[Federal Register Volume 61, Number 246 (Friday, December 20, 1996)]
[Rules and Regulations]
[Pages 67181-67188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32309]


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FARM CREDIT ADMINISTRATION

12 CFR Parts 600, 603, 611, 614, 615, 618, and 619

RIN 3052-AB61


Organization and Functions; Privacy Act Regulations; 
Organization; Loan Policies and Operations; Funding and Fiscal Affairs, 
Loan Policies and Operations, and Funding Operations; General 
Provisions; Definitions

AGENCY: Farm Credit Administration.

ACTION: Interim rule; request for comment.

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SUMMARY: The Farm Credit Administration (FCA or Agency) through the 
Farm Credit Administration Board (Board) amends the current regulations 
in parts 600, 603, 611, 614, 615, 618, and 619 to eliminate 
unnecessary, outdated, duplicative, or burdensome regulatory 
requirements, to replace outdated regulatory language with more current 
terminology, and to clarify the intended meaning of certain regulatory 
provisions. This is an interim rule, with request for comment, because 
the changes cover issues that are primarily technical in nature.

DATES: The regulations shall be effective upon the expiration of 30 
days after publication during which either or both houses of Congress 
are in session. Written comments must be received on or before January 
31, 1997. Notice of effective date will be published in the Federal 
Register.

ADDRESSES: Comments may be mailed or delivered to Patricia W. DiMuzio, 
Director, Regulation Development Division, Office of Policy Development 
and Risk Control, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, VA 22102-5090 or by facsimile at (703) 734-5784. Comments may 
also be submitted via electronic mail to ``[email protected]''. Copies 
of all communications received will be available for review by 
interested parties in the Office of Policy Development and Risk 
Control, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:
Linda C. Sherman, Policy Analyst, Regulation Development Division, 
Office of Policy Development and Risk Control, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4498, TDD (703) 883-
4444.

      or

Wendy R. Laguarda, Senior Attorney, Legal Counsel Division, Office of 
General Counsel, Farm Credit Administration, McLean, VA 22102-5090, 
(703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION:

I. Basic Objectives for Interim Regulation

    The FCA is continuing efforts to streamline its regulations as part 
of its commitment to the principles contained in the Board's Policy 
Statement on Regulatory Philosophy (Policy Statement). See 60 FR 26034 
(May 16, 1995). Pursuant to the Policy Statement, the FCA will strive 
to ensure that each regulation has a well-defined objective that 
addresses specific problems or risks. The Policy Statement commits the 
FCA to repeal regulations that prescribe detailed management and 
operational practices for Farm Credit System (System) institutions and 
that are not needed to enhance safe and sound bank operations. It is in 
furtherance of these objectives that the Agency is making a number of 
deletions, clarifications, and technical amendments to its regulations.

II. Background Information

    As part of its ongoing efforts to streamline the regulatory 
process, the Agency took the following initiatives to determine ways to 
reduce regulatory burden:
    A. The establishment of an FCA task force, pursuant to the Agency's 
Strategic Action Plan, to eliminate nonstatutory prior approvals of 
routine business matters;
    B. A 1993 Solicitation for Public Comments concerning ways to 
reduce regulatory burden (See 58 FR 34003, June 23, 1993);
    C. The consideration of Regulatory Petitions submitted by the 
public that recommended certain changes to existing regulations;
    D. The establishment of an FCA task force on agricultural credit 
bank (ACB) issues to evaluate the need for technical changes to 
existing regulations in order to include ACBs; and
    E. The consideration of FCA staff submissions containing 
suggestions for regulatory deletions and amendments.
    Substantive issues arising from such actions have been incorporated 
into existing or new Agency regulatory projects. In order to provide 
regulatory relief in the most expeditious manner possible, remaining 
non-substantive and technical issues are addressed in this regulation.

III. Section-by-Section Analysis

1. 12 CFR 600.5  (Subpart A)--Farm Credit Administration

    This section is amended to reflect the Agency's recent 
organizational changes.

2. 12 CFR 603.310 (b)--Privacy Act Regulations

    This section is amended to reflect the fact that the Privacy Act 
Officer position has moved from the Office of Congressional and Public 
Affairs to the Office of General Counsel.

3. 12 CFR 611.1135  (Subpart I)--Service Organizations

    Section 611.1135(e) requires prior approval by the FCA for amending 
the bylaws of service corporations. Section 4.25 of the Farm Credit Act 
of 1971, as amended (Act) authorizes the FCA to charter service 
corporations. However, section 5.17(b) of the Act provides that the FCA 
shall not have the authority to approve bylaws, or amendments, 
modifications or changes to bylaws, of System institutions. Further, 
Sec. 4.26 of the Act no longer authorizes the FCA to approve bylaws of 
service corporations. Thus, the FCA is deleting Sec. 611.1135(e) and 
removing the FCA prior approval requirement for amendments to bylaws 
for service corporations.
    As part of the normal chartering application process, service 
corporation bylaws will continue to be reviewed by the FCA. Such review 
will be limited, however, to whether the bylaws violate any statutory, 
regulatory or safety and soundness provisions.
    Under the Farm Credit System Reform Act of 1996, Pub. L. 104-105, 
110 Stat. 162, February 10, 1996, associations are authorized to form 
service corporations. Technical changes to make Sec. 611.1135 
consistent with the 1996 legislation have been incorporated into the 
interim rule. This rule also replaces outdated language with more 
current terminology. For example, the word ``Chairman'' is deleted, and 
in its place the words ``Farm Credit Administration'' are inserted.

4. 12 CFR 611.1140 and 611.1145  (Subpart J)--Merger and Reorganization 
Proposals Required by the Agricultural Credit Act of 1987

    The FCA is deleting all of subpart J. These regulations were issued 
to facilitate the consolidation of System institutions as required by 
section 412 of the Agricultural Credit Act of 1987. All consolidations 
were required to be completed by January 1, 1990. Hence, these 
regulations, including the FCA

[[Page 67182]]

prior approval requirements in Secs. 611.1140(d) and 611.1145(c), have 
become obsolete.

