[Federal Register Volume 69, Number 52 (Wednesday, March 17, 2004)]
[Notices]
[Pages 12694-12696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5988]


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FARM CREDIT ADMINISTRATION


Systematic Collection of Standardized Loan Data

AGENCY: Farm Credit Administration.

ACTION: Notice with request for comment.

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SUMMARY: The Farm Credit Administration (FCA or agency) is seeking 
public input on the changes it should consider making to its systematic 
collection of standardized loan data. The agency currently collects 
basic descriptive information from Farm Credit System (FCS or System) 
banks and associations, in a standardized format, using the Loan 
Account Reporting System--Modified (LARS-M). The agency is planning to 
reengineer its collection of standardized loan data to meet its current 
and future information needs. In support of this reengineering project, 
FCA is seeking public comment on changes the agency should consider 
making to the loan data it collects; what processes and technological 
approaches to employ when collecting loan data; how to minimize the 
reporting burden on System institutions while meeting agency needs; and 
what types of standardized reports to make available to the general 
public and System institutions.

DATES: Please send your comments to the FCA by May 3, 2004.

ADDRESSES: We encourage you to 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 Andrew Jacob, 
Assistant Director, Office of Policy and Analysis, Farm Credit 
Administration, 1501 Farm Credit Drive, McLean, VA 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: 
    Gaylon J. Dykstra, Policy Analyst, Office of Policy and Analysis, 
Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4073, TTY 
(703) 883-4434;
    or
    Howard Rubin, Senior Attorney, Office of the General Counsel, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4029, TTY (703) 
883-2020.

SUPPLEMENTARY INFORMATION: 

I. Background

A. What Loan Data Does FCA Collect?

    FCA currently collects certain standardized loan information from 
FCS banks and associations using the LARS-M. Examples of standardized 
variables collected include:
    1. The date the loan was originated and the date on which it 
matures;

[[Page 12695]]

    2. The primary agricultural commodity produced by the borrower;
    3. Whether a loan is covered by a government guarantee;
    4. If a loan is past due, the number of days the loan payment is 
delinquent;
    5. The risk of the loan based on the uniform classification system 
as defined in the FCA Examination Manual (EM-320); and
    6. Whether the borrower is in bankruptcy or the loan is in 
foreclosure status.
    The agency also obtains direct institution-specific loan data as 
needed for examination purposes.

B. How Does FCA Use Loan Data?

    FCA uses loan information to support its supervision and regulation 
of System institutions. For supervisory purposes, loan information is 
important for evaluating portfolio risk associated with agricultural 
lending and analyzing credit risks in individual agricultural loans. 
Loan data are also required for monitoring Systemwide trends and 
emerging vulnerabilities. For regulatory purposes, loan information is 
used for developing regulations and other public policy actions. FCA 
also uses loan data in fulfilling reporting requirements and 
informational requests.

C. Identifying Loan Portfolio Risk

    Identification of risks in a loan portfolio is essential to FCA's 
evaluation of an institution's safety and soundness. Loan portfolio 
risk reflects individual loan exposures and the combined effects on a 
portfolio. Risk in individual loans is a function of characteristics 
associated with a borrower's agricultural operation and financial 
condition and performance. Examples of loan characteristics include the 
commodities produced, geographic location, payment history, financial 
strength, and off-farm income. These types of loan data are important 
determinants of the credit risk of a loan. Therefore, FCA access to 
loan data is critical for evaluating portfolio risks of System 
institutions and the credit risk of individual loans.

D. Monitoring Systemwide Trends

    Analyzing Systemwide trends and emerging vulnerabilities is a 
critical agency activity for monitoring the overall mission 
accomplishment and ongoing safety and soundness of the FCS. Monitoring 
Systemwide trends helps FCA identify when risks are impacting the 
System's agricultural loans. For example, the System may show an 
overall increase in delinquent loans. Access to loan data allows the 
agency to analyze this trend and associated characteristics, such as 
geographic location, commodity linkage, or other commonalities among 
affected institutions. Similarly, the agency uses loan data to analyze 
the impact of emerging vulnerabilities, such as food safety concerns, 
trade disputes, changes in government support programs, shifts in 
consumer preferences, and climactic events. Using loan data, the agency 
can better identify vulnerable System loans. Access to loan data 
increases FCA's understanding of the systemic risks facing the FCS and 
helps the agency determine if any policy actions are needed.

