaging or has engaged in any unsafe or unsound banking 
practices;
    (ii) Has inadequate capital;
    (iii) Is sustaining operating losses;
    (iv) Has financial or managerial deficiencies, as determined by the 
Bank, that bear upon the member's creditworthiness; or
    (v) Has any other deficiencies, as determined by the Bank; or
    (2) Make advances and renewals only if the Bank determines that it 
may safely make such advance or renewal to the member, including 
advances and renewals made pursuant to this section.
    (b) New advances to members without positive tangible capital. (1) A 
Bank shall not make a new advance to a member without positive tangible 
capital unless the member's appropriate federal banking agency or 
insurer requests in writing that the Bank make such advance. The Bank 
shall promptly provide the Finance Board with a copy of any such 
request.
    (2) A Bank shall use the most recently available Thrift Financial 
Report, Report of Condition, and Income

[[Page 740]]

or other regulatory report of financial condition to determine whether a 
member has positive tangible capital.
    (c) Renewals of advances to members without positive tangible 
capital--(1) Renewal for 30-day terms. A Bank may renew outstanding 
advances, for successive terms of up to 30 days each, to a member 
without positive tangible capital; provided, however, that a Bank shall 
honor any written request of the appropriate federal banking agency or 
insurer that the Bank not renew such advances.
    (2) Renewal for longer than 30-day terms. A Bank may renew 
outstanding advances to a member without positive tangible capital for a 
term greater than 30 days at the written request of the appropriate 
federal banking agency or insurer.
    (d) Advances to capital deficient but solvent members. (1) Except as 
provided in paragraph (d)(2)(i) of this section, a Bank may make a new 
advance or renew an outstanding advance to a capital deficient member 
that has positive tangible capital.
    (2)(i) A Bank shall not lend to a capital deficient member that has 
positive tangible capital if it receives written notice from the 
appropriate federal banking agency or insurer that the member's use of 
Bank advances has been prohibited. The Bank shall promptly provide the 
Finance Board with a copy of any such notice.
    (ii) A Bank may resume lending to such a capital deficient member if 
the Bank receives a written statement from the appropriate federal 
banking agency or insurer which re-establishes the member's ability to 
use advances.
    (e) Reporting. (1) Each Bank shall provide the Finance Board with a 
monthly report of the advances and commitments outstanding to each of 
its members.
    (2) Such monthly report shall be in a format or on a form prescribed 
by the Finance Board.
    (3) Each Bank shall, upon written request from a member's 
appropriate federal banking agency or insurer, provide to such entity 
information on advances and commitments outstanding to the member.
    (f) Members without federal regulators. In the case of members that 
are not federally insured depository institutions, the references in 
paragraphs (b), (c), (d) and (e) of this section to ``appropriate 
federal banking agency or insurer'' shall mean the member's state 
regulator acting in a capacity similar to an appropriate federal banking 
agency or insurer.
    (g) Advance commitments. (1) In the event that a member's access to 
advances from a Bank is restricted pursuant to this section, the Bank 
shall not fund outstanding commitments for advances not exercised prior 
to the imposition of the restriction. This requirement shall apply to 
all advance commitments made by a Bank after August 25, 1993.
    (2) Each Bank shall include the stipulation contained in paragraph 
(g)(1) of this section as a clause in either:
    (i) The written advances agreement required by Sec. 950.4(b)(2) of 
this part; or
    (ii) The written advances application required by Sec. 950.4(a) of 
this part.

[58 FR 29469, May 20, 1993, as amended at 59 FR 2949, Jan. 20, 1994; 64 
FR 71278, Dec. 21, 1999; 65 FR 8263, Feb. 18, 2000. Redesignated at 65 
FR 44429, July 18, 2000]



Sec. 950.5  Terms and conditions for advances.

    (a) Advance maturities. Each Bank shall offer advances with 
maturities of up to ten years, and may offer advances with longer 
maturities consistent with the safe and sound operation of the Bank.
    (b) Advance pricing--(1) General. A Bank shall not price its 
advances to members below:
    (i) The marginal cost to the Bank of raising matching term and 
maturity funds in the marketplace, including embedded options; and
    (ii) The administrative and operating costs associated with making 
such advances to members.
    (2) Differential pricing. (i) Each Bank may, in pricing its 
advances, distinguish among members based upon its assessment of:
    (A) The credit and other risks to the Bank of lending to any 
particular member; or
    (B) Other reasonable criteria that may be applied equally to all 
members.
    (ii) Each Bank shall include in its member products policy required 
by

[[Page 741]]

Sec. 917.4 of this chapter, standards and criteria for such differential 
pricing and shall apply such standards and criteria consistently and 
without discrimination to all members applying for advances.
    (3) Exceptions. The advance pricing policies contained in paragraph 
(b)(1) of this section shall not apply in the case of:
    (i) A Bank's CICA programs; and
    (ii) Any other advances programs that are volume limited and 
specifically approved by the Bank's board of directors.
    (c) Authorization for pricing advances. (1) A Bank's board of 
directors, a committee thereof, or the Bank's president, if so 
authorized by the Bank's board of directors, shall set the rates of 
interest on advances consistent with paragraph (b) of this section.
    (2) A Bank president authorized to set interest rates on advances 
pursuant to this paragraph (c) may delegate any part of such authority 
to any officer or employee of the Bank.
    (d) Putable or convertible advances--(1) Disclosure. A Bank that 
offers a putable or convertible advance to a member shall disclose in 
writing to such member the type and nature of the risks associated with 
putable or convertible advance funding. The disclosure should include 
detail sufficient to describe such risks.
    (2) Replacement funding for putable advances. If a Bank terminates a 
putable advance prior to the stated maturity date of such advance, the 
Bank shall offer to provide replacement funding to the member, provided 
the member is able to satisfy the normal credit and collateral 
requirements of the Bank for the replacement funding requested.
    (3) Definition. For purposes of this paragraph (d), the term putable 
advance means an advance that a Bank may, at its discretion, terminate 
and require the member to repay prior to the stated maturity date of the 
advance.

[58 FR 29469, May 20, 1993, as amended at 61 FR 52687, Oct. 8, 1996; 65 
FR 8263, Feb. 18, 2000. Redesignated and amended at 65 FR 44429, July 
18, 2000]



Sec. 950.6  Fees.

    (a) Fees in member products policy. All fees charged by each Bank 
and any schedules or formulas pertaining to such fees shall be included 
in the Bank's member products policy required by Sec. 917.4 of this 
chapter. Any such fee schedules or formulas shall be applied 
consistently and without discrimination to all members.
    (b) Prepayment fees. (1) Except where an advance product contains a 
prepayment option, each Bank shall establish and charge a prepayment fee 
pursuant to a specified formula which makes the Bank financially 
indifferent to the borrower's decision to repay the advance prior to its 
maturity date.
    (2) Prepayment fees are not required for:
    (i) Advances with original terms to maturity or repricing periods of 
six months or less;
    (ii) Advances funded by callable debt; or
    (iii) Advances which are otherwise appropriately hedged so that the 
Bank is financially indifferent to their prepayment.
    (3) The board of directors of each Bank, a designated committee 
thereof, or officers specifically authorized by the board of directors, 
may waive a prepayment fee only if such prepayment will not result in an 
economic loss to the Bank. Any such waiver must subsequently be ratified 
by the board of directors.
    (4) A Bank, in determining whether or not to waive a prepayment fee, 
shall apply consistent standards to all of its members.
    (c) Commitment fees. Each Bank may charge a fee for its commitment 
to fund an advance.
    (d) Other fees. Each Bank is authorized to charge other fees as it 
deems necessary and appropriate.

[58 FR 29469, May 20, 1993; 65 FR 8263, Feb. 18, 2000. Redesignated and 
amended at 65 FR 44429, July 18, 2000]



Sec. 950.7  Collateral.

    (a) Eligible security for advances to all members. At the time of 
origination or renewal of an advance, each Bank shall obtain from the 
borrowing member or, in accordance with paragraph (g) of this section, 
an affiliate of the borrowing member, and thereafter maintain, a 
security interest in collateral

[[Page 742]]

that meets the requirements of one or more of the following categories:
    (1) Mortgage loans and privately issued securities. (i) Fully 
disbursed, whole first mortgage loans on improved residential real 
property not more than 90 days delinquent; or
    (ii) Privately issued mortgage-backed securities, excluding the 
following:
    (A) Securities that represent a share of only the interest payments 
or only the principal payments from the underlying mortgage loans;
    (B) Securities that represent a subordinate interest in the cash 
flows from the underlying mortgage loans;
    (C) Securities that represent an interest in any residual payments 
from the underlying pool of mortgage loans; or
    (D) Such other high-risk securities as the Board in its discretion 
may determine.
    (2) Agency securities. Securities issued, insured or guaranteed by 
the United States Government, or any agency thereof, including without 
limitation:
    (i) Mortgage-backed securities, as defined in Sec. 950.1 of this 
part, issued or guaranteed by the Federal Home Loan Mortgage 
Corporation, the Federal National Mortgage Association, the Government 
National Mortgage Association, or any other agency of the United States 
Government;
    (ii) Mortgages or other loans, regardless of delinquency status, to 
the extent that the mortgage or loan is insured or guaranteed by the 
United States or any agency thereof, or otherwise is backed by the full 
faith and credit of the United States, and such insurance, guarantee or 
other backing is for the direct benefit of the holder of the mortgage or 
loan; and
    (iii) Securities backed by, or representing an equity interest in, 
mortgages or other loans referred to in paragraph (a)(2)(ii) of this 
section.
    (3) Cash or deposits. Cash or deposits in a Bank.
    (4) Other real estate-related collateral. (i) Other real estate-
related collateral provided that:
    (A) Such collateral has a readily ascertainable value, can be 
reliably discounted to account for liquidation and other risks, and can 
be liquidated in due course; and
    (B) The Bank can perfect a security interest in such collateral.
    (ii) Eligible other real estate-related collateral may include, but 
is not limited to:
    (A) Privately issued mortgage-backed securities not otherwise 
eligible under paragraph (a)(1)(ii) of this section;
    (B) Second mortgage loans, including home equity loans;
    (C) Commercial real estate loans; and
    (D) Mortgage loan participations.
    (5) Securities representing equity interests in eligible advances 
collateral. Any security the ownership of which represents an undivided 
equity interest in underlying assets, all of which qualify either as:
    (i) Eligible collateral under paragraphs (a)(1), (2), (3) or (4) of 
this section; or
    (ii) Cash equivalents.
    (b) Additional collateral eligible as security for advances to CFI 
members or their affiliates--(1) General. Subject to the requirements 
set forth in part 980 of this chapter, a Bank is authorized to accept 
from CFI members or their affiliates as security for advances small 
business loans, small farm loans or small agri-business loans fully 
secured by collateral other than real estate, or securities representing 
a whole interest in such loans, provided that:
    (i) Such collateral has a readily ascertainable value, can be 
reliably discounted to account for liquidation and other risks, and can 
be liquidated in due course; and
    (ii) The Bank can perfect a security interest in such collateral.
    (2) Change in CFI status. If a Bank determines, as of April 1 of 
each year, that a member that has previously qualified as a CFI no 
longer qualifies as a CFI, and the member has total advances outstanding 
that exceed the amount that can be fully secured by collateral under 
paragraph (a) of this section, the Bank may:
    (i) Permit the advances of such member to run to their stated 
maturities; and
    (ii) Renew such member's advances to mature no later than March 31 
of the following year; provided that the

[[Page 743]]

total of the member's advances under paragraphs (b)(2)(i) and (ii) of 
this section shall be fully secured by collateral set forth in 
paragraphs (a) and (b) of this section.
    (c) Bank restrictions on eligible advances collateral. A Bank at its 
discretion may further restrict the types of eligible collateral 
acceptable to the Bank as security for an advance, based upon the 
creditworthiness or operations of the borrower, the quality of the 
collateral, or other reasonable criteria.
    (d) Additional advances collateral. The provisions of paragraph (a) 
of this section shall not affect the ability of any Bank to take such 
steps as it deems necessary to protect its secured position on 
outstanding advances, including requiring additional collateral, whether 
or not such additional collateral conforms to the requirements for 
eligible collateral in paragraphs (a) or (b) of this section or section 
10 of the Act (12 U.S.C. 1430).
    (e) Bank stock as collateral. (1) Pursuant to section 10(c) of the 
Act (12 U.S.C. 1430(c)), a Bank shall have a lien upon, and shall hold, 
the stock of a member in the Bank as further collateral security for all 
indebtedness of the member to the Bank.
    (2) The written security agreement used by the Bank shall provide 
that the borrowing member's Bank stock is assigned as additional 
security by the member to the Bank.
    (3) The security interest of the Bank in such member's Bank stock 
shall be entitled to the priority provided for in section 10(f) of the 
Act (12 U.S.C. 1430(f)).
    (f) Advances collateral security requiring formal approval. No home 
mortgage loan otherwise eligible to be accepted as collateral for an 
advance by a Bank under this section shall be accepted as collateral for 
an advance if any director, officer, employee, attorney or agent of the 
Bank or of the borrowing member is personally liable thereon, unless the 
board of directors of the Bank has specifically approved such acceptance 
by formal resolution, and the Finance Board has endorsed such 
resolution.
    (g) Pledge of advances collateral by affiliates. Assets held by an 
affiliate of a member that are eligible as collateral under paragraphs 
(a) or (b) of this section may be used to secure advances to that member 
only if:
    (1) The collateral is pledged to secure either:
    (i) The member's obligation to repay advances; or
    (ii) A surety or other agreement under which the affiliate has 
assumed, along with the member, a primary obligation to repay advances 
made to the member; and
    (2) The Bank obtains and maintains a legally enforceable security 
interest pursuant to which the Bank's legal rights and privileges with 
respect to the collateral are functionally equivalent in all material 
respects to those that the Bank would possess if the member were to 
pledge the same collateral directly, and such functional equivalence is 
supported by adequate documentation.

[58 FR 29469, May 20, 1993, as amended at 64 FR 16621, Apr. 6, 1999; 65 
FR 8262, Feb. 18, 2000. Redesignated and amended at 65 FR 44429, July 
18, 2000]



Sec. 950.8  Banks as secured creditors.

    (a) Except as provided in paragraph (b) of this section, 
notwithstanding any other provision of law, any security interest 
granted to a Bank by a member, or by an affiliate of such member, shall 
be entitled to priority over the claims and rights of any party, 
including any receiver, conservator, trustee or similar party having 
rights of a lien creditor, to such collateral.
    (b) A Bank's security interest as described in paragraph (a) of this 
section shall not be entitled to priority over the claims and rights of 
a party that:
    (1) Would be entitled to priority under otherwise applicable law; 
and
    (2) Is an actual bona fide purchaser for value of such collateral or 
is an actual secured party whose security interest in such collateral is 
perfected in accordance with applicable state law.

[58 FR 29469, May 20, 1993. Redesignated at 65 FR 8256, Feb. 18, 2000 
and further redesignated at 65 FR 44429, July 18, 2000]



Sec. 950.9  Pledged collateral; verification.

    (a) Collateral safekeeping. (1) A Bank may permit a member that is a 
depository institution to retain documents

[[Page 744]]

evidencing collateral pledged to the Bank, provided that the Bank and 
such member have executed a written security agreement pursuant to 
Sec. 950.4(c) of this part whereby such collateral is retained solely 
for the Bank's benefit and subject to the Bank's control and direction.
    (2) A Bank shall take any steps necessary to ensure that its 
security interest in all collateral pledged by non-depository 
institutions for an advance is as secure as its security interest in 
collateral pledged by depository institutions.
    (3) A Bank may at any time perfect its security interest in 
collateral securing an advance to a member.
    (b) Collateral verification. Each Bank shall establish written 
procedures and standards for verifying the existence of collateral 
securing the Bank's advances, and shall regularly verify the existence 
of the collateral securing its advances in accordance with such 
procedures and standards.

[58 FR 29469, May 20, 1993, as amended at 64 FR 16621, Apr. 6, 1999; 65 
FR 8263, Feb. 18, 2000. Redesignated at 65 FR 44430, July 18, 2000]



Sec. 950.10  Collateral valuation; appraisals.

    (a) Collateral valuation. Each Bank shall determine the value of 
collateral securing the Bank's advances in accordance with the 
collateral valuation procedures set forth in the Bank's member products 
policy established pursuant to Sec. 917.4 of this chapter.
    (b) Fair application of procedures. Each Bank shall apply the 
collateral valuation procedures consistently and fairly to all borrowing 
members, and the valuation ascribed to any item of collateral by the 
Bank shall be conclusive as between the Bank and the member.
    (c) Appraisals. A Bank may require a member to obtain an appraisal 
of any item of collateral, and to perform such other investigations of 
collateral as the Bank deems necessary and proper.

[65 FR 44430, July 18, 2000]



Sec. 950.11  Capital stock requirements; unilateral redemption of excess stock.

    (a) Capital stock requirement for advances. At no time shall the 
aggregate amount of outstanding advances made by a Bank to a member 
exceed 20 times the amount paid in by such member for capital stock in 
the Bank.
    (b) Unilateral redemption of excess capital stock; fee in lieu 
prohibited. (1) A Bank, after providing 15 calendar days advance written 
notice to a member, may require the redemption of that amount of the 
member's Bank capital stock that exceeds the capital stock requirements 
set forth in paragraph (a) of this section, provided the minimum amount 
required in section 6(b)(1) of the Act is maintained. The Bank shall 
have the discretion to determine the timing of such unilateral 
redemption. The Bank's implementation of its redemption policy shall be 
consistent with the requirement of section 7(j) of the Act (12 U.S.C. 
1427(j)) that the affairs of the Bank shall be administered fairly and 
impartially and without discrimination in favor of or against any member 
borrower.
    (2) A Bank may not impose on or accept from a member a fee in lieu 
of redeeming the member's excess Bank capital stock.

[58 FR 29469, May 20, 1993, as amended at 64 FR 16791, Apr. 6, 1999; 65 
FR 8263, Feb. 18, 2000; 65 FR 13870, Mar. 15, 2000. Redesignated at 65 
FR 44430, July 18, 2000]



Sec. 950.12  Intradistrict transfer of advances.

    (a) Advances held by members. A Bank may allow one of its members to 
assume an advance extended by the Bank to another of its members, 
provided the assumption complies with the requirements of this part 
governing the issuance of new advances. A Bank may charge an appropriate 
fee for processing the transfer.
    (b) Advances held by nonmembers. A Bank may allow one of its members 
to assume an advance held by a nonmember, provided the advance was 
originated by the Bank and provided the assumption complies with the 
requirements of this part governing the issuance of new advances. A Bank 
may charge an appropriate fee for processing the transfer.

[59 FR 2950, Jan. 20, 1994. Redesignated at 65 FR 44430, July 18, 2000]

[[Page 745]]



Sec. 950.13  Special advances to savings associations.

    (a) Eligible institutions. (1) A Bank, upon receipt of a written 
request from the Director of the OTS, may make short-term advances to a 
savings association member.
    (2) Such request must certify that the member:
    (i) Is solvent but presents a supervisory concern to the OTS because 
of the member's financial condition; and
    (ii) Has reasonable and demonstrable prospects of returning to a 
satisfactory financial condition.
    (b) Terms and conditions. Advances made by a Bank to a member 
savings association under this section shall:
    (1) Be subject to all applicable collateral requirements of the 
Bank, this part and section 10(a) of the Act (12 U.S.C. 1430(a)); and
    (2) Be at the interest rate applicable to advances of similar type 
and maturity that are made available to other members that do not pose 
such a supervisory concern.

[58 FR 29469, May 20, 1993. Redesignated at 65 FR 8256, Feb. 18, 2000 
and further redesignated at 65 FR 44430, July 18, 2000]



Sec. 950.14  Advances to the Savings Association Insurance Fund.

    (a) Authority. Upon receipt of a written request from the FDIC, a 
Bank may make advances to the FDIC for the use of the SavingsAssociation 
Insurance Fund. The Bank shall provide a copy of such request to the 
Finance Board.
    (b) Requirements. Advances to the FDIC for the use of the Savings 
Association Insurance Fund shall:
    (1) Bear a rate of interest not less than the Bank's marginal cost 
of funds, taking into account the maturities involved and reasonable 
administrative costs;
    (2) Have a maturity acceptable to the Bank;
    (3) Be subject to any prepayment, commitment, or other appropriate 
fees of the Bank; and
    (4) Be adequately secured by collateral acceptable to the Bank.

[58 FR 29469, May 20, 1993, as amended at 65 FR 8262, Feb. 18, 2000. 
Redesignated at 65 FR 44430, July 18, 2000]



Sec. 950.15  Liquidation of advances upon termination of membership.

    If an institution's membership in a Bank is terminated, the Bank 
shall determine an orderly schedule for liquidating any indebtedness of 
such member to the Bank; this section shall not require a Bank to call 
any such indebtedness prior to maturity of the advance. The Bank shall 
deem any such liquidation a prepayment of the member's indebtedness, and 
the member shall be subject to any fees applicable to such prepayment.

[58 FR 29469, May 20, 1993. Redesignated at 65 FR 8256, Feb. 18, 2000 
and further redesignated at 65 FR 44430, July 18, 2000]



                Subpart B--Advances to Housing Associates

    Source: 62 FR 12079, Mar. 14, 1997, unless otherwise noted.



Sec. 950.16  Scope.

    Except as otherwise provided in Sec. Sec. 950.14 and 950.17, the 
requirements of subpart A apply to this subpart.

[58 FR 29469, May 20, 1993. Redesignated at 65 FR 44430, July 18, 2000]



Sec. 950.17  Advances to housing associates.

    (a) Authority. Subject to the provisions of the Act and this 
subpart, a Bank may make advances only to a housing associate whose 
principal place of business, as determined in accordance with part 925 
of this chapter, is located in the Bank's district.
    (b) Collateral requirements--(1) Advances to housing associates. A 
Bank may make an advance to any housing associate upon the security of 
the following collateral:
    (i) Mortgage loans insured by the Federal Housing Administration of 
HUD under title II of the National Housing Act; or
    (ii) Securities representing a whole interest in the principal and 
interest payments due on a pool of mortgage loans insured by the Federal 
Housing Administration of HUD under title II of the National Housing 
Act. A Bank may only accept as collateral the securities described in 
this paragraph (b)(1)(ii) if

[[Page 746]]

the housing associate provides evidence that such securities are backed 
solely by mortgages of the type described in paragraph (b)(1)(i) of this 
section.
    (2) Certain advances to SHFAs. (i) In addition to the collateral 
described in paragraph (b)(1) of this section, a Bank may make an 
advance to a housing associate that has satisfied the requirements of 
Sec. 926.3(b) for the purpose of facilitating residential or commercial 
mortgage lending that benefits individuals or families meeting the 
income requirements in section 142(d) or 143(f) of the Internal Revenue 
Code (26 U.S.C. 142(d) or 143(f)) upon the security of the following 
collateral:
    (A) The collateral described in Sec. 950.9(a) (1) or (2).
    (B) The collateral described in Sec. 950.7(a)(3). Solely for the 
purpose of facilitating acceptance of such collateral, a Bank may 
establish a cash collateral account for a housing associate that has 
satisfied the requirements of Sec. 926.3(b).
    (C) The other real estate-related collateral described in 
Sec. 950.7(a)(4), provided that such collateral is comprised of mortgage 
loans on one-to-four family or multifamily residential property.
    (ii) Prior to making an advance pursuant to this paragraph (b)(2), a 
Bank shall obtain a written certification from the housing associate 
that it shall use the proceeds of the advance for the purposes described 
in paragraph (b)(2)(i) of this section.
    (c) Terms and conditions--(1) General. Subject to the provisions of 
this paragraph (c), a Bank, in its discretion, shall determine whether, 
and on what terms, it will make advances to a housing associate.
    (2) Advance pricing. (i) A Bank shall price advances to housing 
associates in accordance with the requirements for pricing advances to 
members set forth in Sec. 950.6(b). Wherever the term ``member'' appears 
in Sec. 950.6(b), the term shall be construed also to mean `` housing 
associate.''
    (ii) A Bank shall apply the pricing criteria identified in 
Sec. 944.5(b)(2) equally to all of its member and housing associate 
borrowers.
    (3) Limit on advances. The principal amount of any advance made to a 
housing associate may not exceed 90 percent of the unpaid principal of 
the mortgage loans or securities pledged as security for the advance. 
This limit does not apply to an advance made to a housing associate 
under paragraph (b)(2) of this section.
    (d) Transaction accounts. Solely for the purpose of facilitating the 
making of advances to a housing associate, a Bank may establish a 
transaction account for each housing associate.
    (e) Loss of eligibility--(1) Notification of status changes. A Bank 
shall require a housing associate that applies for an advance to agree 
in writing that it will promptly inform the Bank of any change in its 
status as a housing associate.
    (2) Verification of eligibility. A Bank may, from time to time, 
require a housing associate to provide evidence that it continues to 
satisfy all of the eligibility requirements of the Act and this subpart.
    (3) Loss of eligibility. A Bank shall not extend a new advance or 
renew an existing advance to a housing associate that no longer meets 
the eligibility requirements of the Act and this subpart until the 
entity has provided evidence satisfactory to the Bank that it is in 
compliance with such requirements.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0005 with an expiration date of November 30, 2002.)

[58 FR 29469, May 20, 1993, as amended by 65 FR 203, Jan. 4, 2000; 65 FR 
8263, Feb. 18, 2000. Redesignated and amended at 65 FR 44430, July 18, 
2000]



  Subpart C--Advances to Out-of-District Members and Housing Associates



Sec. 950.25  Advances to out-of-district members and housing associates.

    (a) Establishment of creditor/debtor relationship. Any Bank may 
become a creditor to a member or housing associate of another Bank 
through the purchase of an outstanding advance, or a participation 
interest therein, from the other Bank, or through an arrangement with 
the other Bank that provides for the establishment of such a

[[Page 747]]

creditor/debtor relationship at the time an advance is made.
    (b) Applicability of advances requirements. Any debtor/creditor 
relationship established pursuant to paragraph (a) of this section shall 
be subject to all of the provisions of this part that would apply to an 
advance made by a Bank to its own members or housing associates.

[65 FR 43981, July 17, 2000; 65 FR 46049, July 26, 2000]



PART 951--AFFORDABLE HOUSING PROGRAM--Table of Contents




Sec.
951.1  Definitions.
951.2  Required annual AHP contributions.
951.3  Operation of Program and adoption of AHP implementation plan.
951.4  Advisory Councils.
951.5  Minimum eligibility standards for AHP projects.
951.6  Procedure for approval of applications for funding.
951.7  Modifications of applications prior to project completion.
951.8  Procedure for funding.
951.9  Modifications of applications after project completion.
951.10  Initial monitoring requirements.
951.11  Long-term monitoring requirements.
951.12  Remedial actions for noncompliance.
951.13  Agreements.
951.14  Temporary suspension of AHP contributions.
951.15  Affordable Housing Reserve Fund.
951.16  Application to existing AHP projects.

    Authority: 12 U.S.C. 1430(j).

    Source: 62 FR 41828, Aug. 4, 1997, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 951.1  Definitions.

    As used in this part:
    Advance means a loan to a member from a Bank that is:
    (1) Provided pursuant to a written agreement; (2) Supported by a 
note or other written evidence of the member's obligation; and
    (3) Fully secured by collateral in accordance with the Act and part 
950 of this chapter.
    Affordable means that the rent charged for a unit which is to be 
reserved for occupancy by a household with an income at or below 80 
percent of the median income for the area, does not exceed 30 percent of 
the income of a household of the maximum income and size expected, under 
the commitment made in the AHP application, to occupy the unit (assuming 
occupancy of 1.5 persons per bedroom or 1.0 person per unit without a 
separate bedroom).
    AHP or Program means the Affordable Housing Program established 
pursuant to 12 U.S.C. 1430(j) and this part.
    CIP means a Bank's Community Investment Program established under 
section 10(i) of the Act (12 U.S.C. 1430(i)).
    Cost of funds means, for purposes of a subsidized advance, the 
estimated cost of issuing Bank System consolidated obligations with 
maturities comparable to that of the subsidized advance.
    Direct subsidy means an AHP subsidy in the form of a direct cash 
payment, but does not include homeownership set-aside funds.
    Family member means any individual related to a person by blood, 
marriage or adoption.
    Habitable means suitable for occupancy, taking into account local 
health, safety, and building codes.
    Homeless household means a household made up of one or more 
individuals, other than individuals imprisoned or otherwise detained 
pursuant to state or federal law, who:
    (1) Lack a fixed, regular, and adequate nighttime residence; or
    (2) Have a primary nighttime residence that is:
    (i) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing for the mentally ill);
    (ii) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (iii) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    Homeownership set-aside funds means funds provided to a member by a 
Bank pursuant to a Bank's homeownership set-aside program.
    HUD means the Department of Housing and Urban Development.
    Low-or moderate-income household. (1) Owner-occupied projects. For 
purposes of

[[Page 748]]

an owner-occupied project, low-or moderate-income household means a 
household which, at the time it is qualified by the sponsor for 
participation in the project, has an income of 80 percent or less of the 
median income for the area.
    (2) Rental projects. (i) In general. For purposes of a rental 
project, low-or moderate-income household means a household which, upon 
initial occupancy of a rental unit, has an income at or below 80 percent 
of the median income for the area.
    (ii) Housing with current occupants. In the case of projects 
involving the purchase or rehabilitation of rental housing with current 
occupants, low- or moderate-income household means an occupying 
household with an income at or below 80 percent of the median income for 
the area at the time an application for AHP subsidy is submitted to the 
Bank.
    (3) Family-size adjustment. The income limit for low-or moderate-
income households may be adjusted for family size in accordance with the 
methodology of the applicable median income standard.
    Low-or moderate-income neighborhood means any neighborhood in which 
51 percent or more of the households have incomes at or below 80 percent 
of the median income for the area.
    Median income for the area. (1) Owner-occupied projects. A Bank 
shall identify in its AHP implementation plan one or more of the 
following median income standards from which all owner-occupied projects 
may choose for purposes of the AHP:
    (i) The median income for the area, as published annually by HUD;
    (ii) The applicable median family income, as determined under 26 
U.S.C. 143(f) (Mortgage Revenue Bonds) and published by a State agency 
or instrumentality;
    (iii) The median income for the area, as published by the United 
States Department of Agriculture; or
    (iv) The median income for any definable geographic area, as 
published by a federal, state, or local government entity for purposes 
of that entity's housing programs, and approved by the Board of 
Directors, at the request of a Bank, for use under the AHP.
    (2) Rental projects. A Bank shall identify in its AHP implementation 
plan one or more of the following median income standards from which all 
rental projects may choose for purposes of the AHP:
    (i) The median income for the area, as published annually by HUD; or
    (ii) The median income for any definable geographic area, as 
published by a federal, state, or local government entity for purposes 
of that entity's housing programs, and approved by the Board of 
Directors, at the request of a Bank, for use under the AHP.
    (3) Procedure for approval. Prior to requesting approval by the 
Board of Directors of a median income standard, a Bank shall amend its 
AHP implementation plan to permit the use of such standard, conditioned 
on Board of Directors approval. Requests for approval of median income 
standards shall receive prompt consideration by the Board of Directors.
    Net earnings of a Bank means the net earnings of a Bank for a 
calendar year after deducting the Bank's annual contribution to the 
Resolution Funding Corporation required under sections 21A or 21B of the 
Act (12 U.S.C. 1441a, 1441b), and before declaring any dividend under 
section 16 of the Act (12 U.S.C. 1436).
    Owner-occupied project means a project involving the purchase, 
construction, or rehabilitation of owner-occupied housing, including 
condominiums and cooperative housing, by or for very low-or low-or 
moderate-income households.
    Owner-occupied unit means a unit in an owner-occupied project. 
Housing with two to four dwelling units consisting of one owner-occupied 
unit and one or more rental units shall be considered a single owner-
occupied unit.
    Rental project means a project involving the purchase, construction, 
or rehabilitation of rental housing, including overnight shelters and 
transitional housing for homeless households and mutual housing, where 
at least 20 percent of the units in the project are occupied by and 
affordable for very low-income households.
    Retention period means:
    (1) 5 years from closing for an AHP-assisted owner-occupied unit; 
and

[[Page 749]]

    (2) 15 years from the date of project completion for a rental 
project.
    Sponsor means a not-for-profit or for-profit organization or public 
entity that:
    (1) Has an ownership interest (including any partnership interest) 
in a rental project; or
    (2) Is integrally involved in an owner-occupied project, such as by 
exercising control over the planning, development, or management of the 
project, or by qualifying borrowers and providing or arranging financing 
for the owners of the units.
    State means a state of the United States, the District of Columbia, 
Guam, Puerto Rico, or the U.S. Virgin Islands.
    Subsidized advance means an advance to a member at an interest rate 
reduced below the Bank's cost of funds, by use of a subsidy.
    Subsidy means:
    (1) A direct subsidy, provided that if a direct subsidy is used to 
write down the interest rate on a loan extended by a member, sponsor, or 
other party to a project, the subsidy shall equal the net present value 
of the interest foregone from making the loan below the lender's market 
interest rate (calculated as of the date the AHP application is 
submitted to the Bank, and subject to adjustment under 
Sec. 951.8(c)(3));
    (2) The net present value of the interest revenue foregone from 
making a subsidized advance at a rate below the Bank's cost of funds, 
determined as of the earlier of the date of disbursement of the 
subsidized advance or the date prior to disbursement on which the Bank 
first manages the funding to support the subsidized advance through its 
asset/liability management system, or otherwise; or
    (3) Homeownership set-aside funds.
    Very low-income household. (1) Owner-occupied projects. For purposes 
of an owner-occupied project, very low-income household means a 
household which, at the time it is qualified by the sponsor for 
participation in the project, has an income at or below 50 percent of 
the median income for the area.
    (2) Rental projects. (i) In general. For purposes of a rental 
project, very low-income household means a household which, upon initial 
occupancy of a rental unit, has an income at or below 50 percent of the 
median income for the area.
    (ii) Housing with current occupants. In the case of projects 
involving the purchase or rehabilitation of rental housing with current 
occupants, very low-income household means an occupying household with 
an income at or below 50 percent of the median income for the area at 
the time an application for AHP subsidy is submitted to the Bank.
    (3) Family-size adjustment. The income limit for very low-income 
households may be adjusted for family size in accordance with the 
methodology of the applicable median income standard.
    Visitable means, in either owner-occupied or rental housing, at 
least one entrance is at-grade (no steps) and approached by an 
accessible route such as a sidewalk, and the entrance door and all 
interior passage doors are at least 2 feet, 10 inches wide, offering 32 
inches of clear passage space.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27672, May 20, 1998; 64 
FR 24027, May 5, 1999; 65 FR 5419, Feb. 4, 2000; 65 FR 8263, Feb. 18, 
2000; 65 FR 17437, Apr. 3, 2000]



Sec. 951.2  Required annual AHP contributions.

    Each Bank shall contribute annually to its Program the greater of:
    (a) 10 percent of the Bank's net earnings for the previous year; or
    (b) That Bank's pro rata share of an aggregate of $100 million to be 
contributed in total by the Banks, such proration being made on the 
basis of the net earnings of the Banks for the previous year.



Sec. 951.3  Operation of Program and adoption of AHP implementation plan.

    (a) Allocation of AHP contributions--(1) Homeownership set-aside 
programs. Each Bank, after consultation with its Advisory Council, may 
set aside annually, in the aggregate, up to the greater of $1.5 million 
or 15 percent of its annual required AHP contribution to provide funds 
to members participating in the

[[Page 750]]

Bank's homeownership set-aside programs, pursuant to the requirements of 
this part. In cases where the amount of homeownership set-aside funds 
applied for by members in a given year exceeds the amount available for 
that year, a Bank may allocate up to the greater of $1.5 million or 15 
percent of its annual required AHP contribution for the subsequent year 
to the current year's homeownership set-aside programs. A Bank may 
establish one or more homeownership set-aside programs pursuant to 
written policies adopted by the Bank's board of directors. A Bank's 
board of directors shall not delegate to Bank officers or other Bank 
employees the responsibility for adopting such policies.
    (2) Competitive application program. That portion of a Bank's 
required annual AHP contribution that is not set aside to fund 
homeownership set-aside programs shall be provided to members through a 
competitive application program, pursuant to the requirements of this 
part.
    (b) AHP implementation plan--(1) Adoption of plan. Each Bank's board 
of directors shall adopt a written AHP implementation plan which shall 
set forth:
    (i) The applicable median income standard or standards, adopted by 
the Bank consistent with the definition of median income for the area in 
Sec. 951.1;
    (ii) The requirements for any homeownership set-aside programs 
adopted by the Bank pursuant to paragraph (a)(1) of this section;
    (iii) The Bank's project feasibility guidelines, adopted consistent 
with Sec. 951.5(b)(2);
    (iv) The Bank's schedule for AHP funding periods;
    (v) Any additional District eligibility requirement, adopted by the 
Bank pursuant to Sec. 951.5(b)(10);
    (vi) The Bank's scoring guidelines, adopted by the Bank consistent 
with Sec. 951.6(b)(4);
    (vii) The Bank's time limits on use of AHP subsidies and procedures 
for verifying compliance upon disbursement of AHP subsidies pursuant to 
Sec. 951.8; and
    (viii) The Bank's procedures for carrying out its monitoring 
obligations under Secs. 951.10(c) and 951.11.
    (2) No delegation. A Bank's board of directors shall not delegate to 
Bank officers or other Bank employees the responsibility for adopting 
the AHP implementation plan, or any subsequent amendments thereto.
    (3) Advisory Council review. Prior to adoption of the Bank's AHP 
implementation plan, and any subsequent amendments thereto, the Bank 
shall provide its Advisory Council an opportunity to review the plan and 
any subsequent amendments, and the Advisory Council shall provide its 
recommendations to the Bank's board of directors.
    (4) Submission of plan amendments to the Finance Board. A Bank shall 
submit any amendments of its AHP implementation plan to the Finance 
Board within 30 days after the date the Bank's board of directors 
approves such amendments.
    (5) Public Access. A Bank's initial AHP implementation plan, and any 
subsequent amendments, shall be made available to members of the public, 
upon request.
    (c) Conflicts of interest--(1) Bank directors and employees. Each 
Bank's board of directors shall adopt a written policy providing that if 
a Bank director or employee, or such person's family member, has a 
financial interest in, or is a director, officer, or employee of an 
organization involved in, a project that is the subject of a pending or 
approved AHP application, the Bank director or employee shall not 
participate in or attempt to influence decisions by the Bank regarding 
the evaluation, approval, funding, monitoring or any remedial process 
for such project.
    (2) Advisory Council members. Each Bank's board of directors shall 
adopt a written policy providing that if an Advisory Council member, or 
such person's family member, has a financial interest in, or is a 
director, officer, or employee of an organization involved in, a project 
that is the subject of a pending or approved AHP application, the 
Advisory Council member shall not participate in or attempt to influence 
decisions by the Bank regarding the approval for such project.

[[Page 751]]

    (3) No delegation. A Bank's board of directors shall not delegate to 
Bank officers or other Bank employees the responsibility to adopt 
conflicts of interest policies.
    (d) Reporting. Each Bank shall provide such reports and 
documentation concerning its Program as the Finance Board may request 
from time to time.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 64 FR 24027, May 5, 1999; 65 
FR 5419, Feb. 4, 2000; 65 FR 8263, Feb. 18, 2000]



Sec. 951.4  Advisory Councils.

    (a) In general. Each Bank's board of directors shall appoint an 
Advisory Council of from 7 to 15 persons who reside in the Bank's 
District and are drawn from community and not-for-profit organizations 
actively involved in providing or promoting low- and moderate-income 
housing in the District.
    (b) Nominations and appointments. Each Bank shall solicit 
nominations for membership on the Advisory Council from community and 
not-for-profit organizations pursuant to a nomination process that is as 
broad and as participatory as possible, allowing sufficient time for 
responses. The Bank's board of directors shall appoint Advisory Council 
members giving consideration to the size of the Bank's District and the 
diversity of low- and moderate-income housing needs and activities 
within the District.
    (c) Diversity of membership. In appointing the Advisory Council, a 
Bank's board of directors shall ensure that the membership includes 
persons drawn from a diverse range of organizations, provided that 
representatives of no one group shall constitute an undue proportion of 
the membership of the Advisory Council.
    (d) Terms of Advisory Council members. Advisory Council members 
shall be appointed by the Bank's board of directors to serve for terms 
of three years, and such terms shall be staggered to provide continuity 
in experience and service to the Advisory Council. An Advisory Council 
member appointed to fill a vacancy shall be appointed for the unexpired 
term of his or her predecessor in office. No Advisory Council member may 
be appointed to serve for more than three consecutive terms. 
Appointments for the unexpired term of a predecessor shall not count 
toward the three-term limit.
    (e) Election of officers. Each Advisory Council may elect from among 
its members a chairperson, a vice chairperson, and any other officers 
the Advisory Council deems appropriate.
    (f) Duties.--(1) Meetings with the Banks. Representatives of the 
board of directors of the Bank shall meet with the Advisory Council at 
least quarterly to obtain the Advisory Council's advice on ways in which 
the Bank can better carry out its housing finance and community 
investment mission, including, but not limited to, advice on the low- 
and moderate-income housing and community investment programs and needs 
in the Bank's District, and on the use of AHP subsidies, Bank advances, 
and other Bank credit products for these purposes.
    (2) Summary of AHP applications. The Bank shall comply with requests 
from the Advisory Council for summary information regarding AHP 
applications from prior funding periods.
    (3) Annual report to the Finance Board. Each Advisory Council shall 
submit to the Finance Board annually by March 1 its analysis of the low- 
and moderate-income housing and community development activity of the 
Bank by which it is appointed.
    (g) Expenses. The Bank shall pay Advisory Council members travel 
expenses, including transportation and subsistence, for each day devoted 
to attending meetings with representatives of the board of directors of 
the Bank and meetings requested by the Finance Board.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27672, May 20, 1998; 65 
FR 5419, Feb. 4, 2000]

[[Page 752]]



Sec. 951.5  Minimum eligibility standards for AHP projects.

    (a) Homeownership set-aside programs. A Bank's homeownership set-
aside programs must meet the following requirements:
    (1) Homeownership set-aside funds must be provided to members 
pursuant to allocation criteria established by the Bank;
    (2) Members must provide homeownership set-aside funds only to 
households that:
    (i) Are low-or moderate-income households, as defined in Sec. 951.1;
    (ii) Complete a homebuyer or homeowner counseling program provided 
by, or based on one provided by, an organization recognized as 
experienced in homebuyer or homeowner counseling, respectively; and
    (iii) Meet such other eligibility criteria that may be established 
by the Bank, such as a matching funds requirement or criteria that give 
priority for the purchase or rehabilitation of housing in particular 
areas or as part of a disaster relief effort;
    (3) Members must provide homeownership set-aside funds to households 
as a grant, in an amount up to a maximum of $10,000 per household, as 
established by the Bank, which limit shall apply to all households;
    (4) Households must use homeownership set-aside funds to pay for 
downpayment, closing cost, counseling, or rehabilitation assistance in 
connection with the household's purchase or rehabilitation of an owner-
occupied housing unit, including a condominium or cooperative housing 
unit, to be used as the household's primary residence;
    (5) A housing unit purchased or rehabilitated using homeownership 
set-aside funds must be subject to a retention agreement described in 
Sec. 951.13(d)(1);
    (6) If a member is providing mortgage financing to a participating 
household, the member must provide financial or other incentives in 
connection with such mortgage financing, and the rate of interest, 
points, fees, and any other charges by the member must not exceed a 
reasonable market rate of interest, points, fees, and other charges for 
a loan of similar maturity, terms, and risk;
    (7) Homeownership set-aside funds may be used to pay for counseling 
costs only where:
    (i) Such costs are incurred in connection with counseling of 
homebuyers who actually purchase an AHP-assisted unit;
    (ii) The cost of the counseling has not been covered by another 
funding source, including the member; and
    (iii) The homeownership set-aside funds are used to pay only for the 
amount of such reasonable and customary costs that exceeds the highest 
amount the member has spent annually on homebuyer counseling costs 
within the preceding three years; and
    (8) Homeownership set-aside funds must be drawn down and used by 
eligible households within the period of time specified by the Bank in 
its AHP implementation plan.
    (b) Competitive application program. Projects receiving AHP 
subsidies pursuant to a Bank's competitive application program must meet 
the eligibility requirements of this paragraph (b).
    (1) Owner-occupied or rental housing. A project must be either an 
owner-occupied project or a rental project, as defined, respectively, in 
Sec. 951.1.
    (2) Project feasibility and need for subsidy--(i) Sources and uses 
of funds. The project's estimated uses of funds must equal its estimated 
sources of funds, as reflected in the project's development budget. A 
project's sources of funds must include:
    (A) Estimates of funds the project sponsor intends to obtain from 
other sources but which have not yet been committed to the project; and
    (B) Estimates of the market value of in-kind donations and volunteer 
professional labor or services committed to the project, but not the 
value of sweat-equity.
    (ii) Project costs--(A) In general. Project costs, as reflected in 
the project's development budget, must be reasonable and customary, in 
accordance with the Bank's project feasibility guidelines, in light of:
    (1) Industry standards for the location of the project; and
    (2) The long-term financial needs of the project.
    (B) Cost of property and services provided by a member. The purchase 
price

[[Page 753]]

of property or services, as reflected in the project's development 
budget, sold to the project by a member providing AHP subsidy to the 
project, or, in the case of property, upon which such member holds a 
mortgage or lien, may not exceed the market value of such property or 
services as of the date the purchase price for the property or services 
was agreed upon. In the case of real estate owned property sold to a 
project by a member providing AHP subsidy to a project, or property sold 
to the project upon which the member holds a mortgage or lien, the 
market value of such property is deemed to be the ``as-is'' or ``as-
rehabilitated'' value of the property, whichever is appropriate, as 
reflected in an independent appraisal of the property performed by a 
State certified or licensed appraiser, as defined in 12 CFR 564.2(j) and 
(k), within six months prior to the date the Bank disburses AHP subsidy 
to the project.
    (iii) Operational feasibility and need for subsidy. The project must 
be operationally feasible, in accordance with the Bank's project 
feasibility guidelines, based on relevant factors including, but not 
limited to, applicable financial ratios, geographic location of the 
project, needs of tenants, and other non-financial project 
characteristics. The requested AHP subsidy must be necessary for the 
financial feasibility of the project, as currently structured, and the 
rate of interest, points, fees, and any other charges for all loans 
financing the project must not exceed a market rate of interest, points, 
fees, and other charges for loans of similar maturity, terms, and risk.
    (3) Timing of subsidy use. The AHP subsidy must be likely to be 
drawn down by the project or used by the project to procure other 
financing commitments within 12 months of the date of approval of the 
application for subsidy funding the project.
    (4) Prepayment, cancellation, and processing fees. The project must 
not use AHP subsidies to pay for:
    (i) Prepayment fees imposed by a Bank on a member for a subsidized 
advance that is prepaid, unless, subsequent to such prepayment, the 
project will continue to comply with the terms of the application for 
the subsidy, as approved by the Bank, and the requirements of this part 
for the duration of the original retention period, and any unused 
subsidy is returned to the Bank and made available for other AHP 
projects;
    (ii) Cancellation fees and penalties imposed by a Bank on a member 
for a subsidized advance commitment that is canceled; or
    (iii) Processing fees charged by members for providing direct 
subsidies to a project.
    (5) Counseling costs. AHP subsidies may be used to pay for 
counseling costs only where:
    (i) Such costs are incurred in connection with counseling of 
homebuyers who actually purchase an AHP-assisted unit; and
    (ii) The cost of the counseling has not been covered by another 
funding source, including the member.
    (6) Refinancing. If the project uses AHP subsidies to refinance an 
existing single-family or multifamily mortgage loan, the equity proceeds 
of the refinancing must be used only for the purchase, construction, or 
rehabilitation of housing units meeting the eligibility requirements of 
this paragraph (b).
    (7) Retention--(i) Owner-occupied projects. The project's AHP-
assisted units are or are committed to be subject to a retention 
agreement described in Sec. 951.13 (c)(4) or (d)(1).
    (ii) Rental projects. AHP-assisted rental projects are or are 
committed to be subject to a retention agreement described in 
Sec. 951.13 (c)(5) or (d)(2).
    (8) Project sponsor qualifications. A project's sponsor must be 
qualified and able to perform its responsibilities as committed to in 
the application for subsidy funding the project.
    (9) Fair housing. The project, as proposed, must comply with 
applicable Federal and State laws on fair housing and housing 
accessibility, including, but not limited to, the Fair Housing Act, the 
Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, 
and the Architectural Barriers Act of 1969, and must demonstrate how the 
project will be affirmatively marketed.
    (10) District eligibility requirements. (i) A project receiving AHP 
subsidies may be required by a Bank to meet one or

[[Page 754]]

more of the following additional eligibility requirements adopted by a 
Bank's board of directors, after consultation with its Advisory Council:
    (A) A requirement that the amount of subsidy requested for the 
project does not exceed limits established by the Bank as to the maximum 
amount of AHP subsidy available per member each year; or per member, per 
project, or per project unit in a single funding period;
    (B) A requirement that the project is located in the Bank's 
District; or
    (C) A requirement that the member submitting the application has 
made use of a minimum amount of a credit product offered by the Bank, 
other than AHP or CIP credit products, within the previous 12 months, 
provided that such a minimum threshold for credit product usage 
established by a Bank shall not exceed 1.5 percent of a member's total 
assets, and all members shall have access to some amount of AHP subsidy, 
as determined by the Bank, regardless of whether they meet the Bank's 
minimum threshold for credit product usage.
    (ii) Any limit on the amount of AHP subsidy available per member 
must result in equal amounts of AHP subsidy available to all members 
receiving subsidy pursuant to such limit.

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27672, May 20, 1998; 64 
FR 23015, Apr. 29, 1999; 64 FR 24027, May 5, 1999; 65 FR 8263, Feb. 18, 
2000]



Sec. 951.6  Procedure for approval of applications for funding.

    (a) Homeownership set-aside programs. A Bank shall accept 
applications for homeownership set-aside funds from members and may, in 
its discretion, accept applications from institutions with pending 
applications for membership in the Bank. The Bank shall approve 
applications in accordance with the Bank's criteria governing the 
allocation of funds.
    (b) Competitive application program--(1) Funding periods; amounts 
available. A Bank shall accept applications for funding under its 
competitive application program from members and may, in its discretion, 
accept applications from institutions with pending applications for 
membership in the Bank. A Bank may accept applications for funding 
during a specified number of funding periods each year, as determined by 
the Bank. The amount of subsidies offered in each funding period shall 
be comparable.
    (2) Submission of applications. A Bank shall require applicants for 
AHP subsidies to submit information sufficient for the Bank to:
    (i) Determine that the proposed AHP project meets the eligibility 
requirements of Sec. 951.5(b); and
    (ii) Evaluate the application pursuant to the scoring criteria in 
paragraph (b)(4) of this section.
    (3) Review of applications for project eligibility. A Bank shall 
review applications to determine that the proposed AHP project meets the 
eligibility requirements of Sec. 951.5(b).
    (4) Scoring of applications--(i) In general. A Bank shall score only 
those applications meeting the eligibility requirements of 
Sec. 951.5(b). A Bank shall not adopt additional scoring criteria or 
point allocations, except as specifically authorized under this 
paragraph (b)(4). A Bank shall adopt written guidelines implementing the 
scoring requirements of this paragraph (b)(4).
    (ii) Point allocations. A Bank shall allocate 100 points among the 
nine scoring criteria identified in paragraph (b)(4)(iv) of this 
section. The scoring criterion for targeting identified in paragraph 
(b)(4)(iv)(C) of this section shall be allocated at least 20 points. The 
remaining scoring criteria shall be allocated at least five points each.
    (iii) Satisfaction of scoring criteria. A Bank shall designate each 
scoring criterion as either a fixed-point or a variable-point criterion. 
Variable-point criteria are those where there are varying degrees to 
which an application can satisfy the criteria. The number of points that 
may be awarded to an application for meeting a variable-point criterion 
will vary, depending on the extent to which the application satisfies 
the criterion, compared to the other applications being scored. A Bank 
shall designate the targeting and subsidy-per-unit scoring criteria 
identified in paragraphs (b)(4)(iv) (C) and (H), respectively, of this 
section as variable-point criteria. The application(s) best achieving 
each variable-

[[Page 755]]

point criterion shall receive the maximum point score available for that 
criterion, with the remaining applications scored on a declining scale. 
Fixed-point criteria are those which cannot be satisfied in varying 
degrees and are either satisfied, or not. An application meeting a 
fixed-point criterion shall be awarded the total number of points 
allocated to that criterion.
    (iv) Scoring criteria. An application for a proposed project may 
receive points based on satisfaction of the nine scoring criteria set 
forth in this paragraph (b)(4)(iv).
    (A) Use of donated government-owned or other properties. The 
creation of housing using a significant proportion of units or land 
donated or conveyed for a nominal price by the Federal government or any 
agency or instrumentality thereof, or by any other party. For purposes 
of this paragraph, a nominal price is a small, negligible amount, most 
often one dollar, and may be accompanied by modest expenses related to 
the conveyance of the property for use by the project.
    (B) Sponsorship by a not-for-profit organization or government 
entity. Project sponsorship by a not-for-profit organization, a state or 
political subdivision of a state, a state housing agency, a local 
housing authority, a Native American Tribe, an Alaskan Native Village, 
or the government entity for Native Hawaiian Home Lands.
    (C) Targeting. The extent to which a project creates housing for 
very low- and low- or moderate-income households.
    (1) Rental projects. An application for a rental project shall be 
awarded the maximum number of points available under this scoring 
criterion if 60 percent or more of the units in the project are reserved 
for occupancy by households with incomes at or below 50 percent of the 
median income for the area. Applications for projects with less than 60 
percent of the units reserved for occupancy by households with incomes 
at or below 50 percent of the median income for the area shall be 
awarded points on a declining scale based on the percentage of units in 
a project that are reserved for households with incomes at or below 50 
percent of the median income for the area, and on the percentage of the 
remaining units reserved for households with incomes at or below 80 
percent of the median income for the area. In order to facilitate 
reliance on monitoring by a federal, state, or local government entity 
providing funds or allocating federal Low-Income Housing Tax Credits to 
a proposed project, a Bank, in its discretion, may score each project 
according to the targeting commitments made by the project to such 
entity, and the Bank shall include such scoring practice in its AHP 
implementation plan.
    (2) Owner-occupied projects. Applications for owner-occupied 
projects shall be awarded points based on a declining scale, with 
projects having the highest percentage of units targeted to households 
with the lowest percentage of median income for the area awarded the 
highest number of points.
    (3) Separate scoring. For purposes of this scoring criterion, 
applications for owner-occupied projects and rental projects may be 
scored separately.
    (D) Housing for homeless households. The creation of rental housing, 
excluding overnight shelters, reserving at least 20 percent of the units 
for homeless households, the creation of transitional housing for 
homeless households permitting a minimum of six months occupancy, or the 
creation of permanent owner-occupied housing reserving at least 20 
percent of the units for homeless households.
    (E) Promotion of empowerment. The provision of housing in 
combination with a program offering: employment; education; training; 
homebuyer, homeownership or tenant counseling; daycare services; 
resident involvement in decisionmaking affecting the creation or 
operation of the project; or other services that assist residents to 
move toward better economic opportunities, such as welfare to work 
initiatives.
    (F) First District priority. The satisfaction of one of the 
following criteria, or one of a number of the following criteria, as 
recommended by the Bank's Advisory Council and adopted by the Bank's 
board of directors and set forth in the Bank's AHP implementation

[[Page 756]]

plan, as long as the total points available for meeting the criterion or 
criteria adopted under this category do not exceed the total points 
allocated to this category:
    (1) Special needs. The creation of housing in which at least 20 
percent of the units are reserved for occupancy by households with 
special needs, such as the elderly, mentally or physically disabled 
persons, persons recovering from physical abuse or alcohol or drug 
abuse, or persons with AIDS; or the creation of housing that is 
``visitable'' by persons with physical disabilities who are not 
occupants of such housing;
    (2) Community development. The creation of housing meeting housing 
needs documented as part of a community revitalization or economic 
development strategy approved by a unit of a state or local government;
    (3) First-time homebuyers. The financing of housing for first-time 
homebuyers;
    (4) Member financial participation. Member financial participation 
(excluding the pass-through of AHP subsidy) in the project, such as 
providing market rate or concessionary financing, fee waivers, or 
donations;
    (5) Disaster areas. The financing of housing located in federally 
declared disaster areas;
    (6) Rural. The financing of housing located in rural areas;
    (7) Urban. The financing of urban in-fill or urban rehabilitation 
housing;
    (8) Economic diversity. The creation of housing that is part of a 
strategy to end isolation of very low-income households by providing 
economic diversity through mixed-income housing in low- or moderate-
income neighborhoods, or providing very low- or low- or moderate-income 
households with housing opportunities in neighborhoods or cities where 
the median income equals or exceeds the median income for the larger 
surrounding area--such as the city, county, or Primary Metropolitan 
Statistical Area--in which the neighborhood or city is located;
    (9) Fair housing remedy. The financing of housing as part of a 
remedy undertaken by a jurisdiction adjudicated by a federal, state, or 
local court to be in violation of title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d et seq.), the Fair Housing Act (42 U.S.C. 3601 et 
seq.), or any other federal, state, or local fair housing law, or as 
part of a settlement of such claims;
    (10) Community involvement. Demonstrated support for the project by 
local government, other than as a project sponsor, in the form of 
property tax deferment or abatement, zoning changes or variances, 
infrastructure improvements, fee waivers, or other similar forms of non-
cash assistance, or demonstrated support for the project by community 
organizations or individuals, other than as project sponsors, through 
the commitment by such entities or individuals of donated goods and 
services, or volunteer labor;
    (11) Lender consortia. The involvement of financing by a consortium 
of at least two financial institutions; or
    (12) In-District projects. The creation of housing located in the 
Bank's District.
    (G) Second District priority--defined housing need in the District. 
The satisfaction of a housing need in the Bank's District, as defined 
and recommended by the Bank's Advisory Council and adopted by the Bank's 
board of directors and set forth in the Bank's AHP implementation plan. 
The Bank may, but is not required to, use one of the criteria listed in 
paragraph (b)(4)(iv)(F) of this section, provided it is different from 
the criterion or criteria adopted by the Bank under paragraph 
(b)(4)(iv)(F) of this section.
    (H) AHP subsidy per unit. The extent to which a project proposes to 
use the least amount of AHP subsidy per AHP-targeted unit. In the case 
of an application for a project financed by a subsidized advance, the 
total amount of AHP subsidy used by the project shall be estimated based 
on the Bank's cost of funds as of the date on which all applications are 
due for the funding period in which the application is submitted. For 
purposes of this scoring criterion, applications for owner-occupied 
projects and rental projects may be scored separately.
    (I) Community stability. The promotion of community stability, such 
as by rehabilitating vacant or abandoned properties, being an integral 
part of a

[[Page 757]]

neighborhood stabilization plan approved by a unit of state or local 
government, and not displacing low- or moderate-income households, or if 
such displacement will occur, assuring that such households will be 
assisted to minimize the impact of such displacement.
    (5) Approval of applications--(i) Approval by Bank's board. The 
board of directors of each Bank shall approve applications in descending 
order starting with the highest scoring application until the total 
funding amount for the particular funding period, except for any amount 
insufficient to fund the next highest scoring application, has been 
allocated. The board of directors also shall approve at least the next 
four highest scoring applications as alternates and, within one year of 
approval, may fund such alternates if any previously committed AHP 
subsidies become available.
    (ii) No delegation. A Bank's board of directors shall not delegate 
to Bank officers or other Bank employees the responsibility to approve 
or disapprove AHP applications.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27673, May 20, 1998; 64 
FR 23015, Apr. 29, 1999; 64 FR 24028, May 5, 1999; 65 FR 5419, Feb. 4, 
2000; 65 FR 8263, Feb. 18, 2000]



Sec. 951.7  Modifications of applications prior to project completion.

    (a) Modification procedure. If, prior to final disbursement of funds 
to a project from all funding sources, there is or will be a change in 
the project that would change the score that the project application 
received in the funding period in which it was originally scored and 
approved, had the changed facts been operative at that time, a Bank, in 
its discretion, may approve in writing a modification to the terms of 
the approved application, provided that:
    (1) The project, incorporating any such changes, would meet the 
eligibility requirements of Sec. 951.5(b);
    (2) The application, as reflective of such changes, continues to 
score high enough to have been approved in the funding period in which 
it was originally scored and approved by the Bank; and
    (3) There is good cause for the modification.
    (b) Modifications involving a subsidy increase. Modifications 
involving an increase in AHP subsidy shall be approved or disapproved by 
a Bank's board of directors. The authority to approve or disapprove such 
requests shall not be delegated to Bank officers or other Bank 
employees.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27673, May 20, 1998; 65 
FR 5419, Feb. 4, 2000; 65 FR 8263, Feb. 18, 2000]



Sec. 951.8  Procedure for funding.

    (a) Disbursement of subsidies to members. (1) A Bank may disburse 
AHP subsidies only to institutions that are members of the Bank at the 
time they request a draw-down of subsidy.
    (2) If an institution with an approved application for AHP subsidy 
fails to obtain or loses its membership in a Bank, the Bank may disburse 
subsidies to a member of such Bank to which the institution has 
transferred its obligations under the approved application, or the Bank 
may disburse subsidies through another Bank to a member of that Bank 
that has assumed the institution's obligations under the approved 
application.
    (b) Homeownership set-aside programs--(1) Time limit on use of 
subsidies. If homeownership set-aside funds are not drawn down and used 
by eligible households within the period of time specified by the Bank 
in its AHP implementation plan, the Bank shall cancel the application 
for funds and make the funds available for other applicants for 
homeownership set-aside funds or for other AHP-eligible projects.
    (2) Member certification upon disbursement. Prior to disbursement of 
homeownership set-aside funds by a Bank to a member, the Bank shall 
require the member to certify that:

[[Page 758]]

    (i) The funds received from the Bank will be provided to a household 
meeting the eligibility requirements of Sec. 951.5(a)(2);
    (ii) If the member is providing mortgage financing to the household, 
the member will provide financial or other incentives in connection with 
such mortgage financing, and the rate of interest, points, fees, and any 
other charges by the member will not exceed a reasonable market rate of 
interest, points, fees, and other charges for a loan of similar 
maturity, terms, and risk; and
    (iii) Funds received from the Bank for homebuyer counseling costs 
will be provided according to the requirements of Sec. 951.5(a)(7).
    (c) Competitive application program--(1) Time limit on use of 
subsidies. If AHP subsidies approved for a project under a Bank's 
competitive application program are not drawn down and used by the 
project within the period of time specified by the Bank in its AHP 
implementation plan, the Bank shall cancel its approval of the 
application for the subsidies and make the subsidies available for other 
AHP-eligible projects.
    (2) Compliance upon disbursement of subsidies. A Bank shall verify 
prior to its initial disbursement of subsidies for an approved project, 
and prior to each disbursement thereafter, that the project meets the 
eligibility requirements of Sec. 951.5(b) and all obligations committed 
to in the approved application.
    (3) Changes in approved AHP subsidy amount where a direct subsidy is 
used to write down prior to closing the principal amount or interest 
rate on a loan.--(i) Change in subsidy amount. If a member is approved 
to receive a direct subsidy to write down prior to closing the principal 
amount or the interest rate on a loan to a project and the amount of 
subsidy required to maintain the debt service cost for the loan 
decreases from the amount of subsidy initially approved by the Bank due 
to a decrease in market interest rates between the time of approval and 
the time the lender commits to the interest rate to finance the project, 
the Bank shall reduce the subsidy amount accordingly. If market interest 
rates rise between the time of approval and the time the lender commits 
to the interest rate to finance the project, the Bank may, in its 
discretion, increase the subsidy amount accordingly.
    (ii) Reconciliation of AHP fund. If a Bank reduces the amount of AHP 
subsidy approved for a project, the amount of such reduction shall be 
returned to the Bank's AHP fund. If a Bank increases the amount of AHP 
subsidy approved for a project, the amount of such increase shall be 
drawn first from any currently uncommitted or repaid AHP subsidies and 
then from the Bank's required AHP contribution for the next year.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 65 FR 5419, Feb. 4, 2000; 65 
FR 8263, 8264, Feb. 18, 2000]



Sec. 951.9  Modifications of applications after project completion.

    Modification procedure. If, after final disbursement of funds to a 
project from all funding sources, there is or will be a change in the 
project that would change the score that the project application 
received in the funding period in which it was originally scored and 
approved, had the changed facts been operative at that time, a Bank, in 
its discretion, may approve in writing a modification to the terms of 
the approved application, other than an increase in the amount of 
subsidy approved for the project, provided that:
    (a) The project is in financial distress, or is at substantial risk 
of falling into such distress;
    (b) The project sponsor or owner has made best efforts to avoid 
noncompliance with the terms of the application for subsidy and the 
requirements of this part;
    (c) The project, incorporating any material changes, would meet the 
eligibility requirements of Sec. 951.5(b); and
    (d) The application, as reflective of such changes, continues to 
score high enough to have been approved in the

[[Page 759]]

funding period in which it was originally scored and approved by the 
Bank.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 64 FR 23016, Apr. 29, 1999; 65 
FR 5419, Feb. 4, 2000; 65 FR 8264, Feb. 18, 2000]



Sec. 951.10  Initial monitoring requirements.

    (a) Requirements for project sponsors and owners--(1) Owner-occupied 
projects. (i) During the period of construction or rehabilitation of an 
owner-occupied project, the project sponsor must report to the member 
semiannually on whether reasonable progress is being made towards 
completion of the project.
    (ii) Where AHP subsidies are used to finance the purchase of owner-
occupied units, the project sponsor must certify annually to the member 
and the Bank, until all approved AHP subsidies are provided to eligible 
households in the project, that those households receiving AHP subsidies 
during the year were eligible households, and such certifications shall 
be supported by household income verification documentation maintained 
by the project sponsor and available for review by the member or the 
Bank.
    (2) Rental projects. (i) During the period of construction or 
rehabilitation of a rental project, the project owner must report to the 
member semiannually on whether reasonable progress is being made towards 
completion of the project.
    (ii) Within the first year after project completion, the project 
owner must:
    (A) Certify to the member and the Bank that the services and 
activities committed to in the AHP application have been provided in 
connection with the project;
    (B) Provide a list of actual tenant rents and incomes to the member 
and the Bank and certify that:
    (1) The tenant rents and incomes are accurate and in compliance with 
the rent and income targeting commitments made in the AHP application; 
and
    (2) The project is habitable; and
    (C) Maintain documentation regarding tenant rents and incomes and 
project habitability available for review by the member or the Bank, to 
support such certifications.
    (b) Requirements for members--(1) Owner-occupied projects. (i) 
During the period of construction or rehabilitation of an owner-occupied 
project, the member must take the steps necessary to determine whether 
reasonable progress is being made towards completion of the project and 
must report to the Bank semiannually on the status of the project.
    (ii) Within one year after disbursement to a project of all approved 
AHP subsidies, the member must review the project documentation and 
certify to the Bank that:
    (A) The AHP subsidies have been used according to the commitments 
made in the AHP application; and
    (B) The AHP-assisted units are subject to deed restrictions or other 
legally enforceable retention agreements or mechanisms meeting the 
requirements of Sec. 951.13(c)(4) or (d)(1);
    (2) Rental projects. (i) During the period of construction or 
rehabilitation of a rental project, the member must take the steps 
necessary to determine whether reasonable progress is being made towards 
completion of the project and must report to the Bank semiannually on 
the status of the project.
    (ii) Within the first year after project completion, the member must 
review the project documentation and certify to the Bank that:
    (A) The project is habitable;
    (B) The project meets its income targeting commitments; and
    (C) The rents charged for income-targeted units do not exceed the 
maximum levels committed to in the AHP application.
    (c) Requirements for Banks--(1) Owner-occupied projects. Each Bank 
must take the steps necessary to determine, based on a review of the 
documentation for a sample of projects and units within one year of 
receiving the certifications described in paragraph (b)(1)(ii) of this 
section that:
    (i) The incomes of the households that own the AHP-assisted units 
did not exceed the levels committed to in

[[Page 760]]

the AHP application at the time the households were qualified by the 
sponsor to participate in the project;
    (ii) The AHP subsidies were used for eligible purposes, the 
project's actual costs were reasonable and customary in accordance with 
the Bank's project feasibility guidelines, and the subsidies were 
necessary for the financial feasibility of the project, as currently 
structured; and
    (iii) The AHP-assisted units are subject to deed restrictions or 
other legally enforceable retention agreements or mechanisms meeting the 
requirements of Sec. 951.13(c)(4) or (d)(1).
    (2) Rental projects. Each Bank must take the steps necessary to 
determine that:
    (i) Within the first year after completion of a rental project, the 
services and activities committed to in the AHP application have been 
provided in connection with the project; and
    (ii) The AHP subsidies were used for eligible purposes, the 
project's actual costs were reasonable and customary in accordance with 
the Bank's project feasibility guidelines, and the subsidies were 
necessary for the financial feasibility of the project, as currently 
structured.
    (d) Annual adjustment of targeting commitments. For purposes of 
determining compliance with the targeting commitments in an AHP 
application, such commitments shall be considered to adjust annually 
according to the current applicable median income data. A rental unit 
may continue to count toward meeting the targeting commitment of an 
approved AHP application as long as the rent charged remains affordable, 
as defined in Sec. 951.1, for the household occupying the unit.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997; as amended at 65 FR 5419, Feb. 4, 2000; 65 
FR 8264, Feb. 18, 2000]



Sec. 951.11  Long-term monitoring requirements.

    (a) Rental projects. For purposes of monitoring a rental project, 
Banks, members, and project owners shall carry out their long-term 
monitoring obligations pursuant to one of the three methods set forth in 
this paragraph (a).
    (1) Reliance on monitoring by a federal, state or local government 
entity. For those projects that receive funds from, or are allocated 
federal Low-Income Housing Tax Credits by, a federal, state, or local 
government entity, a Bank may rely on the monitoring by such entity if:
    (i) The income targeting requirements, the rent requirements, and 
the retention period monitored by such entity for purposes of its own 
program are the same as, or more restrictive than, those committed to in 
the AHP application;
    (ii) The entity agrees to inform the Bank of instances where tenant 
rents or incomes are found to be in noncompliance with the requirements 
being monitored by the entity or where the project is not habitable; and
    (iii) The entity has demonstrated and continues to demonstrate to 
the Bank its ability to carry out monitoring under its own program, and 
the Bank does not have information that such monitoring is not occurring 
or is inadequate.
    (2) Reliance on monitoring of AHP application commitments by a 
contractor. For those projects that receive funds from, or are allocated 
federal Low-Income Housing Tax Credits by, a federal, state, or local 
government entity that monitors for income targeting requirements, rent 
requirements, or retention periods under its own program that are less 
restrictive than those committed to in the project's AHP application, a 
Bank, in its discretion, may rely on the monitoring by such entity if:
    (i) The entity agrees to monitor the income targeting requirements, 
the rent requirements, and the retention period committed to in the AHP 
application;
    (ii) The entity agrees to inform the Bank of instances where tenant 
rents or incomes are found to be in noncompliance with the requirements 
committed to in the AHP application or where the project is not 
habitable; and
    (iii) The entity has demonstrated and continues to demonstrate to 
the Bank

[[Page 761]]

its ability to carry out such monitoring, and the Bank does not have 
information that such monitoring is not occurring or is inadequate.
    (3) Long-term monitoring by the Banks, members, and project owners. 
In cases where a Bank does not rely on monitoring by a federal, state, 
or local government entity pursuant to paragraphs (a)(1) or (a)(2) of 
this section, the Bank, members, and project owners shall monitor rental 
projects according to the requirements in this paragraph (a)(3).
    (i) Requirements for project owners. In the second year after 
completion of a rental project and annually thereafter until the end of 
the project's retention period, the project owner must:
    (A) Certify to the Bank that:
    (1) The tenant rents and incomes are in compliance with the rent and 
income targeting commitments made in the AHP application; and
    (2) The project is habitable; and
    (B) Maintain documentation regarding tenant rents and incomes and 
project habitability available for review by the Bank, to support such 
certifications.
    (ii) Requirements for members. For rental projects receiving 
$500,000 or less in AHP subsidy from a member, during the period from 
the second year after project completion to the end of the project's 
retention period, the member must certify to the Bank at least once 
every three years, based on an exterior visual inspection, that the 
project appears to be suitable for occupancy.
    (iii) Requirements for Banks--(A) Certifications received by the 
Bank. Each Bank shall review certifications provided by project owners 
and members regarding tenant rents and incomes and project habitability.
    (B) Review of project documentation. Each Bank shall review 
documentation maintained by the project owner regarding tenant rents and 
incomes and project habitability to verify compliance with the rent and 
income targeting commitments in the AHP application and project 
habitability, according to the following schedule:
    (1) $50,001 to $250,000. For projects receiving $50,001 to $250,000 
of AHP subsidies, the Bank must review project documentation for a 
sample of the project's units at least once every six years;
    (2) $250,001 to $500,000. For projects receiving $250,001 to 
$500,000 of AHP subsidies, the Bank must review project documentation 
for a sample of the project's units at least once every four years; and
    (3) Over $500,000. For projects receiving over $500,000 of AHP 
subsidies, the Bank must perform an on-site review of project 
documentation for a sample of the project's units at least once every 
two years.
    (C) Sampling plan. A Bank may use a reasonable sampling plan to 
select the projects monitored each year and to review the project 
documentation supporting the certifications made by members and project 
owners.
    (iv) Monitoring by a contractor. A Bank, in its discretion, may 
contract with a third party to carry out the Bank's monitoring 
obligations set forth in paragraph (a)(3)(iii) of this section.
    (b) Annual adjustment of targeting commitments. For purposes of 
determining compliance with the targeting commitments in an AHP 
application, such commitments shall be considered to adjust annually 
according to the current applicable median income data. A rental unit 
may continue to count toward meeting the targeting commitment of an 
approved AHP application as long as the rent charged remains affordable, 
as defined in Sec. 951.1, for the household occupying the unit.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[ 62 FR 41828, Aug. 4, 1997, as amended at 65 FR 5419, Feb. 4, 2000; 65 
FR 8264, Feb. 18, 2000]



Sec. 951.12  Remedial actions for noncompliance.

    (a) Repayment of subsidies by members--(1) Noncompliance by member. 
A member shall repay to the Bank the amount of any subsidies (plus 
interest, if appropriate) that, as a result of the member's actions or 
omissions, is not used in compliance with the terms of the application 
for the subsidy, as approved by the Bank, and the requirements of this 
part, unless:

[[Page 762]]

    (i) The member cures the noncompliance within a reasonable period of 
time; or
    (ii) The circumstances of noncompliance are eliminated through a 
modification of the terms of the application for the subsidy pursuant to 
Secs. 951.7 or 951.9.
    (2) Noncompliance by project sponsors or owners--(i) Duty to recover 
subsidies. A member shall recover from the sponsor of an owner-occupied 
project or the owner of a rental project and repay to the Bank the 
amount of any subsidies (plus interest, if appropriate) that, as a 
result of the sponsor's or owner's actions or omissions, is not used in 
compliance with the terms of the application for the subsidy, as 
approved by the Bank, and the requirements of this part, unless:
    (A) The sponsor or owner cures the noncompliance within a reasonable 
period of time; or
    (B) The circumstances of noncompliance are eliminated through a 
modification of the terms of the application for the subsidy pursuant to 
Secs. 951.7 or 951.9.
    (ii) Limitation on duty to recover subsidies. The member shall not 
be liable to the Bank for the return of amounts that cannot be recovered 
from the project sponsor or owner through reasonable collection efforts 
by the member.
    (b) Repayment of subsidies by project sponsors or owners. A sponsor 
of an owner-occupied project and the owner of a rental project shall 
repay to the member the amount of any subsidies (plus interest, if 
appropriate) that, as a result of the sponsor's or owner's actions or 
omissions, is not used in compliance with the terms of the application 
for the subsidy, as approved by the Bank, and the requirements of this 
part, unless:
    (1) The sponsor or owner cures the noncompliance within a reasonable 
period of time; or
    (2) The circumstances of noncompliance are eliminated through a 
modification of the terms of the application for the subsidy pursuant to 
Secs. 951.7 or 951.9.
    (c) Requirements for Banks--(1) Duty to recover subsidies. A Bank 
shall recover from a member:
    (i) The amount of any subsidies (plus interest, if appropriate) 
that, as a result of the member's actions or omissions, is not used in 
compliance with the terms of the application for the subsidy, as 
approved by the Bank, and the requirements of this part; and
    (ii) The amount of any subsidies recovered by a member from the 
sponsor of an owner-occupied project or the owner of a rental project 
pursuant to the requirements of paragraph (a)(2) of this section.
    (2) Settlements. A Bank may enter into an agreement or other 
arrangement with a member for the purpose of settling claims against the 
member for repayment of subsidies. If a Bank enters into a settlement 
that results in the return of a sum that is less than the full amount of 
any AHP subsidy that is not used in compliance with the terms of the 
application for the subsidy, as approved by the Bank, and the 
requirements of this part, the Bank may be required by the Finance Board 
to reimburse its AHP fund in the amount of any shortfall under paragraph 
(c)(3) of this section, unless:
    (i) The Bank has sufficient documentation showing that the sum 
agreed to be repaid under the settlement is reasonably justified, based 
on the facts and circumstances of the noncompliance (including the 
degree of culpability of the noncomplying parties and the extent of the 
Bank's recovery efforts); or
    (ii) The Bank obtains a determination from the Board of Directors 
that the sum agreed to be repaid under the settlement is reasonably 
justified, based on the facts and circumstances of the noncompliance 
(including the degree of culpability of the noncomplying parties and the 
extent of the Bank's recovery efforts).
    (3) Reimbursement of AHP fund. The Finance Board may order a Bank to 
reimburse its AHP fund in an appropriate amount upon determining that:
    (i) As a result of the Bank's actions or omissions, AHP subsidy is 
not used in compliance with the terms of the application for the 
subsidy, as approved by the Bank, and the requirements of this part; or
    (ii) The Bank has failed to recover AHP subsidy from a member 
pursuant

[[Page 763]]

to the requirements of paragraph (c)(1) of this section, and has not 
shown such failure is reasonably justified, considering factors such as 
the extent of the Bank's recovery efforts.
    (d) Parties to enforcement proceedings. A Bank, in its AHP 
implementation plan, may provide for a member, project sponsor, or 
project owner to enter into a written agreement with a Bank under which 
such member, sponsor, or owner consents to be a party to any enforcement 
proceeding initiated by the Finance Board regarding the repayment of AHP 
subsidies received by such member, sponsor, or owner, or the suspension 
or debarment of such parties, provided that the member, sponsor, or 
owner has agreed to be bound by the Finance Board's final determination 
in the enforcement proceeding.
    (e) Use of repaid subsidies. Amounts repaid to a Bank pursuant to 
this section, including any interest, shall be made available for other 
AHP-eligible projects.
    (f) Suspension and debarment--(1) At a Bank's initiative. A Bank may 
suspend or debar a member, project sponsor, or owner from participation 
in the Program if such party shows a pattern of noncompliance, or 
engages in a single instance of flagrant noncompliance, with the terms 
of an application for AHP subsidy or the requirements of this part.
    (2) At the Finance Board's initiative. The Finance Board may order a 
Bank to suspend or debar a member, project sponsor, or owner from 
participation in the Program if such party shows a pattern of 
noncompliance, or engages in a single instance of flagrant 
noncompliance, with the terms of an application for AHP subsidy or the 
requirements of this part.
    (g) Transfer of Program administration. Without limitation on other 
remedies, the Finance Board, upon determining that a Bank has engaged in 
mismanagement of its Program, may designate another Bank to administer 
all or a portion of the first Bank's annual AHP contribution, for the 
benefit of the first Bank's members, under such terms and conditions as 
the Finance Board may prescribe.
    (h) Finance Board actions under this section. Except as provided in 
paragraph (c)(2)(ii) of this section, actions taken by the Finance Board 
pursuant to this section shall be subject to the Finance Board's 
Procedures for Review of Disputed Supervisory Determinations.

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27673, May 20, 1998; 65 
FR 8264, Feb. 18, 2000]



Sec. 951.13  Agreements.

    (a) Agreements between Banks and members. A Bank shall have in place 
with each member receiving a subsidized advance or direct subsidy an 
agreement or agreements containing the provisions set forth in this 
section.
    (b) General provisions--(1) Subsidy pass-through. The member shall 
pass on the full amount of the AHP subsidy to the project, or household 
in the case of homeownership set-aside funds, for which the subsidy was 
approved.
    (2) Use of subsidy--(i) Use of subsidy by the member. The member 
shall use the AHP subsidy in accordance with the terms of the member's 
application for the subsidy, as approved by the Bank, and the 
requirements of this part.
    (ii) Use of subsidy by the project sponsor or owner. The member 
shall have in place an agreement with the sponsor of an owner-occupied 
project and each owner of a rental project in which the sponsor or owner 
agrees to use the AHP subsidy in accordance with the terms of the 
member's application for the subsidy, as approved by the Bank, and the 
requirements of this part.
    (3) Repayment of subsidies in case of noncompliance--(i) 
Noncompliance by the member. The member shall repay subsidies to the 
Bank in accordance with the requirements of Sec. 951.12(a)(1).
    (ii) Noncompliance by a project sponsor or owner--(A) Agreement. The 
member shall have in place an agreement with the sponsor of an owner-
occupied project and each owner of a rental project in which the sponsor 
or owner agrees to repay AHP subsidies in accordance with the 
requirements of Sec. 951.12(b).
    (B) Recovery of subsidies. The member shall recover from the project 
sponsor or owner and repay to the Bank any subsidy in accordance with 
the requirements of Sec. 951.12(a)(2).

[[Page 764]]

    (4) Project monitoring--(i) Monitoring by the member. The member 
shall comply with the monitoring requirements of Secs. 951.10(b) and 
951.11(a)(3)(ii).
    (ii) Monitoring by the project sponsor. The member shall have in 
place an agreement with the sponsor of an owner-occupied project in 
which the sponsor agrees to comply with the monitoring requirements of 
Sec. 951.10(a)(1).
    (iii) Monitoring by the project owner. The member shall have in 
place an agreement with the owner of a rental project in which the owner 
agrees to comply with the monitoring requirements of Secs. 951.10(a)(2) 
and 951.11(a)(3)(i).
    (5) Transfer of AHP obligations to another member. The member will 
make best efforts to transfer its obligations under the approved 
application for AHP subsidy to another member in the event of its loss 
of membership in the Bank prior to the Bank's final disbursement of AHP 
subsidies.
    (c) Special provisions where members obtain subsidized advances--(1) 
Repayment schedule. The term of the subsidized advance shall be no 
longer than the term of the member's loan to the project funded by the 
advance, and at least once in every 12-month period, the member shall be 
scheduled to make a principal repayment to the Bank equal to the amount 
scheduled to be repaid to the member on its loan to the project in that 
period.
    (2) Prepayment fees. Upon a prepayment of the subsidized advance, 
the Bank shall charge a prepayment fee only to the extent the Bank 
suffers an economic loss from the prepayment.
    (3) Treatment of loan prepayment by project. If all or a portion of 
the loan or loans financed by a subsidized advance are prepaid by the 
project to the member, the member may, at its option, either:
    (i) Repay to the Bank that portion of the advance used to make the 
loan or loans to the project, and be subject to a fee imposed by the 
Bank sufficient to compensate the Bank for any economic loss the Bank 
experiences in reinvesting the repaid amount at a rate of return below 
the cost of funds originally used by the Bank to calculate the interest 
rate subsidy incorporated in the advance; or
    (ii) Continue to maintain the advance outstanding, subject to the 
Bank resetting the interest rate on that portion of the advance used to 
make the loan or loans to the project to a rate equal to the cost of 
funds originally used by the Bank to calculate the interest rate subsidy 
incorporated in the advance.
    (4) Retention agreements for owner-occupied units--(i) Units with 
AHP-assisted permanent financing. The member shall ensure that an owner-
occupied unit with permanent financing obtained from the proceeds of a 
subsidized advance is subject to a deed restriction or other legally 
enforceable retention agreement or mechanism requiring that:
    (A) The Bank or its designee is to be given notice of any sale or 
refinancing of the unit occurring prior to the end of the retention 
period;
    (B) In the case of a refinancing prior to the end of the retention 
period, the full amount of the interest rate subsidy received by the 
owner, based on the pro rata portion of the interest rate subsidy 
imputed to the subsidized advance during the period the owner occupied 
the unit prior to refinancing, shall be repaid to the Bank from any net 
gain realized upon the refinancing, unless the unit continues to be 
subject to a deed restriction or other legally enforceable retention 
agreement or mechanism described in this paragraph (c)(4)(i); and
    (C) The obligation to repay AHP subsidy to the Bank shall terminate 
after any foreclosure.
    (ii) Units constructed or rehabilitated with AHP-assisted financing. 
The member shall ensure that an owner-occupied unit constructed or 
rehabilitated with a loan from the proceeds of a subsidized advance but 
which does not have permanent financing from the proceeds of a 
subsidized advance, is subject to a deed restriction or other legally 
enforceable retention agreement or mechanism requiring that:
    (A) The Bank or its designee is to be given notice of any sale or 
refinancing of the unit occurring prior to the end of the retention 
period;
    (B) In the case of a sale prior to the end of the retention period, 
an amount

[[Page 765]]

equal to the pro rata portion of the interest rate subsidy imputed to 
the subsidized advance that financed the construction or rehabilitation 
loan for the unit, reduced for every year the seller owned the unit, 
shall be repaid to the Bank from any net gain realized upon the sale of 
the unit after deduction for sales expenses, unless the purchaser is a 
low- or moderate-income household;
    (C) In the case of a refinancing prior to the end of the retention 
period, an amount equal to the pro rata portion of the interest rate 
subsidy imputed to the subsidized advance that financed the construction 
or rehabilitation loan for the unit, reduced for every year the owner 
occupied the unit, shall be repaid to the Bank from any net gain 
realized upon the refinancing, unless the unit continues to be subject 
to a deed restriction or other legally enforceable retention agreement 
or mechanism described in this paragraph (c)(4)(ii); and
    (D) The obligation to repay AHP subsidy to the Bank shall terminate 
after any foreclosure.
    (5) Retention agreements for rental projects. The member shall 
ensure that a rental project financed by a loan from the proceeds of a 
subsidized advance is subject to a deed restriction or other legally 
enforceable retention agreement or mechanism requiring that:
    (i) The project's rental units, or applicable portion thereof, must 
remain occupied by and affordable for households with incomes at or 
below the levels committed to be served in the AHP application for the 
duration of the retention period;
    (ii) The Bank or its designee is to be given notice of any sale or 
refinancing of the project occurring prior to the end of the retention 
period;
    (iii) In the case of a sale or refinancing of the project prior to 
the end of the retention period, the full amount of the interest rate 
subsidy received by the owner, based on the pro rata portion of the 
interest rate subsidy imputed to the subsidized advance during the 
period the owner owned the project prior to the sale or refinancing, 
shall be repaid to the Bank, unless the project continues to be subject 
to a deed restriction or other legally enforceable retention agreement 
or mechanism incorporating the income-eligibility and affordability 
restrictions committed to in the AHP application for the duration of the 
retention period; and
    (iv) The income-eligibility and affordability restrictions 
applicable to the project terminate after any foreclosure.
    (6) Transfer of AHP obligations to a nonmember. If, after final 
disbursement of AHP subsidies to the member, the member undergoes an 
acquisition or a consolidation resulting in a successor organization 
that is not a member of the Bank, the nonmember successor organization 
assumes the member's obligations under its approved application for AHP 
subsidy upon prepayment or orderly liquidation by the nonmember of the 
subsidized advance.
    (d) Special provisions where members obtain direct subsidies--(1) 
Retention agreements for owner-occupied units. The member shall ensure 
that an owner-occupied unit that is purchased, constructed, or 
rehabilitated with the proceeds of a direct subsidy is subject to a deed 
restriction or other legally enforceable retention agreement or 
mechanism requiring that:
    (i) The Bank or its designee is to be given notice of any sale or 
refinancing of the unit occurring prior to the end of the retention 
period;
    (ii) In the case of a sale prior to the end of the retention period, 
an amount equal to a pro rata share of the direct subsidy that financed 
the purchase, construction, or rehabilitation of the unit, reduced for 
every year the seller owned the unit, shall be repaid to the Bank from 
any net gain realized upon the sale of the unit after deduction for 
sales expenses, unless the purchaser is a low- or moderate-income 
household;
    (iii) In the case of a refinancing prior to the end of the retention 
period, an amount equal to a pro rata share of the direct subsidy that 
financed the purchase, construction, or rehabilitation of the unit, 
reduced for every year the occupying household has owned the unit, shall 
be repaid to the Bank from any net gain realized upon the refinancing, 
unless the unit continues to be subject to a deed restriction or other 
legally enforceable retention

[[Page 766]]

agreement or mechanism described in this paragraph (d)(1); and
    (iv) The obligation to repay AHP subsidy to the Bank shall terminate 
after any foreclosure.
    (2) Retention agreements for rental projects. The member shall 
ensure that a rental project financed by the proceeds of a direct 
subsidy is subject to a deed restriction or other legally enforceable 
retention agreement or mechanism requiring that:
    (i) The project's rental units, or applicable portion thereof, must 
remain occupied by and affordable for households with incomes at or 
below the levels committed to be served in the AHP application for the 
duration of the retention period;
    (ii) The Bank or its designee is to be given notice of any sale or 
refinancing of the project occurring prior to the end of the retention 
period;
    (iii) In the case of a sale or refinancing of the project prior to 
the end of the retention period, an amount equal to the full amount of 
the direct subsidy shall be repaid to the Bank, unless the project 
continues to be subject to a deed restriction or other legally 
enforceable retention agreement or mechanism incorporating the income-
eligibility and affordability restrictions committed to in the AHP 
application for the duration of the retention period; and
    (iv) The income-eligibility and affordability restrictions 
applicable to the project terminate after any foreclosure.
    (3) Lending of direct subsidies. If a member or a project sponsor 
lends a direct subsidy to a project, any repayments of principal and 
payments of interest received by the member or the project sponsor must 
be paid forthwith to the Bank.
    (4) Transfer of AHP obligations to a nonmember. If, after final 
disbursement of AHP subsidies to the member, the member undergoes an 
acquisition or a consolidation resulting in a successor organization 
that is not a member of the Bank, the nonmember successor organization 
assumes the member's obligations under its approved application for AHP 
subsidy.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 63 FR 27673, May 20, 1998; 65 
FR 5419, Feb. 4, 2000; 65 FR 8264, Feb. 18, 2000]



Sec. 951.14  Temporary suspension of AHP contributions.

    (a) Application for temporary suspension--(1) Notification to 
Finance Board. If a Bank finds that the contributions required pursuant 
to Sec. 951.2 are contributing to the financial instability of the Bank, 
the Bank shall notify the Finance Board promptly, and may apply in 
writing to the Finance Board for a temporary suspension of such 
contributions.
    (2) Contents. A Bank's application for a temporary suspension of 
contributions shall include:
    (i) The period of time for which the Bank seeks a suspension;
    (ii) The grounds for a suspension;
    (iii) A plan for returning the Bank to a financially stable 
position; and
    (iv) The Bank's annual financial report for the preceding year, if 
available, and the Bank's most recent quarterly and monthly financial 
statements and any other financial data the Bank wishes the Finance 
Board to consider.
    (b) Board of Directors review of application for temporary 
suspension--(1) Determination of financial instability. In determining 
the financial instability of a Bank, the Board of Directors shall 
consider such factors as:
    (i) Whether the Bank's earnings are severely depressed;
    (ii) Whether there has been a substantial decline in the Bank's 
membership capital; and
    (iii) Whether there has been a substantial reduction in the Bank's 
advances outstanding.
    (2) Limitations on grounds for suspension. The Board of Directors 
shall disapprove an application for a temporary suspension if it 
determines that the Bank's reduction in earnings is a result of:

[[Page 767]]

    (i) A change in the terms of advances to members which is not 
justified by market conditions;
    (ii) Inordinate operating and administrative expenses; or
    (iii) Mismanagement.
    (c) Board of Directors decision. The Board of Directors' decision 
shall be in writing and shall be accompanied by specific findings and 
reasons for its action. If the Board of Directors approves a Bank's 
application for a temporary suspension, the Board of Directors' written 
decision shall specify the period of time such suspension shall remain 
in effect.
    (d) Monitoring. During the term of a temporary suspension approved 
by the Board of Directors, the affected Bank shall provide to the Board 
of Directors such financial reports as the Board of Directors shall 
require to monitor the financial condition of the Bank.
    (e) Termination of suspension. If, prior to the conclusion of the 
temporary suspension period, the Board of Directors determines that the 
Bank has returned to a position of financial stability, the Board of 
Directors may, upon written notice to the Bank, terminate the temporary 
suspension.
    (f) Application for extension of temporary suspension period. If a 
Bank's board of directors determines that the Bank has not returned to, 
or is not likely to return to, a position of financial stability at the 
conclusion of the temporary suspension period, the Bank may apply in 
writing for an extension of the temporary suspension period, stating the 
grounds for such extension.

[62 FR 41828, Aug. 4, 1997, as amended at 65 FR 8264, Feb. 18, 2000]



Sec. 951.15  Affordable Housing Reserve Fund.

    (a) Reserve Fund--(1) Deposits. If a Bank fails to use or commit the 
full amount it is required to contribute to the Program in any year 
pursuant to Sec. 951.2, 90 percent of the unused or uncommitted amount 
shall be deposited by the Bank in an Affordable Housing Reserve Fund 
established and administered by the Finance Board. The remaining 10 
percent of the unused and uncommitted amount retained by the Bank should 
be fully used or committed by the Bank during the following year, and 
any remaining portion must be deposited in the Affordable Housing 
Reserve Fund.
    (2) Use or commitment of funds. Approval of applications for AHP 
subsidies sufficient to exhaust the amount a Bank is required to 
contribute pursuant to Sec. 951.2 shall constitute use or commitment of 
funds. Amounts remaining unused or uncommitted at year-end are deemed to 
be used or committed if, in combination with AHP subsidies that have 
been returned to the Bank or de-committed from canceled projects, they 
are insufficient to fund:
    (i) The next highest scoring AHP application in the Bank's final 
funding period of the year for its competitive application program; or
    (ii) Pending applications for funds under the Bank's homeownership 
set-aside programs.
    Such insufficient amounts shall be carried over for use or 
commitment during the following year.
    (b) Annual statement. By January 15 of each year, each Bank shall 
provide to the Finance Board a statement indicating the amount of unused 
and uncommitted funds from the prior year, if any, which will be 
deposited in the Affordable Housing Reserve Fund.
    (c) Annual notification. By January 31 of each year, the Finance 
Board shall notify the Banks of the total amount of funds, if any, 
available in the Affordable Housing Reserve Fund.

(The Office of Management and Budget has approved the information 
collection contained in this section and assigned control number 3069-
0006 with an expiration date of January 31, 2003.)

[62 FR 41828, Aug. 4, 1997, as amended at 65 FR 5419, Feb. 4, 2000; 65 
FR 8264, Feb. 18, 2000]



Sec. 951.16  Application to existing AHP projects.

    The requirements of section 10(j) of the Act and the provisions of 
this part, as amended, are incorporated into all agreements between 
Banks, members, sponsors, or owners receiving AHP subsidies. To the 
extent the requirements of this part are amended from time to time, such 
agreements are deemed to incorporate the amendments to conform to any 
new requirements of this part. No amendment to this part shall

[[Page 768]]

affect the legality of actions taken prior to the effective date of such 
amendment.



PART 952--COMMUNITY INVESTMENT CASH ADVANCE PROGRAMS--Table of Contents




Sec.
952.1  Scope.
952.2  Purpose.
952.3  Definitions.
952.4  Targeted Community Lending Plan.
952.5  Community Investment Cash Advance Programs.
952.6  Reporting.
952.7  Documentation.

    Authority: 12 U.S.C. 1422b(a)(1) and 1430.

    Source: 63 FR 65546, Nov. 27, 1998, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 952.1  Scope.

    Section 10(j)(10) of the Act authorizes the Banks to offer Community 
Investment Cash Advance (CICA) programs. (See 12 U.S.C. 1430(j)(10)). 
This part establishes requirements for all CICA programs offered by a 
Bank, except for a Bank's Affordable Housing Program (AHP), which is 
governed specifically by part 951 of this chapter.

[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000]



Sec. 952.2  Purpose.

    The purpose of this part is to identify targeted community lending 
projects that the Banks may support through the establishment of CICA 
programs under section 10(j)(10) of the Act. (12 U.S.C. 1430(j)(10)). 
Pursuant to this part, a Bank may offer Rural Development Advance (RDA) 
or Urban Development Advance (UDA) programs, or both, for targeted 
community lending using the targeted beneficiaries or targeted income 
levels specified in Sec. 952.3 of this part, without prior Finance Board 
approval. A Bank also may offer other CICA programs for targeted 
community lending using targeted beneficiaries and targeted income 
levels other than those specified in Sec. 952.3 of this part, 
established by the Bank with the prior approval of the Finance Board. In 
addition, a Bank shall offer CICA programs under section 10(i) of the 
Act (Community Investment Program (CIP), 12 U.S.C. 1430(i)), and section 
10(j) of the Act (Affordable Housing Program (AHP), 12 U.S.C. 1430(j)).

[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 952.3  Definitions.

    As used in this part:
    Advance has the same meaning as in Sec. 950.1 of this chapter.
    AHP means the Affordable Housing Program, the CICA program required 
to be offered pursuant to section 10(j) of the Act (12 U.S.C. 1430(j)) 
and part 951 of this chapter.
    Champion Community means a community which developed a strategic 
plan and applied for designation by either the Secretary of HUD or the 
Secretary of the USDA as an Empowerment Zone or Enterprise Community, 
but was designated a Champion Community.
    CICA or Community Investment Cash Advance has the same meaning as in 
Sec. 950.1 of this chapter.
    CICA program or Community Investment Cash Advance program means:
    (1) A Bank's AHP;
    (2) A Bank's CIP;
    (3) REA Bank's RDA program or UDA program using any combination of 
the targeted beneficiaries and targeted income levels specified in 
Sec. 952.3 of this part; and
    (4) Any other program offered by a Bank using targeted beneficiaries 
and targeted income levels other than those specified in Sec. 952.3 of 
this part, established by the Bank with the prior approval of the 
Finance Board.
    CIP means the Community Investment Program, a CICA program required 
to be offered pursuant to section 10(i) of the Act (12 U.S.C. 1430(i)).
    Targeted community lending means providing financing for economic 
development projects for targeted beneficiaries.
    Economic development projects means:
    (1) Commercial, industrial, manufacturing, social service, and 
public facility projects and activities; and
    (2) Public or private infrastructure projects, such as roads, 
utilities, and sewers.
    Family means one or more persons living in the same dwelling unit.

[[Page 769]]

    Housing projects means projects or activities that involve the 
purchase, construction or rehabilitation of, or predevelopment financing 
for:
    (1) Individual owner-occupied housing units, each of which is 
purchased or owned by a family with an income at or below the targeted 
income level;
    (2) Projects involving multiple units of owner-occupied housing in 
which at least 51% of the units are owned or are intended to be 
purchased by families with incomes at or below the targeted income 
level;
    (3) Rental housing where at least 51% of the units in the project 
are occupied by, or the rents are affordable to, families with incomes 
at or below the targeted income level; or
    (4) Manufactured housing parks where:
    (i) At least 51% of the units in the project are occupied by, or the 
rents are affordable to, families with incomes at or below the targeted 
income level; or
    (ii) The project is located in a neighborhood with a median income 
at or below the targeted income level.
    HUD means the United States Department of Housing and Urban 
Development.
    Median income for the area. (1) Owner-occupied housing projects and 
economic development projects. For purposes of owner-occupied housing 
projects and economic development projects, median income for the area 
means one or more of the following, as determined by the Bank:
    (i) The median income for the area, as published annually by HUD;
    (ii) The applicable median family income, as determined under 26 
U.S.C. 143(f) (Mortgage Revenue Bonds) and published by a State agency 
or instrumentality;
    (iii) The median income for the area, as published by the USDA; or
    (iv) The median income for any definable geographic area, as 
published by a Federal, State, or local government entity for purposes 
of that entity's housing and economic development programs, and approved 
by the Board of Directors, at the request of a Bank, for use under the 
Bank's CICA programs.
    (2) Rental housing projects. For purposes of rental housing 
projects, median income for the area means one or more of the following, 
as determined by the Bank:
    (i) The median income for the area, as published annually by HUD; or
    (ii) The median income for any definable geographic area, as 
published by a Federal, State, or local government entity for purposes 
of that entity's housing programs, and approved by the Board of 
Directors, at the request of a Bank, for use under the Bank's CICA 
programs.
    MSA means a Metropolitan Statistical Area as designated by the 
Office of Management and Budget.
    Neighborhood means:
    (1) A census tract or block numbering area;
    (2) A unit of local government with a population of 25,000 or less;
    (3) A rural county; or
    (4) A geographic location designated in comprehensive plans, 
ordinances, or other local documents as a neighborhood, village, or 
similar geographic designation that is within the boundary of but does 
not encompass the entire area of a unit of general local government.
    Provide financing means:
    (1) Originating loans;
    (2) Purchasing a participation interest, or providing financing to 
participate, in a loan consortium for CICA-eligible housing or economic 
development projects;
    (3) Making loans to entities that, in turn, make loans for CICA-
eligible housing or economic development projects;
    (4) Purchasing mortgage revenue bonds or mortgage-backed securities, 
where all of the loans financed by such bonds and all of the loans 
backing such securities, respectively, meet the eligibility requirements 
of the CICA program under which the member or housing associate borrower 
receives an advance;
    (5) Creating or maintaining a secondary market for loans, where all 
such loans are mortgage loans meeting the eligibility requirements of 
the CICA program under which the member or housing associate borrower 
receives an advance;

[[Page 770]]

    (6) Originating CICA-eligible loans within 3 months prior to 
receiving the CICA advance; and
    (7) Purchasing low-income housing tax credits.
    RDA or Rural Development Advance means an advance made pursuant to 
an RDA program.
    RDA program or Rural Development Advance program means a program 
offered by a Bank for targeted community lending in rural areas.
    Rural area means:
    (1) A unit of general local government with a population of 25,000 
or less;
    (2) An unincorporated area outside an MSA; or
    (3) An unincorporated area within an MSA that qualifies for housing 
or economic development assistance from the USDA.
    Small business means a ``small business concern,'' as that term is 
defined by section 3(a) of the Small Business Act (15 U.S.C. 632(a)) and 
implemented by the Small Business Administration under 13 CFR part 121, 
or any successor provisions.
    Targeted beneficiaries means beneficiaries determined by the 
geographical area in which a project is located (Geographically Defined 
Beneficiaries), by the individuals who benefit from a project as 
employees or service recipients (Individual Beneficiaries), or by the 
nature of the project itself (Activity Beneficiaries), as follows:
    (1) Geographically Defined Beneficiaries:
    (i) The project is located in a neighborhood with a median income at 
or below the targeted income level;
    (ii) The project is located in a rural Champion Community, or a 
rural Empowerment Zone or rural Enterprise Community, as designated by 
the Secretary of the USDA;
    (iii) The project is located in an urban Champion Community, or an 
urban Empowerment Zone or urban Enterprise Community, as designated by 
the Secretary of HUD;
    (iv) The project is located in an Indian area, as defined by the 
Native American Housing Assistance and Self-Determination Act of 1996 
(25 U.S.C. 4101 et seq.), Alaskan Native Village, or Native Hawaiian 
Home Land;
    (v) The project is located in an area and involves a property 
eligible for a Brownfield Tax Credit;
    (vi) The project is located in an area affected by a military base 
closing and is a ``community in the vicinity of the installation'' as 
defined by the Department of Defense at 32 CFR part 176;
    (vii) The project is located in a designated community under the 
Community Adjustment and Investment Program as defined under 22 U.S.C. 
290m-2;
    (viii) The project is located in a Federally declared disaster area; 
or
    (ix) The project is located in a state declared disaster area, or 
qualifies for assistance under another Federal or State targeted 
economic development program, approved by the Finance Board.
    (2) Individual Beneficiaries:
    (i) The annual salaries for at least 51% of the permanent full- and 
part-time jobs, computed on a full-time equivalent basis, created or 
retained by the project, other than construction jobs, are at or below 
the targeted income level; or
    (ii) At least 51% of the families who otherwise benefit from (other 
than through employment), or are provided services by, the project have 
incomes at or below the targeted income level.
    (3) Activity Beneficiaries: Projects that qualify as small 
businesses.
    (4) Other Targeted Beneficiaries. A Bank may designate, with the 
prior approval of the Finance Board, other targeted beneficiaries for 
its targeted community lending.
    (5) Only targeted beneficiaries identified in paragraphs (1)(i) 
through (1)(iv), and (2)(i) and (2)(ii) of this definition are eligible 
for CIP advances.
    Targeted income level means:
    (1) For rural areas, incomes at or below 115 percent of the median 
income for the area, as adjusted for family size in accordance with the 
methodology of the applicable area median income standard or, at the 
option of the Bank, for a family of four;
    (2) For urban areas, incomes at or below 100 percent of the median 
income for the area, as adjusted for family size in accordance with the 
methodology of the applicable area median income

[[Page 771]]

standard or, at the option of the Bank, for a family of four;
    (3) For CICA advances provided under CIP:
    (i) For economic development projects, incomes at or below 80 
percent of the median income for the area; or
    (ii) For housing projects, incomes at or below 115 percent of the 
median income for the area, both as adjusted for family size in 
accordance with the methodology of the applicable area median income 
standard or, at the option of the Bank, for a family of four; or
    (4) For CICA advances provided under any other CICA program offered 
by a Bank, a targeted income level established by the Bank with the 
prior approval of the Finance Board.
    UDA or Urban Development Advance means an advance made pursuant to a 
UDA program.
    UDA program or Urban Development Advance program means a program 
offered by a Bank for targeted community lending in urban areas.
    Urban area means:
    (1) A unit of general local government with a population of more 
than 25,000; or
    (2) An unincorporated area within an MSA that does not qualify for 
housing or economic development assistance from the USDA.
    USDA means the United States Department of Agriculture.

[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 952.4  Targeted Community Lending Plan

    Each Bank shall develop and adopt an annual Targeted Community 
Lending Plan pursuant to Sec. 944.6 of this chapter.

[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 952.5  Community Investment Cash Advance Programs.

    (a) In general. (1) Each Bank shall offer an AHP in accordance with 
part 951 of this chapter.
    (2) Each Bank shall offer a CIP to provide financing for housing 
projects and for eligible targeted community lending at the appropriate 
targeted income levels.
    (3) Each Bank may offer RDA programs or UDA programs, or both, for 
targeted community lending using the targeted beneficiaries or targeted 
income levels specified in Sec. 952.3 of this part, without prior 
Finance Board approval.
    (4) Each Bank may offer CICA programs for targeted community lending 
using targeted beneficiaries and targeted income levels other than those 
specified in Sec. 952.3 of this part, established by the Bank with the 
prior approval of the Finance Board.
    (b) Mixed-use projects. (1) For projects funded under CICA programs 
other than CIP, involving a combination of housing projects and economic 
development projects, only the economic development components of the 
project must meet the appropriate targeted income level for the 
respective CICA program.
    (2) For projects funded under CIP, both the housing and economic 
development components of the project must meet the appropriate targeted 
income levels.
    (c) Refinancing. CICA advances other than AHP may be used to 
refinance economic development projects and housing projects, provided 
that any equity proceeds of the refinancing of rental housing and 
manufactured housing parks are used to rehabilitate the projects or to 
preserve affordability for current residents.
    (d) Pricing and Availability of CICA advances--(1) Advances to 
members. For CICA programs other than AHP and CIP, a Bank shall price 
advances to members as provided in Sec. 950.6 of this chapter, and may 
price such advances at rates below the price of advances of similar 
amounts, maturities and terms made pursuant to section 10(a) of the Act. 
(12 U.S.C. 1430(a)).
    (2) Pricing of CIP advances. The price of CICA advances made under 
CIP shall not exceed the Bank's cost of issuing consolidated obligations 
of comparable maturity, taking into account reasonable administrative 
costs.
    (3) Pricing of AHP advances. A Bank shall price CICA advances made 
under AHP in accordance with parts 950 and 951 of this chapter.

[[Page 772]]

    (4) Advances to housing associate borrowers. (i) A Bank may offer 
advances under CICA programs to housing associate borrowers at the 
Bank's option, except for AHP and CIP, which are available only to 
members.
    (ii) A Bank shall price advances to housing associate borrowers as 
provided in Sec. 950.24 of this chapter, and may price such advances at 
rates below the price of advances of similar amounts, maturities and 
terms made pursuant to section 10b of the Act. (12 U.S.C. 1430b).
    (5) Pricing pass-through. A Bank may require that borrowers 
receiving CICA advances pass through the benefit of any price reduction 
from regular advance pricing to their borrowers.
    (6) Discount Fund. (i) A Bank may establish a fund which the Bank 
may use to reduce the price of CIP or other CICA advances below the 
advance prices provided for by this part.
    (ii) Price reductions made through the Discount Fund shall be made 
in accordance with a fair distribution scheme.

[63 FR 65546, Nov. 27, 1998, as amended at 65 FR 8264, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 952.6  Reporting.

    (a) By July 1, 1999, each Bank shall provide to the Finance Board an 
initial assessment of the credit needs and market opportunities in a 
Bank's district for targeted community lending.
    (b) Effective in 2000, each Bank annually shall provide to the 
Finance Board, on or before January 31, a Targeted Community Lending 
Plan.
    (c) Each Bank shall provide such other reports concerning its CICA 
programs as the Finance Board may request from time to time.

[63 FR 65546, Nov. 27, 1998. Redesignated at 65 FR 8256, Feb. 18, 2000, 
as amended at 65 FR 44431, July 18, 2000]



Sec. 952.7  Documentation.

    (a) A Bank shall require the borrower to certify to the Bank that 
each project funded by a CICA advance (other than AHP) meets the 
respective targeting requirements of the CICA program. Such 
certification shall include a description of how the project meets the 
requirements, and where appropriate, a statistical summary or list of 
incomes of the borrowers, rents for the project, or salaries of jobs 
created or retained.
    (b) For those CICA-funded projects that also receive funds from 
another targeted Federal economic development program that has income 
targeting requirements that are the same as, or more restrictive than, 
the targeting requirements of the applicable CICA program, the Bank 
shall permit the borrower to certify that compliance with the criteria 
of such Federal economic development program will meet the requirements 
of the respective CICA program.
    (c) Such certifications shall satisfy the Bank's obligations to 
document compliance with the CICA lending provisions of this part.



PART 955--ACQUIRED MEMBER ASSETS--Table of Contents




Sec.
955.1  Definitions.
955.2  Authorization to hold acquired member assets.
955.3  Required credit-risk sharing structure.
955.4  Reporting requirements for acquired member assets.
955.5  Administrative and investment transactions between Banks.
955.6  Risk-based capital requirement for acquired member assets.

Appendix A to Part 955--Reporting requirements for single-family 
          acquired member assets that are residential mortgages: loan-
          level data elements
Appendix B to Part 955--Reporting requirements for multi-family acquired 
          member assets that are residential mortgages: loan-level data 
          elements


    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, 1431.

    Source: 65 FR 43981, July 17, 2000, unless otherwise noted.



Sec. 955.1  Definitions.

    As used in this section:
    Affiliate has the meaning set forth in Sec. 950.1 of this chapter.
    Expected losses means the base loss scenario in the methodology of 
an NRSRO applicable to that type of AMA asset.
    Residential real property has the meaning set forth in Sec. 950.1 of 
this chapter.

[[Page 773]]

    State has the meaning set forth in Sec. 925.1 of this chapter.



Sec. 955.2  Authorization to hold acquired member assets.

    Subject to the requirements of part 980 of this chapter, each Bank 
may hold assets acquired from or through Bank System members or housing 
associates by means of either a purchase or a funding transaction (AMA), 
subject to each of the following requirements:
    (a) Loan type requirement. The assets are either:
    (1) Whole loans that are eligible to secure advances under 
Secs. 950.7 (a)(1)(i), (a)(2)(ii), (a)(4), or (b)(1) of this chapter, 
excluding:
    (i) Single-family mortgages where the loan amount exceeds the limits 
established pursuant to 12 U.S.C. 1717(b)(2); and
    (ii) Loans made to an entity, or secured by property, not located in 
a state;
    (2) Whole loans secured by manufactured housing, regardless of 
whether such housing qualifies as residential real property; or
    (3) State and local housing finance agency bonds;
    (b) Member or housing associate nexus requirement. The assets are:
    (1) Either:
    (i) Originated or issued by, through, or on behalf of a Bank System 
member or housing associate, or an affiliate thereof; or
    (ii) Held for a valid business purpose by a Bank System member or 
housing associate, or an affiliate thereof, prior to acquisition by a 
Bank; and
    (2) Acquired either:
    (i) From a member or housing associate of the acquiring Bank;
    (ii) From a member or housing associate of another Bank, pursuant to 
an arrangement with that Bank, which, in the case of state and local 
finance agency bonds only, may be reached in accordance with the 
following process:
    (A) The housing finance agency shall first offer the Bank in whose 
district the agency is located (local Bank) a right of first refusal to 
purchase, or negotiate the terms of, its proposed bond offering;
    (B) If the local Bank indicates, within a three day period, that it 
will negotiate in good faith to purchase the bonds, the agency may not 
offer to sell or negotiate the terms of a purchase with another Bank; 
and
    (C) If the local Bank declines the offer, or has failed to respond 
within the three day period, the acquiring Bank will be considered to 
have an arrangement with the local Bank for purposes of this section and 
may offer to buy or negotiate the terms of a bond sale with the agency;
    (iii) From another Bank; and
    (c) Credit risk-sharing requirement. The transactions through which 
the Bank acquires the assets either:
    (1) Meet the credit risk-sharing requirements of Sec. 955.3 of this 
part; or
    (2) Were authorized by the Finance Board under section II.B.12 of 
the FMP and are within any total dollar cap established by the Finance 
Board at the time of such authorization.



Sec. 955.3  Required credit risk-sharing structure.

    (a) Determination of necessary credit enhancement. At the earlier of 
270 days from the date of the Bank's acquisition of the first loan in a 
pool, or the date at which the amount of a pool's assets reaches $100 
million, a Bank shall determine the total credit enhancement necessary 
to enhance the asset or pool of assets to a credit quality that is 
equivalent to that of an instrument having at least the fourth highest 
credit rating from an NRSRO, or such higher credit rating as the Bank 
may require. The Bank shall make this determination for each AMA product 
using a methodology that is confirmed in writing by an NRSRO to be 
comparable to a methodology that the NRSRO would use in determining 
credit enhancement levels when conducting a rating review of the asset 
or pool of assets in a securitization transaction.
    (b) Credit risk-sharing structure. A Bank acquiring AMA shall 
implement, and have in place at all times, a credit risk-sharing 
structure for each AMA product under which a member or housing associate 
of the Bank or, with the approval of both Banks, a member or housing 
associate of another Bank,

[[Page 774]]

provides a sufficient credit enhancement from the first dollar of credit 
loss for each asset or pool of assets such that the acquiring Bank's 
exposure to credit risk for the life of the asset or pool of assets is 
no greater than that of an asset rated in the fourth highest credit 
rating category, as determined pursuant to paragraph (a) of this 
section, or such higher rating as the acquiring Bank may require. This 
credit enhancement structure shall meet the following requirements:
    (1) A portion of the credit enhancement may be provided by:
    (i) Contracting with an insurance affiliate of that member or 
housing associate to provide an enhancement or undertaking against 
losses to the Bank, but only where such insurance is positioned in the 
credit enhancement structure so as to cover only losses remaining after 
the member or housing associate has borne losses as required under 
paragraph (b)(2) of this section;
    (ii) Purchasing loan-level insurance, which may include United 
States government insurance or guarantee, but only where:
    (A) The member or housing associate is legally obligated at all 
times to maintain such insurance with an insurer rated not lower than 
the second highest credit rating category; and
    (B) Such insurance is positioned in the credit enhancement structure 
so as to cover only losses remaining after the member or housing 
associate has borne losses as required under paragraph (b)(2) of this 
section;
    (iii) Purchasing pool-level insurance, but only where such 
insurance:
    (A) Insures that portion of the required credit enhancement 
attributable to the geographic concentration and size of the pool; and
    (B) Is positioned last in the credit enhancement structure so as to 
cover only those losses remaining after all other elements of the credit 
enhancement structure have been exhausted; or
    (iv) Contracting with another member or housing associate in the 
Bank's district or in another Bank's district, pursuant to an 
arrangement with that Bank, to provide an enhancement or undertaking 
against losses to the Bank in return for some compensation;
    (2) The member or housing associate that is providing the credit 
enhancement required under paragraph (b)(1) of this section shall in all 
cases bear the direct economic consequences of actual credit losses on 
the asset or pool of assets:
    (i) From the first dollar of loss up to the amount of expected 
losses; or
    (ii) Immediately following expected losses, but in an amount equal 
to or exceeding the amount of expected losses; and
    (3) The portion of the credit enhancement that is an obligation of a 
Bank System member or housing associate shall be fully secured;
    (4) The Bank shall obtain written verification from an NRSRO that 
concludes to the satisfaction of the Finance Board, based on the 
underlying economic terms of the credit enhancement structure as 
represented by the Bank for each AMA product, that either:
    (i) The level of credit enhancement provided by the member or 
housing associate is generally sufficient to enhance the asset or pool 
of assets to a credit quality that is equivalent to that of an 
instrument having the fourth highest credit rating from an NRSRO, or 
such higher rating as the Bank may require; or
    (ii) The methodology used by the Bank for estimating the level of 
credit enhancement provided by the member or housing associate is in 
accordance with the practices established by the NRSRO.
    (c) Timing of NRSRO opinions. For AMA programs already in operation 
at the time of the effective date of this rule, a Bank shall have 90 
days from the effective date of this rule to obtain the NRSRO 
verifications required under paragraphs (a) and (b)(4) of this section.



Sec. 955.4  Reporting requirements for acquired member assets.

    (a) Loan-Level Data Elements. Each Bank that acquires AMA that are 
residential mortgages shall collect and maintain loan-level data on each 
mortgage held, as specified in appendix A (for single-family mortgage 
assets) or appendix B (for multifamily mortgage assets) to this part.

[[Page 775]]

    (b) Quarterly Mortgage Reports. Beginning with calendar year 2001, 
within 60 days of the end of every quarter of every calendar year, each 
Bank that acquires AMA that are residential mortgages shall submit to 
the Finance Board a Mortgage Report, which shall include:
    (1) Aggregations of the loan-level mortgage data compiled by the 
Bank pursuant to paragraph (a) of this section for year-to-date mortgage 
acquisitions, in a format specified by the Finance Board;
    (2) Year-to-date dollar volume, number of units and number of 
mortgages on owner-occupied and rental properties relating to AMA 
acquired by the Bank; and
    (3) For the second and fourth quarter Mortgage Reports only, year-
to-date loan-level data that:
    (i) Comprises the data elements required to be collected and 
maintained by the Bank under paragraph (a) of this section; and
    (ii) Appears in a machine-readable format specified by the Finance 
Board.
    (c) Additional Reports. The Finance Board may at any time require a 
Bank to submit reports in addition to those required under paragraph (b) 
of this section.



Sec. 955.5  Administrative and investment transactions between Banks.

    (a) Delegation of administrative duties. A Bank may delegate the 
administration of an AMA program to another Bank whose administrative 
office has been examined and approved by the Finance Board to process 
AMA transactions. The existence of such a delegation, or the possibility 
that such a delegation may be made, must be disclosed to any potential 
participating member or housing associate as part of any AMA-related 
agreements are signed with that member or housing associate.
    (b) Terminability of Agreements. Any agreement made between two or 
more Banks in connection with any AMA program shall be made terminable 
by either party after a reasonable notice period.
    (c) Delegation of Pricing Authority. A Bank that has delegated its 
AMA pricing function to another Bank shall retain a right to refuse to 
acquire AMA at prices it does not consider appropriate.



Sec. 955.6  Risk-based capital requirement for acquired member assets.

    (a) General. Each Bank shall hold retained earnings plus general 
allowance for losses as support for the credit risk of all AMA estimated 
by the Bank to represent a credit risk that is greater than that of 
comparable instruments that have received the second highest credit 
rating from an NRSRO in an amount equal to or greater than the 
outstanding balance of the assets or pools of assets times a factor 
associated with the putative credit rating of the assets or pools of 
assets as determined by the Finance Board on a case-by-case basis. For 
single-family mortgage assets, the factors are as set forth in Table 1 
of this part.

                                 Table 1
------------------------------------------------------------------------
                                                           Percentage
                                                        applicable to on-
   Putative rating of single-family mortgage assets       balance sheet
                                                        equivalent value
                                                             of AMA
------------------------------------------------------------------------
Third Highest Investment Grade........................              0.90
Fourth Highest Investment Grade.......................              1.50
If Downgraded to Below Investment Grade After
 Acquisition By Bank:
    Highest Below Investment Grade....................              2.25
    Second Highest Below Investment Grade.............              2.60
    All Other Below Investment Grade..................            100.00
------------------------------------------------------------------------

    (b) Recalculation of credit enhancement. For risk-based capital 
purposes, each Bank shall recalculate the estimated credit rating of a 
pool of AMA if there is evidence that a decline in the credit quality of 
that pool may have occurred.

[[Page 776]]

    Appendix A to Part 955--Reporting Requirements for Single-Family 
 Acquired Member Assets That Are Residential Mortgages: Loan-Level Data 
                                Elements

    1. Bank District Flag--Two-digit numeric code designating the 
District Bank that originally acquired the loan.
    2. Participating Bank District Flag--Two-digit numeric code 
designating the District Bank that purchased a participation in the 
loan.
    3. Loan Number--Unique numeric identifier used by the Banks for each 
mortgage acquisition.
    4. US Postal State--Two-digit numeric Federal Information Processing 
Standard (FIPS) code.
    5. US Postal Zip Code--Five-digit zip code for the property.
    6. MSA Code--Four-digit numeric code for the property's metropolitan 
statistical area (MSA) if the property is located in an MSA.
    7. Place Code--Five-digit numeric FIPS code.
    8. County--County, as designated in the most recent decennial census 
by the Bureau of the Census.
    9. Census Tract/Block Numbering Area (BNA)--Tract/BNA number as used 
in the most recent decennial census by the Bureau of the Census.
    10. Census Tract-Percent Minority--Percentage of a census tract's 
population that is minority based on the most recent decennial census by 
the Bureau of the Census.
    11. Census Tract-Median Income--Median family income for the census 
tract based on the most recent decennial census.
    12. Local Area Median Income--Median income for the area based on 
the most recent decennial census.
    13. Tract Income Ratio--Ratio of the census tract median income 
based on the most recent decennial census to that year's local area 
median income (i.e., loan-level data element number 11 divided by loan-
level data element number 12).
    14. Borrower(s) Annual Income--Combined income of all borrowers.
    15. Area Median Family Income--Current median family income for a 
family of four for the area as established by HUD.
    16. Borrower Income Ratio--Ratio of Borrower(s) annual income to 
area median family income.
    17. Acquisition Unpaid Principal Balance (UPB)--UPB in whole dollars 
of the mortgage when acquired by the Bank.
    18. Loan-to-Value (LTV) Ratio at Origination--LTV ratio of the 
mortgage at the time of origination.
    19. Participation Percentage--Where the mortgage acquisition is a 
participation, the percentage of the mortgage for each Bank listed in 
loan-level data element number 2.
    20. Date of Mortgage Note--Date the mortgage note was created.
    21. Date of Acquisition--Date the Bank acquired the mortgage.
    22. Purpose of Loan--Indicates whether the mortgage was a purchase 
money mortgage, a refinancing, a construction mortgage, or a financing 
of property rehabilitation.
    23. Cooperative Unit Mortgage--Indicates whether the mortgage is on 
a dwelling unit in a cooperative housing building.
    24. Product Type--Indicates the product type of the mortgage (i.e., 
fixed rate, adjustable rate mortgage (ARM), balloon, graduated payment 
mortgage (GPM) or growing equity mortgages (GEM), reverse annuity 
mortgage, or other).
    25. Federal Guarantee--Numeric code that indicates whether the 
mortgage has a Federal guarantee, and from which agency.
    26. Term of Mortgage at Origination--Term of the mortgage at the 
time of origination in months.
    27. Amortization Term--For amortizing mortgages, the amortization 
term of the mortgage in months.
    28. Acquiring Lender Institution--Name of the institution from which 
the Bank acquired the mortgage.
    29. Acquiring Lender City--City location of the institution from 
which the Bank acquired the mortgage.
    30. Acquiring Lender State--State location of the institution from 
which the Bank acquired the mortgage.
    31. Type of Acquiring Lender Institution--Type of institution that 
the Bank acquired the mortgage from (i.e., mortgage company, Savings 
Association Insurance Fund (SAIF) insured depositary institution, Bank 
Insurance Fund (BIF) insured depositary institution, National Credit 
Union Association (NCUA) insured credit union, or other seller).
    32. Number of Borrowers--Number of borrowers.
    33. First-Time Home Buyer--Numeric code indicating whether the 
mortgagor(s) are first-time homebuyers (second mortgages and 
refinancings are not treated as first-time homebuyers).
    34. Mortgage Purchased under the Banks' Community Investment Cash 
Advances (CICA) Programs--Indicates whether the mortgage is on a project 
funded under an AHP, CIP or other CICA program.
    35. Acquisition Type--Indicates whether the Bank acquired the 
mortgage with cash, by swap, with a credit enhancement, a bond or debt 
purchase, reinsurance, risk-sharing, real estate investment trust 
(REIT), or a real estate mortgage investment conduit (REMIC), or other.
    36. Bank Real Estate Owned--Indicates whether the mortgage is on a 
property that was in the Bank's real estate owned (REO) inventory.

[[Page 777]]

    37. Borrower Race or National Origin--Numeric code indicating the 
race or national origin of the borrower.
    38. Co-Borrower Race or National Origin--Numeric code indicating the 
race or national origin of the co-borrower.
    39. Borrower Gender--Numeric code that indicates whether the 
borrower is male or female.
    40. Co-Borrower Gender--Numeric code that indicates whether the co-
borrower is male or female.
    41. Age of Borrower--Age of borrower in years.
    42. Age of Co-Borrower--Age of co-borrower in years.
    43. Occupancy Code--Indicates whether the mortgaged property is an 
owner-occupied principal residence, a second home, or a rental 
investment property.
    44. Number of Units--Indicates the number of units in the mortgaged 
property.
    45. Unit--Number of Bedrooms--Where the property contains non-owner-
occupied dwelling units, the number of bedrooms in each of those units.
    46. Unit--Affordable Category--Where the property contains non-
owner-occupied dwelling units, indicates under which, if any, of the 
special affordable goals the units qualified.
    47. Unit--Reported Rent Level--Where the property contains non-
owner-occupied dwelling units, the rent level for each unit in whole 
dollars.
    48. Unit--Reported Rent Plus Utilities--Where the property contains 
non-owner-occupied dwelling units, the rent level plus the utility cost 
for each unit in whole dollars.
    49. Unit--Owner Occupied--Indicates whether each of the units are 
owner-occupied.
    50. Geographically Targeted Indicator--Numeric code that indicates 
loans made in census tracts classified as underserved by HUD.
    51. Interest Rate--Note rate on the loan.
    52. Loan Amount--Loan balance at origination.
    53. Front-end Ratio--Ratio of principal, interest, taxes, and 
insurance to borrower(s) income.
    54. Back-end Ratio--Ratio of all debt payments to borrower(s) 
income.
    55. Borrower FICO Score--Fair, Isaacs, Co. credit score of borrower.
    56. Co-Borrower FICO Score--Fair, Isaacs, Co. credit score of co-
borrower.
    57. PMI Percent--Percent of original loan balance covered by private 
mortgage insurance.
    58. Credit Enhancement--Numeric code indicating type of credit 
enhancement.
    59. Self-Employed Indicator--Numeric indicator for whether the 
borrower is self-employed.
    60. Property Type--Numeric indicator for whether the property is 
single-family detached, condominium, townhouse, PUD, etc.
    61. Default Status--Numeric indicator for whether the loan is 
currently in default.
    62. Termination Date--Date on which the loan terminated.
    63. Termination Type--Numeric indicator for whether the loan 
terminated in a prepayment, foreclosure, or other types of termination.
    64. ARM Index--Index used for the calculation of interest on an ARM.
    65. ARM margin--Margin added to the index for calculation of the 
interest on an ARM.
    66. Prepayment Penalty Terms--Numeric indicator for types of 
prepayment penalties.

Appendix B to Part 955--Reporting Requirements for Multi-Family Acquired 
 Member Assets That Are Residential Mortgages: Loan-Level Data Elements

    1. Bank District Flag--Two-digit numeric code designating the 
District Bank that originally acquired the loan.
    2. Participating Bank District Flag--Two-digit numeric code 
designating the District Bank that purchased a participation in the 
loan.
    3. Loan Number--Unique numeric identifier used by the Banks for each 
mortgage acquisition.
    4. US Postal State--Two-digit numeric Federal Information Processing 
Standard (FIPS) code.
    5. US Postal Zip Code--Five-digit zip code for the property.
    6. MSA Code--Four-digit numeric code for the property's metropolitan 
statistical area (MSA) if the property is located in an MSA.
    7. Place Code--Five-digit numeric FIPS code.
    8. County--County, as designated in the most recent decennial census 
by the Bureau of the Census.
    9. Census Tract/Block Numbering Area (BNA)--Tract/BNA number as used 
in the most recent decennial census by the Bureau of the Census.
    10. Census Tract-Percent Minority--Percentage of a census tract's 
population that is minority based on the most recent decennial census by 
the Bureau of the Census.
    11. Census Tract-Median Income--Median family income for the census 
tract based on the most recent decennial census.
    12. Local Area Median Income--Median income for the area based on 
the most recent decennial census.
    13. Tract Income Ratio--Ratio of the census tract median income 
based on the most recent decennial census to that year's local area 
median income (i.e., loan-level data element number 11 divided by loan-
level data element number 12).
    14. Area Median Family Income--Current median family income for a 
family of four for the area as established by HUD.

