[Federal Register Volume 66, Number 161 (Monday, August 20, 2001)]
[Proposed Rules]
[Pages 43536-43549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-20907]


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FARM CREDIT ADMINISTRATION

12 CFR Parts 611 and 614

RIN 3052-AB86


Organization; Loan Policies and Operations; Termination of Farm 
Credit Status

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

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SUMMARY: This current proposal would amend our regulations to allow a 
Farm Credit System (FCS, Farm Credit or System) institution to 
terminate its FCS charter and become a financial institution under 
another Federal or State chartering authority. Our purpose is to amend 
the existing regulations so they apply to all System banks and 
associations and to make other changes. In our current proposal, we 
generally value equity held by dissenters (i.e., dissenting 
stockholders and System institutions that choose not to hold equity in 
the successor institution) after the exit fee is deducted from a 
terminating institution's capital and assets.

DATES: Please send your comments to us by October 19, 2001.

ADDRESSES: You may send comments by electronic mail to ``[email protected]'' or through the Pending Regulations section of our Web 
site at ``www.fca.gov.'' You may also send comments to Thomas G. 
McKenzie, Director, Regulation and Policy Division, Office of Policy 
and Analysis,

[[Page 43537]]

Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 
22102-5090 or by fax to (703) 734-5784. You may review copies of all 
comments we receive in the Office of Policy and Analysis, FCA.

FOR FURTHER INFORMATION CONTACT:
Alan Markowitz, Senior Policy Analyst, Office of Policy and Analysis, 
Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4479;
        or
Rebecca S. Orlich, Senior Attorney, Office of General Counsel, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 
883-4444.

SUPPLEMENTARY INFORMATION:

I. Objectives

    The objectives of our current proposal are to:
     Provide a termination procedure for Farm Credit 
associations and banks under section 7.10 of the Farm Credit Act of 
1971, as amended (1971 Act);
     Ensure that remaining FCS institutions can continue 
fulfilling their congressional mandate of serving the credit needs of 
farmers, ranchers, and cooperatives;
     Ensure that remaining FCS institutions are able to operate 
safely and soundly;
     Ensure that all equity holders of a terminating 
institution are treated fairly and equitably; and
     Ensure that stockholder disclosure materials are 
informative and easy to understand.

II. Introduction

    We proposed amendments to our existing termination rule on November 
5, 1999. See 64 FR 60370 for a full discussion of the 1999 proposal. We 
also published a sample exit fee calculation for a hypothetical FCS 
bank and association choosing to terminate their Farm Credit status 
under the 1999 proposal. (See 65 FR 5286, Feb. 3, 2000.)
    After further deliberations, including discussions with the Farm 
Credit System Insurance Corporation (FCSIC), we believe the 1999 
proposal needs revision, primarily to the method for calculating 
dissenters' equity. For purposes of this preamble discussion, we will 
use the term ``dissenters'' to refer generally to equity holders of a 
terminating institution that choose not to receive equity in the 
successor institution. Dissenters include System institutions, as well 
as ``dissenting stockholders,'' who are defined in the regulation as 
equity holders other than System institutions that choose not to hold 
stock in the successor institution. ``Dissenting stockholders'' are 
primarily retail borrowers of the associations and CoBank.
    The 1999 proposal required a terminating institution to retire the 
equities of dissenters, in cash or in exchange for other debt or equity 
in the successor institution (if the dissenter agreed), before the exit 
fee was calculated. We noted in the preamble to the 1999 proposal that 
such a calculation would enable dissenters to receive approximately the 
same payment for their equities that they would receive if the 
institution were liquidated.
    On reconsideration, we have decided to calculate the value of 
dissenters' equities after payment of the exit fee. Congress required 
System institutions to make a payment to the Farm Credit Insurance Fund 
(Insurance Fund) as a prerequisite to the exercise of the authority to 
terminate Farm Credit status. Section 7.10(a)(4) of the statute 
provides for the terminating institution to pay ``the amount by which 
total capital exceeds 6 percent of assets.'' The 1971 Act also provides 
that the terminating institution must meet ``such other conditions as 
the Farm Credit Administration Board by regulation considers 
appropriate'' (section 7.10(a)(7)).
    Calculating and deducting the exit fee before other payments 
maximizes the payment to the Insurance Fund. It also means that 
stockholders of a terminating institution will receive approximately 
the same proportionate value for their equities, whether they dissent 
or choose to be stockholders of the successor institution. Dissenters 
will not receive a ``windfall'' at the expense of the continuing 
stockholders, and vice versa. We believe the consequence is that 
stockholders will base their decision to support or dissent from 
termination on other aspects of the proposal, such as whether giving up 
Farm Credit status will benefit borrowers.
    Our current proposal, described in more detail below, treats 
dissenters' equity similarly to the existing regulation. In the 
existing regulation, the calculation and deduction of the exit fee 
occurs before dissenters' equity is valued. System institutions' 
investments are retired for cash, and dissenting stockholders receive a 
combination of cash and subordinated debt in the successor institution. 
In the current proposal, we would continue to require the terminating 
institution to retire other System institutions' investments for cash. 
For dissenting stockholders' equity, we expressly mandate cash payments 
only on purchased equities to enable the terminating institution to 
retain a larger amount of capital and capital-like instruments. The 
terminating institution has the choice of paying cash or issuing 
subordinated debt, or doing both, for a dissenting stockholder's 
remaining equity. We note that when dissenting stockholders receive 
subordinated debt rather than cash, the repayment of that debt will 
depend on the continued financial health of the successor institution.
    Our 1999 proposal would have required the terminating institution 
to escrow all funds that would be paid to dissenting stockholders. In 
our current proposal, we have retained the escrow requirement, but only 
the cash portion of the payment to dissenting stockholders must be 
escrowed.
    We propose to calculate the equity of dissenters as follows:
     First, the terminating institution's exit fee would be 
calculated as the capital in excess of 6 percent of (adjusted) assets. 
The exit fee would then be deducted from the institution's capital and 
assets.
     Second, the value of stockholders' equity would be 
computed.
    Dissenting stockholders would receive cash payment equal to par or 
face value (less any impairment) for equities they purchased from the 
institution. For equity other than purchased equities--such as 
allocated equities, stock distributions, and a pro-rata share of 
unallocated surplus--dissenting stockholders would receive, at the 
option of the terminating institution, cash or subordinated debt with a 
term of up to 7 years, at a rate of interest tied to U.S. Treasury 
debt. System institutions that dissent would receive cash for their 
equity (both purchased equities and other forms of equity).
    We propose a different method of calculating dissenters' equity in 
the case of a non-terminating association. A non-terminating 
association is one that chooses to reaffiliate with another System bank 
when its funding bank decides to terminate. If the reaffiliating 
association transfers all its equity, including its pro-rata share of 
unallocated surplus, to its newly affiliated FCS bank, all such equity 
will be valued and deducted from the terminating bank's assets and 
capital before the bank's exit fee is calculated. However, if the 
reaffiliating association decides not to transfer some of its capital 
to its new bank, such equity will be valued after the exit fee is 
deducted from the terminating bank's assets and capital.
    Although allowing non-terminating associations to transfer equity 
to another System bank before the exit fee

[[Page 43538]]

calculation will reduce the payment to the Insurance Fund, we believe 
such a treatment effectively protects System banks and Systemwide 
bondholders. Capital transferred to another System bank will serve two 
purposes. First, the transferred capital contributes to the financial 
strength of both the bank and the non-terminating association, thus 
making a claim by that bank and association against the Insurance Fund 
less likely. Second, because System banks are jointly and severally 
liable on Systemwide obligations in the event the Insurance Fund is 
ever exhausted, capital at the reaffiliated association's bank remains 
available to repay the obligations.
    Our current proposal would make the following additional changes to 
the existing rule:
     The current proposal applies to all FCS banks and 
associations;
     An institution's exit fee is calculated on the date of 
termination;
     Terminating institutions must escrow 110 percent of both 
the estimated exit fee and cash stock retirements to dissenters pending 
a final audit;
     A terminating association may repay its direct loan on a 
schedule agreed to by its bank;
     If a bank and a terminating association are unable to 
agree on when and how the bank will retire the association's investment 
in the bank, the bank must retire the investment on or before the date 
the association's direct loan is repaid;
     System institutions may exchange their investments in a 
terminating institution for equity in the successor, to the extent 
permitted by law; and
     A terminating bank's payment to the Farm Credit System 
Financial Assistance Corporation (FAC) is based on its retail loan 
volume, the loan volume of associations terminating with the bank, and 
the loan volume of associations maintaining their direct loan with the 
bank after termination.
    We received comments on our 1999 proposal from the Farm Credit 
Council (Council) on behalf of its member banks and associations and 
from an employee of the AgFirst Farm Credit Bank. The bank employee 
commented generally that an institution would be more likely to 
liquidate than to terminate under the 1999 proposal. We also met with 
representatives from the Treasury Department's Office of Government-
Sponsored Enterprise Policy. Treasury's and the Council's comments and 
our responses are described below in our section-by-section analysis.

