[Federal Register Volume 67, Number 184 (Monday, September 23, 2002)]
[Proposed Rules]
[Pages 59479-59480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24031]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 67, No. 184 / Monday, September 23, 2002 / 
Proposed Rules  

[[Page 59479]]



FARM CREDIT ADMINISTRATION

12 CFR Part 614

RIN 3052-AC07


Loan Policies and Operations; Young, Beginning, and Small Farmers 
and Ranchers

AGENCY: Farm Credit Administration (FCA).

ACTION: Advance notice of proposed rulemaking (ANPRM).

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SUMMARY: The Farm Credit Administration (FCA or agency) is considering 
whether regulatory changes are needed to enhance the Farm Credit 
System's (System) service to young, beginning, and small farmers, 
ranchers, and producers or harvesters of aquatic products (YBS farmers 
and ranchers) and the agency's measurement and reporting of the 
System's YBS activities and performance.

DATES: You may send us comments by December 23, 2002.

ADDRESSES: Send us your comments by electronic mail to or through the 
Pending Regulations section of our Web site, www.fca.gov. You may also 
send written comments to Thomas G. McKenzie, Director, Regulation and 
Policy Division, Office of Policy and Analysis, Farm Credit 
Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090, or 
by facsimile transmission to (703) 734-5784. You may review copies of 
all comments we receive in the Office of Policy and Analysis, Farm 
Credit Administration.

FOR FURTHER INFORMATION CONTACT: Samuel R. Coleman, CFA, Senior Policy 
Analyst, Office of Policy and Analysis, Farm Credit Administration, 
McLean, VA 22102-5090, (703) 883-4498, TTY (703) 883-4434; or, Wendy R. 
Laguarda, Senior Counsel, Office of General Counsel, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-
2020.

SUPPLEMENTARY INFORMATION:

I. Objectives

    To ensure that the System accommodates the current and evolving 
needs of YBS farmers and ranchers for credit and closely related 
services, we seek comments in this ANPRM on ways to:
    1. Develop clear, meaningful, and results-oriented guidelines for 
System YBS policies and programs;
    2. Effectively measure the System's YBS performance to ensure that 
the System is fulfilling its YBS statutory mission; and
    3. Provide adequate reporting and disclosure to the public on the 
System's compliance with its statutory YBS mission.

II. Background

    The FCA's mission is to promote a safe and sound, competitive 
System to finance agriculture and rural America as authorized by 
Congress. The System has a special public purpose concerning YBS 
farmers and ranchers. Since 1980, Congress has required the System to 
prepare programs for furnishing sound and constructive credit and 
related services to YBS farmers and ranchers. Specifically, section 
4.19(a) of the Farm Credit Act of 1971, as amended (Act) states:

    Under policies of the district Farm Credit Bank board, each 
Federal land bank association and production credit association \1\ 
shall prepare a program for furnishing sound and constructive credit 
and related services to young, beginning, and small farmers and 
ranchers. Such programs shall assure that such credit and services 
are available in coordination with other units of the Farm Credit 
System serving the territory and with other governmental and private 
sources of credit.

    \1\ Thr requirements of this section of the Act also apply to 
Federal land credit associations as defined in 12 CFR 619.9155 and 
agricultural credit associations as defined in 12 CFR 619.9015
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    Even before the issuance of the Act and its 1980 amendments, the 
System had been serving all categories of YBS farmers and ranchers. The 
agency believes the System's continued success at serving all three 
categories, ``young,'' ``beginning,'' and ``small'' farmers and 
ranchers is crucial to a future generation of farmers and ranchers and 
a strong agricultural economy.

A. FCA's Focus on YBS Lending

    In 1998, the FCA Board adopted a policy statement that called for a 
renewed commitment by the System to YBS lending, provided guiding 
principles for enhanced service to YBS farmers and ranchers, and 
revised definitions for ``young,'' ``beginning,'' and ``small'' farmers 
and ranchers.\2\ To implement the policy statement, the FCA also issued 
a bookletter to the System that provided the revised YBS definitions 
and reporting procedures that were fully phased in by January 1, 
2001.\3\ FCA also requires the System to respond each year to a 
comprehensive questionnaire about the management and credit components 
of its YBS and outreach programs.
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    \2\ FCA-PS-75, Farm Credit System Service to Young, Beginning, 
and Small Farmers and Ranchers, effective December 10, 1998, 
available on the FCA Web site, www.fca.gov (under Legal Info., FCA 
Handbook).
    \3\ FCA BL-040, Policy and Reporting Changes for Young, 
Beginning, and Small Farmers and Ranchers Programs, issued December 
11, 1998, available on the FCA Web site, www.fca.gov (under Legal 
Info., FCA Handbook).
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    Since 1999, YBS lending programs have been a ``focus area'' of 
agency examinations where, among other factors, the agency has looked 
at the System's YBS board policies and procedures; YBS credit 
enhancement programs and underwriting standards; YBS coordination with 
Federal, state, System or other credit sources; demographic studies; 
marketing, advertising, and other outreach programs; and the quality of 
YBS reporting to System boards and FCA.
    In addition to this examination focus area, the FCA Board and staff 
have advocated greater attention on the System's mission to serve YBS 
farmers and ranchers. For example, the agency recently recognized 
several System associations for their successful YBS programs.\4\
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    \4\ See remarks by the Honorable Michael M. Reyna before the 
19th Annual Farm Credit Council meeting, January 22, 2002, available 
on the FCA Web site, www.fca.gov (under About FCA, FCA Board, 
Testimony, Statements, and Speeches).
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B. Report by the General Accounting Office

    On March 8, 2002, the General Accounting Office (GAO) issued a 
report on the FCA's oversight of the System's mission to serve YBS 
farmers and ranchers.\5\ The GAO, after conducting

