[Federal Register Volume 63, Number 23 (Wednesday, February 4, 1998)]
[Rules and Regulations]
[Pages 5721-5725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2726]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
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to and codified in the Code of Federal Regulations, which is published
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The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 63, No. 23 / Wednesday, February 4, 1998 /
Rules and Regulations
[[Page 5721]]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 614 and 627
RIN 3052-AB09
Loan Policies and Operations; Title IV Conservators, Receivers,
and Voluntary Liquidation
AGENCY: Farm Credit Administration.
ACTION: Final rule.
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SUMMARY: The Farm Credit Administration (FCA), through the Farm Credit
Administration Board (Board), issues a final rule amending its
regulation that governs the funding relationship between a Farm Credit
Bank (FCB) or agricultural credit bank (ACB) and a direct lender
association or other financing institution (OFI). This rule repeals the
requirement that the FCA prior approve the General Financing Agreement
(GFA) between an FCB or ACB and a direct lender association or OFI and
eliminates a regulatory direct loan limitation. The rule also amends
another regulation to permit the voluntary liquidation of Farm Credit
institutions by means of an FCA-approved liquidation plan.
EFFECTIVE DATE: This regulation shall become effective 30 days after
publication in the Federal Register during which either or both houses
of Congress are in session. Notice of the effective date will be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
S. Robert Coleman, Senior Policy Analyst, Regulation and Policy
Division, Office of Policy and Analysis, Farm Credit Administration,
McLean, VA 22102-5090, 703) 883-4498,
or
James M. Morris, Senior Counsel, Legal Counsel Division, Office of
General Counsel, Farm Credit Administration, McLean, VA 22102-5090,
(703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: On March 24, 1997, the FCA proposed
amendments to the regulation in subpart C of part 614 that governs the
funding relationship between FCBs or ACBs and direct lender \1\
associations or OFIs. The FCA also proposed amendments to the
regulation contained in part 627 that governs liquidations. These
amendments would authorize the voluntary liquidation of Farm Credit
System (FCS or System) institutions by means of an FCA-approved
liquidation plan. See 62 FR 13842. The amendments were proposed as part
of the FCA's continuing effort to streamline its regulations, provide
flexibility to address issues that pertain to funding relationships,
and outline minimum regulatory criteria for GFAs.
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\1\ As defined in Sec. 619.9135 of this chapter.
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The FCA received 9 comment letters in response to this proposal,
including a comment letter from the Farm Credit Council (FCC or
Council) on behalf of its members,\2\ 5 responses from FCBs, 1 response
from an ACB, and 2 responses from FCS direct lender associations (an
agricultural credit association (ACA) and a jointly managed production
credit association (PCA) and Federal land credit association (FLCA)).
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\2\ The national trade association serving the Farm Credit
System, including FCBs, ACBs, direct lender associations, and
Federal land bank associations.
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In general, all the comments expressed support for the proposed
regulation and its goal to streamline the regulations and provide
flexibility. One FCB commended the FCA for properly relying on its
ongoing examination process and enforcement powers to ensure that GFAs
preserve the interests of the parties and do not pose excessive safety
and soundness risks to the parties involved. Another FCB indicated that
it supports the proposed regulation and, in particular, the elimination
of the requirement for prior FCA approval, as a significant step toward
the streamlining and modernization of the debtor/creditor relationship
between the FCS banks and the direct lender associations.
The FCA responds to specific concerns below as it explains aspects
of the rule commented upon. After considering the comments received in
response to the proposed regulation, the FCA adopts a final rule
governing GFAs and permitting voluntary liquidation of Farm Credit
institutions under FCA-approved liquidation plans.
I. Maximum Term of the General Financing Agreement
The FCA received a comment from the FCC concerning the proposed 3-
year limitation on the term of GFAs. The FCC argued that the final rule
should leave the term of the GFA to the discretion of the parties
involved. The FCC believes that the length or term of the GFA should be
negotiable, like other terms and conditions of the GFA. Further, the
commenter stated that many types of commercial agreements include
``evergreen'' provisions automatically renewing the agreement for an
additional term unless, within a prescribed period of time related to
the stated renewal date, either party gives written notice to the other
of an intent to terminate or renegotiate the arrangement. The commenter
noted that some existing GFAs have terms in excess of 3 years. The FCC
sees no compelling reason for the FCA to restrict by regulation the
parties' latitude to negotiate this aspect of the GFA. As additional
support for its position, the FCC stated that the credit policies and
underwriting standards of many funding banks typically require a
periodic review of their direct lender association's lending
relationship, which includes a review of the GFA itself.
