Title: PROPOSED RULE--Organization--12 CFR Part 611
Issue Date: 11/23/1981
Federal Register Cite: 46 FR 57308
FARM CREDIT ADMINISTRATION
12 CFR Part 611
AGENCY: Farm Credit Administration.
ACTION: Proposed rule.
SUMMARY: The Farm Credit Administration, by its Federal Farm Credit Board, publishes for comment miscellaneous amendment to its organizational regulations. These amendments are for clarification and updating because of new authorities conferred on institutions of the Farm Credit System by the Farm Credit Act Amendments of 1980 (Pub. 96-592).
DATE: Written comments must be received on or before January 19, 1982.
ADDRESS: 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, Congressional and 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).
PART 611 -- ORGANIZATION
Part 611 of Chapter VI, Title 12 of the Code of Federal Regulations is amended as shown:
1. Subpart A is revised to read as follows:
Subpart A -- Introduction
§ 611.100 The Farm Credit Act.
The Farm Credit Act of 1971, Pub. L. 92-181, (Act), approved December 10, 1971, recodified and replaced the prior laws under which the Farm Credit Administration and the institutions of the Farm Credit System were organized and operated. The prior laws which are repealed and superseded by the Act are identified in section 5.26(a) of the Act. Section 5.26(b) retained the effectiveness of the existing regulations of the Farm Credit Administration and the Farm Credit System, the institutions' charters, bylaws, resolutions stock classifications, policy, and elections until superseded, modified, or replaced under the authority of the Act. All obligations and contracts under prior laws remain enforceable unless and until modified by the Act. The purpose of these regulations is to implement the provisions of the Act. Contracts, including but not limited to notes, bonds, debentures, loans, security, and collateral, entered into by the Farm Credit Administration or any of the institutions of the Farm Credit System before the issuance of these regulations shall remain valid and enforceable upon their terms unless and until they are subsequently modified.
2. Subpart B is revised to read as follows:
Subpart B -- Policy
§ 611.200 Farm credit policies.
(a) In recognizing that a prosperous and productive agricultural economy requires a permanent financing system, Congress authorized creation of the Farm Credit System. The Farm Credit System is a limited-purpose system of borrower-owned banks and associations. It is a financing system designed to furnish sound, adequate, and constructive credit and closely related services to farmers, ranchers, producers or harvesters of aquatic products, and agricultural and aquatic cooperatives. The System also finances nonfarm rural housing and selected farm-and aquatic-related businesses. This national policy continues under the Act.
(b) The System is designed to be owned and controlled by its borrowers. This design fosters System responsiveness to the credit needs of agricultural and aquatic producers or cooperatives that have a basis for System credit. The primary objective of the System is to help improve the income and well-being of farmers, ranchers, and producers or harvesters of aquatic products. Because the System was well conceived, it has served a large part of the agricultural and aquatic credit needs of the country. These regulations identify areas in which Systemwide and district policies for the guidance of management and operations of the banks and associations are necessary to assure the accomplishment of the System's objectives.
(c) This wider latitude of service and added functions accentuate the impact of the System on the agricultural and aquatic economy, on the other elements of the Nation's total business community, and on the public generally. Consequently, as is true with other types of financing institutions, the public interest will be protected under rules dealing with supervision, examination, audit, lending, and funding operations of the System.
3. Subpart D is revised to read as follows:
Subpart D -- The Farm Credit System
§ 611.400 System organization.
(a) The Farm Credit System includes the Federal land banks, the Federal land bank associations, the Federal intermediate credit banks, the production credit associations, the banks for cooperatives, service corporations authorized by section 4.25 of the Farm Credit Act of 1971, as amended, and unincorporated service organizations formed pursuant to agreements authorized by section 5.6(a)(5) of the Act. Each institution is chartered by the Farm Credit Administration, an independent agency in the executive branch of the United States Government. Each of these banks, associations, and service corporations is an instrumentality of the United States, created to carry out the congressional policy and objective. These institutions are subject to the regulations and supervision of the Farm Credit Administration. Each bank has immediate supervisory responsibility over its associations in the district. The stockholders of a service corporation have immediate supervisory responsibility through the board of directors over the service corporation.