[[Page 59480]]

its review that began in July 2001, recommended that the agency 
strengthen its oversight role of the System's YBS lending, promote YBS 
compliance, and highlight the System's efforts to provide service to 
YBS by:
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    \5\ Farm Credit Administration: Oversight of Special Mission to 
Serve Young, Beginning, and Small Farmers Needs to be Improved (GAO-
02-304), available on the GAO Web site, www.gao.gov/cgi-bin/getrpt?GAO-02-304.
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    1. Promulgating a regulation that outlines specific activities and 
standards that constitute an acceptable program to implement the YBS 
statutory requirement;
    2. Ensuring that examiners follow the guidance and complete the 
appropriate examination procedures related to YBS, and adequately 
document the work performed and conclusions drawn during examinations; 
and
    3.Publicly disclosing the results of the examinations for YBS 
compliance for individual System associations.
    In its response to Congress, the FCA noted its commitment to 
address the issues raised in the GAO report. Seeking public input 
through an ANPRM is a valuable step in ensuring that the System designs 
comprehensive YBS policies and programs that have a realistic and 
reasonable likelihood of success.

III. Questions

    1. What type of guidelines should FCA implement for YBS policies 
and programs? In your comments to this question, please consider 
whether:
    a. FCA should make regulatory or policy changes to enhance YBS 
policies and programs;
    b. Guidelines should require YBS programs to include both 
quantitative (such as YBS loan volume and portfolio percentage goals) 
and qualitative (such as YBS marketing and outreach strategies, special 
credit and related services programs, and joint YBS efforts) 
performance goals;
    c. Guidelines should be different for each YBS category--that is, 
different guidelines for ``young,'' ``beginning,'' and ``small'' 
farmers and ranchers;
    d. FCA should require YBS programs to include special credit 
treatment for YBS loans (including guarantors, concessionary 
underwriting standards, loan fees, interest rates, and differential 
loan covenants);
    e. In addition to its recent recognition of successful YBS 
programs, FCA should provide incentives, regulatory or otherwise, to 
the System to promote YBS programs;
    f. The System currently offers appropriate related services, such 
as farm business consulting, record keeping, insurance, and tax 
planning and preparation services to YBS farmers and ranchers;
    g. Certain types of marketing and outreach activities most help 
promote YBS programs;
    h. Certain types of System partnerships, alliances, or other joint 
efforts most help promote YBS programs; and
    i. The System should more effectively use Other Financing 
Institutions (OFIs), the Federal Agricultural Mortgage Corporation 
(Farmer Mac), loan participations, loan guarantees, specialized risk 
pools under Sec.  614.4165(c) of our regulations, and Federal, state, 
or private programs to promote YBS programs within each System 
association's risk-bearing capacity.
    2. How should FCA measure the System's YBS performance? In your 
comments to this question, please consider whether:
    a. FCA should establish a formal rating system for YBS performance 
similar to the agency's current Financial Institution Rating System 
(FIRS). If so, what rating components should we include in such a 
system and should we weigh each component equally?;
    b. The data currently available to assess YBS market penetration in 
System territories adequately and accurately measures the number of YBS 
farmers and ranchers in the territory. If not, what meaningful 
alternative data is available?;
    c. The data collected by the agency should focus on the 
``borrowers'' or ``loans'' when measuring each category of YBS farmers 
and ranchers;
    d. FCA should require System associations to conduct demographic 
studies and develop strategies to address inconsistencies between the 
YBS market in their lending area and their penetration of that market; 
and
    e. FCA should take into account the demographics of a System 
association's territory in rating YBS performance.
    3. How should FCA report and publicly disclose the System's YBS 
performance? In your comments to this question, please consider 
whether:
    a. The data that FCA currently collects from the System accurately 
portrays the System's YBS performance. If not, what additional or 
alternative data should the agency collect from the System? For 
example, should FCA require the System to report the number and amount 
of YBS loans made by OFIs, made through loan participations, made 
through risk pools created under Sec.  614.4165(c) of our regulations, 
or made through alliances, joint ventures, or other joint efforts with 
System or non-System entities?;
    b. FCA should require the System to report the number and volume of 
YBS loans sold to Farmer Mac, other secondary market entities, or non-
System lenders;
    c. FCA should require the System to report the number and type of 
related services that YBS farmers and ranchers are using, as well the 
success or lack of success of individual related services programs 
(currently, the agency only requires the reporting of the types of 
related services offered);
    d. FCA should require the System to report the types of, and costs 
associated with, YBS educational programs, technical assistance 
programs, marketing and outreach activities, and coordinated programs 
in which YBS farmers and ranchers have participated, as well the 
success or lack of success of individual programs (currently, the 
agency only requires the reporting of the types of programs offered);
    e. FCA should require the System to separately report loan 
performance information on each category of YBS farmer and rancher 
loans;
    f. FCA should make available to the public the YBS reports of each 
System bank and association and the agency's examination results of YBS 
performance; and
    g. FCA should require the System to include YBS performance reports 
and the agency's examination results of YBS performance in quarterly or 
annual reports to shareholders or would other disclosure methods be 
more effective.
    The agency welcomes any other comments you may have for us to 
consider in developing guidelines for System YBS policies and programs. 
We thank you for your comments.
    The FCA may also conduct public meetings at some future date to 
solicit information from the public on ways to enhance the System's 
service to YBS farmers and ranchers. If such meetings are planned, the 
agency will provide public notice through the Federal Register, as well 
as provide other methods for public announcement and invitation.

    Dated: September 17, 2002.
Jeanette C. Brinkley,
Acting Secretary, Farm Credit Administration Board.
[FR Doc. 02-24031 Filed 9-20-02; 8:45 am]
BILLING CODE 6705-01-P