The FCA believes that it is appropriate for each FCS bank's credit
policies and underwriting standards to require a periodic review of
each direct lender's and OFI's lending relationship. These reviews
enable the funding banks to determine if the existing terms and
conditions of the GFA continue to appropriately address relevant risks
in the lending relationship. Because it is this review, rather than a
re-execution of the GFA, that is fundamental to prudent lending, the
FCA has modified proposed Sec. 614.4120 to require that FCBs and ACBs
adopt policies requiring a review of the terms of each GFA at least
every 5 years. The final regulation permits GFAs to renew automatically
for an additional term if neither the bank, after reviewing the terms,
nor the direct lender association (or OFI) offers objection. The FCA
believes this approach satisfies its concerns while
[[Page 5722]]
allowing the parties to GFAs to operate more efficiently.
The FCA also increases the maximum term for most GFAs from 3 years,
as proposed, to 5 years. This limit will accommodate the maximum term
on all existing GFAs. The FCA believes that its safety and soundness
concerns can be addressed if the FCS banks review GFA terms and seek
modifications as appropriate at least every 5 years. In addition, the
direct lender association should be provided a reasonable opportunity
to periodically request new terms and conditions in its borrowing
arrangement with the funding bank. Accordingly, final Sec. 614.4120
adopts a maximum term of 5 years for any GFA used for secured lending.
The FCA continues to believe that the maximum term for any GFA that
provides for unsecured lending to direct lender associations should not
exceed 1 year because of the additional risks inherent in unsecured
lending.
II. Unsecured Lending
In the preamble to the proposed regulation, the FCA specifically
requested comments as to whether there is a need for special
limitations or restrictions on unsecured lending in addition to the 1-
year limit on the term of any GFA that provides for unsecured lending.
The FCC submitted a comment letter on behalf of its membership, in
which it stated it would be inappropriate for FCA to define further the
circumstances under which unsecured lending may be appropriate or to
impose any additional limitations or restrictions on unsecured lending.
The FCA received no comments indicating a need for additional
limitations or restrictions on unsecured lending activity. Accordingly,
in adopting the final rule, the FCA has not changed any provisions of
the proposed rule related to unsecured lending.
III. Providing the FCA Copies of the General Financing Agreement and
Related Documents
The FCC commented on the proposed requirement in Secs. 614.4125(b)
and 614.4130(b) that a funding bank deliver to the FCA's Chief
Examiner, or designee, a copy of each GFA and all related documents
within 10 business days after their execution. The FCC suggested,
To the extent the substantive terms and conditions of two or
more GFAs in a particular district are identical, the Council's
membership believe it would be more efficient, and less burdensome,
for the funding bank to provide FCA one copy of the GFA, together
with the names of all direct lender associations or OFIs, as the
case may be, that have executed identical agreements.
The FCA agrees that submitting duplicate copies of identical GFAs
may not be necessary. Although FCA has not changed the final
regulation's general requirement to submit copies of GFAs to the Chief
Examiner, FCS banks that execute identical GFAs should contact the FCA
field offices that examine the FCS institutions involved to arrange an
efficient means of satisfying this requirement.
IV. Maximum Credit Limit Calculation
Proposed Sec. 614.4125(d) would require that each GFA establish a
maximum credit limit consistent with the FCS bank's lending policies
and underwriting standards and the creditworthiness of the direct
lender association. The proposed regulation would also establish a
ceiling for any maximum credit limit that was equal to the value of the
``direct lender association's assets available'' to the FCS bank to
support outstanding obligations under section 4.3(c) of the Farm Credit
Act of 1971, as amended (Act). The FCA received comments from 6 FCS
banks and 1 jointly managed PCA/FLCA on this issue.
Upon further consideration of this issue, the FCA has concluded
that, in establishing the maximum credit limit in each GFA, each FCS
bank should be guided by the underwriting standards that FCA
regulations require it to develop. The FCA believes that the proposed
regulatory ceiling is unnecessary and potentially misleading for the
reasons outlined below. Accordingly, the last sentence in each of
proposed Secs. 614.4125(d) and 614.4130(c) has been deleted in the
final regulation.
The comments received generally supported the flexibility offered
by replacing the existing direct loan formula with a requirement that
the FCS bank establish credit limits in accordance with its lending
policies and underwriting standards. The comments differed, however, as
to the components appropriately included in calculating the proposed
regulatory ceiling. Most commenters believed that the calculation
should give a direct lender association at least some credit for its
investment in the FCS bank, but one bank suggested that the amount of a
direct lender association's investment should not be included in the
calculation.