III. Section-by-Section Analysis

Section 611.1205--Definitions That Apply in Subpart P

    We revise our previously proposed definition of ``assets'' by 
removing the phrase ``(less appropriate valuation adjustments).'' We 
agree with the Council's comment that the phrase is unnecessary because 
the definition states that assets must be in conformity with generally 
accepted accounting principles (GAAP).
    The Council asked us to clarify our definition of ``successor 
institution'' to indicate whether an ``other financial institution'' 
referred to in section 7.10(a)(3) of the 1971 Act can include ``finance 
companies that are unregulated financial institutions.'' We understand 
that an ``unregulated'' finance company is a financial institution that 
is not supervised or examined by a Federal or State banking agency. We 
believe that the 1971 Act allows a terminating institution to become a 
financial institution that is not supervised and examined by a Federal 
or State banking agency.

Section 611.1210--Commencement Resolution and Advance Notice

    At the Council's request, we propose revising Sec. 611.1210(b)(1) 
to add the FAC to the entities that receive a certified copy of a 
bank's resolution commencing termination. Accordingly, our current 
proposal requires a certified copy of the commencement resolution to be 
sent to the FCA, FCSIC, FAC, and the Federal Farm Credit Banks Funding 
Corporation (Funding Corporation), as well as certain other Farm Credit 
institutions.
    We clarify that under the first sentence of proposed 
Sec. 611.1210(e), a terminating bank can continue to issue consolidated 
and Systemwide debt through the close of business on the termination 
date. The Council requested that we clarify whether a terminating bank 
can issue consolidated and Systemwide debt on the termination date.

Section 611.1230--FCA Review and Approval

    Section 611.1230(b) provides that we may disapprove a termination 
if we determine that it would have a material adverse impact on the 
ability of the remaining System institutions to fulfill their statutory 
purpose. The Council stated that, in their view, such a determination 
would not be fair to an institution seeking to terminate. While we 
understand the Council's concerns, we believe Congress intended FCA to 
have flexibility to condition a termination on the ability of the 
System to continue to fulfill its congressional mandate of serving the 
credit needs of farmers, ranchers, and their cooperatives. (See section 
7.10(a)(7) of the 1971 Act.) Therefore, Sec. 611.1230(b) remains 
unchanged from our 1999 proposal.
    We revise Sec. 611.1230(c)(3) of our 1999 proposal by adding the 
phrase ``including contingent liabilities'' after ``payments of 
debts.'' The Council requested that we insert a phrase to clarify that 
a terminating institution's obligation to satisfy contingencies does 
not end at termination.

Section 611.1245--Stockholder Reconsideration

    The Council suggested that we specify in Sec. 611.1245(a) how much 
time we will take to review a stockholder petition for a 
reconsideration vote to determine if the petition complies with section 
7.9 of the 1971 Act. The 1971 Act requires a reconsideration vote to 
occur within 60 days of the notice to stockholders informing them of 
the results of a favorable vote to terminate. In the first 35 days of 
the 60-day period, stockholders have the right to petition us to 
require the institution to hold another vote on the termination. The 
Council raised a concern that there will be too little time for 
stockholders to hold a reconsideration vote if we take more than a few 
days to review the petition.
    We are mindful that the 1971 Act gives an institution limited time 
to hold a reconsideration vote. While we understand the Council's 
concern whether there will be enough time for scheduling and holding a 
vote to reconsider the termination, we do not believe it is necessary 
to set specific timeframes for us to act. We anticipate that we will 
expedite our review of any petition we receive so that the 
reconsideration vote can be held within the 60 days specified by 
Congress.

Section 611.1250--Preliminary Exit Fee Estimate

    We rearrange provisions of previously proposed Sec. 611.1250(a) to 
clarify that the average daily balance is based on the 12-month period 
as of the quarterend before submission of the termination application. 
Section 611.1250(a)(3) is moved to Sec. 611.1250(a)(1), and part of 
that provision is redesignated as Sec. 611.1250(a)(2). Previously 
proposed Sec. 611.1250(a)(2) is redesignated as Sec. 611.1250(a)(3). We 
have made these same changes to the preliminary exit fee estimate and 
final exit fee calculations in Secs. 611.1250(b), 611.1255(a), and 
611.1255(b). We also revise redesignated Sec. 611.1250(a)(3) to clarify 
that the audit

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requirements for the financial statements apply to the account balances 
as of a specific date. The Council questioned whether our 1999 proposal 
required an audit of the average daily balances that are used to 
calculate the preliminary exit fee estimate. We intend the audited 
financial statements to be dollar amount balances, not average daily 
balances.
    We revise previously proposed Sec. 611.1250(a)(4)(ii)(A) to include 
a reference to Sec. 611.1260(d). The Council requested that we add this 
reference because Sec. 611.1260(d) describes our requirements for 
satisfying an association's FAC obligations to its affiliated bank when 
it terminates.
    The Council asked us to confirm that previously proposed 
Sec. 611.1250(b)(3), redesignated in the current proposal as 
Sec. 611.1250(b)(4), applies to bank-only financial statements. The 
Council's interpretation is correct. The Council also asked if that 
provision requires different financial reporting for a terminating bank 
from the reporting required of a continuing bank. The reporting 
requirements of the bank-only information for a terminating bank and a 
continuing bank are the same.
    The Council asked us to clarify the meaning of the pro rata portion 
of a terminating bank's general allowance for loan losses as described 
in previously proposed Sec. 611.1250(b)(5)(i)(B). By pro rata we mean 
the proportion of the general allowance that is equal to the amount of 
direct loans of affiliated associations that the terminating bank 
expects to be paid off on or before the termination date, divided by 
the bank's total loans and related assets.
    We revise previously proposed Sec. 611.1250(b)(5)(iii)(A) to 
require a terminating bank to subtract from its assets only equity 
investments held by non-terminating associations that the bank expects 
to transfer to another System bank at or before termination. This 
reflects the change in our current proposal that any equity held in a 
terminating bank by a non-terminating association will be calculated 
after the exit fee is deducted unless that equity is transferred to the 
association's new funding bank. The Council asked us to specify in 
Sec. 611.1250(b)(5)(iii)(A) how to calculate a pro rata share of a 
bank's unallocated surplus for a non-terminating association, since 
different methods can be used. We revise our 1999 proposal to specify 
that a terminating bank must generally calculate a non-terminating 
association's share of unallocated surplus according to the bank's 
liquidation bylaws. However, we may require a terminating bank to use a 
different calculation method if we determine that using the bank's 
liquidation bylaws would be inequitable. This change will result in an 
unallocated surplus calculation that is more consistent with the 
calculation of other dissenters' equity. The change would permit 
calculations of unallocated surplus based on memo accounting or based 
on other factors, provided that the resulting calculation is equitable.
    We revise previously proposed Sec. 611.1250(b)(5)(iii)(B) to 
include a reference to Sec. 611.1270(d). The Council requested that we 
add this reference because Sec. 611.1270(d) describes our requirements 
for satisfying a bank's FAC obligations when terminating.
    The Council asked us to revise previously proposed Sec. 611.1250(c) 
to provide greater detail about when we would consider it necessary to 
adjust an institution's exit fee estimate under our 3-year look-back 
provision. This requirement is very similar to the existing requirement 
for terminating associations, found at Sec. 611.1240(e), which we 
adopted in 1991. (For a further discussion of the 3-year look-back, see 
55 FR 28644-46 (July 12, 1990.)) Our objective is to adjust any account 
balance of a terminating institution if it does not reflect true value 
or if a transaction outside the normal course of business has had the 
effect of raising or lowering the exit fee. We believe our 1999 
proposal adequately describes the transactions that we would most 
likely review to determine if adjustments to a terminating 
institution's business transactions are necessary. Therefore, 
Sec. 611.1250(c) remains as previously proposed.

Section 611.1255--Exit Fee Calculation

    We revise previously proposed Secs. 611.1255(a)(2) and 
611.1255(b)(3) (redesignated in our current proposal as 
Secs. 611.1255(a)(3) and 611.1255(b)(4), respectively) to clarify that 
the audit requirements for these sections apply to the dollar amount 
account balances as of the termination date. The regulation does not 
require an audit of the average daily balances that are used to 
calculate the final exit fee.
    We are deleting previously proposed Sec. 611.1255(a)(4)(C) and 
(b)(5)(D). Our 1999 proposal authorized terminating institutions to add 
back to assets payments to retire the equity of dissenters and Farm 
Credit institutions at termination. As we explained above in the 
Introduction, we now propose deducting the exit fee before calculating 
dissenters' equity (except for equity transferred by a non-terminating 
association to another System bank).
    We are adding a paragraph to clarify that a terminating bank must 
add back the specific allowance, and a pro rata share of its general 
allowance, related to the direct loans that are deducted in the 
calculation. In the current proposal, the new paragraph is at 
Sec. 611.1255(b)(5)(i)(B).
    We revise previously proposed Sec. 611.1255(b)(5)(iii)(A) to 
require a terminating bank to subtract from its assets an amount equal 
to any equity investments held in it by non-terminating associations 
that the bank expects to transfer to another System bank at or before 
termination. This reflects the change in our current proposal that any 
equity held by a non-terminating association will be valued after the 
exit fee calculation if the equity is not transferred to another bank.
    We revise previously proposed Sec. 611.1255(a)(4)(ii)(A) to add a 
reference to Sec. 611.1260(d). The Council requested that we add this 
reference because Sec. 611.1260(d) describes our requirements for 
satisfying an association's FAC obligations to its affiliated bank when 
the association terminates.
    The Council asked whether Sec. 611.1255(c) requires a terminating 
institution to maintain separate escrow accounts for the preliminary 
exit fee estimate and the estimate of equity payments to dissenting 
stockholders and other Farm Credit institutions. Neither our 1999 
proposal nor this current proposal specifically requires two separate 
escrow accounts, and we will not automatically require separate 
accounts. However, we may require separate accounts in a situation 
where we believe a single account would cause confusion or raise other 
problems. We would inform a terminating institution whether it must 
maintain one or two escrow accounts when we approve its termination 
request.
    The Council asked whether the reference to ``account balances'' in 
Sec. 611.1255(d) refers to average daily balances or dollar amounts. 
The reference is to dollar amounts.