5. 12 CFR 611.1155, 611.1157, 611.1158, 611.1160, 611.1161, 611.1162, 
611.1163, 611.1164, 611.1166, 611.1167, 611.1168, 611.1169, 611.1170, 
611.1171, 611.1172, 611.1173, 611.1174, 611.1175, 611.1176, 611.1180, 
611.1181, 611.1182, and 611.1183  (Subparts K, L, M and N)--Appointment 
of Conservators and Receivers, Liquidation of Associations, Liquidation 
of Banks, and Conservators and Conservatorships of Banks and 
Associations

    Subparts K through N address System conservatorships or 
receiverships in which the identity of the conservator or receiver is 
left to the discretion of the FCA. Pursuant to section 4.12 of the Act, 
after January 5, 1993, the Farm Credit System Insurance Corporation 
(FCSIC) is the sole entity that may be appointed by the FCA as receiver 
or conservator for System institutions (except the Federal Agricultural 
Mortgage Corporation) placed into conservatorship or receivership. 
Future conservatorships or receiverships of System institutions are 
governed by 12 CFR part 627. As there are no outstanding System 
receiverships or conservatorships, the regulations in subparts K-N are 
obsolete. An issue was raised regarding whether a System institution 
may liquidate or dissolve through means other than a receivership. This 
issue is substantive and will be addressed at a later date.
    Finally, the FCA previously proposed changes to Secs. 611.1155 and 
611.1157 pertaining to the definition of insolvency (See 53 FR 43897, 
October 31, 1988). In this rulemaking, the FCA is deleting both these 
sections and therefore withdrawing any outstanding proposals on these 
regulations. Any remaining issues pertaining to the definition of 
insolvency will be addressed in the Capital--Phase III (RIN 3052-AB58) 
regulatory project.

6. 12 CFR 611.1190, 611.1191, 611.1192, 611.1193, 611.1194, 611.1195, 
611.1196, 611.1197, 611.1198  (Subpart O)--Special Reconsideration of 
Mergers

    The regulations in subpart O implement the provisions of the 
Agricultural Credit Act of 1987 relating to special reconsideration of 
voluntary mergers and consolidations that occurred after December 23, 
1985, and prior to January 6, 1988. System associations had 1 year, 
until December 1989, to reconsider these mergers. As this regulation is 
obsolete, the FCA is deleting all of subpart O.

7. 12 CFR 614.4321  (Subpart G)--Interest Rates and Charges

    Section 614.4321 currently defines the types of interest rate 
programs that may be utilized by System banks and associations. This 
section also requires the FCA's prior approval of specific criteria for 
differential interest rate programs.
    The FCA has concluded that defining the types of interest rate 
programs and requiring the FCA's prior approval are no longer 
necessary. Also, the last sentence in Sec. 614.4321(d) is duplicative 
of direction already found in the Other Financing Institutions 
regulation at Sec. 614.4640. Accordingly, the FCA is deleting most of 
this section. However, the section on differential interest rates is 
being retained in order to set forth the requirement that System 
institutions adhere to the principle of nondiscrimination among 
similarly situated borrowers in setting differential interest rates.

8. 12 CFR 614.4444  (Subpart L)--Actions on Applications; Review of 
Credit Decisions

    The interim regulation eliminates all references to Special Asset 
Groups and the National Special Assets Council, as these entities no 
longer exist. The interim regulation also revises the last two 
sentences of this paragraph to clarify that System institutions must 
continue to retain sufficient documentation of their reasons not to 
restructure a loan to permit the institution or an outside party, such 
as the FCA, to review each determination. The FCA considers this change 
to be technical in nature because this is not a new requirement. The 
above change permits the review of a decision not to restructure a loan 
to be conducted by a System institution or an outside party such as the 
FCA, rather than by the defunct Special Asset Groups or the National 
Special Asset Council.

9. 12 CFR 614.4510  (Subpart N)--Loan Servicing Requirements; State 
Agricultural Loan Mediation Programs; Right of First Refusal

    Section 614.4510 prescribes guidelines for bank and association 
loan servicing activities. Specifically, paragraph (b) requires the 
district bank to provide guidelines for establishing loan servicing 
policies and procedures for associations. Paragraph (d)(4) of this 
section requires System institutions to provide the FCA with any 
revisions to loan servicing policies. Consistent with the FCA Board's 
emphasis on holding direct lender associations responsible for their 
lending activities, the Agency is deleting paragraphs (b) and (d)(4). 
The funding bank's involvement in association loan servicing policies 
will continue to be monitored through its direct loan and the general 
financing agreement. Further, these policies will continue to be 
reviewed as part of the normal examination process. The interim rule 
also replaces outdated terminology to describe correctly the types of 
System institutions to which this section applies.

10. 12 CFR 614.4515(b), 614.4516, 614.4517(c), and 614.4520  (Subpart 
N)--Loan Servicing Requirements; State Agricultural Loan Mediation 
Programs; Right of First Refusal

    The interim rule eliminates Sec. 614.4515(a)(2), (b)(1) and (b)(2) 
because they contain a statutory requirement relating to restructuring 
policy and reporting that expired on January 6, 1993. The remainder of 
Sec. 614.4515(a) is incorporated in the introductory paragraph of 
Sec. 614.4516, retitled ``Restructuring policy and procedures.''
    The FCA is adding a new paragraph (c), entitled ``Documentation,'' 
to Sec. 614.4517 regarding restructuring decisions. The new paragraph 
clarifies that, when an application for restructuring is denied, 
qualified lenders must maintain sufficient documentation to support 
their decision. The documentation should demonstrate that the 
institution considered all the applicable factors for determining 
whether to restructure a loan, as set forth in paragraphs (a) and (b) 
of this section.
    In addition, the FCA is deleting all of Sec. 614.4520. The Farm 
Credit System Assistance Board (Assistance Board) established the 
National Special Asset Council in June 1988 to ensure that Federal 
financial assistance to financially distressed farmers provided loan 
restructuring measures as alternatives to foreclosure. The Assistance 
Board's charter was canceled by the FCA Board, effective December 31, 
1992, as required by Sec. 6.12 of the Act. The FCA Board also dissolved 
the National Special Asset Council effective December 31, 1992. There 
are no longer any ``certified'' institutions remaining in the System 
today and, thus, this section is no longer necessary.