The comments helped the FCA recognize the potentially misleading
effect of establishing a regulatory ceiling on maximum credit limits
that is solely tied to an asset-based calculation. As proposed, the
ceiling would have been a theoretical, not a practical, limit. The FCA
believes that if FCS banks develop, and apply to their relationship
with direct lender associations, sound lending policies and
underwriting standards, as required by the regulation, the banks will
establish maximum credit limits that are below the proposed regulatory
ceiling. The FCA expects the banks' lending policies and underwriting
standards to produce an appropriate credit limit tailored to each
direct lender association's circumstances. As required in
Sec. 614.4120, and further explained in the preamble to the proposed
rule, each FCS bank must evaluate the creditworthiness of a direct
lender association on the basis of lending policies and loan
underwriting standards set forth in Sec. 614.4150. The loan
underwriting standards will require the bank to go beyond any simple
asset-based calculation to consider risk factors such as the direct
lender association's capital adequacy and adherence to all regulatory
capital requirements, repayment ability, asset quality, liquidity,
quality of collateral offered, business plan objectives, and quality of
board and management. This credit evaluation will determine an
appropriate upper limit on funding for each direct lender association.
Each FCS bank must also have adequate internal controls in place to
manage the debtor/creditor relationship, including appropriate
disbursement and monitoring controls to ensure on-going compliance with
the funding agreement. Including in the regulation a ceiling based
simply on the direct lender association's available collateral may
suggest, incorrectly, that such an asset-based limit could be a safe
and sound maximum credit limit for most or all associations. Consistent
with the FCA's emphasis on loan underwriting standards as the key to
prudent lending, the final regulation eliminates the asset-based
ceiling for credit extensions to associations and OFIs.
V. Notice of Material Defaults--Monetary Penalties
The FCC submitted a comment concerning notification to the FCA and
the Farm Credit System Insurance Corporation (FCSIC) in case of
``material defaults'' under the GFA. Proposed Sec. 614.4125(e) would
require that any funding bank that provides notice to a direct lender
association that it is in material default of any covenant, term, or
condition of the GFA, promissory note, security agreement, or other
related documents simultaneously provide written notification to the
FCA
[[Page 5723]]
and the FCSIC. Proposed Sec. 614.4125(f) would impose a similar
requirement on a direct lender association that receives such notice
from an FCB, ACB or non-FCS institution. The FCC suggested that the FCA
remove the references to the FCSIC in proposed Sec. 614.4125 (e) and
(f). The FCA has not adopted this suggestion because it believes there
is a benefit in a direct notice to the FCSIC.
Finally, the FCA wishes to clarify the discussion contained in the
preamble to the proposed regulation regarding the ``material default''
notice. The discussion indicated that the ``material default'' notice
requirement ``include[s], but is not limited to, notice from the FCB or
ACB about the imposition of any monetary penalties on the direct lender
association, including penalty interest, additional fees, or other
service charges imposed based on a default by the direct lender
association.'' See 62 FR 13844, Mar. 24, 1997. Two FCBs, an ACA, and a
jointly managed PCA/FLCA requested that the FCA clarify that the term
``penalty interest'' would not include changes in pricing under normal
differential pricing and price incentive structures. The commenters
noted that some GFAs provide different interest rates at different
levels of financial performance as an incentive to improve overall
credit quality and financial condition. The commenters expressed a
concern that imposition of notice requirements might encourage
elimination of these incentive programs. Accordingly, the FCA clarifies
that final Sec. 614.4125 does not require institutions to notify the
FCA when changing interest rates in accordance with normal differential
pricing and price incentive structures. Specifically, if monetary
penalties are imposed based on a default by the direct lender
association, notice to the FCA is required. If no default in the GFA
occurs, notice to the FCA is not required.
VI. Additional Regulatory Protections
The FCA received comments from the FCC and an ACA responding to the
FCA's request for comments as to whether specific regulations are
needed to protect the interests of FCS institutions negotiating the
terms and conditions of the GFAs. The FCC indicated that its membership
believes that ``a sufficiently level playing field between funding
banks and their direct lender association-stockholders currently
exists.'' In addition, the FCC, on behalf of its members, stated that
the ``promulgation of additional regulations specifically designed to
`protect' the interest of either party in the negotiation process is
wholly unnecessary and would be inappropriate, in our judgment, for an
arm's-length regulator.'' The FCC comments provided in response to the
proposed GFA regulation were developed by the FCC's membership as a
result of a process that included two Systemwide conference calls. The
FCC indicates that prior to being finalized, draft comments were
circulated throughout the FCS for review, and a third Systemwide
conference call was then held to discuss and finalize the comments
provided. The result was a consensus that a sufficiently level playing
field between funding banks and their direct lender association-
stockholders currently exists.