Section 611.1260--Payment of Debts and Assessments--Terminating 
Association

    We revise previously proposed Sec. 611.1260(d) to clarify how a 
terminating association must calculate its FAC-related payment to its 
affiliated bank. The Council requested that we insert the phrase ``the 
estimated present value of'' in the first sentence to more closely 
track the statutory language. We have done so. The Council also stated

[[Page 43540]]

that the System endorsed the idea of requiring terminating associations 
to pay their affiliated bank a portion of the capital preservation 
agreement payments under section 6.9 of the 1971 Act. We have decided 
not to require such a payment. The 1992 amendments to the 1971 Act 
contain specific repayment provisions when an institution terminates 
but do not require a terminating association to contribute to its 
bank's share of capital preservation agreement payments.

Section 611.1265--Retirement of Terminating Association's Investment in 
Its Affiliated Bank

    We have revised previously proposed Sec. 611.1265 to limit its 
application to treatment of a terminating association's investment in 
its affiliated bank. We have moved the provisions regarding other 
System institutions' investments in a terminating association to 
Sec. 611.1275, as we discuss below under that section.

Section 611.1270--Repayment of Obligations--Terminating Bank

    The Council asked that we revise previously proposed 
Sec. 611.1270(a) by adding a provision addressing derivatives 
contracts. We do not believe this change is necessary because 
Sec. 611.1270(a) includes all debt obligations, which includes 
derivatives contracts.
    The Council also pointed out that the statute provides the 
authority for banks to issue individual debt. The primary liability of 
individual debt obligations that a terminating bank may have under 
section 4.2(b) of the 1971 Act is governed by the general rule stated 
in Sec. 611.1270(a).
    In response to the Council's request, we revise previously proposed 
Sec. 611.1270(c)(1) to clarify that any payment obligation under joint 
and several liability will occur only when there is a call for payment. 
Also at the Council's request, we revise this section to require 
successor institutions to periodically report to the Funding 
Corporation so that it can fulfill its disclosure responsibilities for 
the System.
    The Council noted that in proposed Sec. 611.1270(c)(3) we 
inappropriately ``mixed'' obligations described in section 4.2(b) of 
the 1971 Act, which are individually issued obligations, with the 
consolidated obligations described in section 4.2(c). The previous 
proposal stated that a successor institution would have contingent 
joint and several liability not only for consolidated obligations, but 
also for the interest on any individual obligations issued and 
outstanding on the termination date by other banks operating under the 
same title of the 1971 Act. In response, we have deleted references to 
contingent joint and several liability with respect to interest on 
individual obligations, because such liability is not described in 
those terms under section 4.4(a)(1) of the 1971 Act.
    The Council correctly observed that previously proposed 
Sec. 611.1270(d) does not include future interest payments on FAC debt 
obligations funded by the Farm Credit banks. Repayment of interest on 
FAC debt obligations funded by the Farm Credit banks is not covered by 
section 6.9(e)(3)(C)(ii) or by subparagraphs (c)(5)(E)(i) and 
(d)(1)(C)(iv) of section 6.26 of the 1971 Act. The 1992 amendments to 
the 1971 Act expressly provided for terminating institutions to make 
certain payments related to the FAC debt repayment, including payment 
of Treasury-paid interest. However, the 1992 amendments did not require 
payments related to future bank-paid interest. The repayment of these 
obligations by a terminating bank does not appear to be consistent with 
the FAC repayment provisions of the 1971 Act. Moreover, such payments 
would have the effect of reducing the exit fee, and we believe it is 
more appropriate for the funds to go to the Insurance Fund, to provide 
protection for System institutions and investors.
    In response to the Council's comment, we revise previously proposed 
Sec. 611.1270(d)(1) to clarify that the loan volume of reaffiliating 
associations remaining in the System is not included in the FAC 
repayment calculation by a terminating bank. The loan volume of 
associations that reaffiliate with another System bank will result in 
an increase in that bank's future FAC payments to the extent such 
payments are based on the association's average accruing retail loan 
volume. The terminating bank's FAC payment will be based on the retail 
loan volume that is leaving the System.
    In response to the Council's comment, we revise previously proposed 
Sec. 611.1270(d)(2) to provide that comparable securities used to make 
the present value estimation must be securities that mature no later 
than the due date of the terminating bank's FAC obligations. The 
Council also requested that we require a bank that has redeemed FAC 
preferred stock, but for which the underlying debt remains outstanding, 
to provide for this contingent liability. Our current proposal contains 
this change.

Section 611.1275--Retirement of Equities Held by Other System 
Institutions

    We revise previously proposed Sec. 611.1275, which had covered only 
a terminating bank's equity retirements, to apply instead to 
terminating bank and association equity held by other System 
institutions. (Terminating association equity was covered under 
previously proposed Sec. 611.1265, which in our current proposal 
applies only to a terminating association's investment in its 
affiliated bank.) The current proposal provides that a System 
institution's share of the terminating institution's unallocated 
surplus must be valued according to the liquidation provisions of the 
institution's bylaws, or by another distribution method if we deem the 
bylaws inequitable to stockholders. We make this change in response to 
the Council's comment that our proposal to determine a non-terminating 
association's share of unallocated surplus on a pro rata basis could be 
inappropriate when the bank's stockholders have previously agreed to a 
different distribution (such as a distribution based on patronage). We 
agree and have revised the method of calculating the value of 
unallocated surplus, for both non-terminating associations and other 
System institutions with equity in a terminating institution. We have 
also revised our 1999 proposal to clarify what adjustments must be made 
to stockholder equity. Deductions must be made for FAC payments, taxes, 
and the exit fee. There may be other adjustments as we deem 
appropriate.
    We have also clarified that a non-terminating association may 
reaffiliate with another Farm Credit bank either before or on the 
termination date. We believe that associations wishing to reaffiliate 
should not be required to wait to reaffiliate until the date of their 
bank's termination. If the transfer occurs before the termination date, 
the association's share of bank equities must be valued as of the 
monthend preceding the date of reaffiliation (and before deduction of 
the exit fee).
    We have also added a new paragraph (d) to prohibit continuing 
investments by System institutions in a successor institution if the 
relationship is otherwise prohibited by law. In this section as well as 
in previously proposed Sec. 611.1265, we had allowed System 
institutions with investments in a terminating institution to exchange 
that investment for stock in the successor institution. We retain the 
provision in the current proposal but we have clarified that these 
investments in

[[Page 43541]]

the successor institution must be otherwise permissible under law. We 
made this modification in response to comments made by Treasury, to 
recognize that the Federal Credit Union Act \1\ and the Federal Deposit 
Insurance Act \2\ prohibit certain affiliations and relationships 
between Government-sponsored enterprises, such as System institutions, 
and depository institutions. Depository institutions include commercial 
banks, savings banks and savings associations, and credit unions. If a 
System institution were to exchange its investment in a terminating 
institution for voting stock in a successor depository institution, the 
investment could be deemed to be an affiliation or financial support 
and would be a prohibited relationship. We have revised our 1999 
proposal to clarify that the rule does not sanction investments that 
are otherwise prohibited by law.
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    \1\ 12 U.S.C. 1781(e).
    \2\ 12 U.S.C. 1828(s).
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Section 611.1280--Dissenting Stockholders' Rights

    We revise previously proposed Sec. 611.1280 (d) and (e) regarding 
how terminating institutions must calculate the value of equities held 
by dissenting stockholders, as well as the form of payment. (See our 
discussion of this issue under the Introduction.) Our current proposal 
would require payment in cash and subordinated debt, as provided by the 
existing rule. However, the terminating institution would also have the 
option to pay cash for non-purchased equities. We believe this form of 
payment would permit dissenting stockholders to be treated fairly and 
not force them to own equity in the terminating institution. This 
method also provides a means for the successor institution to retain 
capital should the terminating institution choose to seek a charter 
from a Federal or State chartering authority.

List of Subjects

12 CFR Part 611

    Agriculture, Banks, banking, Organization and functions (Government 
agencies), Rural areas.