[[Page 778]]

    15. Affordability Category--Indicates under which, if any, of the 
special affordable goals mandated by HUD for Fannie Mae and Freddie Mac, 
the property would qualify.
    16. Acquisition Unpaid Principal Balance (UPB)--UPB in whole dollars 
of the mortgage when purchased by the Bank.
    17. Loan-to-Value (LTV) Ratio at Origination--LTV ratio of the 
mortgage at the time of origination.
    18. Participation Percentage--Where the mortgage acquisition is a 
participation, the percentage of the mortgage when the note was created 
for each Bank listed in loan-level data element number 2.
    19. Date of Mortgage Note--Date the mortgage note was created.
    20. Date of Acquisition--Date the Bank acquired the mortgage.
    21. Purpose of Loan--Indicates whether the mortgage was a purchase 
money mortgage, a refinancing, a construction mortgage, or a financing 
of property rehabilitation.
    22. Cooperative Project Loan--Indicates whether the mortgage is a 
project loan on a cooperative housing building.
    23. Mortgagor Type--Indicates the type of mortgagor (i.e., an 
individual, a for-profit entity such as a corporation or partnership, a 
nonprofit entity such as a corporation or partnership, a public entity, 
or other type of entity).
    24. Product Type--Indicates the product type of the mortgage (i.e., 
fixed rate, adjustable rate mortgage (ARM), balloon, graduated payment 
mortgage (GPM) or growing equity mortgages (GEM), reverse annuity 
mortgage, or other).
    25. Construction Loan--Indicates whether the mortgage is for a 
construction loan.
    26. Government Insurance--Indicates whether any part of the mortgage 
has government insurance.
    27. FHA Risk Share Percent--The percentage of the risk assumed for 
the mortgage purchased under a risk-sharing arrangement with FHA.
    28. Mortgage Purchased under the Banks' Community Investment Cash 
Advances (CICA) Programs--Indicates whether the mortgage is on a project 
under an AHP, CIP or other CICA program.
    29. Acquisition Type--Indicates whether the FHLBank acquired the 
mortgage with cash, by swap, with a credit enhancement, a bond or debt 
purchase, reinsurance, risk-sharing, real estate investment trust 
(REIT), or a real estate mortgage investment conduit (REMIC), or other.
    30. Term of Mortgage at Origination--Term of the mortgage at the 
time of origination in months.
    31. Amortization Term--For amortizing mortgages, the amortization 
term of the mortgage in months.
    32. Acquiring Lender Institution--Name of the entity from which the 
Bank acquired the mortgage.
    33. Acquiring Lender City--City location of the entity from which 
the Bank acquired the mortgage.
    34. Acquiring Lender State--State location of the institution from 
which the Bank acquired the mortgage.
    35. Type of Acquiring Lender Institution--Type of institution that 
the Bank acquired the mortgage from (i.e., mortgage company, Savings 
Association Insurance Fund (SAIF) insured depositary institution, Bank 
Insurance Fund (BIF) insured depositary institution, National Credit 
Union Association (NCUA) insured credit union, or other seller).
    36. Bank Real Estate Owned--Indicates whether the mortgage is on a 
property that was in the Bank's real estate owned (REO) inventory.
    37. Number of Units--Indicates the number of units in the mortgaged 
property.
    38. Geographically Targeted Indicator--Numeric code that indicates 
loans made in census tracts classified as underserved by HUD.
    39. Public Subsidy Program--Indicates whether the mortgage property 
is involved in a public subsidy program and which level(s) of government 
are involved in the subsidy program (i.e., Federal government only, 
other only, Federal government, etc.).
    40. Unit Class Level--The following data apply to unit types in a 
particular mortgaged property. The unit types are defined by the Banks 
for each property and are differentiated based on the number of bedrooms 
in the units and on the average contract rent for the units. A unit type 
must be included for each bedroom size category in the property;
    A. Unit Type XX-Number of Bedroom(s)--the number of bedrooms in the 
unit type;
    B. Unit Type XX-Number of Units--the number of units in the property 
within the unit type;
    C. Unite Type XX-Average Reported Rent Level--the average rent level 
for the unit type in whole dollars; and
    D. Unit Type XX-Average Reported Rent Plus Utilities--the average 
reported rent level plus the utility cost for each unit in whole 
dollars; and
    E. Unit Type XX-Affordability Level--the ratio of the average 
reported rent plus utilities for the unit type to the adjusted area 
median income;
    F. Unit Type XX-Tenant Income Indicator--indicates whether the 
tenant's income is less than 60 percent of area median income, greater 
than or equal to 60 percent but less than 80 percent of area median 
income, greater than or equal to 80 percent but less than 100 percent of 
area median income, or greater than or equal to 100 percent of area 
median income.
    41. Interest Rate--Note rate on the loan.

[[Page 779]]

    42. Debt Service Coverage Ratio--Ratio of net operating income to 
debt service.
    43. Total Number of Units--Indicates the number of dwelling units in 
the mortgaged property.
    44. Default Status--Numeric indicator for whether the loan is 
currently in default.
    45. Termination Date--Date on which the loan terminated.
    46. Termination Type--Numeric indicator for whether the loan 
terminated in a prepayment, foreclosure, or other types of termination.
    47. ARM Index--Index used for the calculation of interest on an ARM.
    48. ARM margin--Margin added to the index for calculation of the 
interest on an ARM.
    49. Prepayment Penalty Terms--Numeric indicator for types of 
prepayment penalties.



PART 956--FEDERAL HOME LOAN BANK INVESTMENTS--Table of Contents




Sec.
956.1   Definitions.
956.2   Authorized investments.
956.3   Prohibited investments and prudential rules.
956.4   Risk-based capital requirement for investments.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1431, 1436.

    Source: 65 FR 43985, July 17, 2000, unless otherwise noted.



Sec. 956.1  Definitions.

    As used in this part:
    Deposits in banks or trust companies has the meaning set forth in 
Sec. 969.3 of this chapter.
    Financial Management Policy means the Financial Management Policy 
For The Federal Home Loan Bank System approved by the Finance Board 
pursuant to Finance Board Resolution No. 96-45 (July 3, 1996), as 
amended by Finance Board Resolution No. 96-90 (Dec, 6, 1996), Finance 
Board Resolution No. 97-05 (Jan. 14, 1997), and Finance Board Resolution 
No. 97-86 (Dec. 17, 1997).
    GAAP means Generally Accepted Accounting Principles.
    Investment grade means:
    (1) A credit quality rating in one of the four highest credit rating 
categories by an NRSRO and not below the fourth highest credit rating 
category by any NRSRO; or
    (2) If there is no credit quality rating by an NRSRO, a 
determination by a Bank that the issuer, asset or instrument is the 
credit equivalent of investment grade using credit rating standards 
available from an NRSRO or other similar standards.
    NRSRO has the meaning set forth in Sec. 966.1 of this chapter.



Sec. 956.2  Authorized investments.

    In addition to assets enumerated in parts 950 and 955 of this 
chapter and subject to the applicable limitations set forth in this 
part, in the Financial Management Policy and in part 980 of this 
chapter, each Bank may invest in:
    (a) Obligations of the United States;
    (b) Deposits in banks or trust companies;
    (c) Obligations, participations or other instruments of, or issued 
by, the Federal National Mortgage Association or the Government National 
Mortgage Association;
    (d) Mortgages, obligations, or other securities that are, or ever 
have been, sold by the Federal Home Loan Mortgage Corporation pursuant 
to 12 U.S.C. 1454 or 1455;
    (e) Stock, obligations, or other securities of any small business 
investment company formed pursuant to 15 U.S.C. 681(d), to the extent 
such investment is made for purposes of aiding members of the Bank; and
    (f) Instruments that the Bank has determined are permissible 
investments for fiduciary or trust funds under the laws of the state in 
which the Bank is located.



Sec. 956.3  Prohibited investments and prudential rules.

    (a) Prohibited investments. A Bank may not invest in:
    (1) Instruments that provide an ownership interest in an entity, 
except for investments described in Sec. Sec. 940.3(e) and (f) of this 
chapter;
    (2) Instruments issued by non-United States entities, except United 
States branches and agency offices of foreign commercial banks;
    (3) Debt instruments that are not rated as investment grade, except:
    (i) Investments described in Sec. 940.3(e) of this chapter;
    (ii) Debt instruments that were downgraded to a below investment 
grade rating after acquisition by the Bank; or

[[Page 780]]

    (4) Whole mortgages or other whole loans, or interests in mortgages 
or loans, except:
    (i) Acquired member assets;
    (ii) Investments described in Sec. 940.3(e) of this chapter;
    (iii) Marketable direct obligations of state, local, or tribal 
government units or agencies, having at least the second highest credit 
rating from a NRSRO, where the purchase of such obligations by the Bank 
provides to the issuer the customized terms, necessary liquidity, or 
favorable pricing required to generate needed funding for housing or 
community lending;
    (iv) Mortgage-backed securities, or asset-backed securities 
collateralized by manufactured housing loans or home equity loans, that 
meet the definition of the term ``securities'' under 15 U.S.C. 
77b(a)(1); and
    (v) Loans held or acquired pursuant to section 12(b) of the Act (12 
U.S.C. 1432(b)).
    (b) Foreign currency or commodity positions prohibited. A Bank may 
not take a position in any commodity or foreign currency. If a Bank 
participates in consolidated obligations denominated in a currency other 
than U.S. Dollars or linked to equity or commodity prices, the currency, 
commodity and equity risks must be hedged.



Sec. 956.4  Risk-based capital requirement for investments.

    Each Bank shall hold retained earnings plus general allowance for 
losses as support for the credit risk of all investments that are not 
rated by a NRSRO, or are rated or have a putative rating below the 
second highest credit rating, in an amount equal to or greater than the 
outstanding balance of the investments multiplied by:
    (a) A factor associated with the credit rating of the investments as 
determined by the Finance Board on a case-by-case basis for rated assets 
to be sufficient to raise the credit quality of the asset to the second 
highest credit rating category; and
    (b) 0.08 for assets having neither a putative nor actual rating.

              PART 960--OFF-BALANCE SHEET ITEMS [RESERVED]



PART 961--STANDBY LETTERS OF CREDIT--Table of Contents




Sec.
961.1  Definitions.
961.2  Standby letters of credit on behalf of members.
961.3  Standby letters of credit on behalf of housing associates.
961.4  Obligation to Bank under all standby letters of credit.
961.5  Additional provisions applying to all standby letters of credit.

    Authority: 12 U.S.C. 1422b, 1429, 1430, 1430b, 1431.

    Source: 63 FR 65699, Nov. 30, 1998, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 961.1  Definitions.

    As used in this part:
    Applicant means a person or entity at whose request or for whose 
account a standby letter of credit is issued.
    Beneficiary means a person or entity who, under the terms of a 
standby letter of credit, is entitled to have its complying presentation 
honored.
    Confirm means to undertake, at the request or with the consent of 
the issuer, to honor a presentation under a standby letter of credit 
issued by a member or housing associate.
    Document means a draft or other demand, document of title, 
investment security, certificate, invoice, or other record, statement, 
or representation of fact, law, right, or opinion that is presented 
under the terms of a standby letter of credit.
    Issuer means a person or entity that issues a standby letter of 
credit.
    Presentation means delivery of a document to an issuer, or an entity 
that has undertaken a confirmation at the request or with the consent of 
the issuer, for the giving of value under a standby letter of credit.
    Residential housing finance means:
    (1) The purchase or funding of ``residential housing finance 
assets,'' as that term is defined in Sec. 950.1 of this chapter; or
    (2) Other activities that support the development or construction of 
residential housing.
    SHFA associate means a housing associate that is a ``state housing 
finance agency,'' as that term is defined in Sec. 926.1 of this chapter, 
and that has met

[[Page 781]]

the requirements of Sec. 926.3(b) of this chapter.
    Standby letter of credit means a definite undertaking by an issuer 
on behalf of an applicant that represents an obligation to the 
beneficiary, pursuant to a complying presentation: to repay money 
borrowed by, advanced to, or for the account of the applicant; to make 
payment on account of any indebtedness undertaken by the applicant; or 
to make payment on account of any default by the applicant in the 
performance of an obligation. The term standby letter of credit does not 
include a commercial letter of credit, or any short-term self-
liquidating instrument used to finance the movement of goods.

[63 FR 65699, Nov. 30, 1998, as amended at 65 FR 8265, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 961.2  Standby letters of credit on behalf of members.

    (a) Authority and purposes. Each Bank is authorized to issue or 
confirm on behalf of members standby letters of credit that comply with 
the requirements of this part, for any of the following purposes:
    (1) To assist members in facilitating residential housing finance;
    (2) To assist members in facilitating community lending;
    (3) To assist members with asset/liability management; or
    (4) To provide members with liquidity or other funding.
    (b) Fully secured. A Bank, at the time it issues or confirms a 
standby letter of credit on behalf of a member, shall obtain and 
maintain a security interest in collateral that is sufficient to secure 
fully the member's unconditional obligation described in 
Sec. 961.4(a)(2) of this part, and that complies with the requirements 
set forth in paragraph (c) of this section.
    (c) Eligible collateral. (1) Any standby letter of credit issued or 
confirmed on behalf of a member may be secured in accordance with the 
requirements for advances under Sec. 950.7 of this chapter.
    (2) A standby letter of credit issued or confirmed on behalf of a 
member for a purpose described in paragraphs (a)(1) or (a)(2) of this 
section may, in addition to the collateral described in paragraph (c)(1) 
of this section, be secured by obligations of state or local government 
units or agencies rated as investment grade by an NRSRO.

[63 FR 65699, Nov. 30, 1998, as amended at 65 FR 8265, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 961.3  Standby letters of credit on behalf of housing associates.

    (a) Housing associates. Each Bank is authorized to issue or confirm 
on behalf of housing associates standby letters of credit that are fully 
secured by collateral described in Sec. Sec. 950.17(b)(1)(i) or (ii) of 
this chapter, and that otherwise comply with the requirements of this 
part, for any of the following purposes:
    (1) To assist housing associates in facilitating residential housing 
finance;
    (2) To assist housing associates in facilitating community lending;
    (3) To assist housing associates with asset/liability management; or
    (4) To provide housing associates with liquidity or other funding.
    (b) SHFA associates. Each Bank is authorized to issue or confirm on 
behalf of SHFA associates standby letters of credit that are fully 
secured by collateral described in Sec. 950.17(b)(2)(i) (A), (B) or (C) 
of this chapter, and that otherwise comply with the requirements of this 
part, for the purpose of facilitating residential or commercial mortgage 
lending that benefits individuals or families meeting the income 
requirements in section 142(d) or 143(f) of the Internal Revenue Code 
(26 U.S.C. 142(d) or 143(f)).

[63 FR 65699, Nov. 30, 1998, as amended at 65 FR 8265, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 961.4  Obligation to Bank under all standby letters of credit.

    (a) Obligation to reimburse. A Bank may issue or confirm a standby 
letter of credit only on behalf of a member or housing associate that 
has:
    (1) Established with the Bank a cash account pursuant to 
Secs. 950.17(b)(2)(i)(B), 950.17(d), or 969.2 of this chapter; and
    (2) Assumed an unconditional obligation to reimburse the Bank for 
value given by the Bank to the beneficiary under the terms of the 
standby letter of credit by depositing immediately

[[Page 782]]

available funds into the account described in paragraph (a)(1) of this 
section not later than the date of the Bank's payment of funds to the 
beneficiary.
    (b) Prompt action to recover funds. If a member or housing associate 
fails to fulfill the obligation described in paragraph (a)(2) of this 
section, the Bank shall take action promptly to recover the funds that 
such member or housing associate is obligated to repay.
    (c) Obligation financed by advance. Notwithstanding the obligations 
and duties of the Bank and its member or housing associate under 
paragraphs (a) and (b) of this section, the Bank may, at its discretion, 
permit such member or housing associate to finance repayment of the 
obligation described in paragraph (a)(2) of this section by receiving an 
advance that complies with sections 10 or 10b of the Act and part 950 of 
this chapter.

[63 FR 65699, Nov. 30, 1998, as amended at 65 FR 8265, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]



Sec. 961.5  Additional provisions applying to all standby letters of credit.

    (a) Requirements. Each standby letter of credit issued or confirmed 
by a Bank shall:
    (1) Contain a specific expiration date, or be for a specific term; 
and
    (2) Require approval in advance by the Bank of any transfer of the 
standby letter of credit from the original beneficiary to another person 
or entity.
    (b) Additional collateral provisions. (1) A Bank may take such steps 
as it deems necessary to protect its secured position on standby letters 
of credit, including requiring additional collateral, whether or not 
such additional collateral conforms to the requirements of 
Sec. Sec. 961.2 or 961.3 of this part.
    (2) Collateral pledged by a member or housing associate to secure a 
letter of credit issued or confirmed on its behalf by a Bank shall be 
subject to the provisions of Secs. 950.7(d), 950.7(e), 950.8, 950.9 and 
950.10 of this chapter.

[63 FR 65699, Nov. 30, 1998, as amended at 65 FR 8265, Feb. 18, 2000; 65 
FR 44431, July 18, 2000]

[[Page 783]]





            SUBCHAPTER H--FEDERAL HOME LOAN BANK LIABILITIES



PART 965--SOURCE OF FUNDS--Table of Contents




Sec.
965.1  Definitions.
965.2  Authorized liabilities.
965.3  Liquidity reserves for deposits.

    Authority: 12 U.S.C. 1422a, 1422b, and 1431.

    Source: 65 FR 36298, June 7, 2000, unless otherwise noted.



Sec. 965.1  Definitions.

    As used in this part:
    Deposits in banks or trust companies means:
    (1) A deposit in another Bank;
    (2) A demand account in a Federal Reserve Bank;
    (3) A deposit in, or a sale of Federal funds to:
    (i) An insured depository institution, as defined in section 
2(12)(A) of the Act (12 U.S.C. 1422(12)(A)), that is designated by a 
Bank's board of directors;
    (ii) A trust company that is a member of the Federal Reserve System 
or insured by the Federal Deposit Insurance Corporation, and is 
designated by a Bank's board of directors; or
    (iii) A U.S. branch or agency of a foreign bank, as defined in the 
International Banking Act of 1978, as amended (12 U.S.C. 3101 et seq.), 
that is subject to the supervision of the Board of Governors of the 
Federal Reserve System, and is designated by a Bank's board of 
directors.
    Repurchase agreement means an agreement in which a Bank sells 
securities and simultaneously agrees to repurchase those securities or 
similar securities at an agreed upon price, with or without a stated 
time for repurchase.



Sec. 965.2  Authorized liabilities.

    As a source of funds for business operations, each Bank is 
authorized to incur liabilities by:
    (a) Accepting proceeds from the issuance of consolidated obligations 
issued in accordance with part 966 of this chapter;
    (b) Accepting time or demand deposits from members, other Banks or 
instrumentalities of the United States, and cash accounts from members 
or associates pursuant to Sec. Sec. 969.2, 950.24(b)(2)(i)(B), 950.24(d) 
or 961.4(a)(1), or other institutions for which the Bank is providing 
correspondent services pursuant to section 11(e) of the Act (12 U.S.C. 
1431(e));
    (c) Purchasing Federal funds; and
    (d) Entering into repurchase agreements.



Sec. 965.3  Liquidity reserves for deposits.

    Each Bank shall at all times have at least an amount equal to the 
current deposits received from its members invested in:
    (a) Obligations of the United States;
    (b) Deposits in banks or trust companies; or
    (c) Advances with a maturity of not to exceed five years that are 
made to members in conformity with part 950 of this chapter.



PART 966--CONSOLIDATED OBLIGATIONS--Table of Contents




Sec.
966.1  Definitions.
966.2  Issuance of consolidated obligations.
966.3  Leverage limit and credit rating requirements.
966.4  Form of consolidated obligations.
966.5  Transactions in consolidated obligations.
966.6  Lost, stolen, destroyed, mutilated or defaced consolidated 
          obligations.
966.7  Administrative provision.
966.8  Conditions for issuance of consolidated obligations.
966.9  Joint and several liability.
966.10  Savings clause.

    Authority: 12 U.S.C. 1422a, 1422b, and 1431.

    Source: 65 FR 36298, June 7, 2000, unless otherwise noted.



Sec. 966.1  Definitions.

    For purposes of this part:
    Financial Management Policy (FMP) has the meaning set forth in 
Sec. 956.1 of this chapter.

[65 FR 36298, June 7, 2000, as amended at 65 FR 43986, July 17, 2000]

[[Page 784]]



Sec. 966.2  Issuance of consolidated obligations.

    (a) Consolidated obligations issued by the Finance Board. The 
Finance Board may issue consolidated obligations under section 11(c) of 
the Act (12 U.S.C. 1431(c)), including the determination of the dates of 
issue, maturities, rates of interest, terms and conditions thereof, and 
the manner in which such consolidated obligations shall be issued. The 
Finance Board in its discretion from time to time may delegate this by 
resolution of the Board of Directors of the Finance Board, or may 
terminate such delegation.
    (b) Consolidated obligations issued by the Banks. (1) Pursuant to 
the Banks' housing finance mission set forth in section 2A(a)(3)(B)(ii) 
of the Act (12 U.S.C. 1422a(a)(3)(B)(ii)), pursuant to the Finance 
Board's duty to ensure that the Banks carry out that mission and remain 
adequately capitalized and able to raise funds in the capital markets 
under section 2A(a)(3)(B)(ii) and (iii) of the Act (12 U.S.C. 
1422a(a)(3)(B)(ii) and (iii)), and subject to the provisions of this 
part and such rules, regulations, terms and conditions as the Finance 
Board may prescribe, the Banks are authorized to issue joint debt under 
section 11(a) of the Act (12 U.S.C. 1431(a)), which shall be called 
consolidated obligations and on which the Banks shall be jointly and 
severally liable under Sec. 966.9 of this part.
    (2) Consolidated obligations shall be issued only through the Office 
of Finance, as agent of the Banks pursuant to this part and part 985.
    (3) The authorization contained herein shall be deemed to constitute 
satisfaction of the requirement for Finance Board approval of the 
``terms and conditions'' of the consolidated obligations pursuant to 
section 11(a) of the Act (12 U.S.C. 1431(a)).
    (c) Negative pledge requirement. Each Bank shall at all times 
maintain assets described in paragraphs (c)(1) through (c)(6) of this 
section free from any lien or pledge, in an amount at least equal to a 
pro rata share of the total amount of currently outstanding consolidated 
obligations jointly issued by the Banks pursuant to section 11(a) of the 
Act (12 U.S.C. 1431(a)) and by the Finance Board pursuant to section 
11(c) of the Act (12 U.S.C. 1431(c)) and equal to such Bank's 
participation in all such COs outstanding, provided that any assets that 
are subject to a lien or pledge for the benefit of the holders of any 
issue of consolidated obligations shall be treated as if they were 
assets free from any lien or pledge for purposes of compliance with this 
paragraph (c). Eligible assets are:
    (1) Cash;
    (2) Obligations of or fully guaranteed by the United States;
    (3) Secured advances;
    (4) Mortgages as to which one or more Banks have any guaranty or 
insurance, or commitment therefor, by the United States or any agency 
thereof;
    (5) Investments described in section 16(a) of the Act (12 U.S.C. 
1436(a)); and
    (6) Other securities that have been assigned a rating or assessment 
by an NRSRO that is equivalent to or higher than the rating or 
assessment assigned by that NRSRO to consolidated obligations 
outstanding.



Sec. 966.3  Leverage limit and credit rating requirements.

    (a) Bank leverage. (1) Except as provided in paragraph (a)(2) of 
this section, the total assets of any Bank shall not exceed 21 times the 
total of paid-in capital stock, retained earnings, and reserves 
(excluding loss reserves and liquidity reserves for deposits pursuant to 
12 U.S.C. 1431(g)) of that Bank.
    (2) The aggregate amount of assets of any Bank may be up to 25 times 
the total paid-in capital stock, retained earnings, and reserves of that 
Bank, provided that non-mortgage assets, after deducting the amount of 
deposits and capital, do not exceed 11 percent of such total assets. For 
the purposes of this section, the amount of non-mortgage assets equals 
total assets after deduction of core mission activity assets and assets 
described in sections II.B.8 through II.B.11 of the FMP.
    (b) Credit ratings. (1) The Banks, collectively, shall obtain from 
an NRSRO and, at all times, maintain a current credit rating on the 
Banks' consolidated obligations.

[[Page 785]]

    (2) Each Bank shall operate in such a manner and take any actions 
necessary, including without limitation reducing Bank leverage, to 
ensure that the Banks' consolidated obligations receive and continue to 
receive the highest credit rating from any NRSRO by which the 
consolidated obligations have then been rated.
    (c) Individual Bank credit rating. Each Bank shall operate in such a 
manner and take any actions necessary to ensure that the Bank has and 
maintains an individual issuer credit rating of at least the second 
highest credit rating from any NRSRO providing a rating, where such 
rating is a meaningful measure of the individual Bank's financial 
strength and stability, and is updated at least annually by an NRSRO, or 
more frequently as required by the Finance Board, to reflect any 
material changes in the condition of the Bank.
    (d) Transition provision. Each Bank shall obtain the credit rating 
from an NRSRO required under paragraph (c) of this section by July 1, 
2001.



Sec. 966.4  Form of consolidated obligations.

    (a) All consolidated obligations shall be issued in pari passu.
    (b) Consolidated obligations with maturities of one year or less may 
be designated consolidated notes.



Sec. 966.5  Transactions in consolidated obligations.

    The general regulations of the Department of the Treasury now or 
hereafter in force governing transactions in United States securities, 
except 31 CFR part 357 regarding book-entry procedure, are hereby 
incorporated into this part 966, so far as applicable and as necessarily 
modified to relate to consolidated obligations, as the regulations of 
the Finance Board for similar transactions on consolidated obligations. 
The book-entry procedure for consolidated obligations is contained in 
part 987 of this subchapter.



Sec. 966.6  Lost, stolen, destroyed, mutilated or defaced consolidated obligations.

    United States statutes and regulations of the Department of the 
Treasury now or hereafter in force governing relief on account of the 
loss, theft, destruction, mutilation or defacement of United States 
securities, so far as applicable and as necessarily modified to relate 
to consolidated obligations, are hereby adopted as the regulations of 
the Finance Board for the issuance of substitute consolidated 
obligations or the payment of lost, stolen, destroyed, mutilated or 
defaced consolidated obligations.



Sec. 966.7  Administrative provision.

    The Secretary of the Treasury or the Acting Secretary of the 
Treasury is hereby authorized and empowered, as the agent of the Finance 
Board and the Banks, to administer Secs. 966.5 and 966.6, and to 
delegate such authority at their discretion to other officers, 
employees, and agents of the Department of the Treasury. Any such 
regulations may be waived on behalf of the Finance Board and the Banks 
by the Secretary of the Treasury, the Acting Secretary of the Treasury, 
or by an officer of the Department of the Treasury authorized to waive 
similar regulations with respect to United States securities, but only 
in any particular case in which a similar regulation with respect to 
United States securities would be waived. The terms ``securities'' and 
``bonds'' as used in this section shall, unless the context otherwise 
requires, include and apply to coupons and interim certificates.



Sec. 966.8  Conditions for issuance of consolidated obligations.

    (a) The OF board of directors shall authorize the offering for 
current and forward settlement (up to 12 months) or the reopening of 
COs, as necessary, and authorize the maturities, rates of interest, 
terms and conditions thereof, subject to the provisions of 31 U.S.C. 
9108.
    (b) COs may be offered for sale only to the extent that Banks are 
committed to take the proceeds.
    (c) COs shall not be directly placed with any Bank.



Sec. 966.9  Joint and several liability.

    (a) In general. (1) Each and every Bank, individually and 
collectively, has an obligation to make full and

[[Page 786]]

timely payment of all principal and interest on consolidated obligations 
when due.
    (2) Each and every Bank, individually and collectively, shall ensure 
that the timely payment of principal and interest on all consolidated 
obligations is given priority over, and is paid in full in advance of, 
any payment to or redemption of shares from any shareholder.
    (3) The provisions of this part shall not limit, restrict or 
otherwise diminish, in any manner, the joint and several liability of 
all of the Banks on all of the consolidated obligations issued by the 
Finance Board pursuant to section 11(c) of the Act (12 U.S.C. 1431(c)) 
and by the Banks pursuant to section 11(a) of the Act (12 U.S.C. 
1431(a)).
    (b) Certification and reporting. (1) Before the end of each calendar 
quarter, and before declaring or paying any dividend for that quarter, 
the President of each Bank shall certify in writing to the Finance Board 
that, based on known current facts and financial information, the Bank 
will remain in compliance with the liquidity requirements set forth in 
section 11(g) of the Act (12 U.S.C. 1431(g)), and the Finance Board's 
FMP or any regulations (as the same may be amended, modified or 
replaced), and will remain capable of making full and timely payment of 
all of its current obligations, including direct obligations, coming due 
during the next quarter.
    (2) A Bank shall immediately provide written notice to the Finance 
Board if at any time the Bank:
    (i) Is unable to provide the certification required by paragraph 
(b)(1) of this section;
    (ii) Projects at any time that it will fail to comply with statutory 
or regulatory liquidity requirements, or will be unable to timely and 
fully meet all of its current obligations, including direct obligations, 
due during the quarter;
    (iii) Actually fails to comply with statutory or regulatory 
liquidity requirements or to timely and fully meet all of its current 
obligations, including direct obligations, due during the quarter; or
    (iv) Negotiates to enter or enters into an agreement with one or 
more other Banks to obtain financial assistance to meet its current 
obligations, including direct obligations, due during the quarter; the 
notice of which shall be accompanied by a copy of the agreement, which 
shall be subject to the approval of the Finance Board.
    (c) Consolidated obligation payment plans. (1) A Bank promptly shall 
file a consolidated obligation payment plan for Finance Board approval:
    (i) If the Bank becomes a non-complying Bank as a result of failing 
to provide the certification required in paragraph (b)(1) of this 
section;
    (ii) If the Bank becomes a non-complying Bank as a result of being 
required to provide the notice required pursuant to paragraph (b)(2) of 
this section, except in the event that a failure to make a principal or 
interest payment on a consolidated obligation when due was caused solely 
by a temporary interruption in the Bank's debt servicing operations 
resulting from an external event such as a natural disaster or a power 
failure; or
    (iii) If the Finance Board determines that the Bank will cease to be 
in compliance with the statutory or regulatory liquidity requirements, 
or will lack the capacity to timely and fully meet all of its current 
obligations, including direct obligations, due during the quarter.
    (2) A consolidated obligation payment plan shall specify the 
measures the non-complying Bank will undertake to make full and timely 
payments of all of its current obligations, including direct 
obligations, due during the applicable quarter.
    (3) A non-complying Bank may continue to incur and pay normal 
operating expenses incurred in the regular course of business (including 
salaries, benefits, or costs of office space, equipment and related 
expenses), but shall not incur or pay any extraordinary expenses, or 
declare, or pay dividends, or redeem any capital stock, until such time 
as the Finance Board has approved the Bank's consolidated obligation 
payment plan or inter-Bank assistance agreement, or ordered another 
remedy, and all of the non-complying Bank's direct obligations have been 
paid.

[[Page 787]]

    (d) Finance Board payment orders; Obligation to reimburse. (1) The 
Finance Board, in its discretion and notwithstanding any other provision 
in this section, may at any time order any Bank to make any principal or 
interest payment due on any consolidated obligation.
    (2) To the extent that a Bank makes any payment on any consolidated 
obligation on behalf of another Bank, the paying Bank shall be entitled 
to reimbursement from the non-complying Bank, which shall have a 
corresponding obligation to reimburse the Bank providing assistance, to 
the extent of such payment and other associated costs (including 
interest to be determined by the Finance Board).
    (e) Adjustment of equities. (1) Any non-complying Bank shall apply 
its assets to fulfill its direct obligations.
    (2) If a Bank is required to meet, or otherwise meets, the direct 
obligations of another Bank due to a temporary interruption in the 
latter Bank's debt servicing operations (e.g., in the event of a natural 
disaster or power failure), the assisting Bank shall have the same right 
to reimbursement set forth in paragraph (d)(2) of this section.
    (3) If the Finance Board determines that the assets of a non-
complying Bank are insufficient to satisfy all of its direct obligations 
as set forth in paragraph (e)(1) of this section, then the Finance Board 
may allocate the outstanding liability among the remaining Banks on a 
pro rata basis in proportion to each Bank's participation in all 
consolidated obligations outstanding as of the end of the most recent 
month for which the Finance Board has data, or otherwise as the Finance 
Board may prescribe.
    (f) Reservation of authority. Nothing in this section shall affect 
the Finance Board's authority to adjust equities between the Banks in a 
manner different than the manner described in paragraph (e) of this 
section, or to take enforcement or other action against any Bank 
pursuant to the Finance Board's authority under the Act or otherwise to 
supervise the Banks and ensure that they are operated in a safe and 
sound manner.
    (g) No rights created. (1) Nothing in this part shall create or be 
deemed to create any rights in any third party.
    (2) Payments made by a Bank toward the direct obligations of another 
Bank are made for the sole purpose of discharging the joint and several 
liability of the Banks on consolidated obligations.
    (3) Compliance, or the failure to comply, with any provision in this 
section shall not be deemed a default under the terms and conditions of 
the consolidated obligations.



Sec. 966.10  Savings clause.

    Any agreements or other instruments entered into in connection with 
the issuance of COs prior to the amendments made to this part shall 
continue in effect with respect to all COs issued under the authority of 
section 11 of the Act and pursuant to this part. References to 
consolidated obligations in such agreements and instruments shall be 
deemed to refer to all joint and several obligations of the Banks.



PART 969--DEPOSITS--Table of Contents




Sec.
969.1  Definitions. [Reserved]
969.2  Deposits from members.

    Authority: 12 U.S.C. 1422b(a)(1), 1431.

    Source: 65 FR 8266, Feb 18, 2000, unless otherwise noted.



Sec. 969.1  Definitions. [Reserved]



Sec. 969.2  Deposits from members.

    Banks may accept demand and time deposits from members, reserving 
the right to require notice of intention to withdraw any part of time 
deposits. Rates of interest paid on all deposits shall be set by the 
Bank's board of directors (or, between regular meetings thereof, by a 
committee of directors selected by the board) or by the Bank President, 
if so authorized by the board. Unless otherwise specified by the board, 
a Bank President may delegate to any officer or employee of the Bank any 
authority he possesses under this section.

[[Page 788]]





   SUBCHAPTER I--MISCELLANEOUS FEDERAL HOME LOAN BANK OPERATIONS AND 
                               AUTHORITIES




PART 975--COLLECTION, SETTLEMENT, AND PROCESSING OF PAYMENT INSTRUMENTS--Table of Contents




Sec.
975.1  Authority and scope.
975.2  Definitions.
975.3  General provisions.
975.4  Incidental powers.
975.5  Operations.
975.6  Pricing of services.
975.7  Rights, powers, responsibilities, duties, and liabilities.

    Authority: 12 U.S.C. 1430, 1431.

    Source: 45 FR 64164, Sept. 29, 1980, unless otherwise noted. 
Redesignated at 54 FR 36759, Sept. 5, 1989. Redesignated at 65 FR 8256, 
Feb. 18, 2000.



Sec. 975.1  Authority and scope.

    (a) Pursuant to section 11(e)(2) of the Act (12 U.S.C. 1431(e)(2)) 
(Bank Act), the Finance Board has promulgated this part governing the 
collection, processing, and settlement, and services incidental thereto, 
of drafts, checks, and other negotiable and nonnegotiable items and 
instruments by Banks. Settlement, collection, and processing include the 
following activities as defined in this part: Account processing, data 
processing, data communication, issuance of forms, transportation of 
items, and storage services.
    (b) Any activity authorized by section 11(e)(2) of the Bank Act 
shall be governed by the provisions of this part.

[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]



Sec. 975.2  Definitions.

    (a) Unless otherwise defined in this part, the terms used in this 
part shall conform, in the following order, to: Regulations of the 
Finance Board, the Uniform Commercial Code, regulations of the Federal 
Reserve System, and general banking usage.
    (b) The term account processing includes charging, crediting, and 
settling of member or eligible institution accounts, excluding 
individual customer accounts.
    (c) As used in this part, the term assets includes furniture and 
equipment, leasehold improvements, and capitalized start-up costs.
    (d) The term data processing includes capture, storage, and 
assembling of, and computation of, data from payment instruments 
received from Federal Reserve offices, Banks, clearinghouse 
associations, depository institutions, and other direct sending 
entities.
    (e) The term data communication means transmitting and receiving of 
data to or from Banks, Federal Reserve offices, clearinghouse 
associations, depository institutions or their service bureaus, and 
other direct sending entities, arrangement for delivery of information; 
and telephone inquiry service.
    (f) The term eligible institution means any institution eligible to 
make application to become a member of a Bank under section 4 of the 
Bank Act (12 U.S.C. 1424).
    (g) The term issuance of forms means the designation and 
distribution of standardized forms for use in collection, processing, 
and settlement services.
    (h) The term presentment means a demand for acceptance or payment 
made upon the maker, acceptor, drawee or other payor by or on behalf of 
the holder, and may involve the use of electronic transmission of an 
instrument or item or transmission of data from the instrument or item 
by electronic or mechanical means.
    (i) The term statement packaging includes receiving statement 
information from members or eligible institutions or their service 
bureaus on respective customer cycle dates; printing statements; 
matching customer account statements; packaging the statements with 
appropriate items and informational materials, as authorized by 
individual members and eligible institutions, for distribution to their 
customers; sending the packages to the members or eligible institutions 
or mailing the packages directly to their customers.
    (j) The term storage services includes filing, storage, and 
truncation of items.

[[Page 789]]

    (k) The term transportation of items includes transporting items 
from Federal Reserve offices, other Banks clearinghouse associations, 
depository institutions, and other direct sending entities to a Bank; 
forwarding items to financial institutions after sorting and forwarding 
cash items or return items to Federal Reserve offices and other sending 
entities.

[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]



Sec. 975.3  General provisions.

    The Banks are authorized (a) to engage in, be agents or 
intermediaries for, or otherwise participate or assist in, the 
processing, collection, and settlement of checks, drafts, or any other 
negotiable or nonnegotiable items and instruments of payment drawn on 
eligible institutions or Bank members; and (b) to be drawees of checks, 
drafts, and other negotiable and nonnegotiable items and instruments 
issued by eligible institutions or Bank members.

[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]



Sec. 975.4  Incidental powers.

    In connection with the collection, processing, and settlement of 
items and instruments drawn on or issued by eligible institutions or 
Bank members, a Bank may also perform the following services, as defined 
in Sec. 975.2:
    (a) Statement packaging; and
    (b) Any other activity that the Finance Board shall, from time to 
time, after notice and comment, find necessary for the exercise of the 
authority of this part.

[45 FR 64164, Sept. 29, 1980, as amended at 55 FR 2231, Jan. 23, 1990; 
65 FR 8266, Feb. 18, 2000]



Sec. 975.5  Operations.

    A Bank may utilize the services of a Federal Reserve Bank and may 
become a member or use the services of a clearinghouse, public or 
private financial institution, or agency in the exercise of any powers 
or functions under this part.

[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]



Sec. 975.6  Pricing of services.

    (a) General. Banks shall charge for services authorized in this part 
in a manner consistent with the principles of section 11(A)(c) of the 
Federal Reserve Act (12 U.S.C. 248a(c)), as interpreted by this part.
    (b) Payment instrument account services. (1) In determining the fees 
for services provided under this part, a Bank must take into account all 
direct and indirect costs of providing the services.
    (2) Prices must reflect the imputed rate of return that would have 
been earned and the taxes that would have been paid if the Bank were a 
private corporation, by using a cost of capital adjustment factor 
applied to those assets used in providing services authorized under this 
part.
    (c) Review and publication. The Finance Board shall from time to 
time and at least annually review the cost of capital adjustment factor 
and review prices for services authorized in this part for compliance 
with the principles set forth in paragraphs (a) and (b) of this section. 
All prices for Bank services authorized in this part will be published 
annually in the Federal Register, except those for fees charged to an 
applicant for draws made by a beneficiary under a standby letter of 
credit.

(12 U.S.C. 1431(e); Reorg. Plan No. 3 of 1947, 12 FR 4981, 3 CFR, 1943-
48 Comp., p. 1071)

[45 FR 64164, Sept. 29, 1980, as amended at 46 FR 38900, July 30, 1981. 
Redesignated at 54 FR 36759, Sept. 5, 1989, and amended at 58 FR 59936, 
Nov. 12, 1993; 60 FR 57682, Nov. 17, 1995; 63 FR 65700, Nov. 30, 1998; 
65 FR 8266, Feb. 18, 2000]



Sec. 975.7  Rights, powers, responsibilities, duties, and liabilities.

    To the extent it is not inconsistent with other provisions of this 
part, the Uniform Commercial Code governs the rights, powers, 
responsibilities, duties, and liabilities of Banks in the exercise of 
their authority under this part. For purposes of this paragraph, the 
term ``bank,'' as used in the Uniform Commercial Code and clearinghouse 
rules, includes Banks and their members and eligible institutions.

[45 FR 64164, Sept. 5, 1989, as amended at 65 FR 8266, Feb. 18, 2000]

[[Page 790]]



PART 977--MISCELLANEOUS BANK AUTHORITIES--Table of Contents




Sec.
977.1  Definitions. [Reserved]
977.2  Transfer of funds between Banks.
977.3  Trustee powers.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1431(a), 1431(e), 
1432(a).

    Source: 65 FR 8266, Feb. 18, 2000, unless otherwise noted.



Sec. 977.1  Definitions. [Reserved]



Sec. 977.2  Transfer of funds between Banks.

    Inter-Bank borrowing shall be through unsecured deposits bearing 
interest at rates negotiated between Banks.



Sec. 977.3  Trustee powers.

    A Bank may act, and make reasonable charges for doing so, as trustee 
of any trust affecting the business of any member or any institution or 
group applying for membership or for insurance of accounts, or any group 
applying for a charter for a Federal Savings Association, if:
    (a) Such trust is created or arises for the benefit of the 
institution or its depositors, investors, or borrowers, or for the 
promotion of sound and economical home financing; and
    (b) In the case of applicants, the Bank ceases to act as trustee if 
the application is withdrawn or rejected.



PART 978--BANK REQUESTS FOR INFORMATION--Table of Contents




Sec.
978.1  Definitions.
978.2  Scope.
978.3  Request for confidential information.
978.4  Form of request.
978.5  Storage of confidential information.
978.6  Access to confidential information.
978.7  Third party requests for confidential information.
978.8  Computer data.

    Authority: 12 U.S.C. 1422b(a), 1442.

    Source: 65 FR 8266, Feb. 18, 2000, unless other noted.



Sec. 978.1  Definitions.

    As used in this part:
    Confidential information means any record, data, or report, 
including but not limited to examination reports, or any part thereof, 
that is non-public, privileged or otherwise not intended for public 
disclosure which is in the possession or control of a financial 
regulatory agency and which contains information regarding members of a 
Bank or financial institutions with which a Bank has had or contemplates 
having transactions under the Act.
    Financial regulatory agency means any of the following:
    (1) The Department of the Treasury, including either the Office of 
the Comptroller of the Currency or the Office of Thrift Supervision;
    (2) The Board of Governors of the Federal Reserve System;
    (3) The National Credit Union Administration; or
    (4) The Federal Deposit Insurance Corporation.
    Third party means any person or entity except a director, officer, 
employee or agent of either:
    (1) A Bank in possession of any particular confidential information; 
or
    (2) The financial regulatory agency that supplied the particular 
confidential information to such Bank.



Sec. 978.2  Scope.

    This part governs the procedure by which a Bank will request and 
receive confidential information pursuant to section 22 of the Act, 12 
U.S.C. 1442.



Sec. 978.3  Request for confidential information.

    A Bank shall make all requests for confidential information to a 
financial regulatory agency, or to a regional office of such agency if 
mutually agreeable, in accordance with the procedures contained in this 
part as well as any procedures of general applicability for requesting 
information promulgated by such financial regulatory agency. This part 
and its procedures may be supplemented by a confidentiality agreement 
between a Bank and a financial regulatory agency.



Sec. 978.4  Form of request.

    A request by a Bank to a financial regulatory agency for 
confidential information shall be made in writing or

[[Page 791]]

by such other means as may be agreed upon between the Bank and the 
financial regulatory agency. The request shall reference section 22 of 
the Act, 12 U.S.C. 1442, as amended, and this regulation, and shall 
describe the confidential information requested and identify its 
intended use pursuant to the Act. The request shall be signed or 
otherwise made by any duly authorized Bank officer or employee.



Sec. 978.5  Storage of confidential information.

    Each Bank shall:
    (a) Store all identified confidential information in secure storage 
areas or filing cabinets or other secured facilities generally used by 
such Bank and limit access thereto in the same manner as it maintains 
the confidentiality of its own members' privileged or non-public 
information;
    (b) Have in place a written set of procedures and policies designed 
to ensure the confidentiality of confidential information in its 
possession; and
    (c) Establish an internal review of its procedures for storing 
confidential information and maintaining its confidentiality, as a part 
of its internal audit process.



Sec. 978.6  Access to confidential information.

    Each Bank shall ensure that access to the confidential information 
stored at its facility is limited to those with a need to know such 
information and that employees with access maintain the confidentiality 
of the confidential information in accordance with the Bank's own 
procedures for maintaining the confidentiality of its members' 
privileged or non-public information.



Sec. 978.7  Third party requests for confidential information.

    (a) General. In the event a Bank receives a request for confidential 
information in its possession from any third party, the Bank shall 
forward such request to the financial regulatory agency from which the 
confidential information was obtained.
    (b) Subpoena. In the event a Bank receives a subpoena for 
confidential information issued by a Federal, state or local government 
department, agency, court or bureau, the Bank shall give timely written 
notice of such subpoena to the financial regulatory agency from which 
the confidential information was obtained, unless such notice is 
prohibited by applicable law. Except as limited in this part, the Bank 
may disclose confidential information pursuant to the subpoena, after 
giving timely written notice, when:
    (1) The financial regulatory agency gives written approval to the 
disclosure; or
    (2) A binding order to produce the confidential information has 
become final with all rights of appeal either exhausted or lapsed.
    (c) Nondisclosure to third parties. Except as provided in paragraph 
(b) of this section, a Bank shall not disclose confidential information 
to any third party. A Bank shall refer all third party requests for such 
confidential information to the financial regulatory agency that 
released the confidential information to the Bank.
    (d) Disclosure to Finance Board. (1) Neither this part nor any 
confidentiality agreement executed between a Bank and a financial 
regulatory agency shall prevent a Bank from disclosing confidential 
information in its possession to the Finance Board whenever disclosure 
is necessary to accomplish the Finance Board's supervision of Bank 
membership applications or Bank director eligibility issues, or 
disclosing any confidential information in its possession if such 
disclosure is made pursuant to an audit conducted pursuant to Sec. 978.5 
or section 20 of the Act, 12 U.S.C. 1440.
    (2) The Finance Board shall keep all confidential information 
received under paragraph (d) of this section in strict confidence.



Sec. 978.8  Computer data.

    Nothing in this part shall preclude a Bank from arranging with any 
financial regulatory agency to transmit or allow access to confidential 
information with the consent of such agency by means of an electronic 
computer system. Any such arrangement shall ensure the security of the 
computerized data stored in a Bank's computer and restrict access to 
such data in order to preserve confidentiality in a

[[Page 792]]

manner agreed upon by the Bank and the financial regulatory agency.

[[Page 793]]





           SUBCHAPTER J--NEW FEDERAL HOME LOAN BANK ACTIVITIES




PART 980--NEW BUSINESS ACTIVITIES--Table of Contents




Sec.
980.1  Definitions.
980.2  Limitation on Bank authority to undertake new business 
          activities.
980.3  New business activity notice requirement.
980.4  Commencement of new business activities.
980.5  Notice by the Finance Board.
980.6  Finance Board consent.
980.7  Examinations; requests for additional information.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1431(a), 1432(a).

    Source: 65 FR 44431, July 18, 2000, unless otherwise noted.



Sec. 980.1  Definitions.

    As used in this part:
    New business activity means any business activity undertaken, 
transacted, conducted, or engaged in by a Bank that has not been 
previously undertaken, transacted, conducted, or engaged in by that 
Bank, or was previously undertaken, transacted, conducted, or engaged in 
under materially different terms and conditions, such that it:
    (1) Involves the acceptance of collateral enumerated under 
Sec. 950.7(a)(4) of this chapter;
    (2) Involves the acceptance of classes of collateral enumerated 
under Sec. 950.7(b) of this chapter for the first time;
    (3) Entails risks not previously and regularly managed by that Bank, 
its members, or both, as appropriate; or
    (4) Involves operations not previously undertaken by that Bank.



Sec. 980.2  Limitation on Bank authority to undertake new business activities.

    No Bank shall undertake any new business activity except in 
accordance with the procedures set forth in this part.



Sec. 980.3  New business activity notice requirement.

    At least sixty days prior to undertaking a new business activity, 
except as provided in Sec. 980.4(b), a Bank shall submit to the Finance 
Board a written notice containing the following information:
    (a) General requirements. Except as provided in paragraph (b) of 
this section, a Bank's notice of new business activity shall include:
    (1) An opinion of counsel citing the statutory, regulatory, or other 
legal authority for the new business activity;
    (2) A good faith estimate of the anticipated dollar volume of the 
activity over the short-and long-term;
    (3) A full description of:
    (i) The purpose and operation of the proposed activity;
    (ii) The market targeted by the activity;
    (iii) The delivery system for the activity;
    (iv) The effect of the activity on the housing, or relevant 
community lending, market; and
    (4) A demonstration of the Bank's capacity, through staff, or 
contractors employed by the Bank, sufficiency of experience and 
expertise, to safely administer and manage the risks associated with the 
new activity;
    (5) An assessment of the risks associated with the activity, 
including the Bank's ability to manage these risks and the Bank's 
ability to manage the risks associated with increasing volumes of the 
new activity; and
    (6) The criteria that the Bank will use to determine the eligibility 
of its members or housing associates to participate in the new activity.
    (b) New collateral activities. If a proposed new business activity 
relates to the acceptance of collateral under Sec. 950.7 of this 
chapter, a Bank's notice of new business activity shall include:
    (1) A description of the classes or amounts of collateral proposed 
to be accepted by the Bank;

[[Page 794]]

    (2) A copy of the Bank's member products policy, adopted pursuant to 
Sec. 917.4 of this chapter;
    (3) A copy of the Bank's procedures for determining the value of the 
collateral in question, established pursuant to Sec. 950.10 of this 
chapter; and
    (4) A demonstration of the Bank's capacity, personnel, technology, 
experience and expertise to value, discount and manage the risks 
associated with the collateral in question.



Sec. 980.4  Commencement of new business activities.

    A Bank may commence a new business activity:
    (a) Sixty days after receipt by the Finance Board of the notice of 
new business activity under Sec. 980.3, if the Finance Board has not 
issued to the Bank a notice as described in Sec. 980.5(a)(1) through 
(4);
    (b) In the case of the acceptance of collateral enumerated under 
Sec. 950.7(a)(4) of this chapter, immediately upon receipt by the 
Finance Board of a notice of new business activity under Sec. 980.3; or
    (c) Immediately upon issuance by the Finance Board of a letter of 
approval under Sec. 980.6.



Sec. 980.5  Notice by the Finance Board.

    (a) Issuance. Within sixty days after receipt of a notice of new 
business activity under Sec. 980.3, the Finance Board may issue to a 
Bank a notice that:
    (1) Disapproves the new business activity;
    (2) Instructs the Bank not to commence the new business pending 
further consideration by the Finance Board;
    (3) Declares an intent to examine the Bank;
    (4) Requests additional information including but not limited to the 
requests listed in Sec. 980.7;
    (5) Establishes conditions for the Finance Board's approval of the 
new business activity, including but not limited to the conditions 
listed in Sec. 980.7; or
    (6) Contains other instructions or information that the Finance 
Board deems appropriate under the circumstances.
    (b) Effect. Following receipt of a notice issued pursuant to 
paragraph (a) of this section, a Bank may not undertake any new business 
activity that is the subject of the notice until the Bank has received 
the Finance Board's consent pursuant to Sec. 980.6.



Sec. 980.6  Finance Board consent.

    The Finance Board may at any time provide consent for a Bank to 
undertake a particular new business activity and setting forth the terms 
and conditions that apply to the activity, with which the Bank shall 
comply if the Bank undertakes the activity in question.



Sec. 980.7  Examinations; requests for additional information.

    (a) General. Nothing in this part shall limit in any manner the 
right of the Finance Board to conduct any examination of any Bank.
    (b) Requests for additional information and conditions for approval. 
With respect to a new business activity, nothing in this part shall 
limit the right of the Finance Board at any time to:
    (1) Request further information from a Bank concerning a new 
business activity; and
    (2) Require a Bank to comply with certain conditions in order to 
undertake, or continue to undertake, the new business activity in 
question, including but not limited to:
    (i) Successful completion of pre- or post-implementation safety and 
soundness examinations;
    (ii) Demonstration by the Bank of adequate operational capacity, 
including the existence of appropriate policies, procedures and 
controls;
    (iii) Demonstration by the Bank of its ability to manage the risks 
associated with accepting increasing volumes of particular collateral, 
or holding increasing volumes of particular assets, including the Bank's 
capacity reliably to value, discount and market the collateral or assets 
for liquidation;
    (iv) Demonstration by the Bank that the new business activity is 
consistent with the housing finance and community lending mission of the 
Banks and the cooperative nature of the Bank System; and
    (v) Finance Board review of any contracts or agreements between the 
Bank and its members or housing associates.

[[Page 795]]





                     SUBCHAPTER K--OFFICE OF FINANCE




PART 985--THE OFFICE OF FINANCE--Table of Contents




Sec.
985.1  Definitions.
985.2  Authority of the OF.
985.3  Functions of the OF.
985.4  Finance Board oversight.
985.5  Funding of the OF.
985.6  Debt management duties of the OF.
985.7  Structure of the OF board of directors.
985.8  General duties of the OF board of directors.

Appendix A to Part 985--Exceptions to the General Disclosure Standards

    Source: 65 FR 36300, June 7, 2000, unless otherwise noted.



Sec. 985.1  Definitions.

    For purposes of this part:
    Bank System means the Banks and the Office of Finance.
    Chair means the Chairperson of the board of directors of the Office 
of Finance.
    Managing Director means the managing director of the Office of 
Finance.
    OF means the Office of Finance, a joint office of the Banks pursuant 
to section 2B of the Act (12 U.S.C. 1422b(b)(2)).



Sec. 985.2  Authority of the OF.

    (a) General. The OF shall enjoy such incidental powers under section 
12(a) of the Act (12 U.S.C. 1432(a)), as are necessary, convenient and 
proper to accomplish the efficient execution of its duties and functions 
pursuant to this part, including the authority to contract with a Bank 
or Banks for the use of Bank facilities or personnel in order to perform 
its functions or duties.
    (b) Agent. The OF in the performance of its duties, shall have the 
power to act on behalf of:
    (1) The Banks in issuing consolidated obligations pursuant to 
section 11(a) of the Act (12 U.S.C. 1431(a));
    (2) By delegation of the Finance Board under Sec. 966.2 of this 
chapter in issuing consolidated obligations pursuant to section 11(c) of 
the Act (12 U.S.C. 1431(c)); and
    (3) The Banks in paying principal and interest due on the 
consolidated obligations, or other obligations of the Banks.
    (c) Assessments. The OF shall have authority to assess the Banks for 
the funding of its operations in accordance with Sec. 985.5.



Sec. 985.3  Functions of the OF.

    (a) Joint debt issuance. Subject to parts 965 and 966 of this 
chapter, and this part, the OF as agent shall offer, issue and service 
(including making timely payments on principal and interest due) 
consolidated obligations on which the Banks are jointly and severally 
liable on behalf of the Finance Board pursuant to section 11(c) of the 
Act (12 U.S.C. 1431(c), or the Banks pursuant to section 11(a) of the 
Act (12 U.S.C. 1431(a)).
    (b) Preparation of combined financial reports. The OF shall prepare 
and issue the combined annual and quarterly financial reports for the 
Bank System in accordance with the requirements of Sec. 985.6(b) and 
Appendix A of this part.
    (c) Fiscal agent. The OF shall function as the Fiscal Agent of the 
Banks.
    (d) Financing Corporation and Resolution Funding Corporation. The OF 
shall perform such duties and responsibilities for the Financing 
Corporation (FICO) as may be required under part 995 of this chapter, or 
for the Resolution Funding Corporation (REFCorp) as may be required 
under part 996 of this chapter or authorized by the Finance Board 
pursuant to section 21B(c)(6)(B) of the Act (12 U.S.C. 1441b(c)(6)(B)).



Sec. 985.4  Finance Board oversight.

    (a) Oversight and enforcement actions. The Finance Board shall have 
the same regulatory oversight authority and enforcement powers over the 
OF, the OF board of directors, the directors, officers, employees, 
agents, attorneys, accountants or other OF staff, as it has over a Bank 
and its respective directors, officers, employees, attorneys, 
accountants, agents or other staff.
    (b) Examinations. Pursuant to section 20 of the Act (12 U.S.C. 
1440), the Finance Board shall examine the OF, all

[[Page 796]]

funds and accounts that may be established pursuant to this part 985, 
and the operations and activities of the OF, as provided for in the Act 
or any regulations promulgated pursuant thereto.



Sec. 985.5  Funding of the OF.

    (a) Generally. The Banks are responsible for jointly funding all of 
the expenses of the Office of Finance, including the costs of 
indemnifying the members of the OF board of directors, the Managing 
Director and other officers and employees of the OF, as provided for in 
this part.
    (b) Funding policies. (1) At the direction of, and pursuant to 
policies and procedures adopted by, the OF board of directors, the Banks 
shall periodically reimburse the OF in order to maintain sufficient 
operating funds under the budget approved by the OF board of directors. 
The OF operating funds shall be:
    (i) Available for expenses of the Office of Finance and the OF board 
of directors, according to their approved budgets; and
    (ii) Subject to withdrawal by check, wire transfer or draft signed 
by the Managing Director or other person designated by the OF board of 
directors.
    (2) Each Bank's respective pro rata share of the reimbursement 
described in paragraph (b)(1) of this section shall be based on the 
ratio of the total paid-in value of its capital stock relative to the 
total paid-in value of all capital stock in the Bank System.
    (c) Alternative formula for assessment. With the prior approval of 
the Finance Board, the OF board of directors may implement an 
alternative formula for determining each Bank's respective share of the 
OF expenses or, by contract with a Bank or Banks, may choose to be 
reimbursed through a fee structure in lieu of or in addition to 
assessment, for services provided to the Bank or Banks.
    (d) Prompt reimbursement. Each Bank from time to time shall promptly 
forward funds to the OF in an amount representing its share of the 
reimbursement described in paragraph (b) of this section when directed 
to do so by the Managing Director pursuant to procedures of the OF board 
of directors.
    (e) Indemnification expenses. All expenses incident to 
indemnification of the members of the OF board of directors, the 
Managing Director, and other officers and employees of the OF shall be 
treated as an expense of the OF to be reimbursed by the Banks under the 
provisions of this part.
    (f) Operating funds shall be segregated. (1) Any funds received by 
the OF from the Banks pursuant to this section for OF operating expenses 
promptly shall be deposited into one or more accounts and shall not be 
commingled with any proceeds from the sale of consolidated obligations 
in any manner.
    (2) Neither the proceeds from the sale of consolidated obligations 
under part 966, nor any operating expense reimbursements received by the 
OF from assessments on the Banks under this section shall be construed 
to be Government Funds or appropriated monies or subject to 
apportionment for the purposes of chapter 15 of title 31 of the United 
States Code, or any other authority, in accordance with section 2B(b)(1) 
of the Act (12 U.S.C. 1422b(b)(1)).



Sec. 985.6  Debt management duties of the OF.

    (a) Issuance and servicing of COs. The OF shall issue and service 
(including making timely payments on principal and interest due, subject 
to Secs. 966.8 and 966.9 of this chapter) consolidated obligations 
pursuant to and in accordance with the policies and procedures 
established by the OF board of directors under this part.
    (b) Combined financial reports requirements. The OF shall prepare 
and distribute the combined annual and quarterly financial reports for 
the Bank System in accordance with the following requirements:
    (1) The scope, form and content of the disclosure generally shall be 
consistent with the requirements of the Securities and Exchange 
Commission's Regulations S-K and S-X (17 CFR parts 229 and 210).
    (2) Information about each Bank shall be presented as a segment of 
the Bank System as if Statement of Financial Accounting Standards No. 
131, titled ``Disclosures about Segments of an Enterprise and Related 
Information''

[[Page 797]]

(FASB 131) applied to the combined annual and quarterly financial 
reports of the Bank System.
    (3) The standards set forth in paragraphs (b)(1) and (2) of this 
section are subject to the exceptions set forth in the Appendix to this 
part.
    (4) The combined Bank System annual report shall be filed with the 
Finance Board and distributed to each Bank and Bank member within 90 
days after the end of the fiscal year. The combined Bank System 
quarterly reports shall be filed with the Finance Board and distributed 
to each Bank and Bank member within 45 days after the end of the first 
three fiscal quarters of each year.
    (5) The Finance Board in its sole discretion shall determine whether 
or not a combined Bank System annual or quarterly financial report 
complies with the standards of this part.
    (6) The OF board of directors shall comply promptly with any 
directive of the Finance Board regarding the preparation, filing, 
amendment or distribution of the combined Bank System annual or 
quarterly financial reports.
    (7) Nothing in this section shall create or be deemed to create any 
rights in any third party.
    (c) Capital markets data. The OF board of directors shall provide 
capital markets information concerning debt to the Banks.
    (d) NRSROs. The OF board of directors shall manage relationships 
with Nationally Recognized Statistical Rating Organizations in 
connection with their rating of consolidated obligations.
    (e) Research. The OF shall conduct research reasonably related to 
the issuance or servicing of consolidated obligations.
    (f) Monitor Banks' credit exposure. The OF shall timely monitor each 
Bank's and the Bank System's unsecured credit exposure to individual 
counterparties.



Sec. 985.7  Structure of the OF board of directors.

    (a) Membership. The OF board of directors shall consist of three 
part-time members appointed by the Finance Board as follows:
    (1) Two Bank Presidents; and
    (2) A citizen of the United States with a demonstrated expertise in 
financial markets. Such appointee may not be an officer, director or 
employee of a Bank or Bank System member, hold shares, or any other 
financial interest in, any member of a Bank, or be affiliated with any 
consolidated obligation selling or dealer group member under contract 
with the OF.
    (b) Terms. (1) Except as provided in paragraph (b)(2) of this 
section, the members of the OF board of directors shall serve for three-
year terms (which shall be staggered), and shall be subject to removal 
or suspension for cause by the Finance Board.
    (2) The Finance Board shall fill any vacancy occurring on the OF 
board of directors. An appointment to fill a vacancy shall be only for 
the remainder of the term during which the vacancy occurred.
    (3) Any member of the OF board of directors is authorized to 
continue to serve on the OF board of directors after the expiration of 
the member's term until a successor has been appointed by the Finance 
Board.
    (c) Chair. (1) The private citizen member of the OF board of 
directors shall serve as the Chair, and the Vice Chair shall be selected 
by a majority vote of the members of the OF board of directors.
    (2) The Chair shall preside over the meetings of the OF board of 
directors. In the absence of the Chair, the Vice Chair shall preside.
    (3) The Chair shall be responsible for ensuring that the directives 
and resolutions of the OF board of directors are drafted and maintained 
and for keeping the minutes of all meetings.
    (d) Compensation. (1) The Bank President members shall not receive 
any additional compensation or reimbursement as a result of their 
service on the OF board of directors.
    (2) Each Bank shall be entitled to be reimbursed by from the Office 
of Finance for its expenditure of travel and per diem expenses 
associated with its Bank President's attendance at an OF board of 
directors meeting as a director member thereof.
    (3) The Office of Finance shall pay compensation and expenses to the 
private citizen member of the OF board of

[[Page 798]]

directors in accordance with the requirements for payment of 
compensation and expenses to Bank chairs as set forth in part 918 of 
this chapter.
    (e) Indemnification. (1) The OF board of directors shall indemnify 
its members, the Managing Director, and other officers and employees of 
the OF under such terms and conditions as shall be determined by the OF 
board of directors, provided that such terms and conditions are 
consistent with the terms and conditions of indemnification of 
directors, officers and employees of the Bank System generally.
    (2) The OF board of directors shall adopt indemnification 
procedures, which shall be supplemented by a contract of insurance.
    (f) Delegation. The OF board of directors may delegate any of its 
authority or duties to any employee of the OF in order to enable the OF 
to carry out its functions.



Sec. 985.8  General duties of the OF board of directors.

    (a) General. (1) Conduct of business. Each director shall have the 
duties prescribed in Sec. 917.2(b) of this chapter, as appropriate.
    (2) Bylaws. The OF board of directors shall adopt bylaws in 
accordance with the provisions of Sec. 917.10 of this chapter.
    (b) Meetings and quorum. The OF board of directors shall conduct its 
business by majority vote of its members at meetings convened in 
accordance with its bylaws, and shall hold no fewer than nine meetings 
annually. Due notice shall be given to the Finance Board by the Chair 
prior to each meeting. A quorum, for purposes of meetings of the OF 
board of directors, shall be not less than two members.
    (c) Duties regarding COs. The OF board of directors shall establish 
policies regarding COs that shall:
    (1) Govern the frequency and timing of issuance, issue size, minimum 
denomination, CO concessions, underwriter qualifications, currency of 
issuance, interest-rate change or conversion features, call features, 
principal indexing features, selection and retention of outside counsel, 
selection of clearing organizations, and the selection and compensation 
of underwriters for consolidated obligations, which shall be in 
accordance with the requirements and limitations set forth in paragraph 
(c)(4) of this section;
    (2) Prohibit the issuance of COs intended to be privately placed 
with or sold without the participation of an underwriter to retail 
investors, or issued with a concession structure designed to facilitate 
the placement of the COs in retail accounts, unless the OF has given 
notice to the board of directors of each Bank describing a policy 
permitting such issuances, soliciting comments from each Bank's board of 
directors, and considering the comments received before adopting a 
policy permitting such issuance activities;
    (3) Require all broker-dealers or underwriters under contract to the 
OF to have and maintain adequate suitability sales practices and 
policies, which shall be acceptable to, and subject to review by, the 
Office of Finance;
    (4) Require that COs shall be issued efficiently and at the lowest 
all-in funding costs over time, consistent with:
    (i) Prudent risk-management practices, prudential debt parameters, 
short and long-term market conditions, and the Banks' role as 
government-sponsored enterprises;
    (ii) Maintaining reliable access to the short-term and long-term 
capital markets; and
    (iii) Positioning the issuance of debt to take advantage of current 
and future capital market opportunities.
    (d) Other duties. The OF board of directors shall:
    (1) Set policies for management and operation of the OF;
    (2) Approve a strategic business plan for the OF in accordance with 
the provisions of Sec. 917.5 of this chapter, as appropriate;
    (3) Review, adopt and monitor annual operating and capital budgets 
of the OF in accordance with the provisions of Sec. 917.8 of this 
chapter, as appropriate;
    (4) Constitute and perform the duties of an audit committee, which 
to the extent possible shall operate consistent with:
    (i) The requirements of Sec. 917.6 of this chapter, and

[[Page 799]]

    (ii) The requirements pertaining to audit committee reports set 
forth in Item 306 of Regulation S-K promulgated by the Securities and 
Exchange Commission.
    (5) Select, employ, determine the compensation for, and assign the 
duties and functions of a Managing Director of the OF who shall:
    (i) Be the chief executive officer for the OF and shall direct the 
implementation of the OF board of directors' policies;
    (ii) Serve as a member of the Directorate of the Financing 
Corporation, pursuant to section 21(b)(1)(A) of the Act (12 U.S.C. 
1441(b)(1)(A)); and
    (iii) Serve as a member of the Directorate of the Resolution Funding 
Corporation, pursuant to section 21B(c)(1)(A) of the Act (12 U.S.C. 
1441b(c)(1)(A)).
    (6) Review and approve all contracts of the OF;
    (7) Have the exclusive authority to employ and contract for the 
services of an independent, external auditor for the Banks' annual and 
quarterly combined financial statements;
    (8) Select, evaluate, determine the compensation of, and, where 
appropriate, replace the internal auditor, who may be removed only by 
vote of the OF board of directors; and
    (9) Assume any other responsibilities that may from time to time be 
delegated to it by the Finance Board.
    (e) No rights created. Nothing in this part shall create or be 
deemed to create any rights in any third party.

 Appendix A to Part 985--Exceptions to the General Disclosure Standards

    A. Related-party transactions. Item 404 of Regulation S-K, 17 CFR 
229.404, requires the disclosure of certain relationships and related 
party transactions. In light of the cooperative nature of the Bank 
System, related-party transactions are to be expected, and a disclosure 
of all related-party transactions that meet the threshold would not be 
meaningful. Instead, the combined annual report will disclose the 
percent of advances to members an officer of which serves as a Bank 
director, and list the top ten holders of advances in the Bank System 
and the top five holders of advances by Bank, with a further disclosure 
indicating which of these members had an officer that served as a Bank 
director.
    B. Biographical information. The biographical information required 
by Items 401 and 405 of Regulation S-K, 17 CFR 229.401 and 405, will be 
provided only for the members of the Board of Directors of the Finance 
Board, Bank presidents, chairs and vice chairs, and the directors and 
Managing Director of the OF.
    C. Compensation. The information on compensation required by Item 
402 of Regulation S-K, 17 CFR 229.402, will be provided only for Bank 
presidents and the Managing Director of the OF. Since stock in each Bank 
trades at par, the Office of Finance will not include the performance 
graph specified in Item 402(1) of Regulation S-K, 17 CFR 229.402(1).
    D. Submission of matters to a vote of stockholders. No information 
will be presented on matters submitted to shareholders for a vote, as 
otherwise required by Item 4 of the SEC's form 10-K, 17 CFR 249.310. The 
only item shareholders vote upon is the annual election of directors.
    E. Exhibits. The exhibits required by Item 601 of Regulation S-K, 17 
CFR 229.601, are not applicable and will not be provided.
    F. Per share information. The statement of financial information 
required by Items 301 and 302 of Rule S-K, 17 CFR 229.301 and 302, is 
inapplicable because the shares of the Banks are subscription capital 
that trades at par, and the shares expand or contract with changes in 
member assets or advance levels.
    G. Beneficial ownership. Item 403 of Rule S-K, 17 CFR 229.403, 
requires the disclosure of security ownership of certain beneficial 
owners and management. The combined financial report will provide a 
listing of the ten largest holders of capital stock in the Bank System 
and a listing of the five largest holders of capital stock by Bank. This 
listing will also indicate which members had an officer that served as a 
director of a Bank.



PART 987--BOOK-ENTRY PROCEDURE FOR CONSOLIDATED OBLIGATIONS--Table of Contents




Sec.
987.1  Definitions.
987.2  Law governing rights and obligations of Banks, Finance Board, 
          Office of Finance, United States and Federal Reserve Banks;
 
          rights of any Person against Banks, Finance Board, Office of 
          Finance, United States and Federal Reserve Banks.
987.3  Law governing other interests.
987.4  Creation of Participant's Security Entitlement; security 
          interests.
987.5  Obligations of Banks and the Office of Finance; no Adverse 
          Claims.
987.6  Authority of Federal Reserve Banks.
987.7  Liability of Banks, Finance Board, Office of Finance and Federal 
          Reserve Banks.

[[Page 800]]

987.8  Additional requirements; notice of attachment for Book-entry 
          consolidated obligations.
987.9  Reference to certain Department of Treasury commentary and 
          determinations.
987.10  Obligations of United States with respect to consolidated 
          obligations.

    Authority: 12 U.S.C. 1422a, 1422b, 1431, 1435.

    Source: 63 FR 8059, Feb. 18, 1998, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 987.1  Definitions.

    For purposes of this part, unless the context otherwise requires or 
indicates:
    Adverse Claim means a claim that a claimant has a property interest 
in a Book-entry consolidated obligation and that it is a violation of 
the rights of the claimant for another Person to hold, transfer, or deal 
with the Security.
    Book-entry consolidated obligation means a consolidated obligation 
maintained in the book-entry system of the Federal Reserve Banks.
    Entitlement Holder means a Person or a Bank to whose account an 
interest in a Book-entry consolidated obligation is credited on the 
records of a Securities Intermediary.
    Federal Reserve Bank means a Federal Reserve Bank or branch, acting 
as fiscal agent for the Office of Finance, unless otherwise indicated.
    Federal Reserve Bank Operating Circular means the publication issued 
by each Federal Reserve Bank that sets forth the terms and conditions 
under which the Federal Reserve Bank maintains Book-entry Securities 
accounts and transfers Book-entry Securities.
    Funds account means a reserve and/or clearing account at a Federal 
Reserve Bank to which debits or credits are posted for transfers against 
payment, Book-entry Securities transaction fees, or principal and 
interest payments.
    Office of Finance means the Office of Finance established under part 
985 of this chapter, acting as agent of the Finance Board in all matters 
relating to the issuance of Book-entry consolidated obligations, or as 
agent of the Banks in the performance of all other necessary and proper 
functions relating to Book-entry consolidated obligations, including the 
payment of principal and interest due thereon.
    Participant means a Person or a Bank that maintains a Participant's 
Securities Account with a Federal Reserve Bank.
    Participant's Securities Account means an account in the name of a 
Participant at a Federal Reserve Bank to which Book-entry consolidated 
obligations held for a Participant are or may be credited.
    Person means and includes an individual, corporation, company, 
governmental entity, association, firm, partnership, trust, estate, 
representative, and any other similar organization, but does not mean or 
include a Bank, the Finance Board, the Office of Finance, the United 
States, or a Federal Reserve Bank.
    Revised Article 8 means Uniform Commercial Code, Revised Article 8, 
Investment Securities (with Conforming and Miscellaneous Amendments to 
Articles 1, 3, 4, 5, 9, and 10) 1994 Official Text. Copies of this 
publication are available from the Executive Office of the American Law 
Institute, 4025 Chestnut Street, Philadelphia, PA 19104, and the 
National Conference of Commissioners on Uniform State Laws, 676 North 
St. Clair Street, Suite 1700, Chicago, IL 60611.
    Securities Intermediary means:
    (1) A Person that is registered as a ``clearing agency'' under the 
Federal securities laws; a Federal Reserve Bank; any other person that 
provides clearance or settlement services with respect to a Book-entry 
consolidated obligation that would require it to register as a clearing 
agency under the Federal securities laws but for an exclusion or 
exemption from the registration requirement, it its activities as a 
clearing corporation, including promulgation of rules, are subject to 
regulation by a Federal or State governmental authority; or
    (2) A Person (other than an individual, unless such individual is 
registered as a broker or dealer under the Federal securities laws) 
including a bank or broker, that in the ordinary course of its business 
maintains securities accounts for others and is acting in that capacity.

[[Page 801]]

    Security Entitlement means the rights and property interest of an 
Entitlement Holder with respect to a Book-entry consolidated obligation.
    State means any State of the United States, the District of 
Columbia, Puerto Rico, the Virgin Islands, or any other territory or 
possession of the United States.
    Transfer Message means an instruction of a Participant to a Federal 
Reserve Bank to effect a transfer of a Book-entry consolidated 
obligation, as set forth in Federal Reserve Bank Operating Circulars.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.2  Law governing rights and obligations of Banks, Finance Board,

 Office of Finance, United States and Federal Reserve Banks; rights of 

any Person 
          against Banks, Finance Board, Office of Finance, United States 
          and Federal Reserve Banks.

    (a) Except as provided in paragraph (b) of this section, the rights 
and obligations of the Banks, the Finance Board, the Office of Finance, 
the United States and the Federal Reserve Banks with respect to: A Book-
entry consolidated obligation or Security Entitlement and the operation 
of the Book-entry system, as it applies to consolidated obligations; and 
the rights of any Person, including a Participant, against the Banks, 
the Finance Board, the Office of Finance, the United States and the 
Federal Reserve Banks with respect to: A Book-entry consolidated 
obligation or Security Entitlement and the operation of the Book-entry 
system, as it applies to consolidated obligations; are governed solely 
by regulations of the Finance Board, including the regulations of this 
part 987, the applicable offering notice, applicable procedures 
established by the Office of Finance, and Federal Reserve Bank Operating 
Circulars.
    (b) A security interest in a Security Entitlement that is in favor 
of a Federal Reserve Bank from a Participant and that is not recorded on 
the books of a Federal Reserve Bank pursuant to Sec. 987.4(c)(1), is 
governed by the law (not including the conflict-of-law rules) of the 
jurisdiction where the head office of the Federal Reserve Bank 
maintaining the Participant's Securities Account is located. A security 
interest in a Security Entitlement that is in favor of a Federal Reserve 
Bank from a Person that is not a Participant, and that is not recorded 
on the books of a Federal Reserve Bank pursuant to Sec. 987.4(c)(1), is 
governed by the law determined in the manner specified in Sec. 987.3.
    (c) If the jurisdiction specified in the first sentence of paragraph 
(b) of this section is a State that has not adopted Revised Article 8, 
then the law specified in the first sentence of paragraph (b) of this 
section shall be the law of that State as though Revised Article 8 had 
been adopted by that State.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.3  Law governing other interests.

    (a) To the extent not inconsistent with this part 987, the law (not 
including the conflict-of-law rules) of a Securities Intermediary's 
jurisdiction governs:
    (1) The acquisition of a Security Entitlement from the Securities 
Intermediary;
    (2) The rights and duties of the Securities Intermediary and 
Entitlement Holder arising out of a Security Entitlement;
    (3) Whether the Securities Intermediary owes any duties to an 
adverse claimant to a Security Entitlement;
    (4) Whether an Adverse Claim can be asserted against a Person who 
acquires a Security Entitlement from the Securities Intermediary or a 
Person who purchases a Security Entitlement or interest therein from an 
Entitlement Holder; and
    (5) Except as otherwise provided in paragraph (c) of this section, 
the perfection, effect of perfection or non-perfection, and priority of 
a security interest in a Security Entitlement.
    (b) The following rules determine a ``Securities Intermediary's 
jurisdiction'' for purposes of this section:
    (1) If an agreement between the Securities Intermediary and its 
Entitlement Holder specifies that it is governed by the law of a 
particular jurisdiction, that jurisdiction is the Securities 
Intermediary's jurisdiction.

[[Page 802]]

    (2) If an agreement between the Securities Intermediary and its 
Entitlement Holder does not specify the governing law as provided in 
paragraph (b)(1) of this section, but expressly specifies that the 
securities account is maintained at an office in a particular 
jurisdiction, that jurisdiction is the Securities Intermediary's 
jurisdiction.
    (3) If an agreement between the Securities Intermediary and its 
Entitlement Holder does not specify a jurisdiction as provided in 
paragraph (b)(1) or (b)(2) of this section, the Securities 
Intermediary's jurisdiction is the jurisdiction in which is located the 
office identified in an account statement as the office serving the 
Entitlement Holder's account.
    (4) If an agreement between the Securities Intermediary and its 
Entitlement Holder does not specify a jurisdiction as provided in 
paragraph (b)(1) or (b)(2) of this section and an account statement does 
not identify an office serving the Entitlement Holder's account as 
provided in paragraph (b)(3) of this section, the Securities 
Intermediary's jurisdiction is the jurisdiction in which is located the 
chief executive office of the Securities Intermediary.
    (c) Notwithstanding the general rule in paragraph (a)(5) of this 
section, the law (but not the conflict-of-law rules) of the jurisdiction 
in which the Person creating a security interest is located governs 
whether and how the security interest may be perfected automatically or 
by filing a financing statement.
    (d) If the jurisdiction specified in paragraph (b) of this section 
is a State that has not adopted Revised Article 8, then the law for the 
matters specified in paragraph (a) of this section shall be the law of 
that State as though Revised Article 8 had been adopted by that State. 
For purposes of the application of the matters specified in paragraph 
(a) of this section, the Federal Reserve Bank maintaining the Securities 
Account is a clearing corporation, and the Participant's interest in a 
Bank Book-entry Security is a Security Entitlement.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.4  Creation of Participant's Security Entitlement; security interests.

    (a) A Participant's Security Entitlement is created when a Federal 
Reserve Bank indicates by book entry that a Book-entry consolidated 
obligation has been credited to a Participant's Securities Account.
    (b) A security interest in a Security Entitlement of a Participant 
in favor of the United States to secure deposits of public money, 
including, without limitation, deposits to the Treasury tax and loan 
accounts, or other security interest in favor of the United States that 
is required by Federal statute, regulation, or agreement, and that is 
marked on the books of a Federal Reserve Bank is thereby effected and 
perfected, and has priority over any other interest in the Securities. 
Where a security interest in favor of the United States in a Security 
Entitlement of a Participant is marked on the books of a Federal Reserve 
Bank, such Federal Reserve Bank may rely, and is protected in relying, 
exclusively on the order of an authorized representative of the United 
States directing the transfer of the Security. For purposes of this 
paragraph (b), an ``authorized representative of the United States'' is 
the official designated in the applicable regulations or agreement to 
which a Federal Reserve Bank is a party, governing the security 
interest.
    (c)(1) The Banks, the Finance Board, the Office of Finance, the 
United States and the Federal Reserve Banks have no obligation to agree 
to act on behalf of any Person or to recognize the interest of any 
transferee of a security interest or other limited interest in a 
Security Entitlement in favor of any Person except to the extent of any 
specific requirement of Federal law or regulation or to the extent set 
forth in any specific agreement with the Federal Reserve Bank on whose 
books the interest of the Participant is recorded. To the extent 
required by such law or regulation or set forth in an agreement with a 
Federal Reserve Bank, or the Federal Reserve Bank Operating Circular, a 
security interest in a Security Entitlement that is in favor of a 
Federal Reserve Bank or a Person may be created and perfected by a 
Federal Reserve Bank marking its books to record

[[Page 803]]

the security interest. Except as provided in paragraph (b) of this 
section, a security interest in a Security Entitlement marked on the 
books of a Federal Reserve Bank shall have priority over any other 
interest in the Securities.
    (2) In addition to the method provided in paragraph (c)(1) of this 
section, a security interest in a Security Entitlement, including a 
security interest in favor of a Federal Reserve Bank, may be perfected 
by any method by which a security interest may be perfected under 
applicable law as described in Sec. 987.2(b) or Sec. 987.3. The 
perfection, effect of perfection or non-perfection, and priority of a 
security interest are governed by that applicable law. A security 
interest in favor of a Federal Reserve Bank shall be treated as a 
security interest in favor of a clearing corporation in all respects 
under that law, including with respect to the effect of perfection and 
priority of the security interest. A Federal Reserve Bank Operating 
Circular shall be treated as a rule adopted by a clearing corporation 
for such purposes.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.5  Obligations of the Banks and the Office of Finance; no Adverse Claims.

    (a) Except in the case of a security interest in favor of the United 
States or a Federal Reserve Bank or otherwise as provided in 
Sec. 987.4(c)(1), for the purposes of this part 987, the Banks, the 
Office of Finance and the Federal Reserve Banks shall treat the 
Participant to whose Securities Account an interest in a Book-entry 
consolidated obligations has been credited as the person exclusively 
entitled to issue a Transfer Message, to receive interest and other 
payments with respect thereof and otherwise to exercise all the rights 
and powers with respect to the Security, notwithstanding any information 
or notice to the contrary. Neither the Banks, the Finance Board, the 
Office of Finance, the United States, nor the Federal Reserve Banks are 
liable to a Person asserting or having an Adverse Claim to a Security 
Entitlement or to a Book-entry consolidated obligations in a 
Participant's Securities Account, including any such claim arising as a 
result of the transfer or disposition of a Book-entry consolidated 
obligation by a Federal Reserve Bank pursuant to a Transfer Message that 
the Federal Reserve Bank reasonably believes to be genuine.
    (b) The obligation of the Banks and the Office of Finance to make 
payments of interest and principal with respect to Book-entry 
consolidated obligations is discharged at the time payment in the 
appropriate amount is made as follows:
    (1) Interest on Book-entry consolidated obligations is either 
credited by a Federal Reserve Bank to a Funds Account maintained at the 
Federal Reserve Bank or otherwise paid as directed by the Participant.
    (2) Book-entry consolidated obligations are paid, either at maturity 
or upon redemption, in accordance with their terms by a Federal Reserve 
Bank withdrawing the securities from the Participant's Securities 
Account in which they are maintained and by either crediting the amount 
of the proceeds, including both principal and interest, where 
applicable, to a Funds Account at the Federal Reserve Bank or otherwise 
paying such principal and interest as directed by the Participant. No 
action by the Participant is required in connection with the payment of 
a Book-entry consolidated obligation, unless otherwise expressly 
required.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.6  Authority of Federal Reserve Banks.

    (a) Each Federal Reserve Bank is hereby authorized as fiscal agent 
of the Office of Finance: To perform functions with respect to the 
issuance of Book-entry consolidated obligations, in accordance with the 
terms of the applicable offering notice and with procedures established 
by the Office of Finance; to service and maintain Book-entry 
consolidated obligations in accounts established for such purposes; to 
make payments of principal, interest and redemption premium (if any), as 
directed by the Office of Finance; to effect

[[Page 804]]

transfer of Book-entry consolidated obligations between Participants' 
Securities Accounts as directed by the Participants; and to perform such 
other duties as fiscal agent as may be requested by the Office of 
Finance.
    (b) Each Federal Reserve Bank may issue Operating Circulars not 
inconsistent with this part 987, governing the details of its handling 
of Book-entry consolidated obligations, Security Entitlements, and the 
operation of the Book-entry system under this part 987.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.7  Liability of Banks, Finance Board, Office of Finance and Federal Reserve Banks.

    The Banks, the Finance Board, the Office of Finance and the Federal 
Reserve Banks may rely on the information provided in a tender, 
transaction request form, other transaction documentation, or Transfer 
Message, and are not required to verify the information. Neither the 
Banks, the Finance Board, the Office of Finance, the United States, nor 
the Federal Reserve Banks shall be liable for any action taken in 
accordance with the information set out in a tender, transaction request 
form, other transaction documentation, or Transfer Message, or evidence 
submitted in support thereof.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.8  Additional requirements; notice of attachment for Book-entry consolidated obligations.

    (a) Additional requirements. In any case or any class of cases 
arising under the regulations in this part 987, the Office of Finance 
may require such additional evidence and a bond of indemnity, with or 
without surety, as may in its judgment, or in the judgment of the Banks 
or the Finance Board, be necessary for the protection of the interests 
of the Banks, the Finance Board, the Office of Finance or the United 
States.
    (b) Notice of attachment. The interest of a debtor in a Security 
Entitlement may be reached by a creditor only by legal process upon the 
Securities Intermediary with whom the debtor's securities account is 
maintained, except where a Security Entitlement is maintained in the 
name of a secured party, in which case the debtor's interest may be 
reached by legal process upon the secured party. The regulations in this 
part 987 do not purport to establish whether a Federal Reserve Bank is 
required to honor an order or other notice of attachment in any 
particular case or class of cases.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.9  Reference to certain Department of Treasury commentary and determinations.

    (a) The Department of Treasury TRADES Commentary (31 CFR part 357, 
appendix B) addressing the Department of Treasury regulations governing 
book-entry procedure for Treasury Securities is hereby referenced, so 
far as applicable and as necessarily modified to relate to Book-entry 
consolidated obligations, as an interpretive aid to this part 987.
    (b) Determinations of the Department of Treasury regarding whether a 
State shall be considered to have adopted Revised Article 8 for purposes 
of 31 CFR part 357, as published in the Federal Register or otherwise, 
shall also apply to this part 987.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 987.10  Obligations of United States with respect to consolidated obligations.

    Consolidated obligations are not obligations of the United States 
and are not guaranteed by the United States.

[63 FR 8059, Feb. 18, 1998, as amended at 65 FR 8268, Feb. 18, 2000]



PART 989--FINANCIAL STATEMENTS OF THE BANKS--Table of Contents




Sec.
989.1  Definitions.
989.2  Audit requirements.
989.3  Requirement to provide financial and other information to the 
          Finance Board and the Office of Finance.
989.4  Requirement for voluntary bank disclosure.

    Authority: 12 U.S.C. 1422a, 1422b, 1426, 1431, and 1440.

[[Page 805]]


    Source: 63 FR 39704, July 24, 1998, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 989.1  Definitions.

    For purposes of this part:
    Audit means an examination of the financial statements by an 
independent accountant in accordance with Generally Accepted Accounting 
Principles for the purpose of expressing an opinion thereon.
    Audit report means a document in which an independent accountant 
indicates the scope of the audit made and sets forth an opinion 
regarding the financial statement taken as a whole, or an assertion to 
the effect that an overall opinion cannot be expressed. When an overall 
opinion cannot be expressed, the reasons therefor shall be stated.

[65 FR 36303, June 7, 2000]



Sec. 989.2  Audit requirements.

    (a) Each Bank, the OF and the Financing Corporation shall obtain 
annually an independent, external audit of and an audit report on its 
individual financial statement.
    (b) The OF board of directors shall obtain an audit and an audit 
report on the combined annual financial statements for the Bank System.
    (c) All audits must be conducted in accordance with generally 
accepted auditing standards and in accordance with the most current 
government auditing standards issued by the Office of the Comptroller 
General of the United States.
    (d) An independent, external auditor must meet at least twice each 
year with the audit committee of each Bank, the OF board of directors, 
and the Financing Corporation Directorate.
    (e) Finance Board examiners shall have unrestricted access to all 
auditors' work papers and to the auditors to address substantive 
accounting issues that may arise during the course of any audit.

[65 FR 36303, June 7, 2000]



Sec. 989.3  Requirement to provide financial and other information to the Finance Board and the Office of Finance.

    In order to facilitate the preparation by the Office of Finance of 
combined Bank System annual and quarterly reports, each Bank shall 
provide to the Office of Finance in such form and within such timeframes 
as the Finance Board or the Office of Finance shall specify, all 
financial and other information and assistance the Office of Finance 
shall request for that purpose. Nothing in this section shall contravene 
or be deemed to circumscribe in any manner the authority of the Finance 
Board to obtain any information from any Bank related to the preparation 
or review of any financial report.

[65 FR 36303, June 7, 2000]



Sec. 989.4  Requirement for voluntary bank disclosure.

    Any financial statements contained in an annual or quarterly 
financial report issued by an individual Bank must be consistent in both 
form and content with the financial statements presented in the combined 
Bank System annual or quarterly financial reports prepared and issued by 
the Office of Finance .

[63 FR 39704, July 24, 1998. Redesignated and amended at 65 FR 36303, 
36304, June 7, 2000.]

[[Page 806]]





                 SUBCHAPTER L--NON-BANK SYSTEM ENTITIES



PART 995--FINANCING CORPORATION OPERATIONS--Table of Contents




Sec.
995.1  Definitions.
995.2  General authority.
995.3  Authority to establish investment policies and procedures.
995.4  Book-entry procedure for Financing Corporation obligations.
995.5  Bank and Office of Finance employees.
995.6  Budget and expenses.
995.7  Administrative expenses.
995.8  Non-administrative expenses; assessments.
995.9  Reports to the Finance Board.
995.10  Review of books and records.

    Authority: 12 U.S.C. 1441(b)(8), (c), and (j).

    Source: 62 FR 50248, Sept. 25, 1997, unless otherwise noted. 
Redesignated at 65 FR 8256, Feb. 18, 2000.



Sec. 995.1  Definitions.

    For purposes of this part:
    Administrative expenses:
    (1) Include general office and operating expenses such as telephone 
and photocopy charges, printing, legal, and professional fees, postage, 
courier services, and office supplies; and
    (2) Do not include any form of employee compensation, custodian 
fees, issuance costs, or any interest on (and any redemption premium 
with respect to) any Financing Corporation obligations.
    BIF-assessable deposit means a deposit that is subject to assessment 
for purposes of the Bank Insurance Fund under the Federal Deposit 
Insurance Act (12 U.S.C. 1811 et seq.), including a deposit that is 
treated as a deposit insured by the Bank Insurance Fund under section 
5(d)(3) of the Federal Deposit Insurance Act.
    Custodian fees means any fee incurred by the Financing Corporation 
in connection with the transfer of any security to, or maintenance of 
any security in, the segregated account established under section 
21(g)(2) of the Act, and any other expense incurred by the Financing 
Corporation in connection with the establishment or maintenance of such 
account.
    Directorate means the board established under section 21(b) of the 
Act to manage the Financing Corporation.
    Exit fees means the amounts paid under sections 5(d)(2)(E) and (F) 
of the Federal Deposit Insurance Act, and regulations promulgated 
thereunder (12 CFR part 312).
    FDIC means the agency established as the Federal Deposit Insurance 
Corporation.
    Insured depository institution has the same meaning as in section 3 
of the Federal Deposit Insurance Act.
    Issuance costs means issuance fees and commissions incurred by the 
Financing Corporation in connection with the issuance or servicing of 
Financing Corporation obligations, including legal and accounting 
expenses, trustee, fiscal, and paying agent charges, securities 
processing charges, joint collection agent charges, advertising 
expenses, and costs incurred in connection with preparing and printing 
offering materials to the extent the Financing Corporation incurs such 
costs in connection with issuing any obligations.
    Non-administrative expenses means custodian fees, issuance costs, 
and interest on Financing Corporation obligations.
    Obligations means debentures, bonds, and similar debt securities 
issued by the Financing Corporation under sections 21(c)(3) and (e) of 
the Act.
    Office of Finance means the joint office of the Banks established 
under part 985 of this chapter.
    Receivership proceeds means the liquidating dividends and payments 
made on claims received by the Federal Savings and Loan Insurance 
Corporation Resolution Fund established under section 11A of the Federal 
Deposit Insurance Act from receiverships, that are not required by the 
Resolution Funding Corporation to provide funds for the Funding 
Corporation Principal Fund established under section 21B of the Act.
    SAIF-assessable deposit means a deposit that is subject to 
assessment for

[[Page 807]]

purposes of the Savings Association Insurance Fund under the Federal 
Deposit Insurance Act, including a deposit that is treated as a deposit 
insured by the Savings Association Insurance Fund under section 5(d)(3) 
of the Federal Deposit Insurance Act.

[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 995.2  General authority.

    Subject to the limitations and interpretations in this part and such 
orders and directions as the Finance Board may prescribe, the Financing 
Corporation shall have authority to exercise all powers and authorities 
granted to it by the Act and by its charter and bylaws regardless of 
whether the powers and authorities are specifically implemented in 
regulation.



Sec. 995.3  Authority to establish investment policies and procedures.

    The Directorate shall have authority to establish investment 
policies and procedures with respect to Financing Corporation funds 
provided that the investment policies and procedures are consistent with 
the requirements of section 21(g) of the Act. The Directorate shall 
promptly notify the Finance Board in writing of any changes to the 
investment policies and procedures.



Sec. 995.4  Book-entry procedure for Financing Corporation obligations.

    (a) Authority. Any Federal Reserve Bank shall have authority to 
apply book-entry procedure to Financing Corporation obligations.
    (b) Procedure. The book-entry procedure for Financing Corporation 
obligations shall be governed by the book-entry procedure established 
for Bank securities, codified at part 987 of this chapter. Wherever the 
terms ``Bank(s),'' ``consolidated obligation(s)'' or ``Book-entry 
consolidated obligation(s)'' appear in part 912, the terms shall be 
construed also to mean ``Financing Corporation,'' ``Financing 
Corporation obligation(s),'' or ``Book-entry Financing Corporation 
obligation(s),'' respectively, if appropriate to accomplish the purposes 
of this section.

[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 995.5  Bank and Office of Finance employees.

    Without further approval of the Finance Board, the Financing 
Corporation shall have authority to utilize the officers, employees, or 
agents of any Bank or the Office of Finance in such manner as may be 
necessary to carry out its functions.



Sec. 995.6  Budget and expenses.

    (a) Directorate approval. The Financing Corporation shall submit 
annually to the Directorate for approval, a budget of proposed 
expenditures for the next calendar year that includes administrative and 
non-administrative expenses.
    (b) Finance Board approval. The Directorate shall submit annually to 
the Finance Board for approval, the budget of the Financing 
Corporation's proposed expenditures it approved pursuant to paragraph 
(a) of this section.
    (c) Spending limitation. The Financing Corporation shall not exceed 
the amount provided for in the annual budget approved by the Finance 
Board pursuant to paragraph (b) of this section, or as it may be amended 
by the Directorate within limits set by the Finance Board.
    (d) Amended budgets. Whenever the Financing Corporation projects or 
anticipates that it will incur expenditures, other than interest on 
Financing Corporation obligations, that exceed the amount provided for 
in the annual budget approved by the Finance Board or the Directorate 
pursuant to paragraph (b) or (c) of this section, the Financing 
Corporation shall submit an amended annual budget to the Directorate for 
approval, and the Directorate shall submit such amended budget to the 
Finance Board for approval.



Sec. 995.7  Administrative expenses.

    (a) Payment by Banks. The Banks shall pay all administrative 
expenses of the Financing Corporation approved pursuant to Sec. 995.6.

[[Page 808]]

    (b) Amount. The Financing Corporation shall determine the amount of 
administrative expenses each Bank shall pay in the manner provided by 
section 21(b)(7)(B) of the Act. The Financing Corporation shall bill 
each Bank for such amount periodically.
    (c) Adjustments. The Financing Corporation shall adjust the amount 
of administrative expenses the Banks are required to pay in any calendar 
year pursuant to paragraphs (a) and (b) of this section, by deducting 
any funds that remain from the amount paid by the Banks for 
administrative expenses in the prior calendar year.

[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, Feb. 18, 2000]



Sec. 995.8  Non-administrative expenses; assessments.

    (a) Interest expenses. The Financing Corporation shall determine 
anticipated interest expenses on its obligations at least semiannually.
    (b) Assessments on insured depository institutions--(1) Authority. 
To provide sufficient funds to pay the non-administrative expenses of 
the Financing Corporation approved under Sec. 995.6, the Financing 
Corporation shall, with the approval of the board of directors of the 
FDIC, assess against each insured depository institution an assessment 
in the same manner as assessments are made by the FDIC under section 7 
of the Federal Deposit Insurance Act.
    (2) Assessment rate--(i) Determination. The Financing Corporation at 
least semiannually shall establish an assessment rate formula, which may 
include rounding methodology, to determine the rate or rates of the 
assessment it will assess against insured depository institutions 
pursuant to section 21(f)(2) of the Act and paragraph (b)(1) of this 
section.
    (ii) Limitation. Until the earlier of December 31, 1999, or the date 
as of which the last savings association ceases to exist, the rate of 
the assessment imposed on an insured depository institution with respect 
to any BIF-assessable deposit shall be a rate equal to \1/5\ of the rate 
of the assessment imposed on an insured depository institution with 
respect to any SAIF-assessable deposit.
    (iii) Notice. The Financing Corporation shall notify the FDIC and 
the collection agent, if any, of the formula established under paragraph 
(b)(2)(i) of this section.
    (3) Collecting assessments--(i) Collection agent. The Financing 
Corporation shall have authority to collect assessments made under 
section 21(f)(2) of the Act and paragraph (b)(1) of this section through 
a collection agent of its choosing.
    (ii) Accounts. Each Bank shall permit any insured depository 
institution whose principal place of business is in its district to 
establish and maintain at least one demand deposit account to facilitate 
collection of the assessments made under section 21(f)(2) of the Act and 
paragraph (b)(1) of this section.
    (c) Receivership proceeds--(1) Authority. To the extent the amounts 
collected under paragraph (b) of this section are insufficient to pay 
the non-administrative expenses of the Financing Corporation approved 
under Sec. 995.6, the Financing Corporation shall have authority to 
require the FDIC to transfer receivership proceeds to the Financing 
Corporation in accordance with section 21(f)(3) of the Act.
    (2) Procedure. The Directorate shall request in writing that the 
FDIC transfer the receivership proceeds to the Financing Corporation. 
Such request shall specify the estimated amount of funds required to pay 
the non-administrative expenses of the Financing Corporation approved 
under Sec. 995.6.
    (d) Exit fees--(1) Authority. To the extent the amounts provided 
under paragraphs (b) and (c) of this section are insufficient to pay the 
interest due on Financing Corporation obligations, the Financing 
Corporation shall have authority to request that the Secretary of the 
Treasury order the transfer of exit fees to the Financing Corporation in 
accordance with section 5(d)(2)(E) of the Federal Deposit Insurance Act 
or as otherwise may be provided for by statute.
    (2) Procedure. The Directorate shall request in writing that the 
Secretary of the Treasury order that exit fees be transferred to the 
Financing Corporation. Such request shall specify the estimated amount 
of funds required to

[[Page 809]]

pay the interest due on Financing Corporation obligations.

[62 FR 50248, Sept. 25, 1997, as amended at 65 FR 8268, 8269, Feb. 18, 
2000]



Sec. 995.9  Reports to the Finance Board.

    The Financing Corporation shall file such reports as the Finance 
Board shall direct.



Sec. 995.10  Review of books and records.

    The Finance Board shall examine the Financing Corporation at least 
annually to determine whether the Financing Corporation is performing 
its functions in accordance with the requirements of section 21 of the 
Act and this part.



PART 996--AUTHORITY FOR BANK ASSISTANCE OF THE RESOLUTION FUNDING CORPORATION--Table of Contents




Sec.
996.1  Bank employees.
996.2  Demand deposit accounts.

    Authority: 12 U.S.C. 1422a, 1422b.



Sec. 996.1  Bank employees.

    Upon the request of the Directorate of the Resolution Funding 
Corporation, established pursuant to section 21B(b) of the Act, 
officers, employees, or agents of the Banks are authorized to act for 
and on behalf of the Resolution Funding Corporation in such manner as 
may be necessary to carry out the functions of the Resolution Funding 
Corporation as provided in section 21B(c)(6)(B) of the Act.

[54 FR 39729, Sept. 28, 1989, as amended at 65 FR 8269, Feb. 18, 2000]



Sec. 996.2  Demand deposit accounts.

    Each Bank shall allow any Savings Association Insurance Fund member 
(``SAIF member'') whose principal place of business is in its district 
to establish and maintain at least one demand deposit account for the 
purpose of facilitating the Resolution Funding Corporation's assessments 
pursuant to section 21B(e)(7) of the Act.

[54 FR 39729, Sept. 28, 1989, as amended at 65 FR 8269, Feb. 18, 2000]



PART 997--RESOLUTION FUNDING CORPORATION OBLIGATIONS OF THE BANKS--Table of Contents




Sec.
997.1  Definitions.
997.2  Reduction of the payment term.
997.3  Extension of the payment term.
997.4  Calculation of the quarterly present-value determination.
997.5  Termination of the obligation.

    Authority: 12 U.S.C. 1422b(a) and 1441b(f).

    Source: 65 FR 17438, Apr. 3, 2000, unless otherwise noted.



Sec. 997.1  Definitions.

    As used in this part:
    Actual quarterly payment means the quarterly amount paid by the 
Banks to fulfill the Banks' obligation to pay toward interest owed on 
bonds issued by the REFCORP. The amount will equal the aggregate of 20 
percent of the quarterly net earnings of each Bank, or such other amount 
assessed in accordance with the Act and the regulations adopted 
thereunder.
    Benchmark quarterly payment means $75 million, or such amount that 
may result from adjustments required by calculations made in accordance 
with Secs. 997.2 and 997.3.
    Current benchmark quarterly payment means the benchmark quarterly 
payment that corresponds to the date of the actual quarterly payment.
    Deficit quarterly payment means the amount by which the actual 
quarterly payment falls short of the current benchmark quarterly 
payment.
    Estimated interest rate means the interest rate provided to the 
Finance Board by the Department of the Treasury on a zero-coupon 
Treasury bond, the maturity of which is the same as the date of the 
benchmark quarterly payment that is being defeased, or if no bond 
matures on that date, then is the date closest to the date of the 
payment being defeased.
    Excess quarterly payment means the amount by which the actual 
quarterly payment exceeds the current benchmark quarterly payment.
    Quarterly present-value determination means the quarterly 
calculation that will determine the extent to which an excess quarterly 
payment or deficit quarterly payment alters the term of

[[Page 810]]

the Banks' obligation to the REFCORP. This determination will fulfill 
the requirements of 12 U.S.C 1441b(f)(2)(C)(ii), as amended by Pub. L. 
106-102, sec. 607, 113 Stat.1456-57.
    REFCORP means the Resolution Funding Corporation established in 12 
U.S.C. 1441b.



Sec. 997.2  Reduction of the payment term.

    (a) Generally. The Finance Board shall shorten the term of the 
obligation of the Banks to make payments toward the interest owed on 
bonds issued by the REFCORP for each quarter in which there is an excess 
quarterly payment.
    (b) Excess quarterly payment. Where there is an excess quarterly 
payment, the quarterly present-value determination shall be as follows:
    (1) The future value of the excess quarterly payment shall be 
calculated using the estimated interest rate corresponding to the last 
non-defeased benchmark quarterly payment.
    (2) The future value calculated in paragraph (b)(1) of this section 
shall be subtracted from the amount of the last non-defeased quarterly 
benchmark payment.
    (3) If the difference resulting from the calculation in paragraph 
(b)(2) of this section is greater than zero, then the last non-defeased 
quarterly benchmark payment is reduced by the future value of the excess 
quarterly payment.
    (4) If the difference resulting from the calculation in paragraph 
(b)(2) of this section is less than zero, then the last non-defeased 
quarterly benchmark payment shall be defeased and the payment term shall 
be shortened.
    (5) The amount of the excess quarterly payment that has not already 
been applied to defeasing the payment under paragraph (b)(4) of this 
section shall be applied toward defeasing the last non-defeased 
quarterly benchmark payment using the applicable estimated interest 
rate.



Sec. 997.3  Extension of the payment term.

    (a) Generally. The Finance Board will extend the term of the 
obligation of the Banks to make payments toward interest owed on bonds 
issued by the REFCORP for each calendar quarter in which there is a 
deficit quarterly payment.
    (b) Deficit quarterly payment. Where there is a deficit quarterly 
payment, the quarterly present-value determination shall be as follows:
    (1) The future value of the deficit quarterly payment shall be 
calculated using the estimated interest rate corresponding to the last 
non-defeased benchmark quarterly payment, or to the first quarter 
thereafter if the last non-defeased benchmark quarterly payment already 
equals $75 million.
    (2) The future value calculated in paragraph (b)(1) of this section 
shall be added to the amount of the last non-defeased quarterly 
benchmark payment if that sum is $75 million or less.
    (3) If the sum calculated in paragraph (b)(2) of this section 
exceeds $75 million, the last non-defeased quarterly benchmark payment 
will become $75 million, and the quarterly benchmark payment term will 
be extended.
    (4) The extended payment will equal the future value of the amount 
of the deficit quarterly payment that has not already been applied to 
raising the quarterly benchmark payment to $75 million under paragraph 
(b)(3) of this section, using the estimated interest rate corresponding 
to the date of the extended benchmark quarterly payment.
    (c) Term beyond maturity. The benchmark quarterly payment term may 
be extended beyond April 15, 2030, if such extension is necessary to 
ensure that the value of the aggregate amounts paid by the Banks exactly 
equals the present value of an annuity of $300 million per year that 
commences on the date on which the first obligation of the REFCORP was 
issued and ends on April 15, 2030.



Sec. 997.4  Calculation of the quarterly present-value determination.

    (a) Applicable interest rates. The Finance Board shall obtain from 
the Department of the Treasury the applicable estimated interest rates 
and provide those rates to the REFCORP so that the REFCORP can perform 
the calculations required under Secs. 997.2 and 997.3.
    (b) Calculation by the Finance Board. If Sec. 997.3 requires that 
the term for the

[[Page 811]]

Banks' actual quarterly payments extend beyond April 15, 2030 or if, for 
any reason, the REFCORP is unable to perform the calculations or to 
provide the Finance Board with the results of the calculations, the 
Finance Board shall make all calculations required under this part.
    (c) Records. The Finance Board will maintain the official record of 
the results of all quarterly present-value determinations made under 
this part.



Sec. 997.5  Termination of the obligation.

    (a) Generally. The Banks' obligation to the REFCORP, or to the 
Department of the Treasury if the term of that obligation extends beyond 
April 15, 2030, will terminate when the aggregate actual quarterly 
payments made by the Banks exactly equal the present value of an annuity 
of $300 million per year that commences on the date on which the first 
obligation of the REFCORP was issued and ends on April 15, 2030.
    (b) Date of the final payment. The aggregate actual quarterly 
payments made by the Banks exactly equal the present value of the 
annuity described in paragraph (a) of this section when the value of any 
remaining benchmark quarterly payment(s), after the benchmark quarterly 
payments have been adjusted as required by Secs. 997.2 and 997.3, 
exactly equals the actual quarterly payment.

[65 FR 17438, Apr. 3, 2000, as amended at 65 FR 40492, June 30, 2000]

[[Page 813]]



     CHAPTER XI--FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL




  --------------------------------------------------------------------
Part                                                                Page
1101            Description of office, procedures, public 
                    information.............................         815
1102            Appraiser regulation........................         820

[[Page 815]]



PART 1101--DESCRIPTION OF OFFICE, PROCEDURES, PUBLIC INFORMATION--Table of Contents




Sec.
1101.1  Scope and purpose.
1101.2  Authority and functions.
1101.3  Organization and methods of operation.
1101.4  Disclosure of information, policies, and records.
1101.5  Testimony and production of documents in response to subpoena, 
          order, etc.

    Authority: 5 U.S.C. 552; 12 U.S.C. 3307.

    Source: 45 FR 46794, July 11, 1980, unless otherwise noted.



Sec. 1101.1  Scope and purpose.

    This part implements the Freedom of Information Act (FOIA), 5 U.S.C. 
552, with respect to the Federal Financial Institutions Examination 
Council (Council), and establishes related information disclosure 
procedures.



Sec. 1101.2  Authority and functions.

    (a) The Council was established by the Federal Financial 
Institutions Examination Council Act of 1978 (Act), 12 U.S.C. 3301-3308. 
It is composed of the Comptroller of the Currency; the Chairman of the 
Federal Deposit Insurance Corporation; a Governor of the Board of 
Governors of the Federal Reserve System; the Chairman of the Federal 
Home Loan Bank Board; and the Chairman of the National Credit Union 
Administration Board.
    (b) The statutory functions of the Council are set out at 12 U.S.C. 
3305. In summary, the mission of the Council is to promote consistency 
and progress in federal examination and supervision of financial 
institutions and their affiliates. The Council is empowered to prescribe 
uniform principles, standards, and reporting forms and systems; make 
recommendations in the interest of uniformity; and conduct examiner 
schools open to personnel of the agencies represented on the Council and 
employees of state financial institutions supervisory agencies.



Sec. 1101.3  Organization and methods of operation.

    (a) Statutory requirements relating to the Council's organization 
are stated in 12 U.S.C. 3303.
    (b) Council staff. Administrative support and substantive 
coordination for Council activities are provided by a small staff 
detailed on a full-time basis from the five member agencies. The 
Executive Secretary and Deputy Executive Secretary of the Council 
supervise this staff.
    (c) Agency Liaison Group, Task Forces and Legal Advisory Group. Most 
staff support in the substantive areas of the Council's duties is 
provided by interagency task forces and the Council's Legal Advisory 
Group (LAG). These task forces and the LAG are responsible for securing 
the services, as needed, of staff experts from the five agencies; 
supervising research and other investigative work for the Council; and 
preparing reports and recommendations for the Council. The Agency 
Liaison Group (ALG) is responsible for the overall coordination of the 
respective agencies' staff contributions to Council business. The ALG, 
the task forces, and the LAG are each composed of Council member agency 
staff serving the Council on a part-time basis.
    (d) State Liaison Committee. Under 12 U.S.C. 3306, the Council has 
established a State Liaison Committee, composed of five representatives 
of state financial institutions supervisory agencies.
    (e) Council address. Council offices are located at 1776 G Street, 
NW., Suite 701, Washington, DC 20006.

[45 FR 46794, July 11, 1980, as amended at 53 FR 7341, Mar. 8, 1988]



Sec. 1101.4  Disclosure of information, policies, and records.

    (a) Statements of policy published in the Federal Register or 
available for public inspection and copying; indices. Under 5 U.S.C. 
552(a)(1), the Council publishes general rules, policies and 
interpretations in the Federal Register. Under 5 U.S.C. 552(a)(2), 
policies and interpretations adopted by the Council, including 
instructions to Council staff affecting members of the public, and an 
index to the same, are available for

[[Page 816]]

public inspection and copying at the address set out in Sec. 1101.3(e) 
of this part during regular business hours. The preceding materials may 
be withheld from disclosure under the principles stated in paragraph 
(b)(1) of this section.
    (b) Other records of the Council available for public inspection; 
procedures--(1) General rule and exemptions. Under 5 U.S.C. 552(a)(3), 
all other records of the Council are available for public inspection and 
copying, except those exempted from disclosure as provided in this 
paragraph. Except as specifically authorized by the Council, the 
following records, and portions thereof, are not available to the 
public:
    (i) A record, or portion thereof, which is specifically authorized 
under criteria established by an Executive order to be kept secret in 
the interest of national defense or foreign policy and which is, in 
fact, properly classified pursuant to such Executive order.
    (ii) A record, or portion thereof, relating solely to the internal 
personnel rules and practices of an agency.
    (iii) A record, or portion thereof, specifically exempted from 
disclosure by statute (other than 5 U.S.C. 552b), provided that such 
statute (A) requires that the matters be withheld from the public in 
such a manner as to leave no discretion on the issue, or (B) establishes 
particular criteria for withholding or refers to particular types of 
matters to be withheld.
    (iv) A record, or portion thereof, containing trade secrets and 
commercial or financial information obtained from a person and 
privileged or confidential.
    (v) An intraagency or interagency memorandum or letter that would 
not be routinely available by law to a private party in litigation, 
including, but not limited to, memoranda, reports, and other documents 
prepared by the personnel of the Council or its constituent agencies.
    (vi) A personnel, medical, or similar record, including a financial 
record, or any portion thereof, the disclosure of which would constitute 
a clearly unwarranted invasion of personal privacy.
    (vii) Records or information compiled for law enforcement purposes, 
including records relating to a proceeding by a financial institution's 
regulatory agency for the issuance of a cease-and-desist order, or order 
of suspension or removal, or assessment of a civil money penalty and the 
granting, withholding, or revocation of any approval, permission, or 
authority, but only to the extent that the production of such law 
enforcement records or information (A) could reasonably be expected to 
interfere with enforcement proceedings; (B) would deprive a person of a 
right to a fair trial or an impartial adjudication; (C) could reasonably 
be expected to constitute an unwarranted invasion of personal privacy; 
(D) could reasonably be expected to disclose the identity of a 
confidential source, including a state, local, or foreign agency or 
authority or any private institution which furnished information on a 
confidential basis, and, in the case of a record or information compiled 
by a criminal law enforcement authority in the course of a criminal 
investigation, or by an agency conducting a lawful national security 
intelligence investigation, information furnished by a confidential 
source; (E) would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or (F) could 
reasonably be expected to endanger the life or physical safety of any 
individual.
    (viii) A record, or portion thereof, containing, relating to, or 
derived from an examination, operating, or condition report prepared by, 
or on behalf of, or for the use of any agency directly or indirectly 
responsible for the regulation or supervision of financial institutions, 
relating to the affairs of any financial institution or affiliate 
thereof, financial institution holding company or subsidiary, broker, 
finance company, or any other person engaged, or proposing to engage, in 
the business of operating, managing or controlling financial 
institutions.
    (ix) A record, or portion thereof, which contains or is related to 
geological and geophysical information and data, including maps, 
concerning wells.

[[Page 817]]

    (2) Waiver of exemption. Notwithstanding the applicability of an 
exemption, the Council or the Council's designee may elect, under the 
circumstances of a particular request, to disclose all or a portion of 
any requested record where permitted by law. Such disclosure has no 
precedential significance whatsoever.
    (3) Procedure for records request--(i) Initial request. Requests for 
records shall be submitted in writing to the Executive Secretary of the 
Council, at the address set out in Sec. 1101.3(e) of this part. Mailed 
requests should be marked ``Freedom of Information Request,'' ``FOIA 
Request,'' or the like on the envelope. Requests must reasonably 
describe the records sought. The Executive Secretary will aid members of 
the public in formulating their requests. All requests should give the 
complete telephone number of the individual seeking the records, if 
possible.
    (ii) Council response to initial requests. The Executive Secretary 
will respond by mail to all properly submitted initial requests within 
10 working days of receipt. The time for response may be extended up to 
10 additional working days, as provided in 5 U.S.C. 552(a)(6)(B), or for 
other periods by agreement between the requesting party and the 
Executive Secretary.
    (iii) Appeals of responses to initial requests. If a request is 
denied in whole or in part, the individual making the request may appeal 
in writing, within 35 days of the date of the denial, to the Chairman of 
the Council, at the address set out in Sec. 1101.3(e) of this part. 
Mailed requests should be marked ``Freedom of Information Appeal,'' 
``FOIA Appeal,'' or the like on the envelope. Appeals should refer to 
the date of the original request and the date of the Council's initial 
ruling. Appeals should include an explanation of the basis for the 
appeal.
    (iv) Council response to appeals. The Chairman of the Council, or 
another member designated by the Chairman, will respond by mail to all 
properly submitted appeals within 20 working days of receipt. The time 
for response may be extended up to 10 additional working days, as 
provided in 5 U.S.C. 552(a)(6)(B), or for other periods by agreement 
between the requesting party and the Chairman or the Chairman's 
designee.
    (4) Procedure for access to records if request is granted. When a 
request for access to records is granted, in whole or in part, a copy of 
the records to be disclosed will be promptly delivered to the requesting 
party or made available for inspection, whichever was requested. 
Inspection of records, or duplication and delivery of copies of records 
will be arranged so as not to interfere with their use by the Council 
and other users of the records.
    (5) Fees for document search, review, and duplication; waiver and 
reduction of fees--(i) Definitions--(A) Direct costs means those 
expenditures which the Council actually incurs in searching for, 
duplicating, and reviewing documents to respond to a FOIA request.
    (B) Search means all time spent looking for material that is 
responsive to a request, including page-by-page or line-by-line 
identification of material within documents. Searches may be done 
manually or by computer using existing programming.
    (C) Duplication means the process of making a copy of a document 
necessary to respond to a FOIA request.
    (D) Review means the process of examining documents located in 
response to a request that is for a commercial use (see 
Sec. 1101.4(b)(5)(i)(E)) to determine whether any portion of any 
document located is permitted to be withheld and processing such 
documents for disclosure.
    (E) Commercial use request means a request from or on behalf of one 
who seeks information for a use or purpose that furthers the commercial, 
trade, or profit interests of the requester or the person on whose 
behalf the request is made.
    (F) Educational institution means a preschool, an elementary or 
secondary school, an institution of undergraduate higher education, an 
institution of graduate higher education, an institution of professional 
education, and an institution of vocational education, which operates a 
program or programs of scholarly research.
    (G) Noncommercial scientific institution means an institution that 
is not operated on a ``commercial'' basis as that term is referenced in 
Sec. 1101.4(b)(i)(E),

[[Page 818]]

and which is operated solely for the purposes of conducting scientific 
research, the results of which are not intended to promote any 
particular product or industry.
    (H) Representative of the news media means any person actively 
gathering news for an entity that is organized and operated to publish 
or broadcast news to the public. The term ``news'' means information 
that is about current events or that would be of current interest to the 
public.
    (ii) Fees to be charged. The Council will charge fees that recoup 
the full allowable direct costs it incurs. The Council may contract with 
the private sector to locate, reproduce, and/or disseminate records. 
Provided, however, that the Council has ensured that the ultimate cost 
to the requester is no greater than it would be if the Council performed 
these tasks. Fees are subject to change as costs change. In no case will 
the Council contract out responsibilities which the FOIA provides that 
it alone may discharge, such as determining the applicability of an 
exemption, or determining whether to waive or reduce fees.
    (A) Manual searches and review. The Council will charge fees at the 
following rates for manual searches for and review of records:
    (1) If search/review is done by clerical staff, the hourly rate for 
GS-7, step 5, plus 16 percent of the rate to cover benefits;
    (2) If search/review is done by professional staff, the hourly rate 
for GS-13, step 5, plus 16 percent of the rate to cover benefits.
    (B) Computer searches. The Council will charge fees at the hourly 
rate for GS-13, step 5, plus 16 percent of the rate to cover benefits, 
plus the hourly cost of operating the computer for computer searches for 
records.
    (C) Duplication of records. (1) The per-page fee for paper copy 
reproduction of a document is $.25;
    (2) The fee for documents generated by computer is the hourly rate 
for the computer operator (at GS 7, step 5, plus 16 percent for benefits 
if clerical staff, and GS 13, step 5, plus 16 percent for benefits if 
professional staff) plus the cost of materials (computer paper, tapes, 
labels, etc.).
    (3) If any other method of duplication is used, the Council will 
charge the actual direct cost of duplicating the documents.
    (D) If search, duplication and/or review is provided by personnel of 
member agencies of the Council, fees will reflect their actual hourly 
rates, plus 16 percent for benefits.
    (E) Fees to exceed $25. If the Council estimates that duplication 
and/or search fees are likely to exceed $25, it will notify the 
requester of the estimated amount of fees, unless the requester has 
indicated in advance his/her willingness to pay fees as high as those 
anticipated. In the case of such notification by the Council, the 
requester will then have the opportunity to confer with Council 
personnel with the object of reformulating the request to meet his/her 
needs at a lower cost.
    (F) Other services. Complying with requests for special services is 
entirely at the discretion of the Council. The Council will recover the 
full costs of providing such services to the extent it elects to provide 
them.
    (G) Restriction on assessing fees. The Council will not charge fees 
to any requester, including commercial use requesters, if the cost of 
collecting a fee would be equal to or greater than the fee itself.
    (H) Waiving or reducing fees. The Council shall waive or reduce fees 
under this section whenever disclosure of information is in the public 
interest because it is likely to contribute significantly to public 
understanding of the operations or activities of the government and is 
not primarily in the commercial interest of the requester.
    (1) The Council will make a determination of whether the public 
interest requirement above is met based on the following factors:
    (i) The subject of the request: Whether the subject of the requested 
records concerns the operations or activities of the government;
    (ii) The informative value of the information to be disclosed: 
Whether the disclosure is likely to contribute to an understanding of 
government operations or activities;
    (iii) The contribution to an understanding of the subject by the 
general public likely to result from disclosure:

[[Page 819]]

Whether disclosure of the requested information will contribute to 
public understanding;
    (iv) The significance of the contribution to the public 
understanding: Whether the disclosure is likely to contribute 
significantly to public understanding of government operations or 
activities.
    (2) If the public interest requirement is met, the Council will make 
a determination on the commercial interest requirement based upon the 
following factors:
    (i) The existence and magnitude of a commercial interest: Whether 
the requester has a commercial interest that would be furthered by the 
requested disclosure; and if so
    (ii) The primary interest in disclosure: Whether the magnitude of 
the identified commercial interest of the requester is sufficiently 
large in comparison with the public interest in disclosure; that 
disclosure is primarily in the commercial interest of the requester.
    (3) If the required public interest exists and the requester's 
commercial interest is not primary in comparison to it, the Council will 
waive or reduce fees.
    (iii) Categories of requesters. (A) Commercial use requesters. The 
Council will assess fees for commercial use requesters which recover the 
full direct costs of searching for, reviewing for release, the 
duplicating the records sought. Commercial use requesters are not 
entitled to two hours of free search time nor 100 free pages of 
reproduction of documents.
    (B) Requesters who are representatives of the news media, 
educational and noncommercial scientific institution requesters. The 
Council shall provide documents to requesters in these categories for 
the cost of reproduction alone, excluding fees for the first 100 pages.
    (C) All other requesters. The Council shall charge requesters who do 
not fit into any of the categories above fees which recover the full 
reasonable direct cost of searching for and reproducing records that are 
responsive to the request, except that the first 100 pages of 
reproduction and the first two hours of search time shall be furnished 
without a fee.
    (D) All requesters must specifically describe records sought.
    (iv) Interest on unpaid fees. The Council may begin assessing 
interest charges on an unpaid bill starting on the 31st day following 
the day on which the bill was sent. Interest will be at the rate 
prescribed in section 3717 of title 31 U.S.C. and will accrue from the 
date of the billing.
    (v) Fees for unsuccessful search and review. The Council may assess 
fees for time spent searching and reviewing, even if it fails to locate 
the records or if records located are determined to be exempt from 
disclosure.
    (vi) Aggregating requests. A requester(s) may not file multiple 
requests each seeking portions of a document or documents, solely in 
order to avoid payment of fees. If this is done, the Council may 
aggregate any such requests and charge accordingly. In no case will the 
Council aggregate multiple requests on unrelated subjects from the same 
requester.
    (vii) Advance payment of fees. The Council will not require a 
requester to make an assurance of payment or an advance payment unless:
    (A) The Council estimates or determines that allowable charges that 
a requester may be required to pay are likely to exceed $250. The 
Council will notify the requester of the likely cost and obtain 
satisfactory assurance of full payment where the requester has a history 
of prompt payment of FOIA fees, or require an advance payment of an 
amount up to the full estimated charges in the case of requesters with 
no history of payment; or
    (B) A requester has previously failed to pay a fee charged in a 
timely fashion. The Council may require the requester to pay the full 
amount owed plus any applicable interest as provided in 
Sec. 1101.4(b)(5)(iv) or demonstrate that he/she has, in fact, paid the 
fee, and to make an advance payment of the full amount of the estimated 
fee before the Council begins to process a new request or a pending 
request from that requester.

[[Page 820]]

    (C) When the Council acts under Sec. 1101.4(b)(5)(vii) (A) or (B), 
the administrative time limits prescribed in subsection (a)(6) of the 
FOIA (i.e., 10 working days from receipt of initial requests and 20 
working days from receipt of appeals from initial denial, plus 
permissible extensions of these time limits) will begin only after the 
Council has received the fee payments described.
    (6) Records of another agency. If a requested record is the property 
of another federal agency or department, and that agency or department, 
either in writing or by regulation, expressly retains ownership of such 
record, upon receipt of a request for the record the Council will 
promptly inform the requester of this ownership and immediately shall 
forward the request to the proprietary agency or department either for 
processing in accordance with the latter's regulations or for guidance 
with respect to disposition.

[45 FR 46794, July 11, 1980, as amended at 53 FR 7341, Mar. 8, 1988]



Sec. 1101.5  Testimony and production of documents in response to subpoena, order, etc.

    No person shall testify, in court or otherwise, as a result of 
activities on behalf of the Council without prior written authorization 
from the Council. This section shall not restrict the authority of a 
Council member to testify before Congress on matters within his or her 
official responsibilities as a Council member. No person shall furnish 
documents reflecting information of the Council in compliance with a 
subpoena, order, or otherwise, without prior written authorization from 
the Council. The Council may authorize testimony or production of 
documents after the litigant (or the litigant's attorney) submits an 
affidavit to the Council setting forth the interest of the litigant and 
the testimony or documents desired. Authorization to testify or produce 
documents is limited to authority expressly granted by the Council. When 
the Council has not authorized testimony or production of documents, the 
individual to whom the subpoena or order has been directed will appear 
in court and respectfully state that he or she is unable to comply 
further with the subpoena or order by reason of this section.



PART 1102--APPRAISER REGULATION--Table of Contents




                  Subpart A--Temporary Waiver Requests

Sec.
1102.1  Authority, purpose, and scope.
1102.2  Requirements for requests.
1102.3  Other requests and information submissions.
1102.4  Notice and comment.
1102.5  Subcommittee determination.
1102.6  Waiver extension.
1102.7  Waiver termination.

              Subpart B--Rules of Practice for Proceedings

1102.20  Authority, purpose, and scope.
1102.21  Definitions.
1102.22  Appearance and practice before the Subcommittee.
1102.23  Formal requirements as to papers filed.
1102.24  Filing requirements.
1102.25  Service.
1102.26  When papers are deemed filed or served.
1102.27  Computing time.
1102.28  Documents and exhibits in proceedings public.
1102.29  Conduct of proceedings.
1102.30  Rules of evidence.
1102.31  Burden of proof.
1102.32  Notice of Intention to Commence a Proceeding.
1102.33  Rebuttal or Notice Not To Contest.
1102.34  Briefs, memoranda and statements.
1102.35  Opportunity for informal settlement.
1102.36  Oral presentations.
1102.37  Decision of the Subcommittee and judicial review.
1102.38  Compliance activities.
1102.39  Duty to cooperate.

Subpart C--Rules Pertaining to the Privacy of Individuals and Systems of 
            Records Maintained by the Appraisal Subcommittee

1102.100  Authority, purpose and scope.
1102.101  Definitions.
1102.102  Times, places and requirements for requests pertaining to 
          individual records in a record system and for the 
          identification of individuals making requests for access to 
          records pertaining to them.
1102.103  Disclosure of requested records.
1102.104  Special procedure: Medical records.
1102.105  Requests for amendment of records.
1102.106  Review of requests for amendment.

[[Page 821]]

1102.107  Appeal of initial adverse agency determination regarding 
          access or amendment.
1102.108  General provisions.
1102.109  Fees.
1102.110  Penalties.

