Title: ADVANCE NOTICE OF PROPOSED RULEMAKING--Organization: Reorganization Authorities for System Institutions--12 CFR Part 611
Issue Date: 02/16/1988
Agency: FCA
Federal Register Cite: 53 FR 4416

12 CFR Part 611

Organization: Reorganization Authorities for System Institutions

ACTION: Advance Notice of Proposed Rulemaking.

SUMMARY: The Agricultural Credit Act of 1987, enacted on January 6, 1988, contains several new statutory provisions governing the authority of the Farm Credit System (System) institutions to reorganize. The legislation provides the Farm Credit Administration (FCA) with the specific authority to regulate numerous aspects of these reorganization authorities. The FCA comments relating to the exercise of these new regulatory authorities and requests comments on specific issues that must be addressed by FCA regulations.

DATE: Comments must be received on or before February 29, 1988.

ADDRESS: Comments may be mailed or delivered (in triplicate) to Anne E. Dewey, General Counsel, Office of General Counsel, Farm Credit Administration, McLean, Virginia 22102-5090. Copies of all communications received will be available for examination by interested parties in the Office of General Counsel, Farm Credit Administration.


James F. Thies, Assistant Chief, Financial Analysis and Standards Division, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4475, or

Gary L. Norton, Senior Attorney, Office of General Counsel, Farm Credit Administration, McLean VA 22102-5090, (703) 883-4020, TDD(703) 883-4444.

TEXT: SUPPLEMENTARY INFORMATION: The Agricultural Credit Act of 1987 (1987 Act), Pub. L. 100-233, was enacted on January 6, 1988. Title IV of that Act contains several new statutory authorities and amendments to existing authorities governing the merger, dissolution, and other forms of reorganization of System institutions. The FCA is empowered to issue regulations implementing several of these new authorities. The sections of the 1987 Act and the sections of the Farm Credit Act of 1971 (1971 Act) that are amended by the 1987 Act to these matters are contained in:

Section 412. Providing for the establishment of a special committee for developing a proposal for the consolidation of Farm Credit districts;

New section 3.21. Providing for the nomination and election of members of the board of a consolidated bank for cooperatives;

New section 7.1. Establishing the initial board of directors of a merged institution composed of a Farm Credit Bank (FCB) and bank for cooperatives (BC);

New section 7.2. Providing for the reconciliation of the powers and obligations of a merged entity composed of a FCB and BC;

New section 7.6. Authorizing the transfer of lending authority from a Federal land bank (FLB) to a Federal land bank association (FLBA);

New section 7.8. Providing for the mergers of like and unlike associations and reconciling the powers and obligations of such associations in connection with such mergers;

New section 7.9. Providing for the special reconsideration of mergers which occurred between December 31, 1985, and the date of enactment of 1987 Act;

New section 7.10. Authorizing System institutions to convert into lending institutions not organized under the 1971 Act;

New section 7.12. Authorizing the merger of like banks;

New section 7.13. Authorizing for the merger of like associations.

Section 4.20. Prohibiting the use of signed ballots in elections for directors of System institutions.

The FCA requests public comments on the issues raised in connection with these new authorities. Comments received will be considered in the development of proposed regulations implementing these statutory provisions. The FCA is seeking any comments members of the public deem relevant to these matters and in particular, seeks comments relating to the following specific issues:

1. New section 3.21 provides for the election of a director for the board of the National Bank for Cooperatives (NBC) by institutions that are not stockholders of the bank. By whom and how should the election be conducted and what are the appropriate mechanisms for verifying voter eligibility records? The section also provides for the election of three directors from each BC that merged to become the NBC, but only specifies procedures for the election of the first and second member. The law is silent on how the third member is elected. What mechanism should be used for electing the third board member by the NBC stockholders?

2. Various sections of the amendments authorize transfers of FLB authorities to FLBAs, dissolution of districtwide associations, and reconsideration of mergers that occurred between December 23, 1985 and January 6, 1988. What terms and conditions and approval requirements should be placed on these actions, specifically as they relate to the provision of financial assistance under the 1987 Act.

3. If unlike banks and associations merge, the 1987 Act requires FCA to adopt regulations to reconcile the powers of the merged institutions. How should the first lien requirement on real estate loans be applied to loans traditionally made by production credit associations (PCAs) of BCs? If a BC that has a national charter merges with an FCB, does the merged entity retain any aspect of the national charter? If so, does the national charter extend to all of its lending authorities or only to the BC component of those authorities?

4. The amendments authorize the transfer of FLB authorities, assets, and liabilities to the FLBAs. To what extent is there a need for staggering the effective dates of such transfers, specifically as it relates to new accounting and record keeping requirements imposed on the FLBAs?

5. The authorities for reconsideration of certain mergers occurring between December 23, 1985, and January 6, 1988 would allow for the dissolution of mergers involving a number of constituent associations. What procedures could be used to minimize the need for multiple votes of different associations that want to withdraw from a merged association? What should be the required content and supported material for withdrawal petitioners? What is the appropriate method for verifying stockholder signatures on the petitioners? What procedures should be adopted to protect the rights of stockholders of the merged association that do not wish to withdraw?

6. Sections 413(b)(2) and (3) describe the effects of BC stockholder votes in consideration of establishing a national BC. Paragraph (3) appears to require the merger of approving banks even if the merger is approved by the stockholders of only two banks which may be in districts at opposite ends of the country. What considerations need to be addressed to deal with this situation?

7. Any other issues which the commentor believes should be addressed in these FCA regulations.

Additionally, the FCA requests commentors' views on whether holding a public hearing would facilitate consideration of these matters, and, if so, what specific issues should be addressed in such a hearing.

A notice of proposed rulemaking will be published after analysis of all the issues relevant to these new authorities and consideration of the comments received in response to this notice.

Dated: February 10, 1988.

David Hill,

Secretary, Farm Credit Administration Board.

[FR Doc. 88-3229 Filed 2-12-88; 8:45 am]