12 CFR Part 614

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

    For the reasons stated in the preamble, parts 611 and 614 of 
chapter VI, title 12 of the Code of Federal Regulations are proposed to 
be amended to read as follows:

PART 611--ORGANIZATION

    1. The authority citation for part 611 is revised to read as 
follows:

    Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15, 
4.20, 4.21, 5.9, 5.10, 5.17, 6.9, 6.26, 7.0-7.13, 8.5(e) of the Farm 
Credit Act (12 U.S.C. 2011, 2021, 2071, 2091, 2121, 2142, 2183, 
2203, 2208, 2209, 2243, 2244, 2252, 2278a-9, 2278b-6, 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.
    2. Revise subpart P to read as follows:

Subpart P--Termination of System Institution Status

Sec.
611.1200   Applicability of this subpart.
611.1205   Definitions that apply in this subpart.
611.1210   Commencement resolution and advance notice.
611.1215   Prohibited acts.
611.1220   Filing of termination application.
611.1221   Filing of termination application--timing.
611.1222   Plan of termination--contents.
611.1223   Information statement--contents.
611.1230   FCA review and approval.
611.1240   Voting record date and stockholder approval.
611.1245   Stockholder reconsideration.
611.1250   Preliminary exit fee estimate.
611.1255   Exit fee calculation.
611.1260   Payment of debts and assessments--terminating 
association.
611.1265   Retirement of a terminating association's investment in 
its affiliated bank.
611.1270   Repayment of obligations--terminating bank.
611.1275   Retirement of equities held by other System institutions.
611.1280   Dissenting stockholders' rights.
611.1285   Loan refinancing by borrowers.
611.1290   Continuation of borrower rights.

Subpart P--Termination of System Institution Status


Sec. 611.1200  Applicability of this subpart.

    The regulations in this subpart apply to each bank and association 
that desires to terminate its System institution status and become 
chartered as a bank, savings association or other financial 
institution.


Sec. 611.1205  Definitions that apply in this subpart.

    Assets means all assets determined in conformity with GAAP, except 
as otherwise required in this subpart.
    GAAP means ``generally accepted accounting principles'' as that 
term is defined in Sec. 621.2(c) of this chapter.
    OFI means an ``other financing institution'' that has a funding and 
discount agreement with a Farm Credit bank under section 1.7(b)(1) of 
the Act.
    Successor institution means the bank, savings association, or other 
financial institution that the terminating bank or association will 
become when we revoke its Farm Credit charter.


Sec. 611.1210  Commencement resolution and advance notice.

    (a) Adoption of commencement resolution. Your board of directors 
must begin the termination process by adopting a commencement 
resolution stating your intention to terminate Farm Credit status under 
section 7.10 of the Act.
    (b) Advance notice. Within 5 days after adopting the commencement 
resolution, you must:
    (1) Send a certified copy of the commencement resolution to us and 
the Farm Credit System Insurance Corporation (FCSIC). If you are an 
association, also send a copy to your affiliated bank. If you are a 
bank, also send a copy to your affiliated associations, the other Farm 
Credit banks, the Federal Farm Credit Banks Funding Corporation 
(Funding Corporation), and the Farm Credit System Financial Assistance 
Corporation (FAC);
    (2) Mail an announcement to all equity holders stating you are 
taking steps to terminate Farm Credit status and describing the 
following:
    (i) The process of termination;
    (ii) The expected effect of termination on equity holders, 
including the effect on borrower rights and the consequences of any 
stock retirements before termination;
    (iii) The type of charter the successor institution will have; and
    (iv) Any bylaw creating a special class of borrower stock and 
participation certificates under paragraph (f) of this section.
    (c) Bank negotiations on joint and several liability. If you are a 
terminating bank, within 10 days of adopting the commencement 
resolution you and the other Farm Credit banks must begin negotiations 
to provide for your satisfaction of liabilities (other than your 
primary liability) under section 4.4 of the Act. The Funding 
Corporation may, at its option, be a party to the negotiations to the 
extent necessary to fulfill its duties with respect to financing and 
disclosure. The agreement must comply with the requirements in 
Sec. 611.1270(c).
    (d) Disclosure to customers after commencement resolution. Between 
the date of the commencement resolution and the termination date, you 
must give the following information to your customers:

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    (1) For each applicant who is not a current stockholder, describe 
at the time of loan application:
    (i) The effect of the proposed termination on the borrower's loan; 
and
    (ii) Whether the borrower will continue to have any of the borrower 
rights provided under the Act and regulations.
    (2) For any equity holders who ask to have their equities retired, 
explain that the retirement would extinguish the holder's right to 
exchange those equities for an interest in the successor institution. 
In addition, inform holders of equities entitled to your residual 
assets in liquidation that retirement before termination would 
extinguish their right to dissent from the termination and have their 
equities retired.
    (e) Terminating bank's right to continue issuing debt. Through the 
termination date, a terminating bank may continue to participate in the 
issuance of consolidated and Systemwide obligations to the same extent 
it would be able to participate if it were not terminating.
    (f) Special class of stock. Notwithstanding any requirements to the 
contrary in Sec. 615.5230(b) of this chapter, you may adopt bylaws 
providing for the issuance of a special class of stock and 
participation certificates between the date of adoption of a 
commencement resolution and the termination date. Your stockholders 
must approve the special class before you adopt the commencement 
resolution. The equities must comply with section 4.3A of the Act and 
be identical in all respects to existing classes of equities that are 
entitled to the residual assets of the institution in a liquidation, 
except for the value a holder will receive in a termination. In a 
termination, the holder of the special class of stock receives value 
equal to the lower of either par (or face) value, or the value 
calculated under Sec. 611.1280 (c) and (d). A holder must have the same 
right to vote (if the equity is held on the voting record date) and to 
dissent as holders of similar equities issued before the commencement 
resolution. If the termination does not occur, the special classes of 
stock and participation certificates must automatically convert into 
shares of the otherwise identical equities.


Sec. 611.1215  Prohibited acts.

    (a) Statements about termination. Neither the institution nor any 
director, officer, employee or agent may make any untrue or misleading 
statement of a material fact, or fail to disclose any material fact, 
about the termination to a current or prospective equity holder.
    (b) Representations regarding FCA approval. Neither the institution 
nor any director, officer, employee or agent may make an oral or 
written representation to anyone that a preliminary or final approval 
of the termination by us is, directly or indirectly, either a 
recommendation on the merits of the proposal or an assurance that the 
information you give to your equity holders is adequate or accurate.


Sec. 611.1220  Filing of termination application.

    (a) Adoption of termination resolution. Your board must adopt a 
termination resolution authorizing the application for termination and 
for a new charter.
    (b) Contents of termination application. Send us an original and 
five copies of the termination application for review and preliminary 
approval. If you send us the application in electronic form, you must 
send us at least one hard copy application with original signatures. 
The application must contain:
    (1) A certified copy of the termination resolution;
    (2) A copy of the plan of termination required under Sec. 611.1222;
    (3) An information statement that complies with Sec. 611.1223;
    (4) All other information that you give to current or prospective 
equity holders in connection with the termination; and
    (5) Any additional information that either we request or your board 
of directors wishes to submit in support of the application.
    (c) Requirement to update application. You must immediately send us 
any material changes to information in the plan of termination, 
including financial information, that occur between the date you file 
the application and the termination date. In addition, send us copies 
of any additional written information on the termination that you give 
to current or prospective equity holders before termination.


Sec. 611.1221  Filing of termination application--timing.

    If we receive the termination application required in Sec. 611.1220 
less than 30 days after receiving the advance notice, we may in our 
discretion disapprove the application.


Sec. 611.1222  Plan of termination--contents.

    The plan of termination must include:
    (a) Copies of all contracts, agreements, and other documents on the 
proposed termination and organization of the successor institution.
    (b) A statement of how you will transfer assets to, and have your 
liabilities assumed by, the successor institution.
    (c) Your plan to retire outstanding equities or convert them to 
equities of the successor institution.
    (d) A copy of the charter application for the successor 
institution, with any exhibits or other supporting information.
    (e) A statement, if applicable, whether the successor institution 
will continue to borrow from a Farm Credit bank and how such a 
relationship will affect your provision for payment of debts. The plan 
of termination must include evidence of any agreement and plan for 
satisfaction of outstanding debts (including amounts you owe to the 
(FAC) because of the termination).


Sec. 611.1223  Information statement--contents.

    (a) Plain language requirements. (1) Present the contents of the 
information statement in a clear, concise and understandable manner.
    (2) Use short, explanatory sentences, bullet lists or charts where 
helpful, and descriptive headings and subheadings.
    (3) Minimize the use of glossaries or defined terms.
    (4) Write in the active voice when possible.
    (5) Avoid legal and highly technical business terminology.
    (b) Disclaimer. Place the following statement in boldface type in 
the material sent to equity holders, either on the notice of meeting or 
the first page of the information statement:

The Farm Credit Administration has not determined if this information 
is accurate or complete. You should not rely on any statement to the 
contrary.
    (c) Summary. The first part of the information statement must be a 
summary that concisely explains:
    (1) Which stockholders have a right to vote on termination;
    (2) The material changes the termination will cause to the rights 
of stockholders, borrowers, and other equity holders;
    (3) The effect of those changes;
    (4) The potential benefits and disadvantages of the termination;
    (5) The right of certain stockholders to dissent and receive 
payment for their existing equities; and
    (6) The proposed termination date.
    (d) Remaining requirements. The rest of the information statement 
must contain the following:
    (1) Plan of termination. Describe the plan of termination.