    Subpart D--Description of Office, Procedures, Public Information

1102.300  Purpose and scope.
1102.301  Definitions.
1102.302  ASC authority and functions.
1102.303  Organization and methods of operation.
1102.304  Federal Register publication.
1102.305  Publicly available records.
1102.306  Procedures for requesting records.
1102.307  Disclosure of exempt records.
1102.308  Right to petition for issuance, amendment and repeal of rules 
          of general application.
1102.309  Confidential treatment procedures.
1102.310  Service of process.



                  Subpart A--Temporary Waiver Requests

    Authority: 12 U.S.C. 3348(b).

    Source: 57 FR 10982, Apr. 1, 1992, unless otherwise noted.



Sec. 1102.1  Authority, purpose and scope.

    (a) Authority. This subpart is issued under section 1119(b) of Title 
XI of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989 (``FIRREA'') (12 U.S.C. Sec. 3348(b)).
    (b) Purpose and scope. This subpart prescribes rules of practice and 
procedure governing temporary waiver proceedings under Section 1119(b) 
of Title XI of FIRREA (12 U.S.C. 3348(b)). These procedures apply 
whenever a State appraiser regulatory agency requests the Appraisal 
Subcommittee of the Federal Financial Institutions Examination Council 
(``ASC'') for a waiver of any requirement relating to certification or 
licensing of a person to perform appraisals under Title XI of FIRREA. 
They also apply whenever the ASC, based on sufficient, credible 
information or requests received from other persons or entities, 
initiates a temporary waiver proceeding.



Sec. 1102.2  Requirements for requests.

    A request will not be deemed received by the ASC unless it fully and 
accurately sets out:
    (a) If the requester is a State Appraiser Regulatory Agency, a 
written, duly authorized determination by the State Appraiser Regulatory 
Agency that there is a scarcity of State licensed or State certified 
appraisers leading to significant delays in obtaining appraisals in 
federally related transactions. The scarcity can relate to the entire 
State or to particular geographical or political subdivisions. In the 
absence of such a written determination, a State Appraiser Regulatory 
Agency must ask the ASC for such a determination;
    (b) The requirement or requirements of State law from which relief 
is being sought;
    (c) A description of all significant problems currently being 
encountered in efforts to comply with Title XI;
    (d) The nature of the scarcity of certified or licensed appraisers 
(including supporting documentation);
    (e) The extent of the delays anticipated or experienced in obtaining 
the services of certified or licensed appraisers (including supporting 
documentation);
    (f) The reasons why the requester believes that the requirement or 
requirements are causing the scarcity of certified or licensed 
appraisers and the service delays; and
    (g) A specific plan for expeditiously alleviating the scarcity and 
the service delays.



Sec. 1102.3  Other requests and information submissions.

    The federal financial institutions regulatory agencies and the 
Resolution Trust Corporation, their respective regulated financial 
institutions, and other persons or institutions with a demonstrable 
interest in appraiser regulation, may ask the ASC for a determination 
under Sec. 1102.2(a) of this subpart, and may ask that the ASC exercise 
its discretionary authority to initiate a temporary waiver proceeding. 
Such regulated financial institutions and other persons or institutions 
do not need to comply with Sec. 1102.2(g) of this subpart, but are 
strongly encouraged to include meaningful suggestions and 
recommendations for remedying the situation. A copy of the request or

[[Page 822]]

informational submission shall be forwarded promptly to the State 
Appraiser Regulatory Agency. The ASC shall consider these submissions 
and requests in exercising its authority to initiate a temporary waiver 
procedure. When the ASC initiates a temporary waiver proceeding, these 
documents shall correspond to a received request under Sec. 1102.4 of 
this subpart.



Sec. 1102.4  Notice and comment.

    The ASC shall publish promptly in the Federal Register a notice 
respecting:
    (a) The received request; or
    (b) The ASC order initiating a temporary waiver proceeding. The 
notice or initiation order shall contain a concise general statement of 
the nature and basis for the action and shall give interested persons 30 
calendar days from its publication in which to submit written data, 
views and arguments.



Sec. 1102.5  Subcommittee determination.

    Within 45 calendar days of the date of the publication of the notice 
or initiation order in the Federal Register, the ASC, by order, shall 
either grant or deny a waiver in whole, in part, and upon specified 
terms and conditions, including provisions for waiver termination. Such 
order shall respond to comments received from interested members of the 
public and shall provide the reasons for the ASC's finding. The order 
shall be published promptly in the Federal Register, which, in the case 
of an approval order, shall be after Federal Financial Institution 
Examination Council concurrence. Upon the ASC's determination that an 
emergency exists, the ASC may issue an interim approval order 
simultaneously with its action under Sec. 1120.4 of this subpart. Any 
ASC approval order shall be effective only upon Federal Financial 
Institution Examination Council concurrence.



Sec. 1102.6  Waiver extension.

    The ASC may initiate an extension of temporary waiver relief and 
shall follow Secs. 1102.4, 1102.5 and 1102.7 of this subpart. A State 
Appraiser Regulatory Agency also may request an extension of temporary 
waiver relief by forwarding an additional written request to the ASC. A 
request for an extension from State Appraiser Regulatory Agency shall be 
subject to all the requirements of this subpart.



Sec. 1102.7  Waiver termination.

    The ASC at any time may terminate a waiver order on the finding 
that:
    (a) The significant delays in obtaining the services of certified or 
licensed appraisers no longer exist; or
    (b) The terms and conditions of the waiver order are not being 
satisfied. The ASC shall publish a finding of waiver termination 
promptly in the Federal Register, giving interested persons no less than 
30 calendar days from publication in which to submit written data, views 
and arguments. In the absence of further ASC action to the contrary, the 
finding of waiver termination automatically shall become final 21 
calendar days after the close of the comment period.



              Subpart B--Rules of Practice for Proceedings

    Authority: 12 U.S.C. 3332, 3335, 3347, and 3348(c).

    Source: 57 FR 31650, July 17, 1992, unless otherwise noted.



Sec. 1102.20  Authority, purpose, and scope.

    (a) Authority. This subpart is issued under sections 1103, 1106, 
1118 and 1119(c) of Title XI of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (FIRREA) (12 U.S.C. 3332, 3335, 
3347, and 3348(c)).
    (b) Purpose and scope. This subpart prescribes rules of practice and 
procedure governing non-recognition proceedings under section 1118 of 
Title XI (12 U.S.C. 3347); and other proceedings necessary to carry out 
the purposes of Title XI under section 1119(c) of Title XI (12 U.S.C. 
3348(c)).

[57 FR 31650, July 17, 1992, as amended at 57 FR 35004, Aug. 7, 1992]



Sec. 1102.21  Definitions.

    As used in this subpart:
    (a) Subcommittee or ASC means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination

[[Page 823]]

Council, as established under section 1011 of Title XI (12 U.S.C. 3310).
    (b) Party means the ASC or a person, agency or other entity named as 
a party, including, when appropriate, persons appearing in the 
proceeding under Sec. 1102.22 of this subpart.
    (c) Respondent means any party other than the ASC.
    (d) Secretary means the Secretary of the ASC under its Rules of 
Operation.



Sec. 1102.22  Appearance and practice before the Subcommittee.

    (a) By attorneys and notice of appearance. Any person who is a 
member in good standing of the bar of the highest court of any State or 
of the District of Columbia, or of any possession, territory, or 
commonwealth of the United States, may represent parties before the ASC 
upon filing with the Secretary a written notice of appearance stating 
that he or she is currently qualified as provided in this paragraph and 
is authorized to represent the particular party on whose behalf he or 
she acts.
    (b) By non-attorneys. An individual may appear on his or her own 
behalf. A member of a partnership may represent the partnership, and an 
officer, director or employee of any government unit, agency, 
institution, corporation or authority may represent that unit, agency, 
institution, corporation or authority. The partner, officer, director or 
employee must file with the Secretary a written statement that he or she 
has been duly authorized by the partnership, government unit, agency, 
institution, corporation or authority to act on its behalf. The ASC may 
require the representative to attach to the statement appropriate 
supporting documentation, such as a corporate resolution.
    (c) Conduct during proceedings. All participants in a proceeding 
shall conduct themselves with dignity and in an orderly and ethical 
manner. The attorney or other representative of a party shall make every 
effort to restrain a client from improper conduct in connection with a 
proceeding. Improper language or conduct, refusal to comply with 
directions, use of dilatory tactics, or refusal to adhere to reasonable 
standards of orderly and ethical conduct constitute grounds for 
immediate exclusion from the proceeding at the direction of the ASC.



Sec. 1102.23  Formal requirements as to papers filed.

    (a) Form. All papers filed under this subpart must be double-spaced 
and printed or typewritten on 8\1/2\" x 11" paper. All copies shall be 
clear and legible.
    (b) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the ASC and of the filing party, the title 
and/or docket number of the proceeding and the subject of the particular 
paper.
    (c) Party names, signatures, certificates of service. All papers 
filed must set forth the name, address and telephone number of the 
attorney or party making the filing, must be signed by the attorney or 
party, and must be accompanied by a certification setting forth when and 
how service has been made on all other parties.
    (d) Copies. Unless otherwise specifically provided in the notice of 
proceeding or by the ASC during the proceeding, an original and one copy 
of all documents and papers shall be furnished to the Secretary.



Sec. 1102.24  Filing requirements.

    (a) Filing. All papers filed with the ASC in any proceeding shall be 
filed with the Secretary, Appraisal Subcommittee, 2100 Pennsylvania 
Avenue, NW., suite 200, Washington, DC 20037.
    (b) Manner of filing. Unless otherwise specified by the ASC, filing 
may be accomplished by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery; and
    (3) Mailing the papers by first class, registered, or certified 
mail.



Sec. 1102.25  Service.

    (a) Methods; appearing party. A serving party, who has made an 
appearance under Sec. 1102.22 of this subpart, shall use one or more of 
the following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight

[[Page 824]]

delivery service, or to the U.S. Post Office for Express Mail delivery; 
and
    (3) Mailing the papers by first class, registered, or certified 
mail.
    (b) Methods; non-appearing party. If a party has not appeared in the 
proceeding in accordance with Sec. 1102.22 of this subpart, the ASC or 
any other party shall make service by any of the following methods:
    (1) By personal service;
    (2) By delivery to a person of suitable age and discretion at the 
party's last known address;
    (3) By registered or certified mail addressed to the party's last 
known address; or
    (4) By any other manner reasonably calculated to give actual notice.
    (c) By the Subcommittee. All papers required to be served by the ASC 
shall be served by the Secretary unless some other person shall be 
designated for such purpose by the ASC.
    (d) By the respondent. All papers filed in a proceeding under this 
subpart shall be served by a respondent on the Secretary and each 
party's attorney, or, if any party is not so represented, then upon such 
party. Such service may be made by any of the appropriate methods 
specified in paragraphs (a) and (b) of this section.



Sec. 1102.26  When papers are deemed filed or served.

    (a) Effectiveness. Filing and service are deemed effective:
    (1) For personal service or same-day commercial courier delivery, 
upon actual delivery; and
    (2) For overnight commercial delivery service, U.S. Express Mail 
delivery, or first class, registered, or certified mail, upon deposit 
in, or delivery to, an appropriate point of collection.
    (b) Modification. The effective times for filing and service in 
paragraph (a) of this section may be modified by the ASC in the case of 
filing or by agreement of the parties in the case of service.



Sec. 1102.27  Computing time.

    (a) General rule. In computing any period of time prescribed or 
allowed by this subpart, the date of the act, event or default from 
which the designated period of time begins to run is not included. The 
last day so computed is included, unless it is a Saturday, Sunday, or 
Federal holiday, in which event the period runs until the end of the 
next day which is not a Saturday, Sunday or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays shall not be 
included in the computation.
    (b) For service and filing responsive papers. Whenever a time limit 
is measured by a prescribed period from the service of any notice or 
paper, the applicable time periods are calculated as follows:
    (1) If service is made by first class, registered or certified mail, 
add three days to the prescribed period; and
    (2) If service is made by express mail or overnight delivery 
service, add one day to the prescribed period.



Sec. 1102.28  Documents and exhibits in proceedings public.

    Unless and until otherwise ordered by the ASC or unless otherwise 
provided by statute or by ASC regulation, all documents, papers and 
exhibits filed in connection with any proceeding, other than those that 
may be withheld from disclosure under applicable law, shall be placed by 
the Secretary in the proceeding's public file and will be available for 
public inspection and copying at the address set out in Sec. 1102.24 of 
this subpart.



Sec. 1102.29  Conduct of proceedings.

    (a) In general. Unless otherwise provided in the notice of 
proceedings, all proceedings under this subpart shall be conducted as 
hereinafter provided.
    (b) Written submissions. All aspects of the proceeding shall be 
conducted by written submissions only, with the exception of oral 
presentations allowed under Sec. 1102.36 of this subpart.
    (c) Disqualification. A Subcommittee member who deems himself or 
herself disqualified may at any time withdraw. Upon receipt of a timely 
and sufficient affidavit of personal bias or disqualification of such 
member, the ASC will rule on the matter as a part of the record and 
decision in the case.
    (d) User of ASC staff. Appropriate members of the ASC's staff who 
are not engaged in the performance of investigative or prosecuting 
functions in the

[[Page 825]]

proceeding may advise and assist the ASC in the consideration of the 
case and in the preparation of appropriate documents for its 
disposition.
    (e) Authority of Subcommittee Chairperson. The Chairperson of the 
ASC, in consultation with other members of the ASC whenever appropriate, 
shall have complete charge of the proceeding and shall have the duty to 
conduct it in a fair and impartial manner and to take all necessary 
action to avoid delay in the disposition of proceedings in accordance 
with this subpart.
    (f) Conferences. (1) The ASC may on its own initiative or at the 
request of any party, direct all parties or counsel to meet with one or 
more duly authorized ASC members or staff at a specified time and place, 
or to submit to the ASC or its designee, suggestions in writing for the 
purpose of considering any or all of the following:
    (i) Scheduling of matters, including a timetable for the 
information-gathering phase of the proceeding;
    (ii) Simplification and clarification of the issues;
    (iii) Stipulations and admissions of fact and of the content and 
authenticity of documents;
    (iv) Matters of which official notice will be taken; and
    (v) Such other matters as may aid in the orderly disposition of the 
proceeding, including disclosure of the names of persons submitting 
affidavits or other documents and exhibits which may be introduced into 
the public file of the proceeding.
    (2) Such conferences will not be recorded, but the Secretary shall 
place in the proceeding's public file a memorandum summarizing the 
results of the conference and shall provide a copy of the memorandum to 
each party. The memorandum shall control the subsequent course of the 
proceedings, unless the ASC for good cause shown by one or more parties 
to the conference, modifies those results and instructs the Secretary to 
place an amendatory memorandum to that effect in the public file.
    (g) Changes or extensions of time and changes of place of 
proceeding. The ASC, in connection with initiating a specific 
proceedings under Sec. 1102.32 of this subpart, may instruct the 
Secretary to publish in the Federal Register time limits different from 
those specified in this subpart, and may, on its own initiative or for 
good cause shown, issue an exemption changing the place of the 
proceeding or extending any time limit prescribed by this subpart, 
including the date for ending the information-gathering phase of the 
proceeding.
    (h) Call for further briefs, memoranda, statements; reopening of 
matters. The ASC may call for the production of further information upon 
any issue, the submission of briefs, memoranda and statements (together 
with written responses), and, upon appropriate notice, may reopen any 
aspect of the proceeding at any time prior to a decision on the matter.

[57 FR 31650, July 17, 1992, as amended at 57 FR 35004, Aug. 7, 1992]



Sec. 1102.30  Rules of evidence.

    (a) In general. (1) Except as is otherwise set forth in this 
section, relevant, material and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and other applicable 
law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted under this subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may be deemed or ruled admissible in a proceeding conducted 
under this subpart if such evidence is relevant, material, reliable and 
not unduly repetitive.
    (b) Stipulations. Any party may stipulate in writing as to any 
relevant matters of fact, law, or the authenticity of any relevant 
documents. The Secretary shall place such stipulations in the public 
file, and they shall be binding on the parties.
    (c) Official notice. Every matter officially noticed by the ASC 
shall appear in the public file, unless the ASC determines that the 
matter must be withheld from public disclosure under applicable Federal 
law.



Sec. 1102.31  Burden of proof.

    The ultimate burden of proof shall be on the respondent. The burden 
of going

[[Page 826]]

forward with a prima facie case shall be on the ASC.



Sec. 1102.32  Notice of Intention to Commence a Proceeding.

    The ASC shall instruct the Secretary or other designated officer 
acting for the ASC to publish in the Federal Register a Notice of 
Intention To Commence A Proceeding (Notice of Intention). The Notice of 
Intention shall be served upon the party or parties to the proceeding 
and shall commence at the time of service. The Notice of Intention shall 
state the legal authority and jurisdiction under which the proceeding is 
to be held; shall contain, or incorporate by appropriate reference, a 
specific statement of the matters of fact or law constituting the 
grounds for the proceeding; and shall state a date no sooner than 25 
days after service of the Notice of Intention is made for termination of 
the information-gathering phase of the proceeding. The Notice of 
Intention also must contain a bold-faced warning respecting the effect 
of a failure to file a Rebuttal or Notice Not To Contest under 
Sec. 1102.33(d) of this subpart. The ASC may amend a Notice of Intention 
in any manner and to the extent consistent with provisions of applicable 
law.



Sec. 1102.33  Rebuttal or Notice Not To Contest.

    (a) When required. A party to the proceeding may file either a 
Rebuttal or a Notice Not to Contest the statements contained in the 
Notice of Intention or any amendment thereto with the Secretary within 
15 days after being served with the Notice of Intention or an amendment 
to such Notice. The Secretary shall place the Rebuttal or the Notice Not 
To Contest in the public file.
    (b) Requirements of Rebuttal; effect of failure to deny. A Rebuttal 
filed under this section shall specifically admit, deny or state that 
the party does not have sufficient information to admit or deny each 
statement in the Notice of Intention. A statement of lack of information 
shall have the effect of a denial. Any statement not denied shall be 
deemed to be admitted. When a party intends to deny only a part or a 
qualification of a statement, the party shall admit so much of it as is 
true and shall deny only the remainder.
    (c) Notice Not To Contest. A party filing a Notice Not To Contest 
the statement of fact set forth in the Notice of Intention shall 
constitute a waiver of the party's opportunity to rebut the facts 
alleged, and together with the Notice of Intention and any referenced 
documents, will provide a record basis on which the ASC shall decide the 
matter. The filing of a Notice Not To Contest shall not constitute a 
waiver of the right of such party to a judicial review of the ASC's 
decision, findings and conclusions.
    (d) Effect of failure to file Rebuttal or Notice Not To Contest. 
Failure of a party to file a response required by this section within 
the time provided shall constitute a waiver of the party's opportunity 
to rebut and to contest the statements in the Notice of Intention and 
shall constitute authorization for the ASC to find the facts to be as 
presented in the Notice of Intention and to file with the Secretary a 
decision containing such findings and appropriate conclusions. The ASC, 
for good cause shown, will permit the filing of a Rebuttal after the 
prescribed time.



Sec. 1102.34  Briefs, memoranda and statements.

    (a) By the parties. Until the end of the information-gathering phase 
of the proceeding, any party may file with the Secretary a written 
brief, memorandum or other statement providing factual data and policy 
and legal arguments regarding the matters set out in the Notice of 
Intention. The filing party shall simultaneously serve other parties to 
the proceeding with a copy of the document. No later than ten days after 
such service, any party may file with the Secretary a written response 
to the document and must simultaneously serve a copy thereof on the 
other parties to the proceeding. The Secretary will receive documents 
and responses and will place them in the public file.
    (b) By interested persons, in non-recognition proceedings. Until the 
end of the information-gathering phase of a proceeding under section 
1118 of FIRREA (12 U.S.C. 3347), any person with a demonstrable, direct 
interest in

[[Page 827]]

the outcome of the proceeding may file with the Secretary a written 
brief, memorandum or other statement providing factual data and policy 
and legal arguments regarding the matters set out in the Notice of 
Intention. The ASC's Chairperson or his or her designee may not accept 
any such written brief, memorandum or other statement if the submitting 
person cannot demonstrate a direct interest in the outcome of the 
proceeding. Upon acceptance of the written brief, memorandum or other 
statement, the Secretary shall make copies of the document and forward 
one copy thereof to each party to the proceeding. No later than ten days 
after such service, any party may file with the Secretary a written 
response to the document and must simultaneously serve one copy thereof 
on the other parties to the proceeding. The Secretary will place a copy 
of such briefs, memoranda, statements and responses in the public file.



Sec. 1102.35  Opportunity for informal settlement.

    Any party may at any time submit to the Secretary, for consideration 
by the Subcommittee, written offers or proposals for settlement of a 
proceeding, without prejudice to the rights of the parties. No offer or 
proposal shall be included in the proceeding's public file over the 
objection of any party to such proceeding. This paragraph shall not 
preclude settlement of any proceeding by the filing of a Notice Not To 
Contest as provided in Sec. 1102.33(c) or by the submission of the case 
to the ASC on a stipulation of facts.



Sec. 1102.36  Oral presentations.

    (a) In general. A party does not have a right to an oral 
presentation. Under this section, a party's request to make an oral 
presentation may be denied if such a denial is appropriate and 
reasonable under the circumstances. An oral presentation shall be 
considered as an opportunity to offer, emphasize and clarify the facts, 
policies and laws concerning the proceeding.
    (b) Method and time of request. Between the commencement of the 
proceeding and ten days before the end of the information-gathering 
phase, any party to the proceeding may file with the Secretary a letter 
requesting that the Secretary schedule an opportunity for the party to 
give an oral presentation to the ASC. That letter shall include the 
reasons why an oral presentation is necessary.
    (c) ASC processing. The Secretary must promptly forward the letter 
request to the Chairman of the ASC. The Chairman, after informally 
contacting other ASC members and the ASC's senior staff for their views, 
will instruct the Secretary to forward a letter to the party either: 
Scheduling a date and time for the oral presentation and specifying the 
allowable duration of the presentation; or declining the request and 
providing the reasons therefor. The party's letter request and the ASC's 
response will be included in the proceeding's public file.
    (d) Procedure on presentation day. On the appropriate date and time, 
the party or his or her attorney (if any) will make the oral 
presentation before the ASC. Any ASC member may ask the party or the 
attorney, as the case may be, pertinent questions relating to the 
content of the oral presentation. Oral presentations will not be 
recorded or otherwise transcribed. The Secretary must enter promptly 
into the proceeding's public file a memorandum summarizing the subjects 
discussed during the oral presentation.



Sec. 1102.37  Decision of the Subcommittee and judicial review.

    At a reasonable time after the end of the information-gathering 
phase of the proceeding, but not exceeding 35 days, the ASC shall issue 
a final decision, containing specified terms and conditions as it deems 
appropriate, in the matter and shall cause the decision to be published 
promptly in the Federal Register. The final decision shall be effective 
on issuance. The Secretary shall serve the decision upon the parties 
promptly, shall place it in the proceeding's public file and shall 
furnish it to such other persons as the ASC may direct. Pursuant to the 
provisions of chapter 7 of title 5 of the U.S. Code and section 
1118(c)(3) of title XI of FIRREA (12 U.S.C. 3348(c)(3)), a final 
decision of the ASC is a prerequisite to seeking judicial review.

[[Page 828]]



Sec. 1102.38  Compliance activities.

    (a) Where, from complaints received from members of the public, 
communications from Federal or State agencies, examination of 
information by the ASC, or otherwise, it appears that a person has 
violated, is violating or is about to violate title XI of FIRREA or the 
rules or regulations thereunder, the ASC staff may commence an informal, 
preliminary inquiry into the matter. If, upon such inquiry, it appears 
that one or more allegations relate to possible violations of 
regulations administered by another agency or instrumentality of the 
Federal Government, then the matter shall be referred to that agency or 
instrumentality for appropriate action. The ASC, pursuant to its 
responsibilities under section 1103(a)(2) of title XI (12 U.S.C. 
3332(a)(2)) and section 1119(c) of title XI (12 U.S.C. 3348)), shall 
monitor the matter. If, upon inquiry, it appears that one or more 
allegations are within the ASC's jurisdiction, then the ASC, in its 
discretion, may determine to commence a formal investigation respecting 
the matter and shall instruct the Secretary to create a public file for 
the formal investigation. The Secretary shall place in that file a 
memorandum naming the person or persons subject to the investigation and 
the statutory basis for the investigation.
    (b) Unless otherwise instructed by the ASC or required by law, the 
Secretary shall ensure that all other papers, documents and materials 
gathered or submitted in connection with the investigation are non-
public and for ASC use only.
    (c) Persons who become involved in preliminary inquiries or formal 
investigations may, on their own initiative, submit a written statement 
to the Secretary setting forth their interests, positions or views 
regarding the subject matter of the investigation. Upon request, the 
staff, in its discretion, may advise such persons of the general nature 
of the investigation, including the indicated violations as they pertain 
to them and the amount of time that may be available for preparing and 
submitting such a statement prior to the presentation of a staff 
recommendation to the ASC. Upon the commencement of a formal 
investigation or a proceeding under this subpart, the Secretary shall 
place any such statement in the appropriate public file.
    (d) In instances where the staff has concluded its inquiry of a 
particular matter and has determined that it will not recommend the 
commencement of a formal investigation or a proceeding under this 
subpart against a person, the staff shall advise the person that its 
inquiry has been terminated. Such advice, if given, must in no way be 
construed as indicating that the person has been exonerated or that no 
action may ultimately result from the staff's inquiry into the 
particular matter.



Sec. 1102.39  Duty to cooperate.

    In the course of the investigations and proceedings, the ASC (and 
its staff, with appropriate authorization) must provide parties or 
persons ample opportunity to work out problems by consent, by 
settlement, or in some other manner.



Subpart C--Rules Pertaining to the Privacy of Individuals and Systems of 
            Records Maintained by the Appraisal Subcommittee

    Authority: 12 U.S.C. 552a.

    Source: 57 FR 36357, Aug. 13, 1992, unless otherwise noted.



Sec. 1102.100  Authority, purpose and scope.

    (a) This subpart is issued under the Privacy Act of 1974, Public Law 
93-579, 88 Stat. 1896; 12 U.S.C. 552a, as amended.
    (b) The Privacy Act of 1974 is based, in part, on the finding by 
Congress that ``in order to protect the privacy of individuals 
identified in information systems maintained by Federal agencies, it is 
necessary and proper for the Congress to regulate the collection, 
maintenance, use, and dissemination of information by such agencies.'' 
To achieve this objective, the Act generally provides that Federal 
agencies must advise an individual upon request whether records 
maintained by the agency in a system of records pertain to the 
individual and must grant the individual access to such records. The

[[Page 829]]

Act further provides that individuals may request amendments to records 
pertaining to them that are maintained by the agency, and that the 
agency shall either grant the requested amendments or set forth fully 
its reasons for refusing to do so.
    (c) The Appraisal Subcommittee of the Federal Financial Institutions 
Examination Council (ASC), pursuant to subsection (f) of the Privacy 
Act, adopts the following rules and procedures to implement the 
provisions of the Act summarized above and other provisions of the Act. 
These rules and procedures are applicable to all requests for 
information and access or amendment to records pertaining to an 
individual that are contained in any system of records that is 
maintained by the ASC.



Sec. 1102.101  Definitions.

    The following definitions shall apply for purposes of this subpart:
    (a) The terms individual, maintain, record, system of records, and 
routine use are defined for purposes of these rules as they are defined 
in 5 U.S.C. 552a(a)(2), (a)(3), (a)(4), (a)(5) and (a)(7).
    (b) ASC or Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (c) Privacy Act Officer means the ASC's Associate Director for 
Administration or such other ASC staff officer, other than the Executive 
Director, duly designated by the ASC's Executive Director.



Sec. 1102.102  Times, places and requirements for requests pertaining to individual records in a record system and for the identification of individuals making 
          requests for access to records pertaining to them.

    (a) Place to make request. Any request by an individual to be 
advised whether any system of records maintained by the ASC and named by 
the individual contains a record pertaining to him or her, or any 
request by an individual for access to a record pertaining to him or her 
that is contained in a system of records maintained by the ASC, shall be 
submitted in person at the ASC between 9 a.m. and 4:30 p.m., Monday 
through Friday, which is located at 2100 Pennsylvania Avenue, NW., suite 
200, Washington, DC. 20037, or by mail addressed to: Privacy Act 
Officer, ASC, 2100 Pennsylvania Avenue, NW., suite 200, Washington, DC. 
20037. All requests will be required to be put in writing and signed by 
the individual making the request. In the case of requests for access 
that are made by mail, the envelope should be clearly marked ``Privacy 
Act Request.''
    (1) Information to be included in requests. Each request by an 
individual concerning whether the ASC maintains in a system of records a 
record that pertains to the individual, or for access to any record 
pertaining to the individual that is maintained by the ASC in a system 
of records, shall include such information as will assist the ASC in 
identifying those records as to which the individual is seeking 
information or access. Where practicable, the individual should identify 
the system of records that is the subject of his or her request by 
reference to the ASC's notices of systems of records, which are 
published in the Federal Register, as required by section (e)(4) of the 
Privacy Act, 5 U.S.C. 552a(e)(4). Where a system of records is compiled 
on the basis of a specific identification scheme, the individual should 
include in his or her request the identification number or other 
identifier assigned to the individual. In the event the individual does 
not know that number or identifier, the individual shall provide other 
information, including his or her full name, address, date of birth and 
subject matter of the record, to aid in processing his or her request. 
If additional information is required before a request can be processed, 
the individual shall be so advised.
    (2) Verification of identity. When the fact of the existence of a 
record is not required to be disclosed under the Freedom of Information 
Act, 5 U.S.C. 552, as amended, or when a record as to which access has 
been requested is not required to be disclosed under that Act, the 
individual seeking the information or requesting access to the record 
shall be required to verify his or her identity before access will be 
granted or information given. For this purpose, individuals shall appear 
at the ASC located at 2100 Pennsylvania Avenue, NW., suite 200, 
Washington, DC., between 9

[[Page 830]]

a.m. to 4:30 p.m., Monday through Friday. The ASC's Office is not open 
on Saturdays, Sundays or Federal holidays.
    (3) Methods for verifying identity--appearance in person. For the 
purpose of verifying identity, an individual seeking information 
regarding pertinent records or access to those records shall furnish 
documentation that may reasonably be relied on to establish the 
individual's identity. Such documentation might include a valid birth 
certificate, driver's license, employee or military identification card, 
and medicare card.
    (4) Method for verifying identity--by mail. Where an individual 
cannot appear at the ASC's Office for the purpose of verifying identity, 
the individual shall submit, along with the request for information or 
access, a signed and notarized statement attesting to his or her 
identity. Where access is being sought, the sworn statement shall 
include a representation that the records being sought pertain to the 
individual and a stipulation that the individual is aware that knowingly 
and willfully requesting or obtaining records pertaining to an 
individual from the ASC under false pretenses is a criminal offense.
    (5) Additional procedures for verifying identity. When it appears 
appropriate to the Privacy Act Officer, other arrangements may be made 
for the verification of identity as are reasonable under the 
circumstances and appear to be effective to prevent unauthorized 
disclosure of, or access to, individual records.
    (b) Acknowledgement of requests for information pertaining to 
individual records in a record system or for access to individual 
records. (1) Except where an immediate acknowledgement is given for 
requests made in person, the receipt of a request for information 
pertaining to individual records in a record system will be acknowledged 
within 10 days, excluding Saturdays, Sundays and Federal holidays. 
Requests will be processed as promptly as possible and a response to 
such requests will be given within 30 days (excluding Saturdays, 
Sundays, and Federal holidays) unless, within the 30 day period and for 
cause shown, the individual making the request is notified in writing 
that a longer period is necessary.



Sec. 1102.103  Disclosure of requested records.

    (a) Initial review. Requests by individuals for access to records 
pertaining to them will be referred to the ASC's Privacy Act Officer, 
who initially will determine whether access will be granted.
    (b) Grant of request for access. (1) If it is determined that a 
request for access to records pertaining to an individual will be 
granted, the individual will be advised by mail that access will be 
given at the ASC or a copy of the requested record will be provided by 
mail if the individual shall so indicate. Where the individual requests 
that copies of the record be mailed to or her or requests copies of a 
record upon reviewing it at the ASC, the individual shall pay the cost 
of making requested copies, as set forth in Sec. 1102.109 of this 
subpart.
    (2) In granting access to an individual to a record pertaining to 
him or her, the ASC staff shall take steps to prevent the unauthorized 
disclosure of information pertaining to other individuals.
    (c) Denial of request for access. If it is determined that access 
will not be granted, the individual making the request will be notified 
of that fact and given the reasons why access is being denied. The 
individual also will be advised of his or her right to seek review by 
the Executive Director of the initial decision to deny access, in 
accordance with the procedures set forth in Sec. 1102.107 of this 
subpart.
    (d) Time for acting on requests for access. Access to a record 
pertaining to an individual normally will be granted or denied within 30 
days (excluding Saturdays, Sundays, and Federal holidays) after the 
receipt of the request for access, unless the individual making the 
request is notified in writing within the 30 day period that, for good 
cause shown, a longer time is required. In such cases, the individual 
making the request shall be informed in writing of the difficulties 
encountered and an indication shall be given as to when it is 
anticipated that access may be granted or denied.

[[Page 831]]

    (e) Authorization to allow designated person to review and discuss 
records pertaining to another individual. An individual, who is granted 
access to records pertaining to him or her and who appears at the ASC 
Office to review the records, may be accompanied by another person of 
his or her choosing. Where the records as to which access has been 
granted are not required to be disclosed under provisions of the Freedom 
of Information Act, 5 U.S.C. 552, as amended, the individual requesting 
the records, before being granted access, shall execute a written 
statement, signed by him or her, specifically authorizing the latter 
individual to review and discuss the records. If such authorization has 
not been given as described, the person who has accompanied the 
individual making the request will be excluded from any review or 
discussion of the records.
    (f) Exclusion for certain records. Nothing contained in these rules 
shall allow an individual access to any information compiled in 
reasonable anticipation of an administrative judicial or civil action or 
proceeding.



Sec. 1102.104  Special procedure: Medical records.

    (a) Statement of physician or mental health professional. When an 
individual requests access to records pertaining to the individual that 
include medical and/or psychological information, the ASC, if it deems 
it necessary under the particular circumstances, may require the 
individual to submit with the request a signed statement by the 
individual's physician or a mental health professional indicating that, 
in his or her opinion, disclosure of the requested records or 
information directly to the individual will not have an adverse effect 
on the individual.
    (b) Designation of physician or mental health professional to 
receive records. If the ASC believes, in good faith, that disclosure of 
medical and/or psychological information, directly to an individual 
could have an adverse effect on that individual, the individual may be 
asked to designate in writing a physician or mental health professional 
to whom the individual would like the records to be disclosed, and 
disclosure that otherwise would be made to the individual will instead 
be made to the designated physician or mental health professional.



Sec. 1102.105  Requests for amendment of records.

    (a) Place to make requests. A request by an individual to amend 
records pertaining to him or her may be made in person during normal 
business hours at the ASC located at 2100 Pennsylvania Avenue, NW., 
Suite 200, Washington, DC, or by mail addressed to the Privacy Act 
Officer, ASC, 2100 Pennsylvania Avenue, NW., suite 200, Washington, DC 
20037.
    (1) Information to be included in requests. Each request to amend an 
ASC record shall reasonably describe the record sought to be amended. 
Such description should include, for example, relevant names, dates and 
subject matter to permit the record to be located among the records 
maintained by the ASC. An individual who has requested that a record 
pertaining to the individual be amended will be advised promptly if the 
record cannot be located on the basis of the description given and that 
further identifying information is necessary before the request can be 
processed. An initial evaluation of a request presented in person will 
be made immediately to ensure that the request is complete and to 
indicate what, if any, additional information will be required. 
Verification of the individual's identity as set forth in 
Sec. 1102.102(a) (2), (3), (4) and (5) may also be required.
    (2) Basis for amendment. An individual requesting an amendment to a 
record pertaining to the individual shall specify the substance of the 
amendment and set forth facts and provide such materials that would 
support his or her contention that the record as maintained by the ASC 
is not accurate, timely or complete, or that the record is not necessary 
and relevant to accomplish a statutory purpose of the ASC as authorized 
by law or by Executive Order of the President.
    (b) Acknowledgement of requests for amendment. Receipt of a request 
to amend a record pertaining to an individual normally will be 
acknowledged

[[Page 832]]

in writing within 10 days after such request has been received, 
excluding Saturdays, Sundays and Federal holidays. When a request to 
amend is made in person, the individual making the request will be given 
a written acknowledgement when the request is presented. The 
acknowledgement will describe the request received and indicate when it 
is anticipated that action will be taken on the request. No 
acknowledgement will be sent when the request for amendment will be 
reviewed, and an initial decision made, within the 10 day period after 
such request has been received.



Sec. 1102.106  Review of requests for amendment.

    (a) Initial review. As in the case of requests for access, requests 
by individuals for amendment to records pertaining to them will be 
referred to the ASC's Privacy Act Officer for an initial determination.
    (b) Standards to be applied in reviewing requests. In reviewing 
requests to amend records, the Privacy Act Officer will be guided by the 
criteria set forth in 5 U.S.C. 552(e) (1) and (5), i.e., that records 
maintained by the ASC shall contain only such information as is 
necessary and relevant to accomplish a statutory purpose of the ASC as 
required by statute or Executive Order of the President and that such 
information also be accurate, timely, relevant and complete. These 
criteria will be applied whether the request is to add material to a 
record or to delete information from a record.
    (c) Time for acting on requests. Initial review of a request by an 
individual to amend a record shall be completed as promptly as is 
reasonably possible and normally within 30 days (excluding Saturdays, 
Sundays, and Federal holidays) from the date the request was received, 
unless unusual circumstances preclude completion of review within that 
time. If the anticipated completion date indicated in the 
acknowledgement cannot be met, the individual requesting the amendment 
will be advised in writing of the delay and the reasons therefor, and 
also advised when action is expected to be completed.
    (d) Grant of requests to amend records. If a request to amend a 
record is granted in whole or in part, the Privacy Act Officer will:
    (1) Advise the individual making the request in writing of the 
extent to which it has been granted;
    (2) Amend the record accordingly; and
    (3) Where an accounting of disclosures of the record has been kept 
pursuant to 5 U.S.C. 552a(c), advise all previous recipients of the 
record of the fact that the record has been amended and the substance of 
the amendment.
    (e) Denial of requests to amend records. If an individual's request 
to amend a record pertaining to him is denied in whole or in part, the 
Privacy Act Officer will:
    (1) Promptly advise the individual making the request in writing of 
the extent to which the request has been denied;
    (2) State the reasons for the denial of the request;
    (3) Describe the procedures established by the ASC to obtain further 
review within the ASC of the request to amend, including the name and 
address of the person to whom the appeal is to be addressed; and
    (4) Inform the individual that the Privacy Act Officer will provide 
information and assistance to the individual in perfecting an appeal of 
the initial decision.



Sec. 1102.107  Appeal of initial adverse agency determination regarding access or amendment.

    (a) Administrative review. Any person who has been notified pursuant 
to Sec. 1102.103(c) that a request for access to records pertaining to 
him or her has been denied in whole or in part, or pursuant to 
Sec. 1102.106(e) of this subpart that a request for amendment has been 
denied in whole or in part, or who has received no response to a request 
for access or to amend within 30 days (excluding Saturdays, Sundays and 
Federal holidays) after the request was received by the ASC's staff (or 
within such extended period as may be permitted in accordance with 
Secs. 1102.103(d) and 1102.106(c) of this subpart), may appeal the 
adverse determination or failure to respond by applying for an order

[[Page 833]]

of the Executive Director determining and directing that access to the 
record be granted or that the record be amended in accordance with his 
or her request.
    (1) The application shall be in writing and shall describe the 
record in issue and set forth the proposed amendment and the reasons 
therefor.
    (2) The application shall be delivered to the ASC, 2100 Pennsylvania 
Avenue, NW., suite 200, Washington, DC, or by mail addressed to the 
Privacy Act Officer, ASC, 2100 Pennsylvania Avenue, NW., suite 200, 
Washington, DC 20037.
    (3) The applicant may state such facts and cite such legal or other 
authorities in support of the application.
    (4) The Executive Director will make a determination with respect to 
any appeal within 30 days after the receipt of such appeal (excluding 
Saturdays, Sundays, and Federal holidays), unless for good cause shown, 
the Executive Director shall extend that period. If such an extension is 
made, the individual who is appealing shall be advised in writing of the 
extension, the reasons therefor, and the anticipated date when the 
appeal will be decided.
    (5) In considering an appeal from a denial of a request to amend a 
record, the Executive Director shall apply the same standards as set 
forth in Sec. 1102.106(b).
    (6) If the Executive Director concludes that access should be 
granted, the Executive Director shall issue an order granting access and 
instructing the Privacy Act Officer to comply with Sec. 1102.103(b).
    (7) If the Executive Director concludes that the request to amend 
the record should be granted in whole or in part, the Executive Director 
shall issue an order granting the requested amendment in whole or in 
part and instructing the Privacy Act Officer to comply with the 
requirements of Sec. 1102.106(d) of this subpart, to the extent 
applicable.
    (8) If the Executive Director affirms the initial decision denying 
access, the Executive Director shall issue an order denying access and 
advising the individual seeking access of:
    (i) The order;
    (ii) The reasons for denying access; and
    (iii) The individual's right to obtain judicial review of the 
decision pursuant to 5 U.S.C. 552a(g)(1)(B).
    (9) If the Executive Director determines that the decision of the 
Privacy Act Officer denying a request to amend a record should be 
upheld, the Executive Director shall issue an order denying the request 
and the individual shall be advised of:
    (i) The order refusing to amend the record and the reasons therefor;
    (ii) The individual's right to file a concise statement setting 
forth his or her disagreement with the Executive Director's decision not 
to amend the record;
    (iii) The procedures for filing such a statement of disagreement 
with the Executive Director;
    (iv) The fact that any such statement of disagreement will be made 
available to anyone to whom the record is disclosed, together with, if 
the Executive Director deems it appropriate, a brief statement setting 
forth the Executive Director's reasons for refusing to amend;
    (v) The fact that prior recipients of the record in issue will be 
provided with the statement of disagreement and the Executive Director's 
statement, if any, to the extent that an accounting of such disclosures 
has been maintained pursuant to 5 U.S.C. 552a(c); and
    (vi) The individual's right to seek judicial review of the Executive 
Director's refusal to amend, pursuant to 5 U.S.C. 552a(g)(1)(A).
    (b) Statement of disagreement. As noted in paragraph (a)(9)(ii) of 
this section, an individual may file with the Executive Director a 
statement setting forth his or her disagreement with the Executive 
Director's denial of his or her request to amend a record.
    (1) Such statement of disagreement shall be delivered to the ASC, 
2100 Pennsylvania Avenue, NW., Suite 200, Washington, DC 20037, within 
30 days after receipt by the individual of the Executive Director's 
order denying the amendment, excluding Saturdays, Sundays and Federal 
holidays. For good cause shown, this period can be extended for a 
reasonable time.
    (2) Such statement of disagreement shall concisely state the basis 
for the

[[Page 834]]

individual's disagreement. Unduly lengthy or irrelevant materials will 
be returned to the individual by the Executive Director for appropriate 
revisions before they become a permanent part of the individual's 
record.
    (3) The record about which a statement of disagreement has been 
filed will clearly note which part of the record is disputed and the 
Executive Director will provide copies of the statement of disagreement 
and, if the Executive Director deems it appropriate, provide a concise 
statement of his or her reasons for refusing to amend the record, to 
persons or other agencies to whom the record has been or will be 
disclosed.



Sec. 1102.108  General provisions.

    (a) Extensions of time. Pursuant to Secs. 1102.103(b), 1102.104(d), 
1102.109(c) and 1102.109(a)(4) of this subpart, the time within which a 
request for information, access or amendment by an individual with 
respect to records maintained by the ASC that pertain to him or her 
normally would be processed may be extended for good cause shown or 
because of unusual circumstances. As used in these rules, good cause and 
unusual circumstances shall include, but only to the extent reasonably 
necessary to the proper processing of a particular request:
    (1) The need to search for and collect the requested records from 
establishments that are separate from the ASC. Some records of the ASC 
may be stored in Federal Records Centers in accordance with law--
including many of the documents that have been on file with the ASC for 
more than 2 years--and cannot be made available promptly. Any person who 
has requested for personal examination a record stored at the Federal 
Records Center will be notified when the record will be made available.
    (2) The need to search for, collect, and appropriately examine a 
voluminous amount of separate and distinct records which may be demanded 
in a single request. While every reasonable effort will be made to 
comply fully with each request as promptly as possible on a first-come, 
first-served basis, work done to search for, collect and appropriately 
examine records in response to a request for a large number of records 
will be contingent upon the availability of processing personnel in 
accordance with an equitable allocation of time to all members of the 
public who have requested or wish to request records.
    (3) The need for consultation, which shall be conducted with all 
practicable speed, with another agency having a substantial interest in 
the determination of the request, or among two or more components within 
the ASC having substantial subject-matter interest herein.
    (b) Effective date of action. Whenever it is provided in this 
subpart that an acknowledgement or response to a request will be given 
by specific times, deposit in the mails of such acknowledgement or 
response by that time, addressed to the person making the request, will 
be deemed full compliance.
    (c) Records in use by a member of the ASC or its staff. Although 
every effort will be made to make a record in use by a member of the ASC 
or its staff available when requested, it may occasionally be necessary 
to delay making such a record available when doing so at the time the 
request is made would seriously interfere with the work of the ASC or 
its staff.
    (d) Missing or lost records. Any person who has requested a record 
or a copy of a record pertaining to him or her will be notified if the 
record sought cannot be found. If the person so requests, he or she will 
be notified if the record subsequently is found.
    (e) Oral requests; misdirected written requests--(1) Telephone and 
other oral requests. Before responding to any request by an individual 
for information concerning whether records maintained by the ASC in a 
system of records pertain to the individual or to any request for access 
to records by an individual, such request must be in writing and signed 
by the individual making the request. The Executive Director will not 
entertain any appeal from an alleged denial of failure to comply with an 
oral request. Any person who has made an oral request for information or 
access to records who believes that the request has been improperly 
denied should resubmit the request in appropriate written form to obtain 
proper

[[Page 835]]

consideration and, if need be, administrative review.
    (2) Misdirected written requests. The ASC cannot assure that a 
timely or satisfactory response will be given to written requests for 
information, access or amendment by an individual with respect to 
records pertaining to him or her that are directed to the ASC other than 
in a manner prescribed in Secs. 1102.103(a), 1102.106(a), 
1102.108(a)(2), and 1102.110 of this subpart. Any staff member who 
receives a written request for information, access or amendment should 
promptly forward the request to the Privacy Act Officer. Misdirected 
requests for records will be considered to have been received by the ASC 
only when they have been actually received by the Privacy Act Officer in 
cases under Sec. 1102.108(a)(2). The Executive Director will not 
entertain any appeal from an alleged denial or failure to comply with a 
misdirected request, unless it is clearly shown that the request was in 
fact received by the Privacy Act Officer.



Sec. 1102.109  Fees.

    (a) There will be no charge assessed to the individual for the ASC's 
expense involved in searching for or reviewing the record. Copies of the 
ASC's records will be provided by a commercial copier at rates 
established by a contract between the copier and the ASC or by the ASC 
at the rates in Sec. 1101.4(b)(5)(ii) of 12 CFR part 1101.
    (b) Waiver or reduction of fees. Whenever the Executive Director of 
the ASC determines that good cause exists to grant a request for 
reduction or waiver of fees for copying documents, he or she may reduce 
or waive any such fees.



Sec. 1102.110  Penalties.

    Title 18 U.S.C. 1001 makes it a criminal offense, subject to a 
maximum fine of $10,000, or imprisonment for not more than 5 years or 
both, to knowingly and willingly make or cause to be made any false or 
fraudulent statements or representations in any matter within the 
jurisdiction of any agency of the United States. 5 U.S.C. 552a(i) makes 
it a misdemeanor punishable by a fine of not more than $5,000 for any 
person knowingly and willfully to request or obtain any record 
concerning an individual from the ASC under false pretenses. 5 U.S.C. 
552a(i) (1) and (2) provide criminal penalties for certain violations of 
the Privacy Act by officers and employees of the ASC.



    Subpart D--Description of Office, Procedures, Public Information

    Authority: 5 U.S.C. 552, 553(e); and Executive Order 12600, 52 FR 
23781 (3 CFR, 1987 Comp., p. 235).

    Source: 57 FR 60724, Dec. 22, 1992, unless otherwise noted.



Sec. 1102.300  Purpose and scope.

    This part sets forth the basic policies of the Appraisal 
Subcommittee of the Federal Financial Institutions Examination Council 
(``ASC'') regarding information it maintains and the procedures for 
obtaining access to such information. This part does not apply to the 
Federal Financial Institutions Examination Council. Section 1102.301 
sets forth definitions applicable to this part 1102, subpart D. Section 
1102.302 describes the ASC's statutory authority and functions. Section 
1102.303 describes the ASC's organization and methods of operation. 
Section 1102.304 describes the types of information and documents 
typically published in the Federal Register. Section 1102.305 explains 
how to access public records maintained on the ASC's World Wide Web site 
and at the ASC's office and describes the categories of records 
generally found there. Section 1102.306 implements the Freedom of 
Information Act (``FOIA'') (5 U.S.C. 552). Section 1102.307 authorizes 
the discretionary disclosure of exempt records under certain limited 
circumstances. Section 1102.308 provides anyone with the right to 
petition the ASC to issue, amend, and repeal rules of general 
application. Section 1102.309 sets out the ASC's confidential treatment 
procedures. Section 1102.310 outlines procedures for serving a subpoena 
or other legal process to obtain information maintained by the ASC.

[64 FR 72496, Dec. 28, 1999]



Sec. 1102.301  Definitions.

    For purposes of this subpart:

[[Page 836]]

    (a) ASC means the Appraisal Subcommittee of the Federal Financial 
Institutions Examination Council.
    (b) Commercial use request means a request from, or on behalf of, a 
requester who seeks records for a use or purpose that furthers the 
commercial, trade, or profit interests of the requester or the person on 
whose behalf the request is made. In determining whether a request falls 
within this category, the ASC will determine the use to which a 
requester will put the records requested and seek additional information 
as it deems necessary.
    (c) Direct costs means those expenditures the ASC actually incurs in 
searching for, duplicating, and, in the case of commercial requesters, 
reviewing records in response to a request for records.
    (d) Disclose or disclosure mean to give access to a record, whether 
by producing the written record or by oral discussion of its contents. 
Where the ASC member or employee authorized to release ASC documents 
makes a determination that furnishing copies of the documents is 
necessary, these words include the furnishing of copies of documents or 
records.
    (e) Duplication means the process of making a copy of a record 
necessary to respond to a request for records or for inspection of 
original records that contain exempt material or that cannot otherwise 
be directly inspected. Such copies can take the form of paper copy, 
microfilm, audiovisual records, or machine readable records (e.g., 
magnetic tape or computer disk).
    (f) Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate or 
graduate higher education, an institution of professional education, and 
an institution of vocational education, which operates a program or 
programs of scholarly research.
    (g) Field review includes, but is not limited to, formal and 
informal investigations of potential irregularities occurring at State 
appraiser regulatory agencies involving suspected violations of Federal 
or State civil or criminal laws, as well as such other investigations as 
may conducted pursuant to law.
    (h) Non-commercial scientific institution means an institution that 
is not operated on a commercial basis as that term is defined in 
paragraph (b) of this section, and which is operated solely for the 
purpose of conducting scientific research, the results of which are not 
intended to promote any particular product or industry.
    (i) Record includes records, files, documents, reports 
correspondence, books, and accounts, or any portion thereof, in any form 
the ASC regularly maintains them.
    (j) Representative of the news media means any person primarily 
engaged in gathering news for, or a free-lance journalist who can 
demonstrate a reasonable expectation of having his or her work product 
published or broadcast by, an entity that is organized and operated to 
publish or broadcast news to the public. The term news means information 
that is about current events or that would be of current interest to the 
general public.
    (k) Review means the process of examining documents located in a 
response to a request that is for a commercial use to determine whether 
any portion of any document located is permitted to be withheld. It also 
includes processing any documents for disclosure, e.g, doing all that is 
necessary to excise them and otherwise prepare them for release. Review 
does not include time spent resolving general legal or policy issues 
regarding the application of exemptions.
    (l) Search includes all time spent looking for material that is 
responsive to a request, including page-by-page or line-by-line 
identification of material within records. Searches may be done manually 
and/or by computer using existing programming.
    (m) State appraiser regulatory agency includes, but is not limited 
to, any board, commission, individual or other entity that is authorized 
by State law to license, certify, and supervise the activities or 
persons authorized to perform appraisals in connections with federally 
related transactions and real estate related financial transactions that 
require the services of a State licensed or certified appraiser.

[64 FR 72496, Dec. 28, 1999]

[[Page 837]]



Sec. 1102.302  ASC authority and functions.

    (a) Authority. The ASC was established on August 9, 1989, pursuant 
to title XI of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989, as amended (``FIRREA''), 12 U.S.C. 3331 and 
3310 through 3351. Title XI is intended ``to provide that Federal 
financial and public policy interests in real estate related 
transactions will be protected by requiring that real estate appraisals 
utilized in connection with federally related transactions are performed 
in writing, in accordance with uniform standards, by individuals whose 
competency has been demonstrated and whose professional conduct will be 
subject to effective supervision.'' 12 U.S.C. 3331.
    (b) Functions. The ASC's statutory functions are generally set out 
in 12 U.S.C. 3332. In summary, the ASC must:
    (1) Monitor the requirements established by the States for the 
certification and licensing of individuals who are qualified to perform 
appraisals in connection with federally related transactions, including 
a code of professional responsibility;
    (2) Monitor the requirements of the Federal financial institutions 
regulatory agency and Resolution Trust Corporation with respect to 
appraisal standards for federally related transactions and 
determinations as to which federally related transactions require the 
services of a State certified appraiser and which require the services 
of a State licensed appraiser;
    (3) Monitor and review the practices, procedures, activities and 
organizational structure of the Appraisal Foundation; and
    (4) Maintain a national registry of State certified and licensed 
appraisers eligible to perform appraisals in federally related 
transactions.



Sec. 1102.303  Organization and methods of operation.

    (a) Statutory and other guidelines. Statutory requirements relating 
to the ASC's organization are stated in 12 U.S.C. 3310, 3333 and 3334. 
The ASC has adopted and published Rules of Operation guiding its 
administration, meetings and procedures. These Rules of Operation were 
published at 56 FR 28561 (June 21, 1991) and 56 FR 33451 (July 22, 
1991).
    (b) ASC members and staff. The ASC is composed of six members, each 
being designated by the head of their respective agencies: the Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, Office of the Comptroller of the Currency, National Credit 
Union Administration, Office of Thrift Supervision, and the Department 
of Housing and Urban Development. Administrative support and substantive 
program, policy, and legal guidance for ASC activities are provided by a 
small, full-time, professional staff supervised by an Executive 
Director.
    (c) FFIEC. Title XI placed the ASC within FFIEC as a separate, 
appropriated agency of the United States Government with specific 
statutory responsibilities under Federal law.
    (d) ASD Address ASC offices are located at 2000 K Street, NW., Suite 
310; Washington, DC 20006.

[57 FR 60724, Dec. 22, 1992, as amended at 64 FR 72497, Dec. 28, 1999]



Sec. 1102.304  Federal Register publication.

    The ASC publishes the following information in the Federal Register 
for the guidance of the public:
    (a) Description of its organization and the established places at 
which, the officers from whom, and the methods whereby, the public may 
secure information, make submittals or re nests, or obtain decisions;
    (b) Statements of the general course and method by which its 
functions are channeled and determined, including the nature and 
requirements of all formal and informal procedures available;
    (c) Rules of procedure, descriptions of forms available or the 
places at which forms may be obtained, and instructions as to the scope 
and contents of all papers, reports or examinations;
    (d) Substantive rules of general applicability adopted as authorized 
by law, and statements of general policy or interpretations of general 
applicability formulated and adopted by the ASC;
    (e) Every amendment, revision or repeal of the foregoing; and

[[Page 838]]

    (f) General notices of proposed rulemaking.

[64 FR 72497, Dec. 28, 1999]



Sec. 1102.305  Publicly available records.

    (a) Records available on the ASCs World Wide Web site--(1) 
Discretionary release of documents. The ASC encourages the public to 
explore the wealth of resources available on the ASC's Internet World 
Wide Web site, located at: http://www.asc.gov. The ASC has elected to 
publish a broad range to materials on its Web site.
    (2) Documents required to be made available via computer 
telecommunications. (i) The following types of documents created on or 
after November 1, 1996, and required to be made available through 
computer telecommunications, may be found on the ASC's Internet World 
Wide Web site located at: http://www.asc.gov:
    (A) Final opinions, including concurring and dissenting opinions, as 
well as final orders, made in the adjudication of cases;
    (B) Statements of policy and interpretations adopted by the ASC that 
are not published in the Federal Register;
    (C) Administrative staff manuals and instructions to staff that 
affect a member of the public;
    (D) Copies of all records (regardless of form or format), such as 
correspondence relating to field reviews or other regulatory subjects, 
released to any person under Sec. 1102.306 that, because of the nature 
of their subject matter, the ASC has determined are likely to be the 
subject of subsequent requests;
    (E) A general index of the records referred to in paragraph 
(a)(2)(i)(D) of this section.
    (ii) To the extent permitted by law, the ASC may delete identifying 
details when it makes available or publishes any records. If reduction 
is necessary, the ASC will, to the extent technically feasible, indicate 
the amount of material deleted at the place in the record where such 
deletion is made unless that indication in and of itself will jeopardize 
the purpose for the redaction.
    (b) Types of written communications. The following types of written 
communications shall be subject to paragraph (a) of this section:
    (1) The ASC's annual report to Congress;
    (2) All final opinions and orders made in the adjudication of cases;
    (3) All statements of general policy not published in the Federal 
Register.
    (4) Requests for the ASC or its staff to provide interpretive advice 
with respect to the meaning or application of any statute administered 
by the ASC or any rule or regulation adopted thereunder and any ASC 
responses thereto;
    (5) Requests for a statement that, on the basis of the facts 
presented in such a request, the ASC would not take any enforcement 
action pertaining to the facts as represented and any ASC responses 
thereto: and
    (6) Correspondence between the ASC and a State appraiser regulatory 
agency arising out of the ASC's field review of the State agency's 
appraiser regulatory program.
    (c) Applicable fees. (1) If applicable, fees for furnishing records 
under this section are as set forth in Sec. 1102.306(e).
    (2) Information on the ASC's World Wide Web site is available to the 
public without charge. If, however, information available on the ASC's 
World Wide Web site is provided pursuant to a Freedom of Information Act 
request processed under g 1102.306 then fees apply and will be assessed 
pursuant to Sec. 1102.306(e).

[59 FR 1902, Jan. 13, 1994, as amended at 64 FR 72497, Dec. 28, 1999]



Sec. 1102.306  Procedures for requesting records.

    (a) Making a request for records. (1) The request shall be submitted 
in writing to the Executive Director:
    (i) By facsimile clearly marked ``Freedom of Information Act 
Request'' to (202) 872-7501;
    (ii) By letter to the Executive Director marked ``Freedom of 
Information Act Request''; 2000 K Street, NW., Suite 301; Washington, DC 
20006; or
    (iii) By sending Internet e-mail to the Executive Director marked 
``Freedom of Information Act Request'' at his or her e-mail address 
listed on the ASC's World Wide Web site.

[[Page 839]]

    (2) The request shall contain the following information:
    (i) The name and address of the requester, an electronic mail 
address, if available, and the telephone number at which the requester 
may be reached during normal business hours;
    (ii) Whether the requester is an educational institution, non-
commercial scientific institution, or news media representative;
    (iii) A statement agreeing to pay the applicable fees, or a 
statement identifying a maximum fee that is acceptable to the requester, 
or a request for a waiver or reduction of fees that satisfies paragraph 
(e)(1)(x) of this section; and
    (iv) The preferred form and format of any responsive information 
requested, if other than paper copies.
    (3) A request for identifiable records shall reasonably describe the 
records in a way that enables the ASC's staff to identify and produce 
the records with reasonable effort and without unduly burdening or 
significantly interfering with any ASC operations.
    (b) Defective requests. The ASC need not accept or process a request 
that does not reasonably describe the records requested or that does not 
otherwise comply with the requirements of this subpart. The ASC may 
return a defective request, specifying the deficiency. The requester may 
submit a corrected request, which will be treated as a new request.
    (c) Processing requests. (1) Receipt of requests. Upon receipt of 
any request that satisfies paragraph (a) of this section, the Executive 
Director shall assign the request to the appropriate processing track 
pursuant to this section. The date of receipt for any request, including 
one that is addressed incorrectly or that is referred by another agency, 
is the date the Executive Director actually receives the request.
    (2) Expedited processing. (i) Where a person requesting expedited 
access to records has demonstrated a compelling need for the records, or 
where the ASC has determined to expedite the response, the ASC shall 
process the request as soon as practicable. To show a compelling need 
for expedited processing, the requester shall provide a statement 
demonstrating that:
    (A) The failure to obtain the records on an expedited basis could 
reasonably be expected to pose an imminent threat to the life or 
physical safety of an individual; or
    (B) The requester can establish that it is primarily engaged in 
information dissemination as its main professional occupation or 
activity, and there is urgency to inform the public of the government 
activity involved in the re request; and
    (C) The requester's statement must be certified to be true and 
correct to the best of the person's knowledge and belief and explain in 
detail the basis for requesting expedited processing.
    (ii) The formality of the certification required to obtain expedited 
treatment may be waived by the Executive Director as a matter of 
administrative discretion.
    (3) A requester seeking expedited processing will be notified 
whether expedited processing has been granted within ten (10) working 
days of the receipt of the request. If the request for expedited 
processing is denied, the requester may file an appeal pursuant to the 
procedures set forth in paragraph (g) of this section, and the ASC shall 
respond to the appeal within ten (10) working days after receipt of the 
appeal.
    (4) Priority of responses. Consistent with sound administrative 
process, the ASC processes requests in the order they are received. 
However, in the ASC's discretion, or upon a court order in a matter to 
which the ASC is a party, a particular request may be processed out of 
turn.
    (5) Notification. (i) The time for response to requests will be 
twenty (20) working days except:
    (A) In the case of expedited treatment under paragraph (c)(2) of 
this section;
    (B) Where the running of such time is suspended for the calculation 
of a cost estimate for the requester if the ASC determines that the 
processing of the request may exceed the requester's maximum fee 
provision or if the charges are likely to exceed $250 as provided for in 
paragraph (e)(1)(iv) of this section;

[[Page 840]]

    (C) Where the running of such time is suspended for the payment of 
fees pursuant to the paragraph (c)(5)(i)(B) and (e)(1) of this section; 
or
    (D) In unusual circumstances, as defined in 5 U.S.C. 552(a)(6)(B) 
and further described in paragraph (c)(5)(iii) of this section.
    (ii) In unusual circumstances as referred to in paragraph 
(c)(5)(i)(D) of this section, the time limit may be extended for a 
period of:
    (A) Ten (10) working days as provided by written notice to the 
requester, setting forth the reasons for the extension and the date on 
which a determination is expected to be dispatched; or
    (B) Such alternative time period as agreed to by the requester or as 
reasonably determined by the ASC when the ASC notifies the requester 
that the request cannot be processed in the specified time limit.
    (iii) Unusual circumstances may arise when:
    (A) The records are in facilities that are not located at the ASC's 
Washington office;
    (B) The records requested are voluminous or are not in close 
proximity to one another; or
    (C) There is a need to consult with another agency or among two or 
more components of the ASC having a substantial interest in the 
determination.
    (6) Response to request. In response to a request that satisfies the 
requirements of paragraph (a) of this section, a search shall be 
conducted of records maintained by the ASC in existence on the date of 
receipt of the request, and a review made of any responsive information 
located. To the extent permitted by law, the ASC may redact identifying 
details when it makes available or publishes any records. If redaction 
is appropriate, the ASC will, to the extent technically feasible, 
indicate the amount of material deleted at the place in the record where 
such deletion is made unless that indication in and of itself will 
jeopardize the purpose for the redaction. The ASC shall notify the 
requester of:
    (i) The ASC's determination of the request;
    (ii) The reasons for the determination;
    (iii) If the response is a denial of an initial request or if any 
information is withheld, the ASC will advise the requester in writing:
    (A) If the denial is in part or in whole;
    (B) The name and title of each person responsible for the denial 
(when other than the person signing the notification);
    (C) The exemptions relied on for the denial; and
    (D) The right of the requester to appeal the denial to the Chairman 
of the ASC within 30 business days following receipt of the 
notification, as specified in paragraph (h) of this section.
    (d) Providing responsive records. (1) Copies of requested records 
shall be sent to the requester by regular U.S. mail to the address 
indicated in the request, unless the requester elects to take delivery 
of the documents at the ASC or makes other acceptable arrangements, or 
the ASC deems it appropriate to send the documents by another means.
    (2) The ASC shall provide a copy of the record in any form or format 
requested if the record is readily reproducible by the ASC in that form 
or format, but the ASC need not provide more than one copy of any record 
to a requester.
    (3) By arrangement with the requester, the ASC may elect to send the 
responsive records electronically if a substantial portion of the 
request is in electronic format. If the information requested is made 
pursuant to the Privacy Act of 1974, 5 U.S.C. 552a, it will not be sent 
by electronic means unless reasonable security measures can be provided.
    (e) Fees--(1) General rules. (i) Persons requesting records of the 
ASC shall be charged for the direct costs of search, duplication, and 
review as set forth in paragraphs (e)(2) and (e)(3) of this section, 
unless such costs are less than the ASC's cost of processing the 
requester's remittance.
    (ii) Requesters will be charged for search and review costs even if 
responsive records are not located or, if located, are determined to be 
exempt from disclosure.

[[Page 841]]

    (iii) Multiple requests seeking similar or related records from the 
same requester or group of requesters will be aggregated for the 
purposes of this section.
    (iv) If the ASC determines that the estimated costs of search, 
duplication, or review of requested records will exceed the dollar 
amount specified in the request, or if no dollar amount is specified, 
the ASC will advise the requester of the estimated costs. The requester 
must agree in writing to pay the costs of search, duplication, and 
review prior to the ASC initiating any records search.
    (v) If the ASC estimates that its search, duplication, and review 
costs will exceed $250, the requester must pay an amount equal to 20 
percent of the estimated costs prior to the ASC initiating any records 
search.
    (vi) The ASC ordinarily will collect all applicable fees under the 
final invoice before releasing copies of requested records to the 
requester.
    (vii) The ASC may require any requester who has previously failed to 
pay charges under this section within 30 calendar days of mailing of the 
invoice to pay in advance the total estimated costs of search, 
duplication, and review. The ASC also may require a requester who has 
any charges outstanding in excess of 30 calendar days following mailing 
of the invoice to pay the full amount due, or demonstrate that the fee 
has been paid in full, prior to the ASC initiating any additional 
records search.
    (viii) The ASC may begin assessing interest charges on unpaid bills 
on the 31st day following the day on which the invoice was sent. 
Interest will be at the rate prescribed in Sec. 3717 of title 31 of the 
United States Code and will accrue from the date of the invoice.
    (ix) The time limit for the ASC to respond to a request will not 
begin to run until the ASC has received the requester's written 
agreement under paragraph (e)(1)(iv) of this section, and advance 
payment under paragraph (e)(1)(v) or (vii) of this section, or payment 
of outstanding charges under paragraph (e)(1)(vii) or (viii) of this 
section.
    (x) As part of the initial request, a requester may ask that the ASC 
waive or reduce fees if disclosure of the records is in the public 
interest because it is likely to contribute significantly to public 
understanding of the operations or activities of the government and is 
not primarily in the commercial interest of the requester. 
Determinations as to a waiver or reduction of fees will be made by the 
Executive Director (or designee), and the requester will be notified in 
writing of his or her determination. A determination not to grant a 
request for a waiver or reduction of fees under this paragraph may be 
appealed to the ASC's Chairman pursuant to the procedure set forth in 
paragraph (g) of this section.
    (2) Chargeable fees by category of requester. (i) Commercial use 
requesters shall be charged search, duplication, and review costs.
    (ii) Educational institutions, noncommercial scientific 
institutions, and news media representatives shall be charged 
duplication costs, except for the first 100 pages.
    (iii) Requesters not described in paragraph (e)(2)(i) or (ii) of 
this section shall be charged the full reasonable direct cost of search 
and duplication, except for the first two hours of search time and first 
100 pages of duplication.
    (3) Fee schedule. The dollar amount of fees which the ASC may charge 
to records requesters will be established by the Executive Director. The 
ASC may charge fees that recoup the full allowable direct costs it 
incurs. Fees are subject to change as costs change. The fee schedule 
will be published periodically on the ASC's Internet World Wide Web site 
(http://www.asc.gov) and will be effective on the date of publication. 
Copies of the fee schedule may be obtained by request at no charge by 
contacting the Executive Director by letter, Internet email or 
facsimile.
    (i) Manual searches for records. The ASC will charge for manual 
searches for records at the basic rate of pay of the employee making the 
search plus 16 percent to cover employee benefit costs.
    (ii) Computer searches for records. The fee for searches of 
computerized records is the actual direct cost of the

[[Page 842]]

search, including computer time, computer runs, and the operator's time 
apportioned to the search multiplied by the operator's basic rate of pay 
plus 16 percent to cover employee benefit costs.
    (iii) Duplication of records. (A) The per-page fee for paper copy 
reproduction of documents is $.25.
    (B) For other methods of reproduction or duplication, the ASC will 
charge the actual direct costs of reproducing or duplicating the 
documents, including each involved employee's basic rate of pay plus 16 
percent to cover employee benefit costs.
    (iv) Review of records. The ASC will charge commercial use 
requesters for the review of records at the time of processing the 
initial request to determine whether they are exempt from mandatory 
disclosure at the basic rate of pay of the employee making the search 
plus 16 percent to cover employee benefit costs. The ASC will not charge 
at the administrative appeal level for review of an exemption already 
applied. When records or portions of records are withheld in full under 
an exemption which is subsequently determined not to apply, the ASC may 
charge for a subsequent review to determine the applicability of other 
exemptions not previously considered.
    (v) Other services. Complying with requests for special services, 
other than a readily produced electronic form or format, is at the ASC's 
discretion. The ASC may recover the full costs of providing such 
services to the requester.
    (4) Use of contractors. The ASC may contact with independent 
contractors to locate, reproduce, and/or disseminate records; provided, 
however, that the ASC has determined that the ultimate cost to the 
requester will be no greater than it would be if the ASC performed these 
tasks itself. In no case will the ASC contract our responsibilities 
which FOIA provides that the ASC alone may discharge, such as 
determining the applicability of an exemption or whether to waive or 
reduce fees.
    (f) Exempt information. A request for records may be denied if the 
requested record contains information that falls into one or more of the 
following categories.\1\ If the requested record contains both exempt 
and nonexempt information, the nonexempt portions, which may reasonable 
be segregated from the exempt portions, will be released to the 
requester. If redaction is necessary, the ASC will, to the extent 
technically feasible, indicate the amount of material deleted at the 
place in the record where such deletion is made unless that indication 
in and of itself will jeopardize the purpose for the redaction. The 
categories of exempt records are as follows:
---------------------------------------------------------------------------

    \1\ Classification of a record as exempt from disclosure under the 
provisions of this paragraph (f) shall not be construed as authority to 
withhold the record if it is otherwise subject to disclosure under the 
Privacy Act of 1974 (5 U.S.C. 552a) or other Federal statute, any 
applicable regulation of ASC or any other Federal agency having 
jurisdiction thereof, or any directive or order of any court of 
competent jurisdiction.
---------------------------------------------------------------------------

    (1) Records that are specifically authorized under criteria 
established by an Executive Order to be kept secret in the interest of 
national defense or foreign policy and are in fact properly classified 
pursuant to such Executive Order;
    (2) Records related solely to the internal personnel rules and 
practices of the ASC;
    (3) Records specifically exempted from disclosure by statute, 
provided that such statute:
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue; or
    (ii) Establishes particular criteria for withholding or refers to 
particular types of matters to be withheld;
    (4) Trade secrets and commercial or financial information obtained 
from a person that is privileged or confidential;
    (5) Interagency or intra-agency memoranda or letters that would not 
be available by law to a private party in litigation with the ASC;
    (6) Personnel, medical, and similar files (including financial 
files) the disclosure of which would constitute a clearly unwarranted 
invasion of personal privacy;
    (7) Records compiled for law enforcement purposes, but only to the 
extent

[[Page 843]]

that the production of such law enforcement records:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trail or an 
impartial adjudication;
    (ii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a State, local, or foreign agency or 
authority or any private institution which furnished records on a 
confidential basis;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual;
    (8) Records that are contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the ASC or any agency responsible for the regulation or 
supervision of financial institutions; or
    (9) Geological and geophysical information and data, including maps, 
concerning wells.
    (g) Appeals. (1) Appeals should be addressed to the Executive 
Director; ASC; 2000 K Street, NW., Suite 310; Washington, DC 20006.
    (2) A person whose initial request for records under this section, 
or whose request for a waiver of fees under paragraph (e)(1)(x) of this 
section, has been denied, either in part or in whole, has the right to 
appeal the denial to the ASC's Chairman (or designee) within 30 business 
days after receipt of notification of the denial. Appeals of denials of 
initial requests or for a waiver of fees must be in writing and include 
any additional information relevant to consideration of the appeal.
    (3) Except in the case of an appeal for expedited treatment under 
paragraph (c)(3) of this section, the ASC will notify the appellant in 
writing within 20 business days after receipt of the appeal and will 
state:
    (i) Whether it is granted or denied in whole or in part;
    (ii) The name and title of each person responsible for the denial 
(if other than the person signing the notification);
    (iii) The exemptions relied upon for the denial in the case of 
initial requests for records; and
    (iv) The right to judicial review of the denial under the FOIA.
    (4) If a requester is appealing for denial of expedited treatment, 
the ASC will notify the appellant within ten business days after receipt 
of the appeal of the ASC's disposition.
    (5) Complete payment of any outstanding fee invoice will be required 
before an appeal is processed.
    (h) Records of another agency. If a requested record is the property 
of another Federal agency or department, and that agency or department, 
either in writing or by regulation, expressly retains ownership of such 
record, upon receipt of a request for the record the ASC will promptly 
inform the requester of this ownership and immediately shall forward the 
request to the proprietary agency or department either for processing in 
accordance with the latter's regulations or for guidance with respect to 
disposition.

[64 FR 72497, Dec. 28, 1999; 65 FR 31960, May 19, 2000]



Sec. 1102.307  Disclosure of exempt records.

    (a) Disclosure prohibited. Except as provided in paragraph (b) of 
this section or by 12 CFR part 1102, subpart C, no person shall disclose 
or permit the disclosure of any exempt records, or information contained 
therein, to any persons other than those officers, directors, employees, 
or agents of the ASC or a State appraiser regulatory agency who has a 
need for such records in the performance of their official duties. In 
any instance in which any person has possession, custody or control of 
ASC exempt records or information contained therein, all copies of such 
records shall remain the property of the ASC and under no circumstances 
shall any person, entity or agency disclose or make public in any manner 
the exempt records or information without

[[Page 844]]

written authorization from the Executive Director, after consultation 
with the ASC General Counsel.
    (b) Disclosure authorized. Exempt records or information of the ASC 
may be disclosed only in accordance with the conditions and requirements 
set forth in this paragraph (b). Requests for discretionary disclosure 
of exempt records of information pursuant to this paragraph (b) may be 
submitted directly to the Executive Director. Such administrative 
request must clearly state that it seeks discretionary disclosure of 
exempt records, clearly identify the records sought, provide sufficient 
information for the ASC to evaluate whether there is good cause for 
disclosure, and meet all other conditions set forth in paragraph (b)(1) 
through (3) of this section. Authority to disclose or authorize 
disclosure of exempt records of the ASC is delegated to the Executive 
Director, after consultation with the ASC General Counsel.
    (1) Disclosure by Executive Director. (i) The Executive Director, or 
designee, may disclose or authorize the disclosure of any exempt record 
in response to a valid judicial subpoena, court order, or other legal 
process, and authorize any current or former member, officer, employee, 
agent of the ASC, or third party, to appear and testify regarding an 
exempt record or any information obtained in the performance of such 
person's official duties, at any administrative or judicial hearing or 
proceeding where such person has been served with a valid subpoena, 
court order, or other legal process requiring him or her to testify. The 
Executive Director shall consider the relevancy of such exempt records 
or testimony to the ligation, and the interests of justice, in 
determining whether to disclose such records or testimony. Third parties 
seeking disclosure of exempt records or testimony in litigation to which 
the ASC is not a party shall submit a request for discretionary 
disclosure directly to the Executive Director. Such requests shall 
specify the information sought with reasonable particularity and shall 
be accompanied by a statement with supporting documentation showing in 
detail the relevance of such exempt information to the litigation, 
justifying good cause for disclosure, and a commitment to be bound by a 
protective order. Failure to exhaust such administration request prior 
to service of a subpoena or other legal process may, in the Executive 
Director's discretion, serve as a basis for objection to such subpoena 
or legal process.
    (ii) The Executive Director, or designee, may in his or her 
discretion and for good cause, disclose or authorize disclosure of any 
exempt record or testimony by a current or former member, officer, 
employee, agent of the ASC, or third party, sought in connection with 
any civil or criminal hearing, proceeding or investigation without the 
service of a judicial subpoena, or other legal process requiring such 
disclosure or testimony. If he or she determines that the records or 
testimony are relevant to the hearing, proceeding or investigation and 
that disclosure is in the best interests of justice and not otherwise 
prohibited by Federal statute. Where the Executive Director or designee 
authorizes a current or former member, officer, director, empl9oyee or 
agent of the ASC to testify or disclose exempt records pursuant to this 
paragraph (b)(1), he or she may, in his or her discretion, limit the 
authorization to so much of the record or testimony as is relevant to 
the issues at such hearing, proceeding or investigation, and he or she 
shall give authorization only upon fulfillment of such conditions as he 
or she deems necessary and practicable to protect the confidential 
nature of such records or testimony.
    (2) Authorization for disclosure by the Chairman of the ASC. Except 
where expressly prohibited by law, the Chairman of the ASC may, in his 
or her discretion, authorize the disclosure of any ASC records. Except 
where disclosure is required by law, the Chairman may direct any current 
or former member, officer, director, employee or agent of the ASC to 
refuse to disclose any record or to give testimony if the Chairman 
determines, in his or her discretion, that refusal to permit such 
disclosure is in the public interest.
    (3) Limitations on disclosure. All steps practicable shall be taken 
to protect the confidentiality of exempt records and information. Any 
disclosure permitted by paragraph (b) of this section

[[Page 845]]

is discretionary and nothing in paragraph (b) of this section shall be 
construed as requiring the disclosure of information. Further, nothing 
in paragrah (b) of this section shall be construed as restricting, in 
any manner, the authority of the ASC, the Chairman of the ASC, the 
Executive Director, the ASC General Counsel, or their designees, in 
their discretion and in light of the facts and circumstances attendant 
in any given case, to require conditions upon, and to limit, the form, 
manner, and extent of any disclosure permitted by this section. Wherever 
practicable, disclosure of exempt records shall be made pursuant to a 
protective order and redacted to exclude all irrelevant or non-
responsive exempt information.

[64 FR 72500, Dec. 28, 1999]



Sec. 1102.308  Right to petition for issuance, amendment and repeal of rules of general application.

    Any person desiring the issuance, amendment or repeal of a rule of 
general application may file a petition for those purposes with the 
Executive Director of the ASC. The petition shall include a statement 
setting forth the text or substance of any proposed rule or amendment 
desired or shall specify the rule for which repeal is desired. The 
petitioner also shall state the nature of his or her interest and the 
reasons for seeking ASC action. The Executive Director shall acknowledge 
receipt of the petition within ten business days of receipt. As soon as 
reasonably practicable, the ASC shall consider the petition and related 
staff recommendations and shall take such action as it deems 
appropriate. The Executive Director shall notify the petitioner in 
writing of the ASC action within ten business days of the action.

[59 FR 1902, Jan. 13, 1994. Redesignated at 64 FR 72497, Dec. 28, 1999]



Sec. 1102.309  Confidential treatment procedures.

    (a) In general. Any submitter of written information to the ASC who 
desires that some or all of his or her submission be afforded 
confidential treatment under 5 U.S.C. 552(b)(4) (i.e., trade secrets and 
commercial or financial information obtained from a person and 
privileged or confidential) shall file a request for confidential 
treatment with the Executive Director of the ASC at the time the written 
information is submitted to the ASC or within ten business days 
thereafter. Nothing in this section limits the authority of the ASC and 
its staff to make determinations regarding access to documents under 
this subpart.
    (b) Form of request. A request for confidential treatment shall be 
submitted in a separate letter or memorandum conspicuously entitled, 
``Request for Confidential Treatment.'' Each request shall state in 
reasonable detail the facts and arguments supporting the request and its 
legal justification. If the submitter had been required by the ASC to 
provide the particular information, conclusory statements that the 
information would be useful to competitors or would impair sales or 
similar statements generally will not be considered sufficient to 
justify confidential treatment. When the submitter had voluntarily 
provided the particular information to the ASC, the submitter must 
specifically identify the documents or information which are of a kind 
the submitter would not customarily make available to the public.
    (c) Designation and separation of confidential material. Submitters 
shall clearly designate all information considered confidential and 
shall clearly separate such information from other non-confidential 
information, whenever possible.
    (d) ASC action on request. A request for confidential treatment of 
information will be considered only in connection with a request for 
access to the information under FOIA as implemented by this subpart. 
Upon the receipt of a request for access, the Executive Director or his 
or her designee (``ASC Officer'') as soon as possible shall provide the 
submitter with a written notice describing the request and shall provide 
the submitter with a reasonable opportunity, no longer than ten business 
days, to submit written objections to disclosure of the information. 
Notice may be given orally, and such notice shall be promptly confirmed 
in writing. The ASC Officer may provide a submitter with a notice if the 
submitter

[[Page 846]]

did not request confidential treatment of the requested information. If 
the ASC required the submitter to provide the requested information, the 
ASC Officer would need substantial reason to believe that disclosure of 
the requested information would result in substantial competitive harm 
to the submitter. If the submitter provided the information voluntarily 
to the ASC, the ASC officer would need to believe that the information 
is of a kind the submitter would not customarily make available to the 
public. The ASC Officer similarly shall notify the person seeking 
disclosure of the information under FOIA of the existence of a request 
for confidential treatment. These notice requirements need not be 
followed if the ASC Officer determines under this subpart that the 
information should not be disclosed; the information has been published 
or has been officially made available to the public; disclosure of the 
information is required by law (other than FOIA); or the submitter's 
request for confidential treatment appears obviously frivolous, in such 
instance the submitter shall be given written notice of the 
determination to disclose the information at least five business days 
prior to release. The ASC Officer shall carefully consider the issues 
involved, and if disclosure of the requested information is warranted, a 
written notice, containing a brief description of why the submitter's 
objections were not sustained, must be forwarded to the submitter within 
ten business days. The time for response may be extended up to ten 
additional business days, as provided in 5 U.S.C. 552(a)(6)(B), or for 
other periods by agreement between the requester and the ASC Officer. 
This notice shall be provided to the submitter at least five business 
days prior to release of the requested information.
    (e) Notice of lawsuit. The ASC Officer shall notify a submitter of 
any filing of any suit against the ASC pursuant to 5 U.S.C. 552 to 
compel disclosure of documents or information covered by the submitter's 
request for confidential treatment within ten business days of service 
of the suit. The ASC Officer also shall notify the requester of the 
documents or information of any suit filed by the submitter against the 
ASC to enjoin their disclosure within ten business days of service of 
the suit.

[59 FR 1902, Jan. 13, 1994. Redesignated at 64 FR 72497, Dec. 28, 1999]



Sec. 1102.310  Service of process.

    (a) Service. Any subpoena or other legal process to obtain 
information maintained by the ASC shall be duly issued by a court having 
jurisdiction over the ASC, and served upon the Chairman ASC; 2000 K 
Street, NW., Suite 310; Washington, DC 20006. Where the ASC is named as 
a party, service of process shall be made pursuant to the Federal Rules 
of Civil Procedure upon the Chairman at the above address. The Chairman 
shall immediately forward any subpoena, court order or legal process to 
the General Counsel. If consistent with the terms of the subpoena, court 
order or legal process, the ASC may require the payment of fees, in 
accordance with the fee schedule referred to in Sec. 1102.306(e) prior 
to the release of any records requested pursuant to any subpoena or 
other legal process.
    (b) Notification by person served. If any current or former member, 
officer, employee or agent of the ASC, or any other person who has 
custody of records belonging to the ASC, is served with a subpoena, 
court order, or other process requiring that person's attendance as a 
witness concerning any matter related to official duties, or the 
production of any exempt record of the ASC, such person shall promptly 
advise the Executive Director of such service, the testimony and records 
described in the subpoena, and all relevant facts that may assist the 
Executive Director, in consultation with the ASC General Counsel, in 
determining whether the individual in question should be authorized to 
testify or the records should be produced. Such person also should 
inform the court or tribunal that issued the process and the attorney 
for the party upon whose application the process was issued, if known, 
of the substance of this section.
    (c) Appearance by person served. Absent the written authorization of 
the Executive Director or designee to disclose the requested 
information, any current or former member, officer, employee, or agent 
of the ASC, and any other person having custody of records

[[Page 847]]

of the ASC, who is required to respond to a subpoena or other legal 
process, shall attend at the time and place therein specified and 
respectfully decline to produce any such record or give any testimony 
with respect thereto, basing such refusal on this section.

[64 FR 72501, Dec. 28, 1999]

[[Page 849]]



          CHAPTER XIV--FARM CREDIT SYSTEM INSURANCE CORPORATION




  --------------------------------------------------------------------
Part                                                                Page
1400            Organization and functions..................         851
1401            Employee responsibilities and conduct.......         851
1402            Releasing information.......................         851
1403            Privacy Act regulations.....................         859
1408            Collection of claims owed the United States.         862
1410            Premiums....................................         875
1411            Rules of practice and procedure.............         879

[[Page 851]]



PART 1400--ORGANIZATION AND FUNCTIONS--Table of Contents




                  Subpart A--Organization and Functions

Sec.
1400.1  Farm Credit System Insurance Corporation.
1400.2  Board of Directors of the Farm Credit System Insurance 
          Corporation.
1400.3  Organization of the Farm Credit System Insurance Corporation.

Subpart B [Reserved]

    Authority: 12 U.S.C. 2277a-5; 12 U.S.C. 2277a-7.

    Source: 55 FR 36610, Sept. 6, 1990, unless otherwise noted.



                  Subpart A--Organization and Functions



Sec. 1400.1  Farm Credit System Insurance Corporation.

    The Farm Credit System Insurance Corporation (Corporation) was 
created by sections 5.52 and 5.58 of the Farm Credit Act of 1971 (Act) 
to carry out the responsibilities set out in part E of title V of the 
Act, including insuring the timely payment of principal and interest on 
notes, bonds, debentures, and other obligations issued under subsection 
(c) or (d) of section 4.2 of the Farm Credit Act on behalf of one or 
more Farm Credit System banks.



Sec. 1400.2  Board of Directors of the Farm Credit System Insurance Corporation.

    The Board of Directors of the Farm Credit System Insurance 
Corporation is entrusted with the responsibility to manage the 
Corporation. The Board of Directors consists of the members of the Farm 
Credit Administration Board. The Chairman of the Corporation is elected 
by the members of the Board.



Sec. 1400.3  Organization of the Farm Credit System Insurance Corporation.

    Officers of the Corporation shall be appointed by the Board of 
Directors of the Corporation. Current information on the organization of 
the Corporation may be obtained from the Corporation, 1501 Farm Credit 
Drive, McLean, Virginia 22102-0826.

Subpart B [Reserved]



PART 1401--EMPLOYEE RESPONSIBILITIES AND CONDUCT--Table of Contents




    Authority: 5 U.S.C. 7301; 12 U.S.C. 2277a-7.



Sec. 1401.1  Cross-references to employee ethical conduct standards and financial disclosure regulations.

    Board members, officers, and other employees of the Farm Credit 
System Insurance Corporation are subject to the Standards of Ethical 
Conduct for Employees of the Executive Branch at 5 CFR part 2635, the 
Farm Credit System Insurance Corporation regulation at 5 CFR part 4001, 
which supplements the Executive Branch-wide Standards, and the executive 
branch-wide financial disclosure regulations at 5 CFR part 2634.

[60 FR 30778, June 12, 1995]



PART 1402--RELEASING INFORMATION--Table of Contents




Subpart A [Reserved]

 Subpart B--Availability of Records of the Farm Credit System Insurance 
                               Corporation

Sec.
1402.10  Official records of the Farm Credit System Insurance 
          Corporation.
1402.11  Current index.
1402.12  Identification of records requested.
1402.13  Request for records.
1402.14  Response to requests for records.
1402.15  Business information.

              Subpart C--Fees for Provision of Information

1402.20  Definitions.
1402.21  Categories of requesters--fees.
1402.22  Fees to be charged.
1402.23  Waiver or reduction of fees.
1402.24  Advance payments--notice.
1402.25  Interest.
1402.26  Charges for unsuccessful searches or reviews.
1402.27  Aggregating requests.

    Authority: Secs. 5.58, 5.59 of the Farm Credit Act (12 U.S.C. 2277a-
7, 2277a-8); 5 U.S.C. 552; 52 FR 10012; E.O. 12600, 52 FR 23781, 3 CFR, 
1987 Comp., p. 235.

    Source: 59 FR 24638, May 12, 1994, unless otherwise noted.

[[Page 852]]

Subpart A [Reserved]



 Subpart B--Availability of Records of the Farm Credit System Insurance 
                               Corporation



Sec. 1402.10  Official records of the Farm Credit System Insurance Corporation.

    (a) The Farm Credit System Insurance Corporation shall, upon any 
request for records which reasonably describes them and is made in 
accordance with the provisions of this subpart, make the records 
available as promptly as practicable to any person, except exempt 
records, which include the following:
    (1) Records specifically authorized under criteria established by an 
Executive order to be kept secret in the interest of national defense or 
foreign policy and are in fact properly classified pursuant to such 
Executive order;
    (2) Records related solely to the internal personnel rules and 
practices of the Farm Credit System Insurance Corporation, including 
matters which are for the guidance of agency personnel;
    (3) Records which are specifically exempted from disclosure by 
statute;
    (4) Trade secret, commercial, proprietary, or financial information 
obtained from any person or organization and privileged or confidential;
    (5) Inter-agency or intra-agency memorandums or letters which would 
not be available by law to a private party in litigation with the Farm 
Credit System Insurance Corporation or in litigation in which the United 
States, as a real party in interest on behalf of the Farm Credit System 
Insurance Corporation, is a party;
    (6) Personnel and similar files, the disclosure of which would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Records or information compiled for law enforcement purposes, 
but only to the extent that the production of such law enforcement 
records or information:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trial or an 
impartial adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a State, local, or foreign agency or 
authority or any private institution which furnished information on a 
confidential basis, and, in the case of a record or information compiled 
by criminal law enforcement authority in the course of a criminal 
investigation or by an agency conducting a lawful national security 
intelligence investigation, information furnished by a confidential 
source;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual; and
    (8) Records of or related to examination, operation, reports of 
condition and performance, or reports of or related to Farm Credit 
System institutions and that are prepared by, on behalf of, or for the 
use of the Farm Credit System Insurance Corporation.
    (b) Any reasonably segregable portion of a record shall be provided 
to any person requesting such record after deletion of the portions 
which are exempt under this section.
    (c) This section does not authorize withholding of information or 
limit the availability of records to the public, except as specifically 
stated in this section. This section is not authority to withhold 
information from Congress.



Sec. 1402.11  Current index.

    The Farm Credit System Insurance Corporation will make available for 
public inspection and copying a current index to provide identifying 
information as to any matter required by 5 U.S.C. 552(a)(2)(C) to be 
made available or published in the Federal Register. Because of the 
anticipated infrequency of requests for material required to be indexed, 
it is determined that the publication of the index in the Federal

[[Page 853]]

Register is unnecessary and impracticable. However, the Farm Credit 
System Insurance Corporation will provide a copy of such index to a 
member of the public upon request therefor at a cost not in excess of 
the direct cost of duplication.



Sec. 1402.12  Identification of records requested.

    A member of the public who requests records from the Farm Credit 
System Insurance Corporation shall provide a reasonable description of 
the records sought including, where possible, specific information as to 
dates, titles, and subject matter, so that such records may be located 
without undue search or inquiry. If a record is not identified by a 
reasonable description, the request therefor may be denied.



Sec. 1402.13  Request for records.

    Requests for records shall be in writing and addressed to the 
attention of the Freedom of Information Officer, Farm Credit System 
Insurance Corporation, McLean, Virginia 22102. A request improperly 
addressed will be deemed not to have been received for purposes of the 
20-day time period set forth in Sec. 1402.14(a) of this part until it is 
received, or would have been received, by the Freedom of Information 
Officer, with the exercise of due diligence by Corporation personnel. 
Records requested in conformance with this subpart and which are not 
exempt records may be received in person or by mail as specified in the 
request. Records to be received in person will be available for 
inspection or copying during business hours on a regular business day in 
the office of the Farm Credit System Insurance Corporation, 1501 Farm 
Credit Drive, McLean, Virginia, 22102.

[62 FR 49593, Sept. 23, 1997]



Sec. 1402.14  Response to requests for records.

    (a) Within 20 days (excluding Saturdays, Sundays, and legal public 
holidays), or any extensions thereof as provided in paragraph (d) of 
this section, of the receipt of a request by the Freedom of Information 
Officer, the Freedom of Information Officer shall determine whether to 
comply with or deny such a request and transmit a written notice thereof 
to the requester.
    (b) Within 30 days of the receipt of a notice denying, in whole or 
in part, a request for records, the requester may appeal the denial. The 
appeal shall be in writing addressed to the Chief Financial Officer, 
Farm Credit System Insurance Corporation, and both the letter and 
envelope shall be clearly marked ``FOIA Appeal.'' An appeal improperly 
addressed shall be deemed not to have been received for purposes of the 
20-day time period set forth in paragraph (c) of this section until it 
is received, or would have been received with the exercise of due 
diligence by Farm Credit System Insurance Corporation personnel.
    (c) Within 20 days (excluding Saturdays, Sundays, and legal public 
holidays), or any extension thereof as provided in paragraph (d) of this 
section, of the receipt of an appeal, the Farm Credit System Insurance 
Corporation shall act upon the appeal and place a notice of the 
determination thereof in writing in the mail addressed to the requester. 
If the determination on the appeal upholds in whole or in part the 
denial of the request for records, or, if a determination on the appeal 
has not been mailed at the end of the 20-day period or the last 
extension thereof, the requester is deemed to have exhausted that 
person's administrative remedies, giving rise to a right of review in a 
district court of the United States as specified in 5 U.S.C. 552(a)(4). 
When a determination cannot be mailed within the applicable time limit, 
the appeal will nevertheless be processed. In such case, upon the 
expiration of the time limit, the requester will be informed of the 
reason for the delay, of the date on which a determination may be 
expected to be mailed, and of that person's right to seek judicial 
review. The requester may be asked to forego judicial review until 
determination of the appeal.
    (d) In ``unusual circumstances,'' the 20-day time limit prescribed 
in paragraphs (a) and (c) of this section, or both, may be extended by 
the Freedom of Information Officer or, in the case of an appeal, by the 
General Counsel, provided that the total of all extensions

[[Page 854]]

does not exceed 10 days (excluding Saturdays, Sundays, and legal public 
holidays). Extensions shall be made by written notice to the requester 
setting forth the reason for the extension and the date on which a 
determination is expected to be dispatched. As used in this paragraph, 
``unusual circumstances'' means, but only to the extent reasonably 
necessary to the proper processing of the request:
    (1) The need to search for and collect the requested records from 
facilities or other establishments that are separate from the office 
processing the request;
    (2) The need to search for, collect, and appropriately examine a 
voluminous amount of separate and distinct records which are demanded in 
a single request; or
    (3) The need for consultation, which shall be conducted with all 
practicable speed, with another agency having a substantial interest in 
the determination of the request or among two or more components of the 
agency having a substantial subject matter interest therein.
    (e) A requester may obtain, upon request, expedited processing of a 
request for records when the requester demonstrates a ``compelling 
need'' for the information. The Freedom of Information Officer will 
notify the requester within 10 calendar days after receipt of such a 
request whether the Corporation granted expedited processing. If 
expedited processing was granted, the request will be processed as soon 
as practicable.
    (1) For the purposes of this paragraph, ``compelling need'' means:
    (i) That a failure to obtain requested records on an expedited basis 
could reasonably be expected to pose an imminent threat to the life or 
physical safety of an individual; or
    (ii) With respect to a request made by a person primarily engaged in 
disseminating information, urgency to inform the public concerning 
actual or alleged Federal Government activity.
    (2) A requester shall demonstrate a compelling need by a statement 
certified by the requester to be true and correct to the best of such 
person's knowledge and belief.
    (3) The procedures of this paragraph (e) for expedited processing 
apply to both requests for information and to administrative appeals.

[59 FR 24638, May 12, 1994, as amended at 62 FR 49593, Sept. 23, 1997]



Sec. 1402.15  Business information.

    (a) Business information provided to the Farm Credit System 
Insurance Corporation by a business submitter shall not be disclosed 
pursuant to a Freedom of Information Act request except in accordance 
with this section. The requirements of this section shall not apply if:
    (1) The Farm Credit System Insurance Corporation determines that the 
information should not be disclosed;
    (2) The information lawfully has been published or otherwise made 
available to the public; or
    (3) Disclosure of the information is required by law (other than 5 
U.S.C. 552).
    (b) For the purpose of this section, the following definitions shall 
apply.
    (1) Business information means trade secrets or other commercial or 
financial information.
    (2) Business submitter means any person or entity which provides 
business information to the government.
    (3) Requester means the person or entity making the Freedom of 
Information Act request.
    (c)(1) The Freedom of Information Officer shall, to the extent 
permitted by law, provide a business submitter with prompt written 
notice of a request encompassing its business information whenever 
required under paragraph (d) of this section. Such notice shall either 
describe the exact nature of the business information requested or 
provide copies of the records or portions thereof containing the 
business information.
    (2) Whenever the Freedom of Information Officer provides a business 
submitter with the notice set forth in paragraph (c)(1) of this section, 
the Freedom of Information Officer shall notify the requester that the 
request includes information that may arguably be exempt from disclosure 
under 5 U.S.C. 552(b)(4) and that the person or entity who submitted the 
information to the Farm Credit System Insurance Corporation has been 
given the opportunity to comment on the proposed disclosure of 
information.

[[Page 855]]

    (d)(1) The Farm Credit System Insurance Corporation shall provide a 
business submitter with notice of a request whenever:
    (i) The business submitter has in good faith designated the 
information as commercially or financially sensitive information; or
    (ii) The Farm Credit System Insurance Corporation has reason to 
believe that the disclosure of the information may result in commercial 
or financial injury to the business submitter.
    (2) Notice of a request for business information falling within 
paragraph (d)(1)(i) of this section shall be required for a period of 
not more than 10 years after the date of submission unless the business 
submitter requests and provides acceptable justification for a specific 
notice period of greater duration.
    (3) Whenever possible, the business submitter's claim of 
confidentiality should be supported by a statement or certification by 
an officer or authorized representative of the business submitter that 
the information in question is in fact a trade secret or commercial or 
financial information that is privileged or confidential.
    (e) Through the notice described in paragraph (c) of this section, 
the Farm Credit System Insurance Corporation shall, to the extent 
permitted by law, afford a business submitter a reasonable period within 
which it can provide the Farm Credit System Insurance Corporation with a 
detailed statement of any objection to disclosure. Such statement shall 
specify all grounds for withholding any of the information under any 
exemption of the Freedom of Information Act and, in the case of the 
exemption provided by 5 U.S.C. 552(b)(4), shall demonstrate why the 
information is contended to be a trade secret or commercial or financial 
information that is privileged or confidential. Information provided by 
a business submitter pursuant to this paragraph may itself be subject to 
disclosure under the Freedom of Information Act.
    (f)(1) The Farm Credit System Insurance Corporation shall consider 
carefully a business submitter's objections and specific grounds for 
nondisclosure prior to determining whether to disclose business 
information. Whenever the Farm Credit System Insurance Corporation 
decides to disclose business information over the objection of a 
business submitter, the Freedom of Information Officer shall forward to 
the business submitter a written notice which shall include:
    (i) A statement of the reasons for which the business submitter's 
disclosure objections were not sustained;
    (ii) A description of the business information to be disclosed; and
    (iii) A specified disclosure date.
    (2) The notice of intent to disclose required by this paragraph 
shall be sent, to the extent permitted by law, within a reasonable 
number of days prior to the specified date upon which disclosure is 
intended.
    (3) The Freedom of Information Officer shall send a copy of such 
disclosure notice to the requester at the same time the notice is sent 
to the business submitter.
    (g) Whenever a requester brings suit seeking to compel disclosure of 
business information covered by paragraph (d) of this section, the Farm 
Credit System Insurance Corporation shall promptly notify the business 
submitter of such action.



              Subpart C--Fees for Provision of Information



Sec. 1402.20  Definitions.

    For the purpose of this subpart, the following definitions shall 
apply:
    (a) Commercial use request means a request for information that is 
from or on behalf of an individual or entity seeking information for a 
use or purpose that furthers the commercial, trade, or profit interests 
of the requester or on whose behalf the request is being made. To 
determine whether a request is properly classified as a commercial use 
request, the Farm Credit System Insurance Corporation shall determine 
the purpose for which the documents requested will be used. If the Farm 
Credit System Insurance Corporation has reasonable cause to doubt the 
purpose specified in the request, for which a requester will use the 
records sought, or where the purpose is not clear from the request 
itself, the Farm Credit System Insurance Corporation

[[Page 856]]

shall seek additional clarification before assigning the request to a 
specified category.
    (b) Direct costs means those expenditures the Farm Credit System 
Insurance Corporation actually incurs in searching for and reproducing 
documents to respond to a request for information. In the case of a 
commercial use request, the term also means those expenditures the Farm 
Credit System Insurance Corporation actually incurs in reviewing 
documents to respond to the request. The direct cost shall include the 
salary of the employee performing work (the basic rate of pay for the 
employee plus 16 percent of that rate to cover benefits) and the cost of 
operating reproduction equipment. Not included in direct costs are 
overhead expenses such as costs of space, and heating or lighting the 
facility in which the records are stored.
    (c) Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate higher 
education, an institution of graduate higher education, an institution 
of professional education, and an institution of vocational education 
that operates a program or programs of scholarly research.
    (d) Noncommercial scientific institution refers to an institution 
that is not operated on a commercial, trade, or profit basis and that is 
operated solely for the purpose of conducting scientific research, the 
results of which are not intended to promote any particular product or 
industry.
    (e) Representative of the news media means any person actively 
gathering news for an entity that is organized and operated to publish 
or broadcast news to the public. The term news means information that is 
about current events or that would be of current interest to the public. 
Examples of news media entities include television or radio stations 
broadcasting to the public at large, and publishers of periodicals (but 
only in those instances when the periodicals can qualify as 
disseminators of ``news'') who make their products available for 
purchase or subscription by the general public. These examples are not 
intended to be all-inclusive. As traditional methods of news delivery 
evolve (e.g., electronic dissemination of newspapers through 
telecommunication services), such alternative media would be included in 
this category. ``Freelance'' journalists may be regarded as working for 
a news organization if they can demonstrate a solid basis for expecting 
publication through that organization even though they are not actually 
employed by the organization. A publication contract would be the 
clearest proof that a journalist is working for a news organization, but 
the Farm Credit System Insurance Corporation may look to a requester's 
past publication record to determine whether a journalist is working for 
a news organization.
    (f) Reproduce and reproduction mean the process of making a copy of 
a document necessary to respond to a request for information. Such 
copies take the form of paper copy, microfilm, audio-visual materials, 
or machine readable documentation (e.g., magnetic tape or disk), among 
others. The copy provided shall be in a form that is reasonably usable 
by requesters.
    (g) Review means the process of examining documents located in 
response to a request for information to determine whether any portion 
of any document located is permitted to be withheld. It also includes 
processing any documents for disclosure (e.g., doing all that is 
necessary to prepare the documents for release). The term review does 
not include the time spent resolving general legal or policy issues 
regarding the application of exemptions. The Farm Credit System 
Insurance Corporation shall only charge fees for reviewing documents in 
response to a commercial use request.
    (h) Search includes all time spent looking for material that is 
responsive to a request for information, including page-by-page or line-
by-line identification of material within documents. Searching for 
material shall be done in the most efficient and least expensive manner 
so as to minimize the costs of the Farm Credit System Insurance 
Corporation and the requester. For example, a line-by-line search for 
responsive material should not be performed when merely reproducing an 
entire document would be the less expensive and the

[[Page 857]]

faster method of complying with a request for information. Searches may 
be done manually or by computer using existing programming. A ``search'' 
for material that is responsive to a request should be distinguished 
from a ``review'' of material to determine whether the material is 
exempt from disclosure.



Sec. 1402.21  Categories of requesters--fees.

    There are four categories of requesters: Commercial use requesters; 
educational and noncommercial scientific institutions; representatives 
of the news media; and all other requesters.
    (a) The Farm Credit System Insurance Corporation shall charge fees 
for records requested by or on behalf of educational institutions and 
noncommercial scientific institutions in an amount which equals the cost 
of reproducing the documents responsive to the request, excluding the 
costs of reproducing the first 100 pages. For a request to be included 
in this category, requesters must show that the request being made is 
authorized by and under the auspices of a qualifying institution and 
that the records are not sought for a commercial use but are sought in 
furtherance of scholarly research (if the request is from an educational 
institution) or scientific research (if the request is from a 
noncommercial scientific institution).
    (b) The Farm Credit System Insurance Corporation shall charge fees 
for records requested by representatives of the news media in an amount 
which equals the cost of reproducing the documents responsive to the 
request, excluding the costs of reproducing the first 100 pages. For a 
request to be included in this category, the requester must qualify as a 
representative of the news media and the request must not be made for a 
commercial use. A request for records supporting the news dissemination 
function of the requester shall not be considered to be a request that 
is for a commercial use.
    (c) The Farm Credit System Insurance Corporation shall charge fees 
for records requested by persons or entities making a commercial use 
request in an amount that equals the full direct costs for searching 
for, reviewing for release, and reproducing the records sought. 
Commercial use requesters are not entitled to 2 hours of free search 
time nor 100 free pages of reproduction of documents. In accordance with 
Sec. 1402.26, commercial use requesters may be charged the costs of 
searching for and reviewing records even if there is ultimately no 
disclosure of records.
    (d) The Farm Credit System Insurance Corporation shall charge fees 
for records requested by persons or entities that are not classified in 
any of the categories listed in paragraphs (a), (b), or (c) of this 
section in an amount that equals the full reasonable direct cost of 
searching for and reproducing records that are responsive to the 
request, excluding the first 2 hours of search time and the cost of 
reproducing the first 100 pages of records. In accordance with 
Sec. 1402.26, requesters in this category may be charged the cost of 
searching for records even if there is ultimately no disclosure of 
records, excluding the first 2 hours of search time.
    (e) For purposes of the exceptions contained in this section on 
assessment of fees, the word pages refers to paper copies of ``8\1/2\ 
x  11'' or ``11  x  14.'' Thus, requesters are not entitled to 100 
microfiche or 100 computer disks, for example. A microfiche containing 
the equivalent of 100 pages or a computer disk containing the equivalent 
of 100 pages of computer printout meets the terms of the exception.
    (f) For purposes of paragraph (d) of this section, the term search 
time has as its basis, manual search. To apply this term to searches 
made by computer, the Farm Credit System Insurance Corporation will 
determine the hourly cost of operating the central processing unit and 
the operator's hourly salary plus 16 percent of that rate. When the cost 
of search (including the operator time and the cost of operating the 
computer to process a request) equals the equivalent dollar amount of 2 
hours of the salary of the person performing the search, i.e., the 
operator, the Farm Credit System Insurance Corporation will begin 
assessing charges for computer search.



Sec. 1402.22  Fees to be charged.

    (a) Generally, the fees charged for requests for records shall cover 
the full

[[Page 858]]

allowable direct costs of searching for, reproducing, and reviewing 
documents that are responsive to a request for information.
    (b) Manual searches for records will be charged at the salary 
rate(s) (i.e., basic pay plus 16 percent of that rate) of the 
employee(s) making the search.
    (c) Computer searches for records will be charged at the actual 
direct cost of providing the service. This will include the cost of 
operating the central processing unit for that portion of operating time 
that is directly attributable to searching for records and the operator/
programmer salary apportionable to the search. A charge shall also be 
made for any substantial amounts of special supplies or materials used 
to contain, present, or make available the output of computers, based 
upon the prevailing levels of costs to the Farm Credit System Insurance 
Corporation for the type and amount of such supplies of materials that 
are used. Nothing in this paragraph shall be construed to entitle any 
person or entity, as a right, to any services in connection with 
computerized records, other than services to which such person or entity 
may be entitled under the provisions of this subpart.
    (d) Only requesters who are seeking documents for commercial use may 
be charged for time spent reviewing records to determine whether they 
are exempt from mandatory disclosure. Charges may be assessed only for 
the initial review; i.e., the review undertaken the first time the Farm 
Credit System Insurance Corporation analyzes the applicability of a 
specific exemption to a particular record or portion of a record. 
Records or portions of records withheld in full under an exemption that 
is subsequently determined not to apply may be reviewed again to 
determine the applicability of other exemptions not previously 
considered. The costs for such a subsequent review is assessable.
    (e) Records will be reproduced at a rate of $.15 per page. For 
copies prepared by computer, such as tapes or printouts, the requester 
shall be charged the actual cost, including operator time, of production 
of the tape or printout. For other methods of reproduction, the actual 
direct costs of producing the document(s) shall be charged.
    (f) The Farm Credit System Insurance Corporation will recover the 
full costs of providing services such as those enumerated below when it 
elects to provide them:
    (1) Certifying that records are true copies; or
    (2) Sending records by special methods such as express mail.
    (g) Remittances shall be in the form either of a personal check or 
bank draft drawn on a bank in the United States, or a postal money 
order. Remittances shall be made payable to the order of the Farm Credit 
System Insurance Corporation.
    (h) A receipt for fees paid will be given upon request.



Sec. 1402.23  Waiver or reduction of fees.

    (a) The Farm Credit System Insurance Corporation may grant a waiver 
or reduction of fees if the Farm Credit System Insurance Corporation 
determines that the disclosure of the information is in the public 
interest because it is likely to contribute significantly to public 
understanding of the operations or activities of the Government, and the 
disclosure of the information is not primarily in the commercial 
interest of the requester.
    (b) The Farm Credit System Insurance Corporation will not charge 
fees to any requester, including commercial use requesters, if the cost 
of collecting a fee would be equal to or greater than the fee itself. 
The elements to be considered in determining the ``cost of collecting a 
fee'' are the administrative costs of receiving and recording a 
requester's remittance and processing the fee.



Sec. 1402.24  Advance payments--notice.

    (a) Where it is anticipated that the fees chargeable will amount to 
more than $25 and the requester has not indicated in advance a 
willingness to pay fees as high as are anticipated, the requester shall 
be promptly notified of the amount of the anticipated fee or such 
portion thereof that can be readily estimated.
    (b) If the anticipated fees exceed $250 and if the requester has a 
history of

[[Page 859]]

promptly paying fees charged in connection with information requests, 
the Farm Credit System Insurance Corporation may obtain satisfactory 
assurances that the requester will fully pay the fees anticipated.
    (c) If the anticipated fees exceed $250 and if the requester has no 
history of paying fees charged in connection with information requests, 
the Farm Credit System Insurance Corporation may require an advance 
payment of fees in an amount up to the full amount anticipated.
    (d) If the requester has previously failed to pay a fee charged 
within 30 days of the date of a billing for fees charged in connection 
with information requests, the Farm Credit System Insurance Corporation 
may require the requester to pay the fees owed, plus interest, or 
demonstrate that the full amount owed has been paid, and require the 
requester to make an advance payment of the full amount of the fees 
anticipated before processing a new request or a pending request from 
that requester.
    (e) The notice of the amount of an anticipated fee or a request for 
an advance deposit shall include an offer to the requester to confer 
with identified Farm Credit System Insurance Corporation personnel to 
attempt to reformulate the request in a manner which will meet the needs 
of the requester at a lower cost.



Sec. 1402.25  Interest.

    The Farm Credit System Insurance Corporation may begin charging 
interest on unpaid fees, starting on the 31st day following the day on 
which the bill for such fees was sent. Interest will not accrue if 
payment of the fees has been received by the Farm Credit System 
Insurance Corporation, even if said payment has not been processed. 
Interest will accrue at the rate prescribed in section 3717 of title 31, 
United States Code, and will accrue from the day on which the bill for 
such fees was sent.



Sec. 1402.26  Charges for unsuccessful searches or reviews.

    The Farm Credit System Insurance Corporation may assess charges for 
time spent searching for records on behalf of requesters in the 
categories provided for in Sec. 1402.21 (c) and (d), even if there are 
no records that are responsive to the request or there is ultimately no 
disclosure of records. The Farm Credit System Insurance Corporation may 
assess charges for time spent reviewing records for requesters in the 
category provided for in Sec. 1402.21(c) even if the records located are 
determined to be exempt from disclosure.



Sec. 1402.27  Aggregating requests.

    A requester may not file multiple requests at the same time, each 
seeking portions of a document or documents, solely in order to avoid 
payment of fees. When the Farm Credit System Insurance Corporation 
reasonably believes that a requester, or a group of requesters acting in 
concert, is attempting to break a request down into a series of requests 
for the purpose of evading the assessment of fees, the Farm Credit 
System Insurance Corporation may aggregate any such requests and charge 
accordingly. One element to be considered in determining whether a 
belief would be reasonable is the time period over which the requests 
have occurred.



PART 1403--PRIVACY ACT REGULATIONS--Table of Contents




Sec.
1403.1  Purpose and scope.
1403.2  Definitions.
1403.3  Procedures for requests pertaining to individual records in a 
          record system.
1403.4  Times, places, and requirements for identification of 
          individuals making requests.
1403.5  Disclosure of requested information to individuals.
1403.6  Special procedures for medical records.
1403.7  Request for amendment to record.
1403.8  Agency review of request for amendment of record.
1403.9  Appeal of an initial adverse determination of a request to amend 
          a record.
1403.10  Fees for providing copies of records.
1403.11  Criminal penalties.
1403.12  Exemptions.

    Authority: Secs. 5.58, 5.59 of the Farm Credit Act (12 U.S.C. 2277a-
7, 2277a-8); 5 U.S.C. app. 3, 5 U.S.C. 552a.

    Source: 59 FR 53084, Oct. 21, 1994, unless otherwise noted.

[[Page 860]]



Sec. 1403.1  Purpose and scope.

    (a) This part is published by the Farm Credit System Insurance 
Corporation pursuant to the Privacy Act of 1974 (Pub. L. 93-579, 5 
U.S.C. 552a) which requires each Federal agency to promulgate rules to 
establish procedures for notification and disclosure to an individual of 
agency records pertaining to that person, and for review of such 
records.
    (b) The records covered by this part include:
    (1) Personnel and employment records maintained by the Farm Credit 
System Insurance Corporation not covered by Secs. 293.101 through 
293.108 of the regulations of the Office of Personnel Management (5 CFR 
293.101 through 293.108); and
    (2) Other records contained in record systems maintained by the Farm 
Credit System Insurance Corporation.
    (c) This part does not apply to any records maintained by the Farm 
Credit System Insurance Corporation in its capacity as a receiver or 
conservator.



Sec. 1403.2  Definitions.

    For the purposes of this part:
    (a) Agency means the Farm Credit System Insurance Corporation. It 
does not include the Farm Credit System Insurance Corporation when it is 
acting as a receiver or a conservator;
    (b) Individual means a citizen of the United States or an alien 
lawfully admitted for permanent residence;
    (c) Maintain includes maintain, collect, use, or disseminate;
    (d) Record means any item, collection, or grouping of information 
about an individual that is maintained by an agency including, but not 
limited to, that person's education, financial transactions, medical 
history, and criminal or employment history, and that contains that 
person's name, or the identifying number, symbol, or other identifying 
particular assigned to the individual, such as a finger or voice print 
or photograph;
    (e) Routine use means, with respect to the disclosure of a record, 
the use of such record for a purpose that is compatible with the purpose 
for which it was collected;
    (f) Statistical record means a record in a system of records 
maintained for statistical research or reporting purposes only and not 
used in whole or in part in making any determination about an 
identifiable individual, except as provided by 13 U.S.C. 8;
    (g) System of records means a group of any records under the control 
of any agency from which information is retrieved by the name of an 
individual or by some identifying number, symbol, or other identifying 
particular assigned to the individual.



Sec. 1403.3  Procedures for requests pertaining to individual records in a record system.

    (a) Any present or former employee of the Farm Credit System 
Insurance Corporation seeking access to that person's official civil 
service records maintained by the Farm Credit System Insurance 
Corporation shall submit a request in such manner as is prescribed by 
the Office of Personnel Management.
    (b) Individuals shall submit their requests in writing to the 
Privacy Act Officer, Farm Credit System Insurance Corporation, McLean, 
Virginia 22102-0826, when seeking to obtain the following information 
from the Farm Credit System Insurance Corporation:
    (1) Notification of whether the agency maintains a record pertaining 
to that person in a system of records;
    (2) Notification of whether the agency has disclosed a record for 
which an accounting of disclosure is required to be maintained and made 
available to that person;
    (3) A copy of a record pertaining to that person or the accounting 
of its disclosure; or
    (4) The review of a record pertaining to that person or the 
accounting of its disclosure.

The request shall state the full name and address of the individual, and 
identify the system or systems of records believed to contain the 
information or record sought.



Sec. 1403.4  Times, places, and requirements for identification of individuals making requests.

    The individual making written requests for information or records 
ordinarily will not be required to verify that person's identity. The 
signature

[[Page 861]]

upon such requests shall be deemed to be a certification by the 
requester that he or she is the individual to whom the record pertains, 
or the parent of a minor, or the duly appointed legal guardian of the 
individual to whom the record pertains. The Privacy Act Officer, 
however, may require such additional verification of identity in any 
instance in which the Privacy Act Officer deems it advisable.



Sec. 1403.5  Disclosure of requested information to individuals.

    (a) The Privacy Act Officer shall, within a reasonable period of 
time after the date of receipt of a request for information of records:
    (1) Determine whether or not such request shall be granted;
    (2) Notify the requester of the determination, and, if the request 
is denied, of the reasons therefor; and
    (3) Notify the requester that fees for reproducing copies of records 
may be charged as provided in Sec. 1403.10.
    (b) If access to a record is denied because the information therein 
has been compiled by the Farm Credit System Insurance Corporation in 
reasonable anticipation of a civil or criminal action proceeding, the 
Privacy Act Officer shall notify the requester of that person's right to 
judicial appeal under 5 U.S.C. 552a(g).
    (c)(1) If access to a record is granted, the requester shall notify 
the Privacy Act Officer whether the requested record is to be copied and 
mailed to the requester or whether the record is to be made available 
for personal inspection.
    (2) A requester who is an individual may be accompanied by an 
individual selected by the requester when the record is disclosed, in 
which case the requester may be required to furnish a written statement 
authorizing the discussion of the record in the presence of the 
accompanying person.
    (d) If the record is to be made available for personal inspection, 
the requester shall arrange with the Privacy Act Officer a mutually 
agreeable time in the offices of the Farm Credit System Insurance 
Corporation for inspection of the record.



Sec. 1403.6  Special procedures for medical records.

    Medical records in the custody of the Farm Credit System Insurance 
Corporation which are not subject to Office of Personnel Management 
regulations shall be disclosed either to the individual to whom they 
pertain or that person's authorized or legal representative or to a 
licensed physician named by the individual.



Sec. 1403.7  Request for amendment to record.

    (a) If, after disclosure of the requested information, an individual 
believes that the record is not accurate, relevant, timely, or complete, 
that person may request in writing that the record be amended. Such a 
request shall be submitted to the Privacy Act Officer and shall identify 
the system of records and the record or information therein, a brief 
description of the material requested to be changed, the requested 
change or changes, and the reason for such change or changes.
    (b) The Privacy Act Officer shall acknowledge receipt of the request 
within 10 days (excluding Saturdays, Sundays, and legal holidays) and, 
if a determination has not been made, advise the individual when that 
person may expect to be advised of action taken on the request. The 
acknowledgment may contain a request for additional information needed 
to make a determination.



Sec. 1403.8  Agency review of request for amendment of record.

    Upon receipt of a request for amendment of a record, the Privacy Act 
Officer shall:
    (a) Correct any portion of a record which the individual making the 
request believes is not accurate, relevant, timely, or complete and 
thereafter inform the individual in writing of such correction, or
    (b) Inform the individual in writing of the refusal to amend the 
record and of the reasons therefor, and advise that the individual may 
appeal such determination as provided in Sec. 1403.9.

[[Page 862]]



Sec. 1403.9  Appeal of an initial adverse determination of a request to amend a record.

    (a) Not more than 10 days (excluding Saturdays, Sundays, and legal 
holidays) after receipt by an individual of an adverse determination on 
the individual's request to amend a record or otherwise, the individual 
may appeal to the Chief Operating Officer, Farm Credit System Insurance 
Corporation, McLean, Virginia 22102-0826.
    (b) The appeal shall be by letter, mailed or delivered to the Chief 
Operating Officer, Farm Credit System Insurance Corporation, McLean, 
Virginia 22102-0826. The letter shall identify the records involved in 
the same manner they were identified to the Privacy Act Officer, shall 
specify the dates of the request and adverse determination, and shall 
indicate the expressed basis for that determination. Also, the letter 
shall state briefly and succinctly the reasons why the adverse 
determination should be reversed.
    (c) The review shall be completed and a final determination made by 
the Chief Operating Officer not later than 30 days (excluding Saturdays, 
Sundays, and legal holidays) from receipt of the request for such 
review, unless the Chief Operating Officer extends such 30-day period 
for good cause. If the 30-day period is extended, the individual shall 
be notified of the reasons therefor.
    (d) If the Chief Operating Officer refuses to amend the record in 
accordance with the request, the individual shall be notified of the 
right to file a concise statement setting forth that person's 
disagreement with the final determination and that person's right under 
5 U.S.C. 552a(g)(1)(A) to a judicial review of the final determination.
    (e) If the refusal to amend a record as requested is confirmed, 
there shall be included in the disputed portion of the record a copy of 
the concise statement filed by the individual together with a concise 
statement of the reasons for not amending the record as requested. Such 
statements will be included when disclosure of the disputed record is 
made to persons and agencies as authorized under 5 U.S.C. 552a.



Sec. 1403.10  Fees for providing copies of records.

    Fees for providing copies of records shall be charged in accordance 
with Secs. 1402.22 and 1402.24 of this chapter.



Sec. 1403.11  Criminal penalties.

    Section 552a(i)(3) of the Privacy Act (5 U.S.C. 552a(i)(3)) makes it 
a misdemeanor, subject to a maximum fine of $5,000, to knowingly and 
willfully request or obtain any record concerning any individual from an 
agency under false pretenses. Sections 552a(i) (1) and (2) of the Act (5 
U.S.C. 552a(i) (1), (2)) provide penalties for violation by agency 
employees of the Act or regulations established thereunder.



Sec. 1403.12  Exemptions.

    Specific. Pursuant to 5 U.S.C. 552a(k)(5), the investigatory 
material compiled for law enforcement purposes in the following system 
of records is exempt from subsections (c)(3), (d), (e)(1), (e)(4) (G), 
(H), and (I), and (f) of 5 U.S.C. 552a and from the provisions of this 
part:

Personnel Security Files--FCSIC.



PART 1408--COLLECTION OF CLAIMS OWED THE UNITED STATES--Table of Contents




             Subpart A--Administrative Collection of Claims

Sec.
1408.1  Authority.
1408.2  Applicability.
1408.3  Definitions.
1408.4  Delegation of authority.
1408.5  Responsibility for collection.
1408.6  Demand for payment.
1408.7  Right to inspect and copy records.
1408.8  Right to offer to repay claim.
1408.9  Right to agency review.
1408.10  Review procedures.
1408.11  Special review.
1408.12  Charges for interest, administrative costs, and penalties.
1408.13  Contracting for collection services.
1408.14  Reporting of credit information.
1408.15  Credit report.

                    Subpart B--Administrative Offset

1408.20  Applicability.
1408.21  Collection by offset.
1408.22  Notice requirements before offset.
1408.23  Right to review of claim.
1408.24  Waiver of procedural requirements.

[[Page 863]]

1408.25  Coordinating offset with other Federal agencies.
1408.26  Stay of offset.
1408.27  Offset against amounts payable from Civil Service Retirement 
          and Disability Fund.

                    Subpart C--Offset Against Salary

1408.35  Purpose.
1408.36  Applicability of regulations.
1408.37  Definitions.
1408.38  Waiver requests and claims to the General Accounting Office.
1408.39  Procedures for salary offset.
1408.40  Refunds.
1408.41  Requesting current paying agency to offset salary.
1408.42  Responsibility of the Corporation as the paying agency.
1408.43  Nonwaiver of rights by payments.

    Authority: Sec. 5.58 of the Farm Credit Act (12 U.S.C. 2277a-7); 31 
U.S.C. 3701-3719; 5 U.S.C. 5514; 4 CFR parts 101-105; 5 CFR part 550.

    Source: 59 FR 24899, May 13, 1994, unless otherwise noted.



             Subpart A--Administrative Collection of Claims



Sec. 1408.1  Authority.

    The regulations of this part are issued under the Federal Claims 
Collection Act of 1966, as amended by the Debt Collection Act of 1982, 
31 U.S.C. 3701-3719 and 5 U.S.C. 5514, and in conformity with the joint 
regulations issued under that Act by the General Accounting Office and 
the Department of Justice (joint regulations) prescribing standards for 
administrative collection, compromise, suspension, and termination of 
agency collection actions, and referral to the General Accounting Office 
and to the Department of Justice for litigation of civil claims for 
money or property owed to the United States (4 CFR parts 101-105).



Sec. 1408.2  Applicability.

    This part applies to all claims of indebtedness due and owing to the 
United States and collectible under procedures authorized by the Federal 
Claims Collection Act of 1966, as amended by the Debt Collection Act of 
1982. The joint regulations and this part do not apply to conduct in 
violation of antitrust laws, tax claims, claims between Federal 
agencies, or to any claim which appears to involve fraud, presentation 
of a false claim, or misrepresentation on the part of the debtor or any 
other party having an interest in the claim, unless the Justice 
Department authorizes the Farm Credit System Insurance Corporation, 
pursuant to 4 CFR 101.3, to handle the claim in accordance with the 
provisions of 4 CFR parts 101 through 105. Additionally, this part does 
not apply to Farm Credit System Insurance Corporation's premiums 
regulations under part 1410 of this chapter.



Sec. 1408.3  Definitions.

    In this part (except where the term is defined elsewhere in this 
part), the following definitions shall apply:
    (a) Administrative offset or offset, as defined in 31 U.S.C. 
3701(a)(1), means withholding money payable by the United States 
Government to, or held by the Government for, a person to satisfy a debt 
the person owes the Government.
    (b) Agency means a department, agency, or instrumentality in the 
executive or legislative branch of the Government.
    (c) Claim or debt means money or property owed by a person or entity 
to an agency of the Federal Government. A ``claim'' or ``debt'' includes 
amounts due the Government from loans insured by or guaranteed by the 
United States and all other amounts due from fees, leases, rents, 
royalties, services, sales of real or personal property, overpayment, 
penalties, damages, interest, and fines.
    (d) Claim certification means a creditor agency's written request to 
a paying agency to effect an administrative offset.
    (e) Corporation means the Farm Credit System Insurance Corporation.
    (f) Creditor agency means an agency to which a claim or debt is 
owed.
    (g) Debtor means the person or entity owing money to the Federal 
Government.
    (h) Hearing official means an individual who is responsible for 
reviewing a claim under Sec. 1408.10.
    (i) Paying agency means an agency of the Federal Government owing 
money to a debtor against which an administrative or salary offset can 
be effected.

[[Page 864]]

    (j) Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deductions at one or more officially established 
pay intervals from the current pay account of a debtor.



Sec. 1408.4  Delegation of authority.

    The Corporation official(s) designated by the Chairman of the Farm 
Credit System Insurance Corporation are authorized to perform all duties 
which the Chairman is authorized to perform under these regulations, the 
Federal Claims Collection Act of 1966, as amended, and the joint 
regulations issued under that Act.



Sec. 1408.5  Responsibility for collection.

    (a) The collection of claims shall be aggressively pursued in 
accordance with the provisions of the Federal Claims Collection Act of 
1966, as amended, the joint regulations issued under that Act, and these 
regulations. Debts owed to the United States, together with charges for 
interest, penalties, and administrative costs, should be collected in 
one lump sum unless otherwise provided by law. If a debtor requests 
installment payments, the debtor, as requested by the Corporation, shall 
provide sufficient information to demonstrate that the debtor is unable 
to pay the debt in one lump sum. When appropriate, the Corporation shall 
arrange an installment payment schedule. Claims which cannot be 
collected directly or by administrative offset shall be either written 
off as administratively uncollectible or referred to the General Counsel 
for further consideration.
    (b) The Chairman, or designee of the Chairman, may compromise claims 
for money or property arising out of the activities of the Corporation, 
where the claim (exclusive of charges for interest, penalties, and 
administrative costs) does not exceed $100,000. When the claim exceeds 
$100,000 (exclusive of charges for interest, penalties, and 
administrative costs), the authority to accept a compromise rests solely 
with the Department of Justice. The standards governing the compromise 
of claims are set forth in 4 CFR part 103.
    (c) The Chairman, or designee of the Chairman, may suspend or 
terminate the collection of claims which do not exceed $100,000 
(exclusive of charges for interest, penalties, and administrative costs) 
after deducting the amount of any partial payments or collections. If, 
after deducting the amount of any partial payments or collections, a 
claim exceeds $100,000 (exclusive of charges for interest, penalties, 
and administrative costs), the authority to suspend or terminate rests 
solely with the Department of Justice. The standards governing the 
suspension or termination of claim collections are set forth in 4 CFR 
part 104.
    (d) The Corporation shall refer claims to the Department of Justice 
for litigation or to the General Accounting Office (GAO) for claims 
arising from audit exceptions taken by the GAO to payments made by the 
Corporation in accordance with 4 CFR part 105.