11. 12 CFR 614.4525(d)  (Subpart O)--Special Lending Programs

    The interim rule removes the requirement that System lenders obtain 
the approval of their respective banks' board of directors prior to 
entering into a memorandum of understanding with other lenders when 
processing loans to

[[Page 67183]]

mutual borrowers. Consistent with the FCA Board's regulatory philosophy 
of repealing regulations that prescribe needlessly detailed management 
and operational practices, the FCA believes that it is reasonable for 
System institutions to decide their own policies on these matters. This 
rule also replaces outdated language with more current terminology.

12. 12 CFR 615.5140(a)(1)  (Subpart E)--Investment Management

    Currently Sec. 615.5140(a)(1) permits System banks to invest in 
obligations that are both ``issued and guaranteed'' by agencies and 
instrumentalities of the United States. The FCA intended to preclude 
System banks from acquiring securities that are not guaranteed by 
Federal agencies or instrumentalities. However, an unintended 
consequence of Sec. 615.5140(a)(1) was to prohibit System banks from 
investing in non-governmental obligations that are not issued, but are 
guaranteed or insured, by a Federal agency or instrumentality.
    For this reason, the FCA is amending Sec. 615.5140(a)(1) to include 
the following as eligible investments: Obligations of the United 
States; full-recourse obligations, other than mortgage-backed 
securities, of agencies, instrumentalities or corporations of the 
United States; or debt obligations of other obligers that are fully 
insured or guaranteed as to both principal and interest by the United 
States, its agencies, instrumentalities, or corporations. This 
amendment will provide System banks with the flexibility they need to 
achieve the investment objectives specified in Sec. 615.5132.

13. 12 CFR 615.5250  (Subpart I)--Issuance of Equities

    Section 615.5250 requires System banks and associations to disclose 
certain information to purchasers of an institution's equities. An 
exception in Sec. 615.5250(e) relieves System institutions from making 
disclosures to ``other financing institutions having a discount or 
lending relationship with the selling Farm Credit System 
institutions.'' This regulation was intended to grant System 
institutions relief from disclosing equity information to sophisticated 
or institutional investors in System equities. System institutions have 
inquired whether the exemption in Sec. 615.5250(e) applies to those 
non-System lenders that purchase System equities as part of a loan 
participation transaction. In response to these inquiries, the FCA is 
clarifying Sec. 615.5250(e) by including ``other financing 
institutions'' as defined in Sec. 1.7(b) of the Act, as well as other 
System institutions and non-System lenders. The interim rule is 
consistent with the FCA's approach concerning disclosures to 
shareholders because the disclosure requirements in Sec. 615.5250 are 
not necessary for financial institutions and other sophisticated 
investors. This clarification also eliminates an unnecessary regulatory 
burden on the System and facilitates loan participation arrangements 
between System institutions and non-System institutions.

14. 12 CFR 618.8260  (Subpart F)--Miscellaneous Provisions

    This section sets forth procedures by which System banks may 
purchase automobiles through the General Services Administration (GSA). 
This regulation is rarely used and contains an unnecessary prior 
approval in Sec. 618.8260(b).
    The authority for System banks to make such purchases exists 
whether or not it is specified in an FCA regulation. Accordingly, the 
Agency is deleting all of Sec. 618.8260. System banks that desire 
guidance on how to proceed may contact the GSA directly, or may request 
additional information from the FCA's Contracting and Procurement 
Branch.

15. 12 CFR 618.8310(b)  (Subpart G)--Releasing Information

    In connection with the regulatory burden project (See 58 FR 34003, 
June 23, 1993), an association submitted comments to the FCA concerning 
the provisions of Sec. 618.8310(b). This regulation prescribes 
circumstances under which a System institution can release lists of its 
stockholders. The association expressed a concern that the regulation 
imposed an undue burden on System institutions in determining what 
constitutes a ``permissible purpose'' and whether System institutions 
can enforce the regulatory provision after releasing a stockholder 
list. It is neither feasible nor advisable to amend this section to 
provide a comprehensive list of every permissible purpose for 
requesting and using a stockholder list. The Agency will provide 
additional interpretive guidance directly to the concerned association 
and to any other interested parties.
    The interim rule also replaces outdated language with more current 
terminology.

16. 12 CFR 618.8320  (Subpart G)--Releasing Information

    The existing regulation prohibits System institutions from 
releasing information regarding borrowers and loan applicants except in 
specified circumstances. The FCA received a letter from a System bank 
requesting clarification on whether releasing borrower information to 
credit bureaus was permitted by this regulation, as the ``reliable 
organization'' exception in Sec. 618.8320(b)(5) does not make this 
clear.
    The FCA believes that credit bureaus should be among the types of 
reliable organizations contemplated by this regulation. To make this 
clear, the interim rule amends Sec. 618.8320(b)(5) by expressly 
authorizing System institutions to provide borrower information to 
consumer reporting agencies.
    Section 618.8320(b)(2) permits System institutions to provide 
borrower data to specified Federal agencies in connection with official 
investigations. The list in the regulation is outdated and restrictive. 
To facilitate communications between the System and Federal law 
enforcement authorities investigating possible borrower misconduct, 
Sec. 618.8320(b)(2) has been modified to replace the list of Federal 
agencies with a generic reference to all Federal agencies with a 
legitimate law enforcement inquiry.
    Finally, a technical change was made to delete Sec. 618.8320(b)(9) 
because it refers to the National Special Asset Council, an entity 
which no longer exists.

