[Federal Register Volume 61, Number 87 (Friday, May 3, 1996)]
[Notices]
[Pages 19938-19939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10988]
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FARM CREDIT ADMINISTRATION
[BM-23-APR-96-02]
Policy Statement on Association Structure
AGENCY: Farm Credit Administration.
ACTION: Policy statement.
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SUMMARY: Section 7.8 of the Farm Credit Act of 1971, as amended,
provides the Farm Credit Administration (FCA) with the authority to
approve mergers of unlike associations. With limited exceptions, the
FCA has not allowed unlike association mergers unless the territories
of the merging entities have been the same. The FCA Board will now
consider merger requests from unlike associations whose territories are
not the same when such mergers promote efficiencies and improve
services to borrowers, provided the resulting institutions are
financially viable and any adverse impact on other Farm Credit System
institutions is minimal. The FCA Board Policy Statement on Association
Structure describes the criteria it will consider when acting on such
merger requests. However, nothing in the Policy Statement limits the
FCA Board's discretion with respect to charter requests.
EFFECTIVE DATE: April 23, 1996.
FOR FURTHER INFORMATION CONTACT: Elna J. Luopa, Chief, Corporate
Affairs Division, Office of Special Supervision and Corporate Affairs,
(703) 883-4475; or Victor A. Cohen, Associate General Counsel,
Regulatory Enforcement Division, Office of General Counsel, Farm Credit
Administration, 1501 Farm Credit Drive, McLean Virginia 22102-5090,
(703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: The text of the Board's policy statement on
association structure is set forth below in its entirety:
Farm Credit Administration Board Policy Statement on Association
Structure, BM-23-APR-96-02, FCA-PS-70
Effective Date: April 23, 1996.
Effect on Previous Action: Supersedes FCA-PS-27 [BM-21-NOV-88-02]
and FCA-PS-30 [BM-06-JAN-89-07].
Source of Authority: Sections 5.17, 7.8, and 7.11 of the Farm
Credit Act of 1971, as amended.
In the interest of providing the highest quality and most efficient
service to agricultural borrowers, the Farm Credit Administration (FCA)
encourages Farm Credit System (System) institutions to select
structural options that are most conducive to that goal. The FCA Board
will favor charter requests that promote such efficiency, provided they
result in viable financial institutions and any adverse effect on other
System institutions is minimal.
The FCA believes that agricultural credit associations (ACAs),
formed pursuant to section 7.8(a) of the Farm Credit Act of l971, as
amended, can promote such efficiency because of their ability to offer
a broad array of services to borrowers. However, when the chartered
territories of the merging associations are not identical, the FCA must
determine whether to disapprove the merger application or to charter an
ACA with (1) Full lending authority throughout its territory, resulting
in competition with one or more adjoining associations; or (2)
different lending authorities in different parts of its territory
(bifurcated charter) with exclusive lending authorities in the common
territory. Except for several ACAs formed as a result of section 411 of
the Agricultural Credit Act of l987, the FCA generally has denied
charter requests for the merger of unlike associations when the
boundaries of the merging entities were not the same. These actions
were taken to protect exclusive charters, to discourage intra-System
competition, and to prevent the administrative difficulties caused by
bifurcated charters. The FCA Board prefers charters that authorize a
full range of services throughout an ACA's
[[Page 19939]]
territory. However, the FCA recognizes that permitting only exclusive,
full-service ACA charters would limit the potential for achieving
additional structural efficiencies at the association level when
voluntary realignment cannot be achieved.
Consequently, the FCA Board has determined that, in acting on ACA
charter requests, it will attempt to strike an appropriate balance
between the efficiencies gained from the merger and any potential
adverse impact the requested charter may have on borrowers, other
associations, and the System. While the Board prefers that the affected
associations resolve their territorial issues to permit the chartering
of non-overlapping, full-service ACAs, the Board will not rule out
granting a permanent, full-service charter that overlaps another
association's territory if the adverse effect caused by any resulting
competition is minimal, especially when the affected association
board(s) consents. Any institution whose charter would be affected by
such a merger request would have the opportunity to comment on the
request. Should a nonexclusive charter be issued, the FCA Board would
consider an application from an affected association(s) to convert to
an ACA or for some other reasonable alternative. In addition, the Board
may approve a request for a bifurcated charter when administrative
difficulties are outweighed by the benefits to be derived. However,
since the Board believes a bifurcated charter should be an interim step
to a full-service ACA, it encourages the newly formed ACA and the
affected association(s) to continue to work toward territorial
realignment and full-service, non-overlapping ACAs..
Nothing in this policy statement shall limit the Board's discretion
with respect to charter requests. Each request will be considered on
its individual merits. In exercising its discretion, the Board will
consider the following factors and any other factors the Board
determines relevant at the time of the request.
1. Projected operating efficiencies to be realized as a result of
the merger.
2. Projected improvements in the quality and range of services to
be offered borrowers.
3. Potential for adverse financial consequences on other
associations because of any competition that will result, and whether
the affected association board(s) consents to the competition.
4. The effects of other alternatives that may be requested by
either the merging constituents or any affected association(s).
This policy statement supersedes the November 221, 1988 FCA Board
Policy Statement on Granting Nonexclusive Charters to Associations and
the January 6, l989 FCA Board Policy Statement on Section 411 Mergers
Resulting in Nonexclusive Charters.
Adopted this 23rd day of April, 1996 by order of the Board.
Dated: April 29, 1996.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 96-10988 Filed 5-2-96; 8:45 am]
BILLING CODE 6705-01-P