[Federal Register Volume 68, Number 12 (Friday, January 17, 2003)]
[Notices]
[Pages 2540-2541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1136]


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FARM CREDIT ADMINISTRATION

RIN 3052-AC13


Loan Policies and Operations; Loan Syndication Transactions

AGENCY: Farm Credit Administration.

ACTION: Notice.

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SUMMARY: The Farm Credit Administration (FCA) is seeking public

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comment on the regulatory treatment of Farm Credit System (FCS or 
System) loan syndication transactions. The FCA has received requests to 
provide guidance about the scope of System institutions' authorities to 
engage in syndications that non-System lenders originate, and the FCA 
seeks input from the public before it responds.

DATES: Please send your comments to the FCA by February 18, 2003.

ADDRESSES: You may send comments by electronic mail to [email protected] 
or through the Pending Regulations section of FCA's Web site, http://www.fca.gov. You may also send 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 to (703) 734-5784. You may review 
copies of all comments we receive at our office in McLean, Virginia.

FOR FURTHER INFORMATION CONTACT: Dennis K. Carpenter, Senior Policy 
Analyst, Office of Policy and Analysis, Farm Credit Administration, 
McLean, VA 22102-5090, (703) 883-4498, TTY (703) 883-4434; or Richard 
A. Katz, Senior Attorney, Office of General Counsel, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-
2020.

SUPPLEMENTARY INFORMATION:

I. Background

    System institutions have asked the FCA to provide guidance on the 
regulatory treatment of loan syndications that they enter into with 
non-System lenders. The FCA Board recognizes the importance of funding 
to agriculture and rural America through multilender transactions, 
including loan syndications and participations.
    The Board acknowledges that System institutions may desire to 
engage in loan syndications for many different reasons, some of which 
would include:
    [sbull] Diversification of an institution's portfolio, which is 
often concentrated in certain industries or geographic regions;
    [sbull] Diversification of an institution's portfolio relative to 
loan size and risk exposure limits;
    [sbull] Increased revenue and in many cases, cooperative patronage 
arising from lower cost of credit delivery;
    [sbull] Networking--strengthening cooperation and relationships 
between FCS institutions and non-System lenders;
    [sbull] Increased knowledge of specific industries;
    [sbull] Support for existing and potential customer bases; and
    [sbull] Expanded opportunities to provide complementary services 
such as appraisal services, industry expertise, loan origination and 
payment collection expertise, and administrative capacity.
    Several System institutions have suggested that loan syndications 
should be treated as part of their participation authority. However, we 
have previously indicated that loan syndication transactions come 
within the System's direct loan authorities. If loan syndications were 
treated as within the System's direct loan authority, the System's 
share of a loan syndication would be subject to the stock purchase, 
borrower rights, and territorial concurrence requirements of the Farm 
Credit Act of 1971, as amended (Act) and applicable regulations. In 
addition, Farm Credit banks operating under title I of the Act that 
have transferred their direct lending authority to their affiliated 
associations would not be authorized to enter into loan syndications. 
Finally, System institutions would not be authorized to purchase 
assignments of loan syndications from outside the System.

II. Questions

    We recognize that the financial markets and the funding needs of 
agriculture continue to evolve. We support the need of the System to 
evolve with agriculture and the financial markets. Therefore, we seek 
your comments on the following:
    1. What is the proper regulatory treatment of loan syndications?
    2. Assuming syndication transactions are within the System's loan-
making authority, should the FCA consider regulatory changes that 
allow: (a) Borrowers to waive borrower rights in syndication 
transactions; and (b) associations to take part in syndications to 
eligible borrowers who are located in the chartered territories of 
other associations without consent?
    3. If the FCA would choose to recommend legislative changes to 
Congress regarding the System's authority to engage in various types of 
multilender transactions with non-System lenders, what specifically 
should the FCA include in its recommendation?

    Dated: January 14, 2003.
Jeanette C. Brinkley,
Secretary, Farm Credit Administration Board.
[FR Doc. 03-1136 Filed 1-16-03; 8:45 am]
BILLING CODE 6705-01-P