17. 12 CFR 618.8330 and 618.8340  (Subpart G)--Releasing Information

    During the regulatory burden project (See 58 FR 34003, June 23, 
1993), the FCA received two letters from System institutions requesting 
clarification of the legal circumstances under which System institution 
personnel could be summoned as witnesses. Their first concern was that 
requiring System personnel to formally inform the court of the FCA's 
regulations was burdensome. After reviewing the issue the Agency has 
determined that, contrary to being a burden, this regulation provides 
System directors, officers or employees with a means to resist 
complying with a subpoena that requests the disclosure of confidential 
information in violation of FCA regulations, except as ordered by a 
court of law. Their second concern pertains to the requirements of 
Sec. 618.8330(b) to consult with an attorney at their funding bank when 
System personnel are summoned as a witness. The Agency agrees that this 
requirement is burdensome and unnecessary. Consistent with the FCA 
Board's regulatory philosophy of repealing regulations that prescribe 
needlessly detailed management and operational

[[Page 67184]]

practices, the FCA is deleting Sec. 618.8330(b).
    Upon review of the regulation at Sec. 618.8340, which requires the 
approval of the supervising funding bank before releasing lists of bank 
and association employees, the FCA has determined to delete it in its 
entirety. Consistent with the FCA Board's regulatory philosophy, the 
FCA believes that it is reasonable for System institutions to decide 
their own policies on these matters.

18. 12 CFR 618.8360 and 618.8370  (Subpart H)--Disposition of Obsolete 
Records

    This subpart currently requires System institutions to maintain 
records indefinitely and to maintain an ``up-to-date records disposal 
schedule.'' Consistent with the FCA Board's regulatory philosophy of 
repealing regulations that prescribe unnecessarily detailed management 
and operational practices, the FCA is proposing to delete this subpart, 
including the list of appropriate records retention practices in the 
current Sec. 618.8360. The FCA believes that System institutions have 
the discretion to dispose of any records that are not required for 
research, legal, audit or examination purposes. In accordance with good 
business practices, records retention policies should be set forth in 
written procedures approved by an institution's board.
    The FCA may issue further guidance (such as in a bookletter or 
examination manual) regarding what records System institutions should 
retain so that they may be adequately examined for safety and soundness 
purposes.
    Section 618.8360(a)(3) requires System institutions to retain basic 
personnel records, including personnel folders, service records, cards, 
and earning records for all active and former employees covered under 
the Civil Service Retirement Act (CSRA). These records were necessary 
to ensure that employees eligible for Civil Service retirement received 
appropriate benefits. The FCA is deleting this requirement because our 
research indicates that there are only three remaining System employees 
eligible for CSRA benefits, and their personnel offices are aware of 
the appropriate Office of Personnel Management requirements.
    Finally, Sec. 618.8360(a)(6) currently requires System institutions 
to keep financial reports as of June 30 and December 31 of each year. 
Although the FCA is deleting Sec. 618.8360(a)(6), the call report 
instructions will continue to require System institutions to keep such 
financial reports.

19. 12 CFR 618.8380, 618.8390, 618.8400, 618.8410, and 618.8420  
(Subpart I)--Federal Records

    This subpart pertains to the maintenance and disposal of Federal 
records. The Federal records held by the System institutions are the 
property of the Federal government rather than the property of the 
System or the FCA. These records must be handled in accordance with the 
laws and regulations governing all Federal records, and there are 
penalties attached to the unauthorized disposal of Federal records. The 
National Archives and Records Administration is the Federal agency 
responsible for promulgating rules and regulations on the management 
and disposal of Federal records.
    Although no new Federal records are being created in the System 
today, some System institutions may still be in possession of Federal 
records as described in current Sec. 618.8390. Because most of these 
records would be over 40 years old, the FCA assumes that their number 
is limited and that most, if not all, could be destroyed or archived. 
The FCA believes that future guidance on their maintenance and 
disposition is more appropriately the subject of a bookletter. 
Therefore, the Agency is deleting all of subpart I. The FCA requests 
that any System institution with records as described in Sec. 618.8390 
notify the Agency during the comment period of the types of Federal 
records in their possession. The goal is to identify all Federal 
records still retained by System institutions so that they can either 
be destroyed (at the institution's discretion) or archived, as 
appropriate.

IV. Agricultural Credit Banks

    In 1987, the Act was amended to allow the System to form 
agricultural credit banks (ACBs). An ACB is formed by the merger of a 
Farm Credit Bank (FCB) and a bank for cooperatives (BC). Pursuant to 
section 7.2 of the Act, an ACB is granted all of the powers of its 
constituent FCB and BC. The FCA reviewed its regulations to determine 
whether or not technical changes were needed to adapt the rules to 
ACBs. The ACB review highlighted the need for technical amendments to 
the regulations. Set forth below is a discussion of issues involving 
ACBs that are technical in nature. A complete listing of the technical 
edits can be found in the amendatory language following the preamble.

A. Definition of Bank for Cooperatives

    Currently, the definition of a bank for cooperatives in 
Sec. 619.9060 reads as follows, ``Banks operating under title III of 
the Act, including the National Bank for Cooperatives, individual and 
regional banks for cooperatives and agricultural credit banks.'' There 
is a separate definition of ACBs in Sec. 619.9020 that reads as 
follows, ``Agricultural credit banks are those banks created by the 
merger of a Farm Credit Bank and a bank for cooperatives pursuant to 
section 7.0 of the Act.'' The current definition of a BC serves to 
ensure that an ACB is subject to the same constraints as a BC on its 
title III lending authorities. However, this BC definition is 
insufficient because it does not address the title I authorities of an 
ACB. As currently written, Sec. 619.9060 has the effect of excluding 
ACBs from various regulatory provisions. For example, BCs are not 
subject to the regulations relating to borrower rights, loan 
disclosures, and secondary market activities.
    For all the foregoing reasons, the FCA is keeping the definitions 
of an ACB and a BC separate by revising the definition of BC to read as 
follows, ``A bank for cooperatives is a bank that is operating under 
section 3.0 of the Act.'' The definition of an ACB will continue to 
read as currently set forth in Sec. 619.9020. The definition of a BC 
also strikes the obsolete reference to the National Bank for 
Cooperatives, whose charter was canceled in 1994, when CoBank and the 
Springfield FCB and BC merged to create CoBank, ACB.