Only the ACA took exception to the FCC's comment. The commenter
stated that direct lender associations are at a competitive
disadvantage when negotiating the GFA and that voting strength alone
does not level that playing field, particularly for associations who
are minority shareholders in their bank. The commenter noted that FCS
associations cannot obtain financing from a source other than their
funding bank without the bank's consent. This dependence places
associations at a disadvantage in negotiating the terms of a GFA. The
commenter did not recommend specific rules that would address the
perceived imbalance in bargaining power but did suggest that the GFA
regulation should provide the associations ``meaningful remedies'' in
the event that an FCS bank fails to perform under the GFA. In addition,
the commenter suggested that the FCA should devise a mechanism for
consistently measuring the effective wholesale cost of funding that
each FCS bank offers to affiliated associations and make that
information available on a Systemwide basis. Finally, the commenter
suggested that FCS banks should be required to establish a specific
policy on approving outside sources of funding for affiliated
associations.
After considering the comments received, the FCA does not believe
that it has been demonstrated that there is a disparity of negotiating
power between FCS banks and direct lender associations that requires a
regulatory solution.\3\ Further, the FCA believes that the remedies
suggested by the ACA commenter go beyond the scope of this regulation.
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\3\ While the FCA agrees with the comment that based on current
information a regulatory solution is unnecessary, the FCA does not
agree that it would be ``inappropriate'' for an arm's-length
regulator to provide a regulatory solution to protect the interest
of either party in the negotiation process, if necessary.
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The FCA adopts conforming changes to the regulations at
Secs. 614.4000(b) and 614.4010(b) to include the reference to the
appropriate sections of the final GFA regulation and references the
definition of an OFI contained in the final regulation at
Sec. 614.4130(a).
List of Subjects
12 CFR Part 614
Agriculture, Banks, Banking, Flood insurance, Foreign trade,
Reporting and recordkeeping requirements, Rural areas.
12 CFR Part 627
Agriculture, Banks, Banking, Claims, Rural areas.
For the reasons stated in the preamble, parts 614 and 627 of
chapter VI, title 12 of the Code of Federal Regulations are amended to
read as follows:
PART 614--LOAN POLICIES AND OPERATIONS
1. The authority citation for part 614 continues to read as
follows:
Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128; secs.
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 1.11, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12,
2.13, 2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 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, 2096, 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, 2279b-1, 2279b-2, 2279f, 2279f-1, 2279aa,
2279aa-5); sec. 413 of Pub. L. 100-233, 101 Stat. 1568, 1639.
Subpart A--Lending Authorities
Sec. 614.4000 [Amended]
2. Section 614.4000 is amended by removing the reference
``Sec. 614.4130(b)'' and adding in its place, the reference
``Sec. 614.4125'' in the last sentence of paragraph (b).
Sec. 614.4010 [Amended]
3. Section 614.4010 is amended by removing the reference
``Sec. 614.4130(b)'' and adding in its place, the reference
``Sec. 614.4125'' in the last sentence of paragraph (b).
Subpart C--Bank/Association Lending Relationship
4. Section 614.4120 is revised to read as follows:
[[Page 5724]]
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.
5. Section 614.4125 is added to read as follows:
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 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.
6. Section 614.4130 is revised to read as follows:
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.
7. The heading for part 627 is revised to read as follows:
PART 627--TITLE IV CONSERVATORS, RECEIVERS, AND VOLUNTARY
LIQUIDATIONS
8. The authority citation for part 627 is revised to read as
follows:
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).
9. Section 627.2700 is revised to read as follows:
Subpart A--General
Sec. 627.2700 General--applicability.
The provisions of this part shall apply to conservatorships,
receiverships, and voluntary liquidations.
Subpart B--Receivers and Receiverships
10. Section 627.2720 is amended by removing paragraph (a);
redesignating paragraphs (b), (c), (d), (e), and (f) as new paragraphs
(a), (b), (c), (d), and (e); and revising newly designated paragraph
(b) to read as follows:
Sec. 627.2720 Appointment of receiver.
* * * * *
(b) The receiver appointed for a Farm Credit institution shall be
the Insurance Corporation.
* * * * *
11. Section 627.2730 is amended by removing paragraph (b);
redesignating paragraph (c) as new paragraph (b); and
[[Page 5725]]
revising newly designated paragraph (b) to read as follows:
Sec. 627.2730 Preservation of equity.
* * * * *
(b) Notwithstanding paragraph (a) of this section, eligible
borrower stock shall be retired in accordance with section 4.9A of the
Act.
* * * * *
12. Part 627 is amended by adding a new subpart D to read as
follows:
Subpart D--Voluntary Liquidation
Sec. 627.2795 Voluntary liquidation.
Sec. 627.2797 Preservation of equity.
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 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.
Dated: January 27, 1998.
Floyd Fithian,
Secretary,
Farm Credit Administration Board.
[FR Doc. 98-2726 Filed 2-3-98; 8:45 am]
BILLING CODE 6705-01-P]