(b) The banks have immediate supervisory responsibility over unincorporated service organizations as owners or as participating users. Together with their boards, the banks prescribe the powers, duties, authorities, and functions of such organizations. Unincorporated organizations are under the direction of their governing bodies, or similar managing bodies.
Subpart F -- General Rules for the Districts
4. Section 611.1010 is revised to read as follows:
§ 611.1010 Powers, duties, and responsibilities.
The district board acting in that capacity, or as the board of a bank, as appropriate, shall:
(a) Provide rules for its operation as a district board and as a separate board for each bank; and provide such other rules, guidelines, and policy guidance within the district as may be appropriate for the effective implementation of the law and these regulations.
(b) Adopt bylaws for each bank and approve bylaws for associations from standard and optional bylaws in a form approved by the Farm Credit Administration. Bylaws and amendments to bylaws proposed by a bank or association require Farm Credit Administration approval before implementation.
(c) Authorize agreements for joint services, which can be most effectively performed by joint undertakings, within or between districts for functions and services to borrowers and to institutions of the System. When such agreements involve impact or implications for other institutions of the System, the general protection of borrowers' equities, and the overall public interests, the proposals shall be undertaken after prior consultation with Farm Credit Administration.
(d) Employ a chief executive officer for each bank, and establish performance standards of the officer. The board shall hold the officer accountable for the responsibilities delegated to him or her in administering the bank's business. The chief executive officer shall operate the bank according to policies prescribed and approved by the board, and according to the provisions of these regulations, the bylaws, and the Act.
(e) Adopt a policy to provide direction for the district and each Farm Credit entity in the district with regard to the management of human resources. Such policy shall include a statement of the board toward recruitment and placement, employee development and training, compensation and benefits.
(f) Provide for the supervision of the associations in the district to assure that authorized services are available to eligible persons in the most effective and efficient manner.
(g) Adopt and prescribe consistent lending and operating policies for each bank and for all associations in the district as authorized by law and by these regulations. Such policies shall establish that the credit and other services available to eligible persons are uniform, to the extent feasible, and are at the lowest reasonable cost consistent with sound business operations. The policies of the board shall recognize that the strength of the Farm Credit System lies substantially in its cooperative character, that each institution is an integral part of the statutory scheme for the whole System, and shall require that each institution shall consider the total credit needs of and services available to eligible borrowers.
(h) Formulate broad policy guidelines concerning the funding operations of banks in the district and, in concert with other district boards, furnish long-range guidance to the System for future funding of the System.
(i) Consider recommendations made in examination and audit reports and take appropriate corrective actions, as determined by the board or as required by the Farm Credit Administration. If the district board does not concur with corrective actions required by the Farm Credit Administration, the Federal Farm Credit Board shall determine the appropriate corrective action.
(j) Provide a periodic review of the credit and related service needs of farmers, ranchers, producers or harvesters of aquatic products, and cooperatives in the district, and recommend programs or program modifications to the Federal Farm Credit Board.
5. Section 611.1055 is revised to read as follows:
§ 611.1055 Minutes of the governing body of incorporated and unincorporated service organizations.
The governing bodies of incorporated service corporations and unincorporated service organizations shall keep full and accurate minutes of their meetings. Copies of the minutes shall be sent, as required, to the Farm Credit Administration.
6. Section 611.1060 is revised to read as follows:
§ 611.1060 District organization.
The district board shall provide a means of facilitating and promoting maximum communications among the banks in the district. In addition, the district board shall provide an efficient and effective means of coordinating communications of the banks in the district with the Farm Credit Administration, with other parts of the System, with other organizations, with borrowers, and with the public. The district board shall provide for these means of communications through a committee of presidents of the three banks in the district or through some other organizational pattern.