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    (2) Benefits and disadvantages. Provide the following information:
    (i) An enumerated statement of the anticipated benefits and 
potential disadvantages of the termination;
    (ii) An explanation of the preliminary exit fee estimate, with any 
adjustments we require, and estimated expenses of termination and 
organization of the successor institution; and
    (iii) An explanation of the board's basis for recommending the 
termination.
    (3) Initial board of directors. List the initial board of directors 
and senior officers for the successor institution, with a brief 
description of the business experience of each person, including 
principal occupation and employment during the past 5 years.
    (4) Bylaws and charter. Summarize the provisions of the bylaws and 
charter of the successor institution that differ materially from your 
bylaws and charter. The summary must state:
    (i) Whether the successor institution will require a borrower to 
hold an equity interest as a condition for having a loan; and
    (ii) Whether the successor institution will require stockholders to 
do business with the institution.
    (5) Changes to equity. Explain any changes in the nature of equity 
investments in the successor institution, such as changes in dividends, 
patronage, voting rights, preferences, retirement of equities, and 
liquidation priority. If equities protected under section 4.9A of the 
Act are outstanding, the information statement must state that the 
Act's protections will be extinguished on termination.
    (6) Effect of termination on statutory and regulatory rights. 
Explain the effect of termination on rights granted by the Act and FCA 
regulations. You must explain the effect termination will have on 
borrower rights granted in the Act and subparts K, L, and N of part 614 
of this chapter.
    (7) Loan refinancing by borrowers. (i) State, as applicable, that 
borrowers may seek to refinance their loans with the System 
institutions that already serve, or will be permitted to serve, your 
territory. State that no System institution is obligated to refinance 
your loans.
    (ii) If we have assigned your territory to another System 
institution before the information statement is mailed to equity 
holders, or if another System institution is already chartered to make 
the same type of loans you make in your territory, identify such 
institution(s) and provide the following information:
    (A) The name, address, and telephone number of the institution; and
    (B) An explanation of the institution's procedures for borrowers to 
apply for refinancing.
    (iii) If we have not assigned the territory before you mail the 
information statement, give the name, address and telephone number of 
the System institution specified by us and state that borrowers may 
contact the institution for information about loan refinancing.
    (8) Equity exchanges. Explain the formula and procedure to exchange 
equity in your institution for equity in the successor institution.
    (9) Employment, retirement, and severance agreements. Describe any 
employment agreement or arrangement between the successor institution 
and any of your senior officers (as defined in Sec. 620.1 of this 
chapter) or directors. Describe any severance and retirement plans that 
cover your employees or directors and state the costs you expect to 
incur under the plans in connection with the termination.
    (10) Exit fee calculation. Explain how the exit fee will be 
calculated.
    (11) New charter. Describe the nature and type of financial 
institution the successor institution will be and any conditions of 
approval of the new chartering authority or regulator.
    (12) Differences in successor institution's programs and policies. 
Summarize any differences between you and the successor institution on:
    (i) Interest rates and fees;
    (ii) Collection policies;
    (iii) Services provided; and
    (iv) Any other item that would affect a borrower's lending 
relationship with the successor institution, including whether a 
stockholder's ability to borrow from the institution will be 
restricted.
    (13) Capitalization. Discuss expected capital requirements of the 
successor institution, and the amount and method of capitalization.
    (14) Sources of funding. Explain the sources and manner of funding 
the successor institution's operations.
    (15) Contingent liabilities. Describe how the successor institution 
will address any contingent liability it will assume from you.
    (16) Tax status. Summarize the differences in tax status between 
your institution and the successor institution, and explain how the 
differences will affect stockholders.
    (17) Regulatory environment. Describe briefly how the regulatory 
environment for the successor institution will differ from your current 
regulatory environment, and any effect on the cost of doing business or 
the value of stockholders' equity.
    (18) Dissenters' rights. Explain which equity holders are entitled 
to dissenters' rights and what those rights are. The explanation must 
include the estimated liquidation value of the stock, procedures for 
exercising dissenters' rights, and a statement of when the rights may 
be exercised.
    (19) Financial information. (i) Present the following financial 
data:
    (A) A balance sheet and income statement for each of the 3 
preceding fiscal years;
    (B) A balance sheet as of a date within 90 days of the date you 
mail the termination application to us, presented on a comparative 
basis with the corresponding period of the previous 2 fiscal years;
    (C) An income statement for the interim period between the end of 
the last fiscal year and the date of the balance sheet required by 
paragraph (d)(19)(i)(B) of this section, presented on a comparative 
basis with the corresponding period of the previous 2 fiscal years;
    (D) A pro forma balance sheet of the successor institution 
presented as if termination had occurred as of the date of the most 
recent balance sheet presented in the statement; and
    (E) A pro forma summary of earnings for the successor institution 
presented as if the termination had been effective at the beginning of 
the interim period between the end of the last fiscal year and the date 
of the balance sheet presented under paragraph (d)(19)(i)(D) of this 
section.
    (ii) The format for the balance sheet and income statement must be 
the same as the format in your annual report and must contain 
appropriate footnote disclosures, including data on high-risk assets, 
other property owned, and allowance for losses.
    (iii) The financial statements must include either:
    (A) A statement signed by the chief executive officer and each 
board member that the various financial statements are unaudited but 
have been prepared in all material respects in conformity with GAAP 
(except as otherwise disclosed) and are, to the best of each signer's 
knowledge, a fair and accurate presentation of the financial condition 
of the institution; or
    (B) A signed opinion by an independent certified public accountant 
that the various financial statements have been examined in conformity 
with generally accepted auditing standards and included such tests of 
the accounting records and other such auditing procedures as were 
considered necessary in the circumstances, and, as of the date of the 
statements, present fairly the financial position of the institution in 
conformity with GAAP

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applied on a consistent basis, except as otherwise disclosed.
    (20) Subsequent financial events. Describe any event after the date 
of the financial statements, but before the date you send the 
termination application to us, that would have a material impact on 
your financial condition or the condition of the successor institution.
    (21) Other subsequent events. Describe any event after you send the 
termination application to us that could have a material impact on any 
information in the termination application.
    (22) Other material disclosures. Describe any other material fact 
or circumstance that a stockholder would need to know to make an 
informed decision on the termination, or that is necessary to make the 
disclosures not misleading.
    (23) Ballot and proxy. Include a ballot and proxy, with 
instructions on the purpose and authority for their use, and the proper 
method for the stockholder to sign the proxy.
    (24) Board of directors certification. Include a certification 
signed by the entire board of directors as to the truth, accuracy, and 
completeness of the information contained in the information statement. 
If any director refuses to sign the certification, the director must 
inform us of the reasons for refusing.


Sec. 611.1230  FCA review and approval.

    (a) FCA review period. We will review a termination application and 
either give preliminary approval or disapprove the application no later 
than 60 days after we receive the application.
    (b) Reservation of right to disapprove termination. In addition to 
any other reason for disapproval, we may disapprove a termination if we 
determine that the termination would have a material adverse effect on 
the ability of the remaining System institutions to fulfill their 
statutory purpose.
    (c) Conditions of final FCA approval. We will give final approval 
to your termination application only if:
    (1) Your stockholders vote in favor of termination in the 
termination vote and in any reconsideration vote;
    (2) You give us executed copies of all contracts, agreements, and 
other documents submitted under Sec. 611.1222;
    (3) You have paid or made adequate provision for payment of debts, 
including responsibility for any contingent liabilities, and for 
retirement of equities;
    (4) A Federal or State chartering authority has granted a new 
charter to the successor institution;
    (5) You deposit into escrow an amount equal to 110 percent of the 
estimated exit fee plus 110 percent of the estimated amount you must 
pay to retire equities of dissenting stockholders and Farm Credit 
institutions, as described in Sec. 611.1255(c); and
    (6) You have fulfilled any other condition of termination we have 
imposed.
    (d) Effective date of termination. If we grant final approval, we 
will revoke your charter, and the termination will be effective on the 
last to occur of--
    (1) Fulfillment of all conditions listed in paragraph (c) of this 
section;
    (2) Your proposed termination date;
    (3) Ninety (90) days after we receive the notice described in 
Sec. 611.1240(e); and
    (4) Fifteen (15) days after any reconsideration vote.


Sec. 611.1240  Voting record date and stockholder approval.

    (a) Stockholder meeting. You must call the meeting by written 
notice in compliance with your bylaws. The stockholder meeting to vote 
on the termination must occur within 60 days of our preliminary 
approval (or, if we take no action, within 60 days of the end of our 
approval period).
    (b) Voting record date. The voting record date may not be more than 
70 days before the stockholders' meeting.
    (c) Information statement. You must provide all equity holders with 
a notice of meeting and the information statement required by 
Sec. 611.1223 at least 30 days before the stockholder vote.
    (d) Voting procedures. The voting procedures must comply with 
Sec. 611.330. You must have an independent third party count the 
ballots. If a voting stockholder notifies you of the stockholder's 
intent to exercise dissenters' rights, the tabulator must be able to 
verify to you that the stockholder voted against the termination. 
Otherwise, the votes of stockholders must remain confidential.
    (e) Notice to FCA and equity holders of voting results. Within 10 
days of the termination vote, you must send us a certified record of 
the results of the vote. You must notify all equity holders of the 
results within 30 days after the stockholder meeting. If the 
stockholders approve the termination, you must give the following 
information to equity holders:
    (1) Stockholders who voted against termination and equity holders 
who were not entitled to vote have a right to dissent as provided in 
Sec. 611.1280; and
    (2) Voting stockholders have a right, under Sec. 611.1245, to file 
a petition with the FCA for reconsideration within 35 days after the 
date you mail to them the notice of the results of the termination 
vote.
    (f) Requirement to notify new equity holders. You must provide the 
information described in paragraph (e)(1) of this section to each 
person that becomes an equity holder after the termination vote and 
before termination.


