Title: NOTICE OF INTENT; REQUEST FOR COMMENT--Statement on Regulatory Burden--12 CFR Ch. VI
Issue Date: 06/23/1993
Agency: FCA
Federal Register Cite: 58 FR 34003

12 CFR Ch. VI

Statement on Regulatory Burden

ACTION: Notice of intent; request for comment.


SUMMARY: The Farm Credit Administration is requesting comments regarding the appropriateness of the requirements it imposes on the Farm Credit System. This action is being taken to improve the regulatory environment in which the Farm Credit System operates. Comments are sought on the requirements that duplicate other governmental requirements, are not effective, or impose a burden that is greater than the benefit derived.

DATES: Comments must be submitted on or before September 21, 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.

FOR FURTHER INFORMATION CONTACT: Eric Howard, Policy Analyst, Regulation Development Division, Office of Examination, Farm Credit Administration, McLean, Virginia 22102-5090, (703) 883-4481, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: The Farm Credit Administration (FCA) is the Federal agency responsible for regulating the institutions that comprise the Farm Credit System (FCS). As a government-sponsored enterprise (GSE), the FCS primarily provides loans to farmers, ranchers, aquatic producers, and agricultural cooperatives. The FCS institutions also provide loans for rural housing and rural utilities.

Several Federal regulatory agencies responsible for the commercial banking and savings and loan industries recently announced plans to reduce loan documentation requirements for their highest quality lenders. They did so in response to expressed concerns that certain regulatory requirements have contributed to limited credit availability. Specifically, the concern is that the financial regulators have gone too far in their efforts to promote safety and soundness by making loan documentation and other requirements too burdensome, resulting in (1) A significant financial cost to lenders, and (2) an increased reluctance to lend. The Board of the FCA has considered whether or not it should adopt an approach similar to that recently adopted by the other regulators.

The FCA Board has decided to focus its attention on the broader concerns of the efficiency and the cost effectiveness of regulation of the FCS in general. Marginal modifications to the loan documentation program for a select few institutions do not seem to adequately address the problems and needs of the FCS. Moreover, the FCS, as a GSE, has statutory limitations on the use of its funds, making it difficult to correlate loan documentation that varies from institution to institution and from borrower to borrower, to a reluctance to lend money. Accordingly, the FCA is interested in hearing from the public, as outlined in this statement, about requirements it imposes that duplicate other governmental requirements, are not effective, or impose a burden that is greater than the benefit derived.

Loan Documentation

The FCA is interested in identifying those documents required by the FCA that exceed those necessary to carry out the Farm Credit Act of 1971, as amended, in a safe and sound manner. We request the comments focus on the FCA regulations, bookletters, or examination guidance that impose excess loan documentation requirements, as opposed to statutory requirements or lender procedures that the FCA does not control. For comments to be most helpful, they should be specific and identify the burden created by the documentation requirement. Commentors are asked to suggest alternatives to existing regulations and procedures that could achieve safe and sound underwriting objectives more efficiently.

Regulatory Burden

Efforts to reduce unnecessary regulatory burden have been underway for some time. For example, the FCA has reduced the number of matters requiring its "prior approval" by more than 70 percent over the last 5 years. Most remaining matters requiring agency "prior approval," such as charter and funding approvals, are required by statute. Nevertheless, the FCA continues to be interested in learning of any regulatory requirements that the public believes are duplicative, unneeded, or not cost justified.

Please note that there are some regulations which have been through a comment period. Also, a number of the FCA's regulations have recently been published for a public comment period or are about to be published for public comment. These regulations are described below. The FCA would like to receive comments on the regulatory burden of the listed regulations during their designated comment periods. Comments on the effect of other regulations would be especially helpful at this time as the FCA seeks to reduce regulatory burden. [*34004]

Regulations Under Consideration

Progress to date
Next action expected
Capital RegulationWould implement permanent capital-related provisions of the statute pertaining to agreements between Farm Credit Banks and associations on where to count certain allocated equities, held by the Farm Credit Banks, for purposes of computing permanent capital The FCA Board adopted the proposed rule in May 1993The regulation will be published for a 30-day public comment period in mid-June, and the Board expects to vote on the final rule in the fall of 1993.
Other High Risk AssetsWould update accounting and reporting requirements, promote consistency with industry practices, and ensure that the regulations are consistent with GAAP. The proposed regulations eliminate the term "nonperforming" and the categories of "other high risk loans" and "other restructured and reduced rate loans." An announcement of proposed rulemaking was published in late 1992, comments were received and considered by the agency. The proposed regulation was published for a 30-day public comment period which closes on July 8, 1993. (58 FR 32071)The Board expects to vote on the final regulation in the fall of 1993, to be effective December 31, 1993.
General Financing AgreementsWould clarify existing regulations to provide uniform guidelines for developing and executing general financing agreements between Farm Credit Banks and direct lending institutions.Three meetings held-one with association representatives and two with bank representatives in 1992.A regulatory impact analysis is in progress and the Board anticipates considering the proposed regulation in the fall of 1993.
Distressed Loan NotificationWould amend the regulations regarding the content of borrower rights notices for distressed loans.The Board adopted the proposed rule in June 1993. It will be published for a 30-day public comment period in mid-July 1993. The Board expects to vote on a final regulation in the fall of 1993.
Termination of Large Associations and BanksWould establish regulations under which a bank or large association could terminate its charter as provided for in the Farm Credit Act of 1971, as amended. The Board adopted the proposed rule in February 1993. The comment period closed in April 1993. (58 FR 15099).The Board will consider a resolicitation of public comments on the proposed regulation.

In a related matter, other financial regulators proposed to modify their appraisal rules, (Real Estate Appraisals, 58 FR 31878, June 4, 1993). The FCA Board has directed staff to (1) Analyze this proposal and report to the Board by July 15, 1993, on how the proposed amendments impact the regulated institutions and (2) recommend proposals appropriate to the FCS.

Information Requirements

Finally, the FCA believes that a key issue for the FCS is the data which must be provided by the FCS institutions to the FCA on a periodic basis. It has been some time since a comprehensive review of the reporting requirements has been undertaken. In some cases, this data is specifically required by statute. It should be noted that the FCA is in the very early stages of a review of information reporting requirements; nevertheless, we are interested in any preliminary comments you might have as they will assist us in planning our future activities.

In conclusion, the FCA believes that the efforts outlined above, in conjunction with those already underway, will work to improve the regulatory environment within which the FCS must operate by targeting areas for more focused study and revising rules where comments present strong evidence that an FCA requirement is unjustified.

Date: June 16, 1993.

Curtis M. Anderson,

Secretary, Farm Credit Administration Board.

[FR Doc. 93-14583 Filed 6-22-93; 8:45 am]