Sec. 1408.6  Demand for payment.

    (a) A total of three progressively stronger written demands at not 
more than 30-day intervals should normally be made upon a debtor, unless 
a response or other information indicates that additional written 
demands would either be unnecessary or futile. When necessary to protect 
the Government's interest, written demands may be preceded by other 
appropriate actions under Federal law, including immediate referral for 
litigation and/or administrative offset.
    (b) The initial demand for payment shall be in writing and shall 
inform the debtor of the following:
    (1) The amount of the debt, the date it was incurred, and the facts 
upon which the determination of indebtedness was made;
    (2) The payment due date, which shall be 30 calendar days from the 
date of mailing or hand delivery of the initial demand for payment;
    (3) The right of the debtor to inspect and copy the records of the 
agency related to the claim or to receive copies if personal inspection 
is impractical. The debtor shall be informed that the debtor may be 
assessed for the cost of copying the documents in accordance with 
Sec. 1408.7;

[[Page 865]]

    (4) The right of the debtor to obtain a review of the Corporation's 
determination of indebtedness;
    (5) The right of the debtor to offer to enter into a written 
agreement with the agency to repay the amount of the claim. The debtor 
shall be informed that the acceptance of such an agreement is 
discretionary with the agency;
    (6) That charges for interest, penalties, and administrative costs 
will be assessed against the debtor, in accordance with 31 U.S.C. 3717, 
if payment is not received by the payment due date;
    (7) That if the debtor has not entered into an agreement with the 
Corporation to pay the debt, has not requested the Corporation to review 
the debt, or has not paid the debt by the payment due date, the 
Corporation intends to collect the debt by all legally available means, 
which may include initiating legal action against the debtor, referring 
the debt to a collection agency for collection, collecting the debt by 
offset, or asking other Federal agencies for assistance in collecting 
the debt by offset;
    (8) The name and address of the Corporation official to whom the 
debtor shall send all correspondence relating to the debt; and
    (9) Other information, as may be appropriate.
    (c) If, prior to, during, or after completion of the demand cycle, 
the Corporation determines to collect the debt by either administrative 
or salary offset, the Corporation shall follow, as applicable, the 
requirements for a Notice of Intent to Collect by Administrative Offset 
or a Notice of Intent to Collect by Salary Offset set forth in 
Sec. 1408.22.
    (d) If no response to the initial demand for payment is received by 
the payment due date, the Corporation shall take further action under 
this part, under the Federal Claims Collection Act of 1966, as amended, 
under the joint regulations (4 CFR parts 101-105), or under any other 
applicable State or Federal law. These actions may include reports to 
credit bureaus, referrals to collection agencies, termination of 
contracts, debarment, and salary or administrative offset.



Sec. 1408.7  Right to inspect and copy records.

    The debtor may inspect and copy the Corporation records related to 
the claim. The debtor shall give the Corporation reasonable advanced 
notice that he/she intends to inspect and copy the records involved. The 
debtor shall pay copying costs unless they are waived by the 
Corporation. Copying costs shall be assessed pursuant to Sec. 1402.22 of 
this chapter.



Sec. 1408.8  Right to offer to repay claim.

    (a) The debtor may offer to enter into a written agreement with the 
Corporation to repay the amount of the claim. The acceptance of such an 
offer and the decision to enter into such a written agreement is at the 
discretion of the Corporation.
    (b) If the debtor requests a repayment arrangement because payment 
of the amount due would create a financial hardship, the Corporation 
shall analyze the debtor's financial condition. The Corporation may 
enter into a written agreement with the debtor permitting the debtor to 
repay the debt in installments if the Corporation determines, in its 
sole discretion, that payment of the amount due would create an undue 
financial hardship for the debtor. The written agreement shall set forth 
the amount and frequency of installment payments and shall, in 
accordance with Sec. 1408.12, provide for the imposition of charges for 
interest, penalties, and administrative costs unless waived by the 
Corporation.
    (c) The written agreement may require the debtor to execute a 
confess-judgment note when the total amount of the deferred installments 
will exceed $750. The Corporation shall provide the debtor with a 
written explanation of the consequences of signing a confess-judgment 
note. The debtor shall sign a statement acknowledging receipt of the 
written explanation. The statement shall recite that the written 
explanation was read and understood before execution of the note and 
that the debtor signed the note knowingly and voluntarily. Documentation 
of these procedures will be maintained in the Corporation's file on the 
debtor.

[[Page 866]]



Sec. 1408.9  Right to agency review.

    (a) If the debtor disputes the claim, the debtor may request a 
review of the Corporation's determination of the existence of the debt 
or of the amount of the debt. If only part of the claim is disputed, the 
undisputed portion should be paid by the payment due date.
    (b) To obtain a review, the debtor shall submit a written request 
for review to the Corporation official named in the initial demand 
letter, within 15 calendar days after receipt of the letter. The 
debtor's request for review shall state the basis on which the claim is 
disputed.
    (c) The Corporation shall promptly notify the debtor, in writing, 
that the Corporation has received the request for review. The 
Corporation shall conduct its review of the claim in accordance with 
Sec. 1408.10.
    (d) Upon completion of its review of the claim, the Corporation 
shall notify the debtor whether the Corporation's determination of the 
existence or amount of the debt has been sustained, amended, or 
canceled. The notification shall include a copy of the written decision 
issued by the hearing official pursuant to Sec. 1408.10(e). If the 
Corporation's determination is sustained, this notification shall 
contain a provision which states that the Corporation intends to collect 
the debt by all legally available means, which may include initiating 
legal action against the debtor, referring the debt to a collection 
agency for collection, collecting the debt by offset, or asking other 
Federal agencies for assistance in collecting the debt by offset.



Sec. 1408.10  Review procedures.

    (a) Unless an oral hearing is required by Sec. 1408.23(d), the 
Corporation's review shall be a review of the written record of the 
claim.
    (b) If an oral hearing is required under Sec. 1408.23(d) the 
Corporation shall provide the debtor with a reasonable opportunity for 
such a hearing. The oral hearing, however, shall not be an adversarial 
adjudication and need not take the form of a formal evidentiary hearing. 
All significant matters discussed at the hearing, however, will be 
carefully documented.
    (c) Any review required by this part, whether a review of the 
written record or an oral hearing, shall be conducted by a hearing 
official. In the case of a salary offset, the hearing official shall not 
be under the supervision or control of the Chairman of the Farm Credit 
System Insurance Corporation.
    (d) The Corporation may be represented by legal counsel. The debtor 
may represent himself or herself or may be represented by an individual 
of the debtor's choice and at the debtor's expense.
    (e) The hearing official shall issue a final written decision based 
on documentary evidence and, if applicable, information developed at an 
oral hearing. The written decision shall be issued as soon as 
practicable after the review but not later than 60 days after the date 
on which the request for review was received by the Corporation, unless 
the debtor requests a delay in the proceedings. A delay in the 
proceedings shall be granted if the hearing official determines, in his 
or her sole discretion, that there is good cause to grant the delay. If 
a delay is granted, the 60-day decision period shall be extended by the 
number of days by which the review was postponed.
    (f) Upon issuance of the written opinion, the Corporation shall 
promptly notify the debtor of the hearing official's decision. Said 
notification shall include a copy of the written decision issued by the 
hearing official pursuant to paragraph (e) of this section.



Sec. 1408.11  Special review.

    (a) An employee subject to salary offset, under subpart C of this 
part, or a voluntary repayment agreement, may, at any time, request a 
special review by the Corporation of the amount of the salary offset or 
voluntary repayment, based on materially changed circumstances such as, 
but not limited to, catastrophic illness, divorce, death, or disability.
    (b) To determine whether an offset would prevent the employee from 
meeting essential subsistence expenses (costs incurred for food, 
housing, clothing, transportation, and medical care), the employee shall 
submit a detailed statement and supporting documents

[[Page 867]]

for the employee, his or her spouse, and dependents indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Expenses for food, housing, clothing, and transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) If the employee requests a special review under this section, 
the employee shall file an alternative proposed offset or payment 
schedule and a statement, with supporting documents, showing why the 
current salary offset or payments result in an extreme financial 
hardship to the employee.
    (d) The Corporation shall evaluate the statement and supporting 
documents, and determine whether the original offset or repayment 
schedule imposes an undue financial hardship on the employee. The 
Corporation shall notify the employee in writing of such determination, 
including, if appropriate, a revised offset or payment schedule.



Sec. 1408.12  Charges for interest, administrative costs, and penalties.

    (a) Except as provided in paragraph (d) of this section, the 
Corporation shall:
    (1) Assess interest on unpaid claims;
    (2) Assess administrative costs incurred in processing and handling 
overdue claims; and
    (3) Assess penalty charges not to exceed 6 percent a year on any 
part of a debt more than 90 days past due.
    The imposition of charges for interest, administrative costs, and 
penalties shall be made in accordance with 31 U.S.C. 3717.
    (b)(1) Interest shall accrue from the date of mailing or hand 
delivery of the initial demand for payment or the Notice of Intent to 
Collect by either Administrative or Salary Offset if the amount of the 
claim is not paid within 30 days from the date of mailing or hand 
delivery of the initial demand or notice.
    (2) The 30-day period may be extended on a case-by-case basis if the 
Corporation reasonably determines that such action is appropriate. 
Interest shall only accrue on the principal of the claim and the 
interest rate shall remain fixed for the duration of the indebtedness, 
except, as provided in paragraph (c) of this section, in cases where a 
debtor has defaulted on a repayment agreement and seeks to enter into a 
new agreement, or if the Corporation reasonably determines that a higher 
rate is necessary to protect the interests of the United States.
    (c) If a debtor defaults on a repayment agreement and seeks to enter 
into a new agreement, the Corporation may assess a new interest rate on 
the unpaid claim. In addition, charges for interest, administrative 
costs, and penalties which accrued but were not collected under the 
original repayment agreement shall be added to the principal of the 
claim to be paid under the new repayment agreement. Interest shall 
accrue on the entire principal balance of the claim, as adjusted to 
reflect any increase resulting from the addition of these charges.
    (d) The Corporation may waive charges for interest, administrative 
costs, and/or penalties if it determines that:
    (1) The debtor is unable to pay any significant sum toward the claim 
within a reasonable period of time;
    (2) Collection of charges for interest, administrative costs, and/or 
penalties would jeopardize collection of the principal of the claim;
    (3) Collection of charges for interest, administrative costs, or 
penalties would be against equity and good conscience; or
    (4) It is otherwise in the best interest of the United States, 
including the situation where an installment payment agreement or offset 
is in effect.



Sec. 1408.13  Contracting for collection services.

    The Chairman, or designee of the Chairman, may contract for 
collection services in accordance with 31 U.S.C. 3718 and 4 CFR 102.6 to 
recover debts.



Sec. 1408.14  Reporting of credit information.

    The Chairman, or designee of the Chairman, may disclose to a 
consumer reporting agency information that an individual is responsible 
for a debt owed to the United States. Information

[[Page 868]]

will be disclosed to reporting agencies in accordance with the terms and 
conditions of agreements entered into between the Corporation and the 
reporting agencies. The terms and conditions of such agreements shall 
specify that all of the rights and protection afforded to the debtor 
under 31 U.S.C. 3711(f) have been fulfilled. The Corporation shall 
notify each consumer reporting agency, to which a claim was disclosed, 
when the debt has been satisfied.



Sec. 1408.15  Credit report.

    In order to aid the Corporation in making appropriate determinations 
regarding the collection and compromise of claims; the collection of 
charges for interest, administrative costs, and penalties; the use of 
administrative offset; the use of other collection methods; and the 
likelihood of collecting the claim, the Corporation may institute, 
consistent with the provisions of the Fair Credit Reporting Act (15 
U.S.C. 1681, et seq.), a credit investigation of the debtor immediately 
following a determination that the claim exists.



                    Subpart B--Administrative Offset



Sec. 1408.20  Applicability.

    (a) The provisions of this subpart shall apply to the collection of 
debts by administrative [or salary] offset under 31 U.S.C. 3716, 5 
U.S.C. 5514, or other statutory or common law.
    (b) Offset shall not be used to collect a debt more than 10 years 
after the Government's right to collect the debt first accrued, unless 
facts material to the Government's right to collect the debt were not 
known and could not reasonably have been known by the official or 
officials of the Government who were charged with the responsibility of 
discovering and collecting such debt.
    (c) Offset shall not be used with respect to:
    (1) Debts owed by other agencies of the United States or by any 
State or local government;
    (2) Debts arising under or payments made under the Social Security 
Act, the Internal Revenue Code of 1986, as amended, or tariff laws of 
the United States; or
    (3) Any case in which collection by offset of the type of debt 
involved is explicitly provided for or prohibited by another statute.
    (d) Unless otherwise provided by contract or law, debts or payments 
which are not subject to offset under 31 U.S.C. 3716 or 5 U.S.C. 5514 
may be collected by offset if such collection is authorized under common 
law or other applicable statutory authority.



Sec. 1408.21  Collection by offset.

    (a) Collection of a debt by administrative [or salary] offset shall 
be accomplished in accordance with the provisions of these regulations, 
4 CFR 102.3, and 5 CFR part 550, subpart K. It is not necessary for the 
debt to be reduced to judgment or to be undisputed for offset to be 
used.
    (b) The Chairman, or designee of the Chairman, may determine that it 
is feasible to collect a debt to the United States by offset against 
funds payable to the debtor.
    (c) The feasibility of collecting a debt by offset will be 
determined on a case-by-case basis. This determination shall be made by 
considering all relevant factors, including the following: (1) The 
degree to which the offset can be accomplished in accordance with law. 
This determination should take into consideration relevant statutory, 
regulatory, and contractual requirements;
    (2) The degree to which the Corporation is certain that its 
determination of the existence and amount of the debt is correct;
    (3) The practicality of collecting the debt by offset. The cost, in 
time and money, of collecting the debt by offset and the amount of money 
which can reasonably be expected to be recovered through offset will be 
relevant to this determination; and
    (4) Whether the use of offset will substantially interfere with or 
defeat the purpose of a program authorizing payments against which the 
offset is contemplated. For example, under a grant program in which 
payments are made in advance of the grantee's performance, the 
imposition of offset against such a payment may be inappropriate.
    (d) The collection of a debt by offset may not be feasible when 
there are circumstances which would indicate that

[[Page 869]]

the likelihood of collection by offset is less than probable.
    (e) The offset will be effected 31 days after the debtor receives a 
Notice of Intent to Collect by Administrative Offset (or Notice of 
Intent to Collect by Salary Offset if the offset is a salary offset), or 
upon the expiration of a stay of offset, unless the Corporation 
determines under Sec. 1408.24 that immediate action is necessary.
    (f) If the debtor owes more than one debt, amounts recovered through 
offset may be applied to them in any order. Applicable statutes of 
limitation would be considered before applying the amounts recovered to 
any debts owed.



Sec. 1408.22  Notice requirements before offset.

    (a) Except as provided in Sec. 1408.24, the Corporation will provide 
the debtor with 30 calendar days' written notice that unpaid debt 
amounts shall be collected by administrative [or salary] offset (Notice 
of Intent to Collect by Administrative [or Salary] Offset) before the 
Corporation imposes offset against any money that is to be paid to the 
debtor.
    (b) The Notice of Intent to Collect by Administrative [or Salary] 
Offset shall be delivered to the debtor by hand or by mail and shall 
provide the following information:
    (1) The amount of the debt, the date it was incurred, and the facts 
upon which the determination of indebtedness was made;
    (2) In the case of an administrative offset, the payment due date, 
which shall be 30 calendar days from the date of mailing or hand 
delivery of the Notice;
    (3) In the case of a salary offset:
    (i) The Corporation's intention to collect the debt by means of 
deduction from the employee's current disposable pay account until the 
debt and all accumulated interest is paid in full; and
    (ii) The amount, frequency, proposed beginning date, and duration of 
the intended deductions;
    (4) The right of the debtor to inspect and copy the records of the 
Corporation related to the claim or to receive copies if personal 
inspection is impractical. The debtor shall be informed that he/she 
shall be assessed for the cost of copying the documents in accordance 
with Sec. 1408.7 of this part;
    (5) The right of the debtor to obtain a review of, and to request a 
hearing, on the Corporation's determination of indebtedness, the 
propriety of collecting the debt by offset, and, in the case of salary 
offset, the propriety of the proposed repayment schedule (i.e., the 
percentage of disposable pay to be deducted each pay period). The debtor 
shall be informed that to obtain a review, the debtor shall deliver a 
written request for a review to the Corporation official named in the 
Notice, within 15 calendar days after the debtor's receipt of the 
Notice. In the case of a salary offset, the debtor shall also be 
informed that the review shall be conducted by an official arranged for 
by the Corporation who shall be a hearing official not under the control 
of the Chairman of the Farm Credit System Insurance Corporation, or an 
administrative law judge;
    (6) That the filing of a petition for hearing within 15 calendar 
days after receipt of the Notice will stay the commencement of 
collection proceedings;
    (7) That a final decision on the hearing (if one is requested) will 
be issued at the earliest practical date, but not later than 60 days 
after the filing of the written request for review unless the employee 
requests, and the hearing official grants, a delay in the proceedings;
    (8) The right of the debtor to offer to enter into a written 
agreement with the Corporation to repay the amount of the claim. The 
debtor shall be informed that the acceptance of such an agreement is 
discretionary with the Corporation;
    (9) That charges for interest, penalties, and administrative costs 
shall be assessed against the debtor, in accordance with 31 U.S.C. 3717, 
if payment is not received by the payment due date. The debtor shall be 
informed that such assessments must be made unless excused in accordance 
with the Federal Claims Collection Standards (4 CFR parts 103 and 104);
    (10) The amount of accrued interest and the amount of any other 
penalties or administrative costs which may have been added to the 
principal debt;

[[Page 870]]

    (11) That if the debtor has not entered into an agreement with the 
Corporation to pay the debt, has not requested the Corporation to review 
the debt, or has not paid the debt prior to the date on which the offset 
is to be imposed, the Corporation intends to collect the debt by 
administrative [or salary] offset or by requesting other Federal 
agencies for assistance in collecting the debt by offset. The debtor 
shall be informed that the offset shall be imposed against any funds 
that might become available to the debtor, until the principal debt and 
all accumulated interest and other charges are paid in full;
    (12) The date on which the offset will be imposed, which shall be 31 
calendar days from the date of mailing or hand delivery of the Notice. 
The debtor shall be informed that the Corporation reserves the right to 
impose an offset prior to this date if the Corporation determines that 
immediate action is necessary;
    (13) That any knowingly false or frivolous statements, 
representations, or evidence may subject the debtor to:
    (i) Penalties under the False Claims Act, 31 U.S.C. 3729 through 
3731, or any other applicable statutory authority;
    (ii) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002, or 
any other applicable statutory authority; and, with regard to employees,
    (iii) Disciplinary procedures appropriate under 5 U.S.C. chapter 75; 
5 CFR part 752, or any other applicable statute or regulation;
    (14) The name and address of the Corporation official to whom the 
debtor shall send all correspondence relating to the debt or the offset;
    (15) Any other rights and remedies available to the debtor under 
statutes or regulations governing the program for which the collection 
is being made;
    (16) That unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted for the debt, 
which are later waived or found not owed to the United States, will be 
promptly refunded to the employee; and
    (17) Other information, as may be appropriate.
    (c) When the procedural requirements of this section have been 
provided to the debtor in connection with the same debt or under some 
other statutory or regulatory authority, the Corporation is not required 
to duplicate those requirements before effecting offset.



Sec. 1408.23  Right to review of claim.

    (a) If the debtor disputes the claim, the debtor may request a 
review of the Corporation's determination of the existence of the debt, 
the amount of the debt, the propriety of collecting the debt by offset, 
and in the case of salary offset, the propriety of the proposed 
repayment schedule. If only part of the claim is disputed, the 
undisputed portion should be paid by the payment due date.
    (b) To obtain a review, the debtor shall submit a written request 
for review to the Corporation official named in the Notice of Intent to 
Collect by Administrative [or Salary] Offset within 15 calendar days 
after receipt of the notice. The debtor's written request for review 
shall state the basis on which the claim is disputed and shall specify 
whether the debtor requests an oral hearing or a review of the written 
record of the claim. If an oral hearing is requested, the debtor shall 
explain in the request why the matter cannot be resolved by a review of 
the documentary evidence alone.
    (c) The Corporation shall promptly notify the debtor, in writing, 
that the Corporation has received the request for review. The 
Corporation shall conduct its review of the claim in accordance with 
Sec. 1408.10.
    (d) The Corporation's review of the claim, under this section, shall 
include providing the debtor with a reasonable opportunity for an oral 
hearing if:
    (1) An applicable statute authorizes or requires the Corporation to 
consider waiver of the indebtedness, the debtor requests waiver of the 
indebtedness, and the waiver determination turns on an issue of 
credibility or veracity; or
    (2) The debtor requests reconsideration of the debt and the 
Corporation determines that the question of the indebtedness cannot be 
resolved by reviewing the documentary evidence; for example, when the 
validity of the debt turns on an issue of credibility or veracity.

[[Page 871]]

    (e) A debtor waives the right to a hearing and will have his or her 
debt offset in accordance with the proposed offset schedule if the 
debtor:
    (1) Fails to file a written request for review within the timeframe 
set forth in paragraph (b) of this section, unless the Corporation 
determines that the delay was the result of circumstances beyond his or 
her control; or
    (2) Fails to appear at an oral hearing of which he or she was 
notified unless the hearing official determines that the failure to 
appear was due to circumstances beyond the employee's control.
    (f) Upon completion of its review of the claim, the Corporation 
shall notify the debtor whether the Corporation's determination of the 
existence or amount of the debt has been sustained, amended, or 
canceled. The notification shall include a copy of the written decision 
issued by the hearing official, pursuant to Sec. 1408.10(e). If the 
Corporation's determination is sustained, this notification shall 
contain a provision which states that the Corporation intends to collect 
the debt by offset or by requesting other Federal agencies for 
assistance in collecting the debt.
    (g) When the procedural requirements of this section have been 
provided to the debtor in connection with the same debt or under some 
other statutory or regulatory authority, the Corporation is not required 
to duplicate those requirements before effecting offset.



Sec. 1408.24  Waiver of procedural requirements.

    (a) The Corporation may impose offset against a payment to be made 
to a debtor prior to the completion of the procedures required by this 
part, if:
    (1) Failure to impose the offset would substantially prejudice the 
Government's ability to collect the debt; and
    (2) The timing of the payment against which the offset will be 
imposed does not reasonably permit the completion of those procedures.
    (b) The procedures required by this part shall be complied with 
promptly after the offset is imposed. Amounts recovered by offset, which 
are later found not to be owed to the Government, shall be promptly 
refunded to the debtor.



Sec. 1408.25  Coordinating offset with other Federal agencies.

    (a)(1) Any creditor agency which requests the Corporation to impose 
an offset against amounts owed to the debtor shall submit to the 
Corporation a claim certification which meets the requirements of this 
paragraph. The Corporation shall submit the same certification to any 
agency that the Corporation requests to effect an offset.
    (2) The claim certification shall be in writing. It shall certify 
the debtor owes the debt and that all of the applicable requirements of 
31 U.S.C. 3716 and 4 CFR part 102 have been met. If the intended offset 
is to be a salary offset, a claim certification shall instead certify 
that the debtor owes the debt and that the applicable requirements of 5 
U.S.C. 5514 and 5 CFR part 550, subpart K, have been met.
    (3) A certification that the debtor owes the debt shall state the 
amount of the debt, the factual basis supporting the determination of 
indebtedness, and the date on which payment of the debt was due. A 
certification that the requirements of 31 U.S.C. 3716 and 4 CFR part 102 
have been met shall include a statement that the debtor has been sent a 
Notice of Intent to Collect by Administrative Offset at least 31 
calendar days prior to the date of the intended offset or a statement 
that pursuant to 4 CFR 102.3(b)(5) said Notice was not required to be 
sent. A certification that the requirements of 5 U.S.C. 5514 and 5 CFR 
part 550, subpart K, have been met shall include a statement that the 
debtor has been sent a Notice of Intent to Collect by Salary Offset at 
least 31 calendar days prior to the date of the intended offset or a 
statement that pursuant to 4 CFR 102.3(b)(5) said Notice was not 
required to be sent.
    (b)(1) The Corporation shall not effect an offset requested by 
another Federal agency without first obtaining the claim certification 
required by paragraph (a) of this section. If the Corporation receives 
an incomplete claim certification, the Corporation shall return the 
claim certification with notice that a claim certification

[[Page 872]]

which complies with the requirements of paragraph (a) of this section 
must be submitted to the Corporation before the Corporation will 
consider effecting an offset.
    (2) The Corporation may rely on the information contained in the 
claim certification provided by a requesting creditor agency. The 
Corporation is not authorized to review a creditor agency's 
determination of indebtedness.
    (c) Only the creditor agency may agree to enter into an agreement 
with the debtor for the repayment of the claim. Only the creditor agency 
may agree to compromise, suspend, or terminate collection of the claim.
    (d) The Corporation may decline, for good cause, a request by 
another agency to effect an offset. Good cause includes that the offset 
might disrupt, directly or indirectly, essential Corporation operations. 
The refusal and the reasons shall be sent in writing to the creditor 
agency.



Sec. 1408.26  Stay of offset.

    (a)(1) When a creditor agency receives a debtor's request for 
inspection of agency records, the offset is stayed for 10 calendar days 
beyond the date set for the record inspection.
    (2) When a creditor agency receives a debtor's offer to enter into a 
repayment agreement, the offset is stayed until the debtor is notified 
as to whether the proposed agreement is acceptable.
    (3) When a review is conducted, the offset is stayed until the 
creditor agency issues a final written decision.
    (b) When offset is stayed, the amount of the debt and the amount of 
any accrued interest or other charges will be withheld from payments to 
the debtor. The withheld amounts shall not be applied against the debt 
until the stay expires. If withheld funds are later determined not to be 
subject to offset, they will be promptly refunded to the debtor.
    (c) If the Corporation is the creditor agency and the offset is 
stayed, the Corporation will immediately notify an offsetting agency to 
withhold the payment pending termination of the stay.



Sec. 1408.27  Offset against amounts payable from Civil Service Retirement and Disability Fund.

    The Corporation may request that monies payable to a debtor from the 
Civil Service Retirement and Disability Fund be administratively offset 
to collect debts owed to the Corporation by the debtor. The Corporation 
must certify that the debtor owes the debt, the amount of the debt, and 
that the Corporation has complied with the requirements set forth in 
this part, 4 CFR 102.3, and the Office of Personnel Management 
regulations. The request shall be submitted to the official designated 
in the Office of Personnel Management regulations to receive the 
request.



                    Subpart C--Offset Against Salary



Sec. 1408.35  Purpose.

    The purpose of this subpart is to implement section 5 of the Debt 
Collection Act of 1982 (Pub. L. 97-365 (5 U.S.C. 5514)), which 
authorizes the collection of debts owed by Federal employees to the 
Federal Government by means of salary offsets. These regulations provide 
procedures for the collection of a debt owed to the Government by the 
imposition of a salary offset against amounts payable to a Federal 
employee as salary. These regulations are consistent with the 
regulations on salary offset published by the Office of Personnel 
Management, codified in 5 CFR part 550, subpart K. Since salary offset 
is a type of administrative offset, the requirements of subpart B also 
apply to salary offsets.



Sec. 1408.36  Applicability of regulations.

    (a) These regulations apply to the following cases:
    (1) Where the Corporation is owed a debt by an individual currently 
employed by another agency;
    (2) Where the Corporation is owed a debt by an individual who is 
currently employed by the Corporation; or
    (3) Where the Corporation currently employs an individual who owes a 
debt to another Federal agency. Upon receipt of proper certification 
from the creditor agency, the Corporation will offset the debtor-
employee's salary in accordance with these regulations.

[[Page 873]]

    (b) These regulations do not apply to the following: (1) Debts or 
claims arising under the Internal Revenue Code of 1986, as amended (26 
U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301 et seq.); the 
tariff laws of the United States; or to any case where collection of a 
debt by salary offset is explicitly provided for or prohibited by 
another statute (e.g., travel advances in 5 U.S.C. 5705 and employee 
training expenses in 5 U.S.C. 4108).
    (2) Any adjustment to pay arising from an employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay if the amount to be recovered was 
accumulated over four pay periods or less.
    (3) A claim which has been outstanding for more than 10 years after 
the creditor agency's right to collect the debt first accrued, unless 
facts material to the Government's right to collect were not known and 
could not reasonably have been known by the official or officials 
charged with the responsibility for discovery and collection of such 
debts.



Sec. 1408.37  Definitions.

    In this subpart, the following definitions shall apply:
    (a) Agency means:
    (1) An executive agency as defined by 5 U.S.C. 105, including the 
United States Postal Service and the United States Postal Rate 
Commission;
    (2) A military department as defined in 5 U.S.C. 102;
    (3) An agency or court of the judicial branch, including a court as 
defined in 28 U.S.C. 610, the District Court for the Northern Mariana 
Islands, and the Judicial Panel on Multi-district Litigation;
    (4) An agency of the legislative branch, including the United States 
Senate and the United States House of Representatives; or
    (5) Other independent establishments that are entities of the 
Federal Government.
    (b) Disposable pay means, for an officially established pay 
interval, that part of current basic pay, special pay, incentive pay, 
retired pay, retainer pay, or, in the case of an employee not entitled 
to basic pay, other authorized pay remaining after the deduction of any 
amount required by law to be withheld. The Corporation shall allow the 
deductions described in 5 CFR 581.105 (b) through (f).
    (c) Employee means a current employee of the Corporation or other 
agency, including a current member of the Armed Forces or Reserve of the 
Armed Forces of the United States.
    (d) Waiver means the cancellation, remission, forgiveness, or 
nonrecovery of a debt allegedly owed by an employee to the Corporation 
or another agency as permitted or required by 5 U.S.C. 5584 or 8346(b), 
10 U.S.C. 2774, 32 U.S.C. 716, or any other law.



Sec. 1408.38  Waiver requests and claims to the General Accounting Office.

    (a) The regulations contained in this subpart do not preclude an 
employee from requesting a waiver of an overpayment under 5 U.S.C. 5584 
or 8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or in any way questioning the 
amount or validity of a debt by submitting a subsequent claim to the 
General Accounting Office in accordance with the procedures prescribed 
by the General Accounting Office.
    (b) These regulations also do not preclude an employee from 
requesting a waiver pursuant to other statutory provisions pertaining to 
the particular debts being collected.



Sec. 1408.39  Procedures for salary offset.

    (a) The Chairman, or designee of the Chairman, shall determine the 
amount of an employee's disposable pay and the amount to be deducted 
from the employee's disposable pay at regular pay intervals.
    (b) Deductions shall begin within three official pay periods 
following the date of mailing or delivery of the Notice of Intent to 
Collect by Salary Offset.
    (c)(1) If the amount of the debt is equal to or is less than 15 
percent of the employee's disposable pay, such debt should be collected 
in one lump-sum deduction.
    (2) If the amount of the debt is not collected in one lump-sum 
deduction, the debt shall be collected in installment deductions over a 
period of time not greater than the anticipated period

[[Page 874]]

of employment. The size and frequency of installment deductions will 
bear a reasonable relation to the size of the debt and the employee's 
ability to pay. However, the amount deducted from any pay period will 
not exceed 15 percent of the employee's disposable pay for that period, 
unless the employee has agreed in writing to the deduction of a greater 
amount.
    (3) A deduction exceeding the 15-percent disposable pay limitation 
may be made from any final salary payment pursuant to 31 U.S.C. 3716 in 
order to liquidate the debt, whether the employee is being separated 
voluntarily or involuntarily.
    (4) Whenever an employee subject to salary offset is separated from 
the Corporation and the balance of the debt cannot be liquidated by 
offset of the final salary check pursuant to 31 U.S.C. 3716, the 
Corporation may offset any later payments of any kind against the 
balance of the debt.
    (d) In instances where two or more creditor agencies are seeking 
salary offsets against current employees of the Corporation or where two 
or more debts are owed to a single creditor agency, the Corporation, at 
its discretion, may determine whether one or more debts should be offset 
simultaneously within the 15-percent limitation. Debts owed to the 
Corporation should generally take precedence over debts owed to other 
agencies.



Sec. 1408.40  Refunds.

    (a) In instances where the Corporation is the creditor agency, it 
shall promptly refund any amounts deducted under the authority of 5 
U.S.C. 5514 when:
    (1) The debt is waived or otherwise found not to be owed to the 
United States (unless expressly prohibited by statute or regulations); 
or
    (2) An administrative or judicial order directs the Corporation to 
make a refund.
    (b) Unless required or permitted by law or contract, refunds under 
this section shall not bear interest.



Sec. 1408.41  Requesting current paying agency to offset salary.

    (a) To request a paying agency to impose a salary offset against 
amounts owed to the debtor, the Corporation shall provide the paying 
agency with a claim certification which meets the requirements set forth 
in Sec. 1408.25(a) of this part. The Corporation shall also provide the 
paying agency with a repayment schedule determined under the provisions 
of Sec. 1408.39 or in accordance with a repayment agreement entered into 
with the debtor.
    (b) If the employee separates from the paying agency before the debt 
is paid in full, the paying agency shall certify the total amount 
collected on the debt. A copy of this certification shall be sent to the 
employee and a copy shall be sent to the Corporation. If the paying 
agency is aware that the employee is entitled to payments from the Civil 
Service Retirement and Disability Fund, or other similar payments, it 
must provide written notification to the agency responsible for making 
such payments that the debtor owes a debt (including the amount) and 
that the provisions of this section have been fully complied with. 
However, the Corporation must submit a properly certified claim to the 
agency responsible for making such payments before the collection can be 
made.
    (c) When an employee transfers to another paying agency, the 
Corporation is not required to repeat the due process procedures set 
forth in 5 U.S.C. 5514 and this part to resume the collection. The 
Corporation shall, however, review the debt upon receiving the former 
paying agency's notice of the employee's transfer to make sure the 
collection is resumed by the new paying agency.
    (d) If a special review is conducted pursuant to Sec. 1408.11 and 
results in a revised offset or repayment schedule, the Corporation shall 
provide a new claim certification to the paying agency.



Sec. 1408.42  Responsibility of the Corporation as the paying agency.

    (a) When the Corporation receives a claim certification from a 
creditor agency, deductions should be scheduled to begin at the next 
officially established pay interval. The Corporation shall send the 
debtor written notice which provides:

[[Page 875]]

    (1) That the Corporation has received a valid claim certification 
from the creditor agency;
    (2) The date on which salary offset will begin;
    (3) The amount of the debt; and
    (4) The amount of such deductions.
    (b) If, after the creditor agency has submitted the claim 
certification to the Corporation, the employee transfers to a different 
agency before the debt is collected in full, the Corporation must 
certify the total amount collected on the debt. The Corporation shall 
send a copy of this certification to the creditor agency and a copy to 
the employee. If the Corporation is aware that the employee is entitled 
to payments from the Civil Service Retirement Fund and Disability Fund, 
or other similar payments, it shall provide written notification to the 
agency responsible for making such payments that the debtor owes a debt 
(including the amount).



Sec. 1408.43  Nonwaiver of rights by payments.

    An employee's involuntary payment of all or any portion of a debt 
being collected under this subpart shall not be construed as a waiver of 
any rights the employee may have under 5 U.S.C. 5514 or any other 
provisions of a written contract or law unless there are statutory or 
contractual provisions to the contrary.



PART 1410--PREMIUMS--Table of Contents




Sec.
1410.1  Purpose and scope.
1410.2  Definitions.
1410.3  Calculation and reporting of premiums due.
1410.4  Payment of premiums.
1410.5  Delinquent premium payments and premium overpayments.
1410.6  Certified statements.
1410.7  Documentation.

    Authority: 12 U.S.C. 2277a-5; 12 U.S.C. 2277a-7.

    Source: 56 FR 3201, Jan. 29, 1991, unless otherwise noted.



Sec. 1410.1  Purpose and scope.

    This part sets forth the rules for:
    (a) The calculation of premiums;
    (b) The time for payment of the premium required by sections 5.55 
and 5.56 of the Farm Credit Act of 1971, as amended;
    (c) Interest charges on delinquent payments;
    (d) The form and content of certified statements; and,
    (e) Documentation supporting certified statements.



Sec. 1410.2  Definitions.

    (a) Act means the Farm Credit Act of 1971, as amended.
    (b) Average principal outstanding means:
    (1) For calendar year 1989, the average annual principal outstanding 
using balances as of monthend for each of the 13 months beginning with 
December 1988 and ending with December 1989;
    (2) For calendar year 1990 and thereafter, the average annual 
principal outstanding on a daily basis using balances as of the close of 
each day. In computing the average annual principal outstanding in this 
manner, the closing balance of the most recent past business day shall 
be the closing balance for days when an institution is closed.
    (c) Direct lending association means any production credit 
association or any other association making direct loans under authority 
provided under section 7.6 of the Act, including, without limitation, 
agricultural credit associations and Federal land credit associations.
    (d) Government-guaranteed loans means loans or credits, or portions 
of loans or credits, that are guaranteed:
    (1) By the full faith and credit of the United States Government or 
any State government; or,
    (2) By an agency or other entity of the United States Government 
whose obligations are explicitly guaranteed by the United States 
Government; or,
    (3) By an agency or other entity of a State government whose 
obligations are explicitly guaranteed by such State government.
    (e) Insured bank means any Farm Credit bank whose participation in 
notes, bonds, debentures, and other obligations issued under subsection 
(c) or (d) of section 4.2 of the Act is insured

[[Page 876]]

under part E of title V of the Act, including, without limitation, the 
Federal Intermediate Credit Bank of Jackson and banks that are in or are 
placed in receivership or conservatorship to the extent that those 
banks' participation in such obligations is insured.
    (f) Loan means any extension of credit or lease resulting from 
direct negotiations between a lender and a borrowing entity that is 
recorded as an asset of an insured bank, a direct lending association, 
or an other financing institution. The term ``loan'' includes loans, 
contracts of sale, notes receivable, and other similar obligations and 
lease financings. The term ``loan'' includes loans originated through 
direct negotiations between the insured bank, direct lending 
association, or other financing institution and a borrowing entity and 
loans or interests in loans purchased from another lender. Loans 
purchased subject to recourse shall be considered loans of the seller to 
the extent of the recourse.
    (g)(1) Nonaccrual loan means any loan where--
    (i) Any amount of outstanding principal and all past and future 
interest accruals, considered over the full term of the asset, are 
determined to be uncollectible for any reason; or,
    (ii) It has been classified ``loss'' as a result of a periodic 
credit evaluation and has not been charged off; or,
    (iii) The loan is severely past due and is not adequately secured, 
in process of collection, and fully collectible with respect to all 
principal and interest.
    (2) For the purposes of determining whether a loan is considered as 
accrual or nonaccrual under this part, all loans on which a borrowing 
entity, or a component of a borrowing entity, is primarily obligated to 
the institution shall be considered as one loan unless a review of all 
pertinent facts supports a reasonable determination that a particular 
loan constitutes an independent credit risk and such determination is 
adequately documented in the loan file.
    (h) Other financing institution means any bank, company, 
institution, corporation, union, or association described in section 
1.7(b)(1)(B) of the Act.

[56 FR 3201, Jan. 29, 1991; 56 FR 10302, Mar. 11, 1991]



Sec. 1410.3  Calculation and reporting of premiums due.

    (a) Premium base. For purposes of computing the annual premium, each 
insured bank shall:
    (1) Report its premium base for each category of loan described in 
paragraph (a)(2) of this section based on the total of the average 
annual principal balances of:
    (i)(A) Loans of each direct lending association that were able to be 
made because the direct lending association is receiving, or has 
received, funds provided through the insured bank;
    (B) Loans of each other financing institution that were able to be 
made because the other financing institution is receiving, or has 
received, funds provided through the insured bank; and,
    (C) The bank's loans, other than loans made to direct lending 
associations and other financing institutions.
    (ii) For purposes of this section, loans of an other financing 
institution were able to be made because of funds provided through the 
insured bank only if they are loans which resulted from funding provided 
through the insured bank and which are pledged to or discounted by the 
insured bank.
    (2) Segregate the loans of each entity described in paragraph (a) of 
this section into:
    (i) Loans in accrual status, excluding the guaranteed portions of 
State and Federal government-guaranteed loans;
    (ii) The guaranteed portions of State government-guaranteed loans 
that are in accrual status;
    (iii) The guaranteed portions of Federal government-guaranteed loans 
that are in accrual status; and,
    (iv) Nonaccrual loans.
    (b) Calculating the 1989 premium payment. The 1989 premium payment 
shall be equal to the sum of:
    (1) The total annual average principal outstanding for calendar year 
1989 on the loans in accrual status as described in paragraph (a)(2)(i) 
of this section of each entity described in paragraph (a)(1) of this 
section multiplied by 0.0015;

[[Page 877]]

    (2) The total annual average principal outstanding for calendar year 
1989 on loans in accrual status as described in paragraph (a)(2)(ii) of 
this section of each entity described in paragraph (a)(1) of this 
section multiplied by 0.0003; and,
    (3) The total annual average principal outstanding for calendar year 
1989 on loans in accrual status as described in paragraph (a)(2)(iii) of 
this section of each entity described in paragraph (a)(1) of this 
section multiplied by 0.00015.
    (c) Calculating the premium payment for 1990 and subsequent years. 
Except as provided in paragraph (d) of this section, the annual premium 
payment for 1990 and for each subsequent year shall be equal to the sum 
of:
    (1) The total annual average principal outstanding for each calendar 
year on the loans in accrual status as described in paragraph (a)(2)(i) 
of this section of each entity described in paragraph (a) of this 
section multiplied by 0.0015;
    (2) The total annual average principal outstanding for each calendar 
year on the loans in accrual status as described in paragraph (a)(2)(ii) 
of this section of each entity described in paragraph (a)(1) of this 
section multiplied by 0.0003;
    (3) The total annual average principal outstanding for each calendar 
year on the loans in accrual status as described in paragraph 
(a)(2)(iii) of this section of each entity as described in paragraph 
(a)(1) of this section multiplied by 0.00015; and,
    (4) The total annual average principal outstanding for each calendar 
year on the nonaccrual loans as described in paragraph (a)(2)(iv) of 
this section of each entity described in paragraph (a)(1) of this 
section multiplied by 0.0025.
    (d) Secure base amount. Upon reaching the secure base amount 
determined by the Corporation in accordance with section 5.55 of the 
Act, the annual premium to be paid by each insured bank, computed in 
accordance with paragraph (c) of this section, shall be reduced by a 
percentage determined by the Corporation so that the aggregate of the 
premiums payable by all of the Farm Credit banks for the following 
calendar year is sufficient to ensure that the Insurance Fund balance is 
maintained at not less than the secure base amount. The Corporation 
shall announce any such percentage no later than December 31 of the year 
prior to the January in which such premiums are to be paid.

[56 FR 3201, Jan. 29, 1991; 56 FR 13211, Mar. 29, 1991]



Sec. 1410.4  Payment of premiums.

    (a) Calendar years 1989 and 1990. Each insured bank shall pay to the 
Corporation the amount of the premium due to the Corporation computed in 
accordance with Sec. 1410.3 of this part, and shown on its certified 
statement, at the time its certified statement is filed. The certified 
statement for calendar years 1989 and 1990 must be filed with the 
Corporation and the premium must be received by the Corporation on or 
before March 29, 1991.
    (b) Calendar year 1991 and subsequent years. Each insured bank shall 
pay to the Corporation the amount of the premium due to the Corporation 
computed in accordance with Sec. 1410.3 of this part, and shown on its 
certified statement, at the time the statement is filed. Certified 
statements shall be considered to have been filed and payments made in a 
timely manner if they are received on or before January 31 following the 
end of the calendar year on which the certified statement is based.
    (c) Premiums as obligations of insured banks. Premiums required to 
be paid by Sec. 1410.3 are obligations of the insured banks, and are to 
be paid at the times required by this section, regardless of whether the 
insured bank has assessed and collected any assessments under section 
1.12 of the Act.

[56 FR 3201, Jan. 29, 1991; 56 FR 10302, Mar. 11, 1991]



Sec. 1410.5  Delinquent premium payments and premium overpayments.

    (a) Delinquent payments. Each insured bank shall pay to the 
Corporation interest on delinquent premium payments. All premiums will 
be considered delinquent if they are received after the time for payment 
specified in

[[Page 878]]

Sec. 1410.4 of this part, including late payments caused by bank errors 
in the certified statement. The interest rate will be the United States 
Treasury Department's current value of funds rate, which is issued under 
the Treasury Fiscal Requirements Manual (TFRM rate) and published 
quarterly in the Federal Register. The interest rate will be determined 
as follows:
    (1) Current year. (i) For delinquent days occurring on or prior to 
March 31, the rate will be the TFRM rate that is published in the 
preceding December.
    (ii) For delinquent days occurring from April 1 to June 30, the rate 
will be the TFRM rate that is published in March for the second quarter 
of the year.
    (iii) For delinquent days occurring from July 1 to September 30, the 
rate will be the TFRM rate that is published in June for the third 
quarter.
    (iv) For delinquent days occurring from October 1 to December 31, 
the rate will be the TFRM rate that is published in September for the 
fourth quarter.
    (2) Prior years. The interest will be calculated quarterly and 
compounded annually at the rates applicable for each quarter as issued 
under the TFRM. For the initial year, the rate will be applied to the 
gross amount of the delinquent payment. For each additional year or 
portion thereof the rate will be applied to the net amount of the 
delinquent payment after it has been reduced by any premium credit under 
paragraph (c) of this section.
    (b) Other rights and remedies. Payment of the interest specified in 
paragraph (a) of this section does not affect any other rights and 
remedies available to the Corporation.
    (c) Overpayments. To the extent that any payment by a bank exceeds 
the required amount:
    (1) The excess shall be credited against future premium payments by 
the bank which overpaid; or,
    (2)(i) Upon written request to the Corporation by the bank which 
overpaid, the excess shall be refunded to the bank within 30 days of 
receipt of the written request; and
    (ii) If the Corporation fails to make a refund within such 30-day 
period, and the Corporation determines that a refund is in order, the 
Corporation shall pay to the bank interest on the amount of the 
overpayment, from the end of such 30-day period through the date the 
refund is issued.



Sec. 1410.6  Certified statements.

    (a) Forms. The certified statements required to be filed by insured 
banks under the provisions of section 5.56 of the Act shall be filed 
with the Corporation. The certified statement forms will be furnished to 
all insured banks by, or may be obtained from, the Corporation. The 
following forms are available from the Corporation:
    (1) Form FCSIC 90-001: First Certified Statement. The form shows the 
premium base for calendar years 1989 and 1990. The premium payment 
period is from January 1 of each year to December 31 of each year. The 
form must show the computation of the premium base and the bank's 
calculation of the premium due the Corporation.
    (2) Form FCSIC 90-002: Certified Statement. This form must be used 
for calendar year 1991 and subsequent years. The form shows the premium 
base for the annual premium payment period. The premium payment period 
is from January 1 of each year to December 31 of each year. The form 
must show the computation of the premium base and the bank's calculation 
of the amount of the premium due the Corporation.
    (b) Amendments to certified statements. In the event of an amendment 
or correction of a previously submitted certified statement, the 
amending insured bank shall resubmit to the Corporation the appropriate 
certified statement along with a letter of explanation regarding the 
amendment or correction.

[56 FR 3201, Jan. 29, 1991, as amended at 56 FR 57233, Nov. 8, 1991]



Sec. 1410.7  Documentation.

    Each insured bank shall:
    (a) Prepare and maintain accurate and complete records as necessary 
to prepare certified statements, including, but not limited to, records 
relating to the loans of each direct lending association and other 
financing institution that are able to make such loans because they are 
receiving, or have received, funding from the insured bank.

[[Page 879]]

    (b) Prepare and maintain on its premises books and records in such a 
manner as to facilitate reconciliation with certified statements 
prepared from them.
    (c) Maintain in its books and records documentation supporting its 
certified statement for a period no less than 5 years following the date 
of each certified statement, unless the bank shall have requested in 
writing, and the Corporation shall have granted to the bank, written 
permission to dispose of such documentation prior to the expiration of 5 
years.
    (d) Make all records and any supporting documentation available, 
without limitation, to Corporation officials upon request.



PART 1411--RULES OF PRACTICE AND PROCEDURE--Table of Contents




    Authority: Secs. 5.58(10), 5.65(c) and (d) of the Farm Credit Act 
(12 U.S.C. 2277a-7(10), 2277a-14(c) and (d)).



 Subpart A--Rules and Procedures for Assessment and Collection of Civil 
                             Money Penalties



Sec. 1411.1  Inflation adjustment of civil money penalties for failure to file a certified statement, pay any premium required or obtain approval before 
          employment of persons convicted of criminal offenses.

    A civil money penalty imposed pursuant to section 5.65(c) or (d) of 
the Act for a violation occurring on or after October 23, 1996 shall not 
exceed $110 per day for each day the violation continues.

[61 FR 55079, Oct. 24, 1996]

[[Page 881]]



                 CHAPTER XV--DEPARTMENT OF THE TREASURY




  --------------------------------------------------------------------

                    SUBCHAPTER A--GENERAL PROVISIONS
Part                                                                Page
1500            Merchant banking investments................         883
1501            Financial subsidiaries......................         888
1502-1503

  [Reserved]

1505-1507

  [Reserved]

              SUBCHAPTER B--RESOLUTION FUNDING CORPORATION
1510            Resolution Funding Corporation operations...         889
1511            Book-entry procedure........................         892

[[Page 883]]





                    SUBCHAPTER A--GENERAL PROVISIONS



PART 1500--MERCHANT BANKING INVESTMENTS--Table of Contents




Sec.
1500.1  How are terms defined for purposes of this part?
1500.2  What investments are permitted under this part and who may make 
          them?
1500.3  What are the limitations on managing or operating a portfolio 
          company held as a merchant banking investment?
1500.4  What are the holding periods permitted for merchant banking 
          investments?
1500.5  What aggregate limits apply to merchant banking investments?
1500.6  What risk management, reporting and record keeping policies are 
          required to make merchant banking investments?
1500.7  How do the statutory cross marketing and sections 23A and 23B 
          limitations apply to merchant banking investments?

    Authority: 12 U.S.C. 1843(k)(4)(7).

    Source: 65 FR 16477, Mar. 28, 2000, unless otherwise noted.



Sec. 1500.1  How are terms defined for purposes of this part?

    Unless otherwise provided in this part, all terms used in this part 
have the meanings given such terms in 12 CFR Part 225 (Regulation Y of 
the Board of Governors of the Federal Reserve System Board).



Sec. 1500.2  What investments are permitted under this part and who may make them?

    (a) What investments are permitted under this part? Section 
4(k)(4)(H) of the Bank Holding Company Act (12 U.S.C. 1843(k)(4)(H)) and 
this part authorize a financial holding company, directly or indirectly 
and as principal or on behalf of one or more persons, to acquire or 
control any amount of shares, assets or ownership interests of a company 
or other entity that is engaged in any activity not otherwise authorized 
for a financial holding company under section 4 of the Bank Holding 
Company Act. For purposes of this part, shares, assets or ownership 
interests acquired or controlled under this part are referred to as 
``merchant banking investments.'' A financial holding company may not 
directly or indirectly acquire or control any merchant banking 
investment except in compliance with the requirements of this part.
    (b) Must the investment be a bona fide merchant banking investment? 
The acquisition or control of shares, assets or ownership interests 
under this part is not permitted unless it is part of a bona fide 
underwriting or merchant or investment banking activity.
    (c) What types of ownership interests may be acquired? Shares, 
assets or ownership interests of a company or other entity include any 
debt or equity security, warrant, option, partnership interest, trust 
certificate or other instrument representing an ownership interest in 
the company or entity, whether voting or nonvoting.
    (d) Where in a financial holding company may merchant banking 
investments be made? A financial holding company and any subsidiary 
(other than a depository institution or subsidiary of a depository 
institution) may acquire or control merchant banking investments. A 
financial holding company and its subsidiaries may not acquire or 
control merchant banking investments on behalf of a depository 
institution or subsidiary of a depository institution.
    (e) May assets other than shares be held directly? A financial 
holding company may not under this part acquire or control assets, other 
than shares or other ownership interests in a company, unless:
    (1) The assets are held within or promptly transferred to a 
portfolio company;
    (2) The portfolio company maintains policies, books and records, 
accounts, and other indicia of corporate, partnership or limited 
liability organization and operation that are separate from the 
financial holding company and that meet the requirements of 12 CFR 
225.174(a)(4) for limiting the legal liability of the financial holding 
company; and
    (3) The portfolio company has management that is separate from the 
financial holding company to the extent required by Sec. 1500.3.

[[Page 884]]

    (f) What type of affiliate is required for a financial holding 
company to make merchant banking investments? A financial holding 
company may not acquire or control merchant banking investments under 
this part unless the financial holding company qualifies under at least 
one of the following:
    (1) Securities affiliate. The financial holding company controls a 
company that is registered with the Securities and Exchange Commission 
as a broker or dealer under the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.); or
    (2) Insurance affiliate with an investment adviser affiliate. The 
financial holding company controls:
    (i) An insurance company that is predominantly engaged in 
underwriting life, accident and health, or property and casualty 
insurance (other than credit-related insurance), or providing and 
issuing annuities; and
    (ii) A company that:
    (A) Is registered with the Securities and Exchange Commission as an 
investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. 
80b-1 et seq.); and
    (B) Provides investment advice to an insurance company.
    (g) What do references to a financial holding company include? The 
term ``financial holding company'' as used in this part means the 
financial holding company and each of its subsidiaries, but, except for 
Sec. 1500.3, does not include a depository institution or subsidiary of 
a depository institution. The term includes a private equity fund 
controlled by the financial holding company, but does not include any 
portfolio company controlled by the financial holding company.
    (h) What do references to a depository institution include? For 
purposes of this part, the term ``depository institution'' includes a 
U.S. branch or agency of a foreign bank that acquires or controls, or is 
affiliated with a company that acquires or controls, merchant banking 
investments under this part.
    (i) What is a portfolio company? A portfolio company is any company 
or entity:
    (1) That is engaged in any activity not authorized for a financial 
holding company under section 4 of the Bank Holding Company Act; and
    (2) The shares, assets or ownership interests of which are held, 
owned or controlled directly or indirectly by the financial holding 
company pursuant to this part.



Sec. 1500.3  What are the limitations on managing or operating a portfolio company held as a merchant banking investment?

    (a) May a financial holding company routinely manage or operate a 
portfolio company? Except as provided in paragraph (d) of this section, 
a financial holding company may not routinely manage or operate any 
portfolio company in which it has a direct or indirect interest and any 
portfolio company held by any company (including a private equity fund) 
in which the financial holding company has an ownership interest under 
this part.
    (b) What does it mean to routinely manage or operate a company? A 
financial holding company routinely manages or operates a portfolio 
company if:
    (1) Any director, officer, employee or agent of the financial 
holding company serves as or has the responsibilities of an officer or 
employee of the portfolio company;
    (2) Any officer or employee of the portfolio company is supervised 
by any director, officer, employee or agent of the financial holding 
company (other than in that individual's capacity as a director of the 
portfolio company);
    (3) Any covenant or other contractual arrangement exists between the 
financial holding company and the portfolio company that would restrict 
the portfolio company's ability to make routine business decisions, such 
as entering transactions in the ordinary course of business or hiring 
employees below the rank of the five highest ranking executive officers;
    (4) Any director, officer, employee or agent of the financial 
holding company, whether in the capacity of a director of the portfolio 
company, adviser to the portfolio company, or otherwise, participates 
in:
    (i) The day-to-day operations of the portfolio company, or
    (ii) Management decisions made in the ordinary course of business of 
the

[[Page 885]]

portfolio company other than decisions in which a director of a company 
customarily participates in that individual's capacity as a director; or
    (5) Any other arrangement or practice exists by which the financial 
holding company routinely manages or operates the portfolio company.
    (c) What arrangements do not involve routinely managing or operating 
a company? (1) Director representation at portfolio companies. A 
financial holding company may select any or all of the directors of a 
portfolio company or have one or more directors, officers, employees or 
agents serve as directors of a portfolio company if:
    (i) The portfolio company employs officers and employees responsible 
for routinely managing and operating the company; and
    (ii) The financial holding company does not routinely manage or 
operate the portfolio company as described in paragraph (b) of this 
section.
    (2) Covenants or other provisions regarding extraordinary events. A 
financial holding company may, by virtue of covenants or other written 
agreements with a portfolio company, require the portfolio company to 
consult with or obtain the approval of the financial holding company to 
take actions outside of the ordinary course of the business of the 
portfolio company, including:
    (i) The acquisition of control or significant assets of other 
companies;
    (ii) Significant changes to the business plan of the portfolio 
company;
    (iii) The redemption, authorization or issuance of any shares of 
capital stock (including options, warrants or convertible shares) of the 
portfolio company; and
    (iv) The sale, merger, consolidation, spin-off, recapitalization, 
liquidation, dissolution or sale of substantially all of the assets of 
the portfolio company or any of its significant subsidiaries.
    (d) When may a financial holding company manage or operate a 
portfolio company? (1) Special circumstances required. A financial 
holding company may routinely manage or operate a portfolio company 
only:
    (i) When intervention is necessary to address a material risk to the 
value or operation of the portfolio company, such as a significant 
operating loss or loss of senior management; and
    (ii) For the period of time as may be necessary to address the cause 
of involvement, to obtain suitable alternative management arrangements, 
to dispose of the investment, or to otherwise obtain a reasonable return 
upon the resale or disposition of the investment.
    (2) Approval required for extended involvement. A financial holding 
company may not routinely manage or operate a portfolio company for a 
period greater than six months without prior approval of the Board.
    (3) Documentation required. A financial holding company must 
maintain and make available to the Board a written record describing its 
involvement in the management or operation of a portfolio company and 
the reasons therefor.
    (e) May a depository institution or its subsidiary manage or operate 
a portfolio company? (1) In general. A depository institution or 
subsidiary of a depository institution may not under any circumstances 
manage or operate a portfolio company in which an affiliated company 
owns or controls an interest under this part.
    (2) Exceptions. Paragraph (e)(1) of this section does not prohibit--
    (i) A director, officer or employee of a depository institution or 
subsidiary of a depository institution from serving as a director of a 
portfolio company in accordance with the limitations set forth in this 
section; or
    (ii) A financial subsidiary held in accordance with section 5136A of 
the Revised Statutes (12 U.S.C. 24a) or section 46(a) of the Federal 
Deposit Insurance Act (12 U.S.C. 1831w) from taking actions in 
accordance with the limitations set forth in this section.



Sec. 1500.4  What are the holding periods permitted for merchant banking investments?

    (a) Must investments be made for resale? A financial holding company 
may own or control shares, assets and ownership interests pursuant to 
this part only for a period of time to enable the sale or disposition 
thereof on a reasonable

[[Page 886]]

basis consistent with the financial viability of the financial holding 
company's merchant banking investment activities.
    (b) What period of time is generally permitted for holding merchant 
banking investments? (1) In general. A financial holding company may 
not, directly or indirectly, own, control or hold any share, asset or 
ownership interest pursuant to this part for a period that exceeds 10 
years, except that an investment in or held through a private equity 
fund may be held for the duration of the fund.
    (2) Ownership interests acquired from or transferred to companies 
held under this part. For purposes of paragraph (b)(1) of this section, 
any interest in shares, assets or ownership interests--
    (i) Acquired by a financial holding company from a company 
(including a private equity fund) in which the financial holding company 
held an interest under this part will be considered to have been 
acquired by the financial holding company on the date that the share, 
asset or ownership interest was acquired by the company; and
    (ii) Acquired by a company (including a private equity fund) from a 
financial holding company will be considered to have been acquired by 
the company on the date that the share, asset or ownership interest was 
acquired by the financial holding company if--
    (A) The financial holding company held the share, asset, or 
ownership interest under this part; and
    (B) The financial holding company holds an interest in the acquiring 
company under this part.
    (3) Interests previously held by a financial holding company under 
limited authority. For purposes of paragraph (b)(1) of this section, any 
shares, assets, or ownership interests previously owned or controlled, 
directly or indirectly, by a financial holding company under any other 
provision of the Federal banking laws that imposes a limited holding 
period will be considered to have been acquired by the financial holding 
company under this part on the date the financial holding company first 
acquired ownership or control of the shares, assets or ownership 
interests under such other provision of law. For purposes of this 
paragraph (b)(3), a financial holding company includes a depository 
institution controlled by the financial holding company and any 
subsidiary of such a depository institution.
    (4) Approval required to hold investments held in excess of 
applicable time limit. A financial holding company may, in extraordinary 
circumstances, seek Board approval to own, control or hold shares, 
assets or ownership interests of a company under this part for a period 
that exceeds the applicable period specified in paragraph (b)(1) of this 
section. A request for approval must:
    (i) Be submitted to the Board no later than 1 year prior to the 
expiration of the applicable time period;
    (ii) Provide the reasons for the request, including information that 
addresses the factors in paragraph (b)(5) of this section; and
    (iii) Explain the financial holding company's plan for divesting the 
shares, assets or ownership interests.
    (5) Factors governing Board determinations. In reviewing any 
proposal under paragraph (b)(4) of this section, the Board may consider 
all the facts and circumstances related to the investment, including:
    (i) The cost to the financial holding company of disposing of the 
investment within the applicable period;
    (ii) The total exposure of the financial holding company to the 
company and the risks that disposing of the investment may pose to the 
financial holding company;
    (iii) Market conditions; and
    (iv) The extent and history of involvement by the financial holding 
company in the management and operations of the company.
    (6) Restrictions applicable to investments held beyond applicable 
period. A financial holding company that directly or indirectly owns, 
controls or holds any share, asset or ownership interest of a company 
under this part for a total period that exceeds the applicable period 
specified in paragraph (b)(1) of this section must:
    (i) Deduct an amount equal to 100 percent of the carrying value of 
the financial holding company's interest in the share, asset or 
ownership interest from the Tier 1 capital of the holding company and 
exclude all unrealized

[[Page 887]]

gains on the share, asset or ownership interest from its Tier 2 capital;
    (ii) Not enter into any additional transactions, contractual 
arrangements or other relationships with the company or extend any 
additional credit to the company without Board approval; and
    (iii) Abide by any other restrictions that the Board may impose in 
connection with granting approval under paragraph (4).
    (c) What is a private equity fund? (1) Definition of a private 
equity fund. For purposes of this part, a ``private equity fund'' is any 
company that:
    (i) Is formed for the purpose of and is engaged exclusively in the 
business of investing in shares, assets, and ownership interests of 
companies for resale or other disposition;
    (ii) Is not an operating company;
    (iii) Issues equity ownership interests to at least 10 investors 
that are not affiliated with, and are not officers, directors, employees 
or principal shareholders of the financial holding company;
    (iv) No more than 25 percent of the total equity of which is held, 
owned or controlled, directly or indirectly, by the financial holding 
company and its directors, officers, employees and principal 
shareholders;
    (v) That has an initial term of not more than 12 years, which term 
may be extended for an additional three 1-year periods with the approval 
of persons holding a majority of the equity of the fund;
    (vi) Establishes a plan for the resale or disposition of its 
investments, and holds, owns or controls investments only for a 
reasonable period of time consistent with making merchant banking 
investments;
    (vii) Maintains policies on diversification of fund investments; and
    (viii) Is not formed or operated for the purpose of making 
investments inconsistent with the authority granted under section 
4(k)(4)(H) of the Bank Holding Company Act or evading the limitations 
contained in this part on merchant banking investments.
    (2) What form may a private equity fund take? A private equity fund 
may be a corporation, partnership, limited liability company or other 
type of company that issues ownership interests in any form.
    (3) May a private equity fund manage a portfolio company? A private 
equity fund may not routinely manage or operate a portfolio company 
except as permitted by this part.



Sec. 1500.5  What aggregate limits apply to merchant banking investments?

    (a) In general. A financial holding company may not, without Board 
approval, directly or indirectly acquire any additional shares, assets 
or ownership interests under this part or make any additional capital 
contribution to any company the shares, assets or ownership interests of 
which are held by it under this part if the aggregate carrying value of 
all merchant banking investments held by the financial holding company 
under this part exceeds:
    (1) The lesser of 30 percent of the Tier 1 capital of the company or 
$6 billion; or
    (2) The lesser of 20 percent of the Tier 1 capital of the company or 
$4 billion excluding interests in private equity funds.
    (b) Do these limits apply to interests held through a private equity 
fund? Paragraph (a) of this section does not prohibit any private equity 
fund that a financial holding company controls from acquiring shares, 
assets or ownership interests.



Sec. 1500.6  What risk management, reporting and recordkeeping policies are required to make merchant banking investments?

    Certain risk management, reporting and recordkeeping requirements 
for merchant banking investments are set forth in the Board's Regulation 
Y, 12 CFR 225.174.



Sec. 1500.7  How do the statutory cross marketing and sections 23A and 23B limitations apply to merchant banking investments?

    Certain cross-marketing limitations and limitations under sections 
23A and 23B of the Federal Reserve Act applicable to merchant banking 
investment are set forth in the Board's Regulation Y, 12 CFR 225.175.

[[Page 888]]



PART 1501--FINANCIAL SUBSIDIARIES--Table of Contents




Sec.
1501.1  How do you request the Secretary to determine that an activity 
          is financial in nature or incidental to a financial activity?
1501.2  Comparable ratings requirement for national banks among the 
          second 50 largest insured banks.

    Authority: Section 5136A of the Revised Statutes of the United 
States (12 U.S.C. 24a).

    Source: 65 FR 14821, Mar. 20, 2000, unless otherwise noted.



Sec. 1501.1  How do you request the Secretary to determine that an activity is financial in nature or incidental to a financial activity?

    (a) Requests regarding activities that may be financial in nature or 
incidental to a financial activity. A national bank or other interested 
party may request the Secretary to determine that an activity not 
defined to be financial in nature or incidental to a financial activity 
in Section 4(k)(4) of the Bank Holding Company Act (12 U.S.C. 
1843(k)(4)), is financial in nature or incidental to a financial 
activity.
    (b) What information must the request contain? A request submitted 
under this section must be in writing and must:
    (1) Identify and define the activity for which the determination is 
sought, specifically describing what the activity would involve and how 
the activity would be conducted;
    (2) Explain in detail why the activity should be considered 
financial in nature or incidental to a financial activity; and
    (3) Provide information supporting the requested determination and 
any other information required by the Secretary concerning the proposed 
activity.
    (c) What factors will the Secretary take into account in making his 
determination? (1) Section 121 of the Gramm-Leach-Bliley Act (GLBA) 
(Public Law 106-102, 113 Stat. 1373) requires the Secretary to take into 
account the following factors in making his determination:
    (i) The purposes of section 5136A of the Revised Statutes (12 U.S.C. 
24a) and the GLBA;
    (ii) Changes or reasonably expected changes in the marketplace in 
which banks compete;
    (iii) Changes or reasonably expected changes in the technology for 
delivering financial services; and
    (iv) Whether the activity is necessary or appropriate to allow a 
bank and the subsidiaries of a bank to--
    (A) Compete effectively with any company seeking to provide 
financial services in the United States;
    (B) Efficiently deliver information and services that are financial 
in nature through the use of technological means, including any 
application necessary to protect the security or efficacy of systems for 
the transmission of data or financial transactions; and
    (C) Offer customers any available or emerging technological means 
for using financial services or for the document imaging of data.
    (2) Because the Secretary is required to consider the factors in 
paragraph (c)(1) of this section in making his determination, any 
request should address the factors in paragraph (c)(1) of this section. 
The Secretary may also consider other relevant factors.
    (d) What action will the Secretary take after receiving a request? 
(1) Consultation with the Board of Governors of the Federal Reserve 
System (Board). Upon receiving the request, the Secretary will send a 
copy to the Board and consult with the Board in accordance with section 
5136A(b)(1)(B)(i) of the Revised Statutes (12 U.S.C. 5136A(b)(1)(B)(i)).
    (2) Public notice. The Secretary may, as appropriate and after 
consultation with the Board, publish a description of the proposal in 
the Federal Register with a request for public comment.
    (e) How and when will the Secretary act on a request? In the case of 
each request, the Secretary:
    (1) Will inform the requester of the Secretary's final determination 
regarding the requested activity; and
    (2) Will endeavor to inform the requester of the Secretary's final 
determination within 60 days of completion of both the consultative 
process described in paragraph (d)(1) of this section and the public 
comment period, if any.
    (f) What must a national bank do in order for a financial subsidiary 
to engage

[[Page 889]]

in activities that the Secretary has determined are financial in nature 
or incidental to financial activities? Once the Secretary determines 
that an activity is financial in nature or incidental to a financial 
activity (either in accordance with this section or after evaluation of 
a proposal raised by the Board under section 5136A(b)(1)(B)(ii) of the 
Revised Statutes), a financial subsidiary may engage in the activity 
subject to the requirements of 12 CFR part 5 and in accordance with any 
terms or conditions established by the Secretary in connection with 
authorizing the activity.



Sec. 1501.2  Comparable ratings requirement for national banks among the second 50 largest insured banks.

    (a) Scope and purpose. Section 5136A of the Revised Statutes permits 
a national bank that is within the second 50 largest insured banks to 
own or control a financial subsidiary only if, among other requirements, 
the bank satisfies the eligible debt requirement set forth in section 
5136A or an alternative criteria jointly established by the Secretary of 
the Treasury and the Board of Governors of the Federal Reserve System. 
This section establishes the alternative criteria that national banks 
among the second 50 largest insured banks may meet, which criteria is 
comparable to and consistent with the purposes of the eligible debt 
requirement established by section 5136A.
    (b) Alternative criteria. A national bank satisfies the alternative 
criteria referenced in Section 5136A(a)(2)(E) of the Revised Statutes 
(12 U.S.C. 24a) and 12 CFR 5.39(g)(3) if the bank has a current long-
term issuer credit rating from at least one nationally recognized 
statistical rating organization that is within the three highest 
investment grade rating categories used by the organization.
    (c) Definition of long-term issuer credit rating. A `long-term 
issuer credit rating' is a written opinion issued by a nationally 
recognized statistical rating organization of the bank's overall 
capacity and willingness to pay on a timely basis its unsecured, dollar-
denominated financial obligations maturing in not less than one year.

[65 FR 15052, Mar. 20, 2000]

                       PARTS 1502-1503  [RESERVED]

                       PARTS 1505-1507  [RESERVED]



              SUBCHAPTER B--RESOLUTION FUNDING CORPORATION



PART 1510--RESOLUTION FUNDING CORPORATION OPERATIONS--Table of Contents




Sec.
Sec. 1510.1  Authority, purpose, and scope.
Sec. 1510.2  Definitions.
Sec. 1510.3  How does the Funding Corporation pay administrative 
          expenses?
Sec. 1510.4  Who may act as the depositary and fiscal agent for the 
          Funding Corporation?
Sec. 1510.5  How does the Funding Corporation make interest payments on 
          its obligations?
Sec. 1510.6  What must the Funding Corporation do with surplus funds?
Sec. 1510.7  What are the Funding Corporation's reporting requirements?
Sec. 1510.8  What are the audit requirements for the Funding 
          Corporation?

    Authority: 12 U.S.C. 1441b; Sec. 14(d), Pub. L. 105-216, 112 Stat. 
910.

    Source: 65 FR 12069, Mar. 8, 2000, unless otherwise noted.



Sec. 1510.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the authority of section 
14(d) of the Homeowners Protection Act of 1998 (Public Law 105-216, 112 
Stat. 910) and section 21B(l) of the Federal Home Loan Bank Act (12 
U.S.C. 1441b(l)).
    (b) Purpose and scope. The purpose of this part is to provide 
direction to the Funding Corporation in carrying out its statutory 
mandate to make interest payments on its outstanding debt obligations. 
This part also provides direction to the Funding Corporation regarding 
funding the administrative costs of its operations. This part does not 
provide direction to the Funding Corporation, however, on activities 
that the Funding Corporation is authorized to carry out under the Act, 
but that it previously has completed or

[[Page 890]]

is not likely to undertake in the future, such as raising capital and 
issuing obligations. Although the Funding Corporation continues to have 
statutory authority to undertake these activities, the circumstances 
under which it would do so are limited. If such circumstances were to 
arise, the Secretary has the authority to provide any necessary 
direction to the Funding Corporation.
    (c) Authority of the Funding Corporation. The Funding Corporation 
may exercise all authority granted to it by the Act in accordance with 
its bylaws, whether or not specifically implemented by regulation, 
subject to the requirements of this part and such other regulations, 
orders and directions as the Secretary may prescribe.



Sec. 1510.2  Definitions.

    The following definitions apply to terms used in this part unless 
the context requires otherwise:
    Act means the Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.).
    Administrative expenses means costs incurred as necessary to carry 
out the functions of the Funding Corporation, including custodian fees, 
but does not include any interest on obligations.
    Bank means a Federal Home Loan Bank established under the authority 
of the Act.
    Custodian fee means any fee incurred by the Funding Corporation in 
connection with the transfer of any security to, or the maintenance of 
any security in, the Funding Corporation Principal Fund and any other 
expense incurred in connection with the establishment or maintenance of 
the Funding Corporation Principal Fund.
    Directorate means the Directorate of the Funding Corporation 
established pursuant to section 21B(c) of the Act (12 U.S.C. 1421b(c)).
    FDIC means the Federal Deposit Insurance Corporation established 
pursuant to section 1 of the Federal Deposit Insurance Act (12 U.S.C. 
1811, et seq.).
    Finance Board means the Federal Housing Finance Board established 
pursuant to section 2A(a)(1) of the Act.
    FSLIC Resolution Fund means the Federal Savings and Loan Insurance 
Corporation Resolution Fund established pursuant to section 11A(a)(1) of 
the Federal Deposit Insurance Act (12 U.S.C. 1811, et seq.).
    Funding Corporation means the Resolution Funding Corporation 
established pursuant to section 21B(b) of the Act.
    Funding Corporation Principal Fund means the separate account 
established under section 21B(g)(2) of the Act.
    Interest payment due date means the date on which the next quarterly 
interest payments on obligations are due.
    Net earnings means net earnings after deducting expenses relating to 
section 10(j) of the Act (Affordable Housing Program) and operating 
expenses, but without reduction for chargeoffs and payments to fund 
interest payments on obligations.
    Obligations means bonds issued by the Funding Corporation under 
section 21B(f) of the Act.
    RTC means the Resolution Trust Corporation established pursuant to 
section 21A(b)(1)(A) of the Act and which terminated on December 31, 
1995, pursuant to section 21A(m) of the Act.
    Secretary means the Secretary of the Treasury or the designee of the 
Secretary of the Treasury.



Sec. 1510.3  How does the Funding Corporation pay administrative expenses?

    (a) The Directorate proposes a budget. By November 15 of each year, 
the Directorate must approve and submit to the Secretary a proposed 
budget for the administrative expenses of the Funding Corporation for 
the following year.
    (b) The Secretary approves the budget. The Funding Corporation's 
budget is subject to the Secretary's prior approval. The proposed budget 
submitted by the Directorate shall be deemed to be approved by the 
Secretary unless the Secretary disapproves it within 45 days of the date 
submitted. The Funding Corporation must transmit a copy of the approved 
budget to each Bank.
    (c) Budget changes must be approved by the Secretary. If the Funding 
Corporation projects or anticipates incurring expenses exceeding its 
approved budget, the Directorate must submit an amended budget to the 
Secretary for approval.
    (d) The Funding Corporation collects funds from the Banks to pay its 
administrative expenses. At least semiannually,

[[Page 891]]

the Funding Corporation must request that each Bank submit within 10 
business days of the request payment for a portion of the administrative 
expenses in the Funding Corporation's budget for the current calendar 
year. The amount of each Bank's payment must be pro rated according to 
the percentage of the total outstanding Funding Corporation capital 
stock owned by the Bank. The Funding Corporation must adjust the amount 
of each Bank's payment as necessary to reflect differences between 
aggregate projected and actual administrative expenses incurred during 
the calendar year and to reflect any changes in estimated aggregate 
administrative expenses for the coming period. The Funding Corporation 
must not request payments from the Banks that, in the aggregate, exceed 
the administrative expenses in the Funding Corporation's approved 
budget.



Sec. 1510.4  Who may act as the depositary and fiscal agent for the Funding Corporation?

    (a) In general, the Federal Reserve Banks. The Funding Corporation 
must use one or more Federal Reserve Banks as depositaries for or fiscal 
agents or custodians of the Funding Corporation.
    (b) For administrative accounts, insured depository institutions. 
Subject to approval by the Secretary, the Funding Corporation may 
establish demand deposit accounts at one or more federally insured 
depository institutions for the management of funds used to pay 
administrative expenses.



Sec. 1510.5  How does the Funding Corporation make interest payments on its obligations?

    (a) The Funding Corporation must obtain funds from up to four 
sources. The Funding Corporation must pay the interest due on its 
obligations with funds it obtains from the following sources and in the 
following order:
    (1) Earnings on assets of the Funding Corporation not invested in 
the Funding Corporation Principal Fund.
    (2) To the extent funds identified in paragraph (a)(1) of this 
section are insufficient, the Funding Corporation must obtain from each 
Bank in each calendar year payments totaling 20 percent of the net 
earnings of the Bank. The Funding Corporation must not obtain funds from 
a Bank under this paragraph after the date upon which the term of the 
Bank's payment obligation has ended, as determined by the Finance Board 
pursuant to section 21B(f)(2)(C)(iii) of the Act.
    (3) To the extent funds identified in paragraphs (a)(1) and (2) of 
this section are insufficient, the Funding Corporation must obtain from 
the FSLIC Resolution Fund amounts available from any net proceeds from 
the sale of assets received from the RTC by the FSLIC Resolution Fund.
    (4) To the extent that funds from the sources identified in 
paragraphs (a)(1) through (3) of this section are insufficient, the 
Funding Corporation must obtain from the Secretary the additional amount 
due.
    (b) The Funding Corporation must obtain projections of funds 
availability from the Banks and the FSLIC Resolution Fund. Not later 
than March 15, June 15, September 15, and December 15 of each year:
    (1) The Funding Corporation must obtain from each Bank a statement 
signed by an officer of such Bank containing sufficient information on 
the Banks net earnings to enable the Funding Corporation to make 
quarterly projections of funds available from the Bank for the current 
quarter and the next three quarters; and
    (2) The Funding Corporation must obtain from an authorized 
representative of the FSLIC Resolution Fund projections of the amount of 
funds available in the current quarter and the next three quarters from 
the net proceeds from the sale of received from the RTC.
    (c) The Funding Corporation must report funding projections to the 
Secretary. Not later than March 20, June 20, September 20, and December 
20 of each year, the Funding Corporation must submit to the Secretary 
for approval a report containing:
    (1) The aggregate amounts of each of the next four quarterly 
interest payments due on obligations; and
    (2) The amounts projected to be available to fund such payments 
from:
    (i) Earnings on assets of the Funding Corporation not invested in 
the Funding Corporation Principal Fund;

[[Page 892]]

    (ii) Payments from the Banks; and
    (iii) Funds transferred from the FSLIC Resolution Fund.
    (d) The Funding Corporation must request funds from the Banks, the 
FSLIC Resolution Fund, and the Secretary--(1) Requests to the Banks. As 
soon as practicable after the end of each quarter, the Funding 
Corporation must obtain from each Bank a report of its actual net 
earnings for that quarter. Not less than six business days prior to the 
interest payment due date, the Funding Corporation must notify each Bank 
in writing of the interest payment due date and the amount of the 
payment due from the Bank. To the extent funds identified in paragraph 
(a)(1) of this section are insufficient to pay the interest due, the 
amount of each Bank's payment must be 20 percent of the Bank's actual 
quarterly net earnings, taking into account any adjustment to the Bank's 
earnings for any previous quarters. The Funding Corporation must request 
the Bank to provide payment through wiring immediately available and 
finally collected funds to the Funding Corporation no later than the 
interest payment due date.
    (2) Request to the FSLIC Resolution Fund. On the day the Funding 
Corporation notifies the Banks of the payments due from them under 
paragraph (d)(1) of this section, the Funding Corporation must:
    (i) Notify the FSLIC Resolution Fund in writing of:
    (A) The interest payment due date;
    (B) The aggregate amount of the quarterly interest payment due on 
that date; and
    (C) The amount of the quarterly interest payment that will be funded 
by earnings on assets of the Funding Corporation not invested in the 
Funding Corporation Principal Fund and payments due from the Banks; and
    (ii) Request that the FSLIC Resolution Fund transfer to the Funding 
Corporation by noon on the fifth business day prior to the interest 
payment due date any funds available from the net proceeds from the sale 
of assets received from the RTC, to the extent funds identified in 
paragraphs (a)(1) and (2) of this section are insufficient to pay the 
interest due.
    (3) Request to the Secretary. No less than five business days prior 
to the interest payment due date, the Funding Corporation must request 
payment from the Secretary by providing a certification, in a form 
satisfactory to the Secretary, stating the total amounts of the 
quarterly interest payment to be paid by the Funding Corporation from 
sources other than the Secretary and the amounts necessary to make up 
the deficiency. Any amount paid by the Secretary becomes a liability of 
the Funding Corporation to be repaid to the Secretary upon the 
dissolution of the Funding Corporation, to the extent of its remaining 
assets.



Sec. 1510.6  What must the Funding Corporation do with surplus funds?

    If the Funding Corporation has funds that are not needed for current 
interest payments on obligations, it must invest the funds in 
obligations of the United States issued by the Secretary, in accordance 
with an investment policy approved by the Secretary.



Sec. 1510.7  What are the Funding Corporation's reporting requirements?

    In addition to the budget submission required by Sec. 1510.3 and the 
funding projection reports required by Sec. 1510.5, the Funding 
Corporation must prepare such reports as the Secretary may require, 
including reports necessary to assist the Secretary in making the annual 
report to Congress and the President on the Funding Corporation under 
section 21B(i) of the Act.



Sec. 1510.8  What are the audit requirements for the Funding Corporation?

    The Funding Corporation must obtain an audit of its books and 
records by an independent external auditor at least annually.



PART 1511--BOOK-ENTRY PROCEDURE--Table of Contents




Sec.
1511.0  Applicability.
1511.1  Definition of terms.
1511.2  Law governing rights and obligations of the Funding Corporation 
          and Federal Reserve Banks; rights of any Person against the 
          Funding Corporation and the Federal Reserve Banks.

[[Page 893]]

1511.3  Law governing other interests.
1511.4  Creation of Participant's Security Entitlement; security 
          interests.
1511.5  Obligations of Funding Corporation; no adverse claims.
1511.6  Authority of Federal Reserve Banks.
1511.7  Liability of the Funding Corporation and Federal Reserve Banks.
1511.8  Notice of attachment.

    Authority: 12 U.S.C. 1441b.

    Source: 61 FR 66875, Dec. 19, 1996, unless otherwise noted.



Sec. 1511.0  Applicability.

    The regulations in this part apply to Book-entry Funding Corporation 
Securities.



Sec. 1511.1  Definitions of terms.

    In this part, unless the context indicates otherwise:
    Act means the Federal Home Loan Bank Act as amended (12 U.S.C. 1421 
et seq.).
    Adverse Claim means a claim that a claimant has a property interest 
in a Book-entry Funding Corporation Security and that it is a violation 
of the rights of the claimant for another Person to hold, transfer, or 
deal with the Book-entry Funding Corporation Security.
    Book-entry Funding Corporation Security means a Funding Corporation 
Security in book-entry form that is issued or maintained in the Book-
entry System. Solely for the purposes of this Part, it also means the 
separate interest and principal components of a Book-entry Funding 
Corporation Security if such security has been divided into such 
components as authorized by the Securities Documentation and the 
components are maintained separately on the books of one or more Federal 
Reserve Banks.
    Book-entry System means the automated book-entry system operated by 
the Federal Reserve Banks acting as the fiscal agent for the Funding 
Corporation, on which Book-entry Funding Corporation Securities are 
issued, recorded, transferred and maintained in book-entry form.
    Entitlement Holder means a Person to whose account an interest in a 
Book-entry Funding Corporation Security is credited on the records of a 
Securities Intermediary.
    Federal Reserve Bank or Reserve Bank means a Federal Reserve Bank or 
Branch.
    Federal Reserve Bank Operating Circular means the publication issued 
by each Federal Reserve Bank that sets forth the terms and conditions 
under which the Reserve Bank maintains book-entry Securities accounts 
(including Book-entry Funding Corporation Securities) and transfers 
book-entry Securities (including Book-entry Funding Corporation 
Securities).
    Funding Corporation means the Resolution Funding Corporation 
established pursuant to section 21B(b) of the Act.
    Funding Corporation Security or Security means a Funding Corporation 
bond, note, debenture and similar obligations issued under section 21B 
of the Act.
    Funds Account means a reserve and/or clearing account at a Federal 
Reserve Bank to which debits or credits are posted for transfers against 
payment, book-entry securities transaction fees, or principal and 
interest payments.
    Participant means a Person that maintains a Participant's Securities 
Account with a Federal Reserve Bank.
    Participant's Securities Account means an account in the name of a 
Participant at a Federal Reserve Bank to which Book-entry Funding 
Corporation Securities held for a Participant are or may be credited.
    Person means and includes an individual, corporation, company, 
governmental entity, association, firm, partnership, trust, estate, 
representative, and any other similar organization, but does not mean or 
include the United States, the Funding Corporation, or a Federal Reserve 
Bank.
    Revised Article 8 means Uniform Commercial Code, Revised Article 8, 
Investment Securities (with Conforming and Miscellaneous Amendments to 
Articles 1, 3, 4, 5, 9, and 10) 1994 Official Text. Revised Article 8 of 
the Uniform Commercial Code is incorporated by reference in this Part 
pursuant to 5 U.S.C. 552(a) and 1 CFR Part 51. Article 8 was adopted by 
the American Law Institute and the National Conference of Commissioners 
on Uniform State laws and approved by the American Bar Association on 
February 14, 1995. Copies of this

[[Page 894]]

publication are available from the Executive Office of the American Law 
Institute, 4025 Chestnut Street, Philadelphia, PA 19104, and the 
National Conference of Commissioners on Uniform State Laws, 676 North 
St. Clair Street, Suite 1700, Chicago, IL 60611. Copies are also 
available for public inspection at the Department of the Treasury 
Library, Room 5030, main Treasury Building, 1500 Pennsylvania Avenue, 
NW., Washington DC 20220, and in the Office of the Federal Register, 800 
North Capitol St., NW., Suite 700, Washington DC.
    Securities Documentation means the applicable offering circular, 
supplement, or other documents establishing the terms of a Book-entry 
Funding Corporation Security.
    Securities Intermediary means:
    (1) A Person that is registered as a ``clearing agency'' under the 
Federal securities laws; a Federal Reserve Bank; any other Person that 
provides clearance or settlement services with respect to a Book-entry 
Funding Corporation Security that would require it to register as a 
clearing agency under the Federal securities laws but for an exclusion 
or exemption from the registration requirement, if its activities as a 
clearing corporation, including promulgation of rules, are subject to 
regulation by a Federal or State governmental authority; or
    (2) A Person (other than an individual, unless such individual is 
registered as a broker or dealer under the federal securities laws) 
including a bank or broker, that in the ordinary course of its business 
maintains securities accounts for others and is acting in that capacity.
    Security Entitlement means the rights and property interest of an 
Entitlement Holder with respect to a Book-entry Funding Corporation 
Security.
    State means any State of the United States, the District of 
Columbia, Puerto Rico, the Virgin Islands, or any other territory or 
possession of the United States.
    Transfer message means an instruction of a Participant to a Federal 
Reserve Bank to effect a transfer of a Book-entry Funding Corporation 
Security, as set forth in Federal Reserve Bank Operating Circulars.



Sec. 1511.2  Law governing rights and obligations of the Funding Corporation and Federal Reserve Banks; rights of any Person against the Funding Corporation and 
          the Federal Reserve Banks.

    (a) Except as provided in paragraph (b) of this section, the 
following are governed solely by the regulations contained in this part 
1511, the Securities Documentation and Federal Reserve Bank Operating 
Circulars:
    (1) The rights and obligations of the Funding Corporation and the 
Federal Reserve Banks with respect to:
    (i) A Book-entry Funding Corporation Security or Security 
Entitlement; and
    (ii) The operation of the Book-entry System as it applies to Funding 
Corporation Securities; and
    (2) The rights of any Person, including a Participant, against the 
Funding Corporation and the Federal Reserve Banks with respect to:
    (i) A Book-entry Funding Corporation Security or Security 
Entitlement; and
    (ii) The operation of the Book-entry System as it applies to Funding 
Corporation Securities.
    (b) A security interest in a Security Entitlement that is in favor 
of a Federal Reserve Bank from a Participant and that is not recorded on 
the books of a Federal Reserve Bank pursuant to Sec. 1511.4(c)(1), is 
governed by the law (not including the conflict-of-law rules) of the 
jurisdiction where the head office of the Federal Reserve Bank 
maintaining the Participant's Securities Account is located. A security 
interest in a Security Entitlement that is in favor of a Federal Reserve 
Bank from a Person that is not a Participant, and that is not recorded 
on the books of a Federal Reserve Bank pursuant to Sec. 1511.4(c)(1), is 
governed by the law determined in the manner specified in Sec. 1511.3.
    (c) If the jurisdiction specified in the first sentence of paragraph 
(b) of this section is a State that has not adopted Revised Article 8 
(incorporated by reference, see Sec. 1511.1), then the law specified in 
paragraph (b) shall be the law of that State as though Revised Article 8 
had been adopted by that State.

[[Page 895]]



Sec. 1511.3  Law governing other interests.

    (a) To the extent not inconsistent with the regulations in this 
part, the law (not including the conflict-of-law rules) of a Securities 
Intermediary's jurisdiction governs:
    (1) The acquisition of a Security Entitlement from the Securities 
Intermediary;
    (2) The rights and duties of the Securities Intermediary and 
Entitlement Holder arising out of a Security Entitlement;
    (3) Whether the Securities Intermediary owes any duties to an 
adverse claimant to a Security Entitlement;
    (4) Whether an Adverse Claim can be asserted against a Person who 
acquires a Security Entitlement from the Securities Intermediary or a 
Person who purchases a Security Entitlement or interest therein from an 
Entitlement Holder; and
    (5) Except as otherwise provided in paragraph (c) of this section, 
the perfection, effect of perfection or non-perfection and priority of a 
security interest in a Security Entitlement.
    (b) The following rules determine a ``Securities Intermediary's 
jurisdiction'' for purposes of this section:
    (1) If an agreement between the Securities Intermediary and its 
Entitlement Holder specifies that it is governed by the law of a 
particular jurisdiction, that jurisdiction is the Securities 
Intermediary's jurisdiction.
    (2) If an agreement between the Securities Intermediary and its 
Entitlement Holder does not specify the governing law as provided in 
paragraph (b)(1) of this section, but expressly specifies that the 
securities account is maintained at an office in a particular 
jurisdiction, that jurisdiction is the Securities Intermediary's 
jurisdiction.
    (3) If an agreement between the Securities Intermediary and its 
Entitlement Holder does not specify a jurisdiction as provided in 
paragraph (b)(1) or (b)(2) of this section, the Securities 
Intermediary's jurisdiction is the jurisdiction in which is located the 
office identified in an account statement as the office serving the 
Entitlement Holder's account.
    (4) If an agreement between the Securities Intermediary and its 
Entitlement Holder does not specify a jurisdiction as provided in 
paragraph (b)(1) or (b)(2) of this section and an account statement does 
not identify an office serving the Entitlement Holder's account as 
provided in paragraph (b)(3) of this section, the Securities 
Intermediary's jurisdiction is the jurisdiction in which is located the 
chief executive office of the Securities Intermediary.
    (c) Notwithstanding the general rule in paragraph (a)(5) of this 
section, the law (but not the conflict-of-law rules) of the jurisdiction 
in which the Person creating a security interest is located governs 
whether and how the security interest may be perfected automatically or 
by filing a financing statement.
    (d) If the jurisdiction specified in paragraph (b) of this section 
is a State that has not adopted Revised Article 8 (incorporated by 
reference, see Sec. 1511.1), then the law for the matters specified in 
paragraph (a) of this section shall be the law of that State as though 
Revised Article 8 had been adopted by that State. For purposes of the 
application of the matters specified in paragraph (a) of this section, 
the Federal Reserve Bank maintaining the Securities Account is a 
clearing corporation, and the Participant's interest in a Book-entry 
Funding Corporation Security is a Security Entitlement.



Sec. 1511.4  Creation of Participant's Security Entitlement; security interests.

    (a) A Participant's Security Entitlement is created when a Federal 
Reserve Bank indicates by book-entry that a Book-entry Funding 
Corporation Security has been credited to a Participant's Securities 
Account.
    (b) A security interest in a Security Entitlement of a Participant 
in favor of the United States to secure deposits of public money, 
including without limitation deposits to the Treasury tax and loan 
accounts, or other security interest in favor of the United States that 
is required by Federal statute, regulation, or agreement, and that is 
marked on the books of a Federal Reserve Bank is thereby effected and 
perfected, and has priority over any other interest in the securities. 
Where a security interest in favor of the United States in a Security 
Entitlement of a

[[Page 896]]

Participant is marked on the books of a Federal Reserve Bank, such 
Reserve Bank may rely, and is protected in relying, exclusively on the 
order of an authorized representative of the United States directing the 
transfer of the security. For purposes of this paragraph, an 
``authorized representative of the United States'' is the official 
designated in the applicable regulations or agreement to which a Federal 
Reserve Bank is a party, governing the security interest.
    (c)(1) The Funding Corporation and the Federal Reserve Banks have no 
obligation to agree to act on behalf of any Person or to recognize the 
interest of any transferee of a security interest or other limited 
interest in favor of any Person except to the extent of any specific 
requirement of Federal law or regulation or to the extent set forth in 
any specific agreement with the Federal Reserve Bank on whose books the 
interest of the Participant is recorded. To the extent required by such 
law or regulation or set forth in an agreement with a Federal Reserve 
Bank, or the Federal Reserve Bank Operating Circular, a security 
interest in a Security Entitlement that is in favor of a Federal Reserve 
Bank, the Funding Corporation, or a Person may be created and perfected 
by a Federal Reserve Bank marking its books to record the security 
interest. Except as provided in paragraph (b) of this section, a 
security interest in a Security Entitlement marked on the books of a 
Federal Reserve Bank shall have priority over any other interest in the 
securities.
    (2) In addition to the method provided in paragraph (c)(1) of this 
section, a security interest in a Security Entitlement, including a 
security interest in favor of a Federal Reserve Bank, may be perfected 
by any method by which a security interest may be perfected under 
applicable law as described in Sec. 1511.2(b) or Sec. 1511.3. The 
perfection, effect of perfection or non-perfection and priority of a 
security interest are governed by such applicable law. A security 
interest in favor of a Federal Reserve Bank shall be treated as a 
security interest in favor of a clearing corporation in all respects 
under such law, including with respect to the effect of perfection and 
priority of such security interest. A Federal Reserve Bank Operating 
Circular shall be treated as a rule adopted by a clearing corporation 
for such purposes.



Sec. 1511.5  Obligations of Funding Corporation; no adverse claims.

    (a) Except in the case of a security interest in favor of the United 
States or a Federal Reserve Bank or otherwise as provided in 
Sec. 1511.4(c)(1), for the purposes of this part 1511, the Funding 
Corporation and the Federal Reserve Banks shall treat the Participant to 
whose Securities Account an interest in a Book-entry Funding Corporation 
Security has been credited as the Person exclusively entitled to issue a 
Transfer Message, to receive interest and other payments with respect 
thereof and otherwise to exercise all the rights and powers with respect 
to such Security, notwithstanding any information or notice to the 
contrary. Neither the Federal Reserve Banks nor the Funding Corporation 
is liable to a Person asserting or having an Adverse Claim to a Security 
Entitlement or to a Book-entry Funding Corporation Security in a 
Participant's Securities Account, including any such claim arising as a 
result of the transfer or disposition of a Book-entry Funding 
Corporation Security by a Federal Reserve Bank pursuant to a Transfer 
Message that the Federal Reserve Bank reasonably believes to be genuine.
    (b) The obligation of the Funding Corporation to make payments of 
interest and principal with respect to Book-entry Funding Corporation 
Securities is discharged at the time payment in the appropriate amount 
is made as follows:
    (1) Interest on Book-entry Funding Corporation Securities is either 
credited by a Federal Reserve Bank to a Funds Account maintained at such 
Bank or otherwise paid as directed by the Participant.
    (2) Book-entry Funding Corporation Securities are redeemed in 
accordance with their terms by a Federal Reserve Bank withdrawing the 
securities from the Participant's Securities Account in which they are 
maintained and by either crediting the amount of the redemption 
proceeds, including both

[[Page 897]]

principal and interest where applicable, to a Funds Account at such Bank 
or otherwise paying such principal and interest, as directed by the 
Participant. The principal of such Securities shall be paid using the 
proceeds of the noninterest bearing instruments maintained by the 
Funding Corporation for such purpose.



Sec. 1511.6  Authority of Federal Reserve Banks.

    (a) Each Federal Reserve Bank is hereby authorized as fiscal agent 
of the Funding Corporation to perform functions with respect to the 
issuance of Book-entry Funding Corporation Securities offered and sold 
by the Funding Corporation, in accordance with the Securities 
Documentation, and Federal Reserve Bank Operating Circulars; to service 
and maintain Book-entry Funding Corporation Securities in accounts 
established for such purposes; to make payments of principal and 
interest with respect to such Book-entry Funding Corporation Securities 
as directed by the Funding Corporation; to effect transfer of Book-entry 
Funding Corporation Securities between Participants' Securities Accounts 
as directed by the Participants; and to perform such other duties as 
fiscal agent as may be requested by the Funding Corporation.
    (b) Each Federal Reserve Bank may issue Operating Circulars not 
inconsistent with this Part, governing the details of its handling of 
Book-entry Funding Corporation Securities, Security Entitlements, and 
the operation of the Book-Entry System under this Part.



Sec. 1511.7  Liability of the Funding Corporation and Federal Reserve Banks.

    The Funding Corporation and the Federal Reserve Banks may rely on 
the information provided in a Transfer Message, or other documentation, 
and are not required to verify the information. The Funding Corporation 
and the Federal Reserve Banks shall not be liable for any action taken 
in accordance with the information set out in a Transfer Message, other 
documentation, or evidence submitted in support thereof.



Sec. 1511.8  Notice of attachment.

    The interest of a debtor in a Security Entitlement may be reached by 
a creditor only by legal process upon the Securities Intermediary with 
whom the debtor's securities account is maintained, except where a 
Security Entitlement is maintained in the name of a secured party, in 
which case the debtor's interest may be reached by legal process upon 
the secured party. The regulations in this part do not purport to 
establish whether a Federal Reserve Bank is required to honor an order 
or other notice of attachment in any particular case or class of cases.

[[Page 899]]



CHAPTER XVII--OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, DEPARTMENT 
                    OF HOUSING AND URBAN DEVELOPMENT




  --------------------------------------------------------------------

             SUBCHAPTER A--OFHEO ORGANIZATION AND FUNCTIONS
Part                                                                Page
1700            Organization and functions..................         901
1702            Implementation of The Privacy Act of 1974...         903
1703            Release of information......................         908
1704            Debt collection.............................         926
1705            Implementation of the Equal Access to 
                    Justice Act.............................         939
                        SUBCHAPTER B  [RESERVED]
                   SUBCHAPTER C--SAFETY AND SOUNDNESS
1750            Capital.....................................         947
              SUBCHAPTER D--RULES OF PRACTICE AND PROCEDURE
1780            Rules of practice and procedure.............         953

[[Page 901]]





             SUBCHAPTER A--OFHEO ORGANIZATION AND FUNCTIONS



PART 1700--ORGANIZATION AND FUNCTIONS--Table of Contents




Sec.
1700.1  Office of Federal Housing Enterprise Oversight.
1700.2  Organization of the Office of Federal Housing Enterprise 
          Oversight.
1700.3  Official seal.
1700.4  Official logo.

    Authority: 5 U.S.C. 552; 12 U.S.C 4513, 4526.

    Source: 59 FR 62304, Dec. 5, 1994, unless otherwise noted.



Sec. 1700.1  Office of Federal Housing Enterprise Oversight.

    (a) Scope and authority. The Office of Federal Housing Enterprise 
Oversight (referred to as OFHEO) is an independent office within the 
Department of Housing and Urban Development. OFHEO was created by the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992 
(Act), Title XIII of the Housing and Community Development Act of 1992 
(Pub. L. 102-550, October 28, 1992; 106 Stat. 3943; 12 U.S.C. 4501, et 
seq.). OFHEO is responsible for the examination and financial regulation 
of the Federal National Mortgage Association (Fannie Mae) and the 
Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the 
Enterprises). OFHEO is charged with ensuring that the Enterprises are 
adequately capitalized and operating in a safe and sound manner. OFHEO's 
costs and expenses are funded by annual assessments paid by the 
Enterprises. OFHEO is headed by a Director, who is appointed by the 
President and confirmed by the Senate for a five-year term.
    (b) Location. OFHEO is located at 1700 G Street NW., 4th Floor, 
Washington, DC 20552. OFHEO's hours of business are 8:30 a.m.-5:00 p.m. 
(eastern standard time), Monday through Friday, excluding Federal 
holidays.



Sec. 1700.2  Organization of the Office of Federal Housing Enterprise Oversight.

    (a) Director. The Director has exclusive authority under the Act 
with respect to the management of OFHEO, and is responsible for 
directing the development, implementation, and review of all OFHEO 
programs and functions. The Director appoints such personnel as may be 
necessary to carry out the functions of OFHEO. The Director may delegate 
to OFHEO officers and employees any of the functions, powers, and duties 
of the Director, as the Director considers appropriate. The Director may 
establish and fix the responsibilities of the offices within OFHEO as 
the Director deems necessary for the efficient functioning of OFHEO.
    (b) Deputy Director. The Deputy Director of OFHEO is appointed by 
the Director in accordance with the Act. In the event of the absence, 
sickness, death or resignation of the Director, the Deputy Director 
serves as acting Director until the Director's return or the appointment 
of a successor. The Deputy Director performs such functions, powers and 
duties as the Director determines are necessary with respect to OFHEO's 
management and the development and implementation of OFHEO's programs 
and functions.
    (c) Offices and functions. (1) Office of Examination and Oversight. 
The Office of Examination and Oversight plans and conducts examinations 
of the Enterprises, as required by the Act, prepares and issues reports 
of examination summarizing the financial condition and management 
practices of each Enterprise, and recommends corrective and preventative 
actions as appropriate. This office also is responsible for off-site 
financial safety and soundness monitoring.
    (2) Office of Risk Analysis and Model Development. The Office of 
Risk Analysis and Model Development develops and applies econometric, 
financial and accounting models to evaluate the credit and interest rate 
risks of the Enterprises, and undertakes other related research and 
analyses. This office has developed and continues to maintain and 
enhance the set of models used for stress tests of the Enterprises, 
including the stress test to determine risk-based capital requirements, 
as required by the Act. This office is responsible

[[Page 902]]

for applying minimum and risk-based capital requirements in determining 
the capital classifications of the Enterprises in order to ensure their 
capital adequacy.
    (3) Office of Finance and Administration. The Office of Finance and 
Administration provides support services in all areas of financial and 
administrative management of OFHEO. This office is responsible for 
developing, managing and implementing agency policies and procedures 
governing: (i) All human resources functions, including payroll; (ii) 
Support for all facility and supply requirements; (iii) Agency 
contracting and procurement programs; and (iv) Agency financial 
management, budgeting and accounting functions, including travel, 
internal controls and financial reporting.
    (4) Office of General Counsel. The Office of General Counsel advises 
the Director and OFHEO staff on all legal matters concerning the 
functions, activities, and operations of OFHEO and of the Enterprises 
under the Act. This office is responsible for interpreting the Act and 
other applicable law, including financial institutions regulatory 
issues, securities and corporate law principles, and administrative and 
general legal matters. This office also coordinates the preparation of 
legislation and agency regulations.
    (5) Office of External Relations. The Office of External Relations 
is responsible for coordinating and communicating on behalf of OFHEO 
with the Congress, for monitoring relevant legislative developments, and 
for analyzing and assisting the Director in developing legislative 
proposals. This office also is responsible for directing and 
coordinating communication with the news media and the public. The 
Associate Director for Public Affairs serves as spokesperson for OFHEO.
    (6) Office of Policy Analysis and Research. The Office of Policy 
Analysis and Research conducts research and policy analysis to assess 
and project the short- and long-term impact of issues and trends in 
housing finance on OFHEO's regulatory and supervisory responsibilities. 
This office also develops policy options and makes recommendations to 
the Director on a broad range of issues.
    (7) Office of Information Technology. The Office of Information 
Technology plans, develops, secures, maintains, and assures the quality 
of the OFHEO information systems and records management functions. This 
office is responsible for establishing and implementing policies, 
procedures and standards in the following areas: information systems 
development and procurement, office automation, records management, 
information systems security and other information technology-related 
services.
    (8) Office of Strategic Planning and Management. The Office of 
Strategic Planning and Management assists the Director in developing and 
maintaining a long term strategic plan that is consistent with the 
mission of OFHEO and facilitates efforts to ensure that the activities 
and operations of the Agency are consistent with the strategic plan. 
This office also is responsible for leading the development of OFHEO's 
Annual Performance Plans and Annual Performance Reports.
    (d) Additional information. Current information on the organization 
of OFHEO may be obtained by mail from the Office of External Affairs, 
1700 G Street NW, 4th Floor, Washington, DC 20552. Such information, as 
well as other OFHEO information, also may be obtained electronically by 
accessing OFHEO's website located at ``www.OFHEO.gov''.

[59 FR 62304, Dec. 5, 1994, as amended at 65 FR 39787, June 28, 2000]



Sec. 1700.3  Official seal.

    This section describes and displays the official seal of the Office 
of Federal Housing Enterprise Oversight.
    (a) Description. A disc consisting of two concentric circles 
enclosing the words ``Office of Federal Housing Enterprise Oversight'' 
and the inaugural year, 1993. In the center of the disc is a stylized 
image of a structure consisting of a solid trapezoidal base topped by a 
solid triangular shape. Placed between the base and the top is the 
acronym for the organization, ``OFHEO.'' Encircling this stylized 
building shape are twelve five-pointed stars.
    (b) Display.

[[Page 903]]

[GRAPHIC] [TIFF OMITTED] TC21SE91.007



Sec. 1700.4  Official logo.

    This section describes and displays the logo adopted by the Office 
of Federal Housing Enterprise Oversight as the official symbol 
representing OFHEO. It is displayed on correspondence and selected 
documents.
    (a) Description. A stylized image of a structure consisting of a 
solid trapezoid-shaped base that becomes increasingly wider at the 
bottom. At the top is a triangular shape which represents the roof of 
the structure. Placed between the triangle and the trapezoid are the 
letters ``OFHEO.'' These letters spell out the acronym of the Office of 
Federal Housing Enterprise Oversight and act as a visual link between 
the top and bottom of the structure.
    (b) Display.
    [GRAPHIC] [TIFF OMITTED] TC21SE91.008
    


PART 1702--IMPLEMENTATION OF THE PRIVACY ACT OF 1974--Table of Contents




Sec.
1702.1  Scope.
1702.2  Definitions.
1702.3  Requests for access to individual records.
1702.4  Decision to grant or deny requests for access to individual 
          records.
1702.5  Special procedures for medical records.

[[Page 904]]

1702.6  Requirements for verification of identity.
1702.7  Requests for amendment of individual records.
1702.8  Decision to grant or deny requests for amendment of individual 
          records.
1702.9  Appeals of the initial decision to deny access to or amendment 
          of individual records.
1702.10  Decision to grant or deny appeals.
1702.11  Disclosure of individual records to other persons or agencies.
1702.12  Accounting of disclosures.
1702.13  Requests for accounting of disclosures.
1702.14  Fees.
1702.15  Preservation of records.
1702.16  Rights of parents and legal guardians.
1702.17  Penalties.

    Authority: 5 U.S.C. 552a, 12 U.S.C. 4513(b).

    Source: 63 FR 8844, Feb. 23, 1998, unless otherwise noted. 
Redesignated at 65 FR 81327, Dec. 26, 2000.



Sec. 1702.1  Scope.

    (a) This part 1702 sets forth the procedures by which an individual 
may request access to records about him/her that are maintained by the 
Office of Federal Housing Enterprise Oversight (OFHEO) in a designated 
system of records, amendment of such records, or an accounting of 
disclosures of such records. This part 1702 implements the provisions of 
the Privacy Act of 1974, as amended (Privacy Act) (5 U.S.C. 552a).
    (b) A request from an individual for a record about that individual 
that is not contained in an OFHEO designated system of records will be 
considered to be a Freedom of Information Act (FOIA) (5 U.S.C. 552) 
request and will be processed under the FOIA.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.2  Definitions.

    For the purposes of this part 1702--
    Amendment means any correction of, addition to, or deletion from a 
record.
    Designated system of records means a system of records that OFHEO 
has listed and summarized in the Federal Register pursuant to the 
requirements of 5 U.S.C. 552a(e).
    Individual means a natural person who is either a citizen of the 
United States of America or an alien lawfully admitted for permanent 
residence.
    Maintain includes collect, use, disseminate, or control.
    Privacy Act Appeals Officer means the OFHEO employee who has been 
delegated the authority to determine Privacy Act appeals.
    Privacy Act Officer means the OFHEO employee who has been delegated 
the authority to determine Privacy Act requests.
    Record means any item, collection, or grouping of information about 
an individual that is maintained by OFHEO and that contains his/her 
name, or the identifying number, symbol, or other identifying particular 
assigned to the individual.
    Routine use, with respect to disclosure of a record, means the use 
of such record for a purpose that is compatible with the purpose for 
which it was created.
    Statistical Record means a record in a system of records maintained 
only for statistical research or reporting purposes and not used, in 
whole or in part, in making any determination about an identifiable 
individual, except as provided by 13 U.S.C. 8.
    System of records means a group of records under the control of 
OFHEO from which information is retrieved by the name of the individual 
or some identifying number, symbol, or other identifying particular 
assigned to the individual.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.3  Requests for access to individual records.

    (a) Any individual may request records about him/her that are 
maintained by OFHEO.
    (b) The procedures for submitting requests are as follows:
    (1) If the records are contained in a governmentwide system of 
records of the U.S. Office of Personnel Management (OPM), the request 
must be submitted as prescribed by the regulations of OPM (5 CFR part 
297).
    (2) If the records are contained in a record in a system of records 
of another Federal agency, the request must be submitted as prescribed 
in the Federal Register Privacy Act notice for the specific 
governmentwide system.

[[Page 905]]

    (3) If the records are contained in a system of records of OFHEO, 
the request must be submitted in writing to the Privacy Act Officer, 
Office of Federal Housing Enterprise Oversight, 1700 G Street, NW., 
Fourth Floor, Washington, DC 20552. The written request should describe 
the records sought and identify the designated systems of records in 
which such records may be contained. (A copy of the designated systems 
of records published by OFHEO in the Federal Register is available upon 
request from the Privacy Act Officer.) No individual shall be required 
to state a reason or otherwise justify a request for access to records 
about him/her.



Sec. 1702.4  Decision to grant or deny requests for access to individual records.

    (a) Basis for the decision. The Privacy Act Officer shall grant 
access to records upon receipt of a request submitted under 
Sec. 1702.3(b)(3), unless the records--
    (1) Were compiled in reasonable anticipation of a civil action or 
proceeding; or
    (2) Require special procedures for medical records provided for in 
Sec. 1702.5.
    (b) Notification procedures. (1) Within 20 business days of receipt 
of a request submitted under Sec. 1702.3(b)(3), the Privacy Act Officer 
shall send a written acknowledgment of receipt to the requesting 
individual.
    (2) As soon as reasonably possible, normally within 20 business days 
following receipt of the request, the Privacy Act Officer shall send a 
written notification that informs the individual whether the requested 
records exist and, if the requested records exist, whether access is 
granted or denied, in whole or in part.
    (c) Access procedures. If access is granted, in whole or in part, 
the Privacy Act Officer shall provide the individual with a reasonable 
period of time to inspect the records at OFHEO during normal business 
hours or shall mail a copy of the requested records to the individual.
    (d) Denial procedures. If access is denied, in whole or in part, the 
Privacy Act Officer shall inform the individual of the reasons for the 
denial and of the right to appeal the denial, as set forth in 
Sec. 1702.9.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.5  Special procedures for medical records.

    The Privacy Act Officer shall grant access to medical records to the 
requesting individual to whom the medical records pertain. However, if, 
in the judgment of OFHEO, such direct access may have an adverse effect 
on that individual, the Privacy Act Officer shall transmit the medical 
records to a licensed medical doctor named by the individual.



Sec. 1702.6  Requirements for verification of identity.

    (a) Written requests submitted in person. Any individual who submits 
in person a written request under this part, may be required to present 
two forms of identification, such as an employment identification card, 
driver's license, passport, or other document typically used for 
identification purposes. One of the two forms of identification must 
contain the individual's photograph and signature.
    (b) Other written requests. Any individual who submits, other than 
in person, a written request under this part may be required to provide 
either one or both of the following:
    (1) Minimal identifying information, such as full name, date and 
place of birth, or other personal information.
    (2) At the election of the individual, either a certification of a 
duly commissioned notary public of any State or territory or the 
District of Columbia attesting to the requesting individual's identity 
or an unsworn declaration subscribed to as true under penalty of perjury 
under the laws of the United States of America.



Sec. 1702.7  Requests for amendment of individual records.

    (a) Procedures for requesting amendment of a record. Any individual 
may request amendment of any record about him/her that the individual 
believes is not accurate, relevant, timely, or complete. To request 
amendment, the individual must submit a written request to the Privacy 
Act Officer, Office of

[[Page 906]]

Federal Housing Enterprise Oversight, 1700 G Street, NW., Fourth Floor, 
Washington, DC 20552. The request should include--
    (1) The reason for requesting the amendment;
    (2) A description of the record, or portion thereof, including the 
name of the appropriate designated system of records, sufficient to 
enable the Privacy Act Officer to identify the particular record or 
portion thereof; and
    (3) If available, a copy of the record, or portion thereof, on which 
the specific portion requested to be amended is notated.
    (b) Requirement for identifying information. The Privacy Act Officer 
may require the individual making the request for amendment to provide 
the identifying information specified in Sec. 1702.6.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.8  Decision to grant or deny requests for amendment of individual records.

    (a) Notification procedures. Within 10 business days following 
receipt of a request for amendment of records, the Privacy Act Officer 
shall send a written acknowledgment of receipt to the requesting 
individual. As soon as reasonably possible, normally within 30 business 
days from the receipt of the request for amendment, the Privacy Act 
Officer shall send a written notification to the individual that informs 
him/her of the decision to grant or deny, in whole or in part, the 
request for amendment.
    (b) Amendment procedures. If the request is granted, in whole or in 
part, the requested amendment shall be made to the subject record. A 
copy of the amended record shall be provided to all prior recipients of 
the subject record in accordance with Sec. 1702.12(b).
    (c) Denial procedures. If the request is denied, in whole or in 
part, the Privacy Act Officer shall include in the written notification 
the reasons for the denial and an explanation of the right to appeal the 
denial, as set forth in Sec. 1702.9.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.9  Appeals of the initial decision to deny access to or amendment of individual records.

    Any individual may appeal the initial denial, in whole or in part, 
of a request for access to or amendment of his/her record. To appeal, 
the individual must submit a written appeal, within 30 business days 
following receipt of written notification of denial, to the Privacy Act 
Appeals Officer, Office of Federal Housing Enterprise Oversight, 1700 G 
Street, NW., Fourth Floor, Washington, DC 20552. Both the envelope and 
the appeal request should be marked ``Privacy Act Appeal.'' The appeal 
should include--
    (a) The information specified for requests for access in 
Sec. 1702.3(b)(3) or for requests for amendment in Sec. 1702.7, as 
appropriate;
    (b) A copy of the initial denial notice; and
    (c) Any other relevant information for consideration by the Privacy 
Act Appeals Officer.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.10  Decision to grant or deny appeals.

    (a) Notification of decision. Within 30 business days following 
receipt of the appeal, the Privacy Act Appeals Officer shall send a 
written notification of the decision to grant or deny to the individual 
making the appeal. The Privacy Act Appeals Officer may extend the 30-day 
notification period for good cause. If the time period is extended, the 
Privacy Act Appeals Officer shall inform in writing the individual 
making the appeal of the reason for the extension and the expected date 
of the final decision.
    (b) Appeal granted. If the appeal for access is granted, in whole or 
in part, the Privacy Act Appeals Officer shall provide the individual 
with reasonable time to inspect the requested records at OFHEO during 
normal business hours or mail a copy of the requested records to the 
individual. If the appeal for amendment is granted, in whole or in part, 
the requested amendment shall be made. A copy of the amended record 
shall be provided to all prior recipients of the subject record in 
accordance with Sec. 1702.12(b).

[[Page 907]]

    (c) Appeal denied. If the Privacy Act Appeals Officer denies, in 
whole or in part, the appeal for access or amendment, he/she shall 
include in the written notification of the reasons for the denial an 
explanation of the right to seek judicial review of the final decision, 
and, with respect to an appeal for amendment, the right to submit a 
statement of disagreement under paragraph (d) of this section.
    (d) Statements of disagreement and explanation. (1) Upon receipt of 
a decision to deny, in whole or in part, the appeal for amendment of 
records, the individual may file a statement with the Privacy Act 
Appeals Officer that sets forth his/her reasons for disagreeing with the 
decision. The Privacy Act Appeals Officer shall attach the statement of 
disagreement to the record that is the subject of the request for 
amendment. In response to the statement of disagreement, the Privacy Act 
Appeals Officer has the discretion to prepare a statement that explains 
why the requested amendment was not made. If prepared, the statement of 
explanation shall be attached to the subject record and a copy of the 
statement provided to the individual who filed the statement of 
disagreement.
    (2) The Privacy Act Appeals Officer shall provide a copy of any 
statement of disagreement, and may provide any statement of explanation, 
to prior recipients of the subject record in accordance with 
Sec. 1702.12(b).
    (e) Right to judicial review. If OFHEO does not comply with the 
notification procedures under paragraph (a) of this Sec. 1720.10 with 
respect to an appeal for amendment of records, the appealing individual 
may bring a civil action against OFHEO in the appropriate district court 
of the United States, as provided for under 5 U.S.C. 552a(g)(1)(A) and 
552a(g)(5) before receiving the written notification of the decision.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.11  Disclosure of individual records to other persons or agencies.

    (a) OFHEO may disclose a record to a person or agency other than the 
individual about whom the record pertains only under one or more of the 
following circumstances:
    (1) If requested and authorized in writing by the individual.
    (2) With the prior written consent of the individual.
    (3) If such disclosure is required under the Freedom of Information 
Act.
    (4) For a routine use, as defined in Sec. 1702.2, with respect to a 
designated system of records as described by OFHEO in its notice of 
systems of records published in the Federal Register.
    (5) Pursuant to the order of a court of competent jurisdiction.
    (6) To the following persons or agencies--
    (i) Officers and employees of OFHEO who have a need for the record 
in the performance of their duties;
    (ii) The Bureau of the Census for purposes of planning or carrying 
out a census or survey or related activity pursuant to the provisions of 
title 13 of the United States Code;
    (iii) A recipient who has provided OFHEO with advance, adequate 
written assurance that the record will be used solely as a statistical 
research or reporting record, and the record is to be transferred in a 
form that is not individually identifiable;
    (iv) The National Archives and Records Administration as a record 
which has sufficient historical or other value to warrant its continued 
preservation by the U.S. Government, or for evaluation by the Archivist 
of the United States to determine whether the record has such value;
    (v) An agency or an instrumentality of any governmental jurisdiction 
within or under the control of the United States for a civil or criminal 
law enforcement activity if the activity is authorized by law, and if 
the head of the agency or instrumentality has made a written request to 
OFHEO specifying the particular portion of the record desired and the 
law enforcement activity for which the record is sought;
    (vi) A person pursuant to a showing of compelling circumstances 
affecting the health or safety of an individual if, concurrently with 
such disclosure, notification is transmitted to the last known address 
of the individual to whom the record pertains;

[[Page 908]]

    (vii) Either House of Congress, or, to the extent of matter within 
its jurisdiction, any committee or subcommittee thereof, any joint 
committee of Congress, or subcommittee of any such joint committee;
    (viii) The Comptroller General, or any of his/her authorized 
representatives, in the course of the performance of the duties of the 
General Accounting Office; or
    (ix) A consumer reporting agency in accordance with 31 U.S.C. 
3711(e).
    (b) Before a record is disclosed to other persons or agencies under 
paragraph (a) (1) or (2) of this section, the identifying information 
specified in Sec. 1702.6 may be required.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.12  Accounting of disclosures.

    (a) OFHEO shall keep an accurate accounting of the date, nature, and 
purpose of each disclosure of a record, and the name and address of each 
person or agency to whom a disclosure was made under Sec. 1702.11, 
except for disclosures made under Sec. 1702.11(a)(3) or (a)(6)(i). OFHEO 
shall retain such accounting for at least 5 years or the life of the 
record, whichever is longer, after the disclosure for which the 
accounting was made.
    (b) When a record has been amended, in whole or in part, or when a 
statement of disagreement has been filed, a copy of the amended record 
and any statement of disagreement must be provided, and any statement of 
explanation may be provided, to all prior and subsequent recipients of 
the affected record whose identities can be determined pursuant to the 
disclosure accountings required under paragraph (a) of this section.

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.13  Requests for accounting of disclosures.

    (a) Any individual may request an accounting of disclosures of 
records about him/her for which an accounting is required to be 
maintained under Sec. 1702.12(a) by submitting a written request to the 
Privacy Act Officer, Office of Federal Housing Enterprise Oversight, 
1700 G Street, NW., Fourth Floor, Washington, DC 20552. Before 
processing the request, the Privacy Act Officer may require that the 
individual provide the identifying information specified under 
Sec. 1702.6.
    (b) The Privacy Act Officer shall make available the accounting of 
disclosures required to be maintained under Sec. 1702.12, except for an 
accounting made under Sec. 1702.11(a)(6)(v).

[63 FR 8844, Feb. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1702.14  Fees.

    OFHEO shall not charge any fees for providing a copy of any records, 
pursuant to a request for access under this part.



Sec. 1702.15  Preservation of records.

    OFHEO shall preserve all correspondence relating to the written 
requests it receives and all records processed pursuant to such requests 
under this part, in accordance with the records retention provisions of 
General Records Schedule 14, Informational Services Records. OFHEO shall 
not destroy records that are subject to a pending request for access, 
amendment, appeal, or lawsuit pursuant to the Privacy Act.



Sec. 1702.16  Rights of parents and legal guardians.

    For purposes of this part, a parent of any minor or the legal 
guardian of any individual who has been declared to be incompetent due 
to physical or mental incapacity or age by a court of competent 
jurisdiction may act on behalf of the individual.



Sec. 1702.17  Penalties.

    The Privacy Act (5 U.S.C. 552a(i)(3)) makes it a misdemeanor, 
subject to a maximum fine of $5,000, to knowingly and willfully request 
or obtain any record concerning an individual from OFHEO under false 
pretenses.



PART 1703--RELEASE OF INFORMATION--Table of Contents




                     Subpart A--General Definitions

Sec.
1703.1  Scope.
1703.2  General definitions.

[[Page 909]]

             Subpart B--Documents and Information Generally

1703.6  General rule.
1703.7  Applicability.
1703.8  OFHEO examination reports.
1703.9  Orders and agreements available to the public.

               Subpart C--Availability of Records of OFHEO

1703.11  Official records of OFHEO.
1703.12  Publicly available records.
1703.13  Requests for records.
1703.14  Response to requests.
1703.15  Form and content of responses.
1703.16  Appeals of denials.
1703.17  Time limits.
1703.18  Special procedures for business information.

              Subpart D--Fees for Provision of Information

1703.21  Definitions.
1703.22  Fees to be charged--general.
1703.23  Fees to be charged--categories of requesters.
1703.24  Limitations on charging fees.
1703.25  Miscellaneous fee provisions.

Subpart E--Testimony and Production of Documents in Legal Proceedings in 
                    Which OFHEO Is Not a Named Party

1703.31  General purposes.
1703.32  Definitions.
1703.33  General policy.
1703.34  Request for testimony or production of documents.
1703.35  Scope of permissible testimony.
1703.36  Manner in which testimony is given.
1703.37  Manner in which documents will be produced.
1703.38  Fees.
1703.39  Responses to demands served on employees.
1703.40  Responses to demands served on nonemployees.

         Subpart F--Rules and Procedures for Service Upon OFHEO

1703.51  Service of process.

    Authority: 5 U.S.C. 301, 552; 12 U.S.C. 4513, 4522, 4526, 4639; E.O. 
12600, 3 CFR, 1987 Comp., p. 235.

    Source: 63 FR 71005, Dec. 23, 1998, unless otherwise noted. 
Redesignated at 65 FR 81327, Dec. 26, 2000.



                     Subpart A--General Definitions



Sec. 1703.1  Scope.

    Definitions in Sec. 1703.2 relate to the meaning of terms used 
throughout part 1703.

[63 FR 71005, Dec. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1703.2  General definitions.

    For the purpose of this part:
    (a) Appeals Officer means the person designated by the Director to 
process appeals of denials of requests for OFHEO records under the FOIA.
    (b) Director means the Director of OFHEO or his or her designee.
    (c) Document means any record or paper, including but not limited to 
a report, credit review, audit, examination, letter, telegram, 
memorandum, study, calendar and diary entry, log, graph, pamphlet, note, 
chart, tabulation, analysis, statistical or information accumulation, 
any record of meetings and conversations, film impression, magnetic 
tape, or any electronic media, disk, film, or mechanical reproduction 
that is generated, obtained, or adopted by OFHEO in connection with the 
conduct of its official business.
    (d) Employee means any officer, former officer, employee, or former 
employee of OFHEO; any conservator appointed by OFHEO; or any agent or 
independent contractor acting on behalf of OFHEO, even though the 
appointment or contract has terminated.
    (e) FOIA means the Freedom of Information Act.
    (f) FOIA Officer means the person designated to process requests for 
OFHEO records under the FOIA.
    (g) Official means concerning the authorized business of OFHEO.
    (h) OFHEO means the Office of Federal Housing Enterprise Oversight.
    (i) Person means any individual, or any agency, corporation, 
partnership, trust, association, joint venture, pool, syndicate, sole 
proprietorship, unincorporated organization, or any other form of entity 
not specifically listed herein, but does not include OFHEO or any 
employee.
    (j) Record means any document, regardless of form or format, which 
is created or obtained by OFHEO and

[[Page 910]]

which is under OFHEO control at the time of an FOIA request.
    (k) Requester means any person seeking access to OFHEO records under 
the FOIA.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55171, Sept. 13, 2000]



             Subpart B--Documents and Information Generally



Sec. 1703.6  General rule.

    Except as authorized by this part or as otherwise necessary in 
performing official duties, no employee shall in any manner disclose or 
permit disclosure of any document or information in the possession of 
OFHEO that is confidential or otherwise of a nonpublic nature, including 
that regarding OFHEO or the Federal National Mortgage Association 
(Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) 
(collectively, the Enterprises).



Sec. 1703.7  Applicability.

    (a) General. The FOIA and the regulations in this part apply to all 
OFHEO documents and information. However, if another law sets specific 
procedure for disclosure, OFHEO will process a request in accordance 
with the procedures that apply to those specific documents. If a request 
is received for disclosure of a document to the public which is not 
required to be released under those provisions, OFHEO will consider the 
request under the FOIA and the regulations in this part.
    (b) The relationship between the FOIA and the Privacy Act of 1974. 
The Privacy Act of 1974 (Privacy Act), 5 U.S.C. 552a, applies to records 
that are about individuals, but only if the records are in a system of 
records as defined in the Privacy Act. Requests from individuals for 
records about themselves which are contained in an OFHEO system of 
records will be processed under the provisions of the Privacy Act as 
well as the FOIA. OFHEO will not deny access by a first party to a 
record under the FOIA or the Privacy Act unless the record is not 
available to that individual under both the Privacy Act and the FOIA.
    (c) Records available through routine distribution procedures. When 
the record requested includes material published and offered for sale, 
e.g., by the Superintendent of Documents or the Government Printing 
Office, or which is available to the public through an established 
distribution system (such as that of the National Technical Information 
Service of the Department of Commerce), or material offered on OFHEO's 
web site (http://www.ofheo.gov), OFHEO will first refer the requester to 
those sources. Nevertheless, if the requester is not satisfied with the 
alternative sources, OFHEO will process the request under the FOIA.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55171, Sept. 13, 2000]



Sec. 1703.8  OFHEO examination reports.

    (a) General. Reports of examinations prepared by OFHEO may be 
disclosed only in accordance with this part or with the prior written 
consent of the Director. No person, agency, or authority, or director, 
officer, employee, or agent thereof, shall disclose any such report or 
information contained therein in any manner except as authorized in 
accordance with this subpart. The report of examination is the property 
of OFHEO and any unauthorized use or disclosure of such report may be 
subject to the penalties provided in 18 U.S.C. 641.
    (b) Enterprises. The Director makes available to each Enterprise a 
copy of OFHEO's report of examination of such Enterprise. The report of 
examination is the property of OFHEO and is provided to the Enterprise 
for its confidential use only. Under no circumstance shall the 
Enterprise or any director, officer, employee, or agent thereof, make 
public or disclose in any manner the report of examination or any 
portion of the contents thereof to any person or organization not 
officially connected with the Enterprise as director, officer, employee, 
attorney, auditor, or independent auditor. Any other disclosure or use 
of this report except as expressly permitted by the Director may be 
subject to the penalties of 18 U.S.C. 641.