Sec. 611.1245  Stockholder reconsideration.

    (a) Right to reconsider termination. Voting stockholders have the 
right to reconsider their approval of the termination if a petition 
signed by 15 percent of the stockholders is filed with us within 35 
days after you mail notices to stockholders that the termination was 
approved. If we determine that the petition complies with the 
requirements of section 7.9 of the Act, you must call a special 
stockholders' meeting to reconsider the vote. The meeting must occur 
within 60 days after the date on which you mailed to stockholders the 
results of the termination vote. If a majority of the stockholders 
voting, in person or by proxy, vote against the termination, the 
termination may not take place.
    (b) Stockholder list and expenses. You must, at your expense, 
timely give stockholders who request it a list of the names and 
addresses of stockholders eligible to vote in the reconsideration vote. 
The petitioners must pay all other expenses for the petition. You must 
pay expenses that you incur for the reconsideration vote.


Sec. 611.1250  Preliminary exit fee estimate.

    (a) Preliminary exit fee estimate-terminating association. You must 
provide a preliminary exit fee estimate to us when you submit the 
termination application. Calculate the preliminary exit fee estimate in 
the following order:
    (1) Base your exit fee calculation on the average daily balances of 
assets and liabilities for the 12-month period as of the quarterend 
immediately before the date you send us your termination application.
    (2) Any amounts we refer to in this section are average daily 
balances unless we specify that they are not. Amounts that are not 
average daily balances will be referred to as ``dollar amount.''
    (3) Compute the average daily balances based on financial 
statements that comply with GAAP. The financial statements, as of the 
quarterend immediately before the date you send us your termination 
application, must be independently audited by a qualified public 
accountant, as defined in Sec. 621.2(i) of this chapter. We may, in our 
discretion, waive the audit

[[Page 43545]]

requirement if an independent audit was performed as of a date less 
than 6 months before you submit the termination application.
    (4) Make adjustments to assets as follows:
    (i) Add back expenses you have incurred related to termination. 
Related expenses include, but are not limited to, legal services, 
accounting services, auditing, business planning, and application fees 
for the termination and reorganization.
    (ii) Subtract the following:
    (A) The dollar amount of your estimated payment (to your affiliated 
bank) related to FAC obligations as described in Sec. 611.1260(d); and
    (B) The dollar amount of your estimated taxes due to the 
termination.
    (iii) Adjust for the dollar amount of significant transactions you 
reasonably expect to occur between the quarterend before you file your 
termination application and termination. Examples of these transactions 
include, but are not limited to, gains or losses on the sale of assets, 
retirements of equity, loan repayments, and patronage distributions. Do 
not make adjustments for future expenses related to termination, such 
as severance or special retirement payments, or stock retirements to 
dissenting stockholders and Farm Credit institutions.
    (5) Subtract from liabilities any liability that we treat as 
regulatory capital under the capital or collateral requirements in 
subparts H and K of part 615 of this chapter.
    (6) Make any adjustments we require under paragraph (c) of this 
section.
    (7) After making these adjustments to assets and liabilities, 
subtract liabilities from assets. This is your preliminary total 
capital for purposes of termination.
    (8) Multiply assets as adjusted above by 6 percent, and subtract 
this amount from preliminary total capital. This is your preliminary 
exit fee estimate.
    (b) Preliminary exit fee estimate--terminating bank. (1) Affiliated 
associations that are terminating with you must calculate their 
individual preliminary exit fee estimates as described in paragraph (a) 
of this section.
    (2) Base your exit fee calculation on the average daily balances of 
assets and liabilities for the 12-month period as of the quarterend 
immediately before the date you send us your termination application.
    (3) Any amounts we refer to in this section are average daily 
balances unless we specify that they are not. Amounts that are not 
average daily balances will be referred to as ``dollar amount.''
    (4) Compute the average daily balances based on bank-only financial 
statements that comply with GAAP. The financial statements, as of the 
quarterend immediately before the date you send us your termination 
application, must be independently audited by a qualified public 
accountant, as defined in Sec. 621.2(i) of this chapter. We may, in our 
discretion, waive this requirement if an independent audit was 
performed as of a date less than 6 months before you submit the 
termination application.
    (5) Make adjustments to assets and liabilities as follows:
    (i) Add back to assets the following:
    (A) Expenses you have incurred related to termination. Related 
expenses include, but are not limited to, legal services, accounting 
services, auditing, business planning, and application fees for the 
termination and reorganization; and
    (B) Any specific allowance for losses, and a pro rata portion of 
any general allowance for loan losses, on direct loans to associations 
that you do not expect to incur before or at termination.
    (ii) Subtract from your assets and liabilities an amount equal to 
your direct loans to your affiliated associations that are not 
terminating.
    (iii) Subtract the following from assets:
    (A) Equity investments in you that are held by non-terminating 
associations and that you expect to transfer to another System bank 
before or at termination. A non-terminating association's investment 
consists of purchased equities, allocated equities, and a share of the 
bank's unallocated surplus calculated in accordance with the bank's 
bylaw provisions on liquidation. We may require a different calculation 
method for the unallocated surplus if we determine that using the 
liquidation provision would be inequitable to stockholders;
    (B) The dollar amount of your estimated termination payment to the 
FAC, as described in Sec. 611.1270(d); and
    (C) The dollar amount of estimated taxes due to the termination.
    (iv) Subtract from liabilities any liability that we treat as 
regulatory capital under the capital or collateral requirements in 
subparts H and K of part 615 of this chapter.
    (v) Adjust for the dollar amount of significant transactions you 
reasonably expect to occur between the quarterend before you file your 
termination application and termination. Examples of these transactions 
include, but are not limited to, retirements of equity, loan 
repayments, and patronage distributions. Do not make adjustments for 
future expenses related to termination, such as severance or special 
retirement payments, or stock retirements to dissenting stockholders 
and Farm Credit institutions.
    (6) Add to assets the dollar amount of estimated termination 
payments of the terminating associations related to FAC obligations.
    (7) Make any adjustments we require under paragraph (c) of this 
section.
    (8) After the above adjustments, combine your balance sheet with 
the balance sheets of your terminating associations after they have 
made the adjustments required in paragraph (a) of this section. 
Subtract liabilities from assets. This is your preliminary total 
capital estimate for purposes of termination.
    (9) Multiply the assets of the combined balance sheet after the 
above adjustments by 6 percent. Subtract this amount from the 
preliminary total capital estimate of the combined balance sheet. The 
remainder is the preliminary exit fee estimate of the bank and 
terminating affiliated associations.
    (10) Your preliminary exit fee estimate is the amount by which the 
preliminary exit fee estimate for the combined entity exceeds the total 
of the individual preliminary exit fee estimates of your affiliated 
terminating associations.
    (c) Three-year look-back. (1) We will review your transactions over 
the 3 years before the date of the termination resolution under 
Sec. 611.1220. Our review will include, but not be limited to, the 
following:
    (i) Additions to or subtractions from any allowance for losses;
    (ii) Additions to assets or liabilities, or subtractions from 
assets or liabilities, due to transactions that are outside your 
ordinary course of business;
    (iii) Dividends or patronage refunds exceeding your usual 
practices;
    (iv) Changes in the institution's capital plan, or in implementing 
the plan, that increased or decreased the level of borrower investment;
    (v) Contingent liabilities, such as loss-sharing obligations, that 
can be reasonably quantified; and
    (vi) Assets that may be overvalued, undervalued or not recorded on 
your books.
    (2) If we determine the account balances do not accurately show the 
value of your assets and liabilities (whether the assets and 
liabilities were booked before or during the 3-year look-back period), 
we will make any adjustments we deem necessary.
    (3) We may require you to reverse the effect of a transaction if we 
determine that:

[[Page 43546]]

    (i) You have retired capital outside the ordinary course of 
business,
    (ii) You have taken any other actions unrelated to core business 
that have the effect of changing the exit fee, or
    (iii) You incurred expenses related to termination prior to the 12-
month average daily balance period on which the exit fee calculation is 
based.
    (4) We may require you to make these adjustments to the preliminary 
exit fee estimate that is disclosed in the information statement, the 
final exit fee calculation, and the calculations of the value of 
equities held by dissenting stockholders, Farm Credit institutions that 
choose to have their equities retired at termination, and reaffiliating 
associations.


Sec. 611.1255  Exit fee calculation.