The organizational pattern should encourage and help effectuate closer relationships among the banks as a means of providing in the most efficient and effective manner the best possible service to members.
7. Section 611.1070 is revised to read as follows:
§ 611.1070 Branches.
(a) A bank, an incorporated service corporation, or an unincorporated service organization may establish branches or other offices necessary for the effective operation of its business upon approval of its board or governing body. Such actions shall require the approval of the Farm Credit Administration.
(b) An association may establish such branches or other offices necessary for the effective service to borrowers when approved by its board and the supervisory bank.
8. Section 611.1090 is revised to read as follows:
§ 611.1090 District changes.
(a) Two or more district boards may recommend to merge, transfer territories, or change the name of a district. The proposal and justification for the recommendation shall be submitted by the district boards to the Farm Credit Administration for review by the Federal Farm Credit Board before it is submitted for any required stockholder approval. Following approval by the stockholders, the proposed change shall be submitted to the Farm Credit Administration for approval by the Federal Farm Credit Board.
9. Section 611.1100 is revised to read as follows:
§ 611.1100 Mergers or consolidations of banks.
As authorized by sections 4.10 and 5.18 of the Farm Credit Act of 1971, as amended, similar banks (operating under the same title of the Act) may merge or consolidate. Any of the banks proposing to merge or consolidate shall jointly submit to the Farm Credit Administration for review the proposal and justification for the proposed action and recommendations for the formulation of a board of directors for the continuing or consolidated bank. Approval of the merging or consolidating banks' stockholders shall be obtained after Farm Credit Administration review. Following approval by the stockholders, the proposed merger or consolidation shall be submitted to the Farm Credit Administration for approval by the Federal Farm Credit Board.
10. Section 611.1110 is revised to read as follows:
§ 611.1110 Creation of new associations.
Any application for the issuance of a charter to a new Federal land bank association shall meet the requirements of 1.13 of the Act, and any application for the charter of a new production credit association shall meet the requirements of 2.10 of the Act. In submitting the application and recommendations required by said sections, the proposed association shall submit its proposed bylaws from the standard or optional bylaws approved by the Farm Credit Administration, or its proposed additions and modifications to approved standard bylaws provisions.
11. Section 611.1120 is revised by amending paragraphs (a) and (b) and adding new paragraphs (c) and (d) to read as set forth below:
§ 611.1120 Amendments of association charters.
(a) The Governor shall have the power to direct at any time changes in an association's charter that are necessary to accomplish the purposes of the Farm Credit Act of 1971, as amended.
(b) Subject to the approval of the bank board and the Farm Credit Administration, an association charter may be amended. Proposals for amendment may include, among others, mergers or consolidations, transfers of territories, and changes in association headquarters and title. Proposals for any charter amendments shall be submitted by the bank to the Farm Credit Administration. The proposal shall be accompanied by the following:
(1) A certified copy of the association's board of directors' resolution approving the proposed change.
(2) A certified statement from the bank's board of directors approving the proposed change.
(3) Any additional information that would be helpful to the Farm Credit Administration in acting upon the proposed change.
(c) Proposals for mergers or consolidations are subject to the following procedures. The boards of directors of two or more similar associations may propose to merge or consolidate associations. The resolutions proposing such agreement shall be submitted to the supervising bank board for approval, together with an agreement setting forth the terms and conditions of the merger or consolidation.
(1) The agreement for merger or consolidation shall include:
(i) The proposed effective date.
(ii) The proposed name and location of the continuing or consolidated association.
(iii) The proposed charter and bylaws of the continuing or consolidated association.
(iv) The names of persons nominated to serve as directors until the first annual meeting after the merger or consolidation. In a merger, present directors of the merging associations may serve as directors of the continuing association until the expiration of the directors' terms. However, the directors must be serving current terms of office that will expire on a staggered basis to assure that an election of directors occurs at the first and subsequent annual stockholders' meetings following the merger. In such cases, the number of directors cannot exceed the maximum number of directors designated in the continuing association's bylaws.