B. Borrower Rights

    When the FCA approved the formation of the first ACB in 1994, it 
addressed the issue of whether borrower rights provisions would apply 
to the new entity. In approving the new charter, the FCA confirmed that 
the ACB would not be subject to the borrower rights provisions of title 
IV, part C of the Act, except to the extent that it lends to farmers, 
ranchers, and producers and harvesters of aquatic products. Thus, the 
FCA concluded that the borrower rights provisions attach to all loans 
made under an ACB's title I lending authorities.
    Many of the current regulations pertaining to borrower rights 
exclude a BC from the definition of ``qualified lender.'' By revising 
the definition of a BC as discussed above, ACBs would now be included 
in the definition of ``qualified lender'' to the extent of their title 
I lending authorities. Therefore, no additional regulatory language 
changes have been made to the borrower rights

[[Page 67185]]

provisions, except for technical corrections in Secs. 614.4440(h)(1) 
and 614.4510, in which outdated language is replaced by more current 
terminology.

C. Termination of Farm Credit Status

    Several technical changes have been made to the regulatory 
provisions pertaining to the termination of Farm Credit status at 
Secs. 611.1200(c), 611.1250(b) and (c), 611.1255, 611.1266(c). These 
changes include adding the phrase ``or agricultural credit bank'' and 
deleting or replacing outdated language with more current terminology, 
where necessary.

D. Miscellaneous Technical Changes

    Several technical changes have been made to various regulatory 
provisions at Secs. 615.5120(a), 615.5143, 615.5280, 615.5290(a), 
618.8310(b)(1) and 618.8325(c). These changes include adding the phrase 
``or agricultural credit bank'' and deleting or replacing outdated 
language with more current terminology, as appropriate.

List of Subjects

12 CFR Part 600

    Organization and functions (Government agencies).

12 CFR Part 603

    Privacy.

12 CFR Part 611

    Agriculture, Banks, banking, Rural areas.

12 CFR Part 614

    Agriculture, Banks, banking, Foreign trade, Reporting and 
recordkeeping requirements, Rural areas.

12 CFR Part 615

    Accounting, Agriculture, Banks, banking, Government securities, 
Investments, Rural areas.

12 CFR Part 618

    Agriculture, Archives and records, Banks, banking, Insurance, 
Reporting and recordkeeping requirements, Rural areas, Technical 
assistance.

12 CFR Part 619

    Agriculture, Banks, banking, Rural areas.

    For the reasons stated in the preamble, parts 600, 603, 611, 614, 
615, 618, and 619 of chapter VI, title 12 of the Code of Federal 
Regulations, are amended to read as follows:

PART 600--ORGANIZATION AND FUNCTIONS

    1. The authority citation for part 600 is revised to read as 
follows:

    Authority: Secs. 5.7, 5.8, 5.9, 5.10, 5.11, 5.17, 8.11 of the 
Farm Credit Act (12 U.S.C. 2241, 2242, 2243, 2244, 2245, 2252, 
2279aa-11).

Subpart A--Farm Credit Administration

    2. Section 600.5 is amended by removing the words ``Special 
Supervision and Corporate Affairs'' and adding in their place the words 
``Policy Development and Risk Control'' in the fourth sentence of 
paragraph (b); removing the words ``coordinates the agency's 
preparation of rules and regulations;'' in the first sentence of 
paragraph (d)(1); and by revising paragraph (d)(2) to read as follows:


Sec. 600.5  Organization of the Farm Credit Administration.

* * * * *
    (d) * * *
    (2) Office of Policy Development and Risk Control.
    The Office of Policy Development and Risk Control (OPDRC) develops 
policies and regulations for the FCA Board's consideration and promotes 
risk management policies and practices by the Farm Credit System. The 
OPDRC has primary responsibility for developing regulatory proposals 
and public policy statements that effectively implement applicable 
statutes and promote the safety and soundness of the System. Other 
major functions include evaluating requests for regulatory and charter 
approvals and managing the FCA's corporate activities; ensuring that 
risks associated with chartering activities are properly disclosed to 
System shareholders and the FCA Board; managing the FCA's formal 
enforcement activities and providing economic and financial analyses 
that identify risk and contribute to the effective management of such 
risks. The OPDRC also facilitates the FCA's strategic planning 
function.
* * * * *

PART 603--PRIVACY ACT REGULATIONS

    3. The authority citation for part 603 is revised to read as 
follows:

    Authority: Secs. 5.9, 5.17 of the Farm Credit Act (12 U.S.C. 
2243, 2252); 5 U.S.C. app. 3, 5 U.S.C. 552a (j)(2) and (k)(2).


Sec. 603.310  [Amended]

    4. Section 603.310 is amended by removing the words ``Congressional 
and Public Affairs'' and adding in their place the words ``General 
Counsel'' in paragraph (b).

PART 611--ORGANIZATION

    5. The authority citation for part 611 continues to read as 
follows:

    Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15, 
4.21, 5.9, 5.10, 5.17, 7.0-7.13, 8.5(e) of the Farm Credit Act (12 
U.S.C. 2011, 2021, 2071, 2091, 2121, 2142, 2183, 2203, 2209, 2243, 
2244, 2252, 2279a-2279f-1, 2279aa-5(e)); secs. 411 and 412 of Pub. 
L. 100-233, 101 Stat. 1568, 1638; secs. 409 and 414 of Pub. L. 100-
399, 102 Stat. 989, 1003, and 1004.

Subpart F--Bank Mergers, Consolidations and Charter Amendments


Sec. 611.1030  [Amended]

    6. Section 611.1030 is amended by removing the words ``Agricultural 
Credit Bank'' and adding in their place, the words ``agricultural 
credit bank'' in the heading and the first sentence.

Subpart I--Service Organizations

    7. Section 611.1135 is amended by removing paragraph (e) and 
revising paragraphs (a), (b)(1), (b)(2), (b)(3)(v), (b)(6), (b)(7), 
(c), (d)(1) introductory text, (d)(1)(iv), and (d)(2) to read as 
follows:


Sec. 611.1135  Incorporation of service organizations.

