[Federal Register Volume 63, Number 121 (Wednesday, June 24, 1998)]
[Rules and Regulations]
[Pages 34267-34268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16809]


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FARM CREDIT ADMINISTRATION

12 CFR Part 607

RIN 3052-AB83


Assessment and Apportionment of Administrative Expenses; 
Technical Change

AGENCY: Farm Credit Administration.

ACTION: Direct final rule with opportunity for comment.

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SUMMARY: The Farm Credit Administration (FCA or Agency), through the 
FCA Board (Board), issues a direct final rule that makes technical 
amendments to its assessment regulations in order to conform to the 
recently adopted FCA Board policy statement on its financial 
institution rating system. The Financial Institution Rating System 
(FIRS) is the rating system used by FCA examiners for evaluating and 
categorizing the safety and soundness of Farm Credit System (System) 
institutions on an ongoing, uniform, and comprehensive basis. The FIRS 
modified the FCA Rating System (which had been referred to as the CAMEL 
rating system) by adding a separate rating factor for sensitivity to 
market risk. In accordance with the FIRS policy statement, these 
technical amendments replace the reference to ``composite CAMEL 
rating'' (the acronym CAMEL referred to the following five rating 
components: capital, asset quality, management, earnings, and 
liquidity), with ``composite Financial Institution Rating System (FIRS) 
rating'' and replace references to ``CAMEL'' with ``FIRS.'' The 
technical amendments do not substantively change the FCA assessment 
process or adversely affect System institutions.

DATES: If no significant adverse comment is received on or before July 
24, 1998, these regulations shall be effective upon the expiration of 
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. If significant adverse 
comment is received, the FCA will publish a timely notice of withdrawal 
of the regulations and indicate how the Agency expects to proceed with 
further rulemaking.

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

FOR FURTHER INFORMATION CONTACT:
Andrew D. Jacob, Senior Financial Analyst, Office of Policy and 
Analysis, Farm Credit Administration, McLean, Virginia 22102-5090, 
(703) 883-4498, TDD (703) 883-4444
      or

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

SUPPLEMENTARY INFORMATION:

I. Background

    The Board is making technical amendments to its assessment 
regulations to replace the reference to ``composite CAMEL rating'' with 
``composite Financial Institution Rating System (FIRS) rating'' and to 
replace references to ``CAMEL'' with ``FIRS.'' The technical amendments 
reflect the Board's adoption, at its April 9, 1998 Board meeting, of a 
policy statement on the FIRS. The policy statement establishes six 
rating factor components and a composite rating that reflect the 
condition and overall safety and soundness of a System institution. The 
FIRS policy statement differs from the previous CAMEL rating system by 
the addition of a sixth rating component--the ``S'' component for 
sensitivity to market risk. Hence, the six rating factor components of 
the FIRS are capital, assets, management, earnings, liquidity, and 
sensitivity (``S'' component). The policy statement also sets forth the 
responsibility of the Chief Examiner to implement, maintain, and 
recommend to the FCA Board changes to the rating system and to 
establish appropriate evaluative criteria for determining FIRS 
composite and component ratings.
    The FIRS is an internal rating system used by the FCA for 
evaluating the safety and soundness of System institutions on a uniform 
basis and for identifying those System institutions requiring special 
supervisory attention or concern. In addition, the FIRS also provides 
the Agency with valuable information for assessing risk and allocating 
resources based on the safety and soundness of regulated institutions. 
The FIRS is similar to the system known as the Uniform Financial 
Institutions Rating System (UFIRS), which is used by Federal and state 
supervisory

[[Page 34268]]

banking agencies for rating commerical banks and savings associations.
    The FIRS policy statement was published in the Federal Register at 
63 FR 19918, April 22, 1998. In addition, the evaluative criteria for 
determining FIRS composite and component ratings is set forth in the 
FCA Examination Manual at section EM 135. The examination manual is a 
public document and available for a fee upon request from the FCA or 
through the FCA's Internet Home Page (http://www.fca.gov).

II. Direct Final Rulemaking

    The FCA is using a ``direct final'' procedure for this rulemaking. 
In a direct final rulemaking, an agency gives notice that a rule will 
become final at a specified future date unless the agency receives 
significant adverse comment on the rule during the comment period 
established in the rulemaking notice. Direct final rulemaking is 
justified under section 553(b)(B) of the Administrative Procedure Act, 
5 U.S.C. 551-59, et seq. (APA). Section 553(b)(B) is the APA's ``good 
cause'' exemption for omitting notice and comment on a rule where an 
agency finds ``that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' 
However, rather than eliminating public comment altogether, as would be 
permissible under section 553(b)(B), in a direct final rule, the FCA 
gives the public adequate opportunity to comment on or object to a 
rule. For a full explanation of direct final rulemaking, see 62 FR 
63644 (December 3, 1997).
    The FCA believes that the technical amendments to the assessment 
regulations fit the category of rules appropriate for direct final 
rulemaking. These changes merely conform the regulations to the FCA 
Board's policy statement on FIRS. The changes amend current regulatory 
references to ``composite CAMEL rating'' with an updated reference to 
``composite FIRS rating.'' As such, the changes are straightforward and 
noncontroversial.
    This rule has a 30-day comment period. If, during that period, the 
FCA receives a significant adverse comment on the rule, the FCA will 
withdraw the rule and may either issue another direct final rule or 
promulgate the rule in proposed form. A significant adverse comment is 
defined as one where the commenter explains why the rule would be 
inappropriate, including challenges to the rule's underlying premise or 
approach, or would be ineffective or unacceptable without a change. In 
general, a significant adverse comment would raise an issue serious 
enough to warrant a substantive response from the FCA in a notice-and-
comment proceeding.
    If no significant adverse comment is received, the FCA will publish 
its customary notice of the effective date of the rule following the 
required Congressional waiting period under section 5.17(c)(1) of the 
Farm Credit Act of 1971, as amended.

List of Subjects in 12 CFR Part 607

    Accounting, Agriculture, Banks, Banking, Reporting and 
recordkeeping requirements, Rural areas.

    As stated in the preamble, part 607 of chapter VI, title 12 of the 
Code of Federal Regulations is amended as follows:

PART 607--ASSESSMENT AND APPORTIONMENT OF ADMINISTRATIVE EXPENSES

    1. The authority citation for part 607 is revised to read as 
follows:

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

    2. Section 607.2 is amended by revising paragraph (c) to read as 
follows:


Sec. 607.2  Definitions.

* * * * *
    (c) Composite Financial Institution Rating System (FIRS) rating 
means the composite numerical assessment of the financial condition of 
an institution assigned to the institution by the FCA based on its most 
recent examination of the institution. The FIRS factors are generally 
considered to be important indicators of an institution's financial 
health. Institutions are rated on each of the factors during an 
examination. The composite FIRS rating ranges from 1 to 5, with a lower 
number indicating a better financial condition than a higher number.
* * * * *


Sec. 607.3  [Amended]

    3. Section 607.3 is amended by removing the acronym ``CAMEL'' and 
adding in its place ``FIRS'' each place it appears in paragraph (b)(2).

    Dated: June 19, 1998.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 98-16809 Filed 6-23-98; 8:45 am]
BILLING CODE 6705-01-P