Title: PROPOSED RULE--Loan Policies and Operations--12 CFR Part 614
Issue Date: 08/06/1981
Federal Register Cite: 46 FR 40028
FARM CREDIT ADMINISTRATION
12 CFR Part 614
Loan Policies and Operations
AGENCY: Farm Credit Administration.
ACTION: Proposed rule.
SUMMARY: The Farm Credit Administration, by its Federal Farm Credit Board, publishes for public comment proposed new and amended regulations to implement a number of the major authorities conferred on institutions of the Farm Credit System by the Farm Credit Act Amendments of 1980, Pub. L. 96-592. The proposed regulations relate to Federal intermediate credit bank lending authorities, bank for cooperatives' loan terms and conditions, and bank for cooperatives' lending limits.
DATE: Written comments must be received on or before October 5, 1981.
ADDRESSES: Submit any comments or suggestions in writing to Donald E. Wilkinson, Governor, Farm Credit Administration, Washington, DC 20578. Copies of all communications received will be available for examination by interested persons in the Office of Director, Public Affairs Division, Office of Administration, Farm Credit Administration.
FOR FURTHER INFORMATION CONTACT:
Larry H. Bacon, Deputy Governor, Office of Administration, 490 L'Enfant Plaza, SW., Washington, DC 20578 (202-755-2181).
SUPPLEMENTARY INFORMATION: The Farm Credit Administration proposes amendments to its current regulations relating to the lending authorities of the Federal intermediate credit banks so as to define the eligibility requirements for institutions from which loans may be discounted or purchased as specified in the Farm Credit Act of 1971, as amended, 12 U.S.C. 2001, et seq., ("1971 Act") and the basis on which such activities are to be conducted.
It is proposed that the regulations of the Farm Credit Administration dealing with banks for cooperatives' loan terms and conditions be revised to reflect amendments to section 3.7(b) of the 1971 Act which authorize banks for cooperatives to make loans, commitments, and extend other technical assistance to foreign and domestic parties, provided a voting stockholder of a bank for cooperatives will benefit substantially.
In addition, amendments are being proposed to regulations concerning the bank for cooperatives' lending limit in order to accommodate the new types of international financing and leveraged lease financing authorized under a number of provisions of Title III of the 1971 Act.
The current regulations of the Farm Credit Administration relating to Federal intermediate credit bank lending authorities are being revised to specify those institutions from which loans may be discounted or purchased as specified in the Farm Credit Act Amendments of 1980 (P.L. 96-592).
Part 614 of Chapter VI, Title 12, of the Code of Federal Regulations is amended as shown.
PART 614 -- LOAN POLICIES AND OPERATIONS
1. Subpart 614.4100 is amended by revising paragraphs (a) and (b) to read as follows:
Subpart C -- Lending Authorities
* * * * *
§ 614.4100 Federal intermediate credit banks.
(a) The banks are authorized to make loans and extend other similar financial assistance to and discount for production credit associations, with their endorsement or guaranty, any note, draft, and other obligation presented by such association. In addition, the banks may participate in loans to eligible borrowers with such associations or other Federal intermediate credit banks.
(b) The banks are authorized to make loans and extend other similar financial assistance to, discount for, and purchase with recourse from any a national bank, State bank, trust company, agricultural credit corporation, incorporated livestock loan company, savings institution, credit union, or any association of agricultural producers engaged in the making of loans to farmers and ranchers, and any corporation engaged in the making of loans to producers or harvesters of aquatic products, notes, drafts, and other obligations for loans which have been made for eligible purposes in accordance with provisions of Subpart P of Part 614 of the Regulations. All such financial instruments shall bear the endorsement or guaranty of the originating lender.
* * * * *
2. Section 614.4210 is amended by revising paragraph (b) and adding new paragraphs (c) through (c)(4) to read as follows:
Subpart E -- Loan Terms and Conditions
§ 614.4210 Banks for cooperatives.
(a) * * *
(b) The documents(s) evidencing a loan approval by a bank shall set out the terms and conditions under which a loan is approved. A loan agreement shall be executed between the borrower and the bank.
(c) Term loans made to finance a foreign or domestic party with respect to transactions with an eligible cooperative and term loans to a foreign or domestic party in which an eligible cooperative has an ownership interest shall be subject to the following conditions:
(1) The loan shall be denominated in U.S. dollars, in order to eliminate foreign exchange risk upon repayment.
(2) The borrower's obligation shall be guaranteed or insured against default under such policies as are available in the United States and other countries. Exceptions may be made for borrowers with long-standing successful business relationships with the banks for cooperatives' customers or borrowers with a high credit rating.