    (a) General. Any Farm Credit bank(s) or association(s) may organize 
a corporation to perform, for or on behalf of the bank(s) or 
association(s), any function or service that the bank(s) or 
association(s) is authorized to perform under the Act and the 
regulations, except extending credit and providing the sale of 
insurance services. The bank(s) or association(s) wishing to organize 
such a corporation shall submit an application to the Farm Credit 
Administration according to the application requirements of paragraph 
(b) of this section. If the proposal meets the requirements of the Act, 
the regulations, and any other conditions that the Farm Credit 
Administration may impose, the Agency may issue a charter for the 
service corporation making it a federally chartered instrumentality of 
the United States. Such service corporation shall be subject to 
examination, supervision, and regulation by the Farm Credit 
Administration. Only Farm Credit banks or associations are eligible to 
become stockholders in such a corporation. Each bank or association 
shall be eligible to become a stockholder of each service corporation 
organized under this section.
    (b) * * *
    (1) The certified resolution of the board of each organizating bank 
or

[[Page 67186]]

association authorizing the incorporation.
    (2) A request signed by the president(s) of the organizing bank(s) 
or association(s) to the Farm Credit Administration to issue a charter, 
supported by a detailed statement demonstrating the need and the 
justification for the proposed entity.
    (3) * * *
    (v) The procedures under which a bank or association may become a 
stockholder;
* * * * *
    (6) Any agreements between the organizing banks or associations 
relating to the organization or the operation of the corporation.
    (7) Any other supporting documentation as may be requested by the 
Farm Credit Administration.
    (c) Approval. The Farm Credit Administration may condition the 
issuance of a charter as it deems appropriate and for good cause may 
deny the application. Upon approval by the Farm Credit Administration 
of a completed application, which shall be kept on file at the Farm 
Credit Administration, the Agency shall issue a charter for the service 
corporation which shall thereupon become a corporate body and a Federal 
instrumentality.
    (d) * * *
    (1) The board of directors of the corporation may request that the 
Farm Credit Administration amend the articles of incorporation by 
sending with its request a certified resolution of the board of 
directors of the service corporation and stating:
* * * * *
    (iv) That the requisite shareholder approval has been obtained. The 
request shall be subject to the approval of the Farm Credit 
Administration as stated in paragraphs (a) and (c) of this section.
    (2) The Farm Credit Administration may at any time make any and all 
changes in the articles of incorporation of a service corporation that 
are necessary and appropriate for the accomplishment of the purposes of 
the Act.

Subparts J, K, L, M, N, and O  [Reserved]

    8. Subparts J, K, L, M, N, and O of part 611 are removed and 
reserved.

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


Sec. 611.1200  [Amended]

    9. Section 611.1200 is amended by adding the words ``or 
agricultural credit bank'' after the words ``Farm Credit Bank'' each 
place they appear in paragraph (c).


Sec. 611.1250  [Amended]

    10. Section 611.1250 is amended by adding the words ``or 
agricultural credit bank'' after the words ``Farm Credit Bank'' in the 
first sentence of paragraph (b) and in the first and third place they 
appear in paragraph (c); and by removing the words ``Farm Credit Bank'' 
the second place they appear and adding in their place the words 
``appropriate bank'' in the first sentence of paragraph (c).
    11. Section 611.1255 is revised to read as follows:


Sec. 611.1255  Retirement of equities owned.

    (a) The Farm Credit Bank or agricultural credit bank may retire all 
equities of the bank that are owned by the terminating association on 
the termination date or may enter into an agreement with the 
terminating association that would provide for a phased retirement of 
the equities. Any such plan for phased retirement shall provide for 
such retirement to be completed by the earlier to occur of the date on 
which the terminating association repays all indebtedness to the bank 
or the date that is 3 years from the termination date, provided that no 
retirement shall occur during that period if any such retirement would 
result in the Bank's failure to meet minimum capital requirements.
    (b) If the Farm Credit Bank or agricultural credit bank, and the 
terminating association are unable to reach agreement regarding the 
retirement of the bank's equities, either institution may send the most 
recent proposals to the Farm Credit Administration along with an 
explanation of the points of disagreement. The Farm Credit 
Administration may require the bank to retire terminating association 
equities under such conditions as the Farm Credit Administration may 
require.
    (c) No retirement shall occur if the Farm Credit Administration 
determines that the retirement of equities of the Farm Credit Bank or 
the agricultural credit bank would threaten the viability of the bank.
    (d) The amount to be paid to a terminating association in the 
retirement of equities owned in the Farm Credit Bank or the 
agricultural credit bank shall be equal to the amount of the allocated 
equities owned by the terminating association in the bank, less any 
impairment, at the date the request for retirement is made by the 
terminating association.
    (e) If the terminating association has outstanding stock issued to 
another Farm Credit institution, the association shall retire all such 
investment prior to termination.
    (f) A Farm Credit Bank's or agricultural credit bank's equities 
obligated to be retired under any agreement between the terminating 
association and the bank shall not be considered as part of the 
permanent capital of the Farm Credit Bank or agricultural credit bank 
for purposes of Sec. 615.5240.


Sec. 611.1266  [Amended]

    12. Section 611.1266 is amended by removing the words ``district 
Farm Credit Bank'' and adding in their place the words ``funding bank'' 
in the last sentence of paragraph (c).

PART 614--LOAN POLICIES AND OPERATIONS

    13. The authority citation for part 614 continues to read as 
follows:

    Authority:  42 U.S.C. 4012a, 4014a, 4104b, 4106, and 4128; secs. 
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13, 
2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 4.12A, 4.13, 
4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 4.18, 4.19, 4.36, 4.37, 
5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 7.7, 7.8, 7.12, 7.13, 8.0, 8.5 of 
the Farm Credit Act (12 U.S.C. 2011, 2013, 2014, 2015, 2017, 2018, 
2071, 2073, 2074, 2075, 2091, 2093, 2094, 2096, 2121, 2122, 2124, 
2128, 2129, 2131, 2141, 2149, 2183, 2184, 2199, 2201, 2202, 2202a, 
2202c, 2202d, 2202e, 2206, 2207, 2219a, 2219b, 2243, 2244, 2252, 
2279a, 2279a-2, 2279b, 2279b-1, 2279b-2, 2279f, 2279f-1, 2279aa, 
2279aa-5); sec. 413 of Pub. L. 100-233, 101 Stat. 1568, 1639; sec. 
207 of Pub. L. 104-105, 110 Stat. 162.

