Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
For Immediate Release
Contact: Martha Schober or Christine Quinn, 703-883-4056
Web site: www.fca.gov
FCA Board Approves Proposed Rule Governing Farmer Mac’s Risk-Based Capital Stress Test
McLEAN, Va., August 9, 2007 — The Farm Credit Administration (FCA or Agency) Board adopted today a proposed rule that would revise FCA regulations governing the Risk-Based Capital Stress Test (RBCST) for the Federal Agricultural Mortgage Corporation (Farmer Mac). Farmer Mac was created by the Agricultural Credit Act of 1987 to provide a secondary market for agricultural real estate and rural housing mortgage loans.
The RBCST calculates the minimum amount of regulatory capital that Farmer Mac is required to hold.
The proposed version of the RBCST (1) adds a component to recognize the risk-reducing characteristics of structures such as Off-Balance-Sheet AgVantage, a new loan product whose volume accounts for a growing percentage of Farmer Mac’s program volume; (2) adds a component to recognize counterparty risk on nonprogram investments; and (3) revises the estimated carrying costs of nonperforming loans.
The proposed rule, which would amend the regulations at 12 CFR part 652, subpart B, will be published in the Federal Register for a 45-day comment period. Comments for the proposed rule may be submitted by electronic mail to firstname.lastname@example.org, through the Pending Regulations section of FCA’s Web site at www.fca.gov, or through the Federal Government Web portal at www.regulations.gov.
Comments also may be sent by mail to S. Robert Coleman, Director, Office of Secondary Market Oversight, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090, or by fax to 703-790-3260. The public may read submitted comments at the FCA office in McLean, Virginia, or on FCA’s Web site at www.fca.gov.
In other action, the Board adopted a revised bookletter to provide guidance to all Farm Credit System (FCS or System) institutions on interpreting the phrase “sound and constructive credit” in the context of the young, beginning and small (YBS) farmers and ranchers mission of the FCS.
FCA Chairman Nancy Pellett said, “Because young, beginning and small farmers and ranchers are vital to the future of agriculture and rural America, they must continue to be a top priority. We believe this revised bookletter will be helpful in providing the System with guidance on the options it has for serving these important groups.”
Section 4.19 of the Farm Credit Act of 1971, as amended, requires System associations to establish programs to provide “sound and constructive credit” to these farmers and ranchers to help them begin, grow or remain in agricultural production. Sound and constructive credit may include credit for the complete credit needs of YBS farmers and ranchers.
The bookletter also provides guidance to System associations for treating part-time YBS farmers who demonstrate a commitment and intent to progress toward making agricultural production their primary business and vocation as full-time farmers for the purposes of extending credit to them. It encourages System lenders to provide credit enhancements so that YBS farmers can qualify for financing. It also encourages System lenders to mitigate the risk of YBS credit by setting aside capital designated for its YBS program through increased coordination with other lending entities and by sharing best practices.
In other business, the Board received a report on Agency operations from the Office of Management Services.
On August 7, the Board authorized the FCS Building Association to amend the existing lease for FCA’s field office in Bloomington, Minnesota, to run through October 31, 2014. The action also authorized an increase in office space.
The Farm Credit Administration is the safety and soundness regulator of the cooperative Farm Credit System. FCA charters, regulates and examines the 107 banks, associations and service corporations of the FCS. System institutions make loans to agricultural producers and their cooperatives nationwide. Members of the FCA Board are Nancy C. Pellett, Chairman and CEO; Dallas P. Tonsager; and Leland A. Strom.
Note: FCA news releases are available on the Internet. Access the FCA Web site at www.fca.gov.