[Federal Register Volume 63, Number 144 (Tuesday, July 28, 1998)]
[Notices]
[Page 40282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20131]


=======================================================================
-----------------------------------------------------------------------

FARM CREDIT ADMINISTRATION

Farmer Mac Risk-Based Capital


Notice of Availability of Study and Request for Comment

SUMMARY: The Farm Credit Administration (FCA or Agency), acting through 
the Office of Secondary Market Oversight (OSMO), is required, under 
section 8.32 of the Farm Credit Act of 1971, as amended (Act), to 
establish a risk-based capital regulation for the Federal Agricultural 
Mortgage Corporation (Farmer Mac). The FCA is in the process of 
developing this regulation and will publish a proposed regulation for 
comment no sooner than February 1999.
    The credit risk portion of the prescribed risk-based capital test 
must take into account agricultural mortgage losses in an area 
containing not less than 5 percent of the U.S. population during a 2-
year historic period in which the highest rates of losses occurred.
    After an extensive search for applicable data on agricultural 
mortgage loan losses, the FCA was able to obtain useful data from the 
Farm Credit Bank of Texas. FCA contracted with the firm of Barry and 
Associates to study these data, to make extrapolations of loss data for 
other states in order to identify the geographic area meeting the 
criteria of the Act, and to determine the applicable credit risk 
component.
    The FCA is making the results of this study available for public 
comment and suggestions that could possibly lead to improved input for 
the credit risk component of the proposed regulation.

DATES: Written comments should be received on or before September 15, 
1998.

ADDRESSES: You may obtain a copy of the study by downloading from the 
FCA web page at www.fca.gov; by submitting an electronic mail request 
for a copy to [email protected]; or by contacting George D. Irwin, 
Director, Office of Secondary Market Oversight, Farm Credit 
Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090, (703) 
883-4280.
    Submit your comments via electronic mail to ``[email protected]'' or 
in hard copy to George D. Irwin, Director, Office of Secondary Market 
Oversight, Farm Credit Administration, 1501 Farm Credit Drive, McLean, 
VA 22102-5090. Copies of all comments received will be available for 
review by interested parties at the Farm Credit Administration offices 
in McLean, Virginia.

FOR FURTHER INFORMATION CONTACT: George D. Irwin, Director, Office of 
Secondary Market Oversight, Farm Credit Administration, 1501 Farm 
Credit Drive, McLean, VA 22102-5090, (703) 883-4280, TDD (703) 883-
4444.

SUPPLEMENTARY INFORMATION: Section 8.32 of the Act specifies that the 
FCA, through the Office of Secondary Market Oversight, shall establish, 
by regulation, a risk-based capital test for Farmer Mac. The statute 
further provides that:

    ``* * * the risk-based capital test shall determine the amount 
of regulatory capital for the Corporation [Farmer Mac] that is 
sufficient for the Corporation to maintain positive capital during a 
10-year period in which both of the following circumstances occur:
    (1) CREDIT RISK * * * losses on the underlying qualified loans 
occur throughout the United States at a rate of default and severity 
(based on any measurements of default reasonably related to 
prevailing industry practice in determining capital adequacy) 
reasonably related to the rate and severity that occurred in 
contiguous areas of the United States containing an aggregate of not 
less than 5 percent of the total population of the United States 
that, for a period of not less than 2 years (as established by the 
Director [of OSMO]), experienced the highest rates of default and 
severity of agricultural mortgage losses, in comparison with such 
rates of default and severity of agricultural mortgage losses in 
other such areas for any period of such duration, as determined by 
the Director.
    (2) INTEREST RATE RISK * * *''

    Section 8.32 also states that the FCA may not publish the risk-
based capital regulations for comment until after February 10, 1999.
    The FCA conducted an extensive search and found usable historic 
databases on loan performance during the severe loss period of the 
1980s in the Farm Credit Bank of Texas. It then became necessary to 
find a method to extrapolate the loan loss experience in Texas to other 
geographic areas of the U.S., which had different experience and 
different loss rates. The contractors evaluated several approaches to 
extrapolation in developing these estimates of loss experience and 
identifying the geographic areas of most severe loss.
    The FCA wishes to make this study available for public comment and 
suggestions. We welcome responses that may offer: (1) Information that 
leads to additional relevant data sources; (2) suggestions that might 
improve use of the study in developing risk-based capital regulations; 
and (3) any other ideas that might lead to an improved credit risk 
component in the risk-based capital regulation being developed for 
Farmer Mac.
    The FCA cautions commenters that this study is based on currently 
available data, which we have found to be very limited. The FCA is 
making the study available at this time solely for informational 
purposes and to seek additional input. FCA may elect to use alternative 
approaches in developing the credit risk component of the risk-based 
capital regulations.

    Dated: July 23, 1998.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 98-20131 Filed 7-27-98; 8:45 am]
BILLING CODE 6705-01-P