[[Page 911]]

    (c) Government agencies. The Director may make available reports of 
examination for the confidential use of Federal agencies responsible for 
investigating or enforcing applicable Federal laws.



Sec. 1703.9  Orders and agreements available to the public.

    (a) General. OFHEO shall make the following documents available to 
the public:
    (1) Any written agreement or other written statement for which a 
violation may be redressed by the Director or any modification to or 
termination thereof, unless the Director, in the Director's discretion, 
determines that public disclosure would be contrary to the public 
interest.
    (2) Any order that is issued with respect to any administrative 
enforcement proceeding initiated by the Director under 12 U.S.C. 4631 
through 4641 that has become final in accordance with 12 U.S.C. 4633 and 
12 U.S.C. 4634.
    (3) Any modification to or termination of any final order made 
public pursuant to this section.
    (b) Delay of public disclosure under exceptional circumstances. If 
the Director makes a determination in writing that the public disclosure 
of any final order pursuant to paragraph (a) of this section would 
seriously threaten the financial health or security of the Enterprise, 
the Director may delay the public disclosure of such order for a 
reasonable time.
    (c) Documents filed under seal in public enforcement hearings. The 
Director may file any document or part thereof under seal in any hearing 
commenced by the Director if the Director determines in writing that 
disclosure thereof would be contrary to the public interest.
    (d) Retention of documents. The Director shall keep and maintain a 
record, for not less than 6 years, of all documents described in 
paragraph (a) of this section and all enforcement agreements and other 
supervisory actions and supporting documents issued with respect to or 
in connection with any enforcement proceedings initiated by the Director 
under 12 U.S.C. 4631 through 4641.
    (e) Disclosure to Congress. This section may not be construed to 
authorize the withholding of any information from, or to prohibit the 
disclosure of any information to, the Congress or any committee or 
subcommittee thereof.



               Subpart C--Availability of Records of OFHEO



Sec. 1703.11  Official records of OFHEO.

    (a) OFHEO shall, upon a written request for records that reasonably 
describes the information or records and is made in accordance with the 
provisions of this subpart, make the records available as promptly as 
practicable to any person for inspection and/or copying, except as 
provided in paragraph (b) of this section. OFHEO may charge a fee 
determined in accordance with subpart D of this part. OFHEO will make 
the record available in the form or format requested if the record is 
readily reproducible in that form or format with reasonable effort. 
``Readily reproducible'' means, with respect to electronic format, that 
the requested record or records can be downloaded or transferred intact 
to a computer disk, tape, or other electronic medium using equipment 
currently in use by OFHEO.
    (b) Records not available. Except as otherwise provided in this 
part, or as may be specifically authorized by the Director, the 
following information and records, or portions thereof, are not 
available to requesters:
    (1) Any record, or portion thereof, that is--
    (i) Specifically authorized under criteria established by an 
Executive order to be kept secret in the interest of national defense or 
foreign policy, and
    (ii) Is in fact properly classified pursuant to such Executive 
order.
    (2) Any record, or portion thereof, related solely to the internal 
personnel rules and practices of OFHEO.
    (3) Any record, or portion thereof that is specifically exempted 
from disclosure by statute (other than 5 U.S.C. 552b), provided that 
such statute--
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue, or

[[Page 912]]

    (ii) Establishes particular criteria for withholding or refers to 
particular types of matters to be withheld.
    (4) Any matter that is a trade secret or that constitutes commercial 
or financial information obtained from a person and that is privileged 
or confidential.
    (5) Any matter contained in inter-agency or intra-agency memoranda 
or letters that would not be available by law to a private party in 
litigation with OFHEO.
    (6) Any information contained in personnel and medical files and 
similar files (including financial files) the disclosure of which would 
constitute a clearly unwarranted invasion of personal privacy.
    (7) Any records or information compiled for law enforcement 
purposes, but only to the extent that the production of such law 
enforcement records or information--
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to fair trial or an impartial 
adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a State, local, or foreign agency or 
authority or any private institution or an Enterprise regulated and 
examined by OFHEO that furnished information on a confidential basis, 
and, in the case of a record of information compiled by a criminal law 
enforcement authority in the course of a criminal investigation or by an 
agency conducting a lawful national security intelligence investigation, 
information furnished by a confidential source;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual.
    (8) Any matter that is contained in or related to examination, 
operating, or condition reports that are prepared by, on behalf of, or 
for the use of OFHEO.
    (9) Any geological and geophysical information and data, including 
maps, concerning wells.
    (c) Even if an exemption described in paragraph (b) of this section 
may be reasonably applicable to a requested record, or portion thereof, 
OFHEO may elect under the circumstances of any particular request not to 
apply the exemption to such requested record, or portion thereof. The 
fact that the exemption is not applied by OFHEO to any requested record, 
or portion thereof, has no precedential significance as to the 
application or nonapplication of the exemption to any other requested 
record, or portion thereof, no matter when the request is received.
    (d) Any reasonably segregable portion of a record shall be provided 
to any person properly requesting such record after deletion of the 
portions which are exempt under this subpart. The amount of the 
information deleted shall be indicated on the released portion of the 
record, unless including that indication would harm an interest 
protected by the exemption in paragraph (b) of this section pursuant to 
which the deletion is made. If technically feasible, the amount of the 
information deleted shall be indicated at the place in the record where 
the deletion is made.
    (e) This section does not authorize withholding of information or 
limit the availability of records to the public, except as specifically 
stated in this section. This section is not authority to withhold 
information from Congress.

[65 FR 55171, Sept. 13, 2000]



Sec. 1703.12  Publicly available records.

    (a) The records described in this paragraph are available for public 
inspection and copying, for a fee determined in accordance with subpart 
D of this part, at OFHEO's offices located at 1700 G Street, NW., Fourth 
Floor, Washington, DC 20552. Records created on or after November 1, 
1996, and current indexes to all records described in paragraphs (a)(1), 
(a)(2), (a)(3), and

[[Page 913]]

(a)(4) of this section, including those created before November 1, 1996, 
are available electronically at http://www.ofheo.gov/docs/. The publicly 
available records include--
    (1) Any final opinions issued by OFHEO, as well as orders made in 
adjudication of cases as set forth in Sec. 1703.9 of subpart B of this 
part;
    (2) Any statements of policy and interpretation that have been 
adopted by OFHEO and have not been published in the Federal Register;
    (3) Any OFHEO administrative staff manuals and instructions to staff 
that affect a member of the public, and that are not exempt from 
disclosure under the Freedom of Information Act;
    (4) Copies of all records released pursuant to this subpart that 
OFHEO determines have become or are likely to become the subject of 
subsequent requests for substantially the same records; and
    (5) Current indexes to the records described in this paragraph.
    (b) To the extent necessary to prevent an invasion of personal 
privacy, the Director may delete identifying details from a record 
described in paragraph (a) of this section. In each case of such 
deletion, the justification will be clearly explained in writing and the 
extent of such deletion indicated (at the place in the record where the 
deletion is made if technically feasible), unless including that 
indication would harm an interest protected by the exemption in 
Sec. 1703.11(b) pursuant to which the deletion is made.

[65 FR 55172, Sept. 13, 2000. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1703.13  Requests for records.

    (a) Addressing requests. Requests for records in the possession of 
OFHEO shall be made in writing but may be submitted by regular mail, 
electronic mail, or facsimile. If the request is sent by regular mail, 
the request shall be addressed to FOIA Officer, Office of Federal 
Housing Enterprise Oversight, 1700 G Street NW., Fourth Floor, 
Washington, DC 20552, with both the envelope and the letter marked 
``FOIA Request.'' Electronic mail requests shall be addressed to foia--
[email protected], with ``FOIA Request'' in the subject line. Requests 
submitted by fax shall be sent to FOIA Officer at (202) 414-8917 and 
shall be clearly marked ``FOIA Request.'' All requests shall include the 
requester's name, address, and telephone number. An improperly addressed 
request will be deemed not to have been received for purposes of the 20-
day time period set forth in Sec. 1703.17(a) of this subpart until it is 
received, or would have been received with the exercise of due 
diligence, by the FOIA Officer. Records requested in conformance with 
this subpart that are not exempt records may be obtained in person, by 
regular mail, or by electronic mail, as specified in the request, 
provided the records are readily reproducible in the requested form or 
format with reasonable effort. Records to be obtained in person will be 
available for inspection or copying during business hours on a regular 
business day in the office of OFHEO.
    (b) Description of records. Each request must reasonably describe 
the desired records in sufficient detail to enable OFHEO personnel to 
locate the records with a reasonable amount of effort. A request for a 
specific category of records will be regarded as fulfilling this 
requirement if it enables responsive records to be identified by a 
technique or process that is not unreasonably burdensome or disruptive 
of OFHEO operations.
    (1) Whenever possible, a request should include specific information 
about each record sought, such as the date, title or name, author, 
recipient, and subject matter of the record.
    (2) If the FOIA Officer determines that a request does not 
reasonably describe the records sought, he or she will either advise the 
requester what additional information is needed to locate the record or 
otherwise state why the request is insufficient. The FOIA Officer will 
also extend to the requester an opportunity to confer with OFHEO 
personnel with the objective of reformulating the request in a manner 
which will meet the requirements of this section.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55172, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]

[[Page 914]]



Sec. 1703.14  Responses to requests.

    (a) Response to initial request. The FOIA Officer of OFHEO is 
authorized to grant or deny any request for a record and to determine 
appropriate fees.
    (b) Referral to another agency. When a requester seeks records that 
originated in another Federal Government agency, OFHEO will refer the 
request to the other agency for response. If OFHEO refers the request to 
another agency, it will notify the requester of the referral. A request 
for any records classified by some other agency will be referred to that 
agency for response.
    (c) Creating records. If a person seeks information from OFHEO in a 
format that does not currently exist, OFHEO will make reasonable efforts 
to provide the information in the format requested. OFHEO is not 
required to create a new record of information to satisfy a request.
    (d) No responsive record. If no records are responsive to the 
request, the FOIA Officer will so notify the requester in writing.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55173, Sept. 13, 2000]



Sec. 1703.15  Form and content of responses.

    (a) Form of notice granting a request. After the FOIA Officer has 
granted a request in whole or in part, the requester will be notified in 
writing. The notice shall describe the manner in which the record will 
be disclosed, whether by providing a copy of the record with the 
response or at a later date, or by making a copy of the record available 
to the requester for inspection at a reasonable time and place. The 
procedure for such an inspection may not unreasonably disrupt the 
operation of OFHEO. The response letter will also inform the requester 
of any fees to be charged in accordance with the provisions of subpart D 
of this part.
    (b) Form of notice denying a request. When the FOIA Officer denies a 
request in whole or in part, he or she will so notify the requester in 
writing. The response will be signed by the FOIA Officer and will 
include--
    (1) The name and title or position of the person making the denial;
    (2) An estimate of the volume of any requested matter that is 
withheld, unless providing the estimate would harm an interest protected 
by the exemption in Sec. 1703.11(b) pursuant to which the denial was 
made;
    (3) A brief statement of the reason or reasons for the denial, 
including the FOIA exemption or exemptions which the FOIA Officer has 
relied upon in denying the request; and
    (4) A statement that the denial may be appealed under Sec. 1703.16 
of this subpart and a description of the requirements of that section.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55173, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]



Sec. 1703.16  Appeals of denials.

    (a) Right of appeal. If a request, including a request for expedited 
processing, has been denied in whole or in part, the requester may 
appeal the denial to: FOIA Appeals Officer, Office of Federal Housing 
Enterprise Oversight, 1700 G Street, NW, Fourth Floor, Washington DC 
20552. Electronic appeals shall be submitted to 
[email protected] with ``FOIA Appeal'' in the subject 
line.
    (b) Letter of appeal. The appeal must be in writing and submitted 
within 30 days of receipt of the denial letter. The appeal shall be 
submitted in the manner described in Sec. 1703.13, except that it shall 
be clearly marked ``FOIA Appeal'' instead of ``FOIA Request.'' An appeal 
shall include a copy of the initial request, a copy of the letter 
denying the request in whole or in part, and a statement of the 
circumstances, reasons, or arguments advanced in support of disclosure 
of the requested record. An improperly addressed appeal shall be deemed 
not to have been received for the purposes of the 20-day time period set 
forth in Sec. 1703.17(b) until it is received, or would have been 
received with the exercise of due diligence, by the Appeals Officer.
    (c) Action on appeal. The disposition of an appeal will be in 
writing and will constitute the final action of OFHEO on a request. A 
decision affirming in whole or in part the denial of a request will 
include a brief statement of the reason or reasons for affirmance, 
including each FOIA exemption relied

[[Page 915]]

on. If the denial of a request is reversed in whole or in part on 
appeal, the request will be processed promptly in accordance with the 
decision on appeal.
    (d) Judicial review. If the denial of the request for records is 
upheld in whole or in part, or, if a determination on the appeal has not 
been mailed at the end of the 20-day period or the last extension 
thereof, the requester is deemed to have exhausted his or her 
administrative remedies, giving rise to a right of judicial review under 
5 U.S.C. 552(a)(4). However, a requester's refusal of OFHEO's offer of 
an opportunity to limit the scope of the request or arrange an alternate 
time frame for processing the request shall be considered as a factor in 
determining whether ``exceptional circumstances'' exist, which permits a 
court in which a requester has sought judicial review, to grant a stay 
to allow OFHEO to complete its review of the records.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55173, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]



Sec. 1703.17  Time limits.

    (a) Initial request. Following receipt of a request for records, the 
FOIA Officer will determine whether to comply with the request and will 
notify the requester in writing of his or her determination within 20 
days (excluding Saturdays, Sundays, and legal holidays) after receipt of 
the request.
    (b) Appeal. A written determination on an appeal submitted in 
accordance with Sec. 1703.16 of this subpart will be issued within 20 
days (excluding Saturdays, Sundays, and legal holidays) after receipt of 
the appeal. However, determination of an appeal of a denial of expedited 
processing will be issued as expeditiously as practicable. When a 
determination cannot be mailed within the applicable time limit, the 
appeal will nevertheless be processed. In such case, upon the expiration 
of the time limit, the requester will be informed of the reason for the 
delay, of the date on which a determination may be expected to be 
mailed, and of that person's right to seek judicial review. The 
requester may be asked to forego judicial review until determination of 
the appeal.
    (c) Extension of time limits. The time limits specified in either 
paragraph (a) or (b) of this section may be extended in unusual 
circumstances after written notice to the requester setting forth the 
reasons for the extension and the date on which a determination is 
expected to be made. If the date specified for the extension is more 
than 10 days after the initial time allowed for response, OFHEO will 
provide the requester an opportunity to limit the scope of the request 
or arrange for an alternate time frame for processing the request. As 
used in this paragraph, unusual circumstances means that there is a need 
to--
    (1) Search for and collect the requested records from facilities 
that are separate from the office processing the request;
    (2) Search for, collect, and appropriately examine a voluminous 
amount of separate and distinct records which are demanded in a single 
request; or
    (3) Consult with another agency having a substantial interest in the 
determination of the request, or consult with various offices within 
OFHEO that have a substantial interest in the records requested.
    (d) Related requests. OFHEO may aggregate multiple requests 
involving clearly related matters made by a single requester, or a group 
of requesters acting in concert, if OFHEO reasonably believes that such 
requests actually constitute a single request that would qualify as an 
``unusual circumstance.''
    (e) Expedited processing. (1) Upon a demonstration of compelling 
need by the requester, OFHEO will grant a request for expedited 
processing of a FOIA request. If a request for expedited processing is 
granted, OFHEO will give the request priority and process it as soon as 
practicable.
    (2) To show a compelling need for expedited processing, the 
requester shall provide a statement demonstrating that:
    (i) The failure to obtain the requested records could reasonably be 
expected to pose an imminent threat to the life or physical safety of an 
individual; or
    (ii) The requester's main professional occupation or activity is 
information dissemination and there is a particular

[[Page 916]]

urgency to inform the public of government activity involved in the 
request beyond the public's right to know about government activity 
generally.
    (3) The requester's statement of compelling need must be certified 
to be true and correct to the best of his or her knowledge and belief 
and must explain in detail the basis for requesting expedited 
processing. The formality of the certification required to obtain 
expedited treatment may be waived by OFHEO in its discretion.
    (4) A requester seeking expedited processing will be notified within 
ten (10) working days of the receipt of the request whether expedited 
processing has been granted. If the request for expedited processing is 
denied, OFHEO will act on any appeal expeditiously.

[65 FR 55173, Sept. 13, 2000. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1703.18  Special procedures for business information.

    (a) In general. Business information provided to OFHEO by a business 
submitter shall not be disclosed pursuant to an FOIA request except in 
accordance with this section.
    (b) Definitions. For the purpose of this section, the following 
definitions shall apply:
    (1) Business information means trade secrets or other commercial or 
financial information, provided to OFHEO by a submitter, which arguably 
is protected from disclosure under Sec. 1703.11(b)(4), because 
disclosure could reasonably be expected to cause substantial competitive 
harm.
    (2) Business submitter means any person or entity which provides 
business information, directly or indirectly, to OFHEO and who has a 
proprietary interest in the information.
    (c) Designation of business information. Submitters of business 
information should use good-faith efforts to designate, by appropriate 
markings, either at the time of submission or at a reasonable time 
thereafter, those portions of their submissions which they deem to be 
protected under Sec. 1703.11(b)(4). Any such designation will expire 10 
years after the records were submitted to the Government, unless the 
submitter requests, and provides reasonable justification for, a 
designation period of longer duration.
    (d) Predisclosure notification. (1) Except as is provided for in 
paragraph (i) of this section, the FOIA Officer shall, to the extent 
permitted by law, provide a submitter with prompt written notice of an 
FOIA request or administrative appeal encompassing its business 
information whenever required under paragraph (e) of this section. Such 
notice shall either describe the exact nature of the business 
information requested or provide copies of the records or portions 
thereof containing the business information.
    (2) Whenever the FOIA Officer provides a business submitter with the 
notice set forth in paragraph (e)(1) of this section, the FOIA Officer 
shall notify the requester that the request includes information that 
may arguably be exempt from disclosure under Sec. 1703.11(b)(4) and that 
the person or entity who submitted the information to OFHEO has been 
given the opportunity to comment on the proposed disclosure of 
information.
    (e) When notice is required. OFHEO shall provide a business 
submitter with notice of a request whenever--
    (1) The business submitter has in good faith designated the 
information as business information deemed protected from disclosure 
under Sec. 1703.11(b)(4); or
    (2) OFHEO has reason to believe that the request seeks business 
information the disclosure of which may result in substantial commercial 
or financial injury to the business submitter.
    (f) Opportunity to object to disclosure. Through the notice 
described in paragraph (d) of this section, OFHEO shall, to the extent 
permitted by law, afford a business submitter at least 10 days 
(excluding Saturdays, Sundays, and legal holidays) within which it can 
provide OFHEO with a detailed written statement of any objection to 
disclosure. Such statement shall demonstrate why the information is 
contended to be a trade secret or commercial or financial information 
that is privileged or confidential and why disclosure would cause 
competitive harm. Whenever possible, the business submitter's claim of 
confidentiality should be supported by a statement or

[[Page 917]]

certification by an officer or authorized representative of the business 
submitter. Information provided by a submitter pursuant to this 
paragraph may itself be subject to disclosure under the FOIA.
    (g) Notice of intent to disclose. (1) The FOIA Officer shall 
consider carefully a business submitter's objections and specific 
grounds for nondisclosure prior to determining whether to disclose 
business information. Whenever the FOIA Officer decides to disclose 
business information over the objection of a business submitter, the 
FOIA Officer shall forward to the business submitter a written notice at 
least 10 days (excluding Saturdays, Sundays, and legal holidays) before 
the date of disclosure containing--
    (i) A statement of the reasons for which the business submitter's 
disclosure objections were not sustained,
    (ii) A description of the business information to be disclosed, and
    (iii) A specified disclosure date.
    (2) Such notice of intent to disclose likewise shall be forwarded to 
the requester at least 10 days (excluding Saturdays, Sundays, and legal 
holidays) prior to the specified disclosure date.
    (h) Notice of FOIA lawsuit. Whenever a requester brings suit seeking 
to compel disclosure of business information, the FOIA Officer shall 
promptly notify the business submitter of such action.
    (i) Exceptions to predisclosure notification. The requirements of 
this section shall not apply if--
    (1) The FOIA Officer determines that the information should not be 
disclosed;
    (2) The information lawfully has been published or has been 
officially made available to the public;
    (3) Disclosure of the information is required by law (other than the 
Freedom of Information Act ); or
    (4) The designation made by the submitter in accordance with 
paragraph (c) of this section appears obviously frivolous; except that, 
in such a case, the FOIA Officer will provide the submitter with written 
notice of any final decision to disclose business information within a 
reasonable number of days prior to a specified disclosure date.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55173, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]



              Subpart D--Fees for Provision of Information



Sec. 1703.21  Definitions.

    For the purpose of this subpart, the following definitions shall 
apply:
    (a) Commercial use request means a request for information that is 
from, or on behalf of, a requester seeking information for a use or 
purpose that furthers the commercial, trade, or profit interests of the 
requester or the person on whose behalf the request is being made. To 
determine whether a request is properly classified as a commercial use 
request, OFHEO shall determine the purpose for which the requested 
records shall be used. If OFHEO has reasonable cause to doubt the 
purpose specified in the request for which a requester will use the 
records sought, or where the purpose is not clear from the request 
itself, OFHEO shall seek additional clarification before assigning the 
request to a specified category.
    (b) Direct costs means the expenditures actually incurred by OFHEO 
in searching for and reproducing records to respond to a request for 
information. In the case of a commercial use request, the term also 
means those expenditures OFHEO actually incurs in reviewing records to 
respond to the request. The direct costs shall include the cost of the 
time of the employee performing the work, determined in accordance with 
Sec. 1703.22(b)(1)(i), the cost of any computer searches, determined in 
accordance with Sec. 1703.22(b)(1)(ii), and the cost of operating 
duplication equipment. Not included in direct costs are overhead 
expenses such as costs of space, and heating or lighting the facility in 
which the records are stored. Direct costs also include the costs 
incurred by OFHEO for any contract services that may be needed to 
respond to a request.

[[Page 918]]

    (c) Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate higher 
education, an institution of graduate higher education, an institution 
of professional education, and an institution of vocational education, 
which operates a program or programs of scholarly research.
    (d) Noncommercial scientific institution refers to an institution 
that is not operated on a commercial, trade, or profit basis and which 
is operated solely for the purpose of conducting scientific research, 
the results of which are not intended to promote any particular product 
or industry.
    (e) Representative of the news media means any person actively 
gathering news for an entity that is organized and operated to publish 
or broadcast news to the public. The term ``news'' means information 
that is about current events or that would be of current interest to the 
public. Examples of news media entities include television or radio 
stations broadcasting to the public at large and publishers of 
periodicals (but only in those instances in which the periodicals can 
qualify as disseminators of ``news'') who make their products available 
for purchase or subscription by the general public. These examples are 
not intended to be all-inclusive. As traditional methods of news 
delivery evolve, e.g., electronic dissemination of newspapers through 
telecommunication services, such alternative media, would be included in 
this category. ``Freelance'' journalists may be regarded as working for 
a news organization if they can demonstrate a solid basis for expecting 
publication through that organization even though they are not actually 
employed by the organization. A publication contract would be the 
clearest proof that a journalist is working for a news organization, but 
OFHEO may look to the requester's past publication record to determine 
whether a journalist is working for a news organization.
    (f) Reproduce and reproduction means the process of making a copy of 
a record necessary to respond to a request for information. Such copies 
take the form of paper copy, microfilm, audio-visual materials, or 
machine-readable documentation, e.g., magnetic tape or disk. The copy 
provided shall be in the form or format requested, provided the record 
is readily reproducible in that form or format with reasonable effort, 
and shall be in a form reasonably usable by the requesters.
    (g) Review means the process of examining records located in 
response to a request for information to determine whether any portion 
of any record located is permitted to be withheld. It also includes 
processing any records for disclosure, e.g., doing all that is necessary 
to prepare the records for release. The term ``review'' does not include 
the time spent resolving general legal or policy issues regarding the 
application of exemptions. OFHEO shall only charge fees for reviewing 
records in response to a commercial use request.
    (h) The term search includes all time spent looking for material 
that is responsive to a request for information, including page-by-page 
or line-by-line identification of material within records. The term 
``search'' includes the extraction of information from a computer using 
existing programming. Searching for materials shall be done in the most 
efficient and least expensive manner so as to minimize the costs of 
OFHEO and the requester. For example, a line-by-line search for 
responsive material should not be performed when merely reproducing an 
entire document would be less expensive and the faster method of 
complying with the request for information. A ``search'' for material 
that is responsive to a request should be distinguished from a 
``review'' of material to determine whether the material is exempt from 
disclosure.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55174, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]



Sec. 1703.22  Fees to be charged--general.

    (a) Generally, the fees charged for requests for records pursuant to 
the Freedom of Information Act will cover the full allowable direct 
costs of searching for, reproducing, and reviewing records that are 
responsive to a request for information. Fees will be assessed according 
to the schedule contained in paragraph (b) of this section

[[Page 919]]

and the category of requesters described in Sec. 1703.23 of this subpart 
for services rendered by OFHEO staff in responding to, and processing 
requests for, records under this part. Fees assessed shall be paid by 
check or money order payable to the Office of Federal Housing Enterprise 
Oversight.
    (b) Types of charges. The types of charges that may be assessed in 
connection with the production of records in response to a FOIA request 
are as follows:
    (1) Searches. (i) Manual searches for records. OFHEO will charge for 
actual search time, billed in 15-minute segments, at a rate determined 
by whether the employee performing the work is classified as clerical, 
professional, or executive. The hourly fee for each classification is 
based on the average of the actual compensation (salary and benefits) of 
employees in the classification and is adjusted periodically to reflect 
significant changes in the average compensation of the class. The 
``executive'' classification includes the senior management of OFHEO, 
i.e. Director, Deputy Director, Associate Directors and Deputy Associate 
Directors. The ``clerical'' classification includes employees performing 
primarily secretarial, clerical, or ministerial tasks. The 
``professional'' classification includes all positions not classified as 
``executive'' or ``clerical.'' A current fee schedule is available on 
electronically at http://www.ofheo.gov/docs/ or by regular mail.
    (ii) Computer searches for records. Requesters will be charged at 
the actual direct costs of conducting a search using existing 
programming. These direct costs will include the cost of operating the 
computer equipment for that portion of operating time that is directly 
attributable to searching for records and the cost of the time of the 
employee performing the work, determined as described in paragraph 
(b)(1)(i) of this section. A charge will also be made for any 
substantial amounts of special supplies or materials used to contain, 
present, or make available the output of computers, based upon the 
prevailing levels of costs to OFHEO for the type and amount of such 
supplies of materials that are used. Nothing in this paragraph shall be 
construed to entitle any person or entity, as of right, to any services 
in connection with computerized records, other than services to which 
such person or entity may be entitled under the provisions of this 
subpart.
    (iii) Unproductive searches. OFHEO may charge search fees even if no 
records are found that are responsive to the request or if the records 
found are exempt from disclosure.
    (2) Reproduction. Records will be photocopied at a rate of $.15 per 
page. For copies prepared by computer, such as tapes or printouts, the 
requester will be charged the actual cost, including operator time, of 
production of the tape or printout. For other methods of reproduction, 
the actual direct costs of reproducing the record(s) will be charged.
    (3) Review. Only requesters who are seeking records for commercial 
use may be charged for time spent reviewing records to determine whether 
they are exempt from mandatory disclosure. Charges may be assessed only 
for initial review, i.e., the review undertaken the first time OFHEO 
analyzes the applicability of a specific exemption to a particular 
record or portion of a record. Records or portions of records withheld 
in full under an exemption that is subsequently determined not to apply 
may be reviewed again to determine the applicability of other exemptions 
not previously considered. The costs for such a review are properly 
assessable.
    (4) Other services and materials. Where OFHEO elects, as a matter of 
administrative discretion, to comply with a request for a special 
service or materials, such as certifying that records are true copies or 
sending records by special methods, the actual direct costs of providing 
the service or materials will be charged.

[65 FR 55174, Sept. 13, 2000. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1703.23  Fees to be charged--categories of requesters.

    (a) Fees for various requester categories. Paragraphs (b) through 
(e) of this section state, for each category of requester, the types of 
fees generally charged by OFHEO. However, for each

[[Page 920]]

of these categories, the fees may be limited, waived or reduced in 
accordance with the provisions set forth in paragraph (c) of 
Sec. 1703.24. If OFHEO has reasonable cause to doubt the purpose 
specified in the request for which a requester will use the records 
sought, or where the purpose is not clear from the request itself, OFHEO 
will seek clarification before assigning the request a specific 
category.
    (b) Commercial use requester. OFHEO shall charge fees for records 
requested by persons or entities making a commercial use request in an 
amount that equals the full direct costs for searching for, reviewing 
for release, and reproducing the records sought. Commercial use 
requesters are not entitled to 2 hours of free search time nor 100 free 
pages of reproduction of records. In accordance with Sec. 1703.22, 
commercial use requesters may be charged the costs of searching for and 
reviewing records even if there is ultimately no disclosure of records.
    (c) Educational and noncommercial scientific institutions. OFHEO 
shall charge fees for records requested by, or on behalf of, educational 
institutions and noncommercial scientific institutions in an amount 
which equals the cost of reproducing the records responsive to the 
request, excluding the cost of reproducing the first 100 pages. No 
search fee shall be charged with respect to requests by educational and 
noncommercial scientific institutions. For a request to be included in 
this category, requesters must show that the request being made is 
authorized by and under the auspices of a qualifying institution, and 
that the records are not sought for commercial use but are sought in 
furtherance of scholarly research (if the request is from an educational 
institution) or scientific research (if the request is from a 
noncommercial scientific institution).
    (d) News media. OFHEO shall charge fees for records requested by 
representatives of the news media in an amount which equals the cost of 
reproducing the records responsive to the request, excluding the costs 
of reproducing the first 100 pages. No search fee shall be charged with 
respect to requests by representatives of the news media. For a request 
to be included in this category, the requester must qualify as a 
representative of the news media and the request must not be made for a 
commercial use. A request for records supporting the news dissemination 
function of the requester shall not be considered to be a request that 
is for commercial use.
    (e) All other requesters. OFHEO shall charge fees for records 
requested by persons or entities that are not classified in any of the 
categories listed in paragraphs (b), (c), or (d) of this section in an 
amount that equals the full reasonable direct cost of searching for and 
reproducing records that are responsive to the request, excluding the 
first 2 hours of search time and the cost of reproducing the first 100 
pages of records. In accordance with Sec. 1703.22, requesters in this 
category may be charged the cost of searching for records even if there 
is ultimately no disclosure of records, excluding the first 2 hours of 
search time.
    (f) For purposes of the exceptions contained in this section on 
assessment of fees, the word ``pages'' refers to paper copies of 8\1/2\ 
x  11 or 11  x  14. Thus, requesters are not entitled to 100 microfiche 
or 100 computer disks, for example. A microfiche containing the 
equivalent of 100 pages or a computer disk containing the equivalent of 
100 pages of computer printout meets the terms of the exception.
    (g) For purposes of paragraph (e) of this section, the term ``search 
time'' has as its basis, manual search. To apply this term to searches 
made by computer, OFHEO will determine the hourly cost of operating the 
computer equipment and the operator's time determined as described in 
paragraph (b)(1)(i) of Sec. 1703.22. When the cost of the search 
(including the operator's time and the cost of operating the computer 
equipment to process a request) equals the equivalent dollar amount of 
two hours of the time of the person performing the work, i.e., the 
operator, OFHEO will begin assessing charges for the computer.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55174, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]

[[Page 921]]



Sec. 1703.24  Limitations on charging fees.

    (a) In general. Except for requesters seeking records for a 
commercial use as described in paragraph (b) of Sec. 1703.23, OFHEO will 
provide, without charge, the first 100 pages of duplication and the 
first 2 hours of search time, or their cost equivalent.
    (b) No fee charged. OFHEO will not charge fees to any requester, 
including commercial use requesters, if the cost of collecting a fee 
would be equal to or greater than the fee itself. The elements to be 
considered in determining the ``cost of collecting a fee'' are the 
administrative costs of receiving and recording a requester's remittance 
and of processing the fee.
    (c) Waiver or reduction of fees. OFHEO may grant a waiver or 
reduction of fees if OFHEO determines that the disclosure of the 
information is in the public interest because it is likely to contribute 
significantly to public understanding of the operations or activities of 
the Federal Government, and the disclosure of the information is not 
primarily in the commercial interest of the requester. Requests for a 
waiver or reduction of fees will be considered on a case-by-case basis.
    (1) The following factors will be considered by OFHEO in determining 
whether a waiver or reduction of fees is in the public interest:
    (i) The subject of the request: Whether the subject of the requested 
records concerns ``the operations or activities of the Government.'' The 
subject matter of the requested records, in the context of the request, 
must specifically concern identifiable operations or activities of the 
Federal Government with a connection that is direct and clear, not 
remote or attenuated. Furthermore, the records must be sought for their 
informative value with respect to those Government operations or 
activities; a request for access to records for their intrinsic 
informational content alone will not satisfy this threshold 
consideration.
    (ii) The informative value of the information to be disclosed: 
Whether the disclosure is ``likely to contribute'' to an understanding 
of Government operations or activities. The disclosable portions of the 
requested records must be meaningfully informative on specific 
Government operations or activities in order to hold potential for 
contributing to increased public understanding of those operations and 
activities. The disclosure of information that is already in the public 
domain, in either a duplicative or substantially identical form, would 
not be likely to contribute to such understanding, as nothing new would 
be added to the public record.
    (iii) The contribution to an understanding of the subject by the 
general public: Whether disclosure of the requested information will 
contribute to the ``public understanding.'' The disclosure must 
contribute to the understanding of the public at large, as opposed to 
the individual understanding of the requester or a narrow segment of 
interested persons. A requester's identity and qualifications, e.g., 
expertise in the subject area and ability and intention to convey 
information to the general public, will be considered.
    (iv) The significance of the contribution in public understanding: 
Whether the disclosure is likely to ``significantly enhance'' the public 
understanding of Government operations or activities. The public's 
understanding of the subject matter in question, as compared to the 
level of public understanding existing prior to the disclosure, must be 
likely to be enhanced by the disclosure to a significant extent. The 
FOIA Officer shall not make a separate value judgment as to whether 
information, even though it in fact would contribute significantly to 
public understanding of the operations or activities of the Government, 
is ``important'' enough to be made public.
    (2) In order to determine whether the second fee waiver requirement 
is met, i.e., that disclosure of the requested information is not 
primarily in the commercial interest of the requester, OFHEO shall 
consider the following two factors in sequence:
    (i) The existence and magnitude of a commercial interest: Whether 
the requester, or any person on whose behalf the requester may be 
acting, has a commercial interest that would be furthered by the 
requested disclosure. In assessing the magnitude of identified 
commercial interests, consideration will be given to the effect that the 
information disclosed would have on those

[[Page 922]]

commercial interests, as well as to the extent to which FOIA disclosures 
serve those interests overall. Requesters shall be given a reasonable 
opportunity in the administrative process to provide information bearing 
upon this consideration.
    (ii) The primary interest in disclosure: Whether the magnitude of 
the identified commercial interest of the requester is sufficiently 
large in comparison with the public interest in disclosure, that 
disclosure is ``primarily in the commercial interest of the requester.'' 
A fee waiver or reduction is warranted only where, once the ``public 
interest'' standard set out in paragraph (c)(1) of this section is 
satisfied, that public interest can fairly be regarded as greater in 
magnitude than that of the requester's commercial interest in 
disclosure. OFHEO will ordinarily presume that, where a news media 
requester has satisfied the public interest standard, the public 
interest will be serviced primarily by disclosure to that requester. 
Disclosure to requesters who compile and market Federal Government 
information for direct economic return will not be presumed to primarily 
serve the ``public interest.''
    (3) Where only a portion of the requested record satisfies the 
requirements for a waiver or reduction of fees under this paragraph, a 
waiver or reduction shall be granted only as to that portion.
    (4) A request for a waiver or reduction of fees must accompany the 
request for disclosure of records and should include--
    (i) A clear statement of the requester's interest in the records;
    (ii) The proposed use of the records and whether the requester will 
derive income or other benefit from such use;
    (iii) A statement of how the public will benefit from release of the 
requested records; and
    (iv) If specialized use of the documents is contemplated, a 
statement of the requester's qualifications that are relevant to the 
specialized use.
    (5) A requester may appeal the denial of a request for a waiver or 
reduction of fees in accordance with the provisions of Sec. 1703.16.

[63 FR 71005, Dec. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1703.25  Miscellaneous fee provisions.

    (a) Notice of anticipated fees in excess of $25.00. Where OFHEO 
determines or estimates that the fees chargeable will amount to more 
than $25.00, OFHEO shall promptly notify the requester of the actual or 
estimated amount of fees or such portion thereof that can be readily 
estimated, unless the requester has indicated his or her willingness to 
pay fees as high as those anticipated. Where a requester has been 
notified that the actual or estimated fees may exceed $25.00, the 
request will be deemed not to have been received until the requester has 
agreed to pay the anticipated total fee. A notice to the requester 
pursuant to this paragraph will include the opportunity to confer with 
OFHEO personnel in order to reformulate the request to meet the 
requester's needs at a lower cost.
    (b) Aggregating requests. A requester may not file multiple requests 
at the same time, each seeking portions of a record or records, solely 
in order to avoid the payment of fees. When OFHEO reasonably believes 
that a requester, or a group of requesters acting in concert, is 
attempting to break a request into a series of requests for the purpose 
of evading the assessment of fees, OFHEO may aggregate such requests and 
charge accordingly. One element to be considered in determining whether 
a belief would be reasonable is the time period over which the requests 
have occurred. OFHEO will presume that multiple requests of this type 
made within a 30-day period have been made in order to evade fees. Where 
requests are separated by a longer period, OFHEO shall aggregate them 
only where there exists a solid basis for determining that such 
aggregation is warranted, e.g., where the requests involve clearly 
related matters. Multiple requests regarding unrelated matters will not 
be aggregated.
    (c) Advance payment of fees. (1) OFHEO does not require an advance 
payment before work is commenced or continued, unless--
    (i) OFHEO estimates or determines that the fees are likely to exceed 
$250.00. If it appears that the fees will exceed $250.00, OFHEO will 
notify the requester of the likely cost and obtain satisfactory 
assurance of full payment

[[Page 923]]

where the requester has a history of prompt payment of FOIA fees. In the 
case of requesters with no history of payment, OFHEO may require an 
advance payment of fees in an amount up to the full estimated charge 
that will be incurred; or
    (ii) The requester has previously failed to pay a fee in a timely 
fashion, i.e., within 30 days of the date of a billing. In such cases, 
OFHEO may require the requester to pay the full amount owed plus any 
applicable interest, as provided in paragraph (d) of this section, or 
demonstrate that the fee owed has been paid, prior to processing any 
further record request. Under these circumstances, OFHEO may require the 
requester to make an advance payment of the full amount of the fees 
anticipated before processing a new request or finishing processing of a 
pending request from that requester.
    (2) A request for an advance deposit shall include an offer to the 
requester to confer with identified OFHEO personnel to attempt to 
reformulate the request in a manner which will meet the needs of the 
requester at a lower cost.
    (3) When OFHEO requests an advance payment of fees, the 
administrative time limits described in 5 U.S.C. 552(a)(6) begin only 
after OFHEO has received the advance payment.
    (d) Interest. OFHEO may assess interest charges on an unpaid bill 
starting on the 31st day following the day on which the bill was sent. 
Once a fee payment has been received by OFHEO, even if not processed, 
the accrual of interest shall be stayed. Interest charges shall be 
assessed at the rate prescribed in 31 U.S.C. 3717 and shall accrue from 
the date of the billing.



Subpart E--Testimony and Production of Documents in Legal Proceedings in 
                    Which OFHEO Is Not a Named Party



Sec. 1703.31  General purposes.

    The purposes of this subpart are to maintain the confidentiality of 
official documents and information of OFHEO, conserve the time of 
employees for their official duties, maintain the impartial position of 
OFHEO in litigation in which OFHEO is not a named party, and enable the 
Director to determine when to authorize testimony and to produce 
documents in legal proceedings in which OFHEO is not a named party. This 
subpart sets forth the procedures to be followed with respect to 
testimony concerning official matters and production of official 
documents of OFHEO in legal proceedings in which OFHEO is not a named 
party. This subpart in no way affects the rights and procedures 
governing public access to official documents pursuant to the FOIA or 
the Privacy Act.



Sec. 1703.32  Definitions.

    For the purpose of this subpart:
    (a) Court means any entity conducting a legal proceeding.
    (b) Demand means any order, subpoena, or other legal process for 
testimony or documents.
    (c) Legal proceeding means any administrative, civil, or criminal 
proceeding, including a discovery proceeding therein, before a court of 
law, administrative board or commission, hearing officer, or other body 
in which OFHEO is not a named party or in which OFHEO has not instituted 
the administrative investigation or administrative hearing.
    (d) OFHEO Counsel means the General Counsel or his or her designee, 
a Department of Justice attorney, or counsel authorized by OFHEO to act 
on behalf of OFHEO or an employee.



Sec. 1703.33  General policy.

    It is the policy of OFHEO that in any legal proceeding in which 
OFHEO is not a named party, no employee shall, in response to a demand, 
produce any documents contained in the files of OFHEO, or disclose any 
information relating to, or based upon, documents contained in the files 
of OFHEO, or disclose or produce any documents acquired as part of the 
performance of that employee's official duties or because of that 
employee's official status. Under appropriate circumstances, the 
Director may grant exceptions in writing to this policy when the 
Director determines that the testimony of employees or disclosure of 
official documents would be in the best interest of OFHEO or in the 
public interest. Prior to any authorized testimony or release

[[Page 924]]

of official documents, the requesting party shall obtain a protective 
order from the court before which the action is pending to preserve the 
confidentiality of the testimony or documents subsequently produced. The 
protective order shall be in a form satisfactory to OFHEO.



Sec. 1703.34  Request for testimony or production of documents.

    (a) No employee shall give testimony concerning official matters or 
produce any official documents in any legal proceeding to which OFHEO is 
not a named party without the prior written authorization of the 
Director.
    (b) If testimony by an employee concerning official matters or the 
production of official documents is desired, the requesting party, or 
his or her attorney, shall submit a letter to the Director setting forth 
the title of the case, the forum, the requesting party's interest in the 
case, a summary of the issues in the litigation, the reasons for the 
request, and a showing that the desired testimony, documents, or 
information are not reasonably available from any other source. If an 
appearance or testimony is requested, the letter shall also set forth 
the intended use of the testimony, a general summary of the scope of the 
testimony requested, and a showing that no document could be provided 
and used in lieu of the testimony or other appearance requested.
    (c) The General Counsel is authorized to consult with the requesting 
party or his or her attorney to refine and limit the request so that 
compliance is less burdensome, or obtain information necessary to make 
the determination described in Sec. 1703.33 of this subpart. Failure of 
the requesting party, or his or her attorney, to cooperate in good faith 
with the General Counsel to enable the Director to make an informed 
determination under this subpart may serve as the basis for a 
determination not to comply with the request.

[63 FR 71005, Dec. 23, 1998. Redesignated and amended at 65 FR 81327, 
Dec. 26, 2000]



Sec. 1703.35  Scope of permissible testimony.

    (a) The scope of permissible testimony by an employee is limited to 
that set forth in the written authorization granted that employee by the 
Director.
    (b) Employees are not authorized to give opinion testimony, except 
as authorized by the Director. OFHEO, as the regulatory agency charged 
with the responsibility of examining, supervising, and regulating the 
financial safety and soundness and capital adequacy of the Enterprises 
under the Federal Housing Enterprises Financial Safety and Soundness Act 
of 1992, 12 U.S.C. 4501 et seq., relies on the ability of its employees 
to gather full and complete information in order to carry out its 
statutory responsibilities. The use of employees to give opinion 
testimony would hamper OFHEO's ability to carry out its statutory 
responsibilities and would cause a serious administrative burden on 
OFHEO's staff.



Sec. 1703.36  Manner in which testimony is given.

    (a) Authorized testimony of employees ordinarily will be made 
available only through depositions or written interrogatories.
    (b) Where, in response to a request, the Director determines that 
circumstances warrant authorizing testimony by an employee, the 
requesting party shall cause a subpoena to be served on the employee in 
accordance with applicable Federal or State rules of procedure, with a 
copy of the subpoena sent by registered or certified mail to the General 
Counsel.
    (c) Normally, authorized depositions will be taken at OFHEO's 
office, at a time arranged with the employee that is reasonably fixed to 
avoid substantial interference with the performance of the employee's 
duties.
    (d) Upon completion of the deposition of an employee, a copy of the 
transcript of the testimony shall be furnished, at the expense of the 
party requesting the deposition, to the General Counsel for OFHEO's 
files.



Sec. 1703.37  Manner in which documents will be produced.

    (a) An employee's authorization to produce official documents is 
limited to the authority granted that employee by the Director.

[[Page 925]]

    (b) Certified or authenticated copies of official OFHEO documents 
authorized by the Director to be released under this subpart will be 
provided upon request.



Sec. 1703.38  Fees.

    Unless waived or reduced, the following fees shall be charged for 
documents produced by OFHEO in connection with requests subject to this 
subpart:
    (a) Searches for documents. OFHEO will charge for the actual search 
time of the employee performing the work, billed in 15-minute segments, 
as described in Sec. 1703.22(b)(1)(i).
    (b) Copying of documents. The standard copying charge for documents 
in paper copy is $.15 per page. When responsive information is provided 
in a format other than paper copy, such as in the form of computer tapes 
and disks, OFHEO will assess the direct costs of the tape, disk, or 
whatever medium is used to produce the information, as well as any 
related reproduction costs. Normally, only one copy will be provided. 
Additional copies will be provided only upon a showing of demonstrated 
need.
    (c) Certification or authentication of documents. OFHEO will charge 
$3.00 for each certification or authentication of documents.
    (d) Computer searches. Services of personnel in the nature of a 
computer search shall be charged at rates prescribed in paragraph (a) of 
this section. A charge shall be made for the computer time involved, 
based upon the prevailing level of costs to OFHEO and upon the 
particular types of computer and associated equipment and the amount of 
time that such equipment is utilized. A charge shall also be made for 
any substantial amount of special supplies or documents used to contain, 
present, or make available the output of computers, based upon 
prevailing levels of costs to OFHEO and upon the type and amount of such 
supplies or documents that are used.
    (e) Other costs. When other services and documents not specifically 
identified in this section are requested and provided, their actual cost 
to OFHEO shall be charged.
    (f) Payments of fees. A bill will be forwarded to the requesting 
party upon completion of the production. Payment shall be made by check 
or money order payable to the Office of Federal Housing Enterprise 
Oversight.

[63 FR 71005, Dec. 23, 1998, as amended at 65 FR 55175, Sept. 13, 2000. 
Redesignated and amended at 65 FR 81327, Dec. 26, 2000]



Sec. 1703.39  Responses to demands served on employees.

    (a) Advice by employee served. Any employee who is served with a 
demand in a legal proceeding requiring his or her personal attendance as 
a witness or requiring the production of documents or information in any 
proceeding, shall immediately notify the General Counsel of such 
service, of the testimony and documents described in the demand, and of 
all relevant facts which may be of assistance to the General Counsel in 
determining whether the individual in question should be authorized to 
testify or the documents requested should be made available.
    (b) When authorization to testify or to produce documents has not 
been granted by the Director, OFHEO Counsel shall provide the party 
issuing the demand or the court with a copy of the regulations contained 
in this subpart and shall inform the party issuing the demand or the 
court that the employee upon whom the demand has been made is prohibited 
from testifying or producing documents without the prior approval of the 
Director.
    (c) Appearance by employee served. Unless OFHEO has authorized 
disclosure of the information requested, any employee who has OFHEO 
information that may not be disclosed and who is required to respond to 
a subpoena or other legal process, shall attend at the time and place 
required and respectfully decline to disclose or to give any testimony 
with respect to the information, basing such refusal upon the provisions 
of this subpart. If the court nevertheless orders the disclosure of the 
information or the giving of testimony irrespective of instructions from 
the Director not to produce the documents or disclose the information 
sought, the employee upon whom the demand has been made shall continue 
to decline respectfully to disclose the

[[Page 926]]

information and shall report promptly the facts to OFHEO for such action 
as OFHEO may deem appropriate.
    (d) A determination under this subpart to comply or not to comply 
with any demand shall not constitute an assertion or waiver of 
privilege, lack of relevance, technical deficiencies, or any other 
ground for noncompliance. OFHEO reserves the right to oppose any demand 
on any legal ground independent of its determination under this subpart.



Sec. 1703.40  Responses to demands served on nonemployees.

    (a) OFHEO reports of examinations, or any documents related thereto, 
are the property of OFHEO and are not to be disclosed to any person 
without the Director's prior written consent.
    (b) If any person who has possession of an OFHEO report of 
examination, or any documents related thereto, is served with a demand 
in a legal proceeding directing that person to produce such OFHEO 
documents or to testify with respect thereto, such person shall 
immediately notify the General Counsel of such service, of the testimony 
and described documents in the demand, and of all relevant facts. Such 
person shall also object to the production of such documents or 
information contained therein on the basis that the documents are the 
property of OFHEO and cannot be released without OFHEO's consent and 
that their production must be sought from OFHEO following the procedures 
set forth in Sec. 1703.33, paragraphs (b) and (c) of Sec. 1703.34, and 
paragraph (b) of Sec. 1703.37 of this subpart.

[63 FR 71005, Dec. 23, 1998. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



         Subpart F--Rules and Procedures for Service Upon OFHEO



Sec. 1703.51  Service of process.

    (a) Except as otherwise provided by OFHEO regulations, the Federal 
Rules of Civil Procedure, or order of a court with jurisdiction over 
OFHEO, any legal process upon OFHEO, including a legal process served on 
OFHEO demanding access to its records under the FOIA, shall be duly 
issued and served upon the General Counsel and any OFHEO personnel named 
in the caption of the documents.
    (b) Service of process upon the General Counsel may be effected by 
personally delivering a copy of the documents to the General Counsel or 
by sending a copy of the documents to the General Counsel by registered 
or certified mail, postage prepaid, to the Office of Federal Housing 
Enterprise Oversight, 1700 G Street, NW., Fourth Floor, Washington, DC 
20552.



PART 1704--DEBT COLLECTION--Table of Contents




                           Subpart A--General

Sec.
1704.1  Authority and scope.
1704.2  Definitions.
1704.3  Collection of debts and referrals to the Department of the 
          Treasury.
1704.4--1704.19  [Reserved]

                        Subpart B--Salary Offset

1704.20  Authority and scope.
1704.21  Notice requirements before salary offset where OFHEO is the 
          creditor agency.
1704.22  Review of OFHEO records related to the debt.
1704.23  Opportunity for a hearing where OFHEO is the creditor agency.
1704.24  Certification where OFHEO is the creditor agency.
1704.25  Voluntary repayment agreements as alternative to salary offset 
          where OFHEO is the creditor agency.
1704.26  Special review where OFHEO is creditor agency.
1704.27  Notice of salary offset where OFHEO is the paying agency.
1704.28  Procedures for salary offset where OFHEO is the paying agency.
1704.29  Coordinating salary offset with other agencies.
1704.30  Interest, penalties, and administrative costs.
1704.31  Refunds.
1704.32  Request from a creditor agency for the services of a hearing 
          official.
1704.33  Non-waiver of rights by payment.
1704.34-1704.39  [Reserved]

                    Subpart C--Administrative Offset

1704.40  Authority and scope.
1704.41  Administrative offset prior to completion of procedures.
1704.42  Procedures.
1704.43  Interest.
1704.44  Refunds.

[[Page 927]]

1704.45  Requests for administrative offset to other Federal agencies.
1704.46  Requests for administrative offset from other Federal agencies.
1704.47  Administrative offset against amounts payable from Civil 
          Service Retirement and Disability Fund.
1704.48--1704.49  [Reserved]

                      Subpart D--Tax Refund Offset

1704.50  Authority and scope.
1704.51  Definitions.
1704.52  Procedures.

    Authority: 5 U.S.C. 5514; 26 U.S.C. 6402(d); 31 U.S.C. 3701-3720A.

    Source: 64 FR 34969, June 30, 1999, unless otherwise noted. 
Redesignated at 65 FR 81328, Dec. 26, 2000.



                           Subpart A--General



Sec. 1704.1  Authority and scope.

    (a) Authority. The Office of Federal Housing Enterprise Oversight 
(OFHEO) issues this part 1704 under the authority of 5 U.S.C. 5514 and 
31 U.S.C. 3701–3720A, and in conformity with the FCCS at 4 CFR 
chapter II; the regulations on salary offset issued by the Office of 
Personnel Management at 5 CFR part 550, subpart K; and the regulations 
on tax refund offset issued by the Internal Revenue Service at 26 CFR 
301.6402–6.
    (b) Scope. (1) This part 1704 applies to debts that are owed to the 
Federal Government by Federal employees, other persons, organizations, 
or entities that are indebted to OFHEO, and by Federal employees of 
OFHEO who are indebted to other agencies, except for those debts listed 
in paragraph (b)(2) of this section.
    (2) Subparts B and C of this part 1704 do not apply to:
    (i) Debts or claims arising under the Internal Revenue Code (26 
U.S.C. 1 et seq.) or the tariff laws of the United States;
    (ii) Any case to which the Contract Disputes Act (41 U.S.C. 601 et 
seq.) applies;
    (iii) Any case where collection of a debt is explicitly provided for 
or provided by another statute, e.g. travel advances under 5 U.S.C. 5705 
and employee training expenses under 5 U.S.C. 4108, or, as provided for 
by title 11 of the United States Code, when the claims involve 
bankruptcy;
    (iv) Any debt based in whole or in part on conduct in violation of 
the antitrust laws or involving fraud, the presentation of a false 
claim, or misrepresentation on the part of the debtor or any party 
having an interest in the claim, unless the Department of Justice 
authorizes OFHEO to handle the collection;
    (v) Claims between agencies; or
    (vi) A claim that has been outstanding for more than 10 years after 
the creditor agency's right to collect the debt first accrued, unless 
facts material to the Federal Government's right to collect were not 
known and could not reasonably have been known by the officials charged 
with the responsibility for discovery and collection of such debts.
    (3) Nothing in this part 1704 precludes the compromise, suspension, 
or termination of collection actions, where appropriate under the FCCS, 
or the use of alternative dispute resolution methods if they are not 
inconsistent with applicable law and regulations.
    (4) Nothing in this part 1704 precludes an employee from requesting 
waiver of an erroneous payment under 5 U.S.C. 5584, 10 U.S.C. 2774, or 
32 U.S.C. 716, or from questioning the amount or validity of a debt, in 
the manner set forth in this part 1704.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.2  Definitions.

    The following definitions apply to the terms used in this part 1704, 
unless the term is defined elsewhere in this part 1704.
    (a) Administrative offset means an action, pursuant to 31 U.S.C. 
3716, in which the Federal Government withholds funds payable to, or 
held by the Federal Government for a person, organization, or other 
entity in order to collect a debt from that person, organization, or 
other entity. Such funds include funds payable by the Federal Government 
on behalf of a State Government.
    (b) Agency means a department, agency, court, court administrative 
office,

[[Page 928]]

or instrumentality in the executive, judicial, or legislative branch of 
the Federal Government, including government corporations.
    (c) Claim or debt (used interchangeably in this part 1704) means any 
amount of funds or property that has been determined by an agency 
official to be due the Federal Government by a person, organization, or 
entity, except another agency. It also means any amount of money, funds, 
or property owed by a person to a State, the District of Columbia, 
American Samoa, Guam, the United States Virgin Islands, the Commonwealth 
of the Northern Mariana Islands, or the Commonwealth of Puerto Rico. A 
claim or debt includes:
    (1) Funds owed on account of loans made, insured, or guaranteed by 
the Federal Government, including any deficiency or any difference 
between the price obtained by the Federal Government in the sale of a 
property and the amount owed to the Federal Government on a mortgage on 
the property;
    (2) Expenditures of non-appropriated funds;
    (3) Overpayments, including payments disallowed by audits performed 
by the Inspector General of the agency administering the program;
    (4) Any amount the Federal Government is authorized by statute to 
collect for the benefit of any person;
    (5) The unpaid share of any non-Federal partner in a program 
involving a Federal payment, and a matching or cost-sharing payment by 
the non-Federal partner;
    (6) Any fines or penalties assessed by an agency; and
    (7) Other amounts of money or property owed to the Federal 
Government.
    (d) Certification means a written statement received by a paying 
agency from a creditor agency that request the paying agency to offset 
the salary of an employee and specifies that required procedural 
protections have been afforded the employee.
    (e) Compromise means the settlement or forgiveness of a debt.
    (f) Creditor agency means the agency to which the debt is owed, 
including a debt collection center when acting in behalf of a creditor 
agency in matters pertaining to the collection of a debt.
    (g) Debt. See Claim or debt in paragraph (c) of this section.
    (h) Debt collection center means the Department of the Treasury or 
any other agency or division designated by the Secretary of the Treasury 
with authority to collect debts on behalf of creditor agencies in 
accordance with 31 U.S.C. 3711(g).
    (i) Debtor means the person, organization, or entity owing money to 
the Federal Government.
    (j) Disposable pay means that part of current basic pay, special 
pay, incentive pay, retired pay, or retainer pay (or in the case of an 
employee not entitled to basic pay, other authorized pay) remaining 
after the deduction of any amount required by law to be withheld (other 
than deductions to execute garnishment orders in accordance with 5 CFR 
parts 581 and 582). Among the legally required deductions that OFHEO 
must apply first to determine disposable pay are levies pursuant to the 
Internal Revenue Code (title 26, United States Code) and deductions 
described in 5 CFR 581.105 (b) through (f), as follows:
    (1) Federal employment taxes;
    (2) Amounts withheld for the United States Soldiers’ and 
Airmen's Home;
    (3) Amounts deducted for Medicare;
    (4) Fines and forfeiture ordered by a court-martial or by a 
commanding officer;
    (5) Federal, State, or local income taxes to the extent authorized 
or required by law, but no greater than would be the case if the 
employee claimed all dependents to which her or she is entitled and such 
additional amounts for which the employee presents evidence of a tax 
obligation supporting the additional withholding;
    (6) Health insurance premiums;
    (7) Normal retirement contributions, including employee 
contributions to the Thrift Savings Plan; and
    (8) Normal life insurance premiums, e.g., Serviceman's Group Life 
Insurance and “Basic Life” Federal Employee's Group Life 
Insurance premiums, not including amounts deducted for supplementary 
coverage.
    (k) Employee means a current employee of OFHEO or other agency, 
including a current member of the Armed

[[Page 929]]

Forces or a Reserve of the Armed Forces of the United States.
    (l) FCCS means the Federal Claims Collection Standards at 4 CFR 
chapter II.
    (m) Hearing official means an individual who is responsible for 
conducting any hearing with respect to the existence or amount of a debt 
claimed and for rendering a decision on the basis of such hearing. A 
hearing official may not be under the supervision or control of the 
Director of OFHEO when OFHEO is the creditor agency but may be an 
administrative law judge.
    (n) Notice of Intent means a written notice of a creditor agency to 
a debtor that states that the debtor owes a debt to the creditor agency 
and apprises the debtor of the applicable procedural rights.
    (o) Notice of salary offset means a written notice from the paying 
agency to an employee after a certification has been issued by a 
creditor agency that informs the employee that salary offset will begin 
at the next officially established pay interval.
    (p) Paying agency means an agency of the Federal Government that 
employs the individual who owes a debt to an agency of the Federal 
Government.
    (q) Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deductions at one or more officially established 
pay intervals from the current pay account of an employee without his or 
her consent.
    (r) Waiver means the cancellation, remission, forgiveness, or non-
recovery of a debt allegedly owed by an employee to OFHEO or another 
agency as permitted or required by 5 U.S.C. 5584 or 8346(b), 10 U.S.C. 
2774, 32 U.S.C. 716, or any other law.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.3  Collection of debts and referrals to the Department of the Treasury.

    (a) Collection activity. The collection of debts directly and by 
offset shall be pursued in accordance with this part 1704. This part 
1704 incorporates all applicable debt collection provisions of the FCCS 
and supplements the FCCS by the prescription of procedures necessary and 
appropriate for the operations of OFHEO.
    (b) Referral of delinquent debts. (1) OFHEO shall transfer to the 
Secretary of the Department of the Treasury any past due, legally 
enforceable nontax debt that has been delinquent for a period of 180 
days or more so that the Secretary may take appropriate action to 
collect the debt or terminate collection action in accordance with 31 
U.S.C. 3716, 5 U.S.C. 5514, the FCCS, 5 CFR 550.1108, and 31 CFR part 
285.
    (2) OFHEO may transfer any past due, legally enforceable nontax debt 
that has been delinquent for less than a period of 180 days to a debt 
collection center for collection in accordance with 31 U.S.C. 3716, 5 
U.S.C. 5514, 5 CFR 550.1108, 31 CFR part 285, and the FCCS.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Secs. 1704.4-1704.19  [Reserved]



                        Subpart B--Salary Offset



Sec. 1704.20  Authority and scope.

    (a) Authority. OFHEO may collect debts owed by employees to the 
Federal Government by means of salary offset under the authority of 5 
U.S.C. 5514, 5 CFR part 550, subpart K, and this subpart B.
    (b) Scope. (1) The procedures set forth in this subpart B apply to 
situations where OFHEO is attempting to collect a debt by salary offset 
that is owed to it by an individual employed by OFHEO or by another 
agency; or where OFHEO employs an individual who owes a debt to another 
agency.
    (2) The procedures set forth in this subpart B do not apply to:
    (i) Any routine intra-agency adjustment of pay that is attributable 
to clerical or administrative error or delay in processing pay documents 
that have occurred within the four pay periods preceding the adjustment, 
or any adjustment to collect a debt amounting to $50 or less. However, 
at the time of any such adjustment, or as soon thereafter as possible, 
OFHEO or its designated payroll agent shall provide the employee with a 
written notice of

[[Page 930]]

the nature and the amount of the adjustment and a point of contact for 
contesting such adjustment.
    (ii) Any negative adjustment to pay that arises from an employee's 
election of coverage or a change in coverage under a Federal benefits 
program that requires periodic deductions from pay, if the amount to be 
recovered was accumulated over four pay periods or less. However, at the 
time the such adjustment is made, OFHEO or its payroll agent shall 
provide in the employee's earnings statement a clear and concise 
statement that informs the employee of the previous overpayment.



Sec. 1704.21  Notice requirements before salary offset where OFHEO is the creditor agency.

    (a) Notice of Intent. Deductions from an employee's salary may not 
be made unless OFHEO provides the employee with a Notice of Intent a 
minimum of 30 calendar days before the salary offset is initiated.
    (b) Contents of Notice of Intent. The Notice of Intent shall advise 
the employee of the following:
    (1) OFHEO has reviewed the records relating to the claim and has 
determined that the employee owes the debt;
    (2) OFHEO intends to collect the debt by deductions from the 
employee's current disposable pay account;
    (3) The amount of the debt and the facts giving rise to the debt;
    (4) The frequency and amount of the intended deduction (stated as a 
fixed dollar amount or as a percentage of pay not to exceed 15 percent 
of disposable pay), and the intention to continue the deductions until 
the debt and all accumulated interest are paid in full or otherwise 
resolved;
    (5) The name, address, and telephone number of the person to whom 
the employee may propose a written alternative schedule for voluntary 
repayment, in lieu of salary offset. The employee shall include a 
justification for the alternative schedule in his or her proposal. If 
the terms of the alternative schedule are agreed upon by the employee 
and OFHEO, the alternative written schedule shall be signed by both the 
employee and OFHEO;
    (6) An explanation of OFHEO's policy concerning interest, penalties, 
and administrative costs, including a statement that such assessments 
must be made unless excused in accordance with the FCCS;
    (7) The employee's right to inspect and copy all records of OFHEO 
pertaining to his or her debt that are not exempt from disclosure or to 
receive copies of such records if he or she is unable personally to 
inspect the records as the result of geographical or other constraints;
    (8) The name, address, and telephone number of the OFHEO employee to 
whom requests for access to records relating to the debt must be sent;
    (9) The employee's right to a hearing conducted by an impartial 
hearing official with respect to the existence and amount of the debt 
claimed or the repayment schedule i.e., the percentage of disposable pay 
to be deducted each pay period, so long as a request is filed by the 
employee as prescribed in Sec. 1704.23; the name and address of the 
office to which the request for a hearing should be sent; and the name, 
address, and telephone number of a person whom the employee may contact 
concerning procedures for requesting a hearing;
    (10) The filing of a request for a hearing on or before the 15th 
calendar day following receipt of the Notice of Intent will stay the 
commencement of collection proceedings and a final decision on whether a 
hearing will be held (if a hearing is requested) will be issued at the 
earliest practical date;
    (11) OFHEO shall initiate certification procedures to implement a 
salary offset unless the employee files a request for a hearing on or 
before the 15th calendar day following receipt of the Notice of Intent;
    (12) Any knowingly false or frivolous statement, representations, or 
evidence may subject the employee to:
    (i) Disciplinary procedures appropriate under 5 U.S.C. chapter LXXV, 
5 CFR part 752, or any other applicable statutes or regulations;
    (ii) Penalties under the False Claims Act, 31 U.S.C. 3729--3731, or 
under any other applicable statutory authority; or

[[Page 931]]

    (iii) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002, 
or under any other applicable statutory authority;
    (13) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made;
    (14) Unless there are applicable contractual or statutory provisions 
to the contrary, amounts paid on or deducted from debts that are later 
waived or found not to be owed to the Federal Government shall be 
promptly refunded to the employee; and
    (15) Proceedings with respect to the debt are governed by 5 U.S.C. 
5514.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.22  Review of OFHEO records related to the debt.

    (a) Request for review. An employee who desires to inspect or copy 
OFHEO records related to a debt owed by the employee to OFHEO must send 
a letter to the individual designated in the Notice of Intent requesting 
access to the relevant records. The letter must be received in the 
office of that individual within 15 calendar days after the employee's 
receipt of the Notice of Intent.
    (b) Review location and time. In response to a timely request 
submitted by the employee, the employee shall be notified of the 
location and time when the employee may inspect and copy records related 
to his or her debt that are not exempt from disclosure. If the employee 
is unable personally to inspect such records as the result of 
geographical or other constraints, OFHEO shall arrange to send copies of 
such records to the employee.



Sec. 1704.23  Opportunity for a hearing where OFHEO is the creditor agency.

    (a) Request for a hearing. (1) Time-period for submission. An 
employee who requests a hearing on the existence or amount of the debt 
held by OFHEO or on the salary-offset schedule proposed by OFHEO, must 
send such request to OFHEO. The request for a hearing must be received 
by OFHEO on or before the 15th calendar day following receipt by the 
employee of the Notice of Intent.
    (2) Failure to submit timely. If the employee files a request for a 
hearing after the expiration of the 15th calendar day, OFHEO may accept 
the request if the employee can show that the delay was the result of 
circumstances beyond his or her control or that he or she failed to 
receive actual notice of the filing deadline.
    (3) Contents of request. The request for a hearing must be signed by 
the employee and must fully identify and explain with reasonable 
specificity all the facts, evidence, and witnesses, if any, that the 
employee believes support his or her position. The employee must also 
specify whether he or she requests an oral hearing. If an oral hearing 
is requested, the employee should explain why a hearing by examination 
of the documents without an oral hearing would not resolve the matter.
    (4) Failure to request a hearing. The failure of an employee to 
request a hearing will be considered an admission by the employee that 
the debt exits in the amount specified in the Notice of Intent that was 
provided to the employee under Sec. 1704.21(b).
    (b) Obtaining the services of a hearing official. (1) Debtor is not 
OFHEO employee. When the debtor is not an OFHEO employee and OFHEO 
cannot provide a prompt and appropriate hearing before an administrative 
law judge or other hearing official, OFHEO may request a hearing 
official from an agent of the paying agency, as designated in 5 CFR part 
581, appendix A, or as otherwise designated by the paying agency.
    (2) Debtor is OFHEO employee. When the debtor is an OFHEO employee, 
OFHEO may contact any agent of another agency, as designated in 5 CFR 
part 581, appendix A, or as otherwise designated by the agency, to 
request a hearing official.
    (c) Procedure. (1) Notice of hearing. After the employee requests a 
hearing, the hearing official shall notify the employee of the form of 
the hearing to be provided. If the hearing will be oral, the notice 
shall set forth the date, time, and location of the hearing,

[[Page 932]]

which must occur no more than 30 calendar days after the request is 
received, unless the employee requests that the hearing be delayed. If 
the hearing will be conducted by an examination of documents, the 
employee shall be notified within 30 calendar days that he or she should 
submit evidence and arguments in writing to the hearing official.
    (2) Oral hearing. (i) An employee who requests an oral hearing shall 
be provided an oral hearing if the hearing official determines that the 
matter cannot be resolved by an examination of the documents alone, as 
for example, when an issue of credibility or veracity is involved. The 
oral hearing need not be an adversarial adjudication and rules of 
evidence need not apply. Witnesses who testify in an oral hearing shall 
do so under oath or affirmation.
    (ii) Oral hearings may take the form of, but are not limited to:
    (A) Informal conferences with the hearing official in which the 
employee and agency representative are given full opportunity to present 
evidence, witnesses, and argument;
    (B) Informal meetings in which the hearing examiner interviews the 
employee; or
    (C) Formal written submissions followed by an opportunity for oral 
presentation.
    (3) Hearing by examination of documents. If the hearing official 
determines that an oral hearing is not necessary, he or she shall make 
the determination based upon an examination of the documents.
    (d) Record. The hearing official shall maintain a summary record of 
any hearing conducted under this section.
    (e) Decision. (1) The hearing official shall issue a written opinion 
stating his or her decision, based upon all evidence and information 
developed during the hearing, as soon as practicable after the hearing, 
but not later than 60 calendar days after the date on which the request 
was received by OFHEO, unless the hearing was delayed at the request of 
the employee, in which case the 60-day decision period shall be extended 
by the number of days by which the hearing was postponed.
    (2) The decision of the hearing official shall be final and is 
considered to be an official certification regarding the existence and 
the amount of the debt for purposes of executing salary offset under 5 
U.S.C. 5514. If the hearing official determines that a debt may not be 
collected by salary offset, but OFHEO finds that the debt is still 
valid, OFHEO may seek collection of the debt through other means in 
accordance with applicable law and regulations.
    (f) Content of decision. The written decision shall include:
    (1) A summary of the facts concerning the origin, nature, and amount 
of the debt;
    (2) The hearing official's findings, analysis, and conclusions; and
    (3) The terms of any repayment schedules, if applicable.
    (g) Failure to appear. If, in the absence of good cause shown, such 
as illness, the employee or the representative of OFHEO fails to appear, 
the hearing official shall proceed with the hearing as scheduled, and 
make his or decision based upon the oral testimony presented and the 
documentation submitted by both parties. At the request of both parties, 
the hearing official may schedule a new hearing date. Both parties shall 
be given reasonable notice of the time and place of the new hearing.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.24  Certification where OFHEO is the creditor agency.

    (a) Issuance. OFHEO shall issue a certification in all cases where 
the hearing official determines that a debt exists or the employee 
admits the existence and amount of the debt, as for example, by failing 
to request a hearing.
    (b) Contents. The certification must be in writing and state:
    (1) That the employee owes the debt;
    (2) The amount and basis of the debt;
    (3) The date of the Federal Government's right to collect the debt 
first accrued;
    (4) The date the employee was notified of the debt, the action(s) 
taken pursuant to OFHEO's regulations, and the dates such actions were 
taken;
    (5) If the collection is to be made by lump-sum payment, the amount 
and date such payment will be collected;

[[Page 933]]

    (6) If the collection is to be made in installments, the amount or 
percentage of disposable pay to be collected in each installment and, if 
OFHEO wishes, the desired commencing date of the first installments, if 
a date other than the next officially established pay period; and
    (7) A statement that OFHEO's regulation on salary offset has been 
approved by the Office of Personnel Management pursuant to 5 CFR part 
550, subpart K.



Sec. 1704.25  Voluntary repayment agreements as alternative to salary offset where OFHEO is the creditor agency.

    (a) Proposed repayment schedule. In response to a Notice of Intent, 
an employee may propose to repay the debt voluntarily in lieu of salary 
offset by submitting a written proposed repayment schedule to OFHEO. Any 
proposal under this section must be received by OFHEO within 15 calendar 
days after receipt of the Notice of Intent.
    (b) Notification of decision. In response to a timely proposal by 
the employee, OFHEO shall notify the employee whether the employee's 
proposed repayment schedule is acceptable. OFHEO has the discretion to 
accept, reject, or propose to the employee a modification of the 
proposed repayment schedule.
    (1) If OFHEO decides that the proposed repayment schedule is 
unacceptable, the employee shall have 15 calendar days from the date he 
or she received notice of the decision in which to file a request for a 
hearing.
    (2) If OFHEO decides that the proposed repayment schedule is 
acceptable or the employee agrees to a modification proposed by OFHEO, 
an agreement shall be put in writing and signed by both the employee and 
OFHEO.



Sec. 1704.26  Special review where OFHEO is the creditor agency.

    (a) Request for review. (1) An employee subject to salary offset or 
a voluntary repayment agreement may, at any time, request a special 
review by OFHEO of the amount of the salary offset or voluntary 
repayment, based on materially changed circumstances, including, but not 
limited to, catastrophic illness, divorce, death, or disability.
    (2) The request for special review must include an alternative 
proposed offset or payment schedule and a detailed statement, with 
supporting documents, that shows why the current salary offset or 
payments result in extreme financial hardship to the employee and his or 
her spouse and dependents. The detailed statement must indicate:
    (i) Income from all sources;
    (ii) Assets;
    (iii) Liabilities;
    (iv) Number of dependents;
    (v) Expenses for food, housing, clothing, and transportation;
    (vi) Medical expenses; and
    (vii) Exceptional expenses, if any.
    (b) Evaluation of request. OFHEO shall evaluate the statement and 
supporting documents and determine whether the original offset or 
repayment schedule imposes extreme financial hardship on the employee. 
OFHEO shall notify the employee in writing within 30 calendar days of 
such determination, including, if appropriate, a revised offset or 
payment schedule. If the special review results in a revised offset or 
repayment schedule, OFHEO shall provide a new certification to the 
paying agency.



Sec. 1704.27  Notice of salary offset where OFHEO is the paying agency.

    (a) Notice. Upon issuance of a proper certification by OFHEO (for 
debts owed to OFHEO) or upon receipt of a proper certification from 
another creditor agency, OFHEO shall send the employee a written notice 
of salary offset.
    (b) Content of notice. Such written notice of salary offset shall 
advise the employee of the:
    (1) Certification that has been issued by OFHEO or received from 
another creditor agency;
    (2) Amount of the debt and of the deductions to be made; and
    (3) Date and pay period when the salary offset will begin.
    (c) If OFHEO is not the creditor agency, OFHEO shall provide a copy 
of the notice of salary offset to the creditor agency and advise the 
creditor agency of the dollar amount to be offset and the pay period 
when the offset will begin.

[[Page 934]]



Sec. 1704.28  Procedures for salary offset where OFHEO is the paying agency.

    (a) Generally. OFHEO shall coordinate salary deductions under this 
section and shall determine the amount of an employee's disposable pay 
and the amount of the salary offset subject to the requirements in this 
section. Deductions shall begin the pay period following the issuance of 
the certification by OFHEO or the receipt by OFHEO of the certification 
from another agency, or as soon thereafter as possible.
    (b) Types of collection. (1) Lump-sum payment. If the amount of the 
debt is equal to or less than 15 percent of the employee's disposable 
pay, such debt ordinarily will be collected in one lump-sum payment.
    (2) Installment deductions. Installment deductions will be made over 
a period not greater than the anticipated period of employment. The size 
and frequency of installment deductions will bear a reasonable relation 
to the size of the debt and the employee's ability to pay. However, the 
amount deducted for any pay period will not exceed 15 percent of the 
disposable pay from which the deduction is made unless the employee has 
agreed in writing to the deduction of a greater amount. The installment 
payment should normally be sufficient in size and frequency to liquidate 
the debt in no more than three years. Installment payments of less than 
$50 should be accepted only in the most unusual circumstances.
    (3) Lump-sum deductions from final check. In order to liquidate a 
debt, a lump-sum deduction exceeding 15 percent of disposable pay may be 
made pursuant to 31 U.S.C. 3716 from any final salary payment due a 
former employee, whether the former employee was separated voluntarily 
or involuntarily.
    (4) Lump-sum deductions from other sources. Whenever an employee 
subject to salary offset is separated from OFHEO, and the balance of the 
debt cannot be liquidated by offset of the final salary check, OFHEO may 
offset any later payments of any kind to the former employee to collect 
the balance of the debt pursuant to 31 U.S.C. 3716.
    (c) Multiple debts. (1) Where two or more creditor agencies are 
seeking salary offset, or where two or more debts are owed to a single 
creditor agency, OFHEO may, at his or her discretion, determine whether 
one or more debts should be offset simultaneously within the 15 percent 
limitation.
    (2) In the event that a debt owed OFHEO is certified while an 
employee is subject to salary offset to repay another agency, OFHEO may, 
at its discretion, determine whether the debt to OFHEO should be repaid 
before the debt to the other agency is repaid, repaid simultaneously 
with the other debt, or repaid after the debt to the other agency.
    (3) A levy pursuant to the Internal Revenue Code of 1986 shall take 
precedence over other deductions under this section, as provided in 5 
U.S.C. 5514(d).



Sec. 1704.29  Coordinating salary offset with other agencies.

    (a) Responsibility of OFHEO as the creditor agency. (1) OFHEO shall 
be responsible for:
    (i) Arranging for a hearing upon proper request by a Federal 
employee;
    (ii) Preparing the Notice of Intent consistent with the requirements 
of Sec. 1704.21;
    (iii) Obtaining hearing officials from other agencies pursuant to 
Sec. 1704.23(b); and
    (iv) Ensuring that each certification of debt is sent to a paying 
agency pursuant to Sec. 1704.24(b).
    (2) Upon completion of the procedures set forth in , OFHEO shall 
submit to the employee's paying agency, if applicable, a certified debt 
claim and an installment agreement or other instruction on the payment 
schedule.
    (i) If the employee is in the process of separating from the Federal 
Government, OFHEO shall submit its debt claim to the employee's paying 
agency for collection by lump-sum deduction from the employee's final 
check. The paying agency shall certify the total amount of its 
collection and furnish a copy of the certification to OFHEO and to the 
employee.
    (ii) If the employee is already separated and all payments due from 
his or her former paying agency have been paid, OFHEO may, unless 
otherwise prohibited, request that money due and

[[Page 935]]

payable to the employee from the Federal Government be administratively 
offset to collect the debt.
    (iii) When an employee transfers to another paying agency, OFHEO 
shall not repeat the procedures described in Secs. 1704.24-1704.26. Upon 
receiving notice of the employee's transfer, OFHEO shall review the debt 
to ensure that collection is resumed by the new paying agency.
    (b) Responsibility of OFHEO as the paying agency. (1) Complete 
claim. When OFHEO receives a certified claim from a creditor agency, the 
employee shall be given written notice of the certification, the date 
salary offset will begin, and the amount of the periodic deductions. 
Deductions shall be scheduled to begin at the next officially 
established pay interval or as otherwise provided for in the 
certification.
    (2) Incomplete claim. When OFHEO receives an incomplete 
certification of debt from a creditor agency, OFHEO shall return the 
claim with notice that procedures under 5 U.S.C. 5514 and 5 CFR 550.1104 
must be followed, and that a properly certified claim must be received 
before OFHEO will take action to collect the debt from the employee's 
current pay account.
    (3) Review. OFHEO is not authorized to review the merits of the 
creditor agency's determination with respect to the amount or validity 
of the debt certified by the creditor agency.
    (4) Employees who transfer from one paying agency to another agency. 
If, after the creditor agency has submitted the debt claim to OFHEO, the 
employee transfers to another agency before the debt is collected in 
full, OFHEO must certify the total amount collected on the debt. One 
copy of the certification shall be furnished to the employee and one 
copy shall be sent to the creditor agency along with notice of the 
employee's transfer. If OFHEO is aware that the employee is entitled to 
payments from the Civil Service Retirement and Disability Fund or other 
similar payments, it must provide written notification to the agency 
responsible for making such payments that the debtor owes a debt 
(including the amount) and that the requirements set forth herein and in 
5 CFR part 550, subpart k, have been met.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.30  Interest, penalties, and administrative costs.

    Where OFHEO is the creditor agency, OFHEO shall assess interest, 
penalties, and administrative costs pursuant to 31 U.S.C. 3717 and the 
FCCS.



Sec. 1704.31  Refunds.

    (a) Where OFHEO is the creditor agency, OFHEO shall promptly refund 
any amount deducted under the authority of 5 U.S.C. 5514 when:
    (1) OFHEO receives notice that the debt has been compromised or 
otherwise found not to be owing to the Federal Government; or
    (2) An administrative or judicial order directs OFHEO to make a 
refund.
    (b) Unless required by law or contract, refunds under this section 
shall not bear interest.



Sec. 1704.32  Request from a creditor agency for the services of a hearing official.

    (a) OFHEO may provide qualified personnel to serve as hearing 
officials upon request of a creditor agency when--
    (1) The debtor is employed by OFHEO and the creditor agency cannot 
provide a prompt and appropriate hearing before a hearing official 
furnished pursuant to another lawful arrangement; or
    (2) The debtor is employed by the creditor agency and that agency 
cannot arrange for a hearing official.
    (b) Services provided by OFHEO to creditor agencies under this 
section shall be provided on a fully reimbursable basis pursuant to 31 
U.S.C. 1535.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.33  Non-waiver of rights by payments.

    A debtor's payment, whether voluntary or involuntary, of all or any 
portion of a debt being collected pursuant to this subpart B shall not 
be construed as a waiver of any rights that the debtor may have under 
any statute, regulation, or contract, except as otherwise provided by 
law or contract.

[[Page 936]]



Secs. 1704.34-1704.39  [Reserved]



                    Subpart C--Administrative Offset



Sec. 1704.40  Authority and scope.

    OFHEO may collect a debt owed to the Federal Government from a 
person, organization, or other entity by administrative offset, pursuant 
to 31 U.S.C. 3716, where:
    (a) The debt is certain in amount;
    (b) Administrative offset is feasible, desirable, and not otherwise 
prohibited;
    (c) The applicable statute of limitations has not expired; and
    (d) Administrative offset is in the best interest of the Federal 
Government.



Sec. 1704.41  Administrative offset prior to completion of procedures.

    Prior to the completion of the procedures described in Sec. 1704.42, 
OFHEO may effect administrative offset if failure to offset would 
substantially prejudice its ability to collect the debt, and if the time 
before the payment is to be made does not reasonably permit completion 
of the procedures described in Sec. 1704.42. Such prior administrative 
offset shall be followed promptly by the completion of the procedures 
described in Sec. 1704.42.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.42  Procedures.

    Unless the procedures described in Sec. 1704.41 are used, prior to 
collecting any debt by administrative offset or referring such claim to 
another agency for collection through administrative offset, OFHEO shall 
provide the debtor with the following:
    (a) Written notification of the nature and amount of the debt, the 
intention of OFHEO to collect the debt through administrative offset, 
and a statement of the rights of the debtor under this section;
    (b) An opportunity to inspect and copy the records of OFHEO related 
to the debt that are not exempt from disclosure;
    (c) An opportunity for review within OFHEO of the determination of 
indebtedness. Any request for review by the debtor shall be in writing 
and shall be submitted to OFHEO within 30 calendar days of the date of 
the notice of the offset. OFHEO may waive the time limits for requesting 
review for good cause shown by the debtor. OFHEO shall provide the 
debtor with a reasonable opportunity for an oral hearing when:
    (1) An applicable statute authorizes or requires OFHEO to consider 
waiver of the indebtedness involved, the debtor requests waiver of the 
indebtedness, and the waiver determination turns on an issue of 
credibility or veracity; or
    (2) The debtor requests reconsideration of the debt and OFHEO 
determines that the question of the indebtedness cannot be resolved by 
review of the documentary evidence, as for example, when the validity of 
the debt turns on an issue of credibility or veracity. Unless otherwise 
required by law, an oral hearing under this subpart C is not required to 
be a formal evidentiary hearing, although OFHEO shall document all 
significant matters discussed at the hearing. In those cases where an 
oral hearing is not required by this subpart C, OFHEO shall make its 
determination on the request for waiver or reconsideration based upon a 
review of the written record; and
    (d) An opportunity to enter into a written agreement for the 
repayment of the amount of the claim at the discretion of OFHEO.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.43  Interest.

    OFHEO shall assess interest, penalties, and administrative costs on 
debts owed to the Federal Government, in accordance with 31 U.S.C. 3717 
and the FCCS. OFHEO may also assess interest and related charges on 
debts that are not subject to 31 U.S.C. 3717 and the FCCS to the extent 
authorized under the common law or other applicable statutory authority.



Sec. 1704.44  Refunds.

    OFHEO shall refund promptly those amounts recovered by 
administrative offset but later found not to be owed to the Federal 
Government.

[[Page 937]]



Sec. 1704.45  Requests for administrative offset to other Federal agencies.

    (a) OFHEO may request that a debt owed to OFHEO be collected by 
administrative offset against funds due and payable to a debtor by 
another agency.
    (b) In requesting administrative offset, OFHEO, as creditor, shall 
certify in writing to the agency holding funds of the debtor:
    (1) That the debtor owes the debt;
    (2) The amount and basis of the debt; and
    (3) That OFHEO has complied with the requirements of its own 
administrative offset regulations and the applicable provisions of the 
FCCS with respect to providing the debtor with due process.



Sec. 1704.46  Requests for administrative offset from other Federal agencies.

    (a) Any agency may request that funds due and payable to a debtor by 
OFHEO be administratively offset in order to collect a debt owed to such 
agency by the debtor.
    (b) OFHEO shall initiate the requested administrative offset only 
upon:
    (1) Receipt of written certification from the creditor agency that:
    (i) The debtor owes the debt, including the amount and basis of the 
debt;
    (ii) The agency has prescribed regulations for the exercise of 
administrative offset; and
    (iii) The agency has complied with its own administrative offset 
regulations and with the applicable provisions of the FCCS, including 
providing any required hearing or review.
    (2) A determination by OFHEO that collection by administrative 
offset against funds payable by OFHEO would be in the best interest of 
the Federal Government as determined by the facts and circumstances of 
the particular case and that such administrative offset would not 
otherwise be contrary to law.



Sec. 1704.47  Administrative offset against amounts payable from Civil Service Retirement and Disability Fund.

    (a) Request for administrative offset. Unless otherwise prohibited 
by law, OFHEO may request that monies that are due and payable to a 
debtor from the Civil Service Retirement and Disability Fund (Fund) be 
offset administratively in reasonable amounts in order to collect in one 
full payment or in a minimal number of payments debt owed to OFHEO by 
the debtor. Such requests shall be made to the appropriate officials of 
the Office of Personnel Management in accordance with such regulations 
as may be prescribed by the Director of the Office of Personnel 
Management.
    (b) Contents of certification. When making a request for 
administrative offset under paragraph (a) of this section, OFHEO shall 
include a written certification that:
    (1) The debtor owes OFHEO a debt, including the amount of the debt;
    (2) OFHEO has complied with the applicable statutes, regulations, 
and procedures of the Office of Personnel Management; and
    (3) OFHEO has complied with the requirements of the FCCS, including 
any required hearing or review.
    (c) If OFHEO decides to request administrative offset under 
paragraph (a) of this section, it shall make the request as soon as 
practicable after completion of the applicable procedures. This will 
satisfy any requirement that administrative offset be initiated prior to 
the expiration of the applicable statute of limitations. At such time as 
the debtor makes a claim for payments from the Fund, if at least one 
year has elapsed since the administrative offset request was originally 
made, the debtor shall be permitted to offer a satisfactory repayment 
plan in lieu of administrative offset if he or she establishes that 
changed financial circumstances would render the administrative offset 
unjust.
    (d) If OFHEO collects part or all of the debt by other means before 
deductions are made or completed pursuant to paragraph (a) of this 
section, OFHEO shall act promptly to modify or terminate its request for 
administrative offset under paragraph (a) of this section.

[[Page 938]]



Secs. 1704.48-1704.49  [Reserved]



                      Subpart D--Tax Refund Offset



Sec. 1704.50  Authority and scope.

    The provisions of 26 U.S.C. 6402(d) and 31 U.S.C. 3720A authorize 
the Secretary of the Treasury to offset a delinquent debt owed the 
Federal Government from the tax refund due a taxpayer when other 
collection efforts have failed to recover the amount due.



Sec. 1704.51  Definitions.

    (a)(1) Debt means money owed by an individual, organization, or 
entity from sources which include loans insured or guaranteed by the 
Federal Government and all other amounts due the Federal Government from 
fees, leases, services, overpayments, civil and criminal penalties, 
damages, interest, fines, administrative costs, and all other similar 
sources.
    (2) A debt becomes eligible for tax refund offset procedures if:
    (i) It cannot currently be collected pursuant to the salary offset 
procedures of 5 U.S.C. 5514(a)(1);
    (ii) The debt is ineligible for administrative offset under 31 
U.S.C. 3716(a) by reason of 31 U.S.C. 3716(c)(2), or it cannot be 
collected currently by administrative offset under 31 U.S.C. 3716(a); 
and
    (iii) The requirements of this section are otherwise satisfied.
    (3) All judgment debts are past due for purposes of this subpart D. 
Judgment debts remain past due until paid in full.
    (b) Dispute means a written statement supported by documentation or 
other evidence that all or part of an alleged debt is not past due or 
legally enforceable, that the amount is not the amount currently owed, 
that the outstanding debt has been satisfied, or in the case of a debt 
reduced to judgment, that the judgement has been satisfied or stayed.
    (c) Notice means the information sent to the debtor pursuant to 
Sec. 1704.53. The date of the notice is that date shown on the notice 
letter as its date of issuance.

[64 FR 34969, June 30, 1999. Redesignated and amended at 65 FR 81328, 
Dec. 26, 2000]



Sec. 1704.52  Procedures.

    (a) Referral to the Department of the Treasury. (1) OFHEO may refer 
any past due, legally enforceable nonjudgment debt of an individual, 
organization, or entity to the Department of the Treasury for tax refund 
offset if OFHEO's or the referring agency's rights of action accrued 
more than three months but less than 10 years before the offset is made.
    (2) Debts reduced to judgment may be referred at any time.
    (3) Debts in amounts lower than $25 are not subject to referral.
    (4) In the event that more than one debt is owed, the tax refund 
offset procedures shall be applied in the order in which the debts 
became past due.
    (5) OFHEO shall notify the Department of the Treasury of any change 
in the amount due promptly after receipt of payment or notice of other 
reductions.
    (b) Notice. OFHEO shall provide the debtor with written notice of 
its intent to offset before initiating the offset. Notice shall be 
mailed to the debtor at the current address of the debtor, as determined 
from information obtained from the Internal Revenue Service pursuant to 
26 U.S.C. 6103(m)(2), (4), (5) or maintained by OFHEO. The notice sent 
to the debtor shall state the amount of the debt and inform the debtor 
that:
    (1) The debt is past due;
    (2) OFHEO intends to refer the debt to the Department of the 
Treasury for offset from tax refunds that may be due to the taxpayer;
    (3) OFHEO intends to provide information concerning the delinquent 
debt exceeding $100 to a consumer reporting bureau unless such debt has 
already been disclosed; and
    (4) Before the debt is reported to a consumer reporting agency, if 
applicable, and referred to the Department of the Treasury for offset 
from tax refunds, the debtor has 65 calendar days from the date of 
notice to request a review under paragraph (d).
    (c) Report to consumer reporting agency. If the debtor neither pays 
the amount due nor presents evidence that the amount is not past due or 
is satisfied or stayed, OFHEO will report the debt to a consumer 
reporting agency at

[[Page 939]]

the end of the notice period, if applicable, and refer the debt to the 
Department of the Treasury for offset from the taxpayer's Federal tax 
refund. OFHEO shall certify to the Department of the Treasury that 
reasonable efforts have been made by OFHEO to obtain payment of such 
debt.
    (d) Request for review. A debtor may request a review by OFHEO if he 
or she believes that all or part of the debt is not past due or is not 
legally enforceable, or in the case of a judgment debt, that the debt 
has been stayed or the amount satisfied, as follows:
    (1) The debtor must send a written request for review to OFHEO at 
the address provided in the notice.
    (2) The request must state the amount disputed and reasons why the 
debtor believes that the debt is not past due, is not legally 
enforceable, has been satisfied, or if a judgment debt, has been 
satisfied or stayed.
    (3) The request must include any documents that the debtor wishes to 
be considered or state that additional information will be submitted 
within the time permitted.
    (4) If the debtor wishes to inspect records establishing the nature 
and amount of the debt, the debtor must make a written request to OFHEO 
for an opportunity for such an inspection. The office holding the 
relevant records not exempt from disclosure shall make them available 
for inspection during normal business hours within one week from the 
date of receipt of the request.
    (5) The request for review and any additional information submitted 
pursuant to the request must be received by OFHEO at the address stated 
in the notice within 65 calendar days of the date of issuance of the 
notice.
    (6) In reaching its decision, OFHEO shall review the dispute and 
shall consider its records and any documentation and arguments submitted 
by the debtor. OFHEO shall send a written notice of its decision to the 
debtor. There is no administrative appeal of this decision.
    (7) If the evidence presented by the debtor is considered by a non-
OFHEO agent or other entities or persons acting on behalf of OFHEO, the 
debtor shall be accorded at least 30 calendar days from the date the 
agent or other entity or person determines that all or part of the debt 
is past due and legally enforceable to request review by OFHEO of any 
unresolved dispute.
    (8) Any debt that previously has been reviewed pursuant to this 
section or any other section of this part, or that has been reduced to a 
judgment, may not be disputed except on the grounds of payments made or 
events occurring subsequent to the previous review or judgment.



PART 1705--IMPLEMENTATION OF THE EQUAL ACCESS TO JUSTICE ACT--Table of Contents




                      Subpart A--General Provisions

Sec.
1705.1  Purpose and scope.
1705.2  Definitions.
1705.3  Eligible parties.
1705.4  Standards for awards.
1705.5  Allowable fees and expenses.
1705.6  Rulemaking on maximum rate for fees.
1705.7  Awards against other agencies.
1705.8-1705.9  [Reserved]

             Subpart B--Information Required from Applicants

1705.10  Contents of the application for award.
1705.11  Request for confidentiality of net worth exhibit.
1705.12  Documentation of fees and expenses.
1705.13-1705.19  [Reserved]

 Subpart C--Procedures for Filing and Consideration of the Application 
                                for Award

1705.20  Filing and service of the application for award and related 
          papers.
1705.21  Answer to the application for award.
1705.22  Reply to the answer.
1705.23  Comments by other parties.
1705.24  Settlement.
1705.25  Further proceedings on the application for award.
1705.26  Decision of the adjudicative officer.
1705.27  Review by OFHEO.
1705.28  Judicial review.
1705.29  Payment of award.

    Authority: 5 U.S.C. 504(c)(1).

    Source: 65 FR 26732, May 9, 2000, unless otherwise noted. 
Redesignated and amended at 65 FR 81328, Dec. 26, 2000.

[[Page 940]]



                      Subpart A--General Provisions



Sec. 1705.1  Purpose and scope.

    (a) This part implements the Equal Access to Justice Act, 5 U.S.C. 
504, by establishing procedures for the filing and consideration of 
applications for award of fees and other expenses to eligible 
individuals and entities who are parties to adversary adjudications 
before OFHEO.
    (b) This part applies to the award of fees and other expenses in 
connection with adversary adjudications before OFHEO. However, if a 
court reviews the underlying decision of the adversary adjudication, an 
award for fees and other expenses may be made only pursuant to 28 U.S.C. 
2412(d)(3).



Sec. 1705.2  Definitions.

    (a) Adjudicative officer means the official who presided at the 
underlying adversary adjudication, without regard to whether the 
official is designated as a hearing examiner, administrative law judge, 
administrative judge, or otherwise.
    (b) Adversary adjudication means an administrative proceeding 
conducted by OFHEO under 5 U.S.C. 554 in which the position of OFHEO or 
any other agency of the United States is represented by counsel or 
otherwise, including but not limited to an adjudication conducted under 
12 CFR part 1780. Any issue as to whether an administrative proceeding 
is an adversary adjudication for purposes of this part will be an issue 
for resolution in the proceeding on the application for award.
    (c) Affiliate means an individual, corporation, or other entity that 
directly or indirectly controls or owns a majority of the voting shares 
or other interests of the party, or any corporation or other entity of 
which the party directly or indirectly owns or controls a majority of 
the voting shares or other interest, unless the adjudicative officer 
determines that it would be unjust and contrary to the purpose of the 
Equal Access to Justice Act in light of the actual relationship between 
the affiliated entities to consider them to be affiliates for purposes 
of this part.
    (d) Agency counsel means the attorney or attorneys designated by the 
General Counsel of OFHEO to represent OFHEO in an adversary adjudication 
covered by this part.
    (e) Demand of OFHEO means the express demand of OFHEO that led to 
the adversary adjudication, but does not include a recitation by OFHEO 
of the maximum statutory penalty when accompanied by an express demand 
for a lesser amount.
    (f) Fees and other expenses include reasonable attorney or agent 
fees, the reasonable expenses of expert witnesses, and the reasonable 
cost of any study, analysis, engineering report, test, or project that 
is found by the agency to be necessary for the preparation of the 
eligible party's case.
    (g) Final disposition means the date on which a decision or order 
disposing of the merits of the adversary adjudication or any other 
complete resolution of the adversary adjudication, such as a settlement 
or voluntary dismissal, becomes final and unappealable, both within the 
agency and to the courts.
    (h) OFHEO means the Office of Federal Housing Enterprise Oversight.
    (i) Party means an individual, partnership, corporation, 
association, or public or private organization that is named or admitted 
as a party, that is admitted as a party for limited purposes, or that is 
properly seeking and entitled as of right to be admitted as a party in 
an adversary adjudication.
    (j) Position of OFHEO means the position taken by OFHEO in the 
adversary adjudication, including the action or failure to act by OFHEO 
upon which the adversary adjudication was based.



Sec. 1705.3  Eligible parties.

    (a) To be eligible for an award of fees and other expenses under 
Sec. 1705.4(a), a party must be a small entity as defined in 5 U.S.C. 
601.
    (b)(1) To be eligible for an award of fees and other expenses for 
prevailing parties under Sec. 1705.5(b), a party must be one of the 
following:
    (i) An individual who has a net worth of not more than $2 million;
    (ii) The sole owner of an unincorporated business who has a net 
worth of not more than $7 million, including both personal and business 
interest, and not more than 500 employees; however, a party who owns an 
unincorporated business will be considered to

[[Page 941]]

be an ``individual'' rather than the ``sole owner of an unincorporated 
business'' if the issues on which the party prevails are related 
primarily to personal interests rather than to business interests.
    (iii) A charitable or other tax-exempt organization described in 
section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3), 
with not more than 500 employees;
    (iv) A cooperative association as defined in section 15(a) of the 
Agricultural Marketing Act, 12 U.S.C. 1141j(a), with not more than 500 
employees; or
    (v) Any other partnership, corporation, association, unit of local 
government, or organization that has a net worth of not more than $7 
million and not more than 500 employees.
    (2) For purposes of eligibility under paragraph (b) of this section:
    (i) The employees of a party include all persons who regularly 
perform services for remuneration for the party, under the party's 
direction and control. Part-time employees shall be included on a 
proportional basis.
    (ii) The net worth and number of employees of the party and its 
affiliates shall be aggregated to determine eligibility.
    (iii) The net worth and number of employees of a party shall be 
determined as of the date the underlying adversary adjudication was 
initiated.
    (c) A party that participates in an adversary adjudication primarily 
on behalf of one or more entities that would be ineligible for an award 
is not itself eligible for an award.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.4  Standards for awards.

    (a) An eligible party that files an application for award of fees 
and other expenses in accordance with this part shall receive an award 
of fees and other expenses related to defending against a demand of 
OFHEO if the demand was in excess of the decision in the underlying 
adversary adjudication and was unreasonable when compared with the 
decision under the facts and circumstances of the case, unless the party 
has committed a willful violation of law or otherwise acted in bad 
faith, or unless special circumstances make an award unjust. The burden 
of proof that the demand of OFHEO was substantially in excess of the 
decision and is unreasonable when compared with the decision is on the 
eligible party.
    (b) An eligible party that submits an application for award in 
accordance with this part shall receive an award of fees and other 
expenses incurred in connection with an adversary adjudication in which 
it prevailed or in a significant and discrete substantive portion of the 
adversary adjudication in which it prevailed, unless the position of 
OFHEO in the adversary adjudication was substantially justified or 
special circumstances make an award unjust. OFHEO has the burden of 
proof to show that its position was substantially justified and may do 
so by showing that its position was reasonable in law and in fact.



Sec. 1705.5  Allowable fees and expenses.

    (a) Awards of fees and other expenses shall be based on rates 
customarily charged by persons engaged in the business of acting as 
attorneys, agents, and expert witnesses, even if the services were made 
available without charge or at a reduced rate to the party. However, 
except as provided in Sec. 1705.6, an award for the fee of an attorney 
or agent may not exceed $125 per hour and an award to compensate an 
expert witness may not exceed the highest rate at which OFHEO pays 
expert witnesses. However, an award may also include the reasonable 
expenses of the attorney, agent, or expert witness as a separate item if 
he or she ordinarily charges clients separately for such expenses.
    (b) In determining the reasonableness of the fee sought for an 
attorney, agent, or expert witness, the adjudicative officer shall 
consider the following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fees for similar services; or, if the 
attorney, agent, or expert witness is an employee of the eligible party, 
the fully allocated costs of the services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;

[[Page 942]]

    (3) The time actually spent in the representation of the eligible 
party;
    (4) The time reasonably spent in light of the difficulty or 
complexity of the issues in the adversary adjudication; and
    (5) Such other factors as may bear on the value of the services 
provided.
    (c) In determining the reasonable cost of any study, analysis, 
engineering report, test, project, or similar matter prepared on behalf 
of a party, the adjudicative officer shall consider the prevailing rate 
for similar services in the community in which the services were 
performed.
    (d) Fees and other expenses incurred before the date on which an 
adversary adjudication was initiated will be awarded only if the 
eligible party can demonstrate that they were reasonably incurred in 
preparation for the adversary adjudication.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.6  Rulemaking on maximum rate for fees.

    If warranted by an increase in the cost of living or by special 
circumstances, OFHEO may adopt regulations providing for an award of 
attorney or agent fees at a rate higher than $125 per hour in adversary 
adjudications covered by this part. Special circumstances include the 
limited availability of attorneys or agents who are qualified to handle 
certain types of adversary adjudications. OFHEO will conduct any 
rulemaking proceedings for this purpose under the informal rulemaking 
procedures of the Administrative Procedures Act, 5 U.S.C. 553.



Sec. 1705.7  Awards against other agencies.

    If another agency of the United States participates in an adversary 
adjudication before OFHEO and takes a position that was not 
substantially justified, the award or appropriate portion of the award 
to an eligible party that prevailed over that agency shall be made 
against that agency.



Secs. 1705.8-1705.9  [Reserved]



             Subpart B--Information Required from Applicants



Sec. 1705.10  Contents of the application for award.

    (a) An application for award of fees and other expenses under either 
Sec. 1705.4(a) and Sec. 1705.4(b) shall:
    (1) Identify the applicant and the adversary adjudication for which 
an award is sought;
    (2) State the amount of fees and other expenses for which an award 
is sought;
    (3) Provide the statements and documentation required by paragraph 
(b) or (c) of this section and Sec. 1705.12 and any additional 
information required by the adjudicative officer; and
    (4) Be signed by the applicant or an authorized officer or attorney 
of the applicant and contain or be accompanied by a written verification 
under oath or under penalty of perjury that the information provided in 
the application is true and correct.
    (b) An application for award under Sec. 1705.4(a) shall show that 
the demand of OFHEO was substantially in excess of, and was unreasonable 
when compared to, the decision in the underlying adversary adjudication 
under the facts and circumstances of the case. It shall also show that 
the applicant is a small entity as defined in 5 U.S.C. 601.
    (c) An application for award under Sec. 1705.4(b) shall:
    (1) Show that the applicant has prevailed in a significant and 
discrete substantive portion of the underlying adversary adjudication 
and identify the position of OFHEO in the adversary adjudication that 
the applicant alleges was not substantially justified;
    (2) State the number of employees of the applicant and describe 
briefly the type and purposes of its organization or business (if the 
applicant is not an individual);
    (3) State that the net worth of the applicant does not exceed $2 
million, if the applicant is an individual; or for all other applicants, 
state that the net

[[Page 943]]

worth of the applicant and its affiliates, if any, does not exceed $7 
million; and
    (4) Include one of the following:
    (i) A detailed exhibit showing the net worth (net worth exhibit) of 
the applicant and its affiliates, if any, when the underlying adversary 
adjudication was initiated. The net worth exhibit may be in any form 
convenient to the applicant as long as the net worth exhibit provides 
full disclosure of the assets and liabilities of the applicant and its 
affiliates, if any, and is sufficient to determine whether the applicant 
qualifies as an eligible party;
    (ii) A copy of a ruling by the Internal Revenue Service that shows 
that the applicant qualifies as an organization described in section 
501(c)(3) of the Internal Revenue Code, 26 U.S.C. 501(c)(3); or in the 
case of a tax-exempt organization not required to obtain a ruling from 
the Internal Revenue Service on its exempt status, a statement that 
describes the basis for the belief that the applicant qualifies under 
such section; or
    (iii) A statement that the applicant is a cooperative association as 
defined in section 15(a) of the Agricultural Marketing Act, 12 U.S.C. 
1141j(a).

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.11  Request for confidentiality of net worth exhibit.

    (a) The net worth exhibit described in Sec. 1705.10(c)(4)(i) shall 
be included in the public record of the proceeding for the award of fees 
and other expenses, except if confidential treatment is requested and 
granted as provided in paragraph (b) of this section.
    (b)(1) The applicant may request confidential treatment of the 
information in the net worth exhibit by filing a motion directly with 
the adjudicative officer in a sealed envelope labeled ``Confidential 
Financial Information.'' If the adjudicative officer finds that the 
information should be withheld from public disclosure, any request to 
inspect or copy the information by another party or the public shall be 
resolved in accordance with the Freedom of Information Act, 5 U.S.C. 
552b, and the Releasing Information regulation at 12 CFR part 1710.
    (2) The motion shall:
    (i) Include a copy of the portion of the net worth exhibit sought to 
be withheld;
    (ii) Describe the information sought to be withheld; and
    (iii) Explain why the information is exempt from disclosure under 
the Freedom of Information Act and why public disclosure of the 
information would adversely affect the applicant and is not in the 
public's interest.
    (iv) Be served on agency counsel but need not be served on any other 
party to the proceeding.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.12  Documentation of fees and expenses.

    (a) The application for award shall be accompanied by full and 
itemized documentation of the fees and other expenses for which an award 
is sought. The adjudicative officer may require the applicant to provide 
vouchers, receipts, logs, or other documentation for any fees or 
expenses claimed.
    (b) A separate itemized statement shall be submitted for each entity 
or individual whose services are covered by the application. Each 
itemized statement shall include:
    (1) The hours spent by each entity or individual;
    (2) A description of the specific services performed and the rates 
at which each fee has been computed; and
    (3) Any expenses for which reimbursement is sought, the total amount 
claimed, and the total amount paid or payable by the applicant or by any 
other person or entity.



Secs. 1705.13-1705.19  [Reserved]



 Subpart C--Procedures for Filing and Consideration of the Application 
                                for Award



Sec. 1705.20  Filing and service of the application for award and related papers.

    (a) An application for an award of fees and other expenses must be 
filed no later than 30 days after the final disposition of the 
underlying adversary adjudication.

[[Page 944]]

    (b) An application for award and other papers related to the 
proceedings on the application for award shall be filed and served on 
all parties in the same manner as papers are filed and served in the 
underlying adversary adjudication, except as otherwise provided in this 
part.
    (c) The computation of time for filing and service of the 
application of award and other papers shall be computed in the same 
manner as in the underlying adversary adjudication.



Sec. 1705.21  Answer to the application for award.

    (a) Agency counsel shall file an answer within 30 days after service 
of an application for award of fees and other expenses except as 
provided in paragraphs (b) and (c) of this section. In the answer, 
agency counsel shall explain any objections to the award requested and 
identify the facts relied upon to support the objections. If any of the 
alleged facts are not already in the record of the underlying adversary 
adjudication, agency counsel shall include with the answer either 
supporting affidavits or a request for further proceedings under 
Sec. 1705.25.
    (b) If agency counsel and the applicant believe that the issues in 
the application for award can be settled, they may jointly file a 
statement of their intent to negotiate a settlement. The filing of this 
statement shall extend the time for filing an answer for an additional 
30 days. Upon request by agency counsel and the applicant, the 
adjudicative officer may grant for good cause further time extensions.
    (c) Agency counsel may request that the adjudicative officer extend 
the time period for filing an answer. If agency counsel does not answer 
or otherwise does not contest or settle the application for award within 
the 30-day period or the extended time period, the adjudicative officer 
may make an award of fees and other expenses upon a satisfactory showing 
of entitlement by the applicant.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.22  Reply to the answer.

    Within 15 days after service of an answer, the applicant may file a 
reply. If the reply is based on any alleged facts not already in the 
record of the underlying adversary adjudication, the applicant shall 
include with the reply either supporting affidavits or a request for 
further proceedings under Sec. 1705.25.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.23  Comments by other parties.

    Any party to the underlying adversary adjudication other than the 
applicant and agency counsel may file comments on an application for 
award within 30 calendar days after it is served, or on an answer within 
15 calendar days after it is served. A commenting party may not 
participate further in proceedings on the application unless the 
adjudicative officer determines that the public interest requires such 
participation in order to permit full exploration of matters raised in 
the comments.



Sec. 1705.24  Settlement.

    The applicant and agency counsel may agree on a proposed settlement 
of an award before the final decision on the application for award is 
made, either in connection with a settlement of the underlying adversary 
adjudication or after the underlying adversary adjudication has been 
concluded. If the eligible party and agency counsel agree on a proposed 
settlement of an award before an application for award has been filed, 
the application shall be filed with the proposed settlement.



Sec. 1705.25  Further proceedings on the application for award.

    (a) On request of either the applicant or agency counsel, on the 
adjudicative officer's own initiative, or as requested by the Director 
of OFHEO under Sec. 1705.27, the adjudicative officer may order further 
proceedings, such as an informal conference, oral argument, additional 
written submissions, or, as to issues other than substantial 
justification (such as the applicant's eligibility or substantiation of 
fees and expenses), pertinent discovery or an evidential hearing. Such 
further proceedings shall be held only when necessary for full and fair 
resolution of the issues arising from the application for award and 
shall be conducted as

[[Page 945]]

promptly as possible. The issue as to whether the position of OFHEO in 
the underlying adversary adjudication was substantially justified shall 
be determined on the basis of the whole administrative record that was 
made in the underlying adversary adjudication.
    (b) A request that the adjudicative officer order further 
proceedings under this section shall specifically identify the 
information sought on the disputed issues and shall explain why the 
additional proceedings are necessary to resolve the issues.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.26  Decision of the adjudicative officer.

    (a) The adjudicative officer shall make the initial decision on the 
basis of the written record, except if further proceedings are ordered 
under Sec. 1705.25.
    (b) The adjudicative officer shall issue a written initial decision 
on the application for award within 30 days after completion of 
proceedings on the application. The initial decision shall become the 
final decision of OFHEO after 30 days from the day it was issued, unless 
review is ordered under Sec. 1705.27.
    (c) In all initial decisions, the adjudicative officer shall include 
findings and conclusions with respect to the applicant's eligibility and 
an explanation of the reasons for any difference between the amount 
requested by the applicant and the amount awarded. If the applicant has 
sought an award against more than one agency, the adjudicative officer 
shall also include findings and conclusions with respect to the 
allocation of payment of any award made.
    (d) In initial decisions on applications filed pursuant to 
Sec. 1705.4(a), the adjudicative officer shall include findings and 
conclusions as to whether OFHEO made a demand that was substantially in 
excess of the decision in the underlying adversary adjudication and that 
was unreasonable when compared with that decision; and, if at issue, 
whether the applicant has committed a willful violation of the law or 
otherwise acted in bad faith, or whether special circumstances would 
make the award unjust.
    (e) In decisions on applications filed pursuant to Sec. 1705.4(b), 
the adjudicative officer shall include written findings and conclusions 
as to whether the applicant is a prevailing party and whether the 
position of OFHEO was substantially justified; and, if at issue, whether 
the applicant unduly protracted or delayed the underlying adversary 
adjudication or whether special circumstance make the award unjust.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.27  Review by OFHEO.

    Within 30 days after the adjudicative officer issues an initial 
decision under Sec. 1705.26, either the applicant or agency counsel may 
request the Director of OFHEO to review the initial decision of the 
adjudicative officer. The Director of OFHEO or his or her designee may 
also decide, on his or her own initiative, to review the initial 
decision. Whether to review a decision is at the discretion of the 
Director of OFHEO or his or her designee. If review is ordered, the 
Director of OFHEO or his or her designee shall issue a final decision on 
the application for award or remand the application for award to the 
adjudicative officer for further proceedings under Sec. 1705.25.

[65 FR 26732, May 9, 2000. Redesignated and amended at 65 FR 81328, Dec. 
26, 2000]



Sec. 1705.28  Judicial review.

    Any party, other than the United States, that is dissatisfied with 
the final decision on an application for award of fees and expenses 
under this part may seek judicial review as provided in 5 U.S.C. 
504(c)(2).



Sec. 1705.29  Payment of award.

    To receive payment of an award of fees and other expenses granted 
under this part, the applicant shall submit a copy of the final decision 
that grants the award and a certification that the applicant will not 
seek review of the decision in the United States courts to the Director, 
Office of Federal Housing Enterprise Oversight, 1700 G Street, NW., 
Washington, DC 20552. OFHEO shall pay the amount awarded to the 
applicant within 60 days of receipt of the submission of the copy of the 
final

[[Page 946]]

decision and the certification, unless judicial review of the award has 
been sought by any party to the proceedings.



                         SUBCHAPTER B [RESERVED]



[[Page 947]]





                   SUBCHAPTER C--SAFETY AND SOUNDNESS



PART 1750--CAPITAL--Table of Contents




                       Subpart A--Minimum Capital

Sec.
1750.1  General.
1750.2  Definitions.
1750.3  Procedure and timing.
1750.4  Minimum capital requirement computation.
1750.5  Notice of capital classification.

Appendix A to Subpart A of Part 1750--Minimum Capital Components for 
          Interest Rate and Foreign Exchange Rate Contracts

Subpart B  [Reserved]

    Authority: 12 U.S.C. 4513, 4514, 4612, 4614, 4618.

    Source: 61 FR 35620, July 8, 1996, unless otherwise noted.



                       Subpart A--Minimum Capital



Sec. 1750.1  General.

    The regulation contained in this subpart A sets forth the 
methodology for computing the minimum capital requirement for each 
Enterprise. The board of directors of each Enterprise is responsible for 
ensuring that the Enterprise maintains capital at a level that is 
sufficient to ensure the continued financial viability of the Enterprise 
and that equals or exceeds the minimum capital requirement contained in 
this subpart A.



Sec. 1750.2  Definitions.

    For purposes of this subpart A, the following definitions shall 
apply:
    Affiliate means any entity that controls, is controlled by, or is 
under common control with, an Enterprise, except as otherwise provided 
by the Director.
    Commitment means any contractual, legally binding agreement that 
obligates an Enterprise to purchase or to securitize mortgages.
    Core Capital--(1) Means the sum of (as determined in accordance with 
generally accepted accounting principles)--
    (i) The par or stated value of outstanding common stock;
    (ii) The par or stated value of outstanding perpetual, noncumulative 
preferred stock;
    (iii) Paid-in capital; and
    (iv) Retained earnings; and
    (2) Does not include debt instruments or any amounts the Enterprise 
could be required to pay at the option of an investor to retire capital 
instruments.
    Director means the Director of OFHEO.
    Enterprise means the Federal National Mortgage Association and any 
affiliate thereof or the Federal Home Loan Mortgage Corporation and any 
affiliate thereof.
    Foreign exchange rate contracts--
    (1) Means cross-currency interest rate swaps, forward foreign 
exchange contracts, currency options purchased (including currency 
options purchased over-the-counter), and any other instrument that gives 
rise to similar credit risks; and
    (2) Does not mean foreign exchange rate contracts with an original 
maturity of 14 calendar days or less and foreign exchange rate contracts 
traded on exchanges that require daily payment of variation margins.
    Interest rate contracts--
    (1) Means single currency interest rate swaps, basis swaps, forward 
rate agreements, interest rate options purchased (including caps, 
collars, and floors purchased), over-the-counter options purchased, and 
any other instrument that gives rise to similar credit risks (including 
when-issued securities and forward deposits accepted); and
    (2) Does not mean such instruments traded on exchanges that require 
daily payment of variation margins.
    Mortgage-backed security means a security, investment, or 
substantially equivalent instrument that represents an interest in a 
pool of loans secured by mortgages or deeds of trust where the principal 
or interest payments to the investor in the security or substantially 
equivalent instrument are guaranteed or effectively guaranteed by an 
Enterprise.

[[Page 948]]

    Multifamily credit enhancement means any guarantee, pledge, purchase 
arrangement, or other obligation or commitment provided or entered into 
by an Enterprise with respect to multifamily mortgages to provide credit 
enhancement, liquidity, interest rate support, and other guarantees and 
enhancements for revenue bonds issued by a state or local governmental 
unit (including a housing finance agency) or other bond issuer.
    1992 Act means the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, found at Title XIII of the Housing and Community 
Development Act of 1992, Pub. L. 102-550, 12 U.S.C. 4501 et seq.
    Notional amount means the face value of the underlying financial 
instrument(s) on which an interest rate or foreign exchange rate 
contract is based.
    Off-balance sheet obligation means a binding agreement, contract, or 
similar arrangement that requires or may require future payment(s) in 
money or kind by another party to an Enterprise, or that effectively 
guarantees all or part of such payment(s) to third parties (including 
commitments), where such agreement or contract is a source of credit 
risk that is not included on its balance sheet.
    OFHEO means the Office of Federal Housing Enterprise Oversight.
    Other off-balance sheet obligations means all off-balance sheet 
obligations of an Enterprise that are not mortgage-backed securities or 
substantially equivalent instruments and that are not resecuritized 
mortgage-backed securities, such as real estate mortgage investment 
conduits or similar resecuritized instruments.
    Perpetual, noncumulative preferred stock means preferred stock 
that--
    (1) Does not have a maturity date;
    (2) Provides the issuer the ability and the legal right to eliminate 
dividends and does not permit the accruing or payment of impaired 
dividends;
    (3) Cannot be redeemed at the option of the holder; and
    (4) Has no other provisions that will require future redemption of 
the issue, in whole or in part, or that will reset the dividend 
periodically based, in whole or in part, on the Enterprise's current 
credit standing, such as auction rate, money market, or remarketable 
preferred stock, or that may cause the dividend to increase to a level 
that could create an incentive for the issuer to redeem the instrument, 
such as exploding rate stock.
    Qualifying collateral means cash on deposit; securities issued or 
guaranteed by the central governments of the OECD-based group of 
countries,\1\ United States Government agencies, or United States 
Government-sponsored agencies; and securities issued by multilateral 
lending institutions or regional development banks.
---------------------------------------------------------------------------

    \1\ The OECD-based group of countries comprises full members of the 
Organization for Economic Cooperation and Development (OECD) regardless 
of entry date, as well as countries that have concluded special lending 
arrangements with the International Monetary Fund (IMF) associated with 
the IMF's General Arrangements to Borrow, but excludes any country that 
has rescheduled its external sovereign debt within the previous 5 years. 
A rescheduling of external sovereign debt generally would include any 
renegotiation of terms arising from a country's mobility or 
unwillingness to meet its external debt service obligations, but 
generally not include any renegotiation to allow the borrower to take 
advantage of a decline in interest rate or other change in market 
conditions. As of November 1995, the OECD countries included the 
following countries: Australia, Austria, Belgium, Canada, Denmark, 
Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, 
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, 
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United 
States; and Saudi Arabia has concluded special lending arrangements with 
the IMF associated with the IMF's General Arrangements to Borrow.
---------------------------------------------------------------------------



Sec. 1750.3  Procedure and timing.

    (a) Each Enterprise shall file with the Director a minimum capital 
report each quarter or at such other times as the Director requires, in 
his or her sole discretion. The report shall contain the information 
that responds to all of the items required by OFHEO in written 
instructions to the Enterprise, including, but not limited to:
    (1) Estimate of the minimum capital requirement;

[[Page 949]]

    (2) Estimate of core capital overage or shortfall relative to the 
estimated minimum capital requirement;
    (3) Such other information as may be required by the Director.
    (b) The quarterly minimum capital report shall be submitted not 
later than April 30, July 30, October 30, and January 30 of each year.
    (c) Each minimum capital report shall be submitted in writing and in 
such other format as may be required by the Director.
    (d) In the event an Enterprise makes an adjustment to its financial 
statements for a quarter or a date for which the information was 
requested, which would cause an adjustment to a minimum capital report, 
the Enterprise shall file with the Director an amended minimum capital 
report not later than 3 business days after the date of such adjustment.
    (e) Each minimum capital report or any amended minimum capital 
report shall contain a declaration by an officer authorized by the board 
of directors of the Enterprise to make such a declaration, including, 
but not limited to a president, vice president, or treasurer, that the 
report is true and correct to the best of such officer's knowledge and 
belief.



Sec. 1750.4  Minimum capital requirement computation.

    (a) The minimum capital requirement for each Enterprise shall be 
computed by adding the following amounts:
    (1) 2.50 percent times the aggregate on-balance sheet assets of the 
Enterprise;
    (2) 0.45 percent times the unpaid principal balance of mortgage-
backed securities and substantially equivalent instruments that were 
issued or guaranteed by the Enterprise;
    (3) 0.45 percent of 50 percent of the average dollar amount of 
commitments outstanding each quarter over the preceding four quarters;
    (4) 0.45 percent of the outstanding principal amount of bonds with 
multifamily credit enhancements;
    (5) 0.45 percent of the dollar amount of sold portfolio remittances 
pending;
    (6)(i) 3.00 percent of the credit equivalent amount of interest rate 
contracts and foreign exchange rate contracts, except to the extent of 
the current market value of posted qualifying collateral, computed in 
accordance with appendix A to this subpart;
    (ii) 1.50 percent of the market value of qualifying collateral 
posted to secure interest rate and foreign exchange rate contracts, not 
to exceed the credit equivalent amount of such contracts, computed in 
accordance with appendix A to this subpart; and
    (7) 0.45 percent of the outstanding amount, credit equivalent 
amount, or other measure determined appropriate by the Director, of 
other off-balance sheet obligations (excluding commitments, multifamily 
credit enhancements, sold portfolio remittances pending, and interest 
rate contracts and foreign exchange rate contracts), except as adjusted 
by the Director to reflect differences in the credit risk of such 
obligations in relation to mortgage-backed securities.
    (b) Any asset or financial obligation that is properly classifiable 
in more than one of the categories enumerated in paragraphs (a) (1) 
through (7) of this section shall be classified in the category that 
yields the highest minimum capital requirement.
    (c) As used in this section, the term ``preceding four quarters'' 
means the last day of the quarter just ended (or the date for which the 
minimum capital report is filed, if different), and the three preceding 
quarter-ends.



Sec. 1750.5  Notice of capital classification.

    (a) Pursuant to section 1364 of the 1992 Act (12 U.S.C. 4614), OFHEO 
is required to determine the capital classification of each Enterprise 
on a not less than quarterly basis.
    (b) The determination of the capital classification shall be made 
following a notice to, and opportunity to respond by, the Enterprise.
    (1) Not later than 60 calendar days after the date for which the 
minimum capital report is filed, OFHEO will provide each Enterprise with 
a notice of proposed capital classification in accordance with section 
1368 of the 1992 Act (12 U.S.C. 4618). The notice shall contain the 
following information--
    (i) The proposed capital classification;

[[Page 950]]

    (ii) The proposed minimum capital requirement; and
    (iii) The summary computation of the proposed minimum capital 
requirement.
    (2) Each Enterprise shall have a period of 30 calendar days 
following receipt of a notice of proposed capital classification to 
submit a response regarding the proposed capital classification. The 
response period may be extended for up to 30 additional calendar days at 
the sole discretion of the Director. The Director may shorten the 
response period with the consent of the Enterprise, or without such 
consent if the Director determines that the condition of the Enterprise 
requires a shorter period.
    (3) The Director shall take into consideration any response to the 
notice of proposed capital classification received from the Enterprise 
and shall issue a notice of final capital classification for each 
Enterprise not later than 30 calendar days following the end of the 
response period in accordance with section 1368 of the 1992 Act (12 
U.S.C. 4618).

  Appendix A to Subpart A of Part 1750--Minimum Capital Components for 
            Interest Rate and Foreign Exchange Rate Contracts

    1. The minimum capital components for interest rate and foreign 
exchange rate contracts are computed on the basis of the credit 
equivalent amounts of such contracts. Credit equivalent amounts are 
computed for each of the following off-balance sheet interest rate and 
foreign exchange rate contracts:

                       a. Interest Rate Contracts

    i. Single currency interest rate swaps.
    ii. Basis swaps.
    iii. Forward rate agreements.
    iv. Interest rate options purchased (including caps, collars, and 
floors purchased).
    v. Any other instrument that gives rise to similar credit risks 
(including when-issued securities and forward deposits accepted).

                   b. Foreign Exchange Rate Contracts

    i. Cross-currency interest rate swaps.
    ii. Forward foreign exchange rate contracts.
    iii. Currency options purchased.
    iv. Any other instrument that gives rise to similar credit risks.
    2. Foreign exchange rate contracts with an original maturity of 14 
calendar days or less and foreign exchange rate contracts traded on 
exchanges that require daily payment of variation margins are excluded 
from the minimum capital requirement computation. Over-the-counter 
options purchased, however, are included and treated in the same way as 
the other interest rate and foreign exchange rate contracts.

               3. Calculation of Credit Equivalent Amounts

    a. The minimum capital components for interest rate and foreign 
exchange rate contracts are computed on the basis of the credit 
equivalent amounts of such contracts. The credit equivalent amount of an 
off-balance sheet interest rate and foreign exchange rate contract that 
is not subject to a qualifying bilateral netting contract in accordance 
with this appendix A is equal to the sum of the current exposure 
(sometimes referred to as the replacement cost) of the contract and an 
estimate of the potential future credit exposure over the remaining life 
of the contract.
    b. The current exposure is determined by the mark-to-market value of 
the contract. If the mark-to-market value is positive, then the current 
exposure is the mark-to-market value. If the mark-to-market value is 
zero or negative, then the current exposure is zero. Mark-to-market 
values are measured in United States dollars, regardless of the currency 
or currencies specified in the contract, and should reflect changes in 
the relevant rates, as well as counterparty credit quality.
    c. The potential future credit exposure of a contract, including a 
contract with a negative mark-to-market value, is estimated by 
multiplying the notional principal amount of the contract by a credit 
conversion factor. The effective rather than the apparent or stated 
notional amount must be used in this calculation. The credit conversion 
factors are:

------------------------------------------------------------------------
                                                              Foreign
                                            Interest rate  exchange rate
            Remaining maturity                 contracts     contracts
                                              (percent)      (percent)
------------------------------------------------------------------------
1 year or less............................            0.0            1.0
Over 1 year...............................            0.5            5.0
------------------------------------------------------------------------

    d. Because foreign exchange rate contracts involve an exchange of 
principal upon maturity, and foreign exchange rates are generally more 
volatile than interest rates, higher conversion factors have been 
established for foreign exchange rate contracts than for interest rate 
contracts.
    e. No potential future credit exposure is calculated for single 
currency interest rate swaps in which payments are made based upon two 
floating rate indexes, so-called floating/floating or basis swaps. The 
credit exposure on these contracts is evaluated solely on the basis of 
their mark-to-market values.

[[Page 951]]

                     4. Avoidance of Double Counting

    In certain cases, credit exposures arising from the interest rate 
and foreign exchange instruments covered by this appendix A may already 
be reflected, in part, on the balance sheet. To avoid double counting 
such exposures in the assessment of capital adequacy, counterparty 
credit exposures arising from the types of instruments covered by this 
appendix A may need to be excluded from balance sheet assets in 
calculating the minimum capital requirement.

                              5. Collateral

    a. The sufficiency of collateral for off-balance sheet items is 
determined by the market value of the collateral in relation to the 
credit equivalent amount. Collateral held against a netting contract is 
not recognized for minimum capital standard purposes unless it is 
legally available to support the single legal obligation created by the 
netting contract. Excess collateral held against one contract or a group 
of contracts for which a recognized netting agreement exists may not be 
considered.
    b. The only forms of collateral that are formally recognized by the 
minimum capital standard framework are cash on deposit; securities 
issued or guaranteed by the central governments of the OECD-based group 
of countries, United States Government agencies, or United States 
Government-sponsored agencies; and securities issued by multilateral 
lending institutions or regional development banks.