E. Developing Regulations and Policy

    FCA uses loan data to support its regulation of System 
institutions. For example, loan data provide information needed to 
evaluate the impact of capital adequacy standards, lending limits, and 
liquidity requirements. Moreover, access to loan data allows the agency 
to analyze the effectiveness and results achieved from regulations and 
policy actions.

F. Fulfilling Reporting Requirements and Responding to Information 
Requests

    The agency is required to periodically provide reports to Congress. 
The agency also frequently responds to information requests from 
Congress and others. Ready access to loan data aids FCA in timely and 
accurately responding to reporting requirements and information 
requests.

G. Why Is FCA Considering Changing Its Standardized Collection of Loan 
Data?

    LARS-M was first implemented in 1987 and last revised in 1993. 
While LARS-M provides FCA with a standardized and centralized 
collection of loan data, it has not kept pace with changes in financial 
reporting systems, is incomplete as to loan types, lacks detail, and 
only allows access to current quarter data. FCA, therefore, believes 
improvements are needed to fully meet the agency's current and future 
information needs.
    FCA examiners also obtain loan information directly from System 
institutions on an as-needed basis for use in conducting examinations, 
but this information is not standardized or centralized. As a result, 
directly downloaded data are not useful or available for Systemwide 
analysis or reporting. More importantly, the downloaded data vary 
considerably by FCA field office since loan information systems vary 
across System institutions. Therefore, standardized and centralized 
collection of loan data would help overcome the variety in electronic 
loan information systems used by FCS institutions.

II. Objectives of This Project

    The objectives of FCA's project to reengineer its standardized 
collection of loan data from System institutions are to:
    1. Determine the appropriate set of loan data to collect on a 
systematic, centralized, and standardized basis that meets the agency's 
needs;
    2. Streamline the collection process of loan data to enhance 
reliability, timeliness, and data accuracy;
    3. Minimize the reporting burden on System institutions; and
    4. Provide appropriate standardized reports to internal and, 
potentially, external parties.
    The reengineering project will address the limitations of the 
current approach to a standardized collection of loan data. The agency 
is already considering the data elements it needs to collect on 
individual loans, including what specific financial information, loan 
performance data, and other essential information about loan 
characteristics that are necessary for adequately evaluating portfolio 
and loan risks. Moreover, the project will also address the agency's 
need to collect information for all loans made by System institutions. 
Along with these considerations, the agency is evaluating the data 
elements needed to model loan performance characteristics through time, 
such as probability of default, loss severity, and exposures at 
default. In the future, modeling loan performance may become a key 
aspect in the evaluation of a System institution's capital adequacy. 
FCA is also evaluating new technologies to streamline and improve the 
collection process. This evaluation includes reducing the reporting 
burden by relying on an efficient process that utilizes information 
readily available in the different FCS institutions' electronic loan 
information systems.
    FCA is also evaluating the standardized reports the agency 
currently uses in conducting its supervisory and regulatory programs, 
including considering the type of reports to make available to the 
general public and System institutions in light of legal restrictions 
and other constraints regarding the release of private and sensitive 
business information used solely for examination purposes.

III. Questions

    To augment the agency's experience and expertise with agricultural 
lending practices and credit analysis, FCA is seeking public input on 
the changes it

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should consider making as it reengineers the systematic collection of 
standardized loan data from System institutions. Specifically, the 
agency requests comments on:
    1. What suggestions do you have regarding loan data elements?
    2. What processes and technological approaches to employ to 
streamline the collection of loan data?
    3. How to minimize the reporting burden on System institutions 
while meeting the agency's informational needs?
    4. What standardized reports to make available to the general 
public and System institutions, considering the need to protect private 
and proprietary confidential information?
    Along with these questions, we welcome any other comments or 
suggestions the agency should consider as it moves forward with this 
initiative.

    Dated: March 12, 2004.
Jeanette C. Brinkley,
Secretary, Farm Credit Administration Board.
[FR Doc. 04-5988 Filed 3-16-04; 8:45 am]
BILLING CODE 6705-01-P