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Capital Adequacy - Capital Components; Basel Accord Tier 1/Tier 2 - ANPRM

Dear Wade and JC;

As part of the Systems response to the ANPRM on capital adequacy regulations, attached is a cover memo and discussion paper, related to the retention of capital counting agreements and Tier 1 capital treatment of Bank patronage stock in a Tier 1/Tier 2 capital regime. Given the long history of issues and the importance of this topic to the U.S. AgBank District, we retained McDermott, Will & Emery (MW&E) to research this issue and assist in the development of the discussion paper.

We believe strongly in the merits of a capital counting agreement based on the distinction between required investment (counted at the Bank level) and excess investment (counted at the Association level) and that the Bank and Association should be entitled to count patronage stock as “Tier 1” capital.

We appreciate your consideration of this information. Please feel free to contact Charles Pfeifer at 316.266.5188 or me at 316.266.5630 if you have any questions or would like to discuss this information.

Best Regards,

David D. Janish| Senior Vice President - Finance | u.s. agbank, fcb | 245 N. Waco | Wichita, ks 67202
phone 316.266.5630| fax 316.291.5030 | mobile 316.214.4450 |

Capital Allocation Agreements memo- discussion paper.pdf