                               6. Netting

    a. For purposes of this appendix A, netting refers to the offsetting 
of positive and negative mark-to-market values in the determination of a 
current exposure to be used in the calculation of a credit equivalent 
amount. Any legally enforceable form of bilateral netting (that is, 
netting with a single counterparty) of interest rate and foreign 
exchange rate contracts is recognized for purposes of calculating the 
credit equivalent amount provided that the following criteria are met:
    i. Netting must be accomplished under a written netting contract 
that creates a single legal obligation, covering all included individual 
contracts, with the effect that the Enterprise would have a claim to 
receive, or obligation to pay, only the net amount of the sum of the 
positive and negative mark-to-market values on included individual 
contracts in the event that a counterparty, or a counterparty to whom 
the contract has been validly assigned, fails to perform due to default, 
insolvency, liquidation, or similar circumstances.
    ii. The Enterprise must obtain a written and reasoned legal 
opinion(s) representing that in the event of a legal challenge--
including one resulting from default, insolvency, liquidation, or 
similar circumstances--the relevant court and administrative authorities 
would find the Enterprise's exposure to be such a net amount under--
    A. The law of the jurisdiction in which the counterparty is 
chartered or the equivalent location in the case of noncorporate 
entities, and if a branch of the counterparty is involved, then also 
under the law of the jurisdiction in which the branch is located;
    B. The law that governs the individual contracts covered by the 
netting contract; and
    C. The law that governs the netting contract.
    iii. The Enterprise must establish and maintain procedures to ensure 
that the legal characteristics of netting contracts are kept under 
review in the event of possible changes in relevant law.
    iv. The Enterprise must maintain in its files documentation adequate 
to support the netting of rate contracts, including a copy of the 
bilateral netting contract and necessary legal opinions.
    b. A contract containing a walkaway clause is not eligible for 
netting for purposes of calculating the credit equivalent amount.\1\
---------------------------------------------------------------------------

    \1\ A walkaway clause is a provision in a netting contract that 
permits a non-defaulting counterparty to make lower payments than it 
would make otherwise under the contract, or no payment at all, to a 
defaulter or to the estate of a defaulter, even if the defaulter or the 
estate of the defaulter is a net creditor under the contract.
---------------------------------------------------------------------------

    c. By netting individual contracts for the purpose of calculating 
its credit equivalent amount, the Enterprise represents that it has met 
the requirements of this appendix A and all the appropriate documents 
are in the Enterprise's files and available for inspection by OFHEO. 
OFHEO may determine that an Enterprise's files are inadequate or that a 
netting contract, or any of its underlying individual contracts, may not 
be legally enforceable under any one of the bodies of law described in 
this appendix A. If such a determination is made, the netting contract 
may be disqualified from recognition for minimum capital standard 
purposes or underlying individual contracts may be treated as though 
they are not subject to the netting contract.
    d. The credit equivalent amount of interest rate and foreign 
exchange rate contracts that are subject to a qualifying bilateral 
netting contract is calculated by adding the current exposure of the 
netting contract and the sum of the estimates of the potential future 
credit exposures on all individual contracts subject to the netting 
contract, estimated in accordance with paragraph 3 of this appendix A. 
Offsetting contracts in the same

[[Page 952]]

currency maturing on the same date will have lower potential future 
exposure as well as lower current exposure. Therefore, for purposes of 
calculating potential future credit exposure to a netting counterparty 
for foreign exchange rate contracts and other similar contracts in which 
notional principal is equivalent to cash flows, total notional principal 
is defined as the net receipts falling due on each value date in each 
currency.
    e. The current exposure of the netting contract is determined by 
summing all positive and negative mark-to-market values of the 
individual contracts included in the netting contract. If the net sum of 
the mark-to-market values is positive, then the current exposure of the 
netting contract is equal to that sum. If the net sum of the mark-to-
market values is zero or negative, then the current exposure of the 
netting contract is zero. OFHEO may determine that a netting contract 
qualifies for minimum capital standard netting treatment even though 
certain individual contracts may not qualify. In such instances, the 
nonqualifying contracts should be treated as individual contracts that 
are not subject to the netting contract.
    f. In the event a netting contract covers contracts that are 
normally excluded from the minimum capital requirement computation--for 
example, foreign exchange rate contracts with an original maturity of 14 
calendar days or less, or instruments traded on exchanges that require 
daily payment of variation margin--an Enterprise may elect consistently 
either to include or exclude all mark-to-market values of such contracts 
when determining net current exposure.

Subpart B  [Reserved]

[[Page 953]]





              SUBCHAPTER D--RULES OF PRACTICE AND PROCEDURE




PART 1780--RULES OF PRACTICE AND PROCEDURE--Table of Contents




                        Subpart A--General Rules

Sec.
1780.1  Scope.
1780.2  Rules of construction.
1780.3  Definitions.
1780.4  Authority of the Director.
1780.5  Authority of the presiding officer.
1780.6  Public hearings.
1780.7  Good faith certification.
1780.8  Ex parte communications.
1780.9  Filing of papers.
1780.10  Service of papers.
1780.11  Computing time.
1780.12  Change of time limits.
1780.13  Witness fees and expenses.
1780.14  Opportunity for informal settlement.
1780.15  OFHEO's right to conduct examination.
1780.16  Collateral attacks on adjudicatory proceeding.

                    Subpart B--Prehearing Proceedings

1780.20  Commencement of proceeding and contents of notice of charges.
1780.21  Answer.
1780.22  Amended pleadings.
1780.23  Failure to appear.
1780.24  Consolidation and severance of actions.
1780.25  Motions.
1780.26  Discovery.
1780.27  Request for document discovery from parties.
1780.28  Document subpoenas to nonparties.
1780.29  Deposition of witness unavailable for hearing.
1780.30  Interlocutory review.
1780.31  Summary disposition.
1780.32  Partial summary disposition.
1780.33  Scheduling and prehearing conferences.
1780.34  Prehearing submissions.
1780.35  Hearing subpoenas.

             Subpart C--Hearing and Posthearing Proceedings

1780.50  Conduct of hearings.
1780.51  Evidence.
1780.52  Post hearing filings.
1780.53  Recommended decision and filing of record.
1780.54  Exceptions to recommended decision.
1780.55  Review by Director.
1780.56  Exhaustion of administrative remedies.
1780.57  Stays pending judicial review.

   Subpart D--Rules of Practice Before the Office of Federal Housing 
                          Enterprise Oversight

1780.70  Scope.
1780.71  Definitions.
1780.72  Appearance and practice in adjudicatory proceedings.
1780.73  Conflicts of interest.
1780.74  Sanctions.
1780.75  Censure, suspension, disbarment and reinstatement.

          Subpart E--Civil Money Penalty Inflation Adjustments

1780.80  Inflation adjustment.
1780.81  Applicability.

    Authority: 12 U.S.C. 4513, 4631-4641.
    Subpart E also issued under 28 U.S.C. 2461 note.

    Source: 62 FR 68154, Dec. 31, 1997, unless otherwise noted.



                        Subpart A--General Rules

    Source: 64 FR 72510, Dec. 28, 1999, unless otherwise noted.



Sec. 1780.1  Scope.

    This subpart prescribes rules of practice and procedure applicable 
to the following adjudicatory proceedings:
    (a) Cease and desist proceedings under sections 1371 and 1373, title 
XIII of the Housing and Community Development Act of 1992, Pub. L. No. 
102-550, known as the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (1992 Act) (12 U.S.C. 4631, 4633).
    (b) Civil money penalty assessment proceedings against the Federal 
National Mortgage Association, the Federal Home Loan Mortgage 
Corporation (collectively, the Enterprises), or any executive officer or 
director of any Enterprise under sections 1373 and 1376 of the 1992 Act 
(12 U.S.C. 4633, 4636).
    (c) Civil money penalty assessment proceedings under section 102 of 
the Flood Disaster Protection Act of 1973, as amended, 42 U.S.C. 4012a.
    (d) All other adjudications required by statute to be determined on 
the

[[Page 954]]

record after opportunity for hearing, except to the extent otherwise 
provided in the regulations specifically governing such an adjudication.



Sec. 1780.2  Rules of construction.

    For purposes of this part--
    (a) Any term in the singular includes the plural and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate; and
    (c) Unless the context requires otherwise, a party's representative 
of record, if any, may, on behalf of that party, take any action 
required to be taken by the party.



Sec. 1780.3  Definitions.

    For purposes of this part, unless explicitly stated to the 
contrary--
    (a) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation;
    (b) Decisional employee means any member of the Director's or the 
presiding officer's staff who has not engaged in an investigative or 
prosecutorial role in a proceeding and who may assist the Director or 
the presiding officer, respectively, in preparing orders, recommended 
decisions, decisions and other documents under this subpart.
    (c) Director means the Director of OFHEO.
    (d) Enterprise means the Federal National Mortgage Association and 
any affiliate thereof and the Federal Home Loan Mortgage Corporation and 
any affiliate thereof.
    (e) OFHEO means the Office of Federal Housing Enterprise Oversight 
of the Department of Housing and Urban Development.
    (f) Party means OFHEO and any person named as a party in any notice.
    (g) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency, or other entity or organization.
    (h) Presiding officer means an administrative law judge or any other 
person appointed by the Director under applicable law to conduct a 
hearing.
    (i) Representative of record means an individual who is authorized 
to represent a person or is representing himself and who has filed a 
notice of appearance in accordance with Sec. 1780.72.
    (j) Respondent means any party other than OFHEO.
    (k) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.
    (l) The 1992 Act is title XIII of the Housing and Community 
Development Act of 1992, Pub. L. No. 102-550, known as the Federal 
Housing Enterprises Financial Safety and Soundness Act of 1992 (1992 
Act) (12 U.S.C. 4501-4641).



Sec. 1780.4  Authority of the Director.

    The Director may, at any time during the pendency of a proceeding, 
perform, direct the performance of, or waive performance of any act that 
could be done or ordered by the presiding officer.



Sec. 1780.5  Authority of the presiding officer.

    (a) General rule. All proceedings governed by this subpart shall be 
conducted in accordance with the provisions of 5 U.S.C. chapter 5. The 
presiding officer shall have complete charge of the hearing, conduct a 
fair and impartial hearing, avoid unnecessary delay and assure that a 
record of the proceeding is made.
    (b) Powers. The presiding officer shall have all powers necessary to 
conduct the proceeding in accordance with paragraph (a) of this section 
and 5 U.S.C. 556(c). The presiding officer is authorized to--
    (1) Set and change the date, time and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;

[[Page 955]]

    (5) Issue subpoenas, subpoenas duces tecum, and protective orders, 
as authorized by this part, and to revoke, quash, or modify such 
subpoenas;
    (6) Take and preserve testimony under oath;
    (7) Rule on motions and other procedural matters appropriate in an 
adjudicatory proceeding, except that only the Director shall have the 
power to grant any motion to dismiss the proceeding or make a final 
determination of the merits of the proceeding;
    (8) Regulate the scope and timing of discovery;
    (9) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (10) Examine witnesses;
    (11) Receive, exclude, limit, or otherwise rule on evidence;
    (12) Upon motion of a party, take official notice of facts;
    (13) Recuse himself upon motion made by a party or on his own 
motion;
    (14) Prepare and present to the Director a recommended decision as 
provided in this part;
    (15) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (16) Do all other things necessary and appropriate to discharge the 
duties of a presiding officer.



Sec. 1780.6  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Director, in his discretion, determines that holding an open hearing 
would be contrary to the public interest. The Director may make such 
determination sua sponte at any time by written notice to all parties.
    (b) Motion for closed hearing. Within 20 days of service of the 
notice of charges, any party may file with the presiding officer a 
motion for a private hearing and any party may file a pleading in reply 
to the motion. The presiding officer shall forward the motion and any 
reply, together with a recommended decision on the motion, to the 
Director, who shall make a final determination. Such motions and replies 
are governed by Sec. 1780.25.
    (c) Filing documents under seal. OFHEO's counsel of record, in his 
discretion, may file any document or part of a document under seal if 
such counsel makes a written determination that disclosure of the 
document would be contrary to the public interest. The presiding officer 
shall take all appropriate steps to preserve the confidentiality of such 
documents or parts thereof, including closing portions of the hearing to 
the public.



Sec. 1780.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice by the Director shall be signed by at 
least one representative of record in his individual name and shall 
state that representative's address and telephone number and the names, 
addresses and telephone numbers of all other representatives of record 
for the person making the filing or submission.
    (b) Effect of signature. (1) By signing a document, the 
representative of record or party certifies that--
    (i) The representative of record or party has read the filing or 
submission of record;
    (ii) To the best of his knowledge, information and belief formed 
after reasonable inquiry, the filing or submission of record is well-
grounded in fact and is warranted by existing law or a good faith, 
nonfrivolous argument for the extension, modification, or reversal of 
existing law; and
    (iii) The filing or submission of record is not made for any 
improper purpose, such as to harass or to cause unnecessary delay or 
needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the presiding 
officer shall strike the filing or submission of record, unless it is 
signed promptly after the omission is called to the attention of the 
pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any representative or party shall 
constitute a certification that to the best of his knowledge, 
information, and belief, formed after reasonable inquiry, his statements 
are well-grounded in fact and are warranted by existing law or a good 
faith, nonfrivolous argument for the extension, modification, or 
reversal

[[Page 956]]

of existing law and are not made for any improper purpose, such as to 
harass or to cause unnecessary delay or needless increase in the cost of 
litigation.



Sec. 1780.8  Ex parte communications.

    (a) Definition. (1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between--
    (i) An interested person outside OFHEO (including the person's 
representative); and
    (ii) The presiding officer handling that proceeding, the Director, a 
decisional employee assigned to that proceeding, or any other person who 
is or may reasonably be expected to be involved in the decisional 
process.
    (2) A communication that does not concern the merits of an 
adjudicatory proceeding, such as a request for status of the proceeding, 
does not constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
commencing the proceeding is issued by the Director until the date that 
the Director issues his final decision pursuant to Sec. 1780.55, no 
person referred to in paragraph (a)(1)(i) of this section shall 
knowingly make or cause to be made an ex parte communication. The 
Director, presiding officer, or a decisional employee shall not 
knowingly make or cause to be made an ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by any person identified in paragraph 
(a) of this section, that person shall cause all such written 
communications (or, if the communication is oral, a memorandum stating 
the substance of the communication) to be placed on the record of the 
proceeding and served on all parties. All parties to the proceeding 
shall have an opportunity, within ten days of receipt of service of the 
ex parte communication, to file responses thereto and to recommend any 
sanctions, in accordance with paragraph (d) of this section, that they 
believe to be appropriate under the circumstances.
    (d) Sanctions. Any party or representative for a party who makes an 
ex parte communication, or who encourages or solicits another to make 
any such communication, may be subject to any appropriate sanction or 
sanctions imposed by the Director or the presiding officer, including, 
but not limited to, exclusion from the proceedings and an adverse ruling 
on the issue that is the subject of the prohibited communication.
    (e) Consultations by presiding officer. Except to the extent 
required for the disposition of ex parte matters as authorized by law, 
the presiding officer may not consult a person or party on any matter 
relevant to the merits of the adjudication, unless on notice and 
opportunity for all parties to participate.
    (f) Separation of functions. An employee or agent engaged in the 
performance of investigative or prosecuting functions for OFHEO in a 
case may not, in that or a factually related case, participate or advise 
in the decision, recommended decision, or Director review under 
Sec. 1780.55 of the recommended decision, except as witness or counsel 
in public proceedings.



Sec. 1780.9  Filing of papers.

    (a) Filing. Any papers required to be filed shall be addressed to 
the presiding officer and filed with OFHEO, 1700 G Street, NW., Fourth 
Floor, Washington, DC 20552.
    (b) Manner of filing. Unless otherwise specified by the Director or 
the presiding officer, filing shall be accomplished by:
    (1) Personal service;
    (2) Delivery to the U.S. Postal Service or to a reliable commercial 
delivery service for same day or overnight delivery;
    (3) Mailing by first class, registered, or certified mail; or
    (4) Transmission by electronic media, only if expressly authorized 
by and upon any conditions specified by the Director or the presiding 
officer. All papers filed by electronic media shall also concurrently be 
filed in accordance with paragraph (c) of this section.

[[Page 957]]

    (c) Formal requirements as to papers filed. (1) Form. All papers 
must set forth the name, address and telephone number of the 
representative or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11-inch paper and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 1780.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of OFHEO and of the filing party, the title 
and docket number of the proceeding and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Director or 
the presiding officer, an original and one copy of all documents and 
papers shall be filed, except that only one copy of transcripts of 
testimony and exhibits shall be filed.



Sec. 1780.10  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers or serving a subpoena shall serve a copy upon the representative 
of record for each party to the proceeding so represented and upon any 
party not so represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivery to the U.S. Postal Service or to a reliable commercial 
delivery service for same day or overnight delivery;
    (3) Mailing by first class, registered, or certified mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec. 1780.9(c).
    (c) By the Director or the presiding officer. (1) All papers 
required to be served by the Director or the presiding officer upon a 
party who has appeared in the proceeding in accordance with Sec. 1780.72 
shall be served by any means specified in paragraph (b) of this section.
    (2) If a notice of appearance has not been filed in the proceeding 
for a party in accordance with Sec. 1780.72, the Director or the 
presiding officer shall make service upon the party by any of the 
following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party; or
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) By any other method reasonably calculated to give actual notice.
    (e) Area of service. Service in any State, commonwealth, possession, 
territory of the United States or the District of Columbia on any person 
doing business in any State, commonwealth, possession, territory of the 
United States or the District of Columbia, or on any person as otherwise 
permitted by law, is effective without regard to the place where the 
hearing is held.

[[Page 958]]

    (f) Proof of service. Proof of service of papers filed by a party 
shall be filed before action is taken thereon. The proof of service, 
which shall serve as prima facie evidence of the fact and date of 
service, shall show the date and manner of service and may be by written 
acknowledgment of service, by declaration of the person making service, 
or by certificate of a representative of record. However, failure to 
file proof of service contemporaneously with the papers shall not affect 
the validity of actual service. The presiding officer may allow the 
proof to be amended or supplied, unless to do so would result in 
material prejudice to a party.



Sec. 1780.11  Computing time.

    (a) General rule. In computing any period of time prescribed or 
allowed by this subpart, the date of the act or event that commences the 
designated period of time is not included. The last day so computed is 
included unless it is a Saturday, Sunday, or Federal holiday. When the 
last day is a Saturday, Sunday or Federal holiday, the period shall run 
until the end of the next day that is not a Saturday, Sunday, or Federal 
holiday. Intermediate Saturdays, Sundays and Federal holidays are 
included in the computation of time. However, when the time period 
within which an act is to be performed is 10 days or less, not including 
any additional time allowed for in paragraph (c) of this section, 
intermediate Saturdays, Sundays and Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective--
    (i) In the case of personal service or same day reliable commercial 
delivery service, upon actual service;
    (ii) In the case of U.S. Postal Service or reliable commercial 
overnight delivery service, or first class, registered, or certified 
mail, upon deposit in or delivery to an appropriate point of collection; 
or
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing in the case of filing, and as 
agreed among the parties in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b)(1) of this section may be modified by the Director or the presiding 
officer in the case of filing or by agreement of the parties in the case 
of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits shall be 
calculated as follows:
    (1) If service was made by first class, registered, or certified 
mail, or by delivery to the U.S. Postal Service for longer than 
overnight delivery service, add three calendar days to the prescribed 
period for the responsive filing.
    (2) If service was made by U.S. Postal Service or reliable 
commercial overnight delivery service, add 1 calendar day to the 
prescribed period for the responsive filing.
    (3) If service was made by electronic media transmission, add one 
calendar day to the prescribed period for the responsive filing, unless 
otherwise determined by the Director or the presiding officer in the 
case of filing, or by agreement among the parties in the case of 
service.



Sec. 1780.12  Change of time limits.

    Except as otherwise provided by law, the presiding officer may, for 
good cause shown, extend the time limits prescribed above or prescribed 
by any notice or order issued in the proceedings. After the referral of 
the case to the Director pursuant to Sec. 1780.53, the Director may 
grant extensions of the time limits for good cause shown. Extensions may 
be granted on the motion of a party after notice and opportunity to 
respond is afforded all nonmoving parties, or on the Director's or the 
presiding officer's own motion.



Sec. 1780.13  Witness fees and expenses.

    Witnesses (other than parties) subpoenaed for testimony or 
depositions shall be paid the same fees for attendance and mileage as 
are paid in the United States district courts in proceedings in which 
the United States is a party, provided that, in the case of a discovery 
subpoena addressed to a party, no witness fees or mileage shall be paid. 
Fees for witnesses shall be tendered in advance by the party requesting 
the subpoena, except that fees and

[[Page 959]]

mileage need not be tendered in advance where OFHEO is the party 
requesting the subpoena. OFHEO shall not be required to pay any fees to 
or expenses of any witness not subpoenaed by OFHEO.



Sec. 1780.14  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to OFHEO's counsel of record written offers or proposals for 
settlement of a proceeding without prejudice to the rights of any of the 
parties. No such offer or proposal shall be made to any OFHEO 
representative other than OFHEO's counsel of record. Submission of a 
written settlement offer does not provide a basis for adjourning or 
otherwise delaying all or any portion of a proceeding under this part. 
No settlement offer or proposal, or any subsequent negotiation or 
resolution, is admissible as evidence in any proceeding.



Sec. 1780.15  OFHEO's right to conduct examination.

    Nothing contained in this part limits in any manner the right of 
OFHEO to conduct any examination, inspection, or visitation of any 
Enterprise or affiliate, or the right of OFHEO to conduct or continue 
any form of investigation authorized by law.



Sec. 1780.16  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.



                    Subpart B--Prehearing Proceedings

    Source: 64 FR 72513, Dec. 28, 1999, unless otherwise noted.



Sec. 1780.20  Commencement of proceeding and contents of notice of charges.

    Proceedings under this subpart are commenced by the issuance of a 
notice of charges by the Director, which must be served upon the 
respondent. Such notice shall state all of the following:
    (a) The legal authority for the proceeding and for OFHEO's 
jurisdiction over the proceeding;
    (b) A statement of the matters of fact or law showing that OFHEO is 
entitled to relief;
    (c) A proposed order or prayer for an order granting the requested 
relief;
    (d) The time, place and nature of the hearing;
    (e) The time within which to file an answer;
    (f) The time within which to request a hearing; and
    (g) The address for filing the answer and/or request for a hearing.



Sec. 1780.21  Answer.

    (a) When. Unless otherwise specified by the Director in the notice, 
respondent shall file an answer within 20 days of service of the notice.
    (b) Content of answer. An answer must respond specifically to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice that is not denied in the answer is deemed admitted for purposes 
of the proceeding. A respondent is not required to respond to the 
portion of a notice that constitutes the prayer for relief or proposed 
order. The answer must set forth affirmative defenses, if any, asserted 
by the respondent.
    (c) Default. Failure of a respondent to file an answer required by 
this section within the time provided constitutes a waiver of such 
respondent's right to appear and contest the allegations in the notice. 
If no timely answer is filed,

[[Page 960]]

OFHEO's counsel of record may file a motion for entry of an order of 
default. Upon a finding that no good cause has been shown for the 
failure to file a timely answer, the presiding officer shall file with 
the Director a recommended decision containing the findings and the 
relief sought in the notice. Any final order issued by the Director 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.



Sec. 1780.22  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Director or presiding officer 
orders otherwise for good cause shown.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
presiding officer may admit the evidence when admission is likely to 
assist in adjudicating the merits of the action. The presiding officer 
will do so freely when the determination of the merits of the action is 
served thereby and the objecting party fails to satisfy the presiding 
officer that the admission of such evidence would unfairly prejudice 
that party's action or defense upon the merits. The presiding officer 
may grant a continuance to enable the objecting party to meet such 
evidence.



Sec. 1780.23  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized representative constitutes a waiver of respondent's 
right to a hearing and is deemed an admission of the facts as alleged 
and consent to the relief sought in the notice. Without further 
proceedings or notice to the respondent, the presiding officer shall 
file with the Director a recommended decision containing the findings 
and the relief sought in the notice.



Sec. 1780.24  Consolidation and severance of actions.

    (a) Consolidation. On the motion of any party, or on the presiding 
officer's own motion, the presiding officer may consolidate, for some or 
all purposes, any two or more proceedings, if each such proceeding 
involves or arises out of the same transaction, occurrence or series of 
transactions or occurrences, or involves at least one common respondent 
or a material common question of law or fact, unless such consolidation 
would cause unreasonable delay or injustice. In the event of 
consolidation under this section, appropriate adjustment to the 
prehearing schedule must be made to avoid unnecessary expense, 
inconvenience, or delay.
    (b) Severance. The presiding officer may, upon the motion of any 
party, sever the proceeding for separate resolution of the matter as to 
any respondent only if the presiding officer finds that undue prejudice 
or injustice to the moving party would result from not severing the 
proceeding and such undue prejudice or injustice would outweigh the 
interests of judicial economy and expedition in the complete and final 
resolution of the proceeding.



Sec. 1780.25  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the presiding officer. Written memoranda, briefs, 
affidavits, or other relevant material or documents may be filed in 
support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the presiding officer directs that such motion be reduced to writing.
    (c) Filing of motions. Motions must be filed with the presiding 
officer, except

[[Page 961]]

that following the filing of a recommended decision, motions must be 
filed with the Director.
    (d) Responses. (1) Except as otherwise provided herein, any party 
may file a written response to a motion within ten days after service of 
any written motion, or within such other period of time as may be 
established by the presiding officer or the Director. The presiding 
officer shall not rule on any oral or written motion before each party 
has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory, or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Secs. 1780.31 and 1780.32.



Sec. 1780.26   Discovery.

    (a) Limits on discovery. Subject to the limitations set out in 
paragraphs (b), (d), and (e) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (b) Relevance. A party may obtain document discovery regarding any 
matter not privileged that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec. 1780.27.
    (c) Forms of discovery. Discovery shall be limited to requests for 
production of documents for inspection and copying. No other form of 
discovery shall be allowed. Discovery by use of interrogatories is not 
permitted. This paragraph shall not be interpreted to require the 
creation of a document.
    (d) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative process 
privilege and any other privileges provided by the Constitution, any 
applicable act of Congress, or the principles of common law.
    (e) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing. No exception to this time 
limit shall be permitted, unless the presiding officer finds on the 
record that good cause exists for waiving the requirements of this 
paragraph.



Sec. 1780.27   Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. Copies of the request shall be served on all other parties. The 
request must identify the documents to be produced either by individual 
item or by category and must describe each item and category with 
reasonable particularity. Documents must be produced as they are kept in 
the usual course of business or they shall be labeled and organized to 
correspond with the categories in the request.

[[Page 962]]

    (b) Production or copying. The request must specify a reasonable 
time, place and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages is 
requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests more than 250 
pages of copying, the requesting party shall pay for copying and 
shipping charges. Copying charges are at the current rate per page 
imposed by OFHEO at Sec. 1710.22(b)(2) of this chapter for requests for 
documents filed under the Freedom of Information Act, 12 U.S.C. 552. The 
party to whom the request is addressed may require payment in advance 
before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request is not required to supplement the response, unless:
    (1) The responding party learns that in some material respect the 
information disclosed is incomplete or incorrect, and
    (2) The additional or corrective information has not otherwise been 
made known to the other parties during the discovery process or in 
writing.
    (d) Motions to strike or limit discovery requests. (1) Any party 
that objects to a discovery request may, within ten days of being served 
with such request, file a motion in accordance with the provisions of 
Sec. 1780.25 to strike or otherwise limit the request. If an objection 
is made to only a portion of an item or category in a request, the 
objection shall specify that portion. Any objections not made in 
accordance with this paragraph and Sec. 1780.25 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, all 
documents withheld on the grounds of privilege must be reasonably 
identified, together with a statement of the basis for the assertion of 
privilege. When similar documents that are protected by deliberative 
process, attorney work-product, or attorney-client privilege are 
voluminous, these documents may be identified by category instead of by 
individual document. The presiding officer has discretion to determine 
when the identification by category is insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec. 1780.25 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may, within five days of service of a motion for the 
issuance of a subpoena compelling production, file a written response to 
the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses to 
motions pursuant to this section has expired, the presiding officer 
shall rule promptly on all such motions. If the presiding officer 
determines that a discovery request or any of its terms calls for 
irrelevant material, is unreasonable, oppressive, excessive in scope, 
unduly burdensome, or repetitive of previous requests, or seeks to 
obtain privileged documents, he may deny or modify the request and may 
issue appropriate protective orders, upon such conditions as justice may 
require. The pendency of a motion to strike or limit discovery or to 
compel production shall not be a basis for staying or continuing the 
proceeding, unless otherwise ordered by the presiding officer. 
Notwithstanding any other provision in this part, the presiding officer 
may not release, or order a party to produce, documents withheld on 
grounds of privilege if the party has stated to the presiding officer 
its intention to file a timely motion for interlocutory review of the 
presiding officer's order to produce the documents, until the motion for 
interlocutory review has been decided.
    (h) Enforcing discovery subpoenas. If the presiding officer issues a 
subpoena

[[Page 963]]

compelling production of documents by a party, the subpoenaing party 
may, in the event of noncompliance and to the extent authorized by 
applicable law, apply to any appropriate United States district court 
for an order requiring compliance with the subpoena. A party's right to 
seek court enforcement of a subpoena shall not in any manner limit the 
sanctions that may be imposed by the presiding officer against a party 
who fails to produce or induces another to fail to produce subpoenaed 
documents.



Sec. 1780.28   Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the presiding officer 
for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for production in response to the subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec. 1780.27. The party obtaining the document 
subpoena is responsible for serving it on the subpoenaed person and for 
serving copies on all parties. Document subpoenas may be served in any 
State, territory, or possession of the United States, the District of 
Columbia, or as otherwise provided by law.
    (3) The presiding officer shall issue promptly any document subpoena 
applied for under this section; except that, if the presiding officer 
determines that the application does not set forth a valid basis for the 
issuance of the subpoena, or that any of its terms are unreasonable, 
oppressive, excessive in scope, or unduly burdensome, he may refuse to 
issue the subpoena or may issue it in a modified form upon such 
conditions as may be determined by the presiding officer.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties and any party 
may respond to such motion within ten days of service of the motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec. 1780.27 and during 
the same time limits during which such an objection could be filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the presiding officer that directs compliance with all or any portion of 
a document subpoena, the subpoenaing party or any other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
subpoena. A party's right to seek court enforcement of a document 
subpoena shall in no way limit the sanctions that may be imposed by the 
presiding officer on a party who induces a failure to comply with 
subpoenas issued under this section.



Sec. 1780.29   Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section to the presiding officer for the 
issuance of a subpoena, including a subpoena duces tecum, requiring the 
attendance of the witness at a deposition. The presiding officer may 
issue a deposition subpoena under this section upon a showing that--
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness, or infirmity, or will be 
otherwise unavailable;
    (ii) The witness' unavailability was not produced or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and

[[Page 964]]

    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed anywhere within the 
United States and its possessions and territories in which that witness 
resides or has a regular place of employment or such other convenient 
place as the presiding officer shall fix.
    (3) Subpoenas must be issued promptly upon request, unless the 
presiding officer determines that the request fails to set forth a valid 
basis under this section for its issuance. Before making a determination 
that there is no valid basis for issuing the subpoena, the presiding 
officer shall require a written response from the party requesting the 
subpoena or require attendance at a conference to determine whether 
there is a valid basis upon which to issue the requested subpoena.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the presiding officer orders otherwise, no deposition under this section 
shall be taken on fewer than 10 days' notice to the witness and all 
parties. Deposition subpoenas may be served anywhere within the United 
States or its possessions or territories on any person doing business 
anywhere within the United States or its possessions or territories, or 
as otherwise permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion under Sec. 1780.25 with the 
presiding officer to quash or modify the subpoena prior to the time for 
compliance specified in the subpoena, but not more than 10 days after 
service of the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for objection might have been avoided if the objection had been 
presented timely. All questions, answers and objections must be 
recorded.
    (2) Any party may move before the presiding officer for an order 
compelling the witness to answer any questions the witness has refused 
to answer or submit any evidence that, during the deposition, the 
witness has refused to submit.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or with any order of the 
presiding officer made upon motion under paragraph (c)(2) of this 
section, the subpoenaing party or other aggrieved party may, to the 
extent authorized by applicable law, apply to an appropriate United 
States district court for an order requiring compliance with the 
portions of the subpoena that the presiding officer has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
presiding officer on a party who fails to comply with or induces a 
failure to comply with a subpoena issued under this section.



Sec. 1780.30   Interlocutory review.

    (a) General rule. The Director may review a ruling of the presiding 
officer prior to the certification of the record

[[Page 965]]

to the Director only in accordance with the procedures set forth in this 
section.
    (b) Scope of review. The Director may exercise interlocutory review 
of a ruling of the presiding officer if the Director finds that--
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any motion for interlocutory review shall be filed by 
a party with the presiding officer within ten days of his ruling. Upon 
the expiration of the time for filing all responses, the presiding 
officer shall refer the matter to the Director for final disposition. In 
referring the matter to the Director, the presiding officer may indicate 
agreement or disagreement with the asserted grounds for interlocutory 
review of the ruling in question.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Director under this 
section suspends or stays the proceeding unless otherwise ordered by the 
presiding officer or the Director.



Sec. 1780.31  Summary disposition.

    (a) In general. The presiding officer shall recommend that the 
Director issue a final order granting a motion for summary disposition 
if the undisputed pleaded facts, admissions, affidavits, stipulations, 
documentary evidence, matters as to which official notice may be taken 
and any other evidentiary materials properly submitted in connection 
with a motion for summary disposition show that--
    (1) There is no genuine issue as to any material fact; and
    (2) The movant is entitled to a decision in its favor as a matter of 
law.
    (b) Filing of motions and responses. (1) Any party who believes 
there is no genuine issue of material fact to be determined and that 
such party is entitled to a decision as a matter of law may move at any 
time for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such motion or 
within such time period as allowed by the presiding officer, may file a 
response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of material facts as to which the movant contends there is no 
genuine issue. Such motion must be supported by documentary evidence, 
which may take the form of admissions in pleadings, stipulations, 
written interrogatory responses, depositions, investigatory depositions, 
transcripts, affidavits and any other evidentiary materials that the 
movant contends support its position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the movant. Any party opposing a motion for summary 
disposition must file a statement setting forth those material facts as 
to which such party contends a genuine dispute exists. Such opposition 
must be supported by evidence of the same type as that submitted with 
the motion for summary disposition and a brief containing the points and 
authorities in support of the contention that summary disposition would 
be inappropriate.
    (c) Hearing on motion. At the request of any party or on his own 
motion, the presiding officer may hear oral argument on the motion for 
summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the presiding officer shall 
determine whether the movant is entitled to summary disposition. If the 
presiding officer determines that summary disposition is warranted, the 
presiding officer shall submit a recommended decision to that effect to 
the Director, under Sec. 1780.53. If the presiding officer finds that 
the moving party is not entitled to summary disposition, the presiding 
officer shall make a ruling denying the motion.

[[Page 966]]



Sec. 1780.32  Partial summary disposition.

    If the presiding officer determines that a party is entitled to 
summary disposition as to certain claims only, he shall defer submitting 
a recommended decision to the Director as to those claims. A hearing on 
the remaining issues must be ordered. Those claims for which the 
presiding officer has determined that summary disposition is warranted 
will be addressed in the recommended decision filed at the conclusion of 
the hearing.



Sec. 1780.33  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as the parties may 
agree, the presiding officer shall direct representatives for all 
parties to meet with him in person at a specified time and place prior 
to the hearing or to confer by telephone for the purpose of scheduling 
the course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The presiding officer may, in addition 
to the scheduling conference, on his own motion or at the request of any 
party, direct representatives for the parties to meet with him (in 
person or by telephone) at a prehearing conference to address any or all 
of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The presiding officer, in his discretion, may 
require that a scheduling or prehearing conference be recorded by a 
court reporter. A transcript of the conference and any materials filed, 
including orders, becomes part of the record of the proceeding. A party 
may obtain a copy of the transcript at such party's expense.
    (d) Scheduling or prehearing orders. Within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the presiding officer shall serve on each party an order 
setting forth any agreements reached and any procedural determinations 
made.



Sec. 1780.34  Prehearing submissions.

    (a) Within the time set by the presiding officer, but in no case 
later than 10 days before the start of the hearing, each party shall 
serve on every other party the serving party's--
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec. 1780.35  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the presiding officer may issue a subpoena or a subpoena duces 
tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at such hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any

[[Page 967]]

State, commonwealth, possession, territory of the United States, or the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of or during a hearing. During a hearing, a party may make 
an application for a subpoena orally on the record before the presiding 
officer.
    (3) The presiding officer shall promptly issue any hearing subpoena 
applied for under this section; except that, if the presiding officer 
determines that the application does not set forth a valid basis for the 
issuance of the subpoena, or that any of its terms are unreasonable, 
oppressive, excessive in scope, or unduly burdensome, he may refuse to 
issue the subpoena or may issue the subpoena in a modified form upon any 
conditions consistent with this subpart. Upon issuance by the presiding 
officer, the party making the application shall serve the subpoena on 
the person named in the subpoena and on each party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
such subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but no more 
than 10 days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
presiding officer that directs compliance with all or any portion of a 
hearing subpoena, the subpoenaing party or any other aggrieved party may 
seek enforcement of the subpoena pursuant to Sec. 1780.28(c). A party's 
right to seek court enforcement of a hearing subpoena shall in no way 
limit the sanctions that may be imposed by the presiding officer on a 
party who induces a failure to comply with subpoenas issued under this 
section.



             Subpart C--Hearing and Posthearing Proceedings

    Source: 64 FR 72518, Dec. 28, 1999, unless otherwise noted.



Sec. 1780.50  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted in accordance 
with 5 U.S.C. chapter 5 and other applicable law and so as to provide a 
fair and expeditious presentation of the relevant disputed issues. 
Except as limited by this subpart, each party has the right to present 
its case or defense by oral and documentary evidence and to conduct such 
cross examination as may be required for full disclosure of the facts.
    (2) Order of hearing. OFHEO's counsel of record shall present its 
case-in-chief first, unless otherwise ordered by the presiding officer 
or unless otherwise expressly specified by law or regulation. OFHEO's 
counsel of record shall be the first party to present an opening 
statement and a closing statement and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order or 
presentation of their cases, but if they do not agree, the presiding 
officer shall fix the order.
    (3) Examination of witnesses. Only one representative for each party 
may conduct an examination of a witness, except that in the case of 
extensive direct examination, the presiding officer may permit more than 
one representative for the party presenting the witness to conduct the 
examination. A party may have one representative conduct the direct 
examination and another representative conduct re-direct examination of 
a witness, or may have one representative conduct the cross examination 
of a witness and another representative conduct the re-cross examination 
of a witness.
    (4) Stipulations. Unless the presiding officer directs otherwise, 
all documents

[[Page 968]]

that the parties have stipulated as admissible shall be admitted into 
evidence upon commencement of the hearing.
    (b) Transcript. The hearing shall be recorded and transcribed. The 
transcript shall be made available to any party upon payment of the cost 
thereof. The presiding officer shall have authority to order the record 
corrected, either upon motion to correct, upon stipulation of the 
parties, or following notice to the parties upon the presiding officer's 
own motion.



Sec. 1780.51  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact that may be judicially noticed by a United States district 
court and any material information in the official public records of any 
Federal or State government agency.
    (2) All matters officially noticed by the presiding officer or the 
Director shall appear on the record.
    (3) If official notice is requested of any material fact, the 
parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a)(1) of this section, 
any document, including a report of examination, oversight activity, 
inspection, or visitation, prepared by OFHEO or by another Federal or 
State financial institutions regulatory agency is admissible either with 
or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines, or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the presiding officer's discretion, be used 
with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear in the record.
    (2) When an objection to a question or line of questioning is 
sustained, the examining representative of record may make a specific 
proffer on the record of what he expected to prove by the expected 
testimony of the witness. The proffer may be by representation of the 
representative or by direct interrogation of the witness.
    (3) The presiding officer shall retain rejected exhibits, adequately 
marked for identification, for the record and transmit such exhibits to 
the Director.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing and that witness has testified in a 
deposition in accordance with Sec. 1780.29, a party may offer as 
evidence all or any part of the transcript of the deposition, including 
deposition exhibits, if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the presiding officer may, on that basis, limit 
the admissibility of the deposition in any manner that justice requires.

[[Page 969]]

    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec. 1780.52  Post hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the presiding officer 
shall serve notice upon each party that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the presiding officer proposed findings of fact, proposed 
conclusions of law and a proposed order within 30 days after the parties 
have received notice that the transcript has been filed with the 
presiding officer, unless otherwise ordered by the presiding officer.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A posthearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document.
    (3) Any party is deemed to have waived any issue not raised in 
proposed findings or conclusions timely filed by that party.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings and conclusions and 
proposed order are due. Reply briefs must be limited strictly to 
responding to new matters, issues, or arguments raised in another 
party's papers. A party who has not filed proposed findings of fact and 
conclusions of law or a posthearing brief may not file a reply brief.
    (c) Simultaneous filing required. The presiding officer shall not 
order the filing by any party of any brief or reply brief supporting 
proposed findings and conclusions in advance of the other party's filing 
of its brief.



Sec. 1780.53  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under 
Sec. 1780.52(b), the presiding officer shall file with and certify to 
the Director, for decision, the record of the proceeding. The record 
must include the presiding officer's recommended decision, recommended 
findings of fact and conclusions of law, and proposed order; all 
prehearing and hearing transcripts, exhibits and rulings; and the 
motions, briefs, memoranda and other supporting papers filed in 
connection with the hearing. The presiding officer shall serve upon each 
party the recommended decision, recommended findings and conclusions, 
and proposed order.
    (b) Filing of index. At the same time the presiding officer files 
with and certifies to the Director, for final determination, the record 
of the proceeding, the presiding officer shall furnish to the Director a 
certified index of the entire record of the proceeding. The certified 
index shall include, at a minimum, an entry for each paper, document or 
motion filed with the presiding officer in the proceeding, the date of 
the filing, and the identity of the filer. The certified index shall 
also include an exhibit index containing, at a minimum, an entry 
consisting of exhibit number and title or description for: Each exhibit 
introduced and admitted into evidence at the hearing; each exhibit 
introduced but not admitted into evidence at the hearing; each exhibit 
introduced and admitted into evidence after the completion of the 
hearing; and each exhibit introduced but not admitted into evidence 
after the completion of the hearing.



Sec. 1780.54  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, recommended findings and conclusions, and proposed 
order under Sec. 1780.53, a party may file with the Director written 
exceptions to the presiding officer's recommended decision, recommended 
findings and conclusions, or proposed order; to the admission or 
exclusion of evidence; or to the failure of the presiding officer to 
make a ruling proposed by a party. A supporting brief may be filed at 
the time the exceptions are filed, either as part of the same document 
or in a separate document.

[[Page 970]]

    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Director if the party 
taking exception had an opportunity to raise the same objection, issue, 
or argument before the presiding officer and failed to do so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in or omissions 
from the presiding officer's recommendations to which that party takes 
exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
presiding officer's recommendations to which exception is taken, the 
page or paragraph references to those portions of the record relied upon 
to support each exception and the legal authority relied upon to support 
each exception. Exceptions and briefs in support shall not exceed a 
total of 30 pages, except by leave of the Director on motion.
    (3) One reply brief may be submitted by each party within ten days 
of service of exceptions and briefs in support of exceptions. Reply 
briefs shall not exceed 15 pages, except by leave of the Director on 
motion.



Sec. 1780.55  Review by Director.

    (a) Notice of submission to the Director. When the Director 
determines that the record in the proceeding is complete, the Director 
shall serve notice upon the parties that the proceeding has been 
submitted to the Director for final decision.
    (b) Oral argument before the Director. Upon the initiative of the 
Director or on the written request of any party filed with the Director 
within the time for filing exceptions under Sec. 1780.54, the Director 
may order and hear oral argument on the recommended findings, 
conclusions, decision and order of the presiding officer. A written 
request by a party must show good cause for oral argument and state 
reasons why arguments cannot be presented adequately in writing. A 
denial of a request for oral argument may be set forth in the Director's 
final decision. Oral argument before the Director must be transcribed.
    (c) Director's final decision. (1) Decisional employees may advise 
and assist the Director in the consideration and disposition of the 
case. The final decision of the Director will be based upon review of 
the entire record of the proceeding, except that the Director may limit 
the issues to be reviewed to those findings and conclusions to which 
opposing arguments or exceptions have been filed by the parties.
    (2) The Director shall render a final decision and issue an 
appropriate order within 90 days after notification of the parties that 
the case has been submitted for final decision, unless the Director 
orders that the action or any aspect thereof be remanded to the 
presiding officer for further proceedings. Copies of the final decision 
and order of the Director shall be served upon each party to the 
proceeding and upon other persons required by statute.



Sec. 1780.56  Exhaustion of administrative remedies.

    To exhaust administrative remedies as to any issue on which a party 
disagrees with the presiding officer's recommendations, a party must 
file exceptions with the Director under Sec. 1780.54. A party must 
exhaust administrative remedies as a precondition to seeking judicial 
review of any decision issued under this subpart.



Sec. 1780.57  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the Director may not, unless specifically ordered 
by the Director or a reviewing court, operate as a stay of any order 
issued by the Director. The Director may, in his discretion and on such 
terms as he finds just, stay the effectiveness of all or any part of an 
order of the Director pending a final decision on a petition for review 
of that order.

[[Page 971]]



   Subpart D--Rules of Practice Before the Office of Federal Housing 
                          Enterprise Oversight

    Source: 64 FR 72520, Dec. 28, 1999, unless otherwise noted.



Sec. 1780.70  Scope.

    This subpart contains rules governing practice by parties or their 
representatives before OFHEO. This subpart addresses the imposition of 
sanctions by the presiding officer or the Director against parties or 
their representatives in an adjudicatory proceeding under this part. 
This subpart also covers other disciplinary sanctions--censure, 
suspension or disbarment--against individuals who appear before OFHEO in 
a representational capacity either in an adjudicatory proceeding under 
this part or in any other matters connected with presentations to OFHEO 
relating to a client's or other principal's rights, privileges, or 
liabilities. This representation includes, but is not limited to, the 
practice of attorneys and accountants. Employees of OFHEO are not 
subject to disciplinary proceedings under this subpart.



Sec. 1780.71  Definitions.

    Practice before OFHEO for the purposes of this subpart, includes, 
but is not limited to, transacting any business with OFHEO as counsel, 
representative or agent for any other person, unless the Director orders 
otherwise. Practice before OFHEO also includes the preparation of any 
statement, opinion, or other paper by a counsel, representative or agent 
that is filed with OFHEO in any certification, notification, 
application, report, or other document, with the consent of such 
counsel, representative or agent. Practice before OFHEO does not include 
work prepared for an Enterprise solely at the request of the Enterprise 
for use in the ordinary course of its business.



Sec. 1780.72  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before OFHEO or a presiding officer. (1) By 
attorneys. A party may be represented by an attorney who is a member in 
good standing of the bar of the highest court of any State, 
commonwealth, possession, territory of the United States, or the 
District of Columbia and who is not currently suspended or disbarred 
from practice before OFHEO.
    (2) By nonattorneys. An individual may appear on his own behalf. A 
member of a partnership may represent the partnership and a duly 
authorized officer, director, employee, or other agent of any 
corporation or other entity not specifically listed herein may represent 
such corporation or other entity; provided that such officer, director, 
employee, or other agent is not currently suspended or disbarred from 
practice before OFHEO. A duly authorized officer or employee of any 
Government unit, agency, or authority may represent that unit, agency, 
or authority.
    (b) Notice of appearance. Any person appearing in a representative 
capacity on behalf of a party, including OFHEO, shall execute and file a 
notice of appearance with the presiding officer at or before the time 
such person submits papers or otherwise appears on behalf of a party in 
the adjudicatory proceeding. Such notice of appearance shall include a 
written declaration that the individual is currently qualified as 
provided in paragraphs (a)(1) or (a)(2) of this section and is 
authorized to represent the particular party. By filing a notice of 
appearance on behalf of a party in an adjudicatory proceeding, the 
representative thereby agrees and represents that he is authorized to 
accept service on behalf of the represented party and that, in the event 
of withdrawal from representation, he or she will, if required by the 
presiding officer, continue to accept service until a new representative 
has filed a notice of appearance or until the represented party 
indicates that he or she will proceed on a pro se basis. Unless the 
representative filing the notice is an attorney, the notice of 
appearance shall also be executed by the person represented or, if the 
person is not an individual, by the chief executive officer, or duly 
authorized officer of that person.

[[Page 972]]



Sec. 1780.73  Conflicts of interest.

    (a) Conflict of interest in representation. No representative shall 
represent another person in an adjudicatory proceeding if it reasonably 
appears that such representation may be limited materially by that 
representative's responsibilities to a third person or by that 
representative's own interests. The presiding officer may take 
corrective measures at any stage of a proceeding to cure a conflict of 
interest in representation, including the issuance of an order limiting 
the scope of representation or disqualifying an individual from 
appearing in a representative capacity for the duration of the 
proceeding.
    (b) Certification and waiver. If any person appearing as counsel or 
other representative represents two or more parties to an adjudicatory 
proceeding or also represents a nonparty on a matter relevant to an 
issue in the proceeding, that representative must certify in writing at 
the time of filing the notice of appearance required by Sec. 1780.72--
    (1) That the representative has personally and fully discussed the 
possibility of conflicts of interest with each such party and nonparty;
    (2) That each such party and nonparty waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.



Sec. 1780.74  Sanctions.

    (a) General rule. Appropriate sanctions may be imposed during the 
course of any proceeding when any party or representative of record has 
acted or failed to act in a manner required by applicable statute, 
regulation, or order, and that act or failure to act--
    (1) Constitutes contemptuous conduct. Contemptuous conduct includes 
dilatory, obstructionist, egregious, contumacious, unethical, or other 
improper conduct at any phase of any adjudicatory proceeding;
    (2) Has caused some other party material and substantive injury, 
including, but not limited to, incurring expenses including attorney's 
fees or experiencing prejudicial delay;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Has delayed the proceeding unduly.
    (b) Sanctions. Sanctions that may be imposed include, but are not 
limited to, any one or more of the following:
    (1) Issuing an order against a party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just;
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Procedure for imposition of sanctions. (1) The presiding 
officer, on the motion of any party, or on his own motion, and after 
such notice and responses as may be directed by the presiding officer, 
may impose any sanction authorized by this section. The presiding 
officer shall submit to the Director for final ruling any sanction that 
would result in a final order that terminates the case on the merits or 
is otherwise dispositive of the case.
    (2) Except as provided in paragraph (d) of this section, no sanction 
authorized by this section, other than refusing to accept late papers, 
shall be imposed without prior notice to all parties and an opportunity 
for any representative or party against whom sanctions would be imposed 
to be heard. The presiding officer shall determine and direct the 
appropriate notice and form for such opportunity to be heard. The 
opportunity to be heard may be limited to an opportunity to respond 
verbally immediately after the act or inaction in question is noted by 
the presiding officer.
    (3) For purposes of interlocutory review, motions for the imposition 
of sanctions by any party and the imposition of sanctions shall be 
treated the same as motions for any other ruling by the presiding 
officer.

[[Page 973]]

    (4) Nothing in this section shall be read to preclude the presiding 
officer or the Director from taking any other action or imposing any 
other restriction or sanction authorized by any applicable statute or 
regulation.
    (d) Sanctions for contemptuous conduct. If, during the course of any 
proceeding, a presiding officer finds any representative or any 
individual representing himself to have engaged in contemptuous conduct, 
the presiding officer may summarily suspend that individual from 
participating in that or any related proceeding or impose any other 
appropriate sanction.



Sec. 1780.75  Censure, suspension, disbarment and reinstatement.

    (a) Discretionary censure, suspension and disbarment. (1) The 
Director may censure any individual who practices or attempts to 
practice before OFHEO or suspend or revoke the privilege to appear or 
practice before OFHEO of such individual if, after notice of and 
opportunity for hearing in the matter, that individual is found by the 
Director--
    (i) Not to possess the requisite qualifications or competence to 
represent others;
    (ii) To be seriously lacking in character or integrity or to have 
engaged in material unethical or improper professional conduct;
    (iii) To have caused unfair and material injury or prejudice to 
another party, such as prejudicial delay or unnecessary expenses 
including attorney's fees;
    (iv) To have engaged in, or aided and abetted, a material and 
knowing violation of the 1992 Act, the Federal Home Loan Mortgage 
Corporation Act, the Federal National Mortgage Association Charter Act 
or the rules or regulations issued under those statutes or any other law 
or regulation governing Enterprise operations;
    (v) To have engaged in contemptuous conduct before OFHEO;
    (vi) With intent to defraud in any manner, to have willfully and 
knowingly deceived, misled, or threatened any client or prospective 
client; or
    (vii) Within the last 10 years, to have been convicted of an offense 
involving moral turpitude, dishonesty or breach of trust, if the 
conviction has not been reversed on appeal. A conviction within the 
meaning of this paragraph shall be deemed to have occurred when the 
convicting court enters its judgment or order, regardless of whether an 
appeal is pending or could be taken and includes a judgment or an order 
on a plea of nolo contendere or on consent, regardless of whether a 
violation is admitted in the consent.
    (2) Suspension or revocation on the grounds set forth in paragraphs 
(a)(1) (ii), (iii), (iv), (v), (vi) and (vii) of this section shall only 
be ordered upon a further finding that the individual's conduct or 
character was sufficiently egregious as to justify suspension or 
revocation. Suspension or disbarment under this paragraph shall continue 
until the applicant has been reinstated by the Director for good cause 
shown or until, in the case of a suspension, the suspension period has 
expired.
    (3) If the final order against the respondent is for censure, the 
individual may be permitted to practice before OFHEO, but such 
individual's future representations may be subject to conditions 
designed to promote high standards of conduct. If a written letter of 
censure is issued, a copy will be maintained in OFHEO's files.
    (b) Mandatory suspension and disbarment. (1) Any counsel who has 
been and remains suspended or disbarred by a court of the United States 
or of any State, commonwealth, possession, territory of the United 
States or the District of Columbia; any accountant or other licensed 
expert whose license to practice has been revoked in any State, 
commonwealth, possession, territory of the United States or the District 
of Columbia; any person who has been and remains suspended or barred 
from practice before the Department of Housing and Urban Development, 
the Office of the Comptroller of the Currency, the Board of Governors of 
the Federal Reserve System, the Office of Thrift Supervision, the 
Federal Deposit Insurance Corporation, the National Credit Union 
Administration, the Federal Housing Finance Board, the Farm Credit 
Administration, the Securities and Exchange Commission, or the Commodity 
Futures Trading Commission is

[[Page 974]]

also suspended automatically from appearing or practicing before OFHEO. 
A disbarment or suspension within the meaning of this paragraph shall be 
deemed to have occurred when the disbarring or suspending agency or 
tribunal enters its judgment or order, regardless of whether an appeal 
is pending or could be taken and regardless of whether a violation is 
admitted in the consent.
    (2) A suspension or disbarment from practice before OFHEO under 
paragraph (b)(1) of this section shall continue until the person 
suspended or disbarred is reinstated under paragraph (d)(2) of this 
section.
    (c) Notices to be filed. (1) Any individual appearing or practicing 
before OFHEO who is the subject of an order, judgment, decree, or 
finding of the types set forth in paragraph (b)(1) of this section shall 
file promptly with the Director a copy thereof, together with any 
related opinion or statement of the agency or tribunal involved.
    (2) Any individual appearing or practicing before OFHEO who is or 
within the last 10 years has been convicted of a felony or of a 
misdemeanor that resulted in a sentence of prison term or in a fine or 
restitution order totaling more than $5,000 shall file a notice promptly 
with the Director. The notice shall include a copy of the order imposing 
the sentence or fine, together with any related opinion or statement of 
the court involved.
    (d) Reinstatement. (1) Unless otherwise ordered by the Director, an 
application for reinstatement for good cause may be made in writing by a 
person suspended or disbarred under paragraph (a)(1) of this section at 
any time more than three years after the effective date of the 
suspension or disbarment and, thereafter, at any time more than one year 
after the person's most recent application for reinstatement. An 
applicant for reinstatement under this paragraph (d)(1) may, in the 
Director's sole discretion, be afforded a hearing.
    (2) An application for reinstatement for good cause by any person 
suspended or disbarred under paragraph (b)(1) of this section may be 
filed at any time, but not less than 1 year after the applicant's most 
recent application. An applicant for reinstatement for good cause under 
this paragraph (d)(2) may, in the Director's sole discretion, be 
afforded a hearing. However, if all the grounds for suspension or 
disbarment under paragraph (b)(1) of this section have been removed by a 
reversal of the order of suspension or disbarment or by termination of 
the underlying suspension or disbarment, any person suspended or 
disbarred under paragraph (b)(1) of this section may apply immediately 
for reinstatement and shall be reinstated by OFHEO upon written 
application notifying OFHEO that the grounds have been removed.
    (e) Conferences. (1) General. Counsel for OFHEO may confer with a 
proposed respondent concerning allegations of misconduct or other 
grounds for censure, disbarment or suspension, regardless of whether a 
proceeding for censure, disbarment or suspension has been commenced. If 
a conference results in a stipulation in connection with a proceeding in 
which the individual is the respondent, the stipulation may be entered 
in the record at the request of either party to the proceeding.
    (2) Resignation or voluntary suspension. In order to avoid the 
institution of or a decision in a disbarment or suspension proceeding, a 
person who practices before OFHEO may consent to censure, suspension or 
disbarment from practice. At the discretion of the Director, the 
individual may be censured, suspended or disbarred in accordance with 
the consent offered.
    (f) Hearings under this section. Hearings conducted under this 
section shall be conducted in substantially the same manner as other 
hearings under this part, provided that in proceedings to terminate an 
existing OFHEO suspension or disbarment order, the person seeking the 
termination of the order shall bear the burden of going forward with an 
application and with proof and that the Director may, in the Director's 
sole discretion, direct that any proceeding to terminate an existing 
suspension or disbarment by OFHEO be limited to written submissions. All 
hearings held under this section shall be closed to the public unless 
the Director, on the Director's own motion or upon the request of a 
party, otherwise directs.

[[Page 975]]



          Subpart E--Civil Money Penalty Inflation Adjustments



Sec. 1780.80  Inflation adjustments.

    The maximum amount of each civil money penalty within OFHEO's 
jurisdiction is adjusted in accordance with the Debt Collection 
Improvement Act of 1996 (28 U.S.C. 2461 note) as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                     Previous      New adjusted
              U.S. Code citation                           Description                maximum         maximum
                                                                                      penalty         penalty
----------------------------------------------------------------------------------------------------------------
12 U.S.C. 4636(b)(1)..........................  First Tier......................          $5,000          $5,500
12 U.S.C. 4636(b)(2)..........................  Second Tier (Executive Officer            10,000          11,000
                                                 or Director.
12 U.S.C. 4636(b)(2)..........................  Second Tier (Enterprise)........          25,000          27,500
12 U.S.C. 4636(b)(3)..........................  Third Tier (Executive Officer or         100,000         110,000
                                                 Director).
12 U.S.C. 4636(b)(3)..........................  Third Tier (Enterprise).........       1,000,000       1,100,000
----------------------------------------------------------------------------------------------------------------


[62 FR 68154, Dec. 31, 1997. Redesignated at 64 FR 72510, Dec. 28, 1999]



Sec. 1780.81  Applicability.

    The inflation adjustments in Sec. 1780.70 apply to civil money 
penalties assessed in accordance with the provisions of 12 U.S.C. 4636 
for violations occurring after October 23, 1996.

[62 FR 68154, Dec. 31, 1997. Redesignated at 64 FR 72510, Dec. 28, 1999]

[[Page 977]]



   CHAPTER XVIII--COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND, 
                       DEPARTMENT OF THE TREASURY




  --------------------------------------------------------------------
Part                                                                Page
1805            Community Development Financial Institutions 
                    Program.................................         979
1806            Bank Enterprise Award Program...............         998
1815            Environmental quality.......................        1008

[[Page 979]]



PART 1805--COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS PROGRAM--Table of Contents




                      Subpart A--General Provisions

Sec.
1805.100  Purpose.
1805.101  Summary.
1805.102  Relationship to other Fund programs.
1805.103  Awardee not instrumentality.
1805.104  Definitions.
1805.105  Waiver authority.
1805.106  OMB control number.

                         Subpart B--Eligibility

1805.200  Applicant eligibility.
1805.201  Certification as a Community Development Financial 
          Institution.

               Subpart C--Use of Funds/Eligible Activities

1805.300  Purposes of financial assistance.
1805.301  Eligible activities.
1805.302  Restrictions on use of assistance.
1805.303  Technical assistance.

                    Subpart D--Investment Instruments

1805.400  Investment instruments--general.
1805.401  Forms of investment instruments.
1805.402  Assistance limits.
1805.403  Authority to sell.

                 Subpart E--Matching Funds Requirements

1805.500  Matching funds--general.
1805.501  Comparability of form and value.
1805.502  Severe constraints waiver.
1805.503  Time frame for raising match.
1805.504  Retained earnings.

                 Subpart F--Applications for Assistance

1805.600  Notice of Funds Availability.
1805.601  Application contents.

           Subpart G--Evaluation and Selection of Applications

1805.700  Evaluation and selection--general.
1805.701  Evaluation of applications.

              Subpart H--Terms and Conditions of Assistance

1805.800  Safety and soundness.
1805.801  Assistance Agreement; sanctions.
1805.802  Disbursement of funds.
1805.803  Data collection and reporting.
1805.804  Information.
1805.805  Compliance with government requirements.
1805.806  Conflict of interest requirements.
1805.807  Lobbying restrictions.
1805.808  Criminal provisions.
1805.809  Fund deemed not to control.
1805.810  Limitation on liability.
1805.811  Fraud, waste and abuse.

    Authority: 12 U.S.C. 4703, 4703 note, 4717; and 31 U.S.C. 321.

    Source: 65 FR 49645, Aug. 14, 2000, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 1805.100  Purpose.

    The purpose of the Community Development Financial Institutions 
Program is to facilitate the creation of a national network of financial 
institutions that is dedicated to community development.



Sec. 1805.101  Summary.

    Under the Community Development Financial Institutions Program, the 
Fund will provide financial and technical assistance to Applicants 
selected by the Fund in order to enhance their ability to make loans and 
investments and provide services. An Awardee must serve an Investment 
Area(s), Targeted Population(s), or both. The Fund will select Awardees 
to receive financial and technical assistance through a competitive 
application process. Each Awardee will enter into an Assistance 
Agreement which will require it to achieve performance goals negotiated 
between the Fund and the Awardee and abide by other terms and conditions 
pertinent to any assistance received under this part.



Sec. 1805.102  Relationship to other Fund programs.

    (a) Bank Enterprise Award Program. (1) No Community Development 
Financial Institution may receive a Bank Enterprise Award under the Bank 
Enterprise Award Program (part 1806 of this chapter) if it has:
    (i) An application pending for assistance under the Community 
Development Financial Institutions Program;
    (ii) Directly received assistance in the form of a disbursement 
under the Community Development Financial Institutions Program within 
the preceding 12-month period; or
    (iii) Ever directly received assistance under the Community 
Development Financial Institutions Program for the

[[Page 980]]

same activities for which it is seeking a Bank Enterprise Award.
    (2) An equity investment (as defined in part 1806 of this chapter) 
in, or a loan to, a Community Development Financial Institution, or 
deposits in an Insured Community Development Financial Institution, made 
by a Bank Enterprise Award Program Awardee may be used to meet the 
matching funds requirements described in subpart E of this part. Receipt 
of such equity investment, loan, or deposit does not disqualify a 
Community Development Financial Institution from receiving assistance 
under this part.
    (b) Liquidity enhancement program. No entity that receives 
assistance through the liquidity enhancement program authorized under 
section 113 (12 U.S.C. 4712) of the Act may receive assistance under the 
Community Development Financial Institutions Program.



Sec. 1805.103  Awardee not instrumentality.

    No Awardee (or its Community Partner) shall be deemed to be an 
agency, department, or instrumentality of the United States.



Sec. 1805.104  Definitions.

    For the purpose of this part:
    (a) Act means the Community Development Banking and Financial 
Institutions Act of 1994, as amended (12 U.S.C. 4701 et seq.);
    (b) Affiliate means any company or entity that controls, is 
controlled by, or is under common control with another company;
    (c) Applicant means any entity submitting an application for 
assistance under this part;
    (d) Appropriate Federal Banking Agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), and 
also includes the National Credit Union Administration with respect to 
Insured Credit Unions;
    (e) Assistance Agreement means a formal agreement between the Fund 
and an Awardee which specifies the terms and conditions of assistance 
under this part;
    (f) Awardee means an Applicant selected by the Fund to receive 
assistance pursuant to this part;
    (g) Community Development Financial Institution (or CDFI) means an 
entity currently meeting the eligibility requirements described in 
Sec. 1805.200;
    (h) Community Development Financial Institution Intermediary (or 
CDFI Intermediary) means an entity that meets the CDFI Program 
eligibility requirements described in Sec. 1805.200 and whose primary 
business activity is the provision of Financial Products to CDFIs and/or 
emerging CDFIs;
    (i) Community Development Financial Institutions Program (or CDFI 
Program) means the program authorized by sections 105-108 of the Act (12 
U.S.C. 4704-4707) and implemented under this part;
    (j) Community Facility means a facility where health care, 
childcare, educational, cultural, or social services are provided;
    (k) Community-Governed means an entity in which the residents of an 
Investment Area(s) or members of a Targeted Population(s) represent 
greater than 50 percent of the governing body;
    (l) Community-Owned means an entity in which the residents of an 
Investment Area(s) or members of a Targeted Population(s) have an 
ownership interest of greater than 50 percent;
    (m) Community Partner means a person (other than an individual) that 
provides loans, Equity Investments, or Development Services and enters 
into a Community Partnership with an Applicant. A Community Partner may 
include a Depository Institution Holding Company, an Insured Depository 
Institution, an Insured Credit Union, a not-for-profit or for-profit 
organization, a State or local government entity, a quasi-government 
entity, or an investment company authorized pursuant to the Small 
Business Investment Act of 1958 (15 U.S.C. 661 et seq.);
    (n) Community Partnership means an agreement between an Applicant 
and a Community Partner to collaboratively provide loans, Equity 
Investments, or Development Services to an Investment Area(s) or a 
Targeted Population(s);
    (o) Comprehensive Business Plan means a document covering not less 
than the next five years which meets the requirements described under 
Sec. 1805.601(d);

[[Page 981]]

    (p) Depository Institution Holding Company means a bank holding 
company or a savings and loan holding company as defined in section 3 of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1));
    (q) Development Services means activities that promote community 
development and are integral to the Applicant's provision of Financial 
Products. Such services shall prepare or assist current or potential 
borrowers or investees to utilize the Financial Products of the 
Applicant. Such services include, for example: financial or credit 
counseling to individuals for the purpose of facilitating home 
ownership, promoting self-employment, or enhancing consumer financial 
management skills; or technical assistance to borrowers or investees for 
the purpose of enhancing business planning, marketing, management, and 
financial management skills;
    (r) Equity Investment means an investment made by an Applicant 
which, in the judgment of the Fund, directly supports or enhances 
activities that serve an Investment Area(s) or a Targeted Population(s). 
Such investments must be made through an arms-length transaction with a 
third party that does not have a relationship with the Applicant as an 
Affiliate. Equity Investments comprise a stock purchase, a purchase of a 
partnership interest, a purchase of a limited liability company 
membership interest, a loan made on such terms that it has sufficient 
characteristics of equity (and is considered as such by the Fund), or 
any other investment deemed to be an Equity Investment by the Fund;
    (s) Financial Products means loans, Equity Investments and, in the 
case of CDFI Intermediaries, grants to CDFIs and/or emerging CDFIs and 
deposits in insured credit union CDFIs and/or emerging insured credit 
union CDFIs;
    (t) Financial Services means checking, savings accounts, check 
cashing, money orders, certified checks, automated teller machines, 
deposit taking, and safe deposit box services;
    (u) Fund means the Community Development Financial Institutions Fund 
established under section 104(a) (12 U.S.C. 4703(a)) of the Act;
    (v) Indian Reservation means any geographic area that meets the 
requirements of section 4(10) of the Indian Child Welfare Act of 1978 
(25 U.S.C. 1903(10)), and shall include land held by incorporated Native 
groups, regional corporations, and village corporations, as defined in 
and pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 
1602), public domain Indian allotments, and former Indian reservations 
in the State of Oklahoma;
    (w) Indian Tribe means any Indian Tribe, band, pueblo, nation, or 
other organized group or community, including any Alaska Native village 
or regional or village corporation, as defined in or established 
pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et 
seq.,) which is recognized as eligible for special programs and services 
provided by the United States to Indians because of their status as 
Indians;
    (x) Insider means any director, officer, employee, principal 
shareholder (owning, individually or in combination with family members, 
five percent or more of any class of stock), or agent (or any family 
member or business partner of any of the above) of any Applicant, 
Affiliate or Community Partner;
    (y) Insured CDFI means a CDFI that is an Insured Depository 
Institution or an Insured Credit Union;
    (z) Insured Credit Union means any credit union, the member accounts 
of which are insured by the National Credit Union Share Insurance Fund;
    (aa) Insured Depository Institution means any bank or thrift, the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation;
    (bb) Investment Area means a geographic area meeting the 
requirements of Sec. 1805.201(b)(3);
    (cc) Low-Income means an income, adjusted for family size, of not 
more than:
    (1) For Metropolitan Areas, 80 percent of the area median family 
income; and
    (2) For non-Metropolitan Areas, the greater of:
    (i) 80 percent of the area median family income; or

[[Page 982]]

    (ii) 80 percent of the statewide non-Metropolitan Area median family 
income;
    (dd) Metropolitan Area means an area designated as such by the 
Office of Management and Budget pursuant to 44 U.S.C. 3504(e) and 31 
U.S.C. 1104(d) and Executive Order 10253 (3 CFR, 1949-1953 Comp., p. 
758), as amended;
    (ee) Non-Regulated CDFI means any entity meeting the eligibility 
requirements described in Sec. 1805.200 which is not a Depository 
Institution Holding Company, Insured Depository Institution, or Insured 
Credit Union;
    (ff) State means any State of the United States, the District of 
Columbia or any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Trust Territories of the Pacific Islands, the Virgin 
Islands, and the Northern Mariana Islands;
    (gg) Subsidiary means any company which is owned or controlled 
directly or indirectly by another company and includes any service 
corporation owned in whole or part by an Insured Depository Institution 
or any Subsidiary of such a service corporation, except as provided in 
Sec. 1805.200(b)(4);
    (hh) Targeted Population means individuals or an identifiable group 
meeting the requirements of Sec. 1805.201(b)(3); and
    (ii) Target Market means an Investment Area(s) and/or a Targeted 
Population(s).



Sec. 1805.105  Waiver authority.

    The Fund may waive any requirement of this part that is not required 
by law upon a determination of good cause. Each such waiver shall be in 
writing and supported by a statement of the facts and the grounds 
forming the basis of the waiver. For a waiver in an individual case, the 
Fund must determine that application of the requirement to be waived 
would adversely affect the achievement of the purposes of the Act. For 
waivers of general applicability, the Fund will publish notification of 
granted waivers in the Federal Register.



Sec. 1805.106  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB control 
number 1505-0154.



                         Subpart B--Eligibility



Sec. 1805.200  Applicant eligibility.

    (a) General requirements. (1) An entity that meets the requirements 
described in Sec. 1805.201(b) and paragraph (b) of this section will be 
considered a CDFI and, subject to paragraph (a)(3) of this section, will 
be eligible to apply for assistance under this part.
    (2) An entity that proposes to become a CDFI is eligible to apply 
for assistance under this part if the Fund determines that such entity's 
application materials provide a realistic course of action to ensure 
that it will meet the requirements described in Sec. 1805.201(b) and 
paragraph (b) of this section within 24 months from September 30 of the 
calendar year in which the applicable application deadline falls or such 
other period as may be set forth in an applicable NOFA. The Fund will 
not, however, disburse any financial assistance to such an entity before 
it meets the requirements described in this section.
    (3) The Fund shall require an entity to meet any additional 
eligibility requirements that the Fund deems appropriate.
    (4) The Fund, in its sole discretion, shall determine whether an 
Applicant fulfills the requirements set forth in this section and 
Sec. 1805.201(b).
    (b) Provisions applicable to Depository Institution Holding 
Companies and Insured Depository Institutions. (1) A Depository 
Institution Holding Company may qualify as a CDFI only if it and its 
Affiliates collectively satisfy the requirements described in this 
section.
    (2) No Affiliate of a Depository Institution Holding Company may 
qualify as a CDFI unless the holding company and all of its Affiliates 
collectively meet the requirements described in this section.
    (3) No Subsidiary of an Insured Depository Institution may qualify 
as a CDFI if the Insured Depository Institution and its Subsidiaries do 
not collectively meet the requirements described in this section.

[[Page 983]]

    (4) For the purposes of paragraphs (b)(1), (2) and (3) of this 
section, an Applicant will be considered to be a Subsidiary of any 
Insured Depository Institution or Depository Institution Holding Company 
that controls 25 percent or more of any class of the Applicant's voting 
shares, or otherwise controls, in any manner, the election of a majority 
of directors of the Applicant.



Sec. 1805.201  Certification as a Community Development Financial Institution.

    (a) General. An entity may apply to the Fund for certification that 
it meets the CDFI eligibility requirements regardless of whether it is 
seeking financial or technical assistance from the Fund. Entities 
seeking such certification shall provide the information set forth in 
paragraph (b) of this section. Certification by the Fund will verify 
that the entity meets the CDFI eligibility requirements. However, such 
certification shall not constitute an opinion by the Fund as to the 
financial viability of the CDFI or that the CDFI will be selected to 
receive an award from the Fund. The Fund, in its sole discretion, shall 
have the right to decertify a certified entity after a determination 
that the eligibility requirements of paragraph (b) of this section, 
Sec. 1805.200(b) or (a)(3) (if applicable) are no longer met.
    (b) Eligibility verification. An Applicant shall provide information 
necessary to establish that it is, or will be, a CDFI. An Applicant 
shall demonstrate whether it meets the eligibility requirements 
described in this paragraph (b) and Sec. 1805.200 by providing the 
information requested in paragraphs (b)(1) through (b)(7) of this 
section. The Fund, in its sole discretion, shall determine whether an 
Applicant has satisfied the requirements of this paragraph (b) and 
Sec. 1805.200.
    (1) Primary mission. A CDFI shall have a primary mission of 
promoting community development. In determining whether an Applicant has 
such a primary mission, the Fund will consider whether the activities of 
the Applicant individually and the Applicant and its Affiliates, when 
viewed collectively (as a whole), are purposefully directed toward 
improving the social and/or economic conditions of underserved people 
(which may include Low-Income persons and persons who lack adequate 
access to capital and/or Financial Services) and/or residents of 
distressed communities (which may include Investment Areas).
    (2) Financing entity. (i) A CDFI shall be an entity whose 
predominant business activity is the provision, in arms-length 
transactions, of Financial Products, Development Services, and/or other 
similar financing. An Applicant may demonstrate that it is such an 
entity if it is a(n):
    (A) Depository Institution Holding Company;
    (B) Insured Depository Institution or Insured Credit Union; or
    (C) Organization that is deemed by the Fund to have such a 
predominant business activity as a result of analysis of its financial 
statements, organizing documents, and any other information required to 
be submitted as part of its application. In conducting such analysis, 
the Fund may take into consideration an Applicant's total assets and its 
use of personnel.
    (ii) An Applicant described under:
    (A) Paragraph (b)(2)(i)(A) of this section shall submit a copy of 
its organizing documents that indicate that it is a Depository 
Institution Holding Company;
    (B) Paragraph (b)(2)(i)(B) of this section shall submit a copy of 
its current certificate of insurance issued by the Federal Deposit 
Insurance Corporation or the National Credit Union Administration; and
    (C) Paragraph (b)(2)(i)(C) of this section shall submit a copy of 
its most recent year-end financial statements (and any notes or other 
supplemental information to its financial statements) documenting its 
assets dedicated to Financial Products, Development Services and/or 
other similar financing, and an explanation of how such assets support 
these activities. An Applicant also shall provide qualitative and 
quantitative information on the percentage of Applicant staff time 
dedicated to the provision of Financial Products, Development Services, 
and/or other similar financing.
    (3) Target Market--(i) General. An Applicant shall provide a 
description of

[[Page 984]]

one or more Investment Areas and/or Targeted Populations that it serves, 
and shall demonstrate that its total activities are principally directed 
to serving the Investment Areas, Targeted Populations, or both. An 
Investment Area shall meet specific geographic and other criteria 
described in paragraph (b)(3)(ii) of this section, and a Targeted 
Population shall meet the criteria described in paragraph (b)(3)(iii) in 
this section.
    (ii) Investment Area. (A) General. A geographic area will be 
considered eligible for designation as an Investment Area if it:
    (1) Is entirely located within the geographic boundaries of the 
United States (which shall encompass any State of the United States, the 
District of Columbia or any territory of the United States, Puerto Rico, 
Guam, American Samoa, the Trust Territories of the Pacific Islands, the 
Virgin Islands, and the Northern Mariana Islands); and either
    (2) Meets at least one of the objective criteria of economic 
distress as set forth in paragraph (b)(3)(ii)(D) of this section and has 
significant unmet needs for loans, Equity Investments, or Financial 
Services as described in paragraph (b)(3)(ii)(E) of this section; or
    (3) Encompasses or is located in an Empowerment Zone or Enterprise 
Community designated under section 1391 of the Internal Revenue Code of 
1986 (26 U.S.C. 1391).
    (B) Geographic units. Subject to the remainder of this paragraph 
(b)(3)(ii)(B), an Investment Area shall consist of a geographic unit(s) 
that is a county (or equivalent area), minor civil division that is a 
unit of local government, incorporated place, census tract, block 
numbering area, block group, or American Indian or Alaska Native area 
(as such units are defined or reported by the U.S. Bureau of the 
Census). However, geographic units in Metropolitan Areas that are used 
to comprise an Investment Area shall be limited to census tracts, block 
groups and American Indian or Alaskan Native areas. An Applicant may 
designate one or more Investment Areas as part of a single application.
    (C) Designation. An Applicant may designate an Investment Area by 
selecting:
    (1) A geographic unit(s) which individually meets one of the 
criteria in paragraph (b)(3)(ii)(D) of this section; or
    (2) A group of contiguous geographic units which together meet one 
of the criteria in paragraph (b)(3)(ii)(D) of this section, provided 
that the combined population residing within individual geographic units 
not meeting any such criteria does not exceed 15 percent of the total 
population of the entire Investment Area.
    (D) Distress criteria. An Investment Area (or the units that 
comprise an area) must meet at least one of the following objective 
criteria of economic distress (as reported in the most recently 
completed decennial census published by the U.S. Bureau of the Census):
    (1) The percentage of the population living in poverty is at least 
20 percent;
    (2) In the case of an Investment Area located:
    (i) Within a Metropolitan Area, the median family income shall be at 
or below 80 percent of the Metropolitan Area median family income or the 
national Metropolitan Area median family income, whichever is greater; 
or
    (ii) Outside of a Metropolitan Area, the median family income shall 
be at or below 80 percent of the statewide non-Metropolitan Area median 
family income or the national non-Metropolitan Area median family 
income, whichever is greater;
    (3) The unemployment rate is at least 1.5 times the national 
average;
    (4) The percentage of occupied distressed housing (as indicated by 
lack of complete plumbing and occupancy of more than one person per 
room) is at least 20 percent; or
    (5) In areas located outside of a Metropolitan Area:
    (i) The county population loss in the period between the most recent 
decennial census and the previous decennial census is at least 10 
percent; or
    (ii) The county net migration loss (outmigration minus immigration) 
over the five year period preceding the most recent decennial census is 
at least 5 percent.

[[Page 985]]

    (E) Unmet needs. An Investment Area will be deemed to have 
significant unmet needs for loans or Equity Investments if studies or 
other analyses provided by the Applicant adequately demonstrate a 
pattern of unmet needs for loans, Equity Investments, or Financial 
Services within such area(s).
    (F) Serving Investment Areas. An Applicant may serve an Investment 
Area directly or through borrowers or investees that serve the 
Investment Area or provide significant benefits to its residents. To 
demonstrate that it is serving an Investment Area, an Applicant shall 
submit:
    (1) A completed Investment Area Designation worksheet referenced in 
the application packet;
    (2) A map of the designated area(s); and
    (3) Studies or other analyses as described in paragraph 
(b)(3)(ii)(E) of this section.
    (iii) Targeted Population--(A) General. Targeted Population shall 
mean individuals, or an identifiable group of individuals, who are Low-
Income persons or lack adequate access to loans, Equity Investments, or 
Financial Services in the Applicant's service area. The members of a 
Targeted Population shall reside within the boundaries of the United 
States (which shall encompass any State of the United States, the 
District of Columbia or any territory of the United States, Puerto Rico, 
Guam, American Samoa, the Trust Territories of the Pacific Islands, the 
Virgin Islands, and the Northern Mariana Islands).
    (B) Serving A Targeted Population. An Applicant may serve the 
members of a Targeted Population directly or indirectly or through 
borrowers or investees that directly serve or provide significant 
benefits to such members. To demonstrate that it is serving a Targeted 
Population, an Applicant shall submit:
    (1) In the case of a Low-Income Targeted Population, a description 
of the service area from which the Low-Income Targeted Population is 
drawn (which could be, for example, a local, regional or national 
service area); or
    (2) In the case of a Targeted Population defined other than on the 
basis of Low-Income--
    (i) A description of the service area from which the Targeted 
Population is drawn; and
    (ii) A brief analytical narrative with information demonstrating 
that the identifiable group of individuals in the Applicant's service 
area, lacks adequate access to loans, Equity Investments, or Financial 
Services.
    (4) Development Services. A CDFI directly, through an Affiliate, or 
through a contract with another provider, shall provide Development 
Services in conjunction with its Financial Products. An Applicant shall 
submit a description of the Development Services to be offered, the 
expected provider of such services, and information on the persons 
expected to use such services.
    (5) Accountability. A CDFI must maintain accountability to residents 
of its Investment Area(s) or Targeted Population(s) through 
representation on its governing board or otherwise. An Applicant shall 
describe how it has and will maintain accountability to the residents of 
the Investment Area(s) or Targeted Population(s) it serves.
    (6) Non-government. A CDFI shall not be an agency or instrumentality 
of the United States, or any State or political subdivision thereof. An 
entity that is created by, or that receives substantial assistance from, 
one or more government entities may be a CDFI provided it is not 
controlled by such entities and maintains independent decision-making 
power over its activities. An Applicant shall submit copies of its 
articles of incorporation (or comparable organizing documents), charter, 
bylaws, or other legal documentation or opinions sufficient to verify 
that it is not a government entity.
    (7) Ownership. An Applicant shall submit information indicating the 
portion of shares of all classes of voting stock that are held by each 
Insured Depository Institution or Depository Institution Holding Company 
investor (if any).

[[Page 986]]



               Subpart C--Use of Funds/Eligible Activities



Sec. 1805.300  Purposes of financial assistance.

    The Fund may provide financial assistance through investment 
instruments described under subpart D of this part. Such financial 
assistance is intended to strengthen the capital position and enhance 
the ability of an Awardee to provide Financial Products and Financial 
Services.



Sec. 1805.301  Eligible activities.

    Financial assistance provided under this part may be used by an 
Awardee to serve Investment Area(s) or Targeted Population(s) by 
developing or supporting:
    (a) Commercial facilities that promote revitalization, community 
stability or job creation or retention;
    (b) Businesses that:
    (1) Provide jobs for Low-Income persons;
    (2) Are owned by Low-Income persons; or
    (3) Enhance the availability of products and services to Low-Income 
persons;
    (c) Community Facilities;
    (d) The provision of Financial Services;
    (e) Housing that is principally affordable to Low-Income persons, 
except that assistance used to facilitate home ownership shall only be 
used for services and lending products that serve Low-Income persons and 
that:
    (1) Are not provided by other lenders in the area; or
    (2) Complement the services and lending products provided by other 
lenders that serve the Investment Area(s) or Targeted Population(s);
    (f) The provision of Consumer Loans (a loan to one or more 
individuals for household, family, or other personal expenditures); or
    (g) Other businesses or activities as requested by the Applicant and 
deemed appropriate by the Fund.



Sec. 1805.302  Restrictions on use of assistance.

    (a) An Awardee shall use assistance provided by the Fund and its 
corresponding matching funds only for the eligible activities approved 
by the Fund and described in the Assistance Agreement.
    (b) An Awardee may not distribute assistance to an Affiliate without 
the Fund's consent.
    (c) Assistance provided upon approval of an application involving a 
Community Partnership shall only be distributed to the Awardee and shall 
not be used to fund any activities carried out by a Community Partner or 
an Affiliate of a Community Partner.



Sec. 1805.303  Technical assistance.

    (a) General. The Fund may provide technical assistance to build the 
capacity of a CDFI or an entity that proposes to become a CDFI. Such 
technical assistance may include training for management and other 
personnel; development of programs, products and services; improving 
financial management and internal operations; enhancing a CDFI's 
community impact; or other activities deemed appropriate by the Fund. 
The Fund, in its sole discretion, may provide technical assistance in 
amounts, or under terms and conditions that are different from those 
requested by an Applicant. The Fund may not provide any technical 
assistance to an Applicant for the purpose of assisting in the 
preparation of an application. The Fund may provide technical assistance 
to a CDFI directly, through grants, or by contracting with organizations 
that possess the appropriate expertise.
    (b) The Fund may provide technical assistance regardless of whether 
the recipient also receives financial assistance under this part. 
Technical assistance provided pursuant to this part is subject to the 
assistance limits described in Sec. 1805.402.
    (c) An Applicant seeking technical assistance must meet the 
eligibility requirements described in Sec. 1805.200 and submit an 
application as described in Sec. 1805.601.
    (d) Applicants for technical assistance pursuant to this part will 
be evaluated pursuant to the competitive review criteria in subpart G of 
this part, except as otherwise may be provided in the applicable NOFA. 
In addition, the requirements for matching funds are

[[Page 987]]

not applicable to technical assistance requests.



                    Subpart D--Investment Instruments



Sec. 1805.400  Investment instruments--general.

    The Fund's primary objective in awarding financial assistance is to 
enhance the stability, performance and capacity of an Awardee. The Fund 
will provide financial assistance to an Awardee through one or more of 
the investment instruments described in Sec. 1805.401, and under such 
terms and conditions as described in this subpart D. The Fund, in its 
sole discretion, may provide financial assistance in amounts, through 
investment instruments, or under rates, terms and conditions that are 
different from those requested by an Applicant.



Sec. 1805.401  Forms of investment instruments.

    (a) Equity. The Fund may make nonvoting equity investments in an 
Awardee, including, without limitation, the purchase of nonvoting stock. 
Such stock shall be transferable and, in the discretion of the Fund, may 
provide for convertibility to voting stock upon transfer. The Fund shall 
not own more than 50 percent of the equity of an Awardee and shall not 
control its operations.
    (b) Capital grants. The Fund may award grants.
    (c) Loans. The Fund may make loans, if permitted by applicable law.
    (d) Deposits and credit union shares. The Fund may make deposits 
(which shall include credit union shares) in Insured CDFIs. Deposits in 
an Insured CDFI shall not be subject to any requirement for collateral 
or security.



Sec. 1805.402  Assistance limits.

    (a) General. Except as provided in paragraph (b) of this section, 
the Fund may not provide, pursuant to this part, more than $5 million, 
in the aggregate, in financial and technical assistance to an Awardee 
and its Affiliates during any three-year period.
    (b) Additional amounts. If an Awardee proposes to establish a new 
Affiliate to serve an Investment Area(s) or Targeted Population(s) 
outside of any State, and outside of any Metropolitan Area, currently 
served by the Awardee or its Affiliates, the Awardee may receive 
additional assistance pursuant to this part up to a maximum of $3.75 
million during the same three-year period. Such additional assistance:
    (1) Shall be used only to finance activities in the new or expanded 
Investment Area(s) or Targeted Population(s); and
    (2) Must be distributed to a new Affiliate that meets the 
eligibility requirements described in Sec. 1805.200 and is selected for 
assistance pursuant to subpart G of this part.
    (c) An Awardee may receive the assistance described in paragraph (b) 
of this section only if no other application to serve substantially the 
same Investment Area(s) or Targeted Population(s) that meets the 
requirements of Sec. 1805.701(a) was submitted to the Fund prior to the 
receipt of the application of said Awardee and within the current 
funding round.



Sec. 1805.403  Authority to sell.

    The Fund may, at any time, sell its equity investments and loans, 
provided the Fund shall retain the authority to enforce the provisions 
of the Assistance Agreement until the performance goals specified 
therein have been met.



                 Subpart E--Matching Funds Requirements



Sec. 1805.500  Matching funds--general.

    All financial assistance awarded under this part shall be matched 
with funds from sources other than the Federal government. Except as 
provided in Sec. 1805.502, such matching funds shall be provided on the 
basis of not less than one dollar for each dollar provided by the Fund. 
Funds that have been used to satisfy a legal requirement for obtaining 
funds under either the CDFI Program or another Federal grant or award 
program may not be used to satisfy the matching requirements described 
in this section. Community Development Block Grant Program and other 
funds provided pursuant to the Housing and Community Development Act of 
1974, as amended (42 U.S.C. 5301 et seq.), shall be considered Federal

[[Page 988]]

government funds and shall not be used to meet the matching 
requirements. Matching funds shall be used as provided in the Assistance 
Agreement. Funds that are used prior to the execution of the Assistance 
Agreement may nevertheless qualify as matching funds provided the Fund 
determines in its reasonable discretion that such use promoted the 
purpose of the Comprehensive Business Plan that the Fund is supporting 
through its assistance.



Sec. 1805.501  Comparability of form and value.

    (a) Matching funds shall be at least comparable in form (e.g., 
equity investments, deposits, credit union shares, loans and grants) and 
value to financial assistance provided by the Fund (except as provided 
in Sec. 1805.502). The Fund shall have the discretion to determine 
whether matching funds pledged are comparable in form and value to the 
financial assistance requested.
    (b) In the case of an Awardee that raises matching funds from more 
than one source, through different investment instruments, or under 
varying terms and conditions, the Fund may provide financial assistance 
in a manner that represents the combined characteristics of such 
instruments.
    (c) An Awardee may meet all or part of its matching requirements by 
committing available earnings retained from its operations.



Sec. 1805.502  Severe constraints waiver.

    (a) In the case of an Applicant with severe constraints on available 
sources of matching funds, the Fund, in its sole discretion, may permit 
such Applicant to comply with the matching requirements by:
    (1) Reducing such requirements by up to 50 percent; or
    (2) Permitting an Applicant to provide matching funds in a form to 
be determined at the discretion of the Fund, if such an Applicant:
    (i) Has total assets of less than $100,000;
    (ii) Serves an area that is not a Metropolitan Area; and
    (iii) Is not requesting more than $25,000 in assistance.
    (b) Not more than 25 percent of the total funds available for 
obligation under this part in any fiscal year may be matched as 
described in paragraph (a) of this section. Additionally, not more than 
25 percent of the total funds disbursed under this part in any fiscal 
year may be matched as described in paragraph (a) of this section.
    (c) An Applicant may request a ``severe constraints waiver'' as part 
of its application for assistance. An Applicant shall provide a 
narrative justification for its request, indicating:
    (1) The cause and extent of the constraints on raising matching 
funds;
    (2) Efforts to date, results, and projections for raising matching 
funds;
    (3) A description of the matching funds expected to be raised; and
    (4) Any additional information requested by the Fund.
    (d) The Fund will grant a ``severe constraints waiver'' only in 
exceptional circumstances when it has been demonstrated, to the 
satisfaction of the Fund, that an Investment Area(s) or Targeted 
Population(s) would not be adequately served without the waiver.



Sec. 1805.503  Time frame for raising match.

    Applicants shall satisfy matching funds requirements within the 
period set forth in the applicable NOFA.



Sec. 1805.504  Retained earnings.

    (a) An Applicant that proposes to meet all or a portion of its 
matching funds requirements as set forth in this part by committing 
available earnings retained from its operations pursuant to 
Sec. 1805.501(c) shall be subject to the restrictions described in this 
section.
    (b)(1) In the case of a for-profit Applicant, retained earnings that 
may be used for matching funds purposes shall consist of:
    (i) The increase in retained earnings (excluding the after-tax value 
to an Applicant of any grants and other donated assets) that has 
occurred over the Applicant's most recent fiscal year (e.g., retained 
earnings at the end of fiscal year 1999 less retained earnings at the 
end of fiscal year 1998); or

[[Page 989]]

    (ii) The annual average of such increases that have occurred over 
the Applicant's three most recent fiscal years.
    (2) Such retained earnings may be used to match a request for an 
equity investment. The terms and conditions of financial assistance will 
be determined by the Fund.
    (c)(1) In the case of a non-profit Applicant (other than a Credit 
Union), retained earnings that may be used for matching funds purposes 
shall consist of:
    (i) The increase in an Applicant's net assets (excluding the amount 
of any grants and value of other donated assets) that has occurred over 
the Applicant's most recent fiscal year; or
    (ii) The annual average of such increases that has occurred over the 
Applicant's three most recent fiscal years.
    (2) Such retained earnings may be used to match a request for a 
capital grant. The terms and conditions of financial assistance will be 
determined by the Fund.
    (d)(1) In the case of an insured credit union Applicant, retained 
earnings that may be used for matching funds purposes shall consist of:
    (i) The increase in retained earnings that have occurred over the 
Applicant's most recent fiscal year;
    (ii) The annual average of such increases that has occurred over the 
Applicant's three most recent fiscal years; or
    (iii) The entire retained earnings that have been accumulated since 
the inception of the Applicant provided that the conditions described in 
paragraph (d)(4) of this section are satisfied.
    (2) For the purpose of paragraph (d)(4) of this section, retained 
earnings shall be comprised of ``Regular Reserves'', ``Other Reserves'' 
(excluding reserves specifically dedicated for losses), and ``Undivided 
Earnings'' as such terms are used in the National Credit Union 
Administration's accounting manual.
    (3) Such retained earnings may be used to match a request for a 
capital grant. The terms and conditions of financial assistance will be 
determined by the Fund.
    (4) If the option described in paragraph (d)(1)(iii) of this section 
is used:
    (i) The Assistance Agreement shall require that:
    (A) An Awardee increase its member and/or non-member shares by an 
amount that is at least equal to four times the amount of retained 
earnings that is committed as matching funds; and
    (B) Such increase be achieved within 24 months from September 30 of 
the calendar year in which the applicable application deadline falls;
    (ii) The Applicant's Comprehensive Business Plan shall discuss its 
strategy for raising the required shares and the activities associated 
with such increased shares;
    (iii) The level from which the increases in shares described in 
paragraph (d)(4)(i) of this section will be measured will be as of 
September 30 of the calendar year in which the applicable application 
deadline falls; and
    (iv) Financial assistance shall be disbursed by the Fund only as the 
amount of increased shares described in paragraph (d)(4)(i)(A) of this 
section is achieved.
    (5) The Fund will allow an Applicant to utilize the option described 
in paragraph (d)(1)(iii) of this section for matching funds only if it 
determines, in its sole discretion, that the Applicant will have a high 
probability of success in increasing its shares to the specified 
amounts.
    (e) Retained earnings accumulated after the end of the Applicant's 
most recent fiscal year ending prior to the appropriate application 
deadline may not be used as matching funds.



                 Subpart F--Applications for Assistance



Sec. 1805.600  Notice of Funds Availability.

    Each Applicant shall submit an application for financial or 
technical assistance under this part in accordance with the regulations 
in this subpart and the applicable NOFA published in the Federal 
Register. The NOFA will advise potential Applicants on how to obtain an 
application packet and will establish deadlines and other requirements. 
The NOFA may specify any limitations, special rules, procedures, and

[[Page 990]]

restrictions for a particular funding round. After receipt of an 
application, the Fund may request clarifying or technical information on 
the materials submitted as part of such application.



Sec. 1805.601  Application contents.

    An Applicant shall provide information necessary to establish that 
it is, or will be, a CDFI. Unless otherwise specified in an applicable 
NOFA, each application must contain the information specified in the 
application packet including the items specified in this section.
    (a) Award request. An Applicant shall indicate:
    (1) The dollar amount, form, rates, terms and conditions of 
financial assistance requested; and
    (2) Any technical assistance needs for which it is requesting 
assistance.
    (b) Previous Awardees. In the case of an Applicant that has 
previously received assistance under this part, the Applicant shall 
demonstrate that it:
    (1) Has substantially met its performance goals and other 
requirements described in its previous Assistance Agreement(s); and
    (2) Will expand its operations into a new Investment Area(s), serve 
a new Targeted Population(s), offer more products or services, or 
increase the volume of its activities.
    (c) Time of operation. At the time of submission of an application, 
an Applicant that has been in operation for:
    (1) Three years or more shall submit information on its activities 
(as described in Sec. 1805.201 (b)(1) and (2) and paragraphs (d)(2) and 
(d)(9)(v) of this section) and financial statements (as described in 
paragraph (d)(4) of this section) for the three most recent fiscal 
years;
    (2) For more than one year, but less than three years, shall submit 
information on its activities (as described in Sec. 1805.201 (b)(1) and 
(2) and paragraphs (d)(2) and (d)(9)(vi) of this section) and financial 
statements (as described in paragraph (d)(4) of this section) for each 
full fiscal year since its inception; or
    (3) For less than one year, shall submit information on its 
activities and financial statements as described in paragraph (d) of 
this section.
    (d) Comprehensive Business Plan. An Applicant shall submit a five-
year Comprehensive Business Plan that addresses the items described in 
this paragraph (d). The Comprehensive Business Plan shall demonstrate 
that the Applicant shall have the capacity to operate as a CDFI upon 
receiving financial assistance from the Fund pursuant to this part.
    (1) Executive summary. The executive summary shall include a 
description of the institution, products and services, markets served or 
to be served, accomplishments to date and key points of the Applicant's 
five year strategy, and other pertinent information.
    (2) Community development track record. The Applicant shall describe 
its community development impact over the past three years, or for its 
period of operation if less than three years. In addition, an Applicant 
with a prior history of serving Investment Area(s) or Targeted 
Population(s) shall describe its activities, operations and community 
benefits created for residents of the Investment Area(s) or Targeted 
Population(s) for such periods as described in paragraph (c) of this 
section.
    (3) Operational capacity and risk mitigation strategies. An 
Applicant shall submit information on its policies and procedures for 
underwriting and approving loans and investments, monitoring its 
portfolio and internal controls and operations. An Applicant shall also 
submit a copy of its conflict of interest policies that are consistent 
with the requirements of Sec. 1805.806.
    (4) Financial track record and strength. An Applicant shall submit 
historic financial statements for such periods as specified in paragraph 
(c) of this section. An Applicant shall submit:
    (i) Audited financial statements;
    (ii) Financial statements that have been reviewed by a certified 
public accountant; or
    (iii) Financial statements that have been reviewed by the 
Applicant's Appropriate Federal Banking Agency. Such statements should 
include balance sheets or statements of financial position, income and 
expense statements or statements of activities, and cash flow 
statements. The Applicant

[[Page 991]]

shall also provide information necessary to assess trends in financial 
and operating performance.
    (5) Capacity, skills and experience of the management team. An 
Applicant shall provide information on the background and capacity of 
its management team, including key personnel and governing board 
members. The Applicant shall also provide information on any training or 
technical assistance needed to enhance the capacity of the organization 
to successfully carry out its Comprehensive Business Plan.
    (6) Market analysis. An Applicant shall provide an analysis of its 
Target Market, including a description of the Target Market, and the 
extent of economic distress, an analysis of the needs of the Target 
Market for Financial Products, Financial Services and Development 
Services, and an analysis of the extent of demand within such Target 
Market for the Applicant's products and services. The Applicant also 
shall provide an assessment of any factors or trends that may affect the 
Applicant's ability to deliver its products and services within its 
Target Market.
    (7) Program design and implementation plan. An Applicant shall:
    (i) Describe the products and services it proposes to provide and 
analyze the competitiveness of such products and services in the Target 
Market;
    (ii) Describe its strategy for delivering its products and services 
to its Target Market;
    (iii) Describe how its proposed activities are consistent with 
existing economic, community and housing development plans adopted for 
an Investment Area(s) or Targeted Population(s);
    (iv) Describe its plan to coordinate use of assistance from the Fund 
with existing government assistance programs and private sector 
resources;
    (v) Describe how it will coordinate with community organizations, 
financial institutions, and Community Partners (if applicable) which 
will provide Equity Investments, loans, secondary markets, or other 
services in the Target Market; and
    (vi) Discuss the extent of community support (if any) within the 
Target Market for its activities.
    (8) Financial projections and resources. An Applicant shall provide:
    (i) Financial projections. (A) Projections for each of the next five 
years which include pro forma balance sheets or statements of financial 
position, income and expense statements or statements of activities, and 
a description of any assumptions that underlie its projections; and
    (B) Information to demonstrate that it has a plan for achieving or 
maintaining sustainability within the five-year period;
    (ii) Matching funds. (A) A detailed description of its plans for 
raising matching funds, including funds previously obtained or legally 
committed to match the amount of financial assistance requested from the 
Fund; and
    (B) An indication of the extent to which such matching funds will be 
derived from private, nongovernment sources. Such description shall 
include the name of the source, total amount of such match, the date the 
matching funds were obtained or legally committed, if applicable, the 
extent to which, and for what purpose, such matching funds have been 
used to date, and terms and restrictions on use for each matching 
source, including any restriction that might reasonably be construed as 
a limitation on the ability of the Applicant to use the funds for 
matching purposes; and
    (iii) Severe constraints waiver. If the Applicant is requesting a 
``severe constraints waiver'' of any matching requirements, it shall 
submit the information requested in Sec. 1805.502.
    (9) Projected community impact. An Applicant shall provide:
    (i) Estimates of the volume of new activity to be achieved within 
its Target Market assuming that assistance is provided by the Fund;
    (ii) A description of the anticipated incremental increases in 
activity to be achieved with assistance provided by the Fund and 
matching funds within the Target Market;
    (iii) An estimate of the benefits expected to be created within its 
Target Market over the next five years;
    (iv) The extent to which the Applicant will concentrate its 
activities within its Target Market;

[[Page 992]]

    (v) A description of how the Applicant will measure the benefits 
created as a result of its activities within its Target Market; and
    (vi) In the case of an Applicant with a prior history of serving a 
Target Market, an explanation of how the Applicant will expand its 
operations into a new Investment Area(s), serve a new Targeted 
Population(s), offer more products or services, or increase the volume 
of its activities.
    (10) Risks and assumptions. An Applicant shall identify and discuss 
critical risks (including strategies to mitigate risk) and assumptions 
contained in its Comprehensive Business Plan, and any significant 
impediments to the Plan's implementation.
    (11) Schedule. An Applicant shall provide a schedule indicating the 
timing of major events necessary to realize the objectives of its 
Comprehensive Business Plan.
    (12) Community Partnership. In the case of an Applicant submitting 
an application with a Community Partner, the Applicant shall:
    (i) Describe how the Applicant and the Community Partner will 
participate in carrying out the Community Partnership and how the 
partnership will enhance activities serving the Investment Area(s) or 
Targeted Population(s);
    (ii) Demonstrate that the Community Partnership activities are 
consistent with the Comprehensive Business Plan;
    (iii) Provide information necessary to evaluate such an application 
as described under Sec. 1805.701(b)(6);
    (iv) Include a copy of any written agreement between the Applicant 
and the Community Partner related to the Community Partnership; and
    (v) Provide information to demonstrate that the Applicant meets the 
eligibility requirements described in Sec. 1805.200 and satisfies the 
selection criteria described in subpart G of this part. (A Community 
Partner shall not be required to meet the eligibility requirements 
described in Sec. 1805.200.)
    (13) Effective use of Fund resources. An Applicant shall describe 
the extent of need for the Fund's assistance, as demonstrated by the 
extent of economic distress in the Applicant's Target Market and the 
extent to which the Applicant needs the Fund's assistance to carry out 
its Comprehensive Business Plan.
    (e) Community ownership and governance. An Applicant shall provide 
information to demonstrate the extent to which the Applicant is, or will 
be, Community-Owned or Community-Governed.
    (f) Environmental information. The Applicant shall provide 
sufficient information regarding the potential environmental impact of 
its proposed activities in order for the Fund to complete its 
environmental review requirements pursuant to part 1815 of this chapter.
    (g) Applicant certification. The Applicant and Community Partner (if 
applicable) shall certify that:
    (1) It possesses the legal authority to apply for assistance from 
the Fund;
    (2) The application has been duly authorized by its governing body 
and duly executed;
    (3) It will not use any Fund resources for lobbying activities as 
set forth in Sec. 1805.807; and
    (4) It will comply with all relevant provisions of this chapter and 
all applicable Federal, State, and local laws, ordinances, regulations, 
policies, guidelines, and requirements.



           Subpart G--Evaluation and Selection of Applications



Sec. 1805.700  Evaluation and selection--general.

    Applicants will be evaluated and selected, at the sole discretion of 
the Fund, to receive assistance based on a review process, that could 
include an interview(s) and/or site visit(s), that is intended to:
    (a) Ensure that Applicants are evaluated on a competitive basis in a 
fair and consistent manner;
    (b) Take into consideration the unique characteristics of Applicants 
that vary by institution type, total asset size, stage of organizational 
development, markets served, products and services provided, and 
location;
    (c) Ensure that each Awardee can successfully meet the goals of its 
Comprehensive Business Plan and achieve community development impact; 
and

[[Page 993]]

    (d) Ensure that Awardees represent a geographically diverse group of 
Applicants serving Metropolitan Areas, non-Metropolitan Areas, and 
Indian Reservations from different regions of the United States.



Sec. 1805.701  Evaluation of applications.

    (a) Eligibility and completeness. An Applicant will not be eligible 
to receive assistance pursuant to this part if it fails to meet the 
eligibility requirements described in Sec. 1805.200 or if it has not 
submitted complete application materials. For the purposes of this 
paragraph (a), the Fund reserves the right to request additional 
information from the Applicant, if the Fund deems it appropriate.
    (b) Substantive review. In evaluating and selecting applications to 
receive assistance, the Fund will evaluate the Applicant's likelihood of 
success in meeting the goals of the Comprehensive Business Plan and 
achieving community development impact, by considering factors such as:
    (1) Community development track record (e.g., in the case of an 
Applicant with a prior history of serving a Target Market, the extent of 
success in serving such Target Market);
    (2) Operational capacity and risk mitigation strategies;
    (3) Financial track record and strength;
    (4) Capacity, skills and experience of the management team;
    (5) Solid understanding of its market context, including its 
analysis of current and prospective customers, the extent of economic 
distress within the designated Investment Area(s) or the extent of need 
within the designated Targeted Population(s), as those factors are 
measured by objective criteria, the extent of need for Equity 
Investments, loans, Development Services, and Financial Services within 
the designated Target Market, and the extent of demand within the Target 
Market for the Applicant's products and services;
    (6) Quality program design and implementation plan, including an 
assessment of its products and services, marketing and outreach efforts, 
delivery strategy, and coordination with other institutions and/or a 
Community Partner, or participation in a secondary market for purposes 
of increasing the Applicant's resources. In the case of an applicant 
submitting an application with a Community Partner, the Fund will 
evaluate the extent to which the Community Partner will participate in 
carrying out the activities of the Community Partnership; the extent to 
which the Community Partner will enhance the likelihood of success of 
the Comprehensive Business Plan; and the extent to which service to the 
designated Target Market will be better performed by a Community 
Partnership than by the Applicant alone;
    (7) Projections for financial performance, capitalization and 
raising needed external resources, including the amount of firm 
commitments and matching funds in hand to meet or exceed the matching 
funds requirements and, if applicable, the likely success of the plan 
for raising the balance of the matching funds in a timely manner, the 
extent to which the matching funds are, or will be, derived from private 
sources, and whether an Applicant is, or will become, an Insured CDFI;
    (8) Projections for community development impact, including the 
extent to which an Applicant will concentrate its activities on serving 
its Target Market(s), the extent of support from the designated Target 
Market, the extent to which an Applicant is, or will be, Community-Owned 
or Community-Governed, and the extent to which the activities proposed 
in the Comprehensive Business Plan will expand economic opportunities or 
promote community development within the designated Target Market;
    (9) The extent of need for the Fund's assistance, as demonstrated by 
the extent of economic distress in the Applicant's Target Market and the 
extent to which the Applicant needs the Fund's assistance to carry out 
its Comprehensive Business Plan. In the case of an Applicant that has 
previously received assistance under the CDFI Program, the Fund also 
will consider the Applicant's level of success in meeting its 
performance goals, financial soundness covenants (if applicable), and 
other requirements contained in the previously negotiated and executed 
Assistance Agreement(s) with the Fund, and

[[Page 994]]

whether the Applicant will, with additional assistance from the Fund, 
expand its operations into a new Target Market, offer more products or 
services, and/or increase the volume of its activities;
    (10) The Fund may consider any other factors, as it deems 
appropriate, in reviewing an application.
    (c) Consultation with Appropriate Federal Banking Agencies. The Fund 
will consult with, and consider the views of, the Appropriate Federal 
Banking Agency prior to providing assistance to:
    (1) An Insured CDFI;
    (2) A CDFI that is examined by or subject to the reporting 
requirements of an Appropriate Federal Banking Agency; or
    (3) A CDFI that has as its Community Partner an institution that is 
examined by, or subject to, the reporting requirements of an Appropriate 
Federal Banking Agency.
    (d) Awardee selection. The Fund will select Awardees based on the 
criteria described in paragraph (b) of this section and any other 
criteria set forth in this part or the applicable NOFA.



              Subpart H--Terms and Conditions of Assistance



Sec. 1805.800  Safety and soundness.

    (a) Regulated institutions. Nothing in this part, or in an 
Assistance Agreement, shall affect any authority of an Appropriate 
Federal Banking Agency to supervise and regulate any institution or 
company.
    (b) Non-Regulated CDFIs. The Fund will, to the maximum extent 
practicable, ensure that Awardees that are Non-Regulated CDFIs are 
financially and managerially sound and maintain appropriate internal 
controls.



Sec. 1805.801  Assistance Agreement; sanctions.

    (a) Prior to providing any assistance, the Fund and an Awardee shall 
execute an Assistance Agreement that requires an Awardee to comply with 
performance goals and abide by other terms and conditions of assistance. 
Such performance goals may be modified at any time by mutual consent of 
the Fund and an Awardee or as provided in paragraph (c) of this section. 
If a Community Partner is part of an application that is selected for 
assistance, such partner must be a party to the Assistance Agreement if 
deemed appropriate by the Fund.
    (b) An Awardee shall comply with performance goals that have been 
negotiated with the Fund and which are based upon the Comprehensive 
Business Plan submitted as part of the Awardees application. Performance 
goals for Insured CDFIs shall be determined in consultation with the 
Appropriate Federal Banking Agency. Such goals shall be incorporated in, 
and enforced under, the Awardee's Assistance Agreement.
    (c) The Assistance Agreement shall provide that, in the event of 
fraud, mismanagement, noncompliance with the Fund's regulations or 
noncompliance with the terms and conditions of the Assistance Agreement 
on the part of the Awardee (or the Community Partner, if applicable), 
the Fund, in its discretion, may:
    (1) Require changes in the performance goals set forth in the 
Assistance Agreement;
    (2) Require changes in the Awardee's Comprehensive Business Plan;
    (3) Revoke approval of the Awardee's application;
    (4) Reduce or terminate the Awardee's assistance;
    (5) Require repayment of any assistance that has been distributed to 
the Awardee;
    (6) Bar the Awardee (and the Community Partner, if applicable) from 
reapplying for any assistance from the Fund; or
    (7) Take any other action as permitted by the terms of the 
Assistance Agreement.
    (d) In the case of an Insured Depository Institution, the Assistance 
Agreement shall provide that the provisions of the Act, this part, and 
the Assistance Agreement shall be enforceable under 12 U.S.C. 1818 of 
the Federal Deposit Insurance Act by the Appropriate Federal Banking 
Agency and that any violation of such provisions shall be treated as a 
violation of the Federal Deposit Insurance Act. Nothing in this 
paragraph (d) precludes the Fund from directly enforcing the Assistance

[[Page 995]]

Agreement as provided for under the terms of the Act.
    (e) The Fund shall notify the Appropriate Federal Banking Agency 
before imposing any sanctions on an Insured CDFI or other institution 
that is examined by or subject to the reporting requirements of that 
agency. The Fund shall not impose a sanction described in paragraph (c) 
of this section if the Appropriate Federal Banking Agency, in writing, 
not later than 30 calendar days after receiving notice from the Fund:
    (1) Objects to the proposed sanction;
    (2) Determines that the sanction would:
    (i) Have a material adverse effect on the safety and soundness of 
the institution; or
    (ii) Impede or interfere with an enforcement action against that 
institution by that agency;
    (3) Proposes a comparable alternative action; and
    (4) Specifically explains:
    (i) The basis for the determination under paragraph (e)(2) of this 
section and, if appropriate, provides documentation to support the 
determination; and
    (ii) How the alternative action suggested pursuant to paragraph 
(e)(3) of this section would be as effective as the sanction proposed by 
the Fund in securing compliance and deterring future noncompliance.
    (f) In reviewing the performance of an Awardee in which its 
Investment Area(s) includes an Indian Reservation or Targeted 
Population(s) includes an Indian Tribe, the Fund shall consult with, and 
seek input from, the appropriate tribal government.
    (g) Prior to imposing any sanctions pursuant to this section or an 
Assistance Agreement, the Fund shall, to the maximum extent practicable, 
provide the Awardee (or the Community Partner, if applicable) with 
written notice of the proposed sanction and an opportunity to comment. 
Nothing in this section, however, shall provide an Awardee or Community 
Partner with the right to any formal or informal hearing or comparable 
proceeding not otherwise required by law.



Sec. 1805.802  Disbursement of funds.

    Assistance provided pursuant to this part may be provided in a lump 
sum or over a period of time, as determined appropriate by the Fund. The 
Fund shall not provide any assistance (other than technical assistance) 
under this part until an Awardee has satisfied any conditions set forth 
in its Assistance Agreement and has secured firm commitments for the 
matching funds required for such assistance. At a minimum, a firm 
commitment must consist of a binding written agreement between an 
Awardee and the source of the matching funds that is conditioned only 
upon the availability of the Fund's assistance and such other conditions 
as the Fund, in its sole discretion, may deem appropriate. Such 
agreement must provide for disbursal of the matching funds to an Awardee 
prior to, or simultaneously with, receipt by an Awardee of the Federal 
funds.



Sec. 1805.803  Data collection and reporting.

    (a) Data--general. An Awardee (and a Community Partner, if 
appropriate) shall maintain such records as may be prescribed by the 
Fund which are necessary to:
    (1) Disclose the manner in which Fund assistance is used;
    (2) Demonstrate compliance with the requirements of this part and an 
Assistance Agreement; and
    (3) Evaluate the impact of the CDFI Program.
    (b) Customer profiles. An Awardee (and a Community Partner, if 
appropriate) shall compile such data on the gender, race, ethnicity, 
national origin, or other information on individuals that utilize its 
products and services as the Fund shall prescribe in an Assistance 
Agreement. Such data will be used to determine whether residents of 
Investment Area(s) or members of Targeted Population(s) are adequately 
served and to evaluate the impact of the CDFI Program.
    (c) Access to records. An Awardee (and a Community Partner, if 
appropriate) must submit such financial and activity reports, records, 
statements, and documents at such times, in such

[[Page 996]]

forms, and accompanied by such reporting data, as required by the Fund 
or the U.S. Department of Treasury to ensure compliance with the 
requirements of this part and to evaluate the impact of the CDFI 
Program. The United States Government, including the U.S. Department of 
Treasury, the Comptroller General, and their duly authorized 
representatives, shall have full and free access to the Awardee's 
offices and facilities and all books, documents, records, and financial 
statements relating to use of Federal funds and may copy such documents 
as they deem appropriate. The Fund, if it deems appropriate, may 
prescribe access to record requirements for entities that are borrowers 
of, or that receive investments from, an Awardee.
    (d) Retention of records. An Awardee shall comply with all record 
retention requirements as set forth in OMB Circular A-110 (as 
applicable).
    (e) Review. (1) At least annually, the Fund will review the progress 
of an Awardee (and a Community Partner, if appropriate) in implementing 
its Comprehensive Business Plan and satisfying the terms and conditions 
of its Assistance Agreement.
    (2) An Awardee shall submit within 60 days after the end of each 
semi-annual period, or within some other period as may be agreed to in 
the Assistance Agreement, internal financial statements covering the 
semi-annual reporting period (i.e., two periods per year) and 
information on its compliance with its financial soundness covenants.
    (3) An Awardee shall submit a report within 60 days after the end of 
its fiscal year, or by such alternative deadline as may be agreed to in 
the Assistance Agreement containing, unless otherwise determined by 
mutual agreement between the Awardee and the Fund, the following:
    (i) A narrative description of an Awardee's activities in support of 
its Comprehensive Business Plan;
    (ii) Qualitative and quantitative information on an Awardee's 
compliance with its performance goals and (if appropriate) an analysis 
of factors contributing to any failure to meet such goals;
    (iii) Information describing the manner in which Fund assistance and 
any corresponding matching funds were used. The Fund will use such 
information to verify that assistance was used in a manner consistent 
with the Assistance Agreement; and certification that an Awardee 
continues to meet the eligibility requirements described in 
Sec. 1805.200.
    (4) An Awardee shall submit within 120 days after the end of its 
fiscal year, or within some other period as may be agreed to in the 
Assistance Agreement, fiscal year end statements of financial condition 
audited by an independent certified public accountant. The audit shall 
be conducted in accordance with generally accepted Government Auditing 
Standards set forth in the General Accounting Offices Government 
Auditing Standards (1994 Revision) issued by the Comptroller General and 
OMB Circular A-133 (Audits of States, Local Governments, and Non-Profit 
Organizations), as applicable.
    (5) An Awardee shall submit a report within 120 days after the end 
of its fiscal year, or by such alternative deadline as may be agreed to 
in the Assistance Agreement containing, unless otherwise determined by 
mutual agreement between the Awardee and the Fund, the following 
information:
    (i) The Awardee's customer profile;
    (ii) Awardee activities including Financial Products and Development 
Services;
    (iii) Awardee portfolio quality;
    (iv) The Awardee's financial condition; and
    (v) The Awardee's community development impact.
    (6) The Fund shall make reports described in paragraph (e)(2) and 
(e)(3) of this section available for public inspection after deleting 
any materials necessary to protect privacy or proprietary interests.
    (f) Exchange of information with Appropriate Federal Banking 
Agencies. (1) Except as provided in paragraph (f)(4) of this section, 
prior to directly requesting information from or imposing reporting or 
record keeping requirements on an Insured CDFI or other institution that 
is examined by or subject to the reporting requirements of

[[Page 997]]

an Appropriate Federal Banking Agency, the Fund shall consult with the 
Appropriate Federal Banking Agency to determine if the information 
requested is available from or may be obtained by such agency in the 
form, format, and detail required by the Fund.
    (2) If the information, reports, or records requested by the Fund 
pursuant to paragraph (f)(1) of this section are not provided by the 
Appropriate Federal Banking Agency within 15 calendar days after the 
date on which the material is requested, the Fund may request the 
information from or impose the record keeping or reporting requirements 
directly on such institutions with notice to the Appropriate Federal 
Banking Agency.
    (3) The Fund shall use any information provided by the Appropriate 
Federal Banking Agency under this section to the extent practicable to 
eliminate duplicative requests for information and reports from, and 
record keeping by, an Insured CDFI or other institution that is examined 
by or subject to the reporting requirements of an Appropriate Federal 
Banking Agency.
    (4) Notwithstanding paragraphs (f)(1) and (2) of this section, the 
Fund may require an Insured CDFI or other institution that is examined 
by or subject to the reporting requirements of an Appropriate Federal 
Banking Agency to provide information with respect to the institutions 
implementation of its Comprehensive Business Plan or compliance with the 
terms of its Assistance Agreement, after providing notice to the 
Appropriate Federal Banking Agency.
    (5) Nothing in this part shall be construed to permit the Fund to 
require an Insured CDFI or other institution that is examined by or 
subject to the reporting requirements of an Appropriate Federal Banking 
Agency to obtain, maintain, or furnish an examination report of any 
Appropriate Federal Banking Agency or records contained in or related to 
such report.
    (6) The Fund and the Appropriate Federal Banking Agency shall 
promptly notify each other of material concerns about an Awardee that is 
an Insured CDFI or that is examined by or subject to the reporting 
requirements of an Appropriate Federal Banking Agency, and share 
appropriate information relating to such concerns.
    (7) Neither the Fund nor the Appropriate Federal Banking Agency 
shall disclose confidential information obtained pursuant to this 
section from any party without the written consent of that party.
    (8) The Fund, the Appropriate Federal Banking Agency, and any other 
party providing information under this paragraph (f) shall not be deemed 
to have waived any privilege applicable to the any information or data, 
or any portion thereof, by providing such information or data to the 
other party or by permitting such data or information, or any copies or 
portions thereof, to be used by the other party.
    (g) Availability of referenced publications. The publications 
referenced in this section are available as follows:
    (1) OMB Circulars may be obtained from the Office of Administration, 
Publications Office, 725 17th Street, NW., Room 2200, New Executive 
Office Building, Washington, DC 20503 or on the Internet (http://
www.whitehouse.gov/OMB/grants/index.html); and
    (2) General Accounting Office materials may be obtained from GAO 
Distribution, 700 4th Street, NW., Suite 1100, Washington, DC 20548.



Sec. 1805.804  Information.

    The Fund and each Appropriate Federal Banking Agency shall cooperate 
and respond to requests from each other and from other Appropriate 
Federal Banking Agencies in a manner that ensures the safety and 
soundness of the Insured CDFIs or other institution that is examined by 
or subject to the reporting requirements of an Appropriate Federal 
Banking Agency.



Sec. 1805.805  Compliance with government requirements.

    In carrying out its responsibilities pursuant to an Assistance 
Agreement, the Awardee shall comply with all applicable Federal, State, 
and local laws, regulations, and ordinances, OMB Circulars, and 
Executive Orders.

[[Page 998]]



Sec. 1805.806  Conflict of interest requirements.

    (a) Provision of credit to Insiders. (1) An Awardee that is a Non-
Regulated CDFI may not use any monies provided to it by the Fund to make 
any credit (including loans and Equity Investments) available to an 
Insider unless it meets the following restrictions:
    (i) The credit must be provided pursuant to standard underwriting 
procedures, terms and conditions;
    (ii) The Insider receiving the credit, and any family member or 
business partner thereof, shall not participate in any way in the 
decision making regarding such credit;
    (iii) The Board of Directors or other governing body of the Awardee 
shall approve the extension of the credit; and
    (iv) The credit must be provided in accordance with a policy 
regarding credit to Insiders that has been approved in advance by the 
Fund.
    (2) An Awardee that is an Insured CDFI or a Depository Institution 
Holding Company shall comply with the restrictions on Insider activities 
and any comparable restrictions established by its Appropriate Federal 
Banking Agency.
    (b) Awardee standards of conduct. An Awardee that is a Non-Regulated 
CDFI shall maintain a code or standards of conduct acceptable to the 
Fund that shall govern the performance of its Insiders engaged in the 
awarding and administration of any credit (including loans and Equity 
Investments) and contracts using monies from the Fund. No Insider of an 
Awardee shall solicit or accept gratuities, favors or anything of 
monetary value from any actual or potential borrowers, owners or 
contractors for such credit or contracts. Such policies shall provide 
for disciplinary actions to be applied for violation of the standards by 
the Awardee's Insiders.



Sec. 1805.807  Lobbying restrictions.

    No assistance made available under this part may be expended by an 
Awardee to pay any person to influence or attempt to influence any 
agency, elected official, officer or employee of a State or local 
government in connection with the making, award, extension, 
continuation, renewal, amendment, or modification of any State or local 
government contract, grant, loan or cooperative agreement as such terms 
are defined in 31 U.S.C. 1352.



Sec. 1805.808  Criminal provisions.

    The criminal provisions of 18 U.S.C. 657 regarding embezzlement or 
misappropriation of funds is applicable to all Awardees and Insiders.



Sec. 1805.809  Fund deemed not to control.

    The Fund shall not be deemed to control an Awardee by reason of any 
assistance provided under the Act for the purpose of any applicable law.



Sec. 1805.810  Limitation on liability.

    The liability of the Fund and the United States Government arising 
out of any assistance to a CDFI in accordance with this part shall be 
limited to the amount of the investment in the CDFI. The Fund shall be 
exempt from any assessments and other liabilities that may be imposed on 
controlling or principal shareholders by any Federal law or the law of 
any State. Nothing in this section shall affect the application of any 
Federal tax law.



Sec. 1805.811  Fraud, waste and abuse.

    Any person who becomes aware of the existence or apparent existence 
of fraud, waste or abuse of assistance provided under this part should 
report such incidences to the Office of Inspector General of the U.S. 
Department of the Treasury.



PART 1806--BANK ENTERPRISE AWARD PROGRAM--Table of Contents




                      Subpart A--General Provisions

Sec.
1806.100  Purpose.
1806.101  Summary.
1806.102  Relationship to the Community Development Financial 
          Institutions Program.
1806.103  Definitions.
1806.104  Waiver authority.
1806.105  OMB control number.

                            Subpart B--Awards

1806.200  Community eligibility and designation.
1806.201  Qualified Activities.

[[Page 999]]

1806.202  Measuring activities.
1806.203  Estimated award amounts.
1806.204  Selection process.
1806.205  Actual award amounts.
1806.206  Applications for Bank Enterpise Awards.

             Subpart C--Terms and Conditions of Assistance.

1806.300  Award Agreement; sanctions.
1806.301  Records, reports and audits of Awardees.
1806.302  Compliance with government requirements.
1806.303  Fraud, waste and abuse.
1806.304  Books of account, records and government access.
1806.305  Retention of records.

    Authority: 12 U.S.C. 1834a, 4703, 4703 note, 4713, 4717; 31 U.S.C. 
321.

    Source: 62 FR 64442, Dec. 5, 1997, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 1806.100  Purpose.

    The purpose of the Bank Enterprise Award Program is to encourage 
insured depository institutions to make Equity Investments and carry out 
CDFI Support Activities and Development and Service Activities to 
revitalize distressed urban and rural communities.



Sec. 1806.101  Summary.

    (a) Under the Bank Enterprise Awards Program, the Fund makes awards 
to selected Applicants that:
    (1) Invest in or otherwise support Community Development Financial 
Institutions;
    (2) Increase lending and investment activities within Distressed 
Communities; or
    (3) Increase the provision of certain services and assistance.
    (b) Distressed Communities must meet minimum poverty and 
unemployment criteria. Applicants are selected to participate in the 
program through a competitive application process. Awards are based on 
increases in Qualified Activities that are carried out by the Applicant 
during an Assessment Period. Bank Enterprise Awards are distributed 
after successful completion of projected Qualified Activities. All 
awards shall be made subject to the availability of funding.



Sec. 1806.102  Relationship to the Community Development Financial Institutions Program.

    (a) Prohibition against double funding. No CDFI may receive a Bank 
Enterprise Award if it has:
    (1) An application pending for assistance under the Community 
Development Financial Institutions Program (part 1805 of this chapter);
    (2) Received assistance from the Community Development Financial 
Institutions Program within the preceding 12-month period; or
    (3) Ever received assistance under the Community Development 
Financial Institutions Program for the same activities for which it is 
seeking a Bank Enterprise Award.
    (b) Matching funds. Equity Investments and CDFI Support Activities 
(except technical assistance) provided to a CDFI under this part can be 
used by the CDFI to meet the matching funds requirements of the 
Community Development Financial Institutions Program.



Sec. 1806.103  Definitions.