Subpart G--Interest Rates and Charges

    14. Section 614.4321 is revised to read as follows:


Sec. 614.4321  Differential interest rate programs.

    Pursuant to policies approved by the board of directors, 
differential interest rates may be established for loans based on a 
variety of factors that may include type, purpose, amount, quality, 
funding or operating costs, or similar factors or combinations of 
factors. Differential interest rate programs should achieve equitable 
rate treatment within categories of borrowers. In the adoption of 
differential interest rate programs, institutions may consider, among 
other things, the effect that such interest rate structures will have 
on the achievement of objectives relating to the special credit needs 
of young, beginning or small farmers.

[[Page 67187]]

Subpart K--Disclosure of Loan Information


Sec. 614.4440  [Amended]

    15. Section 614.4440 is amended by removing the reference to 
``paragraph (f)'' and adding in its place the reference ``paragraph 
(g)'' in paragraph (h)(1).

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

    16. Section 614.4444 is amended by revising the last two sentences 
to read as follows:


Sec. 614.4444  Records.

    * * * The file shall include minutes of each credit review 
committee meeting, and sufficient documentation of the basis for each 
determination not to restructure a loan to permit the institution or 
the FCA to review each determination.

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

    17. Section 614.4510 is amended by removing paragraphs (b) and 
(d)(4); by redesignating paragraphs (c) and (d) as paragraphs (b) and 
(c); and by revising the introductory paragraph, paragraph (a), and 
newly designated paragraph (c) introductory text to read as follows:


Sec. 614.4510  General.

    Direct lenders shall be responsible for the servicing of the loans 
that they make. However, loan participation agreements may designate 
specific loan servicing efforts to be accomplished by a participating 
institution. Each direct lender shall adopt loan servicing policies and 
procedures to assure that loans will be serviced fairly and equitably 
for the borrower while minimizing the risk for the lender. Procedures 
shall include specific plans that help preserve the quality of sound 
loans and that help correct credit deficiencies as they develop.
    (a) The Farm Credit Bank shall provide guidelines for the servicing 
of loans by the Federal land bank associations. The servicing may be 
accomplished either under the direct supervision of the bank or under 
delegated authority.
* * * * *
    (c) In the development of loan servicing policies and procedures, 
the following criteria shall be included:
* * * * *


Sec. 614.4515  [Reserved]

    18. Section 614.4515 is removed and reserved.
    19. Section 614.4516 is amended by revising the heading and adding 
the following introductory paragraph before paragraph (a) to read as 
follows:


Sec. 614.4516  Restructuring policy and procedures.

    Loan restructurings are to be accomplished with the policy adopted 
by the bank board of directors under section 4.14A(g) of the Act.
* * * * *
    20. Section 614.4517 is amended by adding paragraph (c) as follows:


Sec. 614.4517  Restructuring decision.

* * * * *
    (c) Documentation.  In the event that an application for 
restructuring is denied, a qualified lender shall maintain sufficient 
documentation to demonstrate its compliance with paragraphs (a) and (b) 
of this section, as applicable.


Sec. 614.4520  [Reserved]

    21. Section 614.4520 is removed and reserved.

Subpart O--Special Lending Programs


Sec. 614.4525  [Amended]

    22. Section 614.4525 is amended by adding the words ``and 
agricultural credit associations'' after the words ``Production credit 
associations'' in the first sentence of paragraph (c); and by removing 
the words ``Subject to the approval of the respective banks board of 
directors, Federal land banks, Federal intermediate credit banks, for 
cooperatives, and production credit associations'' and adding in their 
place the words ``Farm Credit System institutions that are direct 
lenders'' in the first sentence of paragraph (d).

PART 615--FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS, 
AND FUNDING OPERATIONS

    23. The authority citation for part 615 continues to read as 
follows:

    Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 2.2. 2.3, 2.4, 2.5, 
2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17, 
6.20, 6.26, 8.0, 8.4, 8.6, 8.7, 8.8, 8.10, 8.12 of the Farm Credit 
Act (12 U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 2074, 2075, 2076, 
2093, 2122, 2128, 2132, 2146, 2154, 2154a, 2160, 2202b, 2211, 2243, 
2252, 2278b, 2278b-6, 2279aa, 2279aa-3, 2279aa-4, 2279aa-6, 2279aa-
7, 2279aa-8, 2279aa-10, 2279aa-12); sec. 301(a) of Pub. L. 100-233, 
101 Stat. 1568, 1608; sec. 105 of Pub. L. 104-105, 110 Stat. 162, 
163-64.

Subpart D--Other Funding


Sec. 615.5120  [Amended]

    24. Section 615.5120 is amended by adding the words ``or 
agricultural credit bank'' after the words ``Farm Credit Bank'' in the 
fourth sentence of paragraph (a).
    25. Section 615.5140 is amended by revising paragraph (a)(1) to 
read as follows:


Sec. 615.5140  Eligible investments and risk diversification.

    (a) * * *
    (1) Obligations of the United States; full-recourse obligations, 
other than mortgage-backed securities, of agencies, instrumentalities 
or corporations of the United States; or debt obligations of other 
obligors that are fully insured or guaranteed as to both principal and 
interest by the United States, its agencies, instrumentalities, or 
corporations;
* * * * *

Subpart E--Investment Management


Sec. 615.5143  [Amended]

    26. Section 615.5143 is amended by adding the words ``and 
agricultural credit banks'' at the end of the heading; by adding the 
words ``or agricultural credit banks' '' after the words ``banks for 
cooperatives' '' in the first sentence; and by adding the words ``or 
agricultural credit bank'' after the words ``bank for cooperatives'' in 
the fourth and fifth sentences of the paragraph.

