Title: ADVANCE NOTICE OF PROPOSED RULEMAKING--Accounting and Reporting Requirements--12 CFR Part 621
Issue Date: 12/14/1992
Agency: FCA
Federal Register Cite: 57 FR 58997

12 CFR Part 621

RIN 3052-AB32

Accounting and Reporting Requirements

ACTION: Advance notice of proposed rulemaking.

SUMMARY: The Farm Credit Administration (FCA) issued regulations on Accounting and Reporting Requirements, as a proposed regulation on August 27, 1985 (50 FR 34711). The regulation was published as a final regulation on March 13, 1986 (51 FR 8644). The regulation was developed in large part to set requirements and standards for institutions to use in accounting for high-risk assets (i.e., problem loans) and disclosing loan performance characteristics. The regulation included specific standards and reporting requirements for nonperforming loans. The regulation defined nonperforming loans as nonaccrual, formally restructured, other restructured and reduce rate, and other high-risk loans. The FCA is soliciting comments from the public on possible amendments to the regulatory requirements.

DATES: Comments should be received on or before February 12, 1993.

ADDRESSES: Comments should be mailed or delivered (in triplicate) to Patricia W. DiMuzio, Division Director, Regulation Development Division, Office of Examination, Farm Credit Administration, McLean, Virginia 22102-5090. Copies of all comments received will be available for examination by interested parties in the Regulation Development Division, Farm Credit Administration.

Linda C. Sherman, Policy Analyst, Regulation Development Division, Office of Examination, Farm Credit Administration, McLean, Virginia 22102-5090, (703) 883-4498, TDD (703) 883-4444, or

William L. Larsen, Senior Attorney, Regulatory Operations Division, Office of General Counsel, Farm Credit Administration, McLean, Virginia 22102-5090, (703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: The FCA has undertaken a project to amend and update 12 CFR part 621, Accounting and Reporting Requirements, to promote consistency with industry practices pertaining to problem loan accounting issues and to ensure that the regulatory requirements are standards of 12 CFR part 621 are consistent with those of generally accepted accounting practices.

Since the regulations were issued in 1986, there have been continued efforts on the part of both the FCA and the Farm Credit System (System) to provide additional guidance in the area of problem loan accounting. However, differences continue to exist which have resulted in financial disclosures of problem loans by System institutions that are not readily comparable to similar disclosures of other financial institutions.

After careful analysis of the issues and before initiating the actual drafting of proposed regulations, the FCA has determined that it would be appropriate and beneficial to solicit input from the System and the public on this project through an advance notice of proposed rulemaking (ANPRM). Accordingly, the FCA requests public comments on the accounting and reporting requirements contained in 12 CFR part 621. Comments received will be considered in the drafting of proposed regulations amending part 621.

The FCA is seeking comment from the public with regard to financial disclosures of problem loans by System institutions, particularly as they relate to the following questions:

(1) The FCA is considering modifying 621.2 regarding nonperforming loans and the categories within that area. What costs and/or benefits would you foresee if modifications were to be made to this area? Would revising the nonperforming loan categories enhance the usefulness of performance classifications in measuring the risk to System institutions? System institutions are requested to quantify any costs or savings as specifically as possible.

(2) What benefit would be gained by providing financial disclosure of credit quality statistics for the purpose of risk identification, in addition to the current practice of reporting and disclosing loan performance characteristics?

(3) It has been suggested that the FCA regulations pertaining to problem loan disclosure should parallel those prescribed in the Securities and Exchange Commission's (SEC) Industry Guide 3, "Statistical Disclosure by Bank Holding Companies" to promote comparability between System institutions and commercial banks. If 12 CFR part 621 were amended in such a fashion, what impact would this have on the institutions' disclosure of portfolio risk?

(a) For example, if the other high-risk (OHR) category were to be modified or eliminated, what other types of disclosures, if any, would be appropriate to identify those loans previously disclosed in the OHR category?

(b) What alternatives, if any would you propose for the other restructured and reduced rate category?

(4) The FCA is considering expanding existing nonaccrual loan guidelines to provide direction with regard to the treatment of the application of payments on nonaccrual loans, income recognition on nonaccrual loans, and criteria for reinstatement to accrual loan status. The FCA is seeking information on what criteria is currently used by lending institutions in this area, and what criteria should be established.

(5) The FCA is considering modifications to the existing rule of aggregation. The FCA received considerable comment on the rule of aggregation as it was discussed in the proposed lending limit regulations (56 FR 2452, January 23, 1991). The FCA is seeking input as to how the rule of aggregation, as discussed in 12 CFR part 621, relates to performance categories. In particular, when should the rule of aggregation be applied and what criteria should be established regarding what constitutes an independent credit risk?

(6) Please include any other comments relevant to financial disclosures of problem loans by System institutions, particularly as they relate to the above topics.

Dated: December 8, 1992.

Curtis M. Anderson,

Secretary, Farm Credit Administration Board.

[FR Doc. 92-30301 Filed 12-11-92; 8:45 am]