    For the purpose of this part:
    (a) Act means the Community Development Banking and Financial 
Institutions Act of 1994, as amended (12 U.S.C. 4701 et seq.);
    (b) Agricultural Loan means an origination of a loan secured by farm 
land (including farm residential and other improvements), a loan to 
finance agricultural production, or a loan to a farmer (other than a 
Single Family Loan or Consumer Loan);
    (c) Applicant means any insured depository institution (as defined 
in section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1813)) that is applying for a Bank Enterprise Award;
    (d) Appropriate Federal Banking Agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
    (e) Assessment Period means an annual or semi-annual period 
specified in the applicable Notice of Funds Availability (NOFA) in which 
an Applicant will carry out Qualified Activities;
    (f) Award Agreement means a formal agreement between the Fund and an 
Awardee pursuant to Sec. 1806.300;

[[Page 1000]]

    (g) Awardee means an Applicant selected by the Fund to receive a 
Bank Enterprise Award;
    (h) Bank Enterprise Award means an award made to an Applicant 
pursuant to this part;
    (i) Bank Enterprise Award Program means the program authorized by 
section 114 of the Act and implemented under this part;
    (j) Baseline Period means an annual or semi-annual period specified 
in the applicable NOFA in which an Applicant has previously carried out 
Qualified Activities;
    (k) Business Loan means an origination of a loan used for commercial 
or industrial activities (other than an Agricultural Loan, Commercial 
Real Estate Loan, Multi-Family Loan or Single Family Loan);
    (l) Commercial Real Estate Loan means an origination of a loan 
(other than a Multi-Family Loan or a Single Family Loan) used for 
commercial purposes to finance construction and land development or an 
origination of a loan that is secured by real estate and used to finance 
the acquisition or rehabilitation of a building used for commercial 
purposes;
    (m) Community Development Financial Institution (or CDFI) means an 
entity whose certification as a CDFI under Sec. 1805.201 of this chapter 
is in effect as of the end of the applicable Assessment Period (the 
Assessment Period in which the Qualified Activity takes place) and that 
meets the requirements of Sec. 1805.200(b) through (h) of this chapter 
at the time of the Qualified Activity, subject to the rest of this 
paragraph (m). If an Applicant is proposing to make an Equity Investment 
or engage in CDFI Support Activities with an uncertified CDFI, the 
uncertified CDFI may apply for certification by submitting the 
information described in Sec. 1805.701(b) of this chapter. In order for 
the Applicant to be eligible to receive an award for its activity, the 
required information with respect to the uncertified CDFI shall be 
submitted to the Fund as specified in the applicable NOFA published in 
the Federal Register, and certification must be completed by the end of 
the applicable Assessment Period as specified in the applicable NOFA. 
Notwithstanding anything in this paragraph (m) to the contrary, an 
Applicant may receive an award pursuant to this part for assistance 
provided to an uncertified CDFI that, at the time of the Qualified 
Activity, does not meet the requirements of Sec. 1805.200(b) through (h) 
of this chapter if:
    (1) The Applicant requires the uncertified CDFI to refrain from 
using the assistance provided until the entity is certified;
    (2) The uncertified CDFI is certified by the end of the applicable 
Assessment Period; and
    (3) The Applicant retains the option of recapturing said assistance 
in the event that the uncertified CDFI is not certified by the end of 
the applicable Assessment Period;
    (n) CDFI Related Activities means Equity Investments and CDFI 
Support Activities;
    (o) CDFI Support Activity means assistance provided by an Applicant 
or its Subsidiary to a CDFI that is integrally involved in a Distressed 
Community in the form of the origination of a loan, technical 
assistance, or deposits if such deposits are:
    (1) Uninsured and committed for a term of at least three years; or
    (2) Insured, committed for a term of at least three years, and 
provided at an interest rate that is materially (in the determination of 
the Fund) below market rates;
    (p) Community Services means the following forms of assistance 
provided by officers, employees or agents (contractual or otherwise) of 
the Applicant:
    (1) Provision of technical assistance to Residents in managing their 
personal finances through consumer education programs;
    (2) Provision of technical assistance and consulting services to 
newly formed small businesses located in the Distressed Community;
    (3) Provision of technical assistance to, or servicing the loans of, 
Low- or Moderate-Income homeowners and homeowners located in the 
Distressed Community; and
    (4) Other services provided for Low- and Moderate-Income persons in 
a Distressed Community or enterprises integrally involved in a 
Distressed Community deemed appropriate by the Fund;

[[Page 1001]]

    (q) Consumer Loan means an origination of a loan to one or more 
individuals for household, family, or other personal expenditures;
    (r) Distressed Community means a geographic community which meets 
the minimum area eligibility requirements specified in Sec. 1806.200;
    (s) Development and Service Activities means activities described in 
Sec. 1806.201(b)(4) that are carried out by the Applicant or its 
Subsidiary;
    (t) Equity Investment means financial assistance provided by an 
Applicant or its Subsidiary to a CDFI in the form of a grant, a stock 
purchase, a purchase of a partnership interest, a purchase of a limited 
liability company membership interest, a loan made on such terms that it 
has characteristics of equity (and is considered as such by the Fund and 
is consistent with requirements of the Applicant's Appropriate Federal 
Banking Agency), or any other investment deemed to be an Equity 
Investment by the Fund;
    (u) Financial Services means check-cashing, providing money orders 
and certified checks, automated teller machines, safe deposit boxes, and 
other comparable services as may be specified by the Fund that are 
provided to Low- and Moderate-Income persons in the Distressed Community 
or enterprises integrally involved with the Distressed Community;
    (v) Fund means the Community Development Financial Institutions Fund 
established under section 104(a) of the Act (12 U.S.C. 4703(a));
    (w) Geographic Units means counties (or equivalent areas), 
incorporated places, minor civil divisions that are units of local 
government, census tracts, block numbering areas, block groups, and 
American Indian or Alaska Native areas (as each is defined by the U.S. 
Bureau of the Census) or other areas deemed appropriate by the Fund;
    (x) Indian Reservation means a geographic area that meets the 
requirements of section 4(10) of the Indian Child Welfare Act of 1978 
(25 U.S.C. 1903(10)), and shall include land held by incorporated Native 
groups, regional corporations, and village corporations, as defined in 
and pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 
et seq.), public domain Indian allotments, and former Indian 
Reservations in the State of Oklahoma;
    (y) Low- and Moderate-Income means income that does not exceed 80 
percent of the median income of the area involved, as determined by the 
Secretary of Housing and Urban Development with adjustments for smaller 
and larger families pursuant to section 102(a)(20) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302(a)(20));
    (z) Metropolitan Area means an area designated as such (as of the 
date of the application) by the Office of Management and Budget pursuant 
to 44 U.S.C. 3504(d)(3), 31 U.S.C. 1104(d), and Executive Order 10253 (3 
CFR, 1949-1953 Comp., p. 758), as amended;
    (aa) Multi-Family Loan means an origination of a loan secured by a 
five-or more family residential property;
    (bb) Project Investment means providing financial assistance in the 
form of a purchase of stock, limited partnership interest, other 
ownership instrument, or a grant to an entity that is integrally 
involved with a Distressed Community and formed for the sole purpose of 
engaging in a project or activity, approved by the Fund, related to 
commercial real estate, single family housing, multi-family housing, 
business or agriculture (as defined in this part);
    (cc) Qualified Activities means CDFI Related Activities and 
Development and Service Activities;
    (dd) Resident means an individual domiciled in a Distressed 
Community;
    (ee) Single Family Loan means an origination of a loan secured by a 
one-to-four family residential property;
    (ff) Subsidiary has the same meaning as in section 3 of the Federal 
Deposit Insurance Act, except that a CDFI shall not be considered a 
subsidiary of any insured depository institution or any depository 
institution holding company that controls less than 25 percent of any 
class of the voting shares of such corporation and does not otherwise 
control, in any manner, the election of a majority of directors of the 
corporation; and
    (gg) Unit of General Local Government means any city, county town, 
township, parish, village or other general purpose political subdivision 
of a State

[[Page 1002]]

or Commonwealth of the United States, or general purpose subdivision 
thereof, and the District of Columbia.



Sec. 1806.104  Waiver authority.

    The Fund may waive any requirement of this part that is not required 
by law, upon a determination of good cause. Each such waiver will be in 
writing and supported by a statement of the facts and grounds forming 
the basis of the waiver. For a waiver in any individual case, the Fund 
must determine that application of the requirement to be waived would 
adversely affect the achievement of the purposes of the Act. For waivers 
of general applicability, the Fund will publish notification of granted 
waivers in the Federal Register.



Sec. 1806.105  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB control 
number 1505-0153.



                            Subpart B--Awards



Sec. 1806.200  Community eligibility and designation.

    (a) General. If an Applicant proposes to carry out CDFI Support 
Activities or Development and Service Activities, the Applicant shall 
designate one or more Distressed Communities in which it proposes to 
carry out those activities. If an Applicant proposes to carry out CDFI 
Support Activities, the Applicant shall provide evidence that the CDFI 
it is proposing to support is integrally involved with such a Distressed 
Community. In the case of an Applicant proposing to make an Equity 
Investment, the Fund reserves the right to request information on 
Distressed Communities served by such a CDFI should such information be 
deemed necessary by the Fund to complete the selection process described 
in Sec. 1806.204. In the case of an Applicant that proposes to carry out 
both CDFI Support Activities and Development and Service Activities it 
may designate different Distressed Communities for these two categories 
of activity.
    (b) Minimum area eligibility requirements. A Distressed Community 
must meet the minimum area eligibility requirements contained in this 
paragraph (b).
    (1) Geographic requirements. A Distressed Community must be a 
geographic area:
    (i) That is located within the boundaries of a Unit of General Local 
Government;
    (ii) The boundaries of which are contiguous; and
    (iii) (A) The population of which must be at least 4,000 if any 
portion of the area is located within a Metropolitan Area with a 
population of 50,000 or greater;
    (B) The population must be at least 1,000 if no portion of the area 
is located within such a Metropolitan Area; or
    (C) The area is located entirely within an Indian Reservation.
    (2) Distress requirements. A Distressed Community must be a 
geographic area where:
    (i) At least 30 percent of the Residents have incomes which are less 
than the national poverty level, as published by the U.S. Bureau of the 
Census in the 1990 decennial census; and
    (ii) The unemployment rate is at least 1.5 times greater than the 
national average, as determined by the U.S. Bureau of Labor Statistics' 
most recent data including estimates of unemployment developed using the 
U.S. Bureau of Labor Statistics' Census Share calculation method. U.S. 
Bureau of Labor Statistics data and information necessary for Census 
Share calculations may be obtained from the Fund.
    (c) Area designation. An Applicant shall designate an area as a 
Distressed Community by:
    (1) Selecting Geographic Units which individually meet the minimum 
area eligibility requirements; or
    (2) Selecting two or more Geographic Units which, in the aggregate, 
meet the minimum area eligibility requirements set forth in paragraph 
(b) of this section provided that no Geographic Unit selected by the 
Applicant within the area has a poverty rate of less than 20 percent.
    (d) Designation and notification process. Upon request, the Fund 
will provide a prospective Applicant with data

[[Page 1003]]

and other information to help it identify areas eligible to be a 
Distressed Community. A prospective Applicant is encouraged to contact 
the Fund prior to filing an application to determine if an area meets 
the minimum area eligibility requirements.



Sec. 1806.201  Qualified Activities.

    (a) CDFI Related Activities. An Applicant may receive a Bank 
Enterprise Award for making an Equity Investment or carrying out CDFI 
Support Activities during an Assessment Period.
    (b) Development and Service Activities. (1) General. An Applicant 
may receive a Bank Enterprise Award for carrying out Development and 
Service Activities during an Assessment Period.
    (2) Area served. The Development and Service Activities listed in 
paragraphs (b)(4)(i) through (x) of this section must serve a Distressed 
Community. An activity is considered to serve a Distressed Community if 
it is:
    (i) Undertaken in the Distressed Community; or
    (ii) Provided to Low- and Moderate-Income Residents or enterprises 
integrally involved in the Distressed Community.
    (3) Priority factors. Each Development and Service Activity is 
assigned a priority factor. A priority factor represents the Fund's 
assessment of the degree of difficulty, the extent of innovation, and 
the extent of benefits accruing to the Distressed Community for each 
type of activity.
    (4) Development and Service Activities. Development and Service 
Activities are listed in this paragraph with their corresponding 
priority factors:
    (i) Deposit liabilities in the form of savings or other demand or 
time accounts accepted from Residents at offices located within the 
Distressed Community (priority factor = 1.0);
    (ii) Financial Services (priority factor = 1.2);
    (iii) Community Services (priority factor = 1.4);
    (iv) Consumer Loans (priority factor = 1.2);
    (v) Single Family Loans and related Project Investments (priority 
factor = 1.4);
    (vi) Multi-Family Loans and related Project Investments (priority 
factor = 1.6);
    (vii) Commercial Real Estate Loans and related Project Investments 
(priority factor = 1.6);
    (viii) Business Loans, Agricultural Loans, and related Project 
Investments of $100,000 or less (priority factor = 1.9);
    (ix) Business Loans, Agricultural Loans, and related Project 
Investments of more than $100,000 through $250,000 (priority factor = 
1.8); and
    (x) Business Loans and related Project Investments of more than 
$250,000 through $1,000,000 and Agricultural Loans and related Project 
Investments of more than $250,000 through $500,000 (priority factor = 
1.7).
    (c) Limitation. Financial assistance provided by an Applicant for 
which the Applicant receives benefits through the Low Income Housing Tax 
Credit authorized pursuant to Section 42 of the Internal Revenue Code of 
1986, as amended (26 U.S.C. 42), shall not constitute an Equity 
Investment, Project Investment, or other Qualified Activity, as defined 
in this part, for the purposes of calculating or receiving an award.



Sec. 1806.202  Measuring activities.

    (a) General. Qualified Activities shall be measured by comparing the 
Qualified Activities carried out during the Baseline Period with the 
Qualified Activities projected to be carried out during the Assessment 
Period. Increases in the values of Qualified Activities between the 
Baseline Period and Assessment Period will be used in determining award 
amounts. If an Applicant is seeking assistance only for CDFI Related 
Activities, it should only report its activities for CDFI Related 
Activities categories. If an Applicant is seeking assistance only for 
Development and Service Activities, it should only report its activities 
for Development and Service Activities categories. If an Applicant is 
seeking assistance for both CDFI Related Activities and Development and 
Service Activities, it should report its activities for both types of 
categories. If an Applicant is unable to report its activities in the 
aforementioned manner, the Applicant

[[Page 1004]]

shall provide an explanation satisfactory to the Fund as to why it 
cannot report required information and simultaneously submit to the Fund 
a certification that during the Assessment Period the Applicant did not 
reduce its total activity in any unreported categories. The form and 
content of any certification shall be determined by the Fund. The dates 
of the Baseline Period and Assessment Period will be published in a NOFA 
for each funding round.
    (b) Exception. An Applicant may select not to report its deposit 
liabilities as described in Sec. 1806.201(b)(4)(i). In such a case, an 
Applicant's deposit liabilities will not be considered in calculating 
the service score pursuant to Sec. 1806.203(c).
    (c) Value. The Fund will assess the value of:
    (1) Equity Investments, loans, grants and deposits described in 
Sec. 1806.103 at the original amount of such investments, loans, grants 
or deposits. Where a loan matures, is fully paid and is then renewed, 
the Fund will assess the value of the principal amount of the renewed 
loan. Where a deposit, such as a certificate of deposit, matures and is 
then rolled over, the Fund will assess the value of the full amount of 
the rolled over deposit. However, where an existing loan is refinanced, 
the Fund will only assess the value of any increase in the principal 
amount of the refinanced loan;
    (2) Deposit liabilities at the face dollar amount of monies 
deposited as measured by comparing the net change in the amount of 
applicable funds (as described in Sec. 1806.201(b)(4)(i)) on deposit at 
the Applicant institution during the period described in this paragraph 
(c)(2). An Applicant shall measure the net changes in deposit 
liabilities during:
    (i) The Baseline Period, by comparing the amount of applicable funds 
on deposit at the close of business the day before the beginning of the 
Baseline Period and at the close of business on the last day of the 
Baseline Period; and
    (ii) The Assessment Period, by comparing the amount of applicable 
funds on deposit at the close of business the day before the beginning 
of the Assessment Period and at the close of business on the last day of 
the Assessment Period;
    (3) Financial Services, Community Services, and CDFI Support 
Activities consisting of technical assistance based on the 
administrative costs of providing such services; and
    (4) Project Investments at the original amount of the purchase of 
stock, limited partnership interest, other ownership interest, or grant.
    (d) Closed transactions. A transaction shall be considered to have 
been carried out during the Baseline Period or the Assessment Period if:
    (1) The documentation evidencing the transaction:
    (i) Is executed on a date within the applicable Baseline Period or 
Assessment Period, respectively, as specified in the applicable NOFA; 
and
    (ii) Constitutes a legally binding agreement between the Applicant 
and a borrower or investee which specifies the final terms and 
conditions of the transaction, except that any contingencies included in 
the final agreement must be typical of such transaction and acceptable 
(both in the judgment of the Fund); and
    (2) An initial disbursement of loan or investment proceeds has 
occurred in a manner that is consistent with customary business 
practices and is reasonable given the nature of the transaction, (both 
as determined by the Fund).
    (e) Reporting. An Applicant shall report Qualified Activities on the 
basis of transactions that were:
    (1) Completed during the Baseline Period; and
    (2) Are expected to be completed during the Assessment Period and 
disbursed by the Applicant to a borrower or investee within the period 
described in Sec. 1806.205(a).



Sec. 1806.203  Estimated award amounts.

    Award amounts will be determined at the sole discretion of the Fund 
and estimated as described in this section.
    (a) Equity Investments. The estimated award amount for an Equity 
Investment will be equal to 15 percent (or

[[Page 1005]]

such lower percentage as may be requested by the Applicant) of the 
anticipated increase in the value of such investment between the 
Baseline Period and Assessment Period.
    (b) CDFI Support Activities. If an Applicant is not a CDFI, the 
estimated award amount for CDFI Support Activities will be equal to 11 
percent of the anticipated increase in the dollar amount of such support 
between the Baseline Period and Assessment Period. If Applicant is a 
CDFI, the estimated award amount for CDFI Support Activities will be 
equal to 33 percent of the anticipated increase in the dollar amount of 
such support between the Baseline Period and Assessment Period.
    (c) Development and Service Activities. The estimated award amount 
for Development and Service Activities will be calculated as follows:
    (1) Step 1. For each type of Development and Service Activity, 
subtract the value in the Baseline Period from the estimated value for 
the Assessment Period to yield a remainder;
    (2) Step 2. Multiply the remainder for each Development and Service 
Activity by the assigned priority factor to yield a weighted value for 
each activity;
    (3) Step 3. Add the weighted values for deposit liabilities, 
Financial Services and Community Services to yield a service score;
    (4) Step 4. Add the weighted values for all other categories of 
Development and Service Activities to yield a development score. If the 
development score is negative, an Applicant will be ineligible to 
receive a Bank Enterprise Award. If the development score is positive, 
go to Step 5;
    (5) Step 5. If the service score is greater than the development 
score, reduce the service score to equal the same amount as the 
development score to yield an adjusted service score;
    (6) Step 6. Add the service score (or adjusted service score if 
applicable) and the development score to yield a total score; and
    (7) Step 7. If the Applicant is:
    (i) A CDFI, multiply the total score by 15 percent to yield an 
estimated award amount; or
    (ii) Not a CDFI, multiply the total score by 5 percent to yield an 
estimated award amount.



Sec. 1806.204  Selection process.

    (a) Availability of funds. All awards are subject to the 
availability of funds. If the amount of funds available during a funding 
round is sufficient for all estimated award amounts, an Applicant that 
meets all of the program requirements specified in this part shall 
receive an award that is calculated in the manner specified in 
Sec. 1806.205. If the amount of funds available during a funding round 
is insufficient for all estimated award amounts, Awardees will be 
selected based on the process described in this section.
    (b) Priority of categories--(1) General. The Fund will rank an 
Applicant's estimated award amount for Qualified Activities according to 
the priority categories described in this paragraph (b). All Applicants 
in the first priority category will be selected as Awardees before 
Applicants in the second priority category. Selections within each 
priority category will be based on the relative rankings within each 
such category, subject to the availability of funds.
    (2) First priority. (i) If the amount of funds available during a 
funding round is insufficient for all estimated award amounts, first 
priority will be given to Applicants that propose to engage in CDFI 
Related Activities in the following order:
    (A) Equity Investments in CDFIs serving Distressed Communities;
    (B) Equity Investments in CDFIs not serving Distressed Communities; 
and
    (C) CDFI Support Activities.
    (ii) Ranking Equity Investments. Estimated awards for Equity 
Investments may be ranked within each applicable priority subcategory 
based on the extent to which an Applicant proposes to reduce the 
percentage used to calculate its award amount (e.g., an Applicant that 
chooses to reduce its award to 13 percent will be ranked higher than an 
Applicant that reduces its award to 14 percent). The Applicant, however, 
may not reduce its award percentage below 12 percent. For Applicants 
that propose the same percentage, estimated awards

[[Page 1006]]

will be ranked by the ratio of the proposed Equity Investment to the 
asset size of the Applicant (as reported in the Applicant's most recent 
Report of Condition or Thrift Financial Report) at the time of 
submission of an application.
    (iii) Ranking CDFI Support Activities. Estimated awards for CDFI 
Support Activities may be ranked based on the ratio of the proposed CDFI 
Support Activity to the asset size of the Applicant (as reported in the 
Applicant's most recent Report of Condition or Thrift Financial Report) 
at the time of submission of an application.
    (3) Second priority. (i) If the amount of funds available during a 
funding round is sufficient for all CDFI Related Activities but 
insufficient for all estimated award amounts, second priority will go to 
Applicants that propose to engage in Development and Service Activities.
    (ii) Ranking Development and Service Activities. Estimated awards 
for Development and Service Activities may be ranked by the ratio of the 
total score to the asset size of the Applicant (as reported in the 
Applicant's most recent Report of Condition or Thrift Financial Report) 
at the time of the submission of an application. If the ratios of two 
Applicants are the same, the estimated awards will be ranked based on 
the degree of the poverty of each Applicant's Distressed Community.
    (4) Combined awards. If an Applicant receives an award for more than 
one priority category described in this section, the award amounts will 
be combined into a single Bank Enterprise Award.



Sec. 1806.205  Actual award amounts.

    (a) General. The Fund will assess an Applicant's success in 
achieving the Qualified Activities projected in its application. The 
extent of such success will be measured based on the activities that 
were actually carried out during the Assessment Period and expected to 
be disbursed to an investee, borrower, or other recipient within three 
years of the end of the applicable Assessment Period. The Fund reserves 
the right to extend this period on a case-by-case basis where it has a 
high degree of confidence that disbursement will occur and the activity 
will promote the purposes of the Act. Subject to Sec. 1806.204 and any 
recapture sanction for failure to perform pursuant to this part, the 
actual award amount that an Awardee will receive will be equal to the 
estimated award previously calculated and (if necessary) adjusted 
pursuant to this section.
    (b) Achievement. If an Applicant carries out all or a portion of its 
projected Qualified Activities and satisfies all program requirements 
described in this part, its award amount will be calculated on a pro-
rata basis to reflect the increase in activities actually carried out 
except that if:
    (1) The amount of funds available is insufficient for all estimated 
award amounts; and
    (2) An Applicant carries out less than 75 percent of its projected 
Qualified Activities, the Fund in its sole discretion, may limit the 
amount or deny an award.
    (c) Unobligated or deobligated funds. The Fund, in its sole 
discretion, may use any deobligated funds or funds not obligated during 
a funding round:
    (1) Using the calculation and selection process contained in this 
part:
    (i) To increase an award amount of an Awardee for achievement in 
excess of the projected Qualified Activities; or
    (ii) To select Applicants not previously selected;
    (2) To make additional monies available for a subsequent funding 
round; or
    (3) As otherwise authorized by the Act.
    (d) Limitation. The Fund, in its sole discretion, may deny or limit 
the amount of an award for any reason, including if an Applicant submits 
an application based on unrealistic Assessment Period projections.



Sec. 1806.206  Applications for Bank Enterprise Awards.

    (a) Notice of Funds Availability. An Applicant shall submit an 
application for a Bank Enterprise Award in accordance with this section 
and the applicable NOFA published by the Fund in the Federal Register. 
The NOFA will advise potential Applicants with respect to obtaining an 
application packet and will establish submission deadlines. The NOFA 
also will establish any other

[[Page 1007]]

requirements or restrictions applicable for the funding round including 
any restrictions on award amounts. After receipt of an application, the 
Fund may request clarifying or technical information on materials 
submitted as part of such application.
    (b) Application contents. Each application must contain the 
information required in the application packet, which includes:
    (1) A copy of the Applicant's certificate of insurance issued by the 
Federal Deposit Insurance Corporation and a copy of the Applicant's 
incorporation, charter, organizing, formation, or otherwise establishing 
documents to be used to establish eligibility for an award;
    (2) A completed Bank Enterprise Award Rating and Calculations 
worksheet. (If an Applicant intends to complete a merger with another 
institution during the Assessment Period, it shall submit a separate 
Baseline Period worksheet for each subject institution and one 
Assessment Period worksheet that represents the projected activities of 
the merged institutions. If such a merger is unexpectedly delayed beyond 
the Assessment Period, the Fund reserves the right to withhold 
distribution of an award until the merger has been completed.);
    (3) A narrative summary of each Qualified Activity expected to be 
performed in the Assessment Period;
    (4) The asset size of the Applicant, as reported in its most recent 
Report of Condition or Thrift Financial Report, to its Appropriate 
Federal Banking Agency;
    (5) Information necessary for the Fund to complete its environmental 
review requirements pursuant to part 1815 of this chapter;
    (6) Certifications that the Applicant will comply with all relevant 
provisions of this chapter and all applicable Federal, State, and local 
laws, ordinances, regulations, policies, guidelines, and requirements;
    (7) A copy of the Applicant's most recent annual report;
    (8) In the case of an Applicant proposing to engage in Development 
and Service Activities, a completed Distressed Community Designation 
worksheet and a map and narrative description of the Distressed 
Community;
    (9) In the case of an Applicant proposing to engage in CDFI Related 
Activities:
    (i) Equity Investment. An Applicant shall submit a list of potential 
CDFIs to which assistance may be provided, and a description of the 
amount, terms and conditions of any Equity Investment that may be 
provided.
    (ii) CDFI Support Activities. An Applicant shall submit:
    (A) A list of potential CDFIs to which assistance may be provided 
and a description of the amount, terms and conditions of the assistance 
that may be provided; and
    (B) Information that indicates that each CDFI to which an Applicant 
proposes to provide CDFI Support Activities is integrally involved 
within a Distressed Community, a completed Distressed Community 
Designation worksheet, and a map and narrative description of the 
Distressed Community.



              Subpart C--Terms and Conditions of Assistance



Sec. 1806.300  Award Agreement; sanctions.

    (a) General. After the Fund selects an Awardee, the Fund and the 
Awardee will enter into an Award Agreement. The Award Agreement shall 
provide that an Awardee shall:
    (1) Carry out its Qualified Activities in accordance with applicable 
law, the approved application, and all other applicable requirements;
    (2) Comply with such other terms and conditions (including record 
keeping and reporting requirements) that the Fund may establish; and
    (3) Not receive any monies until the Fund has determined that the 
Awardee has fulfilled all applicable requirements.
    (b) Sanctions. In the event of any fraud, misrepresentation, or 
noncompliance with the terms of the Award Agreement by the Awardee, the 
Fund may terminate, reduce, or recapture the award and pursue any other 
available legal remedies.
    (c) Notice. Prior to imposing any sanctions pursuant to this section 
or an Award Agreement, the Fund will, to

[[Page 1008]]

the maximum extent practicable, provide the Awardee with written notice 
of the proposed sanction and an opportunity to comment. Nothing in this 
section, however, will provide an Awardee with the right to any formal 
or informal hearing or comparable proceeding not otherwise required by 
law.



Sec. 1806.301  Records, reports and audits of Awardees.

    At the end of an Assessment Period, each Applicant shall submit to 
the Fund:
    (a) Worksheet. A Bank Enterprise Award worksheet that reports the 
Qualified Activities actually carried out during the Assessment Period;
    (b) Certification. A certification that the information provided to 
the Fund is true and accurately reflects the Qualified Activities 
carried out during an Assessment Period; and
    (c) Documentation. The Applicant shall make available the following:
    (1) With respect to Equity Investments and CDFI Support Activities, 
the Applicant shall submit documentation that meets the conditions 
described in Sec. 1806.202(d);
    (2) With respect to Development and Services Activities where the 
original amount of the value of the activity is $250,000 or greater, the 
Applicant shall submit documentation that meets the conditions described 
in Sec. 1806.202(d);
    (3) With respect to Development and Services Activities where the 
original amount of the value of the activity is less than $250,000, the 
Applicant shall submit a schedule that describes the original amount, 
census tract served, and the dates of execution, initial disbursement, 
and final disbursement of the instrument; and
    (4) Any other information reasonably requested by the Fund in order 
to document or otherwise assess the validity of information provided by 
the Applicant to the Fund.



Sec. 1806.302  Compliance with government requirements.

    In carrying out its responsibilities pursuant to an Award Agreement, 
the Awardee shall comply with all applicable Federal, State, and local 
laws, regulations and ordinances, OMB Circulars, and Executive Orders.



Sec. 1806.303  Fraud, waste and abuse.

    Any person who becomes aware of the existence or apparent existence 
of fraud, waste, or abuse of assistance provided under this part should 
report such incidences to the Office of Inspector General of the U.S. 
Department of the Treasury.



Sec. 1806.304  Books of account, records and government access.

    An Awardee shall submit such financial and activity reports, 
records, statements, and documents at such times, in such forms, and 
accompanied by such supporting data, as required by the Fund and the 
U.S. Department of the Treasury to ensure compliance with the 
requirements of this part. The United States Government, including the 
U.S. Department of the Treasury, the Comptroller General, and its duly 
authorized representatives, shall have full and free access to the 
Awardee's offices and facilities, and all books, documents, records, and 
financial statements relevant to the award of the Federal funds and may 
copy such documents as they deem appropriate.



Sec. 1806.305  Retention of records.

    An Awardee shall comply with all record retention requirements as 
set forth in OMB Circular A-110 (as applicable). This circular may be 
obtained from Office of Administration, Publications Office, 725 17th 
Street, NW., Room 2200, New Executive Office Building, Washington, DC 
20503.



PART 1815--ENVIRONMENTAL QUALITY--Table of Contents




Sec.
1815.100  Policy.
1815.101  Purpose.
1815.102  Definitions.
1815.103  Designation of responsible Fund official.
1815.104  Specific responsibilities of the designated Fund official.
1815.105  Major decision points.
1815.106  Supplemental environmental review.
1815.107  Determination of review requirement.
1815.108  Actions that normally require an EIS.
1815.109  Preparation of an EIS.
1815.110  Categorical exclusion.

[[Page 1009]]

1815.111  Actions that require an environmental assessment.
1815.112  Preparation of an environmental assessment.
1815.113  Public involvement.
1815.114  Fund decisionmaking procedures.
1815.115  OMB control number.

    Authority: 12 U.S.C. 4703, 4717; 42 U.S.C. 4332; Chapter X, Pub L. 
104-19, 109 Stat. 237 (12 U.S.C. 4703 note).

    Source: 60 FR 54130, Oct. 19, 1995, unless otherwise noted.



Sec. 1815.100  Policy.

    The Community Development Financial Institution Fund's policy is to 
ensure that environmental factors and concerns are given appropriate 
consideration in decisions and actions by the Fund and to reduce any 
possible adverse effects of Fund decisions and actions upon the quality 
of the human environment.



Sec. 1815.101  Purpose.

    This part supplements Council on Environmental Quality regulations 
for implementing the procedural provisions of the National Environmental 
Policy Act of 1969, as amended, and describe how the Community 
Development Financial Institutions Fund intends to consider 
environmental factors and concerns in the Fund's decisionmaking process. 
This part applies only to the Fund and not to any other bureau, office 
or organization within the Department of the Treasury.



Sec. 1815.102  Definitions.

    (a) For the purpose of this part:
    (1) Act means the Community Development Banking and Financial 
Institutions Act (12 U.S.C. 4701 et seq.);
    (2) Application means a request for assistance from the Fund 
submitted pursuant to parts 1805 or 1806 of this chapter;
    (3) CEQ regulations means the regulations for implementing the 
procedural provisions of the National Environmental Policy Act of 1969 
as promulgated by the Council on Environmental Quality, Executive Office 
of the President, appearing at 40 CFR parts 1500-1508 and to which this 
part is a supplement;
    (4) Comprehensive Business Plan means a document submitted as part 
of an Application pursuant to part 1805 of this chapter which describes 
an organization's proposed process for offering products or services to 
a particular market, including organizational requirements needed to 
serve that market effectively;
    (5) Consumer Loans means loans to one or more individuals for 
household, family or other personal expenditures;
    (6) Decisionmaker means the Director of the Fund, unless an 
appropriate delegation of authority has been made;
    (7) EIS means an environmental impact statement as defined in 40 CFR 
1508.11 of the CEQ regulations;
    (8) Fund means the Community Development Financial Institutions 
Fund, established under section 104(a) of the Act (12 U.S.C. 4703(a));
    (9) NEPA means the National Environmental Policy Act, as amended, 42 
U.S.C. 4321-4335; and
    (10) Project means all closely related actions relating to a 
specific site.
    (b) Other terms used in this part are defined in 40 CFR part 1508 of 
the CEQ regulations.



Sec. 1815.103  Designation of responsible Fund official.

    The Director of the Fund is the designated Fund official responsible 
for implementation and operation of the Fund's policies and procedures 
on environmental quality and control.



Sec. 1815.104  Specific responsibilities of the designated Fund official.

    The designated Fund official shall:
    (a) Coordinate the formulation and revision of Fund policies and 
procedures on matters pertaining to environmental quality and control;
    (b) Establish and maintain working relationships with relevant 
government agencies (including Federal, state and local) concerned with 
environmental matters;
    (c) Develop procedures within the Fund's planning and decisionmaking 
processes to ensure that environmental factors are properly considered 
in all proposals and decisions in accordance with this part;
    (d) Develop, monitor, and review the Fund's implementation of 
standards, procedures, and working relationships

[[Page 1010]]

for protection and enhancement of environmental quality and compliance 
with applicable laws and regulations;
    (e) Monitor processes to ensure that the Fund's procedures regarding 
consideration of environmental quality are achieving their intended 
purposes;
    (f) Advise the officers and employees of the Fund of technical and 
management requirements of environmental analysis, of appropriate 
expertise available, and, with the assistance of the Department of the 
Treasury's Office of the General Counsel, of relevant legal 
developments;
    (g) Monitor the consideration and documentation of the environmental 
aspects of Fund planning and decisionmaking processes by appropriate 
officers and employees of the Fund;
    (h) Ensure that all environmental assessments and, where required, 
all EISs are prepared in accordance with the appropriate regulations 
adopted by the Council on Environmental Quality and the Fund;
    (i) Ensure that, as required, a legislative EIS is submitted with 
all proposed legislation;
    (j) Consolidate and transmit to appropriate parties the Fund's 
comments on EISs and other environmental reports prepared by other 
agencies;
    (k) Acquire information and prepare appropriate reports on 
environmental matters required of the Fund; and
    (l) Coordinate the Fund's efforts to make available to other parties 
information and advice on the Fund's policies for protecting and 
enhancing the quality of the environment.



Sec. 1815.105  Major decision points.

    (a) The possible environmental effects of an Application, including 
any Comprehensive Business Plan, must be considered along with 
technical, economic, and other factors throughout the decisionmaking 
process. For most Fund actions there are two distinct stages in the 
decisionmaking process:
    (1) Preliminary approval stage, at which point applications are 
selected for funding; and
    (2) Final approval and funding stage.
    (b) Environmental review shall be integrated into the decisionmaking 
process of the Fund as follows:
    (1) During the preliminary approval stage, the designated Fund 
official shall determine whether the Application proposes actions which 
are categorically excluded, or normally require an environmental 
assessment or an EIS;
    (2) If the designated Fund official determines that the Application 
proposes actions which normally require an environmental assessment or 
an EIS, the applicant shall be informed that the final approval and 
funding, in addition to any other conditions, is contingent upon:
    (i) The applicant supplying to the Fund all information necessary 
for the Fund to perform or have performed any environmental review 
required by this part;
    (ii) The applicant not using any Fund financial assistance to 
perform any of such proposed actions in the Application that affect the 
physical environment until Fund approval is received; and
    (iii) The outcome of the environmental review required by this part;
    (3) The Fund will perform or have performed the environmental 
reviews required by this part;
    (4) A preliminary approval of an Application may be withdrawn or 
further conditions may be imposed based upon the outcome of an 
environmental review required by this part; and
    (5) If the designated Fund official determines that the Application 
proposes actions that require an environmental assessment or an EIS, the 
environmental assessment and/or EIS must be completed and circulated 
prior to the use of Federal funds for any activity that triggers the 
need for an environmental assessment and/or EIS.



Sec. 1815.106  Supplemental environmental review.

    (a) The designated Fund official shall determine whether the 
proposed actions in the Application are sufficiently definite to perform 
a meaningful environmental review during the preliminary approval stage.
    (b) If the designated Fund official determines that the Application 
is sufficiently definite to perform a meaningful environmental review 
during the

[[Page 1011]]

preliminary approval stage, no conditions for supplemental environmental 
review shall be imposed.
    (c) If the designated Fund official determines that the Application, 
or any part of the Application, is not sufficiently definite to complete 
a meaningful environmental review during the preliminary approval stage, 
the Fund shall require a supplemental environmental review prior to the 
taking of any action directly using Fund financial assistance that is 
not categorically excluded from environmental review or for which an 
environmental assessment or EIS has not been approved by the Fund. The 
applicant shall notify the designated Fund official when proposing any 
action requiring a supplemental environmental review and shall supply to 
the Fund all information necessary for the Fund to perform the 
supplemental environmental review. The Fund shall perform or have 
performed such a supplemental environmental review. The applicant shall 
not use any Fund financial assistance to perform any of the proposed 
actions requiring a supplemental environmental review that affect the 
physical environment until Fund approval for such action is received.



Sec. 1815.107  Determination of review requirement.

    In deciding whether to prepare an EIS, the designated Fund official 
shall determine whether the proposal is one that normally:
    (a) Requires an EIS;
    (b) Requires an environmental assessment, but not necessarily an 
EIS; or
    (c) Does not require either an EIS or an environmental assessment 
(categorical exclusion).



Sec. 1815.108  Actions that normally require an EIS.

    (a) If necessary, the Fund shall perform or have performed an 
environmental assessment to determine if an Application, or any portion 
of an Application, requires an EIS. However, it may be readily apparent 
that a proposed action in an Application will have a significant impact 
on the environment; in such cases, an environmental assessment is not 
required and the Fund shall immediately begin to prepare, or have 
prepared, an EIS.
    (b) An EIS normally is required where an Application proposes to 
directly use financial assistance from the Fund for any Project that 
would:
    (1) Remove, demolish, convert, or substantially rehabilitate 2,500 
or more existing housing units, or would result in the construction or 
installation of 2,500 or more new housing units, or which would provide 
sites for 2,500 or more new housing units; or
    (2) Remove, demolish, convert, or substantially rehabilitate 
1,500,000 square feet or more of commercial space, or would result in 
the construction or installation of 1,500,000 square feet or more of new 
commercial space, or which would provide sites for 1,500,000 square feet 
or more of new commercial space.



Sec. 1815.109  Preparation of an EIS.

    (a) If the Fund determines that an EIS should be prepared, it shall 
publish a notice of intent in the Federal Register in accordance with 40 
CFR 1501.7 and 1508.22 of the CEQ regulations. After publishing the 
notice of intent, the Fund shall begin to prepare or have prepared the 
EIS. Procedures for preparing the EIS are set forth in 40 CFR part 1502 
of the CEQ regulations.
    (b) The Fund may supplement a draft or final EIS at any time. The 
Fund shall prepare or have prepared a supplement to either the draft or 
final EIS when:
    (1) Substantial changes are proposed to an action contained in the 
draft or final EIS that are relevant to environmental concerns or there 
are significant new circumstances or information relevant to 
environmental concerns and bearing on the proposed action or its 
impacts; or
    (2) Actions are proposed which relate or are similar to other 
action(s) taken or proposed and that together have a cumulatively 
significant impact on the environment.



Sec. 1815.110  Categorical exclusion.

    The CEQ regulations provide for the categorical exclusion of actions 
that do not individually or cumulatively have

[[Page 1012]]

a significant effect on the human environment (40 CFR 1508.4). 
Therefore, neither an environmental assessment nor an EIS is required 
for such actions. An action which falls into one of the categories below 
may still require the preparation of an EIS or environmental assessment 
if the designated Fund official determines it meets the criteria stated 
in Sec. 1815.109 or involves extraordinary circumstances that may have a 
significant environmental effect. The Fund has determined the following 
categorical exclusions:
    (a) Actions directly related to the administration or operation of 
the Fund (e.g. personnel actions, including, but not limited to, staff 
recruitment and training; purchase of goods and services for the Fund, 
including, but not limited to, furnishings, equipment, supplies and 
services; space acquisition; property management; and security);
    (b) Actions directly related to and implementing proposals for which 
an environmental assessment or an environmental assessment and EIS have 
been prepared;
    (c) Actions directly related to the granting or receipt of Bank 
Enterprise Act awards pursuant to part 1806 of this chapter;
    (d) Actions directly related to training and/or technical 
assistance;
    (e) Projects for the acquisition, disposition, rehabilitation and/or 
modernization of 500 existing housing units or less when all the 
following conditions are met:
    (1) Unit density is not increased more than 20 percent;
    (2) The Project does not involve changes in land use from 
nonresidential to residential;
    (3) The estimated cost of rehabilitation is less than 75 percent of 
the total estimated cost of replacement after rehabilitation; and
    (4) The Project does not involve the demolition of one or more 
buildings containing the primary use served by the project that, 
together, have more than 20 percent of the square footage of the 
Project;
    (f) Projects for the construction of 200 housing units or less when 
all the following conditions are met:
    (1) The Project does not involve changes in existing land use from 
nonresidential to residential; and
    (2) The Project does not involve the demolition of one or more 
buildings containing the primary use served by the project that, 
together, have more than 20 percent of the square footage of the 
Project;
    (g) Projects for the acquisition, disposition, rehabilitation and/or 
modernization of 200,000 square feet or less of existing commercial 
space when all the following conditions are met:
    (1) The Project does not involve changes in existing land use from 
residential to nonresidential;
    (2) The estimated cost of rehabilitation is less than 75 percent of 
the total estimated cost of replacement after rehabilitation; and
    (3) The Project does not involve the demolition of more than 10,000 
square feet of commercial space containing the primary use served by the 
Project;
    (h) Projects for the construction of 100,000 square feet or less of 
commercial space when all the following conditions are met:
    (1) The Project does not involve changes in existing land use from 
residential to nonresidential: and
    (2) The Project does not involve the demolition of more than 10,000 
square feet of commercial space containing the primary use served by the 
Project;
    (i) Projects for the acquisition of an existing structure, provided 
that the property to be acquired is in place and will be retained in the 
same use;
    (j) Projects involving Fund financial assistance of $1,000,000 or 
less;
    (k) Actions directly related to the provision of residential tenant-
based rental assistance, Consumer Loans, health care, child care, 
educational, cultural and/or social services;
    (l) Actions involving Fund financial assistance that is used to 
increase the permanent capital and/or liquidity of an applicant;
    (m) Actions where no use of Federal funds is involved in the 
activity or Project; and
    (n) Actions directly related to the provision of working capital, 
the acquisition of machinery and equipment or the purchase of inventory, 
raw materials or supplies.

[[Page 1013]]



Sec. 1815.111  Actions that require an environmental assessment.

    If a Project or action is not one that normally requires an EIS and 
does not qualify for categorical exclusion, the Fund shall prepare, or 
have prepared, an environmental assessment.



Sec. 1815.112  Preparation of an environmental assessment.

    (a) The Fund shall begin the preparation of an environmental 
assessment as early as possible after the designated Fund official has 
determined that it is required. The Fund may prepare an environmental 
assessment at any time to assist planning and decisionmaking.
    (b) An environmental assessment is a concise public document used to 
determine whether to prepare an EIS. An environmental assessment aids in 
complying with the NEPA when no EIS is necessary, and it facilitates the 
preparation of an EIS, if one is necessary. The environmental assessment 
shall contain brief discussions of the following topics:
    (1) Purpose and need for the proposed action;
    (2) Description of the proposed action;
    (3) Alternatives considered, including the no action alternative;
    (4) Environmental effects of the proposed action and alternative 
actions; and
    (5) Listing of agencies, organizations or persons consulted.
    (c) The most important or significant environmental consequences and 
effects on the areas listed below should be addressed in the 
environmental assessment. Only those areas which are specifically 
relevant to the particular proposal should be addressed. Those areas 
should be addressed in as much detail as is necessary to allow an 
analysis of the alternatives and the proposal. The areas to be 
considered are the following:
    (1) Natural/ecological features (such as floodplain, wetlands, 
coastal zones, wildlife refuges, and endangered species);
    (2) Air quality;
    (3) Sound levels;
    (4) Water supply, wastewater treatment and water runoff;
    (5) Energy requirements and conservation;
    (6) Solid waste;
    (7) Transportation;
    (8) Community facilities and services;
    (9) Social and economic;
    (10) Historic and aesthetic; and
    (11) Other relevant factors.
    (d) If the Fund completes an environmental assessment and determines 
that an EIS is not required, then the Fund shall prepare a finding of no 
significant impact. The finding of no significant impact shall be made 
available to the public by the Fund as specified in 40 CFR 1506.6 of the 
CEQ regulations.



Sec. 1815.113  Public involvement.

    All information collected by the Fund pursuant to this part shall be 
available to the public consistent with the CEQ regulations. Interested 
persons may obtain information concerning any pending EIS or any other 
element of the environmental review process of the Fund by contacting 
the Community Development Financial Institutions Fund, Department of the 
Treasury, 1500 Pennsylvania Avenue NW., room 5116, Washington, DC 20220, 
or such other contact entity designated by the Fund.



Sec. 1815.114  Fund decisionmaking procedures.

    To ensure that at major decisionmaking points all relevant 
environmental concerns are considered by the Decisionmaker, the 
following procedures are established:
    (a) An environmental document, i.e., the EIS, environmental 
assessment, finding of no significant impact, or notice of intent, in 
addition to being prepared at the earliest point in the decisionmaking 
process, shall accompany the relevant proposal or action through the 
Fund's decisionmaking process to ensure adequate consideration of 
environmental factors;
    (b) The Decisionmaker shall consider in its decisionmaking process 
only those alternatives discussed in the relevant environmental 
documents. Also, where an EIS has been prepared, the decisionmaker shall 
consider all comments received during any comment process and all 
alternatives described

[[Page 1014]]

in the EIS. A written record of the consideration of alternatives during 
the decisionmaking process shall be maintained; and
    (c) Any environmental document prepared for a proposal or action 
shall be made part of the record of any formal rulemaking by the Fund.



Sec. 1815.115  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB control 
number 1505-0153 (expires September 30, 1998).


[[Page 1015]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Material Approved for Incorporation by Reference
  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  Redesignation Table
  List of CFR Sections Affected--Transferred Regulations Formerly 
Appearing in Title 12 CFR, Chapter V
  List of CFR Sections Affected

[[Page 1017]]

            Material Approved for Incorporation by Reference

                     (Revised as of January 1, 2001)

  The Director of the Federal Register has approved under 5 U.S.C. 
552(a) and 1 CFR Part 51 the incorporation by reference of the following 
publications. This list contains only those incorporations by reference 
effective as of the revision date of this volume. Incorporations by 
reference found within a regulation are effective upon the effective 
date of that regulation. For more information on incorporation by 
reference, see the preliminary pages of this volume.


12 CFR (PARTS 600-END)

THRIFT DEPOSITOR OVERSIGHT BOARD
                                                                  12 CFR
Uniform Commercial Code, Revised Article 8,             1511.1; 1511.2; 
  Investment Securities, (with Conforming and                     1511.3
  Miscellaneous Amendments to Articles 1,3,4,5,9, 
  and 10) 1994 Official Text.



[[Page 1019]]



                    Table of CFR Titles and Chapters




                     (Revised as of January 1, 2001)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                          Title 2--[Reserved]

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  General Accounting Office (Parts 1--99)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
       VII  Advisory Commission on Intergovernmental Relations 
                (Parts 1700--1799)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)
      XXIV  Federal Energy Regulatory Commission (Part 3401)

[[Page 1020]]

       XXV  Department of the Interior (Part 3501)
      XXVI  Department of Defense (Part 3601)
    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
    LXXIII  Department of Agriculture (Part 8301)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)
     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)
    LXXVII  Office of Management and Budget (Part 8701)

                          Title 6--[Reserved]

              

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture

[[Page 1021]]

         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
      XIII  Northeast Dairy Compact Commission (Parts 1300--1399)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy, Department of Agriculture (Parts 
                2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)

[[Page 1022]]

    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Immigration and Naturalization Service, Department of 
                Justice (Parts 1--599)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Part 1800)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)

[[Page 1023]]

        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 1024]]

        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Export Administration, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  United States Customs Service, Department of the 
                Treasury (Parts 1--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 1025]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board Regulations (Parts 
                900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Board for International Broadcasting (Parts 1300--
                1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 1026]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--999)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

[[Page 1027]]

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--799)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Bureau of Alcohol, Tobacco and Firearms, Department of 
                the Treasury (Parts 1--299)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--199)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)

[[Page 1028]]

       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Pension and Welfare Benefits Administration, 
                Department of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
        VI  Bureau of Mines, Department of the Interior (Parts 
                600--699)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)

[[Page 1029]]

         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

[[Page 1030]]

                        Title 35--Panama Canal

         I  Panama Canal Regulations (Parts 1--299)

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Part 1501)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--799)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

[[Page 1031]]

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans 
                Employment and Training, Department of Labor 
                (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-70)
       304  Payment from a Non-Federal Source for Travel Expenses 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Health Care Financing Administration, Department of 
                Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands

[[Page 1032]]

         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10005)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)

[[Page 1033]]

       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Transportation (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Department of Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  United States Agency for International Development 
                (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)

[[Page 1034]]

        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  Panama Canal Commission (Parts 3500--3599)
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)
        54  Defense Logistics Agency, Department of Defense (Part 
                5452)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Research and Special Programs Administration, 
                Department of Transportation (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Transportation (Parts 400--
                499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Bureau of Transportation Statistics, Department of 
                Transportation (Parts 1400--1499)

[[Page 1035]]

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR



[[Page 1037]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of January 1, 2001)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Commission on Intergovernmental          5, VII
     Relations
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development, United      22, II
     States
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Alcohol, Tobacco and Firearms, Bureau of          27, I
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 1038]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Board for International Broadcasting              22, XIII
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Export Administration, Bureau of                15, VII
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Corporation for National and Community Service    45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Customs Service, United States                    19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51

[[Page 1039]]

  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 2
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   5, LIV; 40, I, IV, VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                25, III, LXXVII; 48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export Administration, Bureau of                  15, VII
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1

[[Page 1040]]

Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Accounting Office                         4, I
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
     of Certain Employees
[[Page 1041]]

  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Health Care Financing Administration            42, IV
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Health Care Financing Administration              42, IV
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Naturalization Service            8, I
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Intergovernmental Relations, Advisory Commission  5, VII
     on
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II

[[Page 1042]]

  Minerals Management Service                     30, II
  Mines, Bureau of                                30, VI
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I; 40, IV
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration and Naturalization Service          8, I
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Pension and Welfare Benefits Administration     29, XXV
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training, Office of    41, 61; 20, IX
       the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
Management and Budget, Office of                  5, III, LXXVII; 48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II
Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Mines, Bureau of                                  30, VI

[[Page 1043]]

Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Dairy Compact Commission                7, XIII
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Panama Canal Commission                           48, 35
Panama Canal Regulations                          35, I
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension and Welfare Benefits Administration       29, XXV
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII

[[Page 1044]]

  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Special Programs Administration      49, I
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V

[[Page 1045]]

  Research and Special Programs Administration    49, I
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Statistics Brureau                 49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol, Tobacco and Firearms, Bureau of        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs Service, United States                  19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training, Office of the  41, 61; 20, IX
     Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 1047]]





                           Redesignation Table




                           Redesignation Table
------------------------------------------------------------------------
                                              12 CFR Ch. IX New Section
    12 CFR Ch. V Former Section Numbers                Numbers
------------------------------------------------------------------------
Part 506                                    Part 910
506.1.....................................  910.1
506.2.....................................  910.2
506.3.....................................  910.3
506.4.....................................  910.4
506.5.....................................  910.5
506.6.....................................  910.6
 
Part 506a                                   Part 912
506a.1....................................  912.1
506a.2....................................  912.2
506a.3....................................  912.3
506a.4....................................  912.4
506a.5....................................  912.5
506a.6....................................  912.6
506a.7....................................  912.7
506a.8....................................  912.8
506a.9....................................  912.9
 
Subchapter B                                Subchapter B
Part 521                                    Part 931
521.1.....................................  931.1
521.2.....................................  931.2
521.3.....................................  931.3
521.4.....................................  931.4
521.5.....................................  931.5
521.6.....................................  931.6
521.6-1...................................  931.7
521.6-2...................................  931.8
521.7.....................................  931.9
521.8.....................................  931.10
521.9.....................................  931.11
521.10....................................  931.12
521.11....................................  931.13
 
Part 522                                    Part 932
522.1.....................................  932.1
522.5.....................................  932.2
522.6.....................................  932.3
522.10....................................  932.4
522.11....................................  932.5
522.12....................................  932.6
522.13....................................  932.7
522.20....................................  932.8
522.21....................................  932.9
522.22....................................  932.10
522.23....................................  932.11
522.24....................................  932.12
522.25....................................  932.13
522.26....................................  932.14
522.27....................................  932.15
522.28....................................  932.16
522.60....................................  932.27
522.61....................................  932.28
522.62....................................  932.29
522.70....................................  932.40
522.71....................................  932.41
522.72....................................  932.42
522.73....................................  932.43
522.75....................................  932.50
522.76....................................  932.51
522.80....................................  932.55
522.81....................................  932.56
522.82....................................  932.57
522.85....................................  932.60
522.86....................................  932.61
522.87....................................  932.62
522.90....................................  932.65
 
Part 523                                    Part 933
523.1.....................................  933.1
523.3.....................................  933.3
523.3-1...................................  933.4
523.3-2...................................  933.5
523.3-3...................................  933.6
523.4.....................................  933.7
523.5.....................................  933.8
523.6.....................................  933.9
523.7.....................................  933.10
523.8.....................................  933.11
523.10....................................  933.13
523.11....................................  933.14
523.12....................................  933.15
523.13....................................  933.16
523.14....................................  933.17
523.15....................................  933.18
523.20....................................  933.22
523.25....................................  933.27
523.29....................................  933.31
523.30....................................  933.32
523.31....................................  933.33
 
Part 524                                    Part 934
524.1.....................................  934.1
524.2.....................................  934.2
524.3.....................................  934.3
524.4.....................................  934.4
524.5.....................................  934.5
524.6.....................................  934.6
524.7.....................................  934.7
524.8.....................................  934.8
524.9.....................................  934.9
524.10....................................  934.10
524.11....................................  934.11
524.12....................................  934.12
524.13....................................  934.13
 
Part 525                                    Part 935
525.1.....................................  935.1
525.2.....................................  935.2
525.3.....................................  935.3
525.4.....................................  935.4
525.5.....................................  935.5
525.6.....................................  935.6
525.7.....................................  935.7
525.8.....................................  935.8
525.9.....................................  935.9
525.10....................................  935.10
525.33....................................  935.30
525.34....................................  935.31
525.35....................................  935.32
525.36....................................  935.33
 

[[Page 1048]]

 
Part 526                                    Part 936
526.1.....................................  936.1
526.2.....................................  936.2
 
Part 527                                    Part 937
527.1.....................................  937.1
527.2.....................................  937.2
527.3.....................................  937.3
527.4.....................................  937.4
527.5.....................................  937.5
527.6.....................................  937.6
527.7.....................................  937.7
527.8.....................................  937.8
 
Part 528                                    Part 938
528.1.....................................  938.1
528.1a....................................  938.2
528.2.....................................  938.3
528.2a....................................  938.4
528.3.....................................  938.5
528.4.....................................  938.6
528.5.....................................  938.7
528.6.....................................  938.8
528.7.....................................  938.9
528.8.....................................  938.10
 
Part 529                                    Part 939
529.1.....................................  939.1
529.2.....................................  939.2
529.3.....................................  939.3
529.4.....................................  939.4
529.5.....................................  939.5
529.6.....................................  939.6
529.7.....................................  939.7
529.8.....................................  939.8
529.9.....................................  939.9
529.10....................................  939.10
529.11....................................  939.11
529.12....................................  939.12
 
Part 531                                    Part 940
531.1.....................................  940.1
531.2.....................................  940.2
531.4.....................................  940.3
531.8.....................................  940.4
531.9.....................................  940.5
531.10....................................  940.6
 
Part 532                                    Part 941
532.1.....................................  941.1
 
Part 533                                    Part 942
533.1.....................................  942.1
 
Part 534                                    Part 943
534.1.....................................  943.1
534.2.....................................  943.2
534.3.....................................  943.3
534.4.....................................  943.4
534.5.....................................  943.5
534.6.....................................  943.6
534.7.....................................  943.7
 
Part 535                                    Part 944
535.1.....................................  944.1
535.2.....................................  944.2
535.3.....................................  944.3
535.4.....................................  944.4
535.5.....................................  944.5
------------------------------------------------------------------------


[[Page 1049]]



List of CFR Sections Affected--Transferred Regulations Formerly 
Appearing in Title 12 CFR, Chapter V



Regulations formerly issued by the Federal Home Loan Bank Board were 
transferred to the Federal Deposit Insurance Corporation at 54 FR 42800, 
Oct. 18, 1989. The following list contains all changes since January 1, 
1986, to the regulations formerly codified in 12 CFR Chapter V prior to 
transfer into 12 CFR Chapter III.
For the period before January 1, 1986, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, and 1973-1985'' published in seven 
separate volumes.

                                  1986

12 CFR
                                                                   51 FR
                                                                    Page
Chapter V
522  Authority citation revised....................................27165
    Section authority citations removed............................27166
522.62  Added......................................................28222
    Correctly designated...........................................28690
522.90  Added......................................................27165
524  Authority citation revised....................................34951
524.1  Authority citation removed..................................34951
524.7  Authority citation removed..................................34951
524.13  Revised....................................................34951
526  Revised.......................................................10816
526.2  (h) revised.................................................34951
531  Authority citation revised....................................10816
531.1  (a) and (d) amended.........................................33584
531.10  Removed; new 531.10 redesignated from 531.11 and authority 
        citation removed...........................................10816
531.11  Redesignated as 531.10 and authority citation removed......10816
532  Authority citation revised....................................10816
532.1  Amended..............................................10816, 34951
535  Exemption.....................................................45879

                                  1987

12 CFR
                                                                   52 FR
                                                                    Page
Chapter V
522  Authority citation revised....................................33402
522.81  (a) (3) and (4) amended; (a)(5) added......................33402
522.87  (a) designation removed.....................................7122
522.90  (a)(2) and (c) revised; (b)(2) amended.....................37763
523  Authority citation revised; section authority citations 
        removed.....................................................7122
523.3-2  Heading and (b) revised; (c) through (g) added............30142
523.3-3  Amended....................................................7122
523.10  (h)(5) amended..............................................7122
524  Authority citation revised....................................49381
524.11  Revised....................................................49381

                                  1988

12 CFR
                                                                   53 FR
                                                                    Page
Chapter V
522.10  Revised....................................................18262
522.72  Revised....................................................52655
524.6  Amended.....................................................30252
525  Authority citation revised; section authority citations 
        removed......................................................320
525.1  Revised.......................................................320

                                  1989

12 CFR
                                                                   54 FR
                                                                    Page
Chapter V
Heading revised....................................................35453
    Revised........................................................49411
506  Redesignated as 12 CFR Part 910 and heading revised...........36759
506a  Redesignted as 12 CFR Part 912 and heading revised...........36759

[[Page 1050]]

521  Redesignated as 12 CFR Part 931...............................36759
522  Redesignated as 12 CFR Part 932...............................36759
523  Redesignated as 12 CFR Part 933...............................36759
524  Redesignated as 12 CFR Part 934...............................36759
525  Redesignated as 12 CFR Part 935...............................36759
525.7  (b)(3) amended; (b)(4) redesignated as (b)(5); new (b)(4) 
        added.......................................................6113
526  Redesignated as 12 CFR Part 936...............................36759
527  Redesignated as 12 CFR Part 937...............................36759
528  Authority citation revised....................................30537
    Redesignated as 12 CFR Part 938................................36759
528.1  (c) revised.................................................30537
528.1a  Revised....................................................30537
528.2  Revised.....................................................30537
528.3  (a) revised.................................................30537
528.4  Revised.....................................................30537
528.5  (b) revised.................................................30537
528.6  Appendixes A and B revised..................................30538
528.7  (f) revised.................................................30541
528.8  Revised.....................................................30541
529  Redesignated as 12 CFR Part 939...............................36759
531  Redesignated as 12 CFR Part 940...............................36759
531.8  (a) revised; (c)(8) added...................................30542
532  Redesignated as 12 CFR Part 941 and heading revised...........36759
533  Redesignated as 12 CFR Part 942...............................36759
534  Redesignated as 12 CFR Part 943...............................36759
535  Redesignated as 12 CFR Part 944...............................36759

[[Page 1051]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations which were 
made by documents published in the Federal Register since January 1, 
1986, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 1986, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, and 1973-1985'' published in seven 
separate volumes.

                                  1986

12 CFR
                                                                   51 FR
                                                                    Page
Chapter VI
600  Revised.......................................................41933
    Effective date corrected.......................................44408
601  Authority citation revised....................................41935
601.100  (b) revised...............................................41935
    Effective date corrected.......................................44408
601.101  Revised...................................................41935
    Effective date corrected.......................................44408
601.110  Introductory text, (a), (b), (d) (4) and (5), and (e) 
        through (i) revised........................................41935
    Effective date corrected.......................................44408
601.126  Revised...................................................41936
    Effective date corrected.......................................44408
601.127  (c) and (e) revised.......................................41936
    Effective date corrected.......................................44408
601.130  Revised...................................................41936
    Effective date corrected.......................................44408
601.140  Revised...................................................41936
    Effective date corrected.......................................44408
601.141  Revised...................................................41936
    Effective date corrected.......................................44408
601.150  Introductory text, (b), and (d) revised...................41936
    Effective date corrected.......................................44408
601.165  (b) revised...............................................41937
    Effective date corrected.......................................44408
601.170  (a) (2), (3), and (4) revised.............................41937
    Effective date corrected.......................................44408
601.171  Introductory text revised.................................41937
    Effective date corrected.......................................44408
601.176  Revised...................................................41937
    Effective date corrected.......................................44408
601.178  Revised...................................................41937
    Effective date corrected.......................................44408
601.180  Revised...................................................41937
    Effective date corrected.......................................44408
601.190  Removed...................................................41938
    Effective date corrected.......................................44408
602  Authority citation revised..............................8656, 41938
602.200  Revised...................................................41938
    Effective date corrected.......................................44408
602.205  Revised...................................................41938
    Effective date corrected.......................................44408
602.210  Removed...................................................41938
    Effective date corrected.......................................44408
602.215  Introductory text, (a), (b), (c), and (e) revised.........41938
    Effective date corrected.......................................44408
602.220  Revised...................................................41938
    Effective date corrected.......................................44408
602.235  Removed...................................................41938
    Effective date corrected.......................................44408
602.240  Removed...................................................41938
    Effective date corrected.......................................44408
602.245  Removed...................................................41938
    Effective date corrected.......................................44408
602.250  (a) introductory text, (5), and (8) revised (effective 
        date pending)...............................................8656
602.260  Revised...................................................41938
    Effective date corrected.......................................44408
602.261  (a), (b), (c), and (d) introductory text revised..........41939
    Effective date corrected.......................................44408
602.265  (c), (d)(2), and (e) revised..............................41939
    Effective date corrected.......................................44408
602.280  Revised...................................................41939
    Effective date corrected.......................................44408

[[Page 1052]]

602.281  (a) through (j) revised...................................41940
    Effective date corrected.......................................44408
602.282  Revised...................................................41940
    Effective date corrected.......................................44408
602.283  Revised...................................................41940
    Effective date corrected.......................................44408
602.284  Revised...................................................41940
    Effective date corrected.......................................44408
602.285  (b) revised...............................................41940
    Effective date corrected.......................................44408
602.286  Revised...................................................41940
    Effective date corrected.......................................44408
602.288  (b) and (c) revised.......................................41940
    Effective date corrected.......................................44408
602.289  Revised...................................................41941
    Effective date corrected.......................................44408
603  Authority citation revised....................................41941
603.300  (a) and (b)(1) revised....................................41941
    Effective date corrected.......................................44408
603.305  Revised...................................................41941
    Effective date corrected.......................................44408
603.310  Revised...................................................41941
    Effective date corrected.......................................44408
603.315  Revised...................................................41941
    Effective date corrected.......................................44408
603.320  (a) introductory text and (3), (b), (c), and (d) revised 
                                                                   41941
    Effective date corrected.......................................44408
603.325  Revised...................................................41942
    Effective date corrected.......................................44408
603.330  Revised...................................................41942
    Effective date corrected.......................................44408
603.335  Introductory text and (b) revised.........................41942
    Effective date corrected.......................................44408
603.340  (a) through (d) revised...................................41942
    Effective date corrected.......................................44408
604  Heading and authority citation revised........................41942
604.300  Redesignated as 603.400 and revised.......................41942
    Effective date corrected.......................................44408
604.305  Redesignated as 604.405 and (b) revised...................41942
    Effective date corrected.......................................44408
604.310  Redesignated as 604.410 and revised.......................41942
    Effective date corrected.......................................44408
604.315  Redesignated as 604.415 and revised.......................41943
    Effective date corrected.......................................44408
604.320  Redesignated as 604.420 and revised.......................41943
    Effective date corrected.......................................44408
604.325  Redesignated as 604.425 and (a) and (c) revised...........41943
    Effective date corrected.......................................44408
604.330  Redesignated as 604.430 and (a) and (c) revised...........41943
    Effective date corrected.......................................44408
604.335  Redesignated as 604.435 and (a), (c), (d), and (e) 
        revised....................................................41943
    Effective date corrected.......................................44408
604.340  Redesignated as 604.440 and revised.......................41944
    Effective date corrected.......................................44408
604.400  Redesignated as 604.300 and revised.......................41942
    Effective date corrected.......................................44408
604.405  Redesignated from 604.305 and (b) revised.................41942
    Effective date corrected.......................................44408
604.410  Redesignated from 604.310 and revised.....................41942
    Effective date corrected.......................................44408
604.415  Redesignated from 604.315 and revised.....................41943
    Effective date corrected.......................................44408
604.420  Redesignated from 604.320 and revised.....................41943
    Effective date corrected.......................................44408
604.425  Redesignated from 604.325 and (a) and (c) revised.........41943
    Effective date corrected.......................................44408
604.430  Redesignated from 604.330 and (a) and (c) revised.........41943
    Effective date corrected.......................................44408
604.435  Redesignated from 604.335 and (a), (c), (d), and (e) 
        revised....................................................41943
    Effective date corrected.......................................44408
604.440  Redesignated from 604.340 and revised.....................41944
    Effective date corrected.......................................44408
611  Authority citation revised.............................32441, 41944
611.100  Revised...................................................41944
    Effective date corrected.......................................44408
611.200 (Subpart B)  Removed.......................................41944
    Effective date corrected.......................................44408
611 (Subpart C)  Removed...........................................41944
    Effective date corrected.......................................44408
611.400  (a) revised...............................................41944
    Effective date corrected.......................................44408
611.500 (Subpart E)  Added.........................................41944
    Effective date corrected.......................................44408
611.1000  Revised..................................................41944
    Effective date corrected.......................................44408
611.1010  (i) revised..............................................41945
    Effective date corrected.......................................44408
611.1090  Revised (effective date pending).........................32441

[[Page 1053]]

    Eff. 10-13-86..................................................37549
611.1115  Removed (effective date pending).........................32441
    Eff. 10-13-86..................................................37549
611.1120  (b) and (c) revised......................................41945
    Effective date corrected.......................................44408
611.1121  Introductory text, and (b), (c), and (d) revised 
        (effective date pending)...................................32441
    Eff. 10-13-86..................................................37549
611.1122  (a) introductory text, (3), (b), (c), (e) introductory 
        text, (4), (g) and (i) revised (effective date pending)....32441
    Eff. 10-13-86..................................................37549
611.1123  (a) introductory text and (7) revised (effective date 
        pending)...................................................32442
    Eff. 10-13-86..................................................37549
611.1124  Revised (effective date pending).........................32442
    Eff. 10-13-86..................................................37549
611.1125  Revised (effective date pending).........................32443
    Eff. 10-13-86..................................................37549
611.1130  Redesignated from 611.1145................................8666
    (d) revised....................................................41945
    Effective date corrected.......................................44408
611.1135  Redesignated from 611.1150................................8666
    (a), (b) (2) and (7), (c), (d)(1) introductory text, (iv), and 
(2), and (e) revised...............................................41945
    Effective date corrected.......................................44408
611.1136  Redesignated from 611.1151................................8666
611.1140--611.1142 (Subpart J)  Added...............................8666
    Comment time extended...................................16291, 21331
611.1141  (b) introductory text corrected..........................10353
611.1142  (c) revised..............................................16292
    (h), (l)(9), and (m) added.....................................21334
611.1145  Redesignated as 611.1130..................................8666
611.1150  (b)(3)(xii) removal eff. 12-15-85.........................2472
    Redesignated as 611.1135........................................8666
611.1151  Redesignated as 611.1136..................................8666
611.1155--611.1158 (Subpart K)  Added (effective date pending).....32443
    Eff. 10-13-86..................................................37549
611.1160--611.1168 (Subpart J)  Redesignated as Subpart L...........8666
611.1160--611.1168 (Subpart L)  Redesignated from Subpart J.........8666
611.1160  Revised (effective date pending).........................32444
    Eff. 10-13-86..................................................37549
611.1161  Revised (effective date pending).........................32444
    Eff. 10-13-86..................................................37549
611.1165  Revised (effective date pending).........................32445
    Eff. 10-13-86..................................................37549
611.1167  Revised (effective date pending).........................32445
    Eff. 10-13-86..................................................37549
611.1168  Revised..................................................41945
    Effective date corrected.......................................44408
611.1170--611.1176 (Subpart K)  Redesignated as Subpart M...........8671
611.1170--611.1176 (Subpart M)  Redesignated from Subpart K.........8671
611.1170  Revised (effective date pending).........................32446
    Eff. 10-13-86..................................................37549
611.1174  (c) and (d)(5) revised...................................41946
    Effective date corrected.......................................44408
611.1175  Revised (effective date pending).........................32446
    Eff. 10-13-86..................................................37549
611.1176  Revised..................................................41946
    Effective date corrected.......................................44408
611.1180--611.1183 (Subpart N)  Added (effective date pending).....32447
    Eff. 10-13-86..................................................37549
612  Authority citation revised....................................41946
612.2130  (p) and (t) revised......................................41946
    Effective date corrected.......................................44408
612.2150  (c) introductory text revised............................41946
    Effective date corrected.......................................44408
612.2200  Heading and (a) revised..................................41946
    Effective date corrected.......................................44408
612.2220  Revised..................................................41946
    Effective date corrected.......................................44408
613  Authority citation revised....................................41947
613.3170  (b) revised..............................................41947
    Effective date corrected.......................................44408
614  Authority citation revised.............................39500, 41947
614.4010  Removed..................................................41947
    Effective date corrected.......................................44408
614.4015  Removed..................................................41947
    Effective date corrected.......................................44408

[[Page 1054]]

614.4020  Removed..................................................41947
    Effective date corrected.......................................44408
614.4260  (c)(5) revised...........................................41947
    Effective date corrected.......................................44408
614.4330  (c)(12) removal, (d) introductory text revision, and 
        (d)(5) addition eff. 1-21-86................................4891
614.4365--614.4367 (Subpart K)  Added..............................39500
614.4440--614.4444 (Subpart L)  Heading revised....................39501
614.4440  Revised..................................................39501
614.4441  Revised..................................................39502
614.4442  Revised..................................................39502
614.4443  Added....................................................39502
614.4444  Added....................................................39502
614.4450  Revised..................................................41947
    Effective date corrected.......................................44408
614.4460  (a), (c), and (d) revised................................41947
    Effective date corrected.......................................44408
614.4510  (d) introductory text, (1), and (2) revised..............39502
614.4512  Removed..................................................39502
614.4513  Added....................................................39502
614.4590  Revised..................................................41947
    Effective date corrected.......................................44408
614.4710  Introductory text, (a)(1) introductory text and (ii), 
        (2), (3), and (4), (d) (1) and (2), and (e) revised........41947
    Effective date corrected.......................................44408
614.4900  (i) revised..............................................41948
    Effective date corrected.......................................44408
615  Authority citation revised....................................41948
615.5150  Revision eff. 1-31-86.....................................4891
615.5250  (b) revised..............................................41948
    Effective date corrected.......................................44408
615.5255  Added....................................................39503
615.5453  Revised..................................................41948
    Effective date corrected.......................................44408
615.5495  (b) revised..............................................41948
    Effective date corrected.......................................44408
617  Heading and authority citation revised........................41948
    Effective date corrected.......................................44408
617.7000--617.7090 (Subpart A)  Heading revised....................41948
    Effective date corrected.......................................44408
617.7000  Revised..................................................41948
    Effective date corrected.......................................44408
617.7020  Revised..................................................41948
    Effective date corrected.......................................44408
617.7030  Revised..................................................41948
    Effective date corrected.......................................44408
617.7050  Removed..................................................41949
    Effective date corrected.......................................44408
617.7060  Removed..................................................41949
    Effective date corrected.......................................44408
617.7070  Introductory text and (a) revised........................41949
    Effective date corrected.......................................44408
617.7080  Revised..................................................41949
    Effective date corrected.......................................44408
617.7100  Removed..................................................41949
    Effective date corrected.......................................44408
618  Authority citation revised.............................39503, 41949
618.8010  Removed..................................................39503
618.8020  Removed..................................................39503
618.8100  Introductory text revised................................41949
    Effective date corrected.......................................44408
618.8150  Removed..................................................41949
    Effective date corrected.......................................44408
618.8160  (a) and (b) revised......................................41949
    Effective date corrected.......................................44408
618.8200  Removed..................................................41949
    Effective date corrected.......................................44408
618.8310  Revised..................................................39503
618.8340  (c) revised..............................................41949
    Effective date corrected.......................................44408
618.8325  Added....................................................39504
618.8350  Removed..................................................41949
    Effective date corrected.......................................44408
618.8400  Revised..................................................41950
    Effective date corrected.......................................44408
618.8410  Revised..................................................41950
    Effective date corrected.......................................44408
620  Added (effective date pending).................................8656
    Authority citation revised..............................21340, 42086
620.1  (c) revised.................................................42086
620.2  (b) revised; (k) added (effective date pending).............21340
    Eff. 7-29-86...................................................29459
620.3  (f)(1)(i) and (iii), (g)(1)(iii)(B) and (2)(i), and (i) 
        revised (effective date pending)...........................21341
    Eff. 7-29-86...................................................29459
    (j)(2), (3)(i) introductory text and (ii) introductory text, 
(A), (B), (D), (E), (F), and (G) revised; (j)(3)(ii)(H) and (I) 
removed............................................................42087
    (j)(3)(i) introductory text correctly designated and correctly 
revised............................................................44783
620.10--620.11 (Subpart B)  Added (effective date pending).........21341
    Eff. 7-29-86...................................................29459
620.20  (c) revised (effective date pending).......................21343

[[Page 1055]]

    Eff. 7-29-86...................................................29459
621  Added (effective date pending).................................8661
    Authority citation revised.....................................21340
621.2  (a)(15)(iii) revised (effective date pending)...............21343
    Eff. 7-29-86...................................................29459
    (a)(15)(iv) removed; (a)(11), (15)(iii), and (18)(ii) revised 
                                                                   42087
    (a)(11)(iii) and (15)(iii) correctly revised; (a)(11) 
republished........................................................44783
622  Added (effective date pending)................................21139
    Eff. 7-28-86...................................................29460
623  Added (effective date pending)................................21147
    Eff. 7-28-86...................................................29460
624  Added.........................................................46600
Chapter VII
Chapter VII  Interpretation and policy statement............16292, 42083
701  Authority citation revised; section authority citations 
        removed....................................................10360
701.27  Revised....................................................10360
709  Removed.......................................................33029
740  Revised.......................................................37556
741  Authority citation revised....................................27523
    Revised........................................................37558
741.5  (b)(1) revised..............................................27523
745  Revised.......................................................37560
790  Authority citation revised; section authority citations 
        removed....................................................33588
790.2  Revised.....................................................33588
794  Added..................................................22889, 22896
794.170  (c) revised...............................................22889
795.1  (b) table amended (OMB numbers)..............................4158
Chapter XII
Chapter removed.....................................................9767
1201--1204  Removed.................................................9767

                                  1987

12 CFR
                                                                   52 FR
                                                                    Page
Chapter VI
602.250  (a) introductory text, (5) and (8) revision eff. 5-6-86 
                                                                    2105
605  Authority citation revised....................................18200
605.502  (d), (f) and (j) revised..................................18200
611  Authority citation corrected..................................48094
611.1020  Revised (effective date pending).........................36013
    Eff. 10-28-87..................................................41401
611.1021  Removed (effective date pending).........................36013
    Eff. 10-28-87..................................................41401
611.1022  Removed (effective date pending).........................36013
    Eff. 10-28-87..................................................41401
611.1030  Removed (effective date pending).........................36013
    Eff. 10-28-87..................................................41401
611.1031  Removed (effective date pending).........................36013
    Eff. 10-28-87..................................................41401
611.1140  (b) introductory text, (1)(ii) and (2)(v), (vi) (B), 
        (C), (F), and (H) and (4) (i), (ii) and (iii) revised; 
        (b)(1)(iii) added (effective date pending).................12142
    Eff. 5-20-87...................................................19129
611.1142  (i) introductory text, (3) and (l)(3) revised; (l)(10) 
        added (effective date pending).............................12143
    Eff. 5-20-87...................................................19129
614  Authority citation revised....................................43740
    Authority citation correctly revised...........................44970
    Authority citation corrected...................................46151
614.4341  Added (effective date pending)...........................43740
    Eff. 12-21-87..................................................48673
614.4366  (e) revised (effective date pending).....................12147
    Eff. 5-20-87...................................................19129
614.4367  (a) introductory text revised; (g) and (h) added 
        (effective date pending)...................................12147
    Eff. 5-20-87...................................................19129
614.4440  (c) revised (effective date pending)..............12147, 45162
    Eff. 5-20-87...................................................19129
614.4442  (b) revised (effective date pending).....................12147
    Eff. 5-20-87...................................................19129
    Revised (effective date pending)...............................45162
614.4443  Existing text designated as (a); (b) added (effective 
        date pending)..............................................12147
    Eff. 5-20-87...................................................19129
620  Addition eff. 5-6-86...........................................2105
    Hearings........................................................8581
620.3  Technical correction.........................................1440
621  Addition eff. 5-6-86...........................................2105
621.2  Technical correction.........................................1440
624  Hearings.......................................................2672

[[Page 1056]]

    Heading and authority citation revised.........................13429
    Authority citation revised.....................................43740
624.100  Revised (effective date pending)..........................43741
    Eff. 12-21-87..................................................48673
624.103  (b) revised (effective date pending)......................43741
    Eff. 12-21-87..................................................48673
624.104  Introductory text revised..................................2671
    Redesignated as 624.105; new 624.104 added.....................13429
624.105  Redesignated from 624.104.................................13429
    Amended........................................................37132
    (b) introductory text revised (effective date pending).........43741
    Eff. 12-21-87..................................................48673
624.110  Revised...................................................13429
624.111  Revised....................................................2671
    (b) revised (effective date pending)...........................43741
    Eff. 12-21-87..................................................48673
624.113  (b) introductory text and (1) introductory text revised 
                                                                    2671
    (a) and (b) introductory text and (1) introductory text 
revised............................................................13429
    (a), (b) introductory text, (1) introductory text and (ii) 
revised (effective date pending)...................................43741
    (b) introductory text correctly revised........................44970
    Eff. 12-21-87..................................................48673
624.114  Removed (effective date pending)..........................43741
    Eff. 12-21-87..................................................48673
Chapter VII
Interpretation and policy statement................................35231
700  Authority citation revised....................................34895
700.1  (h)(1) revised..............................................34895
701.13  Removed....................................................43318
701.21  (c)(7) revised..............................................8061
    (a), (c) (5) and (8), and (d)(5) revised; (h) added............12368
701.27  (c)(3) revised; (d)(6) redesignated as (d)(6)(i) and 
        amended; (c)(5) and (d)(6) (ii) and (iii) added............43570
701.36  (b)(6) revised; (e) (1) through (3) redesignated as (e)(1) 
        (i) through (iii) and revised; (b)(8) and new (e) (2) and 
        (3) added..................................................43570
703.2  (i) revised; (p) through (t) redesignated as (q) through 
        (u); new (p) added.........................................43570
703.4  (e) amended; (f) and (g) added..............................43570
705  Revised.......................................................34893
706  Added; interim................................................35061
    Revised........................................................46586
708  Revised.......................................................12374
721  Authority citation revised....................................43571
721.2  (c) revised; (d) and (e) added..............................43571
741  Authority citation revised....................................12370
741.3  Redesignated as 741.4; new 741.3 added......................12370
741.4  Redesignated as 741.5; new 741.4 redesignated from 741.3....12370
741.5  Redesignated as 741.6; new 741.5 redesignated from 741.4....12370
741.6  Redesignated as 741.7; new 741.6 redesignated from 741.5....12370
741.7  Redesignated as 741.8; new 741.7 redesignated from 741.6....12370
741.8  Redesignated as 741.9; new 741.8 redesignated from 741.7....12370
741.9  Redesignated as 741.10; new 741.9 redesignated from 741.8 
                                                                   12370
741.10  Redesignated from 741.9....................................12370
748  Heading and authority citation revised.........................2861
748.2  Added........................................................2861
    (b) revised.....................................................8062
790.4  (a)(7) revised..............................................27987
790.7  Revised.....................................................27987
795.1  (b) table amended (OMB numbers).............................28132

                                  1988

12 CFR
                                                                   53 FR
                                                                    Page
Chapter VI
600  Revised.......................................................16693
606  Added (effective date pending)................................19889
    Eff. 7-6-88....................................................25481

[[Page 1057]]

611  Authority citation revised...................................12140,
16695, 18810, 39080
611.100 (Subpart A)  Removed (effective date pending)..............50392
611.310--611.340 (Subpart C)  Added (effective date pending).......50392
611.400  Removed; new 611.400 redesignated from 611.1020 and 
        heading revised (effective date pending)...................50393
611.400 (Subpart D)  Heading revised (effective date pending)......50393
611.500--611.525 (Subpart E)  Revised (effective date pending).....50393
611.1000--611.1040 (Subpart F)  Revised (effective date pending) 
                                                                   50395
611.1020  Redesignated as 611.400 and heading revised (effective 
        date pending)..............................................50393
611.1122  (a) (5) and (6) and (e) (11) through (16) redesignated 
        as (a) (6) and (7) and (e) (16) through (21); new (e) (11) 
        through (15) and (a)(5) and (k) added; (g) revised 
        (effective date pending)...................................50396
611.1123  (a)(9) redesignated as (a)(11); new (a) (9), (10), and 
        (c) added (effective date pending).........................50396
611.1136  Revised (effective date pending).........................27155
    Eff. 9-13-88...................................................35303
611.1140--611.1142 (Subpart J)  Removed............................12140
611.1140 (Subpart J)  Added; interim...............................16695
    (d) revised; (e) added.........................................29446
611.1145  Added....................................................39080
611.1162  (c) added................................................18810
611.1166  (d) added................................................18810
611.1172  (c) and (d) added........................................18810
611.1174  (c) removed; (d) through (f) redesignated as (c) through 
        (e); new (d) amended; new (c)(5) revised; new (f) added....18810
611.1190--611.1198 (Subpart O)  Added (effective date pending).....50396
612  Authority citation revised; section authority citations 
        removed....................................................22136
612.2150  (e) added................................................22136
612.2200  Removed (effective date pending).........................50399
614  Authority citation revised....................................35451
614.4341  Revised....................................................775
    Correctly revised...............................................3191
614.4365--614.4368 (Subpart K)  Revised (effective date pending) 
                                                                   35451
    Eff. in part 10-14-88..........................................45076
614.4367  (c)(1) and (d)(1) effective date deferred in part........45076
614.4440--614.4444 (Subpart L)  Revised (effective date pending) 
                                                                   35452
    Eff. 10-14-88..................................................45076
614.4440  (c) revision eff. 2-2-88..................................2826
614.4442  Revision eff. 2-2-88......................................2826
614.4510--614.4522 (Subpart N)  Heading added (effective date 
        pending)...................................................35454
    Heading eff. 10-14-88..........................................45076
614.4512  Added (effective date pending)...........................35454
    Eff. 10-14-88..................................................45076
614.4513  Revised (effective date pending).........................35454
    Eff. 10-14-88..................................................45076
614.4514  Added (effective date pending)...........................35454
    Eff. 10-14-88..................................................45076
614.4515--614.4519  Added (effective date pending).................35455
    Eff. 10-14-88..................................................45076
614.4520  Redesignated as 614.4525 (effective date pending)........35454
    Added (effective date pending).................................35456
    Redesignation and addition eff. 10-14-88.......................45076
614.4521  Added (effective date pending)...........................35456
    Eff. 10-14-88..................................................45076
614.4522  Added (effective date pending)...........................35456
    Eff. 10-14-88..................................................45076
    (c) (2) and (3) introductory text correctly revised............52401
614.4525  Redesignated from 614.4520 (effective date pending)......35454
    Eff. 10-14-88..................................................45076
615  Authority citation revised...................................12141,
27156, 35457, 39247, 40046
615.5200--615.5215 (Subpart H)  Revised (effective date pending) 
                                                                   39247

[[Page 1058]]

615.5215  Amended (effective date pending).........................40046
615.5220--615.5240 (Subpart I)  Removed (effective date pending) 
                                                                   39250
615.5220--615.5250 (Subpart I)  Added (effective date pending).....40046
615.5260--615.5280 (Subpart J)  Revised (effective date pending) 
                                                                   40047
615.5290  Revised (effective date pending).........................35457
    Eff. 10-14-88..................................................45076
615.5330 (Subpart K)  Revised (effective date pending).............40048
615.5350--615.5370 (Subpart L)  Removed (effective date pending) 
                                                                   40049
615.5390--615.5430 (Subpart M)  Removed (effective date pending) 
                                                                   40049
615.5440 (Subpart N)  Removed (effective date pending).............40049
615.5560 (Subpart R)  Added........................................12141
    Addition confirmed.............................................27156
617  Heading and authority citation revised........................27156
617.7000--617.7090 (Subpart A)  Removed (effective date pending) 
                                                                   27156
    Removal eff. 9-13-88...........................................35303
618  Authority citation revised...................................35305,
35457, 39250
618.8030  (b) (6) and (7) removed; (b) (2) through (5) and (8) 
        through (13) redesignated as (b) (3) through (12); new (b) 
        (4), (6), (8) and (11) amended; new (b)(2) added; heading, 
        (a), (b) introductory text, (1) and new (3) revised 
        (effective date pending)...................................35305
    Eff. 10-13-88..................................................40867
618.8100 (Subpart D)  Removed (effective date pending).............50399
618.8160 (Subpart E)  Removed (effective date pending).............50399
618.8310  (b)(1) introductory text revised (effective date 
        pending)...................................................35457
    Eff. 10-14-88..................................................45076
618.8320  (b) (9) and (10) added (effective date pending)..........35457
    Eff. 10-14-88..................................................45076
618.8325  (a) and (b) revised (effective date pending).............35458
    Eff. 10-14-88..................................................45076
618.8440  Added (effective date pending)...........................39250
620  Authority citation revised....................................3335,
16697, 50399
620.1  (a) revised (effective date pending).........................3337
    Eff. 3-8-88.....................................................7340
620.2  (k) revised (effective date pending).........................3337
    Eff. 3-8-88.....................................................7340
620.3  (j)(3) introductory text and (i) revised; (j)(3)(ii) 
        redesignated as (j)(3)(iii) and introductory text revised 
        and (E) and (G) amended; new (j)(3)(ii) added; interim......3335
    (c) revised and (j)(3)(i) introductory text amended (effective 
date pending).......................................................3337
    Eff. 3-8-88.....................................................7340
    (j)(3)(ii) revised (effective date pending)....................16697
    Eff. 6-13-88...................................................21986
620.10  (a) revised (effective date pending)........................3337
    Eff. 3-8-88.....................................................7340
620.11  (b) (2) and (4) revised (effective date pending)............3337
    Eff. 3-8-88.....................................................7340
620.20  (b) and (c) revised (effective date pending)................3337
    Eff. 3-8-88.....................................................7340
620.30--620.32 (Subpart D)  Added..................................50399
621.2  (a)(18)(i) removed; (a)(18) (ii), (iii), (iv) and (v) 
        redesignated as (a)(18) (i), (ii), (iii), and (iv); 
        (a)(24) removed (effective date pending)....................3338
    Eff. 3-8-88.....................................................7340
621.4  Heading revised (effective date pending).....................3338
    Eff. 3-8-88.....................................................7340
622  Authority citation revised; section authority citations 
        removed....................................................27284
622.2  (d) revised (effective date pending)........................27284
    Eff. 9-13-88...................................................35306
622.51--622.60 (Subpart B)  Revised (effective date pending).......27284
    Eff. 9-13-88...................................................35306

[[Page 1059]]

623  Authority citation revised; section authority citations 
        removed....................................................27285
623.2  (d) revised (effective date pending)........................27285
    Eff. 9-13-88...................................................35306
624  Revised (effective date pending)..............................40050
Chapter VII
Interpretation and policy statement................................18268
701  Authority citation revised....................................19748
701.6  (a) revised.................................................19748
701.10  Removed.....................................................4845
701.20  (c) revised.................................................9611
701.21  (i) added; interim.........................................19751
    (c)(7) revised.................................................29645
701.23  (a)(3) removed; (b)(1)(iv) revised..........................4844
701.24  Revised....................................................19747
701.32  Added; interim.............................................50920
701.33  Revised....................................................29642
701.35  (c) revised................................................19748
703  Authority citation revised..............................4844, 19752
    Interpretation and policy statement............................18268
703.1  Revised......................................................4844
    Revised; interim...............................................19752
703.2  (o) revised..................................................4844
703.4  (a) revised; interim........................................19752
704  Revised.......................................................42943
725.2  (h) through (p) redesignated as (i) through (q); new (h) 
        added......................................................22472
725.5  (c) amended.................................................22472
741.5  Redesignated as 741.6; new 741.5 added......................50920
741.6  Redesignated as 741.7; new 741.6 redesignated from 741.5; 
        interim....................................................50920
741.7  Redesignated as 741.8; new 741.7 redesignated from 741.6; 
        interim....................................................50920
741.8  Redesignated as 741.9; new 741.8 redesignated from 741.7; 
        interim....................................................50920
741.9  Redesignated as 741.10; new 741.9 redesignated from 741.8; 
        interim....................................................50920
741.10  Redesignated as 741.11; new 741.10 redesignated from 
        741.9; interim.............................................50920
741.11  Redesignated from 741.10; interim..........................50920
745  Appendix amended..............................................22473
747  Authority citation revised....................................29447
747.501--747.507 (Subpart E)  Heading revised......................29447
747.501  Revised...................................................29447
747.502  Revised...................................................29447
747.503  Revised...................................................29447
747.505  Revised...................................................29448
747.506  Redesignated as 747.507; new 747.506 added................29448
747.507  Redesignated from 747.506.................................29448
748.0  (b) revised..................................................4845
748.1  (c) revised.................................................26232
761  Removed.......................................................29646
790  Heading and authority citation revised........................29647
790.1  (b) revised.................................................29647
790.10  Removed....................................................29647
790.40--790.49 (Subpart C)  Redesignated as 791.9--791.18 (Subpart 
        C) and revised.............................................29647
    Correctly removed..............................................34481
790  Appendix A removed............................................29647
791  Revised.......................................................29647
    Authority citation correctly revised...........................34481
795  Revised (OMB numbers).........................................3001,
29652
795.1  (b) table amended (OMB numbers)..............................1005
Chapter XI
1101  Authority citation revised....................................7341
1101.3  (e) revised.................................................7341
1101.4  (b)(1)(vii) and (5) revised.................................7341

                                  1989

12 CFR
                                                                   54 FR
                                                                    Page
Chapter VI
600  Subpart and section authority citations removed...............50736
600.10 (Subpart B)  Added (effective date pending).................50736
611  Subpart authority citations removed............................1147
611.100 (Subpart A)  Removal eff. 2-22-89...........................7758
611.310--611.340 (Subpart C)  Addition eff. 2-22-89.................7758
611.310  (c) correctly revised...............................2994, 37095
611.400  Removal; new 611.400 redesignation from 611.1020 and 
        heading revision; eff. 2-22-89..............................7758

[[Page 1060]]

611.400 (Subpart D) Heading revision; eff. 2-23-89..................7758
611.500--611.525 (Subpart E)  Revision eff. 2-22-89.................7758
611.1000--611.1040 (Subpart F)  Revision eff. 2-22-89...............7758
611.1020  Redesignation as 611.400 and heading revision; eff. 2-
        23-89.......................................................7758
611.1122  Amendment eff. 2-22-89....................................7758
611.1123  Amendment eff. 2-22-89....................................7758
611.1155  Amended (effective date pending)..........................1148
    Eff. 2-23-89....................................................7758
611.1156  (a) and (b)(1) revised; (b) (4) and (5) amended; (b)(6) 
        added (effective date pending)..............................1148
    Eff. 2-23-89....................................................7758
611.1157  (a) and (b) amended (effective date pending)..............1148
    Eff. 2-23-89....................................................7758
611.1158  Nomenclature change (effective date pending)..............1148
    Eff. 2-23-89....................................................7758
611.1160  (a), (b), (e), (f) and (g) amended (effective date 
        pending)....................................................1148
    Eff. 2-23-89....................................................7758
611.1161  Introductory text and (s) amended (effective date 
        pending)....................................................1148
    Eff. 2-23-89....................................................7758
611.1162  (b) amended; (c) revised and (d) added (effective date 
        pending) (See correction published at 55 FR 10042)..........1148
    Eff. 2-23-89....................................................7758
611.1165  Removed (effective date pending)..........................1148
    Eff. 2-23-89....................................................7758
611.1166  Redesignated as 611.1167; and (a)(4) amended and (d) 
        revised; new 611.1166 added (effective date pending) (See 
        correction published at 55 FR 10042)........................1148
    Eff. 2-23-89....................................................7758
611.1167  Redesignated as 611.1168 and (a) amended and (b) 
        revised; new 611.1167 redesignated from 611.1166; and 
        (a)(4) amended and (d) revised (effective date pending).....1148
    Eff. 2-23-89....................................................7758
611.1168  Redesignated as 611.1169 and amended; new 611.1168 
        redesignated from 611.1167 and (a) amended and (b) revised 
        (effective date pending)....................................1148
    Eff. 2-23-89....................................................7758
611.1169  Redesignated from 611.1168 and amended (effective date 
        pending)....................................................1148
    Eff. 2-23-89....................................................7758
611.1170  (a), (b), (e), (f), and (g) amended; (h) revised 
        (effective date pending)....................................1148
    Eff. 2-23-89....................................................7758
611.1172  (b) amended; (c) and (d) revised (effective date 
        pending) (See also 55 FR 10042).............................1149
    Eff. 2-23-89....................................................7758
611.1174  (c) removed; (d), (e) and (f) redesignated as (c), (d) 
        and (e); new (c)(5) revised; new (d) amended; new (f) 
        added (effective date pending) (See also 55 FR 10042 
        amendment removed)..........................................1149
    Eff. 2-23-89....................................................7758
611.1175  (b) revised (effective date pending)......................1149
    Eff. 2-23-89....................................................7758
611.1176  Amended (effective date pending)..........................1149
    Eff. 2-23-89....................................................7758
611.1180  (a), (d) and (e) amended; (f) revised (effective date 
        pending)....................................................1149
    Eff. 2-23-89....................................................7758
611.1181  (b) and (c)(1) amended (effective date pending)...........1149
    Eff. 2-23-89....................................................7758
611.1182  (a) amended (b) revised (effective date pending)..........1149
    Eff. 2-23-89....................................................7758
611.1190--611.1198 (Subpart O)  Addition eff. 2-22-89...............7758
611.1195  (b) correctly revised.....................................2994
    Eff. 2-23-89....................................................7758
612.2150  (a) and (c) introductory text amended; interim............1150
    Regulation at 54 FR 1150 confirmed (effective date pending)....50736
612.2160  (a) amended; interim......................................1150
    Regulation at 54 FR 1150 confirmed (effective date pending)....50736
612.2200  Removal eff. 2-22-89......................................7758

[[Page 1061]]

614.4280  (a) amended; (a) designation and (b) removed; interim.....1150
    Regulation at 54 FR 1150 confirmed (effective date pending)....50736
614.4320  Amended; interim..........................................1150
    Regulation at 54 FR 1150 confirmed (effective date pending)....50736
614.4321  Introductory text amended; interim........................1150
    Regulation at 54 FR 1150 confirmed (effective date pending)....50736
614.4340  (a) amended; interim......................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
614.4345  Amended; interim..........................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
614.4367  (c)(1) and (d)(1) revised (effective date pending)........1153
    Eff. 2-23-89....................................................7758
614.4460  Introductory text and (f) (1) and (3) amended; interim 
                                                                    1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
614.4511  Amended; interim..........................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
614.4910 (Subpart R)  Added (effective date pending)................1155
    Eff. 2-23-89....................................................7759
615.5000  Revised (effective date pending)..........................1158
    Eff. 2-23-89....................................................7759
615.5010  Revised (effective date pending)..........................1159
    Eff. 2-23-89....................................................7759
615.5030  Revised (effective date pending)..........................1159
    Eff. 2-23-89....................................................7759
615.5040  Amended; interim..........................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
615.5045--615.5090 (Subpart B)  Revised (effective date pending) 
                                                                    1159
    Eff. 2-23-89....................................................7759
615.5100  Revised (effective date pending)..........................1160
    Eff. 2-23-89....................................................7759
615.5101  Revised (effective date pending)..........................1160
    Eff. 2-23-89....................................................7759
615.5102  Revised (effective date pending)..........................1160
    Eff. 2-23-89....................................................7759
615.5104  Amended; interim..........................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
615.5105  (b) revised (effective date pending)......................1160
    Eff. 2-23-89....................................................7759
615.5135  (b) introductory text amended; interim....................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
615.5143  Amended; interim..........................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
615.5190  (b) amended; interim......................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
615.5200--615.5215 (Subpart H)  Revision eff. 2-1-89................5074
615.5210  (e)(3)(iii) table correctly revised......................31323
615.5215  Amendment eff. 2-9-89.....................................6264
615.5220--615.5240 (Subpart I)  Removal eff. 2-1-89.................5074
    Addition eff. 2-9-89............................................6264
615.5230  (b)(4) correctly revised (effective date pending).........6118
615.5250  Clarifying correction.....................................7029
615.5255  Correctly removed.........................................7029
615.5260--615.5290 (Subpart J)  Clarifying correction...............7029
615.5260--615.5280 (Subpart J)  Revision eff. 2-9-89................6264
615.5320  Correctly removed.........................................7029
    (b)(4) revision eff. 2-9-89.....................................6264
615.5325  Correctly removed.........................................7029
615.5330 (Subpart K)  Revision eff. 2-9-89..........................6264
615.5350--615.5370 (Subpart L)  Removal eff. 2-9-89.................6264
615.5390--615.5430 (Subpart M)  Removal eff. 2-9-89.................6264
615.5440 (Subpart N)  Removal eff. 2-9-89...........................6264

[[Page 1062]]

615.5450  Revised (effective date pending)..........................1160
    Eff. 2-23-89....................................................7759
615.5451  Removed (effective date pending)..........................1160
    Eff. 2-23-89....................................................7759
615.5452  Removed...................................................1160
    Eff. 2-23-89....................................................7759
615.5453  Removed...................................................1160
    Eff. 2-23-89....................................................7759
615.5460  (b) and (c) revised (effective date pending)..............1160
    Eff. 2-23-89....................................................7759
615.5497  Removed (effective date pending)..........................1160
    Eff. 2-23-89....................................................7759
618  Authority citation corrected...................................2994
618.8060  Amended; interim..........................................1151
    Regulation at 54 FR 1151 confirmed (effective date pending)....50736
618.8100 (Subpart D)  Removal eff. 2-22-89..........................7758
618.8160 (Subpart E)  Removal eff. 2-22-89..........................7758
618.8440  Addition eff. 2-1-89......................................5074
620  Authority citation revised; section authority citations 
        removed.....................................................1155
620.30--620.32 (Subpart D)  Addition eff. 2-22-89...................7758
620.40 (Subpart E)  Added (effective date pending)..................1155
    Eff. 2-23-89....................................................7759
621  Authority citation revised; section authority citations 
        removed.....................................................1155
621.10  (a) revised (effective date pending)........................1155
    Eff. 2-23-89....................................................7759
621.11  Revised (effective date pending)............................1155
    Eff. 2-23-89....................................................7759
621.20--621.24 (Subpart C)  Added (effective date pending)..........1155
    Eff. 2-23-89....................................................7759
624  Revision eff. 2-9-89...........................................6284
Chapter VII
Interpretation and policy statement................................31168
700.1  (j) and (k) redesignated as (k) and (l); new (k) revised; 
        new (j) added..............................................48234
    (j) through (l) redesignated as (k) through (m)................52015
701  Interpretation and policy statement...........................31168
    Authority citation revised..............................31184, 51383
701.1  Revised.....................................................31168
701.5  Removed.....................................................18474
701.13  Added......................................................51383
701.20  (c) revised................................................18470
701.21  (i) revised................................................18472
    (f) revised....................................................43278
701.31  Revised....................................................46223
701.32  Regulation at 53 FR 50920 comment time extended.............8280
    Revised........................................................31184
    (c) revised....................................................51384
701.36  Revised....................................................18467
701.37  Added......................................................18471
701.37-1  Removed..................................................18471
701.37-2  Removed..................................................18471
702  Authority citation revised....................................48235
702.2  Revised.....................................................48235
702.3  (c) revised.................................................48235
703  Authority citation revised....................................18473
703.1  Regulation at 53 FR 19752 confirmed.........................18473
703.4  Regulation at 53 FR 19752 confirmed.........................18473
705  Authority citation revised....................................51384
705.0  Revised.....................................................51384
705.7  (b)(1) revised..............................................51384
705.9  Revised.....................................................51384
708.301  (a)(2) revised............................................43280
708.302  (a)(2) and (b)(2) revised.................................43280
708.303  (a) amended...............................................43280
741  Authority citation revised...................................31184,
48235, 51383
741.2  Revised.....................................................51383
741.5--741.11  Regulation at 53 FR 50920 comment time extended......8280
741.5  Revised.....................................................31184
741.7  (a) revised.................................................48235
747.01  Revised....................................................43282
747.101  Revised...................................................43282
747.122  Added.....................................................43283
747.301--747.306 (Subpart C)  Revised..............................43283
747.401--747.408 (Subpart D)  Revised..............................43284
747.409  Added.....................................................43284
747.501--747.507 (Subpart E)  Revised..............................43285
747.601--747.611 (Subpart F)  Revised..............................43286
790  Revised.......................................................18474
792  Redesignated as Part 796; new 792 added.......................18476

[[Page 1063]]

796  Redesignated from Part 792....................................18476
Chapter IX
Chapter established................................................36758
900--924 (Subchapter A)  Added.....................................36758
900  Heading added.................................................36758
902  Heading added.................................................36758
904  Heading added.................................................36758
906  Heading added.................................................36758
908  Heading added.................................................36758
910  Redesignated from 12 CFR Part 506 and heading revised.........36759
912  Redesignated from 12 CFR Part 506a and heading revised........36759
914  Heading added.................................................36758
916  Heading added.................................................36758
918  Heading added.................................................36758
920  Heading added.................................................36759
922  Heading added.................................................36758
924  Heading added.................................................36758
931--944 (Subchapter B)  Added.....................................36579
931  Redesignated from 12 CFR Part 521.............................36759
932  Redesignated from 12 CFR Part 522.............................36759
    Authority citation revised.....................................38591
932.8  Republished.................................................38591
932.9  Republished.................................................38591
932.10  Revised....................................................38591
932.11  Revised....................................................38591
932.12  Republished................................................38591
932.13  Revised....................................................38591
932.14  Revised....................................................38591
932.15  Republished................................................38592
932.16  Revised....................................................38592
932.17  Removed; eff. thru 6-15-90.................................38593
    Added (temporary)..............................................38592
    (k) corrected..................................................43384
933  Redesignated from 12 CFR Part 523 and Heading revised.........36759
934  Redesignated from 12 CFR Part 524.............................36759
934  Authority citation revised....................................36760
934.14  Added......................................................36760
935  Redesignated from 12 CFR Part 525.............................36759
936  Redesignated from 12 CFR Part 526.............................36759
937  Redesignated from 12 CFR Part 527.............................36759
938  Redesignated from 12 CFR Part 528.............................36759
939  Redesignated from 12 CFR Part 529.............................36759
940  Redesignated from 12 CFR Part 531.............................36759
941  Redesignated from 12 CFR Part 532 and heading revised.........36759
942  Redesignated from 12 CFR Part 533.............................36759
943  Redesignated from 12 CFR Part 534.............................36759
944  Redesignated from 12 CFR Part 535.............................36759
950 (Subchapter C)  Added..........................................36759
    Heading added..................................................36759
    Added..........................................................38595
955 (Subchapter D)  Added..........................................36759
955  Heading added.................................................36759
    Added..........................................................39729
Chapter XIII
  Chapter established..............................................34487
1300  Added........................................................34487
Chapter XV
Chapter established................................................38966
1510--1511 (Subchapter B)  Added...................................41950
1510  Added........................................................41950
1511  Added........................................................41954

                                  1990

12 CFR
                                                                   55 FR
                                                                    Page
Chapter VI
600.10 (Subpart B)  Regulation at 54 FR 50735 eff. 3-6-90...........7884
611.1162  Regulation at 54 FR 1148 corrected.......................10042
611.1167  Regulation at 54 FR 1148 corrected.......................10042
611.1172  Regulation at 54 FR 1148 corrected.......................10042
611.1174  Regulation at 54 FR 1148 corrected.......................10042
612.2150  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
612.2160  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
613  Authority citation revised; sectional authority citations 
        removed....................................................24877
    Technical correction....................................25773, 41309
613.3000--613.3005 (Subpart A)  Revised (effective date pending) 
                                                                   24877

[[Page 1064]]

    Regulation at 55 FR 24877 eff. 7-30-90.........................30903
613.3000  Corrected................................................28511
613.3005  Redesignated from 614.4160 (effective date pending)......24880
    (c) corrected..................................................28511
    Regulation at 55 FR 24880 eff. 7-30-90.........................30903
613.3010--613.3050 (Subpart B)  Heading revised (effective date 
        pending)...................................................24877
    Regulation at 55 FR 24877 eff. 7-30-90.........................30903
613.3010  Revised (effective date pending).........................24877
    Regulation at 55 FR 24877 eff. 7-30-90.........................30903
613.3020  Revised (effective date pending).........................24877
    Regulation at 55 FR 24877 eff. 7-30-90.........................30903
613.3040  (d)(3) removed; (d)(4) redesignated as (d)(3); (d)(2) 
        revised (effective date pending)...........................24878
    Regulation at 55 FR 24878 eff. 7-30-90.........................30903
613.3045  Revised (effective date pending).........................24878
    (c)(4) corrected...............................................28511
    Regulation at 55 FR 24878 eff. 7-30-90.........................30903
613.3050  (c) revised (effective date pending).....................24878
    Regulation at 55 FR 24878 eff. 7-30-90.........................30903
613.3060 (Subpart C)  Heading and section revised (effective date 
        pending)...................................................24879
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
613.3110 (Subpart D)  Heading, (a)(4), (b) heading, (1) 
        introductory text, (2), and (4) revised; (c) redesignated 
        as (d); new (c) added (effective date pending).............24879
    (c)(2) corrected...............................................28511
    (b)(2)(i) correctly revised....................................28885
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
613.3120  Added (effective date pending)...........................24879
    (b) correctly revised..........................................28885
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614  Sectional authority citations removed..................12473, 24879
    Technical correction....................................25773, 41309
614.4000--614.4050 (Subpart A)  Revised (effective date pending) 
                                                                   24880
    Regulation at 55 FR 24880 eff. 7-30-90.........................30903
614.4030  Redesignated as 614.4100 (effective date pending)........24879
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4040  Redesignated as 614.4145 (effective date pending)........24879
    (a)(3) corrected...............................................28511
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4050  Redesignated as 614.4135 (effective date pending)........24879
    (b)(1)(ii) corrected...........................................28511
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4060  Redesignated as 614.4140 (effective date pending)........24879
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4070--614.4080 (Subpart B)  Revised (effective date pending) 
                                                                   24882
    Regulation at 55 FR 24882 eff. 7-30-90.........................30903
614.4090  Removed (effective date pending).........................24879
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4100--614.4145 (Subpart C)  Heading revised (effective date 
        pending)...................................................24882
    Regulation at 55 FR 24882 eff. 7-30-90.........................30903
614.4100  Removed; new 614.4100 redesignated from 614.4030.........24879
    Revised (effective date pending)...............................24883
    Regulation at 55 FR 24883 eff. 7-30-90.........................30903
614.4110  Revised (effective date pending).........................24883
    Regulation at 55 FR 24883 eff. 7-30-90.........................30903
614.4120  Revised (effective date pending).........................24883
    Regulation at 55 FR 24883 eff. 7-30-90.........................30903

[[Page 1065]]

614.4130  Removed (effective date pending).........................24879
    (a) and (b) redesignated from 614.4190 (c) and (d) (effective 
date pending)......................................................24880
    Heading revised; (a), (b), and (c) amended (effective date 
pending)...........................................................24883
    Regulations at 55 FR 24879 and 24883 eff. 7-30-90..............30903
614.4135  Redesignated from 614.4050 (effective date pending)......24879
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4140  Redesignated as 614.4150; new 614.4140 redesignated from 
        614.4060 (effective date pending)..........................24880
    Regulation at 55 FR 24880 eff. 7-30-90.........................30903
614.4145  Redesignated from 614.4040 (effective date pending)......24879
    Regulation at 55 FR 24879 eff. 7-30-90.........................30903
614.4150  Redesignated as 614.4160 and revised; new 614.4150 
        redesignated from 614.4140 (effective date pending)........24880
    Regulation at 55 FR 24880 eff. 7-30-90.........................30903
614.4160  Redesignated as 613.3005; new 614.4160 redesignated from 
        614.4150 (effective date pending)..........................24880
    Revised........................................................24883
    (e) corrected..................................................28511
    Technical correction...........................................42303
    Regulation at 55 FR 24880 eff. 7-30-90.........................30903
614.4165  (f) removed; (c) introductory text and (d) revised 
        (effective date pending)...................................24883
    Regulation at 55 FR 24883 eff. 7-30-90.........................30903
614.4170  Removed (effective date pending).........................24883
    Regulation at 55 FR 24883 eff. 7-30-90.........................30903
614.4180  Removed (effective date pending).........................24883
    Regulation at 55 FR 24883 eff. 7-30-90.........................30903
614.4190  (c) and (d) redesignated as 614.4130 (a) and (b) 
        (effective date pending)...................................24880
    (a) and (b) removed (effective date pending)...................24883
    Regulations at 55 FR 24880 and 24883 eff. 7-30-90..............30903
614.4200--614.4233 (Subpart E)  Revised (effective date pending) 
                                                                   24884
    Regulation at 55 FR 24884 eff. 7-30-90.........................30903
614.4220  Redesignated as 614.4240 (effective date pending)........24880
    (a) and (c) removed (effective date pending)...................24884
    Regulations at 55 FR 24880 and 24884 eff. 7-30-90..............30903
614.4222  Corrected................................................28511
614.4230  Removed (effective date pending).........................24884
    (a)(2) corrected...............................................28511
    Regulation at 55 FR 24884 eff. 7-30-90.........................30903
614.4231  (a)(2)(iii) corrected....................................28511
    (a)(2) introductory text correctly revised.....................28885
614.4233  (b) correctly revised....................................28886
    Introductory text corrected....................................50544
614.4240--614.4261 (Subpart F)  Heading revised (effective date 
        pending)...................................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4240  (b) redesignated as 614.4130 (c); new 614.4240 
        redesignated from 614.4220 (effective date pending)........24880
    (a) and (c) removed (effective date pending)...................24884
    Regulation at 55 FR 24880 eff. 7-30-90.........................30903
614.4250  Removed (effective date pending).........................24885
    Regulation at 55 FR 24885 eff. 7-30-90.........................30903
614.4260  Removed (effective date pending).........................24885
    Regulation at 55 FR 24885 eff. 7-30-90.........................30903
614.4280  Regulation at 55 FR 50736 eff. 3-6-90.....................7884
614.4320  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
614.4321  Regulation at 54 FR 50736 eff. 3-6-90.....................7884

[[Page 1066]]

614.4340  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
614.4345  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
614.4354  (a)(1)(iii), (vi), (viii), and (x) amended (effective 
        date pending)..............................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4460  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
614.4511  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
614.4525  (a) revised; (b) amended (effective date pending)........24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4530  Heading and introductory text amended (effective date 
        pending)...................................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4540--614.4660 (Subpart P)  Heading revised (effective date 
        pending)...................................................24886
    Regulation at 55 FR 24886; eff. 7-30-90........................30903
614.4540  (e) revised; (h) and (i) added (effective date pending) 
                                                                   24886
    Regulation at 55 FR 24886; eff. 7-30-90........................30903
614.4545  (a), (b), (c) introductory text, (d) and (e) amended 
        (effective date pending)...................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4550  (a) introductory text, (1), (2), (3), and (b) amended 
        (effective date pending)...................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4555  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4560  (a), (b)(1), (2), (3), (4), and (5) amended (effective 
        date pending)..............................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4565  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4570  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4580  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4590  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4600  (a) introductory text, (1) and (2) amended (effective 
        date pending)..............................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4610  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4620  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4630  (a) amended (effective date pending).....................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4640  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4650  (a) introductory text, (1) and (b) amended (effective 
        date pending)..............................................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4660  Amended (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4700  (a) revised (effective date pending).....................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4710  Revised (effective date pending).........................24886
    Regulation at 55 FR 24886 eff. 7-30-90.........................30903
614.4720  Introductory text and (a) revised (effective date 
        pending)...................................................24887
    Regulation at 55 FR 24887 eff. 7-30-90.........................30903

[[Page 1067]]

614.4800  Revised (effective date pending).........................24887
    Regulation at 55 FR 24887 eff. 7-30-90.........................30903
614.4810  (a) introductory text and (b) amended (effective date 
        pending)...................................................24887
    Regulation at 55 FR 24887 eff. 7-30-90.........................30903
614.4900  (a), (b) introductory text and (i) revised (effective 
        date pending)..............................................24887
    Regulation at 55 FR 24887 eff. 7-30-90.........................30903
615  Authority citation correctly revised..........................12473
    Authority citation revised; sectional authority citation 
removed............................................................24887
    Technical correction.............................25773, 28511, 41309
615.5040  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
615.5104  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
615.5135  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
615.5143  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
615.5160  (c) removed; (d) and (e) redesignated as (c) and (d); 
        (a) and new (c) revised (effective date pending)...........24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
    Heading correctly revised......................................38313
615.5190  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
    (a) revised; (b) amended (effective date pending)..............24888
    (b) correctly amended..........................................42184
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
615.5550  Revised (effective date pending).........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
616  Removed (effective date pending)..............................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
    Technical correction.............................25773, 28511, 41309
618  Sectional authority citations removed.........................24888
    Technical correction.............................25773, 28511, 41309
618.8050  Revised (effective date pending).........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
618.8060  Regulation at 54 FR 50736 eff. 3-6-90.....................7884
618.8430  Revised (effective date pending).........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619  Authority citation revised; sectional authority citations 
        removed....................................................24888
    Technical correction.............................25773, 28511, 41309
619.9015  Added (effective date pending)...........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9020  Redesignated as 619.9025; new 619.9020 added (effective 
        date pending)..............................................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9025  Redesignated from 619.9020 (effective date pending)......24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9050  Revised (effective date pending).........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9060  Redesignated as 619.9065; new 619.9060 added (effective 
        date pending)..............................................24888
    Correctly revised..............................................28886
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9065  Redesignated from 619.9060 (effective date pending)......24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9080  Amended (effective date pending).........................24889
    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
619.9135  Redesignated as 619.9146 (effective date pending)........24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
    Added (effective date pending).................................24889

[[Page 1068]]

    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
619.9140  Redesignated as 619.9150 (effective date pending)........24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
    Added (effective date pending).................................24889
    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
619.9145  Added (effective date pending)...........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9146  Redesignated from 619.9135 and revised (effective date 
        pending)...................................................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
    Revised (effective date pending)...............................24889
    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
619.9150  Redesignated as 619.9160; new 619.9150 redesignated from 
        619.9140 (effective date pending)..........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9155  Added (effective date pending)...........................24889
    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
619.9160  Redesignated as 619.9165 and amended (effective date 
        pending)...................................................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9165  Redesignated from 619.9160 and amended (effective date 
        pending)...................................................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9185  Added (effective date pending)...........................24888
    Regulation at 55 FR 24888 eff. 7-30-90.........................30903
619.9290  Amended (effective date pending).........................24889
    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
619.9320  Amended (effective date pending).........................24889
    Regulation at 55 FR 24889 eff. 7-30-90.........................30903
Chapter VII
700  Authority citation revised.....................................1794
700.1  (h) and (i) removed; (j) through (m) redesignated as (h) 
        through (k).................................................1794
701  Authority citation revised.....................................1794
701.6  (d) added....................................................1799
701.14  Added......................................................43086
701.19  Existing regulation confirmed..............................30198
701.21  (c)(7) revised..............................................1797
    (a) revised....................................................30207
701.32  Heading revised; (d) added..................................1794
705  Authority citation revised.....................................1794
705.3  Revised......................................................1794
722  Added.........................................................30207
    Appendix A added; interim; eff. 1-30-91.................53612, 53618
724  Revised.......................................................30211
741  Authority citation revised.......................1794, 30210, 43089
741.4  Redesignated as 741.5; new 741.4 added......................30210
741.5  Revised......................................................1794
    Redesignated as 741.6; new 741.5 redesignated from 741.4.......30210
741.6  Redesignated as 741.7; new 741.6 redesignated from 741.5....30210
741.7  Redesignated as 741.8; new 741.7 redesignated from 741.6....30210
741.8  Redesignated as 741.9; new 741.8 redesignated from 741.7....30210
    Redesignated as 741.9; new 741.8 added.........................43087
741.9  (k) added....................................................1799
    Redesignated as 741.10; new 741.9 redesignated from 741.8......30210
    Redesignated as 741.10; new 741.9 redesignated from 741.8......43087
741.10  Redesignated as 741.11; new 741.10 redesignated from 741.9
                                                                   30210
    Redesignated as 741.11; new 741.10 redesignated from 741.9.....43087
741.11  Redesignated as 741.12; new 741.11 redesignated from 
        741.10.....................................................30210
    Redesignated as 741.12; new 741.11 redesignated from 741.10....43087
741.12  Redesignated from 741.11...................................30210

[[Page 1069]]

    Redesignated as 741.13; new 741.12 redesignated from 741.11....43087
741.13  Redesignated from 741.12...................................43087
741.14  Added......................................................43089
745  Heading and authority citation revised.........................5586
745.0--745.13  Designated as Subpart A; heading added...............5586
745.200--745.203 (Subpart B)  Added.................................5586
745  Appendix amended..............................................47455
747  Authority citation revised..............................5589, 43090
    Heading revised................................................31038
747.1001--747.1003 (Subpart J)  Added...............................5590
747.1101--747.1107 (Subpart K)  Added...............................5590
747.1201--747.1205 (Subpart L)  Added..............................43090
749  Revised.......................................................30212
Chapter IX
910  Authority citation revised.....................................2229
910.1  Amended......................................................2229
910.5  Amended......................................................2229
910.6  Amended......................................................2229
912  Authority citation revised.....................................2229
912.1  (b) amended..................................................2228
912.4  (b) amended..................................................2229
931  Authority citation revised...............................1397, 2229
931.3  Revised......................................................2229
931.6  Removed.....................................................41996
931.14  Added; interim..............................................1397
931.15  Added; interim..............................................1397
931.16  Added; interim..............................................1397
931.17  Added; interim..............................................1397
931.18  Added; interim..............................................1397
931.19  Added; interim..............................................1397
931.20  Added; interim..............................................1397
931.21  Added; interim..............................................1397
931.22  Added; interim..............................................1398
931.23  Added; interim..............................................1398
931.24  Added; interim..............................................1398
931.25  Added; interim..............................................1398
932  Authority citation revised.....................................1398
    Effective date..................................................2229
    Undesignated center headings removed; interim...................1398
932.14  (d) amended; interim........................................1398
932.18  Added; interim..............................................1398
932.19  Added; interim..............................................1399
932.20  Added; interim..............................................1399
932.21  Added; interim..............................................1399
932.22  Added; interim..............................................1400
932.42  Removed; interim............................................1400
932.60  (b) amended.................................................2228
932.65  Removed.....................................................2229
933  Authority citation revised.....................................2229
933.5  (b), (c) (1), (d), (f), and (g) amended; (c) heading and 
        introductory text revised...................................2229
933.6  Removed......................................................2229
933.13  Undesignated center heading and section removed............41996
933.14  Removed.....................................................2229
933.15  Removed.....................................................2229
933.16  Removed.....................................................2229
933.17  Removed.....................................................2229
933.31  Undesignated center heading and section removed............41996
934  Authority citation revised....................................50545
934.3  Amended......................................................2229
934.5  Introductory text amended....................................2229
934.6  Amended......................................................2229
934.11  Amended.....................................................2229
934.12  Amended.....................................................2229
934.15  Added; interim.............................................50545
935  Authority citation revised.....................................2229
935.1  (a) and (b) amended..........................................2229
935.33  Amended.....................................................2229
936  Authority citation revised.....................................2230
    Removed........................................................41996
936.1  (a) and (c) amended..........................................2230
937  Authority citation revised.....................................2230
937.2  (c) amended..................................................2230
937.4  Amended......................................................2230
937.6  Amended......................................................2230
937.8  Amended......................................................2230
938  Authority citation revised.....................................2230
    Removed........................................................41996
938.1  Introductory text and (a) amended............................2230
938.2  Amended......................................................2230
938.3  Cross-reference amended......................................2230
938.4  Cross-reference amended......................................2230
938.5  Cross-reference and (a) introductory text amended............2230
938.7  (b) amended..................................................2230
938.8  (d)(1) amended...............................................2230
938.9  (f) introductory text amended................................2230
938.10  Amended.....................................................2230
939  Authority citation revised.....................................2230
939.1  Amended......................................................2228
939.2  (b) revised..................................................2230
939.3  Introductory text and (d) amended............................2230

[[Page 1070]]

939.8  (a)(2) removed; (a)(3) redesignated as (a)(2); (b) and 
        (c)(3) amended..............................................2230
939.9  (a) and (e) amended; (d)(1) revised..........................2230
939.10  (c) amended.................................................2230
939.12  (c) amended.................................................2231
940  Authority citation revised.....................................2231
940.2  (a) and (b)(3) amended.......................................2231
940.4  (a) and (c)(7) and (8) amended...............................2231
    Removed........................................................41996
940.5  (d) amended..................................................2231
940.6  Removed.....................................................41996
941  Authority citation revised.....................................2231
    Removed........................................................41996
941.1  Amended......................................................2231
942  Authority citation revised.....................................2231
    Removed........................................................41996
943  Authority citation revised.....................................2231
943.4  Introductory text amended....................................2231
944  Authority citation revised.....................................2231
    Removed........................................................41996
944.1  (b) amended..................................................2231
950  Authority citation revised.....................................2231
955  Authority citation revised.....................................2231
960  (Subchapter E and Part) Added; interim.........................7485
Chapter XIV
Chapter XIV  Chapter established (effective date pending)..........36610
    Regulation at 55 FR 36610 eff. 10-9-90.........................41185
1400  Added (effective date pending)...............................36610
    Regulation at 55 FR 36610 eff. 10-9-90.........................41185
Chapter XV
1505  Added; interim................................................5358
1505.19  (b) corrected.............................................11719
1505.26  Corrected.................................................11719
1505.27  (d) corrected.............................................11719
1505.33  Corrected.................................................11719
1505.40  (c)(3) corrected..........................................11719
1506 (Subchapter A and Part)  Added...........................5350, 5356
1506.4  (a)(1), (b)(2), (4), and (c) corrected.....................11720
1506.5  Section designation and (a) introductory text corrected....11720
1506.7  (g) corrected..............................................11720
1506.15  (c) corrected.............................................11720
Chapter XVI
Chapter XVI  Chapter established....................................5356
1605  Added.........................................................5370
1606  Added...................................................5350, 5356
1606.4  (a)(1), (b)(2), (4), and (c) corrected.....................11720
1606.5  Section designation and (a) introductory text corrected....11720
1606.7  (g) corrected..............................................11720
1606.15  (c) corrected.............................................11720
1608  Added........................................................34228
    Appendix A added; interim; eff. 1-30-91.................53612, 53618
1609  Added; interim...............................................14084
    Revised........................................................35568
1611  Added (eff. date pending in part)............................22328

                                  1991

12 CFR
                                                                   56 FR
                                                                    Page
Chapter VI
600.1  Amended (effective date pending).............................2672
    Regulation at 56 FR 2672 eff. 3-4-91............................8910
600.5  (b)(1), (2), (3), and (6) revised (effective date pending) 
                                                                    2672
    Regulation at 56 FR 2672 eff. 3-4-91............................8910
601  Authority citation revised.....................................2673
601.101  (a) introductory text and (b) amended (effective date 
        pending)....................................................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
601.141  Amended (effective date pending)...........................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
602  Authority citation revised; sectional authority citations 
        removed.....................................................2673
602.220  Amended (effective date pending)...........................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
602.250  (a)(5) amended (effective date pending)....................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
    (a)(7) revised (effective date pending)........................28476
    Regulation at 56 FR 28476 eff. 7-29-91.........................35808
602.260  Amended (effective date pending)..........................28476

[[Page 1071]]

    Regulation at 56 FR 28476 eff. 7-29-91.........................35808
602.261  (b), (c) and (d) amended (effective date pending).........28476
    Regulation at 56 FR 28476 eff. 7-29-91.........................35808
602.262  Added (effective date pending)............................28476
    Regulation at 56 FR 28476 eff. 7-29-91.........................35808
602.265  Removed (effective date pending)..........................28477
    Regulation at 56 FR 28477 eff. 7-29-91.........................35808
602.265--602.272 (Subpart C)  Added (effective date pending).......28477
    Regulation at 56 FR 28477 eff. 7-29-91.........................35808
602.280--602.289 (Subpart C)  Redesignated as Subpart D (effective 
        date pending)..............................................28477
    Regulation at 56 FR 28477 eff. 7-29-91.........................35808
603  Authority citation revised.....................................2673
603.340  (a) and (b) amended (effective date pending)...............2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
603.345  Amended (effective date pending)..........................28479
    Regulation at 56 FR 28479 eff. 7-29-91.........................35808
603.355  Revised (effective date pending)...........................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
604  Authority citation revised.....................................2673
604.420  (i)(1) amended (effective date pending)....................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
604.425  (a) amended (effective date pending).......................9611
    Regulation at 56 FR 9611 eff. 4-22-91..........................16265
604.435  (e) amended (effective date pending).......................2673
    Regulation at 56 FR 2673 eff. 3-4-91............................8910
606.670  (c) amended (effective date pending).......................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
611  Sectional authority citations removed..........................3407
611.1122  (b)(1) and (2) removed (effective date pending)...........2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
611.1135  (a) amended (effective date pending)......................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
611.1168  (d) introductory text, (2), (3) and (e) introductory 
        text amended (effective date pending)......................29420
    (d)(3) corrected...............................................42649
    Regulation at 56 FR 29420 eff. 9-10-91.........................46111
611.1175  (d) introductory text, (2), (3) and (e) introductory 
        text amended (effective date pending)......................29420
    (d)(3) corrected...............................................42649
    Regulation at 56 FR 29420 eff. 9-10-91.........................46111
611.1182  (d) amended (effective date pending).....................29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
611.1200--611.1270 (Subpart P)  Added (effective date pending)......3407
    Regulation at 56 FR 3407 eff. 3-11-91..........................10169
611.1205  (g) corrected............................................11589
611.1210  (b)(2) corrected.........................................11589
611.1212  (c) corrected............................................11589
611.1215  (d) corrected............................................11589
611.1225  (k), (p), (t)(3)(ii), (u) and (v) corrected..............11589
611.1255  (a) corrected............................................11589
611.1260  (h) corrected............................................11589
611.1270  Corrected................................................11589
612  Authority citation revised..............................2674, 32957
612.2080  Removed (effective date pending).........................32957
    Regulation at 56 FR 32957 eff. 9-23-91.........................48097
612.2090  Removed (effective date pending).........................32957
    Regulation at 56 FR 32957 eff. 9-23-91.........................48097
612.2120  Removed (effective date pending).........................32957
    Regulation at 56 FR 32957 eff. 9-23-91.........................48097
612.2130  (l), (p), and (t) revised (effective date pending)........2674

[[Page 1072]]

    Regulation at 56 FR 2674 eff. 3-4-91............................8910
    (l), (p) and (t) corrected.....................................12298
612.2150  (b)(6) and (c) introductory text amended (effective date 
        pending)....................................................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
612.2160  (a), (b), and (c) amended (effective date pending)........2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
612.2170  (a) amended (effective date pending)......................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
612.2180  (a) and (b) amended (effective date pending)..............2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
612.2230  (a)(1) amended (effective date pending)...................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
613.3045  (b)(2)(ii) amended; (c) redesignated as (e); new (c) and 
        (d) added (effective date pending).........................65989
614.4233  Introductory text corrected...............................5927
614.4310  Removed (effective date pending)..........................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
614.4460  (c) amended (effective date pending)......................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
614.4640  Revised (effective date pending)..........................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
615  Authority citation corrected..................................12298
615.5103  Removed (effective date pending)..........................2674
    Regulation at 56 FR 2674 eff. 3-4-91............................8910
615.5120  (a) amended (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
615.5135  Transferred to Subpart E (effective date pending).........2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
615.5150  (c) amended (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
615.5151  Revised (effective date pending)..........................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
    Corrected......................................................12298
615.5180  Amended (effective date pending)..........................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
    Corrected......................................................12298
615.5190  (b) amended (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
615.5201  (f) amended (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
615.5210  (d)(2)(i) and (ii) amended (effective date pending).......2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
615.5250  (d)(2) amended (effective date pending)...................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
617  Sectional authority citations removed..........................2675
617.7110  (d) amended (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
617.7150  (b) amended (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
618.8030  (b)(2) and (3)(v) revised (effective date pending).......65990
618.8210  Amended (effective date pending)..........................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
618.8320  (b)(2) revised (effective date pending)...................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
618.8325  (d) removed (effective date pending)......................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910