Subpart I--Issuance of Equities

    27. Section 615.5250 is amended by revising paragraph (e) to read 
as follows:


Sec. 615.5250  Disclosure requirements.

* * * * *
    (e) The requirements of this section shall not apply to the sale of 
Farm Credit System institution equities to other Farm Credit System 
institutions, other financing institutions, or non-Farm Credit System 
lenders.

Subpart J--Retirement of Equities

    28. Section 615.5280 is amended by revising paragraphs (a), (b), 
(c), (d) and (e) to read as follows:


Sec. 615.5280  Retirement in event of default.

    (a) When the debt of a holder of eligible borrower stock issued by 
a production credit association, Federal land association, Federal land 
credit association or agriculture credit association is in default, 
such institution may, but shall not be required to, retire at par 
eligible borrower stock owned by such borrower

[[Page 67188]]

on which the institution has a lien, in total or partial liquidation of 
the debt.
    (b) When the debt of a holder of stock, participation certificates 
or other equities issued by a production credit association, Federal 
land bank association, Federal land credit association or agricultural 
credit association is in default, such institution may, but shall not 
be required to, retire at book value not to exceed par all or part of 
such equities, other than eligible borrower stock as defined in 
Sec. 615.5260(a)(1), owned by such borrower on which the institution 
has a lien, in total or partial liquidation of the debt.
    (c) When the debt of a holder of equities or guaranty fund 
certificates issued by a bank for cooperatives or agricultural credit 
bank is in default the bank may, but shall not be required to, retire 
all or part of such equities qualify or guaranty fund investments owned 
by the borrower on which the bank has a lien, in total or partial 
liquidation of the debt. If such investments qualify as eligible 
borrower stock, it shall be retired at par, as defined in 
Sec. 615.5260(a)(3). All other investments shall be retired at a rate 
determined by the institution to reflect its present value on the date 
of retirement.
    (d) When the debt of a holder of the equities of a Farm Credit Bank 
or agricultural credit bank is in default the bank may, but shall not 
be required to, retire all or part of such equities owned by the 
borrower on which the bank has a lien, in total or partial liquidation 
of the debt. If such equities qualify as eligible borrower stock or are 
retired solely to permit a Federal land bank association to retire 
eligible borrower stock under Sec. 615.5280(a), they shall be retired 
at par. All other equities shall be retired at book value not to exceed 
par.
    (e) Any retirements made under this section by a Federal land bank 
association shall be made only upon the specific approval of, or in 
accordance with, approval procedures issued by the association's 
funding bank.
* * * * *


Sec. 615.5290  [Amended]

    29. Section 615.5290 is amended by adding the words ``or 
agricultural credit bank'' after each reference to ``Farm Credit Bank'' 
in paragraph (a).

PART 618--GENERAL PROVISIONS

    30. The authority citation for part 618 continues to read as 
follows:

    Authority: Secs. 1.5, 1.11, 1.12, 2.2, 2.4, 2.5, 2.12, 3.1, 3.7, 
4.12, 4.13A, 4.25, 4.29, 5.9, 5.10, 5.17 of the Farm Credit Act (12 
U.S.C. 2013, 2019, 2020, 2073, 2075, 2076, 2093, 2122, 2128, 2183, 
2200, 2211, 2218, 2243, 2244, 2252).

Subpart F--Miscellaneous Provisions


Sec. 618.8260  [Reserved]

    31. Section 618.8260 is removed and reserved.

Subpart G--Releasing Information


Sec. 618.8310  [Amended]

    32. Section 618.8310 is amended by adding the words ``agricultural 
credit bank'' before the words ``bank for cooperatives'' in paragraph 
(b)(1).
    33. Section 618.8320 is amended by removing paragraph (b)(9); by 
redesignating paragraphs (b)(10) and (b)(11) as new paragraphs (b)(9) 
and (b)(10) consecutively; and by revising paragraphs (b)(2) and (b)(5) 
to read as follows:


Sec. 618.8320  Data regarding borrowers and loan applicants.

* * * * *
    (b) * * *
    (2) In connection with a legitimate law enforcement inquiry, 
accredited representatives of any agency or department of the United 
States may be given access to information upon presentation of official 
identification and a written request specifying:
    (i) The particular information desired; and
    (ii) That the information is relevant to the law enforcement 
inquiry and will be used only for the purpose for which it is sought.
* * * * *
    (5) Impersonal information based solely on transaction or 
experience with a borrower, such as amounts of loans, terms and payment 
records, may be given by a bank or association to a consumer reporting 
agency, or any other reliable organization for its confidential use in 
contemplation of the extension of credit.
* * * * *


Sec. 618.8325  [Amended]

    34. Section 618.8325 is amended by removing the commas after the 
words ``offices'', ``charter'', and ``inspection'' in paragraph (c).


Sec. 618.8330  [Amended]

    35. Section 618.8330 is amended by removing paragraph (b) and 
removing the designation from paragraph (a).


Sec. 618.8340  [Reserved]

    36. Section 618.8340 is removed and reserved.

Subpart H--Disposition of Obsolete Records


Sec. 618.8360  [Reserved]

    37. Section 618.8360 is removed and reserved.


Sec. 618.8370  [Reserved]

    38. Section 618.8370 is removed and reserved.

Subpart I  [Reserved]

    39. Subpart I, consisting of Secs. 618.8380 through 618.8420, is 
removed and reserved.

PART 619--DEFINITIONS

    40. The authority citation for part 619 continues to read as 
follows:

    Authority: Secs. 1.7, 2.4, 4.9, 5.9, 5.12, 5.17, 5.18, 7.0, 7.6, 
7.7, 7.8 of the Farm Credit Act (12 U.S.C. 2015, 2075, 2160, 2243, 
2246, 2252, 2253, 2279a, 2279b, 2279b-1, 2279b-2).

    41. Section 619.9060 is revised to read as follows:


Sec. 618.9060  Bank for cooperatives.

    A bank for cooperatives is a bank that is operating under section 
3.0 of the Act.

    Dated: December 12, 1996.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 96-32309 Filed 12-19-96; 8:45 am]
BILLING CODE 6705-01-M