    (a) Final exit fee calculation--terminating association. Calculate 
the final exit fee in the following order:
    (1) Base your exit fee calculation on the average daily balances of 
assets and liabilities for the 12-month period preceding the 
termination date. Assume for this calculation that you have not paid or 
accrued the items described in paragraph (a)(4)(ii) of this section.
    (2) Any amounts we refer to in this section are average daily 
balances unless we specify that they are not. Amounts that are not 
average daily balances will be referred to as ``dollar amount.''
    (3) Compute the average daily balances based on financial 
statements that comply with GAAP. The financial statements, as of the 
termination date, must be independently audited by a qualified public 
accountant, as defined in Sec. 621.2(i) of this chapter.
    (4) Make adjustments to assets and liabilities as follows:
    (i) Add back expenses related to termination incurred in the 12 
months before termination. Related expenses include, but are not 
limited to, legal services, accounting services, auditing, business 
planning, payments of severance and special retirements, and 
application fees for the termination and reorganization.
    (ii) Subtract from assets the following:
    (A) The dollar amount of your termination payment (to your 
affiliated bank) related to FAC obligations as described in 
Sec. 611.1260(d); and
    (B) The dollar amount of taxes you will have to pay due to the 
termination;
    (iii) Subtract from liabilities any liability that we treat as 
regulatory capital under the capital or collateral requirements in 
subparts H and K of part 615 of this chapter.
    (iv) Make the adjustments that we require under Sec. 611.1250(c). 
For the final exit fee, we will review and may require additional 
adjustments for transactions between the date you adopted the 
termination resolution and the termination date.
    (5) After making these adjustments to assets and liabilities, 
subtract liabilities from assets. This is your total capital for 
purposes of termination.
    (6) Multiply assets by 6 percent, and subtract this amount from 
total capital. This is your final exit fee.
    (b) Final exit fee calculation--terminating bank. (1) The 
individual exit fees of affiliated associations that are terminating 
with you must be calculated as described in paragraph (a) of this 
section.
    (2) Base your exit fee calculation on the average daily balances of 
assets and liabilities for the 12-month period preceding the 
termination date. Assume for this calculation that you have not paid or 
accrued the items described in paragraph (b)(5)(iii)(B), (C), and (D) 
of this section.
    (3) Any amounts we refer to in this section are average daily 
balances unless we specify that they are not. Amounts that are not 
average daily balances will be referred to as ``dollar amount.''
    (4) Compute the average daily balances based on bank-only financial 
statements that comply with GAAP. The financial statements, as of the 
termination date, must be independently audited by a qualified public 
accountant, as defined in Sec. 621.2(i) of this chapter.
    (5) Make adjustments to assets and liabilities as follows:
    (i) Add back the following to your assets:
    (A) Expenses you have incurred related to termination. Related 
expenses include, but are not limited to, legal services, accounting 
services, auditing, business planning, payments of severance and 
special retirements, and application fees for the termination and 
reorganization.
    (B) The dollar amount of the termination payments to you by the 
terminating associations related to FAC obligations.
    (C) Any specific allowance for losses, and a pro rata share of any 
general allowance for losses, on direct loans to associations that are 
paid off or transferred before or at termination.
    (ii) Subtract from your assets and liabilities your direct loans to 
affiliated associations that were paid off or transferred in the 12-
month period before termination or at termination.
    (iii) Subtract from your assets the following:
    (A) Equity investments held in you by affiliated associations that 
you transferred at termination or during the 12 months before 
termination;
    (B) The dollar amount of your termination payment to the FAC; and
    (C) The dollar amount of taxes paid or accrued due to the 
termination;
    (iv) Subtract from liabilities any liability that we treat as 
regulatory capital (or that we do not treat as a liability) under the 
capital or collateral requirements in subparts H and K of part 615 of 
this chapter.
    (v) Make the adjustments that we require under Sec. 611.1250(c). 
For the final exit fee, we will review and may require additional 
adjustments for transactions between the date you adopted the 
termination resolution and the termination date.
    (6) After the above adjustments, combine your balance sheet with 
the balance sheets of terminating associations after making the 
adjustments required in paragraph (a) of this section.
    (7) Subtract combined liabilities from combined assets. This is the 
total capital of the combined balance sheet.
    (8) Multiply the assets of the combined balance sheet after the 
above adjustments by 6 percent. Subtract this amount from the total 
capital of the combined balance sheet. This amount is the combined 
final exit fee for you and the terminating affiliated associations.
    (9) Your final exit fee is the amount by which the combined final 
exit fee exceeds the total of the individual final exit fees of your 
affiliated terminating associations.
    (c) Payment of exit fee. On the termination date, you must:
    (1) Deposit into an escrow account acceptable to us and the FCSIC 
an amount equal to 110 percent of the preliminary exit fee estimate, 
adjusted to account for stock retirements to dissenting stockholders 
and Farm Credit institutions, and any other adjustments we require.
    (2) Deposit into an escrow account acceptable to us an amount equal 
to 110 percent of the equity you must retire for dissenting 
stockholders and System institutions holding stock that would be 
entitled to a share of the remaining assets in a liquidation.
    (d) Pay-out of escrow. Following the independent audit of the 
institution's account balances as of the termination date, we will 
determine the amount of the final exit fee and the amounts owed to 
stockholders to retire their equities. We will then direct the escrow 
agent to:
    (1) Pay the exit fee to the Farm Credit Insurance Fund;

[[Page 43547]]

    (2) Pay the amounts owed to dissenting stockholders and Farm Credit 
institutions; and
    (3) Return any remaining amounts to the successor institution.
    (e) Additional payment. If the amount held in escrow is not enough 
to pay the amounts under paragraph (d)(1) and (2) of this section, the 
successor institution must pay any remaining liability to the escrow 
agent for distribution to the appropriate parties. The termination 
application must include evidence that, after termination, the 
successor institution will pay any remaining amounts owed.


Sec. 611.1260  Payment of debts and assessments--terminating 
association.

    (a) General rule. If you are a terminating association, you must 
pay or make adequate provision for the payment of all outstanding debt 
obligations and assessments.
    (b) No OFI relationship. If the successor institution will not 
become an OFI, you must either:
    (1) Pay debts and assessments owed to your affiliated Farm Credit 
bank at termination; or
    (2) With your affiliated Farm Credit bank's concurrence, arrange to 
pay any obligations or assessments to the bank after termination.
    (c) Obligations to other Farm Credit institutions. You must pay or 
make adequate provision for payment of obligations to any Farm Credit 
institution (other than your affiliated bank) under any loss-sharing or 
other agreement.
    (d) FAC payments. Before termination, you must pay the estimated 
present value of future assessments and payment obligations to your 
affiliated Farm Credit bank to the extent required by subparagraphs 
(c)(5)(F) and (d)(1)(C)(v) of section 6.26 of the Act. The FAC must 
make the present value estimations, subject to our approval, based on 
an appropriate discount rate. The appropriate discount rate is the non-
interest bearing U.S. Treasury security rate for securities with a 
maturity as near as possible to the period remaining until the 
terminating association's obligations under this paragraph would be due 
(but before the due date).


Sec. 611.1265  Retirement of a terminating association's investment in 
its affiliated bank.

    (a) Safety and soundness restrictions. Notwithstanding anything in 
this subpart to the contrary, we may prohibit a bank from retiring the 
equities you hold in the bank if the retirement would cause the bank to 
fall below its regulatory capital requirements after retirement, or if 
we determine that the bank would be in an unsafe or unsound condition 
after retirement.
    (b) Retirement agreement. Your affiliated bank may retire the 
purchased and allocated equities held by you in the bank according to 
the terms of the bank's capital revolvement plan or an agreement 
between you and the bank.
    (c) Retirement in absence of agreement. Your affiliated bank must 
retire any equities not subject to an agreement or revolvement plan no 
later than when you or the successor institution pays off your loan 
from the bank.
    (d) No retirement of unallocated surplus. When your bank retires 
equities you own in the bank, the bank must pay par or face value for 
purchased and allocated equities, less any impairment. The bank may not 
pay you any portion of its unallocated surplus.
    (e) Exclusion of equities from capital ratios. If another Farm 
Credit institution makes an agreement to retire equities you hold in 
that institution after termination, we may require that institution to 
exclude part or all of those equities from assets and capital when the 
institution calculates its capital and net collateral ratios under 
subparts H and K of part 615 of this chapter.


Sec. 611.1270  Repayment of obligations--terminating bank.

    (a) General rule. If you are a terminating bank, you must pay or 
make adequate provision for the payment of all outstanding debt 
obligations, and provide for your responsibility for any probable 
contingent liabilities identified.
    (b) Satisfaction of primary liability on consolidated or Systemwide 
obligations. After consulting with the other Farm Credit banks, the 
Funding Corporation, and the FCSIC, you must pay or make adequate 
provision for payment of your primary liability on consolidated or 
Systemwide obligations in a method that we deem acceptable. Before we 
make a final decision on your proposal and as we deem necessary, we may 
consult with the other Farm Credit banks, the Funding Corporation, and 
the FCSIC.
    (c) Satisfaction of joint and several liability and liability for 
interest on individual obligations. (1) You and the other Farm Credit 
banks must enter into an agreement, which is subject to our approval, 
covering obligations issued under section 4.2 of the Act and 
outstanding on the termination date. The agreement must specify how you 
and your successor institution will make adequate provision for the 
payment of your joint and several liability to holders of obligations 
other than those obligations on which you are primarily liable, in the 
event we make calls for payment under section 4.4 of the Act. You and 
your successor institution must also provide for your liability under 
section 4.4(a)(1) of the Act to pay interest on the individual 
obligations issued by other System banks. As a part of the agreement, 
you must also agree that your successor institution will provide 
ongoing information to the Funding Corporation to enable it to fulfill 
its funding and disclosure duties. The Funding Corporation may, at its 
option, be a party to the agreement to the extent necessary to fulfill 
its duties with respect to financing and disclosure.
    (2) If you and the other Farm Credit banks are unable to reach 
agreement within 90 days before the proposed termination date, we will 
specify the manner in which you will make adequate provision for the 
payment of the liabilities in question and how we will make joint and 
several calls for those obligations outstanding on the termination 
date.
    (3) Notwithstanding any other provision in these regulations, the 
successor institution will be jointly and severally liable for 
consolidated and Systemwide debt outstanding on the termination date 
(other than the obligations on which you are primarily liable). The 
successor institution will also be liable for interest on other banks' 
individual obligations as described in section 4.4(a)(1) of the Act and 
outstanding on the termination date. The termination application must 
include evidence that the successor institution will continue to be 
liable for consolidated and Systemwide debt and for interest on other 
banks' individual obligations.
    (d) Payment to the FAC. (1) Before termination, you must pay to the 
FAC the amounts required by section 6.9(e)(3)(C)(ii) of the Act and by 
subparagraphs (c)(5)(E)(i) and (d)(1)(C)(iv) of section 6.26 of the 
Act. To make the calculations for section 6.26, you must include your 
retail loan volume, the retail loan volume of the associations that are 
terminating with you, and the retail loan volume of the affiliated 
associations that continue their direct lending relationships with the 
successor institution, but you must not include the retail loan volume 
of associations that reaffiliate with another bank and transfer or 
repay their direct loan on or before termination.
    (2) The FAC must make the present value estimation, subject to our 
approval, based on an appropriate