[[Page 1073]]

618.8360  Introductory text and (d) through (h) removed; (a)(5) 
        revised (effective date pending)............................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
    (a)(5) corrected...............................................12298
619  Authority citation revised; sectional authority citations 
        removed.....................................................2675
619.9146  Amended (effective date pending)..........................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
620.1--620.3 (Subpart A)  Heading revised..........................29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.1  (i) removed; (b) through (h) and (j) redesignated as (o), 
        (e) through (i), (n) and (p); introductory text, new (b) 
        through (d), new (j) through (m) and (q) added; new (g) 
        and (i) revised (effective date pending)...................29421
    (q) correctly designated.......................................42649
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.2  (a), (b) and (c) redesignated as 620.4; (a), (b) and (c); 
        (j) removed; (d) through (i) and (k) redesignated as (a) 
        through (g); introductory text, (h) and (i) added; 
        heading, new (a) and new (g) revised; new (b)(3), new (c) 
        and new (f) amended (effective date pending)...............29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.3  Redesignated as 620.5 (effective date pending)..............29421
    Added (effective date pending).................................29422
    Regulations at 56 FR 29421 and 29422 eff. 9-10-91..............46111
620.4--620.5 (Subpart B)  Added (effective date pending)...........29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.4  (a), (b) and (c) redesignated from 620.2; (a), (b) and (c) 
        (effective date pending)...................................29421
    Heading added; (b) revised; (c) amended (effective date 
pending)...........................................................29422
    (b) corrected..................................................42649
    Regulations at 56 FR 29421 and 29422 eff. 9-10-91..............46111
620.5  Redesignated from 620.3 (effective date pending)............29421
    (c) text designated as (c)(1); (m)(2) removed; (g)(1)(iii), 
(2)(vi), (4)(v) and (m)(3) redesignated as (g)(1)(iv), (2)(vii), 
(4)(vi) and (m)(2); (a)(3), (9), (c) heading, (d), (e)(1), (2), 
(f), (g) introductory text, (1)(i), (2)(ii), (iii), (4)(ii), 
(j)(3)(i), (m)(1), new (g)(1)(iv) heading, (D) and (g)(4)(vi) 
revised; (c)(2), (e)(4), new (g)(1)(iii), (iv)(E), (2)(vi), 
(3)(ii)(C) and new (4)(v) added; (a)(4), (b) and (g)(2)(v) amended 
(effective date pending)...........................................29422
    (g)(1)(iv)(E) and (j)(3)(i) corrected..........................42649
    Regulations at 56 FR 29421 and 29422 eff. 9-10-91..............46111
620.10--620.11 (Subpart B)  Redesignated as Subpart C (effective 
        date pending)..............................................29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.10  Revised (effective date pending)...........................29424
    Regulation at 56 FR 29424 eff. 9-10-91.........................46111
620.11  (a) and (d)(3) revised; (b)(3) removed; (b)(4) through (9) 
        redesignated as (b)(3) through (8); (b) introductory text 
        and (d)(4) added; new (b)(8) and (c) amended (effective 
        date pending)..............................................29424
    Regulation at 56 FR 29424 eff. 9-10-91.........................46111
620.20--620.22 (Subpart C)  Redesignated as Subpart D (effective 
        date pending)..............................................29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.20  Heading revised; (c) amended; (d) through (h) removed 
        (effective date pending)...................................29425
    Regulation at 56 FR 29425 eff. 9-10-91.........................46111
620.21  (c)(4) and (d)(5) amended (effective date pending).........29425
    (c)(4) corrected...............................................42649
    Regulation at 56 FR 29425 eff. 9-10-91.........................46111

[[Page 1074]]

620.22  Removed (effective date pending)...........................29425
    Regulation at 56 FR 29425 eff. 9-10-91.........................46111
620.30--620.32 (Subpart D)  Redesignated as Subpart E (effective 
        date pending)..............................................29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
620.32  Removed (effective date pending)...........................29425
    Regulation at 56 FR 29425 eff. 9-10-91.........................46111
620.40 (Subpart E)  Redesignated as Subpart F (effective date 
        pending)...................................................29421
    Regulation at 56 FR 29421 eff. 9-10-91.........................46111
621.1  Amended (effective date pending).............................2675
    Regulation at 56 FR 2675 eff. 3-4-91............................8910
621.2  (a)(11) introductory text and (12) amended (effective date 
        pending)....................................................2676
    Regulation at 56 FR 2676 eff. 3-4-91............................8910
    (a)(8) introductory text amended (effective date pending)......29425
    Regulation at 56 FR 29425 eff. 9-10-91.........................46111
621.10  (c) amended (effective date pending)........................2676
    Regulation at 56 FR 2676 eff. 3-4-91............................8910
Chapter VII
701.21  (c)(7) revised.............................................37831
    (h) revised....................................................48425
701.23  (b)(3) revised.............................................15036
    (b)(2) revised.................................................35811
    (b)(2) effective date corrected................................37276
703  Revised.......................................................56003
703.5  (e) revised; eff. 3-1-92....................................56005
705.7  (d) revised.................................................67155
709  Added.........................................................56925
722  Appendix A corrected...........................................1229
741  Authority citation revised....................................35811
741.3  Revised.....................................................35811
    Effective date corrected.......................................37276
741.4  Revised.....................................................35811
    Effective date corrected.......................................37276
    (a)(3) corrected...............................................44129
747  Revised.......................................................37767
Chapter IX
900  Added.........................................................67155
922  Added.........................................................55218
    Technical correction....................................56691, 58964
931  Authority citation revised....................................55219
    Technical correction....................................56691, 58964
931.14  Revised....................................................55219
931.15  Revised....................................................55219
931.16  Revised....................................................55219
931.17  Revised....................................................55219
931.18  Revised....................................................55219
931.19  Revised....................................................55219
931.20  Revised....................................................55219
931.21  Revised....................................................55219
931.23  Revised....................................................55219
931.26  Added......................................................55219
931.30  Added......................................................55220
931.32  Added......................................................55220
931.34  Added......................................................55220
931.36  Added......................................................55220
931.38  Added......................................................55220
931.40  Added......................................................55220
932  Authority citation revised....................................55220
    Technical correction....................................56691, 58964
932.18  Revised....................................................55220
    OMB number.....................................................56929
    OMB number corrected...........................................58964
932.19  Revised....................................................55221
932.20  Introductory text revised; table amended...................55221
932.21  Revised....................................................55222
    OMB number.....................................................56929
    OMB number corrected...........................................58964
932.22  Revised....................................................55222
932.23  Added......................................................55222
    OMB number.....................................................56929
    OMB number corrected...........................................58964
936  Added.........................................................58647
960 (Subchapter E)  Revised.........................................8694
Chapter XIV
1410  Added.........................................................3201
1410.2  (g)(1)(iii) correctly designated...........................10302
1410.3  (c)(2) corrected...........................................13211
1410.4  (a) corrected..............................................10302
1410.6  (a)(2) revised.............................................57233
Chapter XV
1507  Added........................................................43998
1510  Authority citation revised...................................57482
1510.10  (b) through (e) revised...................................57483
1510.12  (a) revised...............................................57483
Chapter XVI
1608  Appendix A corrected..........................................1229
1609.2  (h)(1) Regulation at 55 FR 35568 suspended 3-23-91 to 9-
        30-91; new (h)(1) added; effective to 9-30-91..............25353

[[Page 1075]]

1609.7  (a)(3) Regulation at 55 FR 35568 suspended 3-23-91 to 9-
        30-91; new (a)(3) added; effective to 9-30-91..............25353
1613  Added.........................................................5649
1617  Added; interim...............................................40488
1618  Added; interim...............................................30837
1680  Added; interim...............................................34015
    Revised........................................................52160

                                  1992

12 CFR
                                                                   57 FR
                                                                    Page
Chapter VI
603  Authority citation revised....................................32421
603.355  Heading revised; existing text designated as (a) and 
        amended; (b) added.........................................32421
    Regulation at 57 FR 32421 eff. 9-16-92.........................42888
611  Authority citation revised.............................26992, 43394
611.400  (b) introductory text, (2), (3), (5) and (c) introductory 
        text amended; (a) revised; (c)(6) added (effective date 
        pending)...................................................43394
611.1137  Added (effective date pending)...........................26992
    Regulation at 57 FR 26992 eff. 7-27-92.........................33104
611.1155  Amended (effective date pending).........................46487
611.1156  Redesignated as 627.2710 (effective date pending)........46487
611.1157  (a) and (b) amended (effective date pending).............46487
611.1160  (b) and (g) amended (effective date pending).............46487
611.1168  (c), (d) and (e) removed; (f) redesignated as (d); new 
        (c) added (effective date pending).........................46487
611.1170  (b), (g) and (h) amended (effective date pending)........46487
611.1175  (c), (d) and (e) removed; (f) redesignated as (d); new 
        (c) added (effective date pending).........................46487
611.1180  (a) and (f) amended (effective date pending).............46487
612  Authority citation revised....................................43395
612.2000--612.2110 (Subpart A)  Removed (effective date pending) 
                                                                   43395
612.2130--612.2270 (Subpart B)  Heading removed....................43395
612.2150  (b)(5) amended (effective date pending)..................43395
613  Authority citation revised....................................13637
613.3045  Regulation at 56 FR 65989 eff. 2-26-92....................6553
613.3140  Removed (effective date pending).........................13637
    Removal at 57 FR 13637 eff. 5-27-92............................22157
613.3145  Added (effective date pending)...........................13637
    Regulation at 57 FR 13637 eff. 5-27-92.........................22157
613.3150  Revised..................................................13638
    Regulation at 57 FR 13638 eff. 5-27-92.........................22157
613.3151  Added (effective date pending)...........................13638
    Regulation at 57 FR 13638 eff. 5-27-92.........................22157
613.3152  Added (effective date pending)...........................13638
    Regulation at 57 FR 13638 eff. 5-27-92.........................22157
613.3160  (a) revised; (b) introductory text amended (effective 
        date pending)..............................................13638
    Regulation at 57 FR 13638 eff. 5-27-92.........................22157
613.3170  Revised (effective date pending).........................13638
    Regulation at 57 FR 13638 eff. 5-27-92.........................22157
613.3175  Added (effective date pending)...........................13639
    Regulation at 57 FR 13639 eff. 5-27-92.........................22157
614  Authority citation revised....................................38246
    Authority citation corrected...................................43290
614.4000  (e) and (f) added (effective date pending)...............38246
    (e)(1) introductory text corrected.............................43290
    Regulation at 57 FR 38246 eff. 10-7-92.........................46755
614.4010  (f) and (g) added (effective date pending)...............38246
    (g)(3) corrected...............................................43290
    Regulation at 57 FR 38246 eff. 10-7-92.........................46755
614.4030  (c) added (effective date pending).......................38247
    Regulation at 57 FR 38247 eff. 10-7-92.........................46755

[[Page 1076]]

614.4040  (d) added (effective date pending).......................38247
    Regulation at 57 FR 38247 eff. 10-7-92.........................46755
614.4050  (d) added (effective date pending).......................38247
    Regulation at 57 FR 38247 eff. 10-7-92.........................46755
614.4060  Added (effective date pending)...........................38247
    Regulation at 57 FR 38247 eff. 10-7-92.........................46755
614.4240--614.4267 (Subpart F)  Revised (effective date pending) 
                                                                   54695
614.4245  (a) corrected............................................58860
614.4265  (b) corrected............................................58860
614.4325--614.4337 (Subpart H)  Revised (effective date pending) 
                                                                   38248
    Regulation at 57 FR 38248 eff. 10-7-92.........................46755
614.4336  (a)(2)(ii) corrected (effective date pending)............44489
614.4440  (f), (g) and (h) redesignated as (g), (h) and (i); (f) 
        added (effective date pending).............................54699
    (f) corrected..................................................58860
614.4443  (c) revised (effective date pending).....................54699
614.4510  (c) amended (effective date pending).....................38250
    Regulation at 57 FR 38250 eff. 10-7-92.........................46755
614.4710  (a)(4) and (b)(2) amended (effective date pending).......38250
    Regulation at 57 FR 38250 eff. 10-7-92.........................46755
615  Authority citation revised....................................46487
615.5210  (d)(2)(i) suspended in part and (d)(2)(ii) and (iii) 
        suspended (effective date pending).........................38251
    Regulation at 57 FR 38251 eff. 10-7-92.........................46755
615.5216  (b) amended (effective date pending).....................46487
618.8030  Regulation at 56 FR 65990 eff. 2-26-92....................6553
619  Authority citation revised....................................38250
619.9195  Revised (effective date pending).........................38250
    Regulation at 57 FR 38250 eff. 10-7-92.........................46755
619.9320  Removed (effective date pending).........................38250
    Regulation at 57 FR 38250 eff. 10-7-92.........................46755
625  Added (effective date pending)................................60109
627  Added (effective date pending)................................46482
627.2710  Redesignated from 611.1156; (a) revised (effective date 
        pending)...................................................46487
Chapter VII
700.1  (i) introductory text republished; (i)(7) and (15) revised; 
        (i)(16) and (17) redesignated as (i)(17) and (18); new 
        (i)(16) added..............................................47985
701  Authority citation revised....................................42488
701.21  (h)(2)(ii)(A), (iii)(B) and (3) introductory text revised 
                                                                   42488
701.33  (b)(2)(i) revised..........................................54502
702.3  (c)(2) revised; eff. 1-21-93................................60722
703  Interpretive ruling and policy statement......................22157
703.5  (e) stayed...................................................6553
    (e) eff. 12-1-92...............................................53238
704  Revised.......................................................22630
704.1  Existing text designated as (a); new (b) added..............28085
704.2  Corrected...................................................28085
704.6  (b)(2)(vi)(A) correctly revised; (d) corrected..............28085
704.7  (b)(3) corrected............................................28085
704.10  (b)(2) corrected...........................................28086
704.11  (i) corrected..............................................28086
704.12  (c)(2) correctly revised; (c)(5) corrected.................28086
704  Appendix A corrected..........................................28086
705  Authority citation revised....................................20742
705.7  (b)(2) revised..............................................20742
722  Authority citation revised....................................28998
    Temporary exceptions...........................................54173
722.2  (g) through (k) redesignated as (h) through (l); new (g) 
        added......................................................28998
722.3  (a)(4)(iv) and (5) revised; (a)(6) added....................28998
741.9  (a)(3) and (b)(3) revised...................................22636
    (a)(3) and (b)(3) corrected....................................28086
747.0  (a) and (b) corrected.........................................523
747.1  (a), (b), (c) introductory text and (c)(1) corrected..........523
747.3  (f)(1) and (g) corrected......................................523
747.9  (d) corrected.................................................522
747.16  Corrected....................................................523
747.33  (a) corrected................................................523

[[Page 1077]]

747.201  Corrected...................................................523
747.207  Corrected...................................................523
747.208  (a) corrected...............................................523
747.301  Introductory text corrected.................................523
747.304  Corrected...................................................523
747.305  Corrected...................................................523
747.306  (a) corrected...............................................523
747.401--747.406 (Subpart E)  Heading corrected.................522, 523
747.401  Corrected...................................................523
747.405  (c) corrected...............................................523
747.606  (c) corrected...............................................523
747.703  (a) corrected...............................................523
747.803  (b)(1)(iv) corrected........................................523
747.901--747.905 (Subpart J)  Heading corrected......................523
747.901  Corrected...................................................523
747.902  Corrected...................................................523
747.903  (a)(3) corrected............................................523
747.904  (b)(1), (2) and (d)(2) corrected.......................523, 524
747.905  (a) corrected...............................................524
Chapter IX
900.30  Revised.....................................................6468
900.53  Correctly designated.........................................749
910  Authority citation revised....................................62186
910.0  Added; eff. 1-29-93.........................................62186
910.1  Revised; eff. 1-29-93.......................................62186
910.6  Revised; eff. 1-29-93.......................................62186
932  Authority citation revised.....................................6190
932.3  Revised......................................................6190
932.18  Technical correction..........................................81
932.21  Technical correction..........................................81
932.23  Technical correction..........................................81
932.55  Removed; interim............................................2834
    Removal at 57 FR 2834 confirmed................................11429
932.56  Removed; interim............................................2834
    Removal at 57 FR 2834 confirmed................................11429
932.57  Removed; interim............................................2834
    Removal at 57 FR 2834 confirmed................................11429
935.6  Revised.....................................................42889
940.1  (b) revised.................................................42889
941  Added; interim.................................................2834
    Regulation at 57 FR 2384 confirmed.............................11429
941.6  (c)(3) amended; (c)(2) revised..............................11429
941.7  (f)(1)(ii) and (2) amended; (d)(1), (4)(i) and (ii) revised
                                                                   11429
941.8  (a) amended; (d) added......................................11429
941.10  (b) revised................................................11429
Chapter XI
1102  Added........................................................10982
1102.20--1102.39 (Subpart B)  Added................................31650
1102.20  (b) corrected.............................................35004
1102.29  (f)(1)(ii) and (g) corrected..............................35004
1102.100--1102.110 (Subpart C)  Added..............................36357
1102.300--1102.304 (Subpart D)  Added..............................60724
Chapter XIII
Chapter XIII  Chapter removed......................................60113
1300  Removed......................................................60113
Chapter XV
Chapter XV  Heading revised.........................................4715
1502  Added........................................................53240
1503  Added........................................................61252
Chapter XVI
1606  Policy statement.............................................54503
1608  Authority citation revised...................................49388
1608.2  (g) through (k) redesignated as (h) through (l); new (g) 
        added......................................................49388
1608.3  (a) introductory text, (1), (4)(iv) and (5) revised; 
        (a)(6), (7) and (d) added..................................49388
1608.4  (b) and (c) redesignated as (c) and (d); new (b) added.....49388
1609  Revised; interim.............................................19501
    Policy statement...............................................24937
1615  Added; interim...............................................32882
    Revised........................................................48950
1616  Added; interim...............................................43608
1617  Revised; interim.............................................35733
1620  Added........................................................32395
1680.1--1680.17  Designated as subpart A; interim..................37402
    Redesignated as subpart A; heading added.......................56969
1680.21--1680.34 (Subpart B)  Added; interim.......................37402
    Added; final...................................................56969

                                  1993

12 CFR
                                                                   58 FR
                                                                    Page
Chapter VI
601  Revised (effective date pending)...............................5919
    Regulation at 58 FR 5919 eff. 3-3-93...........................12333
607  Added (effective date pending)................................10942

[[Page 1078]]

    Regulation at 58 FR 10942 eff. 3-25-93.........................16104
611.400  Regulation at 57 FR 43393 eff. 1-29-93.....................6604
611.515  (b)(6)(ii)(E) amended (effective date pending)............48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
611.1122  (e)(6)(iii) amended; (e)(9) revised (effective date 
        pending)...................................................48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
611.1130  (b)(4)(iii) amended (effective date pending).............48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
611.1155  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1156  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1157  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1160  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1168  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1170  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1175  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1180  Regulation at 57 FR 46487 eff. 2-23-93...................10945
611.1182  (c) amended (effective date pending).....................48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
611.1197  (b)(6)(ii)(E) amended (effective date pending)...........48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
611.1225  (t)(2) amended (effective date pending)..................48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
611.1240  (c) amended (effective date pending).....................48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
612.2000--612.2110 (Subpart A)  Regulation at 57 FR 43394 eff. 1-
        29-93.......................................................6605
612.2130--612.2270 (Subpart B)  Regulation at 57 FR 43394 eff. 1-
        29-93.......................................................6605
612.2150  Regulation at 57 FR 43395 eff. 1-29-93....................6605
613  Authority citation revised....................................48790
613.3045  (c)(3)(i) amended (effective date pending)...............48790
    Regulation at 58 FR 48790 eff. 12-31-93........................67665
614.4130  (a) amended (effective date pending).....................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
614.4240--614.4267 (Subpart F)  Regulation at 57 FR 54695 eff. 3-
        1-93.......................................................11792
614.4250  (a)(1) amended (effective date pending)..................11372
614.4255  (a) revised; (b), (c) and (d) redesignated as (c), (d) 
        and (e); new (b) added; new (c) amended (effective date 
        pending)...................................................11372
614.4325  (g) removed; (h) redesignated as (g) (effective date 
        pending)...................................................40321
    Regulation at 58 FR 40321 eff. 1-1-94..........................67665
614.4350--614.4360 (Subpart J)  Revised (effective date pending) 
                                                                   40321
    Regulation at 58 FR 40321 eff. 1-1-94..........................67665
614.4440  Regulation at 57 FR 54699 eff. 3-1-93....................11792
614.4443  Regulation at 57 FR 54699 eff. 3-1-93....................11792
614.4470  (c) amended (effective date pending).....................40324
    Regulation at 58 FR 40324 eff. 1-1-94..........................67665
614.4512  (c)(2) and (e)(1) amended (effective date pending).......48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
614.4514  (d) amended (effective date pending).....................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
614.4516  (b)(2) amended (effective date pending)..................48791
    (a) introductory text revised (effective date pending).........62514
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
614.4517  (a)(5) amended (effective date pending)..................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665

[[Page 1079]]

614.4520  (a) amended (effective date pending).....................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
614.4522  (a)(1) heading revised; (b), (c) introductory text, (3), 
        (4), (d) introductory text and (e) amended (effective date 
        pending)...................................................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
614.4710  Introductory text, (a)(2), (3) and (b)(1) amended 
        (effective date pending)...................................40324
    Regulation at 58 FR 40324 eff. 1-1-94..........................67665
615  Authority citation revised....................................63055
615.5131  Added (effective date pending)...........................63055
615.5132  Redesignated from 615.5135(a) and revised (effective 
        date pending)..............................................63056
615.5133  Redesignated from 615.5135(b) and revised (effective 
        date pending)..............................................63056
615.5134  Added (effective date pending)...........................63056
615.5135--615.5160 (Subpart E)  Heading revised (effective date 
        pending)...................................................63055
615.5135  (a) and (b) redesignated as 615.5132 and 615.5133; new 
        615.5135 added (effective date pending)....................63056
615.5136  Added (effective date pending)...........................63057
615.5140  Heading and (a) revised; (b) redesignated as (d); new 
        (b) and (c) added (effective date pending).................63057
615.5141  Removed (effective date pending).........................63055
    Redesignated from 615.5180 (effective date pending)............63056
    Revised; (effective date pending)..............................63058
615.5142  Removed (effective date pending).........................63055
    Added (effective date pending).................................63058
615.5150  Redesignated as 615.5170 (effective date pending)........63056
615.5151  Redesignated as 615.5171 (effective date pending)........63056
615.5160  Redesignated as 615.5172 (effective date pending)........63056
615.5170--615.5172 (Subpart F)  Heading revised (effective date 
        pending)...................................................63058
615.5170  Redesignated from 615.5150 (effective date pending)......63056
615.5171  Redesignated from 615.5151 (effective date pending)......63056
615.5172  Redesignated from 615.5160 (effective date pending)......63056
615.5173  Added (effective date pending)...........................63058
615.5174  Added (effective date pending)...........................63058
615.5180  Redesignated as 615.5141 (effective date pending)........63056
615.5216  Regulation at 57 FR 46487 eff. 2-23-93...................10945
618  Authority citation revised....................................10944
618.8230  Removed (effective date pending).........................10944
    Regulation at 58 FR 10944 eff. 3-25-93.........................16105
618.8320  (b)(10) redesignated as (b)(10)(i); (b)(10)(ii) added 
        (effective date pending)...................................51994
    Regulation at 58 FR 51994 eff. 11-8-93.........................59161
620  Authority citation revised....................................27923
620.1  (i) amended (effective date pending)........................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
620.2  (b)(3) revised (effective date pending).....................27923
    Regulation at 58 FR 27923 eff. 6-17-93.........................33189
    (b)(1) amended (effective date pending)........................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
620.5  (f)(1)(i)(F) and (g)(1)(iv)(A) revised; (l) and (m)(1) 
        amended (effective date pending)...........................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
620.10  (e)(3) and concluding text revised (effective date 
        pending)...................................................27923
    Regulation at 58 FR 27923 eff. 6-17-93.........................33189
    (e)(1) amended (effective date pending)........................48791

[[Page 1080]]

    Regulation at 58 FR 48791 eff. 12-31-93........................67665
620.21  (f) amended (effective date pending).......................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
620.40 (Subpart F)  Revised (effective date pending)...............48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
621  Revised (effective date pending)..............................48786
    Regulation at 58 FR 48786 eff. 12-31-93........................67665
621.20  (b)(3) corrected (effective date pending)..................52888
625  Regulation at 57 FR 60109 eff. 2-23-93........................10945
627  Regulation at 57 FR 46482 eff. 2-23-93........................10945
627.2710  Regulation at 57 FR 46487 eff. 2-23-93...................10945
627.2785  (c) amended (effective date pending).....................48791
    Regulation at 58 FR 48791 eff. 12-31-93........................67665
Chapter VII
700.1  (i)(2) through (6), (15) and (16) introductory text 
        revised; (i)(7) introductory text amended..................40042
701  Authority citation revised..............................6077, 50445
      Authority citation revised.............................6077, 50445
701.12  (b), (c) and (e) revised...................................39433
701.21  (c)(7)(ii)(C) amended.......................................6077
    (c)(5) amended; (h)(1)(i)(C) and (5) revised...................40043
701.32  (b)(1) and (d) revised.....................................21645
701.35  (c) revised; eff. 1-1-95...................................50445
703  Technical correction..........................................16763
703.5  Introductory text, (g) and (j) revised......................34870
    (g)(1)(ii)(A), (2) and (j)(2) corrected........................41419
704.17  Added......................................................57541
705  Revised.......................................................21646
707  Added; eff. 1-1-95............................................50445
710  Revised.......................................................35365
711.2  (h)(1) revised; (l) amended; (o) added......................39435
711.4  (a)(5), (6) and (c) amended; (c) existing text redesignated 
        as (c)(1); (a)(7), (8) and (c)(2) added....................39435
    (a)(8) and (c)(2)(i) introductory text corrected...............58263
711.5  Amended.....................................................39435
722  Temporary exceptions..........................................42640
722.3  (a)(1) and (d) revised......................................40043
740  Authority citation revised....................................50461
740.2  Amended.....................................................50461
741.1  Revised.....................................................57542
741.13  (a) revised.................................................5571
748.1  (c) revised.................................................17492
790  Revised.......................................................45431
791.18  (c) revised................................................17493
796  Removed........................................................6605
Chapter IX
902  Added.........................................................19195
904  Added.........................................................19198
906  Added.........................................................19202
909  Added.........................................................19205
931  Authority citation revised....................................43542
    Technical correction....................................47181, 53023
931.7  Removed.....................................................43542
931.8  Removed.....................................................43542
931.9  Removed.....................................................43542
931.22  Removed....................................................43542
932  Authority citation revised..............................3490, 31901
    Technical correction....................................47181, 53023
932.2  Removed.....................................................43542
932.4  Removed.....................................................43542
932.5  Removed.....................................................43542
932.6  Removed.....................................................43542
932.7  Removed.....................................................43542
932.13  (c) amended; interim........................................3490
    (c) amended....................................................31901
932.14  (d) amended; interim........................................3490
    (d) amended....................................................31901
932.18  (f)(1) and (3) introductory text revised; interim...........3490
    (f)(1) and (3) introductory text revised.......................31901
932.21  (d)(2), (g)(1) and (3) revised; interim.....................3490
    (d)(2), (g)(1) and (3) revised.................................31901
933  Revised.......................................................43542
    Technical correction...........................................52808
933.1  (n) corrected...............................................53023
933.2  OMB number..................................................50837
933.5  OMB number..................................................50837
933.7  (d) corrected...............................................47181
933.9  OMB number..................................................50837
    (b)(1) corrected........................................53023, 58231
933.12  OMB number.................................................50837
933.13  OMB number.................................................50837
933.14  (b)(2) corrected...........................................47181
933.16  (b) corrected..............................................53023
933.18  OMB number.................................................50837

[[Page 1081]]

    (c) corrected..................................................53023
935  Revised.......................................................29469
    Authority citation revised.....................................29477
    Technical correction...........................................40190
935.1  Amended; interim............................................29477
935.20  Revised; interim...........................................29477
935.22  Added; interim.............................................29477
940  Removed.......................................................29474
    Technical correction...........................................40190
943.6  (b)(3) removed; (c) amended.................................59936
960.9  Revised; interim............................................17972
Chapter XVI
1605  Authority citation revised....................................8222
1605.1  Removed.....................................................8222
1605.2  (f), (g), (l), (n), (s) through (v), (x), (y), (cc) and 
        (dd) removed................................................8222
1605.3  Removed.....................................................8222
1605.4  Removed.....................................................8222
1605.5  Removed.....................................................8222
1605.6  Removed.....................................................8222
1605.7--1605.14 (Subpart B)  Heading revised........................8222
1605.7  Removed.....................................................8222
1605.8  Removed.....................................................8222
1605.9  Removed.....................................................8222
1605.10  Removed....................................................8222
1605.11  Removed....................................................8222
1605.12  Removed....................................................8222
1605.13  Removed....................................................8222
1605.14  Removed....................................................8222
1605.15  Removed....................................................8222
1605.16  (d) Footnote 4 redesignated as Footnote 2..................8222
1605.23  (c) and (g) removed........................................8222
1605.27  Removed....................................................8222
1605.28  Removed....................................................8222
1605.29  Removed....................................................8222
1605.30--1605.33 (Subpart E)  Heading revised.......................8222
1605.30  Removed....................................................8222
1605.31  Removed....................................................8222
1605.32  Removed....................................................8222
1605.33  Removed....................................................8222
1605.34--1605.43 (Subpart F)  Heading revised.......................8222
1605.34  Removed....................................................8222
1605.35  Removed....................................................8222
1605.36  Removed....................................................8222
1605.37  Removed....................................................8222
1605.38  Removed....................................................8222
1605.39  Removed....................................................8222
1605.40  Removed....................................................8222
1605.41  Removed....................................................8222
1605.42  Removed....................................................8222
1605.43  Removed....................................................8222
1616  Revised........................................................476
1625  Added........................................................58941
1626  Added........................................................34871
1627  Added; interim...............................................18144
    Technical correction...........................................21627

                                  1994

12 CFR
                                                                   59 FR
                                                                    Page
Chapter VI
600  Authority citation revised....................................21641
600.1  Amended (effective date pending)............................21641
    Regulation  at 59 FR 21641 eff. 4-26-94........................27970
600.4  (b) revised; (c) and (d) added (effective date pending).....21641
    Regulation  at 59 FR 21641 eff. 4-26-94........................27970
600.5  (a), (b) and (c) redesignated as (b), (d) and (e), new (a) 
        and new (c) added; new (b) and new (d) revised (effective 
        date pending)..............................................21642
    Regulation  at 59 FR 21642 eff. 4-26-94........................27970
600.10  (c) amended (effective date pending).......................21642
    Regulation  at 59 FR 21642 eff. 4-26-94........................27970
604  Authority citation revised....................................21642
604.440  Amended (effective date pending)..........................21642
    Regulation  at 59 FR 21642 eff. 4-26-94........................27970
605  Authority citation revised....................................21643
605.502  (f) amended (effective date pending)......................21643
    Regulation  at 59 FR 21643 eff. 4-26-94........................27970
607.2  (b) introductory text amended...............................37403
608  Added (effective date pending)................................13187
    Regulation  at 59 FR 13187 eff. 5-6-94.........................23615
611  Authority citation revised....................................37411
611.400  Revised (effective date pending)..........................37411
    Regulation  at 59 FR 37411 eff. 8-22-94........................45972
611.1130  (a) amended (effective date pending).....................21643

[[Page 1082]]

    Regulation  at 59 FR 21643 eff. 4-26-94........................27970
612  Revised (effective date pending)..............................24894
614.4240--614.4267  (Subpart F) Revised; interim (effective date 
        pending)...................................................46730
614.4266  (e) correctly designated.................................50964
614.4351  (a) revised..............................................37403
614.4443  (c) revised; interim.....................................46734
614.4516  Regulation at 58 FR 62514 eff. 3-15-94...................11898
614.4710  (a)(1)(i) amended........................................37404
615.5060  (a) revised (effective date pending)......................3787
    Regulation  at 59 FR 3787 eff. 3-18-94.........................12811
615.5131  Regulation at 58 FR 63055 eff. 3-15-94...................11898
    (t)  amended...................................................37404
615.5132  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5133  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5134  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5135--615.5160  (Subpart E) Regulation at 58 FR 63055 eff. 3-
        15-94......................................................11898
615.5135  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5136  Regulation at 58 FR 63057 eff. 3-15-94...................11898
615.5140  Regulation at 58 FR 63057 eff. 3-15-94...................11898
    (a)(8)(i)(B)  and (11)(ii) corrected...........................22736
615.5141  Regulations at 58 FR 63055, 63056 and 63058 eff. 3-15-94
                                                                   11898
615.5142  Regulations at 58 FR 63055 and 63058 eff. 3-15-94........11898
615.5150  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5151  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5160  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5170--615.5172 (Subpart  F) Regulation at 58 FR 63058 eff. 3-
        15-94......................................................11898
615.5170  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5171  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5172  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5173  Regulation at 58 FR 63058 eff. 3-15-94...................11898
615.5174  Regulation at 58 FR 63058 eff. 3-15-94...................11898
615.5180  Regulation at 58 FR 63056 eff. 3-15-94...................11898
615.5201  (a) through (l) redesignated as (b) through (g) and (i) 
        through (n); new (a) and new (h) added; new (j) revised; 
        new (k) amended............................................37404
615.5210  (d) and (e) redesignated as (e) and (f); new (e)(4) 
        through (7) redesignated as (e)(6) through (9); (c), new 
        (f)(1), new (3)(i) and new (ii)(D)(1) amended; new (e)(3) 
        removed; new (d), (e)(3), (4) and (5) added; new (e)(2) 
        revised....................................................37404
615.5495  (b) amended (effective date pending).....................21643
    Regulation  at 59 FR 21643 eff. 4-26-94........................27970
618.8270  Revised (effective date pending).........................37411
    Regulation  at 59 FR 37411 eff. 8-22-95........................45972
618.8320  (b)(11) added; interim (effective date pending)..........46734
618.8325  (b) amended; interim (effective date pending)............46734
620.1  (j) amended.................................................37406
620.5  (i) revised (effective date pending)........................37412
    Regulation  at 59 FR 37412 eff. 8-22-95........................45972
621  Authority citation revised....................................60888
621.11  Removed; interim...........................................60888
630  Added (effective date pending)................................46742
650  Added (effective date pending).................................9626
    Regulation  at 59 FR 9626 eff. 9-13-94.........................46913
Chapter VII
701  Authority citation revised....................................39424
    Authority  citation corrected..................................52862
701.1  Revised.....................................................29075
    Amended........................................................36041
701.2  (b)  and (c) amended........................................36041
701.3  Correctly removed; CFR correction...........................54517
701.4  Correctly removed; CFR correction...........................54517

[[Page 1083]]

701.6  (a), (b)(2) and (3) revised.................................33421
701.14  (f) amended................................................36042
701.21  (c)(7)(ii)(C) revised......................................39425
701.31  (d)(3) amended.............................................36041
701.32  (b)(2), (3) and (4) redesignated as (b)(4), (5) and (6); 
        (b)(1) and new (6) revised; new (b)(2) and new (3) added 
                                                                   26102
704.2  Amended; eff. 1-1-96........................................59360
704.10  (b)(2) amended.............................................47072
704.11  (a)(1) and (2) amended.....................................47072
704.12  Revised; eff. 1-1-96.......................................59360
704.13  (c) amended................................................47072
704.16  Amended....................................................47072
704  Appendix B amended............................................47072
707  Compliance date extended......................................39425
707.2  (r) amended.................................................13436
    (a)  and (q) revised...........................................59899
707.6  (b)(3) revised..............................................59899
707.8  (c)(5) revised (OMB number pending).........................13436
707.9  (b) revised (OMB number pending)............................13436
707  Appendix B amended.....................................13436, 13437
    Appendix C  added..............................................59899
708  Redesignated as 708b..........................................48792
708a  Added; interim...............................................48792
708b  Redesignated from 708........................................48792
    Authority  citation revised....................................67620
708b.102  (d) and (e) amended......................................67620
708b.105  (b) amended..............................................67620
708b.106  (a)(2)(ii) and (b) amended...............................67620
708b.202  (a), (b) and (c) amended.................................67620
708b.204  (a), (b) and (c) amended.................................67620
709.8  (c)(1) amended..............................................36041
709.9  (b) amended.................................................36041
722  Statement and order.....................................6531, 40202
    Temporary  exceptions..........................................62562
741.6  (a) amended.................................................26103
741.11  (b)(1), (c), (d) and (g) revised...........................33421
745.202  (a) amended...............................................36041
747.306  (b) amended...............................................36041
747.307  (a) amended...............................................36042
747.609  (d) amended...............................................36041
747.616  Amended...................................................36041
790  Authority citation revised....................................36041
790.2  (b)(6) redesignated as (b)(6)(i) and (ii); (b)(1), (3), new 
        (6)(i), (8) and (9) amended; (b)(6)(iii), (13), (14) and 
        (15) added; (d) and (e) removed............................36042
    (b)(6)(ii)  removed; (b)(6)(iii) redesignated as (b)(6)(ii); 
(b)(10) revised; (b)(16) added.....................................47072
791.8  (c) amended.................................................36041
792  Authority citation revised....................................36041
792.2  (g)(1) amended..............................................36041
    (f),  (g)(1) and (2) amended...................................36042
792.5  (b)(1)(i), (ii) and (2) amended.............................36042
792.22  (a) amended................................................36041
792.24  (b)(3) amended.............................................36042
792.26  (a) amended.........................................36041, 36042
792.27  (a) and (c) amended........................................36041
792.37  (a) amended................................................36042
792.40  Amended....................................................36041
792.50  (a) amended................................................36042
793  Authority citation revised....................................36041
793.2  (c) amended.................................................36041
794.170  (c) amended...............................................36042
Chapter IX
935  Authority citation revised.....................................2949
935.1  Amended......................................................2949
935.5  (a)(2) amended; (a)(3) and (b) through (g) added.............2949
935.17  Revised.....................................................2950
Chapter XI
1102.300--1102.304 (Subpart  D) Authority citation revised..........1902
1102.305  Added.....................................................1902
1102.306  Added.....................................................1902
1102.307  Added.....................................................1902
Chapter XIV
1402  Added........................................................24638
1403  Added; interim...............................................53084
    Regulation  at 59 FR 53084 eff. 11-21-94.......................60888
1408  Added........................................................24899
Chapter XVI
1609  Revised; interim.............................................52671
    Regulation  at 59 FR 52671 confirmed; eff. 1-12-95.............64111
1627  Revised.......................................................5939
1630  Added; interim................................................8845
    Regulation  at 59 FR 8845 confirmed............................37931
1640  Added; interim...............................................47793
    Regulation  at 59 FR 47793 confirmed...........................60305
Chapter XVII
Chapter  XVII Established..........................................62304

[[Page 1084]]

                                  1995

12 CFR
                                                                   60 FR
                                                                    Page
Chapter VI
Chapter  VI Regulatory burden statement............................57913
601  Revised; interim (effective date pending).....................30782
    Regulation at 60 FR 30782 confirmed; eff. 9-13-95..............47453
607.2  Regulation at 59 FR 37403 eff. 12-31-94.......................325
611.1125  (b)(2) amended (effective date pending)..................34099
    Regulation at 60 FR 34099 eff. 8-8-95..........................42049
612  Regulation at 59 FR 24894 eff. 12-31-94.........................325
614  Authority citation revised....................................35289
614.4240--614.4267 (Subpart F)  Regulation at 59 FR 46730 eff. 1-
        4-95........................................................2683
614.4260  (c)(5) introductory text revised..........................2687
614.4351  Regulation at 59 FR 37403 eff. 12-31-94....................325
614.4443  Regulation at 59 FR 46734 eff. 1-4-95.....................2683
614.4470  (b)(1) and (3) amended (effective date pending)..........20010
    Regulation at 60 FR 20010 eff. 5-24-95.........................27402
614.4710  Regulation at 59 FR 37404 eff. 12-31-94....................325
614.4940 (Subpart S)  Added; eff. 1-2-96...........................35289
615.5104  Removed (effective date pending).........................20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
615.5105  (c) removed (effective date pending).....................20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
615.5131  Regulation at 59 FR 37404 eff. 12-31-94....................325
615.5170  (a) designation and (b) through (e) removed (effective 
        date pending)..............................................20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
615.5190 (Subpart G)  Removed (effective date pending).............20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
615.5201  Regulation at 59 FR 37404 eff. 12-31-94....................325
615.5210  Regulation at 59 FR 37404 eff. 12-31-94....................325
615.5230  (a)(1)(ii) and (3) revised; (a)(1)(iii) added (effective 
        date pending)..............................................57921
615.5498  Removed (effective date pending).........................20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
615.5500--615.5530 (Subpart P)  Removed (effective date pending) 
                                                                   20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
    Added; interim (effective date pending)........................57919
618.8000--618.8030 (Subpart A)  Revised (effective date pending) 
                                                                   34099
    Regulation at 60 FR 34099 eff. 8-8-95..........................42029
618.8025  (a) corrected............................................42029
618.8030  Redesignated as 618.8040 (effective date pending)........34099
    Regulation at 60 FR 34099 eff. 8-8-95..........................42029
618.8040  (b)(10) removed; (b)(2) through (9) redesignated as 
        (b)(3) through (10); (b)(1) and new (6) revised; new 
        (b)(2) added; new (b)(3) amended (effective date pending) 
                                                                   34101
    Redesignated from 618.8030 (effective date pending)............34099
    Regulation at 60 FR 34099 eff. 8-8-95..........................42029
618.8220  Removed (effective date pending).........................20011
    Regulation at 60 FR 20011 eff. 5-24-95.........................27402
618.8320  Regulation at 59 FR 46734 eff. 1-4-95.....................2683
618.8325  Regulation at 59 FR 46734 eff. 1-4-95.....................2683
620.1  Regulation at 59 FR 37406 eff. 12-31-94.......................325
620.5  (a)(3) amended (effective date pending).....................34102
    Regulation at 60 FR 34102 eff. 8-8-95..........................42029
620.21  Heading, (c)(3), (d)(1), (3), (5) and (6) revised 
        (effective date pending)...................................20013
    Regulation at 60 FR 20013 eff. 5-24-95.........................27684

[[Page 1085]]

    (d)(1) amended; (d)(3) revised (effective date pending)........57922
630  Regulation at 59 FR 46742 eff. 1-4-95..........................2493
Chapter VII
701.1  OMB number..................................................67321
701.6  (d)(4) revised; eff. 1-29-96................................58503
701.14  (a) amended................................................31911
701.21  (c)(8) revised.............................................51889
    (a) amended; eff. 1-29-96......................................58504
    (a) corrected..................................................63613
701.22  (a)(1), (b)(2), (c)(4) and (d)(1) revised; eff. 1-26-96....58204
701.23  (b)(2)(iii) revised; eff. 1-29-96..........................58504
705.3  (b) revised; eff. 1-29-96...................................58504
707  Compliance date extension..............................25121, 57173
707  Appendix C amended............................................21699
708a  Regulation at 59 FR 48792 confirmed..........................12661
708a.1  Revised....................................................12661
708a.2  Revised....................................................12661
708a.3  Added......................................................12661
708a.4  Added......................................................12662
708a.5  Added......................................................12662
708a.6  Added......................................................12662
708a  Appendix A added.............................................12662
722.3  Heading, (a) and (d) revised; (e) added.....................51894
722.4  Revised.....................................................51894
722.5  (b) revised.................................................51895
722  Appendix A removed............................................51895
741  Revised; eff. 1-29-96.........................................58504
747.901  Amended...................................................31911
747.902  Amended...................................................31911
747.904  (b)(2) amended............................................31911
760  Authority citation revised....................................35289
760.12  Added; eff. 1-2-96.........................................35289
790.2  (b)(14) revised; (c)(2) amended.............................31911
792  Authority citation revised....................................31912
792.2  (f) amended.................................................31911
792.34  (b)(3) added...............................................31912
Chapter IX
900  Authority citation revised....................................49199
900.51  Revised....................................................49199
922.6  Revised.....................................................49199
922.7  Removed.....................................................49199
934  Authority citation revised....................................65516
934.11  Removed; new 934.11 redesignated from 934.12...............65516
934.12  Redesignated as 934.11; new 934.12 redesignated from 
        934.13.....................................................65516
934.13  Redesignated as 934.12; new 934.13 redesignated from 
        934.14.....................................................65516
934.14  Redesignated as 934.13; new 934.14 redesignated from 
        934.15.....................................................65516
934.15  Regulation at 55 FR 50545 confirmed........................42779
    Redesignated as 934.14.........................................65516
937  Removed.......................................................36967
939  Removed.......................................................36967
943  Authority citation revised....................................57682
943.6  (a) and (c) revised.........................................57682
960  Authority citation revised....................................49330
960.4  (a) amended.................................................49330
960.5  (a)(1) revised; (g) added...................................49330
Chapter XIV
1401  Added; interim...............................................30778
Chapter XVI
Chapter XVI  Removed...............................................66483
1617  Revised.......................................................7663
Chapter XVIII
Chapter XVIII  Established; interim................................54115

                                  1996

12 CFR
                                                                   61 FR
                                                                    Page
Chapter VI
600  Authority citation revised....................................67185
600.5  (b) and (d)(1) amended; (d)(2) revised (effective date 
        pending); interim..........................................67185
603  Authority citation revised....................................67185
603.310  (b) amended (effective date pending); interim.............67185
611.1030  Amended (effective date pending); interim................67185
611.1135  (a), (b)(1), (2), (3)(v), (6), (7), (c), (d)(1) 
        introductory text, (iv) and (2) revised; (e) removed 
        (effective date pending); interim..........................67185
611.1140--611.1145 (Subpart J)  Removed (effective date pending); 
        interim....................................................67186
611.1155--611.1158 (Subpart K)  Removed (effective date pending); 
        interim....................................................67186
611.1160--611.1169 (Subpart L)  Removed (effective date pending); 
        interim....................................................67186
611.1170--611.1176 (Subpart M)  Removed (effective date pending); 
        interim....................................................67186

[[Page 1086]]

611.1180--611.1183 (Subpart N)  Removed (effective date pending); 
        interim....................................................67186
611.1190--611.1198 (Subpart O)  Removed (effective date pending); 
        interim....................................................67186
611.1200  (c) amended (effective date pending); interim............67186
611.1250  (b) and (c) amended (effective date pending); interim....67186
611.1255  Revised (effective date pending); interim................67186
611.1266  (c) amended (effective date pending); interim............67186
614.4321  Revised (effective date pending); interim................67186
614.4367  (a)(4) and (c)(3) amended................................11304
    Regulation at 61 FR 11304 eff. 5-3-96..........................20125
614.4440  (h)(1) amended (effective date pending); interim.........67187
614.4444  Amended (effective date pending); interim................67187
614.4510  (b) and (d)(4) removed; (c) and (d) redesignated as (b) 
        and (c); introductory text, (a) and new (c) introductory 
        text revised (effective date pending); interim.............67187
614.4515  Removed (effective date pending); interim................67187
614.4516  Heading revised; introductory text added (effective date 
        pending); interim..........................................67187
614.4517  (c) added (effective date pending); interim..............67187
614.4520  Removed (effective date pending); interim................67187
614.4525  (c) and (d) amended (effective date pending); interim....67187
614.4920--614.4960 (Subpart S)  Revised............................45711
615  Authority citation revised....................................31394
615.5120  (a) amended (effective date pending); interim............67187
615.5140  (a)(1) revised (effective date pending); interim.........67187
615.5143  Amended (effective date pending); interim................67187
615.5230  Regulation at 60 FR 57921 eff. 1-2-96.....................1274
615.5250  (e) revised (effective date pending); interim............67187
615.5280  (a) through (e) revised (effective date pending); 
        interim....................................................67187
615.5290  (a) amended (effective date pending); interim............67188
615.5450--615.5462 (Subpart O)  Revised; interim...................67192
615.5500--615.5502 (Subpart P)  Regulation at 60 FR 57919 
        confirmed..................................................12015
615.5560  (c) revised; interim.....................................67195
615.5570 (Subpart S)  Added........................................31394
    (c) revised; interim...........................................67195
618.8260  Removed (effective date pending); interim................67188
618.8310  (b)(1) amended (effective date pending); interim.........67188
618.8320  (b)(2) and (5) revised; (b)(9) removed; (b)(10) and (11) 
        redesignated as (b)(9) and (10) (effective date pending); 
        interim....................................................67188
618.8325  (c) amended (effective date pending); interim............67188
618.8330  (a) designation and (b) removed (effective date 
        pending); interim..........................................67188
618.8340  Removed (effective date pending); interim................67188
618.8360  Removed (effective date pending); interim................67188
618.8370  Removed (effective date pending); interim................67188
618.8380--618.8420 (Subpart I)  Removed (effective date pending); 
        interim....................................................67188
619.9060  Revised (effective date pending); interim................67188
620.21  Regulation at 60 FR 57922 eff. 1-2-96.......................1274
621.11  Regulation at 59 FR 50888 confirmed........................18236
622  Authority citation revised....................................54729
622.61  Added......................................................54729
Chapter VII
701  Authority citation revised.....................................4214
701.1  Revised (OMB number)........................................11726
    Revised; interim...............................................59308
701.12  (a), (b) and (c) revised; (d) and (e) redesignated as (g) 
        and (h); new (d), new (e) and (f) added....................41323
701.13  (a)(2) amended.............................................41326
701.21  (c)(7)(ii)(C) revised.......................................4214
    (d)(1) amended; (d)(4) introductory text revised...............68128

[[Page 1087]]

701.32  Heading, (a) and (b)(1) revised; (d) redesignated as 
        701.34(a); interim..........................................3790
    Regulation at 61 FR 3790 confirmed.............................50697
701.34  (a) redesignated from 701.32(d); new (a)(1) amended; (b), 
        (c) and Appendix added; interim.............................3790
    (a)(1) revised.................................................50695
    Regulation at 61 FR 3790 confirmed; (b)(2) and (c) revised.....50697
705  Authority citation revised....................................50695
705.3  (b) amended.................................................45875
    (b) revised....................................................50695
705.5  (b)(1) revised..............................................50695
705.7  (a) amended.................................................50696
705.10  Revised....................................................50696
707  Reporting and recordkeeping requirements........................114
707.1  (c) amended.................................................68129
707.3  OMB number....................................................114
707.4  OMB number....................................................114
707.5  OMB number....................................................114
707.6  OMB number....................................................114
707.7  OMB number....................................................114
707.8  OMB number....................................................114
707.9  OMB number....................................................114
707  Appendix C amended............................................68129
709.5  (b)(6) and (7) revised; (b)(8) added; (e) amended; interim 
                                                                    3791
    Regulation at 61 FR 3791 confirmed.............................50697
711  Revised.......................................................50702
741.204  (b) amended; (c) added; interim............................3792
    Regulation at 61 FR 3792 confirmed.............................50697
745  Authority citation revised....................................60186
745.200  (b) and (d) revised.......................................60186
747  Authority citation revised.............................28024, 57291
747.1  (c)(2) amended; (d) redesignated as (e); (c)(3) and new (e) 
        revised; (c)(4) and new (d) added..........................28025
747.6  (a)(3) revised..............................................28025
747.8  (b) revised.................................................28025
747.9  (a) and (b) revised; (e) added..............................28025
747.11  (c)(2) and (d) revised.....................................28025
747.12  (a), (c)(1), (2) and (3) revised...........................28026
747.20  Revised....................................................28026
747.24  (a) and (b) revised........................................28026
747.25  (a), (b), (e) and (g) revised..............................28026
    (b) amended....................................................45876
747.33  (a) revised................................................28027
747.34  (a) and (b)(1) revised.....................................28027
747.35  (a)(3) redesignated as (a)(4); new (a)(3) added; (b) 
        revised....................................................28027
747.37  Heading and (a)(1) revised.................................28027
747.38  Revised....................................................28027
747.1001 (Subpart K)  Added........................................57291
748  Heading revised...............................................11527
    Authority citation revised.....................................11527
748.1  (c) revised.................................................11527
760  Revised.......................................................45713
790.2  (b)(5) revised; (b)(6)(i), (ii) and (7) amended.............45876
791.6  Revised.....................................................55208
Chapter IX
900.12  Revised....................................................68129
900.13  Revised....................................................68130
900.14  Revised....................................................68130
900.15  Revised....................................................68130
900.16  Revised....................................................68130
900.17  Revised....................................................68130
900.18  Revised....................................................68130
900.19  Revised....................................................68130
900.20  Removed....................................................68130
900.21  Removed....................................................68130
902  Authority citation revised....................................64614
902.6  Added; eff. 1-6-97..........................................64614
910  Authority citation revised....................................64024
910.3  Revised; interim............................................64024
912  Revised; interim..............................................64024
931  Authority citation revised....................................40313
931.5  Revised.....................................................40313
932.26  Added......................................................43154
932.27  Revised....................................................43154
933  Heading revised...............................................42542
933.1 (Subpart A)  Revised.........................................42542
933.2--933.5 (Subpart B)  Revised..................................42543
933.6--933.10 (Subpart C)  Redesignated as 933.19--933.23 (Subpart 
        D).........................................................42542
    Added..........................................................42545
933.11--933.12 (Subpart D)  Redesignated as 933.24--933.25 
        (Subpart E)................................................42542
933.13--933.15 (Subpart E)  Redesignated as 933.26--933.28 
        (Subpart F)................................................42542
933.16 (Subpart F)  Redesignated as 933.29 (Subpart G).............42542
933.17 (Subpart G)  Redesignated as 933.30 (Subpart H).............42542

[[Page 1088]]

933.18 (Subpart H)  Redesignated as 933.31 (Subpart I).............42542
933.19 (Subpart I)  Redesignated as 933.32 (Subpart J).............42542
933.19--933.23 (Subpart D)  Redesignated from 933.6--933.10 
        (Subpart C)................................................42542
933.20  (b)(1) and (2) amended.....................................42549
933.22  (b)(1) amended.............................................42549
933.23  Amended....................................................42549
933.24--933.25 (Subpart E)  Redesignated from 933.11--933.12 
        (Subpart D)................................................42542
933.24  (a)(2) and (b)(2) amended..................................42549
933.25  (c), (d)(2)(ii)(A), (B), (iii) and (3) amended.............42549
933.26--933.28 (Subpart F)  Redesignated from 933.13--933.15 
        (Subpart E)................................................42542
933.26  (c) amended................................................42549
933.27  (e) amended................................................42549
933.28  (b) amended................................................42549
933.29  Redesignated from 933.16 (Subpart F).......................42542
    (a)(1) amended.................................................42549
933.30  Redesignated from 933.17 (Subpart G).......................42542
    Introductory text, (a) and (b) amended.........................42549
933.31  Redesignated from 933.18 (Subpart H).......................42542
    (d) amended....................................................42549
933.32 (Subpart J)  Redesignated from 933.19 (Subpart I)...........42542
934  Authority citation revised....................................55880
934.6  Revised.....................................................55880
935.6  (d) added...................................................52687
941  Authority citation revised....................................43155
941.7  (f)(2) revised..............................................43155
950  Revised; interim..............................................59314
Chapter XIV
1401.1  Regulation at 60 FR 30778 confirmed.........................4349
1411  Added........................................................55079
Chapter XV
1511  Revised......................................................66875
Chapter XVII
1750  Added........................................................35620
Chapter XVIII
1805.104  (n) revised; interim......................................1701
1805.201  Amended; interim..........................................1701
1805.600  Amended; interim..........................................1701
    Corrected.......................................................7690
1805.604  Added; interim............................................1701
1805.701  (d)(2)(iii) revised; (e)(3) introductory text amended; 
        interim.....................................................1702
1806.103  (dd) added; interim.......................................1702
    (q) revised; interim...........................................59828
1806.200  (b)(2)(ii) revised; interim...............................1702
1806.201  (b)(2) revised; (b)(4)(xii) and (xiii)(B) amended; 
        (b)(4)(xiv) added; interim..................................1702
1806.202  (a) revised; (b)(2) and (3) amended; (b)(4) and (d) 
        added; interim..............................................1702
    Corrected.......................................................7690
    (a) revised; interim...........................................59828
1806.205  (c)(1) revised; interim..................................59828
1806.206  (b)(1) and (4) revised; interim...........................1702

                                  1997

12 CFR
                                                                   62 FR
                                                                    Page
Chapter VI
600.5  Regulation at 61 FR 67185 eff. 3-4-97.......................18037
602  Authority citation revised....................................41253
602.260  Revised (effective date pending)..........................41254
    Regulation at 62 FR 41254 eff. 10-2-97.........................51593
602.261  (a) and (d) revised; (e) added (effective date pending) 
                                                                   41254
    Regulation at 62 FR 41254 eff. 10-2-97.........................51593
603.310  Regulation at 61 FR 67185 eff. 3-4-97.....................18037
611.1030  Regulation at 61 FR 67185 eff. 3-4-97....................18037
611.1135  (b)(1) corrected.........................................13213
    Regulation at 61 FR 67185 eff. 3-4-97..........................18037
611.1140--611.1145 (Subpart J)  Regulation at 61 FR 67186 eff. 3-
        4-97.......................................................18037
611.1155--611.1158 (Subpart K)  Regulation at 61 FR 67186 eff. 3-
        4-97.......................................................18037
611.1160--611.1169 (Subpart L)  Regulation at 61 FR 67186 eff. 3-
        4-97.......................................................18037
611.1170--611.1176 (Subpart M)  Regulation at 61 FR 67186 eff. 3-
        4-97.......................................................18037

[[Page 1089]]

611.1180--611.1183 (Subpart N)  Regulation at 61 FR 67186 eff. 3-
        4-97.......................................................18037
611.1190--611.1198 (Subpart O)  Regulation at 61 FR 67186 eff. 3-
        4-97.......................................................18037
611.1200  Regulation at 61 FR 67186 eff. 3-4-97....................18037
611.1250  Regulation at 61 FR 67186 eff. 3-4-97....................18037
611.1255  Regulation at 61 FR 67186 eff. 3-4-97....................18037
611.1266  Regulation at 61 FR 67186 eff. 3-4-97....................18037
613  Authority citation revised.....................................4441
613.3000--613.3030 (Subpart A)  Revised (effective date pending) 
                                                                    4441
    Regulation at 62 FR 4441 eff. 3-11-97..........................11071
613.3100--613.3200 (Subpart B)  Revised (effective date pending) 
                                                                    4442
    Regulation at 62 FR 4442 eff. 3-11-97..........................11071
613.3100  (b)(1)(iv) corrected.....................................33746
613.3110--613.3120 (Subpart D)  Removed (effective date pending) 
                                                                    4441
    Regulation at 62 FR 4441 eff. 3-11-97..........................11071
613.3145--613.3175 (Subpart E)  Redesignated as 626 (effective 
        date pending)...............................................4441
    Regulation at 62 FR 4441 eff. 3-11-97..........................11071
613.3200  Correctly designated.....................................11071
613.3300 (Subpart C)  Revised (effective date pending)..............4444
    Regulation at 62 FR 4444 eff. 3-11-97..........................11071
614  Authority citation revised.............................63646, 66817
614.4000  (a) revised; (f) introductory text amended (effective 
        date pending)..............................................51013
    Regulation at 62 FR 51013 eff. 11-5-97.........................59780
614.4010  (d)(4) and (5) amended; (d)(6) and (7) added (effective 
        date pending)...............................................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
    (a) revised; (d)(1) and (2) amended (effective date pending) 
                                                                   51013
    Regulation at 62 FR 51013 eff. 11-5-97.........................59780
614.4020  (a)(4) and (5) amended; (a)(6) and (7) added (effective 
        date pending)...............................................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
    (a)(1) and (2) amended (effective date pending)................51013
    Regulation at 62 FR 51013 eff. 11-5-97.........................59780
614.4030  (a) revised (effective date pending).....................51013
    Regulation at 62 FR 51013 eff. 11-5-97.........................59780
614.4040  (a) revised; (b) removed; (c) and (d) redesignated as 
        (b) and (c); new (b)(1) amended (effective date pending) 
                                                                   51013
    Regulation at 62 FR 51013 eff. 11-5-97.........................59780
614.4050  Introductory text added; (a) and (b) revised (effective 
        date pending)..............................................51013
    Regulation at 62 FR 51013 eff. 11-5-97.........................59780
614.4120  (a) amended (effective date pending).....................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4135  Removed (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4140  Removed (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4145  Removed (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4150  Revised (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4155  Redesignated from 614.4280 and revised (effective date 
        pending)...................................................66818
614.4160  Removed (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
    Redesignated from 614.4321 (effective date pending)............66818

[[Page 1090]]

614.4165  (a) revised; (b) and (c) removed; (d) and (e) 
        redesignated as (b) and (c) (effective date pending).......51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4170  Removed (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4200  Revised (effective date pending).........................51014
    Regulation at 62 FR 51014 eff. 11-5-97.........................59780
614.4210  Removed (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4220  Removed (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4222  Removed (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4230  Removed (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4231  Revised (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4233  Introductory text revised (effective date pending)........4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4245  (d) added (effective date pending).......................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4270--614.4320 (Subpart G)  Removed (effective date pending) 
                                                                   66818
614.4280  Redesignated as 614.4155 (effective date pending)........66818
614.4321  Regulation at 61 FR 67186 eff. 3-4-97....................18037
    Redesignated as 614.4160 (effective date pending)..............66818
614.4325  (a)(1) revised; (e) amended; (h) added (effective date 
        pending)...................................................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4335  Revised (effective date pending).........................63646
614.4336  Revised (effective date pending).........................63647
614.4355  (a)(6), (8) and (b)(1) amended (effective date pending) 
                                                                   51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4358  (a)(1)(ii) amended (effective date pending)..............51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4367  (b) removed; (c), (d) and (e) redesignated as (b), (c) 
        and (d); eff. 1-2-98.......................................63647
614.4440  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4444  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4510  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4515  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4516  Regulation at 61 FR 67187 eff. 3-4-97....................18037
    Introductory text amended......................................25831
614.4517  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4520  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4525  Regulation at 61 FR 67187 eff. 3-4-97....................18037
614.4610  Amended (effective date pending)..........................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4700--614.4900 (Subpart Q)  Heading amended (effective date 
        pending)....................................................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4700  (a) introductory text, (b) and (h) amended (effective 
        date pending)...............................................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4710  Introductory text, (a)(1) introductory text, (i), (ii), 
        (3), (5), (b)(1) and (c) amended (effective date pending) 
                                                                    4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4720  Introductory text amended (effective date pending)........4445

[[Page 1091]]

    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4800  Amended (effective date pending)..........................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
614.4810  (a) introductory text and (b) amended (effective date 
        pending)....................................................4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
    (b) amended (effective date pending)...........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
614.4900  (a) through (d) and (i) amended (effective date pending)
                                                                    4445
    Regulation at 62 FR 4445 eff. 3-11-97..........................11071
615  Authority citation revised.....................................4445
615.5120  Regulation at 61 FR 67187 eff. 3-4-97....................18037
615.5140  Regulation at 61 FR 67187 eff. 3-4-97....................18037
615.5143  Regulation at 61 FR 67187 eff. 3-4-97....................18037
615.5200  (a) and (b) introductory text revised (effective date 
        pending)....................................................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5201  (g) amended; (j)(5) and (6) redesignated as (j)(6) and 
        (7); new (j)(5) added (effective date pending)..............4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5205  Revised (effective date pending)..........................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5210  (e)(7) and (f)(2)(i)(C) revised; (e)(10) added; 
        (f)(2)(i)(D) and (v)(D) removed; (f)(2)(v)(E) redesignated 
        as (f)(2)(v)(D) (effective date pending)....................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5216  Removed (effective date pending)..........................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5220  (f) removed; (g), (h) and (i) redesignated as (f), (g) 
        and (h); (d), (e) and new (f) amended (effective date 
        pending)....................................................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5230  (b)(1) amended (effective date pending)...................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
    (a)(2)(ii) revised.............................................49908
    Regulation at 62 FR 49908 eff. 10-30-97........................58644
615.5240  (b) removed; introductory text and (a) redesignated as 
        (a) and (b); new (a) and new (b)(2) revised; (b)(3) and 
        (c) added (effective date pending)..........................4446
    Regulation at 62 FR 4446 eff. 3-11-97..........................11071
615.5250  (c) removed; (d) and (e) redesignated as (c) and (d); 
        (a)(4)(ii), (iii) and new (c)(3) amended (effective date 
        pending)....................................................4447
    Regulation at 62 FR 4447 eff. 3-11-97..........................11071
    Regulation at 61 FR 67187 eff. 3-4-97..........................18037
615.5260  (a)(2)(i) and (ii) amended; (a)(2)(iii) and (d) removed 
        (effective date pending)....................................4447
    Regulation at 62 FR 4447 eff. 3-11-97..........................11071
615.5270  Amended (effective date pending)..........................4447
    Regulation at 62 FR 4447 eff. 3-11-97..........................11071
615.5280  (a) corrected............................................13213
    Regulation at 61 FR 67187 eff. 3-4-97..........................18037
615.5290  Regulation at 61 FR 67188 eff. 3-4-97....................18037
615.5301--615.5336 (Subpart K)  Revised (effective date pending) 
                                                                    4447
    Regulation at 62 FR 4447 eff. 3-11-97..........................11071
615.5301  (b)(2) corrected.........................................19219
615.5330  (b)(1) corrected.........................................11071
615.5350--615.5354 (Subpart L)  Added (effective date pending)......4448
    Regulation at 62 FR 4448 eff. 3-11-97..........................11071

[[Page 1092]]

615.5355--615.5361 (Subpart M)  Added (effective date pending)......4449
    Regulation at 62 FR 4449 eff. 3-11-97..........................11071
615.5450  (h) revised..............................................53229
615.5451  (c) revised..............................................53229
615.5452  Heading, (a)(1) introductory text and (2) revised........53229
615.5454  (c)(1) revised...........................................53229
615.5455  (a) revised..............................................53229
615.5457  (c)and (d) revised.......................................53230
615.5460  (c) added................................................53230
617  Revised (effective date pending)..............................24566
    Regulation at 62 FR 24566 eff. 6-13-97.........................32478
618.8005  (a) and (b) amended (effective date pending)..............4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
618.8260  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8310  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8320  Regulation at 61 FR 67188 eff. 3-4-97....................18037
    (b)(5) revised.................................................25831
618.8325  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8330  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8340  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8360  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8370  Regulation at 61 FR 67188 eff. 3-4-97....................18037
618.8380--618.8420 (Subpart I)  Regulation at 61 FR 67188 eff. 3-
        4-97.......................................................18037
618.8440  (b)(6) amended (effective date pending)...................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9030  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9040  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9060  Regulation at 61 FR 67188 eff. 3-4-97....................18037
619.9065  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9080  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9090  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9100  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9120  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9150  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9160  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9165  Removed (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
619.9190  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9220  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9270  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9280  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
619.9290  Removed (effective date pending).........................51015
    Regulation at 62 FR 51015 eff. 11-5-97.........................59780
619.9300  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071

[[Page 1093]]

619.9310  Removed (effective date pending)..........................4450
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
620.1  (o), (p) and (q) redesignated as (p), (q) and (r); new (o) 
        added (effective date pending).............................15092
    Regulation at 62 FR 15092 eff. 5-6-97..........................24809
620.2  (a), (b)(3)(i) and (f) through (i) revised (effective date 
        pending)...................................................15092
    Regulation at 62 FR 15092 eff. 5-6-97..........................24809
620.4  (b) revised (effective date pending)........................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.5  (d)(1)(ix) and (g)(4)(ii) revised (effective date pending) 
                                                                    4451
    Regulation at 62 FR 4450 eff. 3-11-97..........................11071
    (g)(2)(vi) revised (effective date pending)....................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.10--620.11 (Subpart C)  Heading revised (effective date 
        pending)...................................................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.10  Revised (effective date pending)...........................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.15--620.17 (Subpart D)  Added (effective date pending).........15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.20--620.21 (Subpart D)  Redesignated as 620.20--620.21 
        (Subpart E) (effective date pending).......................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.20  (c) removed; (b) revised (effective date pending)..........15094
    Regulation at 62 FR 15094 eff. 5-6-97..........................24809
620.30--620.31 (Subpart E)  Redesignated as 620.30--620.31 
        (Subpart F) (effective date pending).......................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
620.40 (Subpart F)  Redesignated as 620.40 (Subpart G) (effective 
        date pending)..............................................15093
    Regulation at 62 FR 15093 eff. 5-6-97..........................24809
626  Redesignated from 613.3145--613.3175 (Subpart E) (effective 
        date pending)...............................................4441
    Authority citation added........................................4451
    Regulation at 62 FR 4441 eff. 3-11-97..........................11071
626.6025  (b) amended (effective date pending)......................4451
    Regulation at 62 FR 4451 eff. 3-11-97..........................11071
630  Authority citation revised....................................15094
630.3  (f) and (g) redesignated as (g) and (h); new (f) added 
        (effective date pending)...................................15094
    Regulation at 62 FR 15094 eff. 5-6-97..........................24809
650  Authority citation revised....................................43635
650.50--650.68 (Subpart C)  Added (effective date pending).........43636
    Regulation at 62 FR 43636 eff. 10-1-97.........................51369
Chapter VII
Chapter  VII Interpretive rulings..................................50245
701  Authority citation revised....................................40930
701.1  Revised......................................................5316
701.21  (c)(7)(ii)(C) revised......................................40930
703  Revised.......................................................33001
703.50  (a) amended; (c) added.....................................64147
703.60  (c) revised................................................64147
703.80  (a) introductory text amended..............................64147
703.100  (k)(2) amended............................................64148
703.150  Amended...................................................64148
704  Revised.......................................................12938
    Compliance date delayed........................................64148
709.5  (b)(7) and (8) revised; (b)(9) added........................12949
725.19  Revised; eff. 1-28-98......................................67550
741.219  Added.....................................................12949
790  Authority citation revised....................................65197
790.2  (b)(4) revised...............................................8155
    (a) revised....................................................37126
    (b)(7) and (8) amended.........................................65197
791.4  (a)(2) introductory text, (b) introductory text and (3) 
        revised....................................................64267
791.5  (a)(2) revised..............................................64267
791.6  (a) revised.................................................64267
792  Authority citation revised..............................8156, 56054

[[Page 1094]]

792.2  (f) revised..................................................8156
792.4  (a) revised; (b)(3) removed.................................56054
792.40--792.49 (Subpart C)  Revised................................56054
Chapter IX
902  Authority citation revised....................................35949
902.2  Revised.....................................................35949
931  Authority citation revised....................................26922
931.5  Revised; interim.............................................6861
    Redesignated as 934.4..........................................26922
932  Authority citation revised........................................9
932.40  Revised........................................................9
932.41  Revised........................................................9
934  Authority citation revised.............................26922, 65198
934.4  Redesignated as 934.5; new 934.4 redesignated from 931.5 
        and revised................................................26922
934.5  Redesignated as 934.6; new 934.5 redesignated from 934.4....26922
934.6  Redesignated as 934.7; new 934.6 redesignated from 934.5....26922
934.7  Redesignated as 934.8; new 934.7 redesignated from 934.6....26922
934.8  Redesignated as 934.9; new 934.8 redesignated from 934.7....26922
934.9  Redesignated as 934.10; new 934.9 redesignated from 934.8 
                                                                   26922
934.10  Redesignated as 934.11; new 934.10 redesignated from 934.9
                                                                   26922
934.11  Redesignated as 934.12; new 934.11 redesignated from 
        934.10.....................................................26922
934.12  Redesignated as 934.13; new 934.12 redesignated from 
        934.11.....................................................26922
934.13  Redesignated as 934.14; new 934.13 redesignated from 
        934.12.....................................................26922
934.14  Redesignated as 934.15; new 934.14 redesignated from 
        934.13.....................................................26922
934.15  Redesignated from 934.14...................................26922
934.16  Added; eff. 1-12-98........................................65198
935  Authority citation revised....................................12079
935.1  Amended; interim......................................8871, 12079
935.13  (a)(3) revised; interim.....................................8871
    (a)(3) revised; OMB number.....................................52015
935.20--935.24 (Subpart B)  Revised................................12079
936  Revised.......................................................28988
936.5  (d)(1)(i) revised...........................................46872
950  Regulation at 61 FR 59314 confirmed; revised..................50248
960  Revised.......................................................41828
    Interpretation.................................................66977
Chapter XIV
1402  Authority citation revised...................................49593
1402.13  Revised...................................................49593
1402.14  (a) and (d) revised; (e) added............................49593
Chapter XVII
1780  Added........................................................68154
Chapter XVIII
1805  Revised; interim.............................................16447
1806  Revised; interim......................................10672, 64442

                                  1998

12 CFR
                                                                   63 FR
                                                                    Page
ChapterVI
607   Authority citation revised...................................34268
607.2   (c) revised (effective date pending).......................34268
607.3   (b)(2) amended (effective date pending)....................34268
    Regulation at 63 FR 34268 eff. 8-3-98..........................41184
611   Authority citation revised...................................64843
611.310--611.340 (Subpart C)   Heading revised (effective date 
        pending)...................................................64843
611.330   Revised (effective date pending).........................64843
611.340   Heading, (a) and (b) amended; (c) and (d) revised 
        (effective date pending)...................................64843
611.350   Added (effective date pending)...........................39225
    Regulation at 63 FR 39225 eff. 9-14-98.........................49265
611.505   (e) revised..............................................64844
611.1122   (k) revised.............................................64844
611.1135   (b)(4) and (c) revised (effective date pending).........39225
    Regulation at 63 FR 39225 eff. 9-14-98.........................49265
611.1205   (c) revised (effective date pending)....................36547
    Regulation at 63 FR 36547 eff. 8-6-98..........................41958

[[Page 1095]]

614.4000   (b) amended (effective date pending).....................5723
    Regulation at 63 FR 5723 eff. 3-13-98..........................12401
614.4010   (b) amended (effective date pending).....................5723
    Regulation at 63 FR 5723 eff. 3-13-98..........................12401
614.4120   Revised (effective date pending).........................5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
614.4125   Added (effective date pending)...........................5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
614.4130   Revised (effective date pending).........................5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
614.4155   Regulation at 62 FR 66818 eff. 3-4-98...................10515
614.4160   Regulation at 62 FR 66818 eff. 3-4-98...................10515
614.4280   Regulation at 62 FR 66818 eff. 3-4-98...................10515
614.4270--614.4320 (Subpart G)   Regulation at 62 FR 66818 eff. 3-
        4-98.......................................................10515
614.4321   Regulation at 62 FR 66818 eff. 3-4-98...................10515
614.4335   Regulation at 62 FR 63646 eff. 3-4-98...................10515
614.4336   Regulation at 62 FR 63647 eff. 3-4-98...................10515
614.4350   (a) revised (effective date pending)....................36547
    Regulation at 63 FR 36547 eff. 8-6-98..........................41958
614.4367   Regulation at 62 FR 63647 eff. 3-4-98...................10515
614.4540--614.4600 (Subpart P)   Revised (effective date pending) 
                                                                   36547
    Regulation at 63 FR 36547 eff. 8-6-98..........................41958
615.5135   Introductory text amended (effective date pending)......39225
    Regulation at 63 FR 39225 eff. 9-14-98.........................49265
615.5180--615.5182 (Subpart G)   Added (effective date pending)....39225
    Regulation at 63 FR 39225 eff. 9-14-98.........................49265
615.5201   (h) amended; (d) through (n) redesignated as (e) 
        through (i), (k), (l) and (n) through (q); new (d), new 
        (j) and new (m) added (effective date pending).............39225
    Regulation at 63 FR 39225 eff. 9-14-98.........................49265
615.5210   (a), (b), (e) introductory text, (1), (6), (10), 
        (f)(2)(i), (ii), (iii) heading, (iv), (3)(ii)(A) and (iii) 
        revised; (e)(11) added; (f)(2)(v) removed (effective date 
        pending)...................................................39226
    Regulation at 63 FR 39226 eff. 9-14-98.........................49265
    (f)(3)(ii)(C)(2) corrected.....................................58289
615.5220   Introductory text and (a) through (h) redesignated as 
        (a) introductory text and (1) through (8); new (b) added 
        (effective date pending)...................................39227
    Regulation at 63 FR 39227 eff. 9-14-98.........................49265
615.5230   (b)(5) added (effective date pending)...................39228
    Regulation at 63 FR 39228 eff. 9-14-98.........................49265
615.5260   (a)(3)(ii) revised (effective date pending).............39228
    Regulation at 63 FR 39228 eff. 9-14-98.........................49265
615.5301   (a), (b)(1)(ii), (iii), (2)(ii), (3), (4), (5), (i)(2), 
        (3), (4) and (7) revised (effective date pending)..........39228
    Regulation at 63 FR 39228 eff. 9-14-98.........................49265
615.5330   Revised (effective date pending)........................39228
    Regulation at 63 FR 39228 eff. 9-14-98.........................49265
615.5335   Revised (effective date pending)........................39229
    Regulation at 63 FR 39229 eff. 9-14-98.........................49265
615.5350   (b)(7) added (effective date pending)...................39229
    Regulation at 63 FR 39229 eff. 9-14-98.........................49265
615.5355   (a)(4) revised (effective date pending).................39229
    Regulation at 63 FR 39229 eff. 9-14-98.........................49265
615.5450   Regulation at 62 FR 53229 eff. 1-27-98...................5223

[[Page 1096]]

615.5451   Regulation at 62 FR 53229 eff. 1-27-98...................5223
615.5452   Regulation at 62 FR 53229 eff. 1-27-98...................5223
615.5454   Regulation at 62 FR 53229 eff. 1-27-98...................5223
615.5455   Regulation at 62 FR 53229 eff. 1-27-98...................5223
615.5457   Regulation at 62 FR 53230 eff. 1-27-98...................5223
615.5460   Regulation at 62 FR 53230 eff. 1-27-98...................5223
620.1   (j) amended (effective date pending).......................39229
    Regulation at 63 FR 39229 eff. 9-14-98.........................49265
620.5   Amended (effective date pending)...........................36549
    (d)(2), (g)(4)(v) and (vi) amended; (f)(3) revised; (f)(4) 
added (effective date pending).....................................39229
    Regulation at 63 FR 36549 eff. 8-6-98..........................41958
    Regulation at 63 FR 39229 eff. 9-14-98.........................49265
627   Heading revised (effective date pending)......................5724
    Authority citation revised......................................5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
627.2700   Revised (effective date pending).........................5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
627.2710   (b)(1) and (3) revised (effective date pending).........39229
    Regulation at 63 FR 39229 eff. 9-14-98.........................49265
627.2720   (a) removed; (b) through (f) redesignated as (a) 
        through (e); new (b) revised (effective date pending).......5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
627.2730   (b) removed; (c) redesignated as (b); new (b) revised 
        (effective date pending)....................................5724
    Regulation at 63 FR 5724 eff. 3-13-98..........................12401
627.2795--627.2797 (Subpart D)   Added (effective date pending).....5725
    Regulation at 63 FR 5725 eff. 3-13-98..........................12401
630.20   (a)(1)(v) amended (effective date pending)................36549
    Regulation at 63 FR 36549 eff. 8-6-98..........................41958
Chapter VII
Interpretive rulings...............................................24099
701   Comment period extension.....................................65532
701.1   Revised..............................................4373, 72018
701.19   (a) amended; interim......................................14026
    (a) amended....................................................52147
701.21   (c)(5) amended; (h) removed; interim......................51799
    (g)(7) added; eff. 1-25-99.....................................71214
701.23   (b)(1)(iv) amended; (b)(3) revised........................70998
701.26   (a) designation and (b) removed...........................10756
701.27   Removed...................................................10756
701.29   (g)(7) added; eff. 1-25-99................................71214
701.36   (b)(4)(iv) amended........................................10756
    (b)(4)(iv) corrected...........................................71342
703.30   (g) removed; (h) through (l) redesignated as (g) through 
        (k)........................................................24104
703.50   Regulation at 62 FR 64147 confirmed.......................24104
    (b)(2) revised.................................................24105
703.60   Regulation at 62 FR 64147 confirmed.......................24104
703.80   Regulation at 62 FR 64147 confirmed.......................24104
703.100   Regulation at 62 FR 64148 confirmed......................24104
    (e) revised....................................................24105
703.130   Revised..................................................24105
703.150   Regulation at 62 FR 64148 confirmed......................24104
704.5   (c)(6) revised.............................................24105
704.11   (e) amended...............................................10756
704   Appendix B amended...........................................24105
707.4   (b)(6)(iii) amended........................................71574
707.5   (c) removed; (d) designated as new (c).....................71574
707.8   (c)(6)(iii) added; (e)(2)(i) revised.......................71575
707.9   (b) revised................................................71575
707  Appendix A amended............................................71575
    Appendix B amended.............................................71575
    Appendix C amended.............................................71575
708a   Heading and authority citation revised......................10517
    Revised; interim...............................................65532
708a   Appendix A amended..........................................10517
708b.301   (a)(1) and (b)(1) amended...............................10519
708b.302   (a)(1), (2), (b)(1) and (2) amended.....................10519

[[Page 1097]]

712   Added........................................................10756
722   Comment period extension.....................................65532
722.3   (a)(7) and (8)(ii) amended; (a)(9) added; interim..........51799
723   Added; interim...............................................51799
    Comment period extension.......................................65532
724   Authority citation revised............................14026, 52147
724.1   Amended; heading revised; interim..........................14026
    Heading revised; amended.......................................52147
741   Comment period extension.....................................65532
741.203   (a) amended; interim.....................................51802
791.5   (a)(2) revised..............................................5859
791.6   (a) amended.................................................5859
792   Authority citation revised...................................14338
792.01--792.32 (Subpart A)   Revised...............................14338
792.20--792.37 (Subpart B)   Redesignated as 792.52--792.69 
        (Subpart E)................................................14338
792.52--792.69 (Subpart E)   Redesignated from 792.20--792.37 
        (Subpart B);...............................................14338
Chapter IX
900   Authority citation revised....................................3455
900.1--900.5 (Subpart A)   Appendix A amended.......................3455
900.51   Amended...................................................65687
904   Revised; interim.............................................37485
910.3   Revised.....................................................8059
912   Revised.......................................................8059
922   Removed......................................................65687
931.5   Redesignated from 931.11...................................65687
931.6   Redesignated from 931.12...................................65687
931.11   Redesignated as 931.5.....................................65687
931.12   Redesignated as 931.6.....................................65687
931.13   Removed...................................................65687
931.14   Removed...................................................65687
931.15   Removed...................................................65687
931.16   Removed...................................................65687
931.17   Removed...................................................65687
931.18   Removed...................................................65687
931.19   Removed...................................................65687
931.20   Removed...................................................65687
931.21   Removed...................................................65687
931.23   Removed...................................................65687
931.24   Removed...................................................65687
931.25   Removed...................................................65687
931.26   Removed...................................................65687
931.30   Removed...................................................65687
931.32   Removed...................................................65687
931.34   Removed...................................................65687
931.36   Removed...................................................65687
931.38   Removed...................................................65687
931.40   Removed...................................................65687
932   Authority citation revised.............................3455, 65688
    Heading revised................................................65687
932.1--932.2   Designated as Subpart A; heading added..............65688
932.1   Revised....................................................65688
932.2   Added......................................................65688
932.3--932.17   Designated as Subpart B; heading added.............65688
932.3   Redesignated as 934.17.....................................65687
    Added..........................................................65688
932.4   Added......................................................65689
932.5   Added......................................................65689
932.6   Added......................................................65689
932.7   Added......................................................65689
932.8   Revised....................................................65690
932.9   Revised....................................................65690
932.10   Revised...................................................65690
932.11   (b) revised................................................3455
    Revised........................................................65690
932.12   Revised...................................................65691
932.13   Revised...................................................65691
932.14   Revised...................................................65691
932.15   Removed; new 932.15 redesignated from 932.20 and amended 
                                                                   65692
932.16   Removed; new 932.16 redesignated from 932.26..............65692
932.17   Redesignated from 932.27..................................65692
932.18--932.19   Designated as Subpart C; heading added............65692
932.18   Removed; new 932.18 redesignated from 932.40; heading and 
        (a) introductory text revised; (d) removed.................65692
932.19   Removed; new 932.19 redesignated from 932.41; heading 
        revised....................................................65692
932.20   Redesignated as 932.15....................................65692
932.21   Removed...................................................65692
932.22   Removed...................................................65692
932.23   Removed...................................................65692
932.26   Redesignated as 932.16....................................65692
932.27   Redesignated as 932.17....................................65692
932.28   Removed...................................................65692
932.29   Removed...................................................65692
932.40   (d) revised...............................................30587
    Redesignated as 932.18.........................................65692
932.41   (b)(2) and (c)(3)(ii) revised; (c)(3)(iv) added; (a) and 
        (d) amended; (f) removed; (g) redesignated as (f)..........30587
    (c)(2)(ii) amended.............................................65544

[[Page 1098]]

    Redesignated as 932.19.........................................65692
932.43   Removed...................................................65692
932.50   Removed...................................................65692
932.51   Removed...................................................65692
932.60   Removed...................................................65692
932.61   Removed...................................................65692
932.62   Removed...................................................65692
933   Authority citation revised....................................3455
933.1 (cc) revised..................................................3455
    (n)(1)(iii) revised; (bb)(6)(iii) and (7) amended; (bb)(8) 
added..............................................................35127
    (l), (z) and (aa) amended; (u), (x) and (y) revised; (ee) 
added..............................................................40023
933.2   (c)(2) amended.............................................40023
933.3   (c) amended................................................40023
933.4   (d) added..................................................40024
933.9   Amended....................................................40023
933.10   Amended...................................................40023
933.11   (a)(1), (3), (4), (b)(1), (2), (3)(i) introductory text 
        and (ii) amended...........................................40023
    (b)(3)(i)(B) and (C) revised...................................40024
933.12   (a) amended...............................................40023
933.14   (a) heading removed; (a)(1) revised; (b) removed..........40024
933.15   (a)(i) and (ii) amended...................................40023
    (c) added......................................................40024
933.16   Amended...................................................40023
933.17   (e)(1) introductory text, (i), (2)(i), (3)(i) and (f)(1) 
        amended....................................................40023
933.18   (a)(1) amended; (e) revised...............................65692
933.20   (b)(1) and (2) amended....................................40024
    (e) revised....................................................65692
933.22   (b)(1) amended............................................65692
933.24   (b)(3) amended; (b)(4) removed............................65692
933.25   (e) amended; (f) removed..................................65692
933.26   (d) amended; (e) removed..................................65692
933.27   (f) amended; (g) removed..................................65692
933.28   (c) amended; (d) removed..................................65692
934.16   Regulation at 62 FR 65198 confirmed.......................39702
934.17   Redesignated from 932.3...................................65687
935.1   Amended.............................................35128, 65545
935.7   Removed....................................................65545
935.13   (a)(5) revised............................................65545
935.14   (b)(2) revised............................................65545
936.1   (g) and (h) revised........................................65545
936.5   (e) revised................................................65545
936.6   (a)(5) added; (b) removed; (c) redesignated as (b); (a) 
        introductory text, (2) and (4) new (b) revised.............65545
936.7   Revised....................................................65545
937   Added........................................................39704
938   Added........................................................65699
941.17   (f)(2) revised............................................65693
943.6   (c) revised................................................65700
960.1   Amended; interim...........................................27672
960.4   (d) revised; interim.......................................27672
960.5   (b)(9), (10)(i)(C) and (ii) revised; interim...............27672
960.6   (b)(4)(ii) and (iii) amended; (b)(4)(iv)(A), (C)(2), (D), 
        (F)(8) and (10) revised; interim...........................27673
960.7   (a) revised; interim.......................................27673
960.9   Introductory text revised; interim.........................27673
960.12   (e) revised; interim......................................27673
960.13   (c)(4), (5)(iv), (d)(1) and (2)(iv) revised; interim......27673
970 (Subchapter F)   Added.........................................65546
Chapter XV
Heading revised....................................................57237
1502   Removed.....................................................57237
1503   Removed.....................................................57237
1505   Removed.....................................................57237
1506   Removed.....................................................57237
1507   Removed.....................................................57237
ChapterXVII
1710   Added; eff. 1-22-99.........................................71005
1720   Added; interim...............................................8844
    Regulation at 63 FR 8844 confirmed.............................26063

                                  1999

12 CFR
                                                                   64 FR
                                                                    Page
Chapter VI
602  Revised (effective date pending)..............................41770
    Regulation at 64 FR 41770 eff. 10-6-99.........................54512
602.11  (e) corrected..............................................45589
611.310--611.340 (Subpart C)  Regulation at 63 FR 64843 eff. 2-11-
        99..........................................................6784
611.330  Regulation at 63 FR 64843 eff. 2-11-99.....................6784
611.340  Regulation at 63 FR 64843 eff. 2-11-99.....................6784
611.400  (c) and (d)(3) revised (effective date pending)...........16618

[[Page 1099]]

    Regulation at 64 FR 16618 eff. 5-11-99.........................25423
611.505  Regulation at 63 FR 64844 eff. 2-11-99.....................6784
611.1122  Regulation at 63 FR 64844 eff. 2-11-99....................6784
612.2165  (b)(7) amended (effective date pending)..................43048
    Regulation at 64 FR 43048 eff. 10-13-99........................55621
614  Authority citation revised....................................34517
614.4000  (e)(4) removed (effective date pending)..................43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
614.4010  (f)(1) revised; (f)(4) removed (effective date pending) 
                                                                   43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
614.4030  (c)(4) removed (effective date pending)..................43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
614.4040  (c)(4) removed (effective date pending)..................43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
614.4050  (d)(4) removed (effective date pending)..................43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
614.4232  Introductory text amended; (c) revised (effective date 
        pending)...................................................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4325  (a)(3) amended (effective date pending)..................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4350--614.4360 (Subpart J)  Heading revised (effective date 
        pending)...................................................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4350  (a) and (c) revised (effective date pending).............34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4351  Amended (effective date pending).........................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4352  (a), (b)(1) and (2) amended (effective date pending).....34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4353  Amended (effective date pending).........................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4354  Amended (effective date pending).........................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4355  Introductory text, (a) heading and (b) heading amended 
        (effective date pending)...................................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4356  Redesignated as 614.4357; new 614.4356 added (effective 
        date pending)..............................................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4357  Redesignated as 614.4358; new 614.4357 redesignated from 
        614.4356 (effective date pending)..........................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4358  Redesignated as 614.4359; new 614.4358 redesignated from 
        614.4357; (a) introductory text, (1), (3) and (b) 
        introductory text amended; (b)(5) redesignated as (b)(6); 
        new (b)(5) added (effective date pending)..................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4359  Redesignated as 614.4360; new 614.4359 redesignated from 
        614.4358; (a) introductory text, (a)(1)(iii), (b), (c) and 
        Table 1 amended (effective date pending)...................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4360   Redesignated as 614.4361; new 614.4360 redesignated 
        from 614.4359; heading, (a), (b), (c) and (d) amended; (d) 
        redesignated as (e); new (d) added (effective date 
        pending)...................................................34517
    Regulation at 64 FR 34517 eff. 8-6-99..........................43049
614.4361  Redesignated from 614.4360 (effective date pending)......34517
    (a) and (b) amended............................................34518

[[Page 1100]]

    Regulations at 64 FR 34517 and 34518 eff. 8-6-99...............43049
614.4460 (Subpart M)  Revised (effective date pending).............43049
    Regulation at 64 FR 43049 withdrawn............................55621
614.4710  Introductory text, (a)(2) and (3) amended (effective 
        date pending)..............................................34518
    Regulation at 64 FR 34518 eff. 8-6-99..........................43049
614.4720   (g) removed (effective date pending)....................43049
    Regulation at 64 FR 43049 confirmed; eff. 10-13-99.............55621
614.4940  (a) revised..............................................71274
615.5131  Revised (effective date pending).........................28895
    Regulation at 64 FR 28895 eff. 7-15-99.........................38111
615.5133  Revised (effective date pending).........................28895
    Regulation at 64 FR 28895 eff. 7-15-99.........................38111
615.5134  (b) revised (effective date pending).....................28896
    Regulation at 64 FR 28896 eff. 7-15-99.........................38111
615.5140  Revised (effective date pending).........................28896
    Regulation at 64 FR 28896 eff. 7-15-99.........................38111
615.5141  Redesignated as 615.5142; new 615.5141 added (effective 
        date pending)..............................................28899
    Regulation at 64 FR 28899 eff. 7-15-99.........................38111
615.5142  Redesignated as 615.5143; new 615.5142 redesignated from 
        615.5141 and revised (effective date pending)..............28899
    Regulation at 64 FR 28899 eff. 7-15-99.........................38111
615.5143  Redesignated as 615.5144; new 615.5143 redesignated from 
        615.5142 and revised (effective date pending)..............28899
    Regulation at 64 FR 28899 eff. 7-15-99.........................38111
615.5144  Redesignated from 615.5143 (effective date pending)......28899
    Regulation at 64 FR 28899 eff. 7-15-99.........................38111
615.5170--615.5174 (Subpart F)  Heading revised (effective date 
        pending)...................................................49961
    Regulation at 64 FR 49961 eff. 10-21-99........................56676
615.5171  Revised (effective date pending).........................49961
    Regulation at 64 FR 49961 eff. 10-21-99........................56676
615.5174  Revised..................................................28899
    Regulation at 64 FR 28899 eff. 7-15-99.........................38111
616  Added (effective date pending)................................34518
    Regulation at 64 FR 34518 eff. 8-6-99..........................43049
618.8050--618.8060 (Subpart C)  Removed (effective date pending) 
                                                                   34519
    Regulation at 64 FR 34519 eff. 8-6-99..........................43049
618.8210--618.8270 (Subpart F)   Removed (effective date pending) 
                                                                   43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
618.8320   (b)(7) removed; (b)(8), (9) and (10) redesignated as 
        (b)(7), (8) and (9) (effective date pending)...............43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
618.8330   Revised (effective date pending)........................43049
    Regulation at 64 FR 43049 eff. 10-13-99........................55621
618.8440  (b)(6) amended (effective date pending)..................34519
    Regulation at 64 FR 34519 eff. 8-6-99..........................43049
620.5  (i)(1) amended (effective date pending).....................16618
    Regulation at 64 FR 16618 eff. 5-11-99.........................25423
621.7  (a)(2)(iii) amended (effective date pending)................34519
    Regulation at 64 FR 34519 eff. 8-6-99..........................43049
Chapter VII
701.2  Removed.....................................................57365
701.12  Removed....................................................41035
701.13  Removed....................................................41035
701.14  (b)(3) introductory text and (c)(2) revised; (b)(4) added; 
        (d)(1) amended.............................................28717
701.20  Removed....................................................28719

[[Page 1101]]

701.21  (c)(7)(ii)(C) Revised.......................................5929
    Regulation at 63 FR 51799 confirmed............................28729
    (a) amended....................................................57365
701.25  Added......................................................19443
701.30  Removed....................................................28718
701.34  (b)(7) revised; Appendix amended; eff. 1-26-00.............72270
701.39  Added......................................................56956
703.20  (c) amended................................................33187
    (a) and (c) amended............................................57365
704.7  (d) amended.................................................57365
707.4  Regulation at 63 FR 71574 confirmed.........................33010
707.5  Regulation at 63 FR 71574 confirmed.........................33010
707.6  Heading revised; (c) added; interim.........................66356
707.8  Regulation at 63 FR 71574 confirmed.........................33010
707.9  Regulation at 63 FR 71575 confirmed.........................33010
707  Regulation at 63 FR 71575 confirmed...........................33010
708a.4  (b) amended................................................28735
708a.5  (c) amended................................................28735
708a.9  (b) revised................................................28735
709.5  (e) amended.................................................57365
711.2  (b) and (f) removed; (c) through (s) redesignated as (b) 
        through (q)................................................66360
711.3  (c) revised.................................................66360
711.5  Revised.....................................................66360
711.6  Revised.....................................................66360
711.7  (a) revised.................................................66360
712.2  Heading revised; (a) and (c) amended; (d) and (e) added.....33187
712.3  (a) and (b) amended; (c) revised............................33187
    (a) amended....................................................57365
712.5  (p) added...................................................33187
    (p) redesignated as (q); new (p) added.........................66361
712.6  (b) revised; interim........................................33188
    (a) designation and (b) removed................................66361
713  Added.........................................................28720
713.2  Amended.....................................................57365
715  Added.........................................................41035
722.3  Regulation at 63 FR 51799 confirmed.........................28729
723  Regulation at 63 FR 51799 confirmed; revised..................28729
723.1  (b)(3) amended..............................................57365
741.3  (a)(3) amended..............................................41040
741.4  (a), (g) and (j) amended; (b)(3) removed; (b)(2) 
        redesignated as (b)(3); (b)(2), (4) and (5) added; (b)(1), 
        (c) through (f) and (h) revised............................56150
741.6  (a) amended; (b) redesignated as (d); new (b) and (c) added
                                                                   41040
741.201  (a) and (b) amended.......................................28721
741.202  (a) and (b) amended.......................................41040
741.203  Regulation at 63 FR 51802 confirmed.......................28729
    (a) amended....................................................28733
745  Authority citation revised....................................19687
745.4  Revised; interim............................................19687
745.8  Revised; interim............................................19687
745  Appendix amended; interim..............................19687, 19688
760.6  (a) revised.................................................71274
790.2  (b)(6)(ii) revised..........................................17086
    (b)(7) and (16) amended........................................57365
791.18  (e) amended................................................57365
792.54  (b) amended................................................57365
792.55  (a) amended................................................57365
792.56  (a) amended................................................57365
792.66  (b)(2) amended.............................................57365
795.1  (b) revised (OMB numbers)...................................49080
Chapter IX
902.6  Removed.....................................................30883
903  Added.........................................................30883
904.9  (f)(2) revised...............................................5930
905  Added; interim................................................44106
    Regulation at 64 FR 44106 confirmed............................61016
910  Authority citation revised....................................55130
910.0  (b), (c) and (d) redesignated as (c), (d) and (e); (a) and 
        new (c) revised; new (b), (f) and (g) added................55130
910.7  Added.......................................................55130
932  Authority citation revised....................................71277
932.16  Revised; interim...........................................71277
932.17  (a), (b) and (c) revised; (f) added; interim...............71278
932.18--932.19 (Subpart C)  Removed; interim.......................71278
934.7  Heading amended; (a)(2) and (b) through (e) removed; 
        (a)(1), (a)(3), (a)(4) and (a)(5) redesignated as (a) 
        through (d); interim.......................................71278
934.16  Revised; interim...........................................71278
934.17  Revised; interim...........................................71278
935  Authority citation revised....................................16621
935.1  Amended.....................................................16621

[[Page 1102]]

935.4  (d)(1) designation and (2) removed; interim.................71278
935.5  (a)(2) removed; (a)(3) redesignated as (a)(2); interim......71278
935.9  (a) revised; (b) heading, (c) heading and (e) heading 
        amended....................................................16621
935.11  (b) revised................................................16621
935.15  (b) revised; interim.......................................16791
935.16  Removed; interim...........................................71278
960  Interpretation................................................12079
960.1  Amended; interim............................................24027
960.3  (b)(4) revised; interim.....................................24027
960.5  (b)(10)(ii) revised.........................................23015
    (b)(2)(ii)(B) amended; interim.................................24027
960.6  (b)(4)(iv)(D) and (F)(8) revised............................23015
    (b)(4)(iv)(D) and (F)(1) revised; interim......................24028
960.7  Corrected....................................................2550
960.9  Introductory text revised...................................23016
Chapter XI
1102.300  Revised; eff. 1-12-00....................................72496
1102.301  Revised; eff. 1-12-00....................................72496
1102.303  (b) and (d) revised; eff. 1-12-00........................72497
1102.304  Revised; eff. 1-12-00....................................72497
1102.305  Heading, (a) and (c) revised; eff. 1-12-00...............72497
1102.306  Redesignated as 1102.309; new 1102.306 added; eff. 1-12-
        00.........................................................72497
1102.307  Redesignated as 1102.308; eff. 1-12-00...................72497
    Added; eff. 1-12-00............................................72500
1102.308  Redesignated from 1102.307; eff. 1-12-00.................72497
1102.309  Redesignated from 1102.306; eff. 1-12-00.................72497
1102.310  Added; eff. 1-12-00......................................72501
Chapter XVII
1730  Added; interim...............................................34969
    Regulation at 64 FR 34969 confirmed............................50246
1780  Part heading revised.........................................72509
    Authority citation revised.....................................72510
1780.1--1780.16 (Subpart A)  Added; eff. 1-27-00...................72510
1780.20--1780.35 (Subpart B)  Added; eff. 1-27-00..................72513
1780.50--1780.57 (Subpart C)  Added; eff. 1-27-00..................72518
1780.70--1780.75 (Subpart D)  Added; eff. 1-27-00..................72520
1780.70  Redesignated as 1780.80; eff. 1-27-00.....................72510
1780.71  Redesignated as 1780.81; eff. 1-27-00.....................72510
1780.80  Redesignated from 1780.70; eff. 1-27-00...................72510
1780.81  Redesignated from 1780.71; eff. 1-27-00...................72510
Chapter XVIII
1805  Revised; interim.............................................59082

                                  2000

12 CFR
                                                                   65 FR
                                                                    Page
Chapter VI
611.400  (e) correctly revised......................................8023
612  Revised (effective date pending)..............................40487
    Regulation at 65 FR 40487 withdrawn; eff. 9-11-00..............54742
614  Technical correction..........................................26278
614.4000  (d)(2) removed; (d)(1) introductory text, (i) and (ii) 
        redesignated as (d) introductory text, (1) and (2); new 
        (d) introductory text, (1) and (2) amended (effective date 
        pending)...................................................24102
    Regulation at 65 FR 24102 eff. 5-25-00.........................33743
614.4010  (e)(2) removed; (e)(1) introductory text, (i) and (ii) 
        redesignated as (e) introductory text, (1) and (2); new 
        (e) introductory text and (2) amended (effective date 
        pending)...................................................24102
    Regulation at 65 FR 24102 eff. 5-25-00.........................33743
614.4030  (b)(2) removed; (b)(1) introductory text, (i) and (ii) 
        redesignated as (b) introductory text, (1) and (2); new 
        (b) introductory text, (1) and (2) amended (effective date 
        pending)...................................................24102
    Regulation at 65 FR 24102 eff. 5-25-00.........................33743
614.4040  (b)(2) removed; (b)(1) introductory text, (i) and (ii) 
        redesignated as (b) introductory text, (1) and (2); new 
        (b) introductory text amended (effective date pending).....24102
    Regulation at 65 FR 24102 eff. 5-25-00.........................33743

[[Page 1103]]

614.4050  (c)(2) removed; (c)(1) introductory text, (i) and (ii) 
        redesignated as (c) introductory text, (1) and (2); new 
        (c) introductory text amended (effective date pending).....24102
    Regulation at 65 FR 24102 eff. 5-25-00.........................33743
614.4440  (f) amended (effective date pending).....................40491
    Regulation at 65 FR 40491 eff. 9-11-00.........................54742
620.5  (i)(3)(i) corrected..........................................8023
622  Authority citation revised....................................46088
622.61  Revised....................................................46088
Chapter VII
700.1  (i) removed; (j) and (k) redesignated as (i) and (j)........44966
701.1  Revised.....................................................64521
701.21  (c)(3) revised.............................................15226
    (c)(7)(ii)(C) revised..........................................44977
701.34  (b)(12) and (13) added; Appendix amended...................21131
702  Revised........................................................8584
702.2  (j)(2) amended; (k) added...................................44966
702.101  (a)(2) corrected..........................................55439
702.102  (a)(1), (2) and (3) amended...............................44966
702.103  Added.....................................................44966
702.104  Added.....................................................44966
702.105  Added.....................................................44967
702.106  Added.....................................................44968
702.107  Added.....................................................44969
702.108  Added.....................................................44971
702.101--702.108 (Subpart A)  Appendix A through F added...........44971
702.302  (a), (c)(1), (2) and (3) amended..........................44974
    (a), (c)(1), (2) and (3) corrected.............................55439
705.10  Amended....................................................80299
707.6  Regulation at 64 FR 66356 confirmed.........................21132
707  Appendix C corrected; CFR correction..........................32010
709  Authority citation revised....................................55442
709.0  Amended.....................................................55442
709.10  Added......................................................55442
709.11  Added......................................................55443
714  Added.........................................................34585
716  Added.........................................................31740
    Corrected......................................................34534
716.4  (f) redesignated as (f)(1); (f)(2) added....................36783
716.7  (d)(6) added................................................36783
724.1  Amended.....................................................10934
741  Authority citation revised.....................................8593
741.3  (a)(1) and (2) revised.......................................8593
741.220  Added.....................................................31750
745  Regulation at 64 FR 19687 confirmed...........................34924
745.2  (a) amended.................................................34924
745.4  Regulation at 64 FR 19687 confirmed; (e) and (f) added......34924
745.9-1  (c) added.................................................34924
745.9-2  (a) amended...............................................10934
    (a) revised....................................................34924
745.10  (a)(1) through (5) and (b) revised; (c) amended............34924
745.88  Regulation at 64 FR 19687 confirmed........................34924
745  Appendix amended..............................................34925
747  Authority citation revised..............................8593, 57280
747.1001 (Subpart K)  Revised......................................57280
747.2001--747.2005 (Subpart L)  Added...............................8594
790.2  (b)(7) and (10) amended.....................................25267
792.41  Amended....................................................63789
792.47  (b) amended................................................63789
792.49  Amended....................................................63789
792.55  (a)(3) revised.............................................63790
792.56  (b)(1), (2) and (3) revised................................63790
792.57  (b) revised................................................63790
792.58  (a) amended................................................63790
792.59  (e) revised................................................63790
792.65  (a)(1) revised.............................................63790
792.66  (a), (b)(1) and (2) amended; (b)(4) added..................63790
792.69  (a) amended................................................63790
Chapter IX
900  Redesignated as 905; new 900 added.............................8256
    Authority citation revised..............................43981, 44426
900.1--900.5 (Subchapter A)  Heading revised........................8256
900.1  Amended................................25274, 36298, 43981, 44426
902  Redesignated as 906............................................8256
903  Redesignated as 907............................................8256
904  Redesignated as 910............................................8256
905--913 (Subchapter B)  Heading revised............................8256
905  Redesignated as 911; new 905 redesignated from 900.............8256
905.1  Amended......................................................8256
905.2  (a) and (c) amended..........................................8256
905.4  (a) and (b) amended..........................................8256
905.14  (d) amended.................................................8257
905.30 (Subpart C)  Removed........................................36298
905.30  Amended.....................................................8257
905.51  Amended.....................................................8257
905.52  Amended.....................................................8257

[[Page 1104]]

906  Redesignated as 912; new 906 redesignated from 902.............8256
906.1  Amended......................................................8257
906.3  (c) amended..................................................8257
907  Redesignated from 903..........................................8256
907.1  Amended......................................................8257
907.2  (a) and (b) amended..........................................8257
907.3  (a) amended..................................................8257
907.4  (a) and (b) amended..........................................8257
907.5  (a) and (b) amended..........................................8257
907.6  (c)(3), (6) and (8) amended..................................8257
907.8  (a) and (b) amended..........................................8257
907.9  (a), (c) and (d) amended.....................................8257
907.10  (b)(3) and (8) amended......................................8257
907.11  (a)(2), (4) and (5) amended.................................8257
907.12  (c), (g) introductory text, (3) and (4)(ii) amended.........8257
907.13  (a)(2) and (c) amended......................................8257
907.14  (d), (e) and (g) amended....................................8257
907.15  (c) amended.................................................8257
908  Removed........................................................8256
909  Redesignated as 913............................................8256
910  Redesignated as 966; new 910 redesignated from 904; heading 
        revised.....................................................8256
    Nomenclature change............................................20346
910.1  Amended...............................................8257, 20346
910.2  (a)(2), amended..............................................8257
    (a)(3), (b)(1) and (3) amended..................................8258
910.3  (b) revised.................................................20346
910.4  (a), (b), (d)(1)(ii) and (e) amended.........................8257
    (c)(3) and (e) revised; (d)(1) amended.........................20346
910.5  (a)(7)(iv) and (a)(8) amended................................8257
910.6  Introductory text amended....................................8257
910.7  Revised.....................................................20346
910.8  (a)(1) and (2) amended.......................................8257
    (a)(1) revised.................................................20346
910.9  (b), (c) and (f)(4)(ii) amended..............................8257
    (c), (d) introductory text, (3)(ii) introductory text, (e), 
(f)(3), (4), (5) and (g) introductory text revised.................20346
911  Redesignated from 905..........................................8256
911.1  Amended......................................................8258
911.3  (a), (c)(1), (3), (4), (d) heading, introductory text and 
        (2) amended.................................................8258
911.5  (e) amended..................................................8258
911.6  (a) amended..................................................8258
911.9  (a) amended..................................................8258
912  Redesignated as 987; new 912 redesignated from 906.............8256
    Nomenclature change.............................................8258
912.1  (a) amended..................................................8258
912.2  Amended......................................................8258
912.3  (a) amended..................................................8258
912.5  (a)(1), (5), (6)(ii), (b)(1), (c)(2) and (3)(i) amended......8258
912.6  (a)(1), (2), (b) and (c)(1) amended..........................8258
913  Redesignated from 909..........................................8256
913.2  Amended......................................................8259
913.4  (a) amended..................................................8259
913.5  (a) amended..................................................8259
913.9  (a) and (b) amended..........................................8259
914  Removed........................................................8256
915--918 (Subchapter C)  Heading revised............................8256
915  Redesignated from 932; heading revised.........................8256
    Nomenclature change.............................................8259
915.1  Amended...............................................8259, 41568
915.3  (b)(3) amended...............................................8259
    (a), (b)(5) and (c) amended; (e) revised.......................41568
915.4  (a), (b)(1) and (2) amended..................................8259
915.5  (b) amended..................................................8259
915.6  (a)(3) amended...............................................8259
915.7  (a) amended..................................................8259
    (a) amended; (b)(2) removed; (b)(3) redesignated as (b)(2) and 
revised; (c)(4) and (d) added......................................41569
915.8  (a), (b) and (c) amended.....................................8259
    (b) amended....................................................41569
915.10  (b) revised................................................41569
915.11  (b) and (f)(1) amended......................................8259
915.12  (a) amended.................................................8259
915.13  (a) and (b) amended.........................................8259
915.14  (a)(2) amended..............................................8259
915.16  Removed.....................................................8259
    Added..........................................................41569
915.17  Removed.....................................................8259
    Added..........................................................41570
915.18  Removed.....................................................8259
915.19  Removed.....................................................8259
915  Appendix A added..............................................41570
917  Added..........................................................8259
    Revised........................................................25274
917.4  Added.......................................................44426
918  Removed........................................................8256
    Added...........................................................8259
918.2  Heading revised.............................................13666
918.3  Heading and (b) revised; (a) redesignated as (a)(1); (a)(2) 
        added......................................................13666

[[Page 1105]]

918.4  Heading revised.............................................13666
918.7  Revised.....................................................13666
918.9  Added.......................................................13666
920  Removed........................................................8256
924  Removed........................................................8256
925 (Subchapter D)  Heading revised..........................8256, 44426
925  Redesignated from 933..........................................8256
925.1  (a), (g), (h) and (s) removed; (n)(1)(iii) and (y) amended 
                                                                    8261
    (n)(1)(iii) amended; (ff) and (gg) added; interim..............13869
    Regulation at 65 FR 13869 confirmed; (ff) and (gg) removed.....40981
925.2  (a)(2), (b), (c) introductory text, (2) and (4) amended......8261
925.3  (a) and (c) amended..........................................8261
925.4  (a), (c), (d)(1) introductory text and (2) amended...........8261
    (a) removed; (b), (c) and (d) redesignated as (a), (b) and 
(c); interim.......................................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.5  (a)(1), (b)(1), (2) and (c) amended..........................8261
925.6  (b) revised; interim........................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.7  Amended......................................................8261
925.8  Amended......................................................8261
925.9  Amended......................................................8261
925.10  Amended.....................................................8261
    Revised; interim...............................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.11  (a) introductory text, (b) introductory text and (c) 
        amended.....................................................8261
925.12  Introductory text amended...................................8261
925.13  (a) amended.................................................8261
925.14  (a)(1), (2), (3), (4)(i), (ii) and (iii) amended............8261
    (a)(3) revised; interim........................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.15  (a)(i) and (a)(ii) redesignated as (a)(1) and (a)(2); 
        introductory text, new (a)(1), new (2), (b) and (c) 
        amended.....................................................8261
925.16  Amended.....................................................8261
925.17  (a), (b), (c) heading, (d) heading, (1), (2), (e) heading, 
        (3)(i), (ii) and (f) heading amended........................8261
925.18  (a)(2), (c)(2), (4), (d)(2) and (e) amended.................8261
    (e) amended; interim...........................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.20  (b), (1), (2) and (e) amended...............................8261
    (a) revised; (b)(1) and (2) amended; interim...................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.22  (b)(1) amended..............................................8261
925.23  Amended.....................................................8262
925.24  (a)(2), (b)(2) and (3) amended..............................8262
925.25  (d)(2) introductory text amended............................8262
    (d)(2)(ii)(A), (B), (iii) and (3) amended.......................8262
925.26  (c) and (d) amended.........................................8262
    (a) revised; interim...........................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.27  (a), (b)(1), (4), (c)(1), (2), (3) and (d) amended..........8261
    (e) and (f) amended.............................................8262
925.28  (b) and (c) amended.........................................8262
925.29  (a)(1) and (2) amended......................................8262
    (a)(1) amended; interim........................................13870
    Regulation at 65 FR 13870 confirmed............................40981
925.30  Introductory text, (a) and (b) amended......................8262
    Revised; interim...............................................13870
    Revised........................................................40981
925.31  (d) amended.................................................8262
926  Added.........................................................44426
930 (Subchapter E)  Heading revised.................................8256
931  Removed........................................................8256
932  Redesignated as 915............................................8256
932.15  Regulation at 64 FR 71277 confirmed........................13666
932.16  Regulation at 64 FR 71278 confirmed........................13666
932.17  Regulation at 64 FR 71278 confirmed........................13666
932.18  Regulation at 64 FR 71278 confirmed........................13666
933  Redesignated as 925............................................8256
934  Removed........................................................8256

[[Page 1106]]

934.7  Regulation at 64 FR 71278 confirmed.........................13666
934.16  Regulation at 64 FR 71278 confirmed........................13666
934.17  Regulation at 64 FR 71278 confirmed........................13666
935  Redesignated as 950............................................8256
935.4  Regulation at 64 FR 71278 confirmed.........................13666
935.5  Regulation at 64 FR 71278 confirmed.........................13666
935.16  Regulation at 64 FR 71278 confirmed........................13666
935.22  OMB number...................................................203
935.23  OMB number...................................................203
935.24  OMB number...................................................203
936  Authority citation revised.....................................5739
    Redesignated as 944.............................................8256
936.2  OMB number...................................................5739
936.3  OMB number...................................................5739
936.4  OMB number...................................................5739
936.5  OMB number...................................................5739
937  Redesignated as 989............................................8256
938  Redesignated as 961............................................8256
939  Removed........................................................8256
940--944 (Subchapter F)  Heading revised............................8256
940  Removed........................................................8256
    Added..........................................................25278
    Heading revised................................................43981
940.1  Amended.....................................................43981
940.3  Added.......................................................43981
941  Redesignated as 985............................................8256
942  Removed........................................................8256
943  Redesignated as 975............................................8256
944  Removed; new 944 redesignated from 936.........................8256
    Amended........................................................44428
944.1  Amended......................................................8262
944.3  (b)(2), (3), (c)(2) and (3) amended..........................8262
944.4  (a) amended..................................................8262
944.5  (a)(3), (4), (d)(2) introductory text, (i) and (e) amended 
                                                                    8262
944.6  (b)(2) amended..............................................44428
950--961 (Subchapter G)  Established................................8256
950  Redesignated as 995; new 950 redesignated from 935.............8256
    Nomenclature change............................................44428
950.1  Amended......................................................8262
    Amended..................................................8263, 44428
950.2  (c)(3) amended...............................................8262
    Removed; new 950.2 redesignated from 950.4.....................44429
950.3  (a) and (c) amended..........................................8262
    Removed; new 950.3 redesignated from 950.14; heading, (a) and 
(b)(1) revised.....................................................44429
950.4  (c)(1) amended...............................................8262
    Redesignated as 950.2; new 950.4 redesignated from 950.5.......44429
950.5  (g)(2)(i) and (ii) amended...................................8263
    Redesignated as 950.4; new 950.5 redesignated from 950.6; 
(b)(1), (2)(ii), (3), (d)(1) and (2) revised.......................44429
950.6  (b)(2)(ii) and (3) amended...................................8263
    Redesignated as 950.5; new 950.6 redesignated from 950.8; (a) 
and (b)(1) revised.................................................44429
950.7  Redesignated from 950.9; (b) through (e) redesignated as 
        (c) through (f); (a) introductory text, (3), (4), (5), new 
        (c) and new (d) revised; new (b) and (g) added.............44429
950.8  (a) amended..................................................8263
    Redesignated as 950.6..........................................44429
    Redesignated from 950.10.......................................44430
950.9  (e) amended..................................................8262
    (a)(2) amended..................................................8263
    Redesignated as 950.7..........................................44429
    Redesignated from 950.11.......................................44430
950.10  Redesignated as 950.8; new 950.10 redesignated from 950.12 
        and revised................................................44430
950.11  (a) amended.................................................8263
    Redesignated as 950.9; new 950.11 redesignated from 950.15.....44430
950.12  Redesignated as 950.10; new 950.12 redesignated from 
        950.17.....................................................44430
950.13  (d)(2) amended..............................................8262
    (c)(1), (2) and (e) amended.....................................8263
    Removed; interim...............................................13870
    Regulation at 65 FR 13870 confirmed............................40981
    Redesignated from 950.18.......................................44430
950.14  Redesignated as 950.3......................................44429
    Redesignated from 950.20.......................................44430
950.15  (a)(2) and (b) amended......................................8263
    (a)(1) redesignated as (a); (a)(2) removed; (b)(1) amended; 
interim............................................................13870
    Regulation at 65 FR 13870 confirmed............................40981
    Redesignated as 950.11; new 950.15 redesignated from 950.19....44430
950.16  Redesignated from 950.21 and revised.......................44430

[[Page 1107]]

950.17  Redesignated as 950.12; new 950.17 redesignated from 
        950.24 and amended; heading and (b)(2)(i)(C) revised.......44430
950.18  Redesignated as 950.13.....................................44430
950.19  Redesignated as 950.15.....................................44430
950.20--950.24 (Subpart B)  Heading revised........................44430
950.20  (a) amended.................................................8262
    Redesignated as 950.14.........................................44430
950.21  Amended.....................................................8263
    Redesignated as 950.16.........................................44430
950.22  (d) amended.................................................8263
    Removed........................................................44430
950.23  (c)(2), (3), (4) introductory text, (i) and (ii) amended 
                                                                    8262
    (b) amended.....................................................8263
    Removed........................................................44430
950.24  (a), (b)(2)(i), (A), (B), (C), (c)(2)(i) and (ii) amended 
                                                                    8263
    Redesignated as 950.17.........................................44430
950.25 (Subpart C)  Added..........................................43981
    Correctly designated...........................................46049
951  Redesignated from 960..........................................8256
951.1  Amended...............................................8263, 17437
951.3  (b)(1)(i), (iii), (v) through (viii) amended.................8263
951.5  (a)(2)(i), (5), (b)(1), (7)(i) and (ii) amended..............8263
951.6  (b)(2)(i), (3) and (4)(i) amended............................8263
951.7  (a)(1) amended...............................................8263
951.8  (b)(2)(i) and (iii) amended..................................8263
    (c)(2) amended..................................................8264
951.9  (c) amended..................................................8264
951.10  (b)(1)(ii)(B), (c)(1)(iii) and (d) amended..................8264
951.11  (b) amended.................................................8264
951.12  (a)(1)(ii), (2)(i)(B) and (b)(2) amended....................8264
951.13  (b)(3)(i), (ii)(A), (B), (b)(4)(i), (ii) and (iii) amended
                                                                    8264
951.14  (a)(1) amended..............................................8264
951.15  (a)(1) and (2) amended......................................8264
952  Redesignated from 970..........................................8256
    Nomenclature change............................................44431
952.1  Amended......................................................8264
952.2  Amended...............................................8264, 44431
952.3  Amended...............................................8264, 44431
952.4  Amended......................................................8264
952.5  (a)(1), (3), (4), (d)(1), (3) and (4)(ii) amended.....8264, 44431
952.6  Amended.....................................................44431
955  Redesignated as 996............................................8256
    Added..........................................................43981
956  Added..........................................................8264
    Revised........................................................43985
960  Redesignated as 951............................................8256
    Added...........................................................8265
960.1  Regulation at 64 FR 24027 confirmed...........................204
    OMB number......................................................5419
960.3  Regulation at 64 FR 24027 confirmed...........................204
    OMB number......................................................5419
960.4  OMB number...................................................5419
960.5  Regulation at 64 FR 24027 confirmed...........................204
960.6  Regulation at 64 FR 24028 confirmed...........................204
    OMB number......................................................5419
960.7  OMB number...................................................5419
960.8  OMB number...................................................5419
960.9  OMB number...................................................5419
960.10  OMB number..................................................5419
960.11  OMB number..................................................5419
960.13  OMB number..................................................5419
960.15  OMB number..................................................5419
961  Redesignated from 938..........................................8256
    Nomenclature change............................................44431
961.1  Amended...............................................8265, 44431
961.2  (a)(2), (b) and (c)(1) amended...............................8265
    (a)(2), (c)(1) and (2) revised.................................44431
961.3  (a) introductory text, (2) and (b) amended...................8265
    (a) introductory text and (b) amended; (a)(2) revised..........44431
961.4  (a)(1) and (c) amended.......................................8265
    (a)(1) amended.................................................44431
961.5  (a)(1)(ii), (iii), (iv), (b)(1) and (2) amended..............8265
    (a) revised; (b)(2) amended....................................44431
965--969 (Subchapter H)  Established................................8256
965  Added.........................................................36298
966  Redesignated from 910..........................................8256
    Revised........................................................36298
966.0  Redesignated as 966.1........................................8265
966.1  Redesignated as 966.2; new 966.1 redesignated from 966.0 
        and amended.................................................8265
    Amended..................................................8266, 43986
966.2  Redesignated as 966.3; new 966.2 redesignated from 966.1; 
        (a) and (b) amended.........................................8265
966.3  Redesignated as 966.4; new 966.3 redesignated from 966.2 
        and amended.................................................8265

[[Page 1108]]

966.4  Redesignated as 966.5; new 966.4 redesignated from 966.3 
        and amended.................................................8265
    Amended.........................................................8266
966.5  Redesignated as 966.6; new 966.5 redesignated from 966.4 
        and amended.................................................8265
966.6  Redesignated as 966.7; new 966.6 redesignated from 966.5 
        and amended.................................................8265
    Amended.........................................................8266
966.7  Redesignated as 966.8; new 966.7 redesignated from 966.6; 
        (b)(2) amended..............................................8265
    (b) introductory text and (2) amended...........................8266
966.8  Redesignated from 966.7......................................8265
969  Added..........................................................8266
969.3  Removed.....................................................36300
970  Redesignated as 952............................................8256
975--978 (Subchapter I)  Established................................8256
975  Redesignated from 943..........................................8256
    Nomenclature change.............................................8266
975.4  Introductory text amended....................................8266
977  Added..........................................................8266
978  Added..........................................................8266
980 (Subchapter J)  Established.....................................8256
    Added..........................................................44431
985--989 (Subchapter K)  Established................................8256
985  Redesignated from 941..........................................8256
    Revised........................................................36300
985.1  Amended......................................................8267
985.2  Amended......................................................8267
985.3  (a) and (b) amended..........................................8267
985.4  (c)(1) amended...............................................8267
985.5  Introductory text amended....................................8267
985.6  (a)(1), (4), (5), (b), (2) and (3) amended...................8267
    (a)(4) amended..................................................8268
985.7  Heading, (a), (b), (c) introductory text, (d)(1) through 
        (4), (e)(1), (2), (3), (f)(1)(i) and (ii) amended...........8267
    (c)(2) and (f)(2) introductory text, (i), (ii) and (iii) 
amended.............................................................8268
985.8  Heading, (a), (b) introductory text, (c) and (d)(1) amended
                                                                    8267
985.9  Heading, (a)(1), (2) and (b) amended.........................8267
985.10  Heading, (a)(1) and (b) amended.............................8267
985.11  (b), (c), (d), (e)(1), (2)(i), (ii), (f)(i), (2)(iii), (3) 
        and (5) amended.............................................8267
985.12  (c) amended.................................................8267
987  Redesignated from 912; heading revised.........................8256
    Nomencalture change.............................................8268
987.1  Amended......................................................8268
987.2  (a) and (b) amended..........................................8268
987.3  (a) introductory text amended................................8268
987.4  (c)(2) amended...............................................8268
987.5  (a) amended..................................................8268
987.6  (b) amended..................................................8268
987.8  (a) and (b) amended..........................................8268
987.9  (a) and (b) amended..........................................8268
989  Redesignated from 937..........................................8256
989.1  Removed......................................................8268
    Added..........................................................36303
989.2  Redesignated as 989.3; new 989.2 added......................36303
989.3  Redesignated as 989.4; new 989.3 redesignated from 989.2 
        and revised................................................36303
989.4  Redesignated from 989.3.....................................36303
    Amended........................................................36304
995--997 (Subchapter L)  Established................................8256
995.1  Amended......................................................8268
995.4  (b) amended..................................................8268
995.7  (a) amended..................................................8268
995.8  (b) amended..................................................8268
    (c)(1) and (2) amended..........................................8269
996  Redesignated from 955; heading revised.........................8256
996.1  Amended......................................................8269
996.2  Amended......................................................8269
997  Added.........................................................17438
997.5  (a) corrected...............................................40492
Chapter XI
1102.306  (a)(2)(iv) correctly designated..........................31960
Chapter XV
1500  Added; interim...............................................16477
1501  Added; interim...............................................14821
1501.2  Added; interim.............................................15052
1510  Revised; interim.............................................12069
Chapter XVII
1700--1705 (Subchapter A)  Heading revised.........................81327
1700.2  (c)(1), (2), (3), (5), (6) and (d) revised; (c)(7) and (8) 
        added......................................................39787
1702  Redesignated from 1720.......................................81327

[[Page 1109]]

1702.1  (a) amended................................................81327
1702.2  Amended....................................................81327
1702.4  (a), (a)(2), (b)(1) and (d) amended........................81327
1702.7  (b) amended................................................81327
1702.8  (b) and (c) amended........................................81327
1702.9  (a) amended................................................81327
1702.10  (b) and (d)(2) amended....................................81327
1702.11  (a)(4) and (b) amended....................................81327
1702.12  (a) amended...............................................81327
1702.13  (a) and (b) amended.......................................81327
1703  Redesignated from 1710.......................................81327
1703.1  Amended....................................................81327
1703.12  (a)(1) and (b) amended....................................81327
1703.13  (a) amended...............................................81327
1703.15  (b)(2) and (4) amended....................................81327
1703.16  (b) amended...............................................81327
1703.17  (b) amended...............................................81327
1703.18  (b)(1), (c), (d)(2) and (e)(1) amended....................81327
1703.21  (b) amended...............................................81327
1703.22  (a) amended...............................................81327
1703.23  (a), (b), (e) and (g) amended.............................81327
1703.24  (a) and (c)(5) amended....................................81327
1703.34  (c) amended...............................................81327
1703.38  (a) amended...............................................81327
1703.40  (b) amended...............................................81328
1704  Redesignated from 1730.......................................81328
1704.1  (a) and (b)(1) through (4) amended.........................81328
1704.2  Amended....................................................81328
1704.3  (a) amended................................................81328
1704.21  (b)(9) and (12)(ii) amended...............................81328
1704.23  (a)(4) amended............................................81328
1704.29  (a)(1)(ii), (iii), (iv), (2) and (2)(iii) amended.........81328
1704.32  (a) amended...............................................81328
1704.41  Amended...................................................81328
1704.42  Amended...................................................81328
1704.51  (c) amended...............................................81328
1705  Redesignated from 1735.......................................81328
1705.3  (a) and (b)(1) amended.....................................81328
1705.5  (a) amended................................................81328
1705.10  (a), (a)(3), (b) and (c) amended..........................81328
1705.11  (a) amended...............................................81328
1705.21  (a) amended...............................................81328
1705.22  Amended...................................................81328
1705.25  Amended...................................................81328
1705.26  (a), (b), (d) and (e) amended.............................81328
1705.27  Amended...................................................81328
1710  Redesignated as 1703.........................................81327
1710.2  (j) amended................................................55171
1710.7  (c) amended................................................55171
1710.11  Revised...................................................55171
1710.12  Revised...................................................55172
1710.13  (a) revised...............................................55172
1710.14  (c) amended...............................................55173
1710.15  (b)(2) and (3) redesignated as (b)(3) and (4); new (b)(2) 
        added......................................................55173
1710.16  (a), (b) and (d) revised..................................55173
1710.17  Revised...................................................55173
1710.18  (b)(1), (c), (d)(2), (e)(1) and (i)(3) amended............55174
1710.21  (b) and (f) revised.......................................55174
1710.22  Revised...................................................55174
1710.23  (g) revised...............................................55174
1710.38  (a) revised...............................................55175
1720  Redesignated as 1702.........................................81327
1730  Redesignated as 1704.........................................81328
1735  Added........................................................26732
    Redesignated as 1705...........................................81328
1750--1770 (Subchapter C)  Added...................................81329
1780  (Subchpater D) Added.........................................81329
Chapter XVIII
1805  Revised......................................................49645