(3) For an eligible cooperative borrower(s) that has a majority ownership interest, financing may be extended for the full value of the transaction; otherwise, financing may be extended only to approximate the percentage of ownership.
(4) Unless otherwise designated, the loan shall be submitted to the Farm Credit Administration for prior approval.
3. Section 614.4354 is amended by revising paragraphs (a)(1)(i) through (v) and by adding paragraphs (a)(1)(vi) through (xi), (a)(2), (a)(3), (a)(4); (b); (c)(1) and (2); (d)(1) and (d)(3); and (e) to read as follows:
Subpart J -- Lending Limits
* * * * *
§ 614.4354 Banks for cooperatives.
(a) * * *
(1) * * *
(i) Term loans to eligible cooperatives: 25 percent.
(ii) Term loans to foreign and domestic parties: 10 percent.
(iii) Lease loans qualifying under § 614.4120 and applying to the lessee: 25 percent.
(iv) Standby letters of credit qualifying under § 614.4810: 35 percent.
(v) Guarantees qualifying under § 614.4800: 35 percent.
(vi) Seasonal loans exclusive of seasonal loans qualifying under § 614.4260(c): 35 percent.
(vii) Foreign trade receivables qualifying under § 614.4700: 50 percent.
(viii) Bankers acceptances held qualifying under § 614.4710 and seasonal loans qualifying under § 614.4260(c): 50 percent.
(ix) Export and import letters of credit qualifying under § 614.4720: 50 percent.
(x) The sum of term and seasonal loans exclusive of seasonal loans qualifying under § 614.4260(c): 35 percent.
(xi) The sum of (i) through (ix): 50 percent.
(2) Loans to an eligible borrower secured by notes of individuals or business entities which are current and carry a full recourse endorsement or unconditional guarantee by the borrower, if the bank determines the financial condition, repayment capacity, and other factors of the original maker reasonably justify the credit granted by the endorser, qualify for the basic lending limits provided in paragraph (a)(1) which may be applied for each original notemaker, provided the following listed documents fully support such a determination and are in the files of the bank:
(i) * * *
(ii) * * *
(iii) * * *
(3) Net worth for the calculation of lending limits at June 30 shall exclude 20 percent of the bank's undistributed earnings and shall not include any portion of Central Bank for Cooperatives' undistributed earnings.
(4) Loans made within the established lending limits that become excessive because of a subsequent decrease in the bank's net worth shall be reduced to the lending limits in an orderly manner over a reasonable period, in accordance with a plan submitted to the Farm Credit Administration.
(b) Total system. Loans outstanding at any one time to any one borrower from one or more district banks and the Central Bank for Cooperatives, exclusive of participations sold to institution(s) other than banks for cooperatives, shall not exceed the percentages specified in paragraph (a)(1) applied to the combined net worth of the 13 banks for cooperatives as determined by the Farm Credit Administration. Loans made within previously established limits that become excessive because of changes in lending limits prescribed herein may be held and liquidated in accordance with terms individually specified by the Farm Credit Administration.
(c) * * *
(1) Direct loans outstanding at any one time to any one borrower as defined by these regulations, exclusive of participations sold to others, shall not exceed the lending limit percentages prescribed in paragraph (a)(1) for district banks.
(2) Participations in loans at any one time to any one borrower as defined by these regulations, exclusive of participations resold to institutions other than banks for cooperatives, shall not exceed amounts greater than the lending limit described in paragraph (b) less amounts held by the district banks.
(d) * * *
(1) Determine its balance sheet net worth total as of the preceding June 30 or December 31, whichever is more recent, or at any interim date determined by the Farm Credit Administration as a result of material changes in the bank's net worth.
(2) * * *
(3) Apply the lending limit percentages outline in paragraph (a)(1).
(4) * * *
(e) The term "one borrower" is generally defined as a cooperative organization or foreign or domestic party and, if any, its affiliated organizations which are controlled by a common directorate or management, or wherein such primary organization owns in excess of 50 percent of the net worth or voting stock of an affiliated organization; provided, however, that any such affiliated organization shall be defined as a separate borrower under certain conditions, subject to prior approval by the Farm Credit Administration. Such definitions shall be based primarily on the conclusion that the affiliated organization would be viable in the event of the demise of the other organization. Particular consideration should be given to, but not limited to, the following items:
* * * * *
(Secs. 5.9, 5.12, 5.18, Pub. L. 92-181, 85 Stat. 619, 620, 621, 12 U.S.C. 2243, 2246 and 2252)
C. T. Fredrickson,
[FR Doc. 81-22910 Filed 8-5-81; 8:45 am]
BILLING CODE 6705-01-M