[[Page 43548]]

discount rate. The appropriate discount rate is the non-interest 
bearing U.S. Treasury security rate for securities with a maturity as 
near as possible to the period remaining until your obligations under 
this paragraph would be due (but before the due date).
    (3) If you or your predecessor bank has redeemed early any 
preferred stock issued to the FAC, we may require you to confirm in 
writing that your successor institution will assume responsibility for 
any and all of your contingent liabilities under any FAC preferred 
stock redemption agreement and indemnification agreement.


Sec. 611.1275  Retirement of equities held by other System 
institutions.

    (a) Retirement at option of equity holder. If you are a terminating 
institution, System institutions that own your equities have the right 
to require you to retire the equities on the termination date.
    (b) Value of equity holders' interests. You must retire the 
equities in accordance with the liquidation provisions in your bylaws 
unless we determine that the liquidation provisions would result in an 
inequitable distribution to stockholders. If we make such a 
determination, we will require you to distribute the equity in 
accordance with another method that we deem equitable to stockholders. 
Before you retire any equity, you must make the following adjustments 
to the amount of stockholder equity as stated in the financial 
statements on the termination date:
    (1) Make deductions for any FAC obligations and taxes due to the 
termination that you have not yet recorded;
    (2) Deduct the amount of the exit fee; and
    (3) Make any adjustments described under Sec. 611.1250(c) that we 
may require as we deem appropriate.
    (c) Transfer of affiliated association's investment. As an 
alternative to equity retirement, an affiliated association that 
reaffiliates with another Farm Credit bank instead of terminating with 
its bank has the right to require the terminating bank to transfer its 
investment to its new affiliated bank when it reaffiliates. If you are 
a terminating bank, at the time of reaffiliation you must transfer the 
purchased and allocated equities held by the association, as well as 
its share of unallocated surplus, to the new affiliated bank. Calculate 
the association's share before deduction of the exit fee as of the 
monthend preceding the reaffiliation date (or the termination date if 
it is the same as the reaffiliation date) in accordance with the 
liquidation provisions of your bylaws, unless we determine that the 
liquidation provisions would result in an inequitable distribution. If 
we make such a determination, we will require you to distribute the 
association's share of your unallocated surplus in accordance with 
another method that we deem equitable to stockholders. Before you 
distribute any unallocated surplus, you must make the following 
adjustments to stockholder equity as stated in the financial statements 
as of the monthend preceding the reaffiliation date (or the termination 
date if it is the same as the reaffiliation date):
    (1) Add back any deductions of FAC obligations due to the 
termination, taxes due to the termination, and the exit fee; and
    (2) Make any adjustments described under Sec. 611.1250(c) that we 
may require as we deem appropriate.
    (d) Prohibition on certain affiliations. No Farm Credit institution 
may retain an equity interest otherwise prohibited by law in a 
successor institution.


Sec. 611.1280  Dissenting stockholders' rights.

    (a) Definition. A dissenting stockholder is an equity holder (other 
than a System institution) in a terminating institution on the 
termination date who either:
    (1) Was eligible to vote on the termination resolution and voted 
against termination;
    (2) Was an equity holder on the voting record date but was not 
eligible to vote; or
    (3) Became an equity holder after the voting record date.
    (b) Retirement at option of dissenting stockholder. A dissenting 
stockholder may require a terminating institution to retire the 
stockholder's equity interest in the terminating institution.
    (c) Value of a dissenting stockholder's interest. You must pay a 
dissenting stockholder according to the liquidation provision in your 
bylaws, except that you must pay at least par or face value for 
eligible borrower stock (as defined in section 4.9A(d)(2) of the Act). 
If we determine that the liquidation provision is inequitable to 
stockholders, we will require you to calculate their share in 
accordance with another formula that we deem equitable.
    (d) Calculation of interest of a dissenting stockholder. Before you 
retire any equity, you must make the following adjustments to the 
amount of stockholder equity as stated in the financial statements on 
the termination date:
    (1) Deduct any FAC obligations and taxes due to the termination 
that you have not yet recorded;
    (2) Deduct the amount of the exit fee; and
    (3) Make any adjustments described under Sec. 611.1250(c) that we 
may require as we deem appropriate.
    (e) Form of payment to a dissenting stockholder. You must pay a 
dissenting stockholder for his equities as follows:
    (1) Pay cash for the par or face value of purchased stock, less any 
impairment;
    (2) For equities other than purchased equities, you may:
    (i) Pay cash;
    (ii) Cause or otherwise provide for the successor institution to 
issue, on the date of termination, subordinated debt to the stockholder 
with a face value equal to the value of the remaining equities. This 
subordinated debt must have a maturity date of 7 years or less, must 
have priority in liquidation ahead of all equity, and must carry a rate 
of interest not less than the rate (at the time of termination) for 
debt of comparable maturity issued by the U.S. Treasury plus 1 percent; 
or
    (iii) Provide for a combination of cash and subordinated debt as 
described above.
    (f) Payment to holders of special class of stock. If you have 
adopted bylaws under Sec. 611.1210(f), you must pay a dissenting 
stockholder who own shares of the special class of stock an amount 
equal to the lower of the par (or face) value or the value of such 
stock as determined under Sec. 611.1280(c) and (d).
    (g) Notice to equity holders. The notice to equity holders required 
in Sec. 611.1240(e) must include a form for stockholders to send back 
to you, stating their intention to exercise dissenters' rights. The 
notice must contain the following information:
    (1) A description of the rights of dissenting stockholders set 
forth in this section, and the approximate value per share that a 
dissenting stockholder can expect to receive. State whether the 
successor institution will require borrowers to be stockholders or 
whether it will require stockholders to be borrowers.
    (2) A description of the current book and par value per share of 
each class of equities, and the expected book and market value of the 
stockholder's interest in the successor institution.
    (3) A statement that that a stockholder must return the enclosed 
form to you within 30 days if the stockholder chooses to exercise 
dissenters' rights.
    (h) Notice to subsequent equity holders. Equity holders that 
acquire their equities after the termination vote

[[Page 43549]]

must also receive the notice described in paragraph (g) of this 
section. You must give them at least 5 business days to decide whether 
to request retirement of their stock.
    (i) Reconsideration. If a reconsideration vote is held and the 
termination is disapproved, the right of stockholders to exercise 
dissenters' rights is rescinded. If a reconsideration vote is held and 
the termination is approved, you must retire the equities of dissenting 
stockholders as if there had been no reconsideration vote.


Sec. 611.1285  Loan refinancing by borrowers.

    (a) Disclosure of credit and loan information. At the request of a 
borrower seeking refinancing with another System institution before you 
terminate, you must give credit and loan information about the borrower 
to such institution.
    (b) No reassignment of territory. If, at the termination date, we 
have not assigned your territory to another System institution, any 
System institution may lend in your territory, to the extent otherwise 
permitted by the Act and the regulations in this chapter.


Sec. 611.1290  Continuation of borrower rights.

    You may not require a waiver of contractual borrower rights 
provisions as a condition of borrowing from and owning equity in the 
successor institution. Institutions that become other financing 
institutions on termination must comply with the applicable borrower 
rights provisions in the Act and subparts K, L, and N of part 614 of 
this chapter.

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, 2097, 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, 2279c-1, 2279f, 2279f-1, 2279aa, 2279aa-5); 
sec. 413 of Pub. L. 100-233, 101 Stat. 1568, 1639.

Subpart C--Bank/Association Lending Relationship


Sec. 614.4130  [Amended]

    2. Amend Sec. 614.4130 by removing the reference 
``Sec. 611.1205(c)'' and adding in its place the reference 
``Sec. 611.1205'' in paragraph (a).

    Dated: August 15, 2001.
Jeanette C. Brinkley,
Acting Secretary, Farm Credit Administration Board.
[FR Doc. 01-20907 Filed 8-17-01; 8:45 am]
BILLING CODE 6705-01-P