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 Proposes Rule to Amend Priority of Claims Regulations
McLEAN, Va., February 8, 2007 — The Farm Credit Administration (FCA) Board today adopted a proposed rule to amend the priority of claims regulations, which govern the distribution of assets of a Farm Credit System (FCS or System) bank in liquidation.
The proposed rule would provide the same priority of claims rights to FCS banks if they made payments under a reallocation agreement to bondholders of a defaulting bank as they would receive if they made such payments under a joint and several call by FCA.
The Farm Credit banks have been considering entering into an agreement among themselves that will provide for nondefaulting banks to pay the Systemwide obligations on which a defaulting bank is primarily liable before the joint and several calls under the Farm Credit Act of 1971, as amended (Act), are triggered. However, before entering into an agreement, the banks petitioned FCA to amend its regulations to give them the same priority of claims rights that the banks would receive if they made the payments subject to a joint and several call under the Act.
This proposed rule would establish that the banks’ payments would have the same priority, whether made under a joint and several call or under a contractual agreement among the banks. The contractual agreement would be subject to FCA’s prior approval.
The proposed rule also clarifies that, in receiverships of all types of System institutions, all claims of the same class or priority will receive payments on a pro rata basis if there are insufficient funds to pay the class of claims in full.
The proposed rule will be published in the Federal Register for a 60-day comment period. Comments for the proposed rule may be submitted by electronic mail to email@example.com, 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 Gary K. Van Meter, Deputy Director, Office of Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090, or by fax to 703-734-5784. Comments received may be reviewed at the FCA office in McLean, Virginia, or through FCA’s Web site at www.fca.gov.
In other business, the Office of Management Services presented a report on the Agency’s first quarter budget status and the status of human capital initiatives.
The FCA Board has approved one notational vote since its January 11, 2007, meeting. Notational votes are actions taken by the FCA Board between Board meetings.
On January 18, the Board approved a request from the Farm Credit Leasing Services Corporation (FCL) to amend Article VII of its Articles of Incorporation to reduce the size of FCL’s board of directors from three to two directors. Under the amendment, a third director may be appointed, but the director does not have to be an outside director. FCL is wholly owned and controlled by CoBank, which has two outside directors. Also, FCL, as a service corporation organized and chartered under section 4.25 of the Act, is not required to have an outside director.
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.