(v) The authority for transferring assets to and for assuming liabilities by the continuing or consolidated association.
(vi) The provision relating to the stock of the constituent associations and the stock of the continuing or consolidated association. No fractional shares of stock shall be issued.
(vii) The granting of authority to persons designated to carry out the terms of the agreement, including the authority to execute any documents necessary to perfect title.
(2) Approval of a merger or a consolidation follows two steps:
(i) If the bank board approves the proposed merger or consolidation, the bank shall certify and shall transmit the tentative agreement to the Farm Credit Administration for review and for tentative approval. When the bank obtains the tentative approval of the Farm Credit Administration, the proposed merger or consolidation shall be submitted to the stockholders of the merging or consolidating associations for approval. Approval shall require a majority of the voting stockholders present and the written proxies (of voting stockholders), which are presented at a duly held stockholders' meeting of each constituent association. The bank shall prescribe the form of proxy which shall be furnished or made available to each stockholder eligible to vote.
(ii) If the associations' stockholders approve the proposed merger or consolidation, the bank shall forward to the Farm Credit Administration a copy of the stockholders' resolution and a certified statement from each constituent association. The statement shall certify that a quorum, including proxies, was present at the stockholders' meeting and that the majority of the members voting, including proxies, approved the proposed merger or consolidation. If the Farm Credit Administration approves the proposed merger or consolidation, it shall amend the charter of the continuing association or issue a new charter to the consolidated association. Thereafter, the designated directors of the continuing or consolidated association may take actions necessary to transact the association's business, subject to ratification by the directors at the first meeting after the effective date of the merger or consolidation. The execution of the agreement and the merger or consolidation in its entirety shall be under the direction of the bank. Bylaws of the continuing or consolidated association shall be submitted to the Farm Credit Administration for approval when appropriate.
(d) Territorial adjustments are subject to the following requirements:
(1) All stockholders and all borrowers whose operations are located in adjusted territories shall be informed in writing of the territory adjustment. Also, they shall be notified of the transfer of their loans and the exchange of related equities for equities of like kinds and amounts in the transferee association. If a like kind of equity is not available in the transferee association, similar equities shall be offered which will not affect adversely the interests of the owner. Upon written request, each stockholder shall be informed of the availability of the association's latest financial and related information for review by the stockholder.
(2) The Agreement of Transfer of Territory and the notice of territory transfer shall provide 60 days from the date of the notice for stock holders to notify either association in writing of their decision to decline acceptance of the equities of the transferee association and to remain with the transferor association for normal servicing until the current loan is paid. Any application by the borrower for renewal or for additional credit shall be made to the transferee association, except for those applications permitted under § 614.4070.
12. Section 611.1150 is revised to read as follows:
§ 611.1150 Incorporation of service corporations.
(a) General. Any Farm Credit bank(s) may organize a service corporation to perform, for or on behalf of the bank(s), any function or service that the bank(s) is authorized to perform under the Act and the Regulations, except extending credit and providing the sale of insurance services, or providing other direct services to borrowers. The bank(s) wishing to organize such a service corporation shall submit a proposal to the Farm Credit Administration according to the application requirements of paragraph (b) of this section. If the proposal meets the requirements of the Act, these Regulations, and any other conditions which the Governor of the Farm Credit Administration may impose, the Governor may issue a charter for the service corporation making it a federally chartered instrumentality of the United States. Such service corporation shall be subject to supervision and examination by the Farm Credit Administration. Only Farm Credit banks are eligible to become stockholders in the corporation. Each bank shall be eligible to become a stockholder of each service corporation organized under this section.
(b) Application. The application for a corporate charter shall include:
(1) A certified resolution of the board of each organizing bank authorizing the incorporation.
(2) A request signed by the president(s) of the organizing bank(s) to the Governor to incorporate, supported by a detailed statement demonstrating the need and the justification for the proposed entity.
(3) The proposed Articles of Incorporation specifying at a minimum the following:
(i) The name of the corporation;
(ii) The city and State in which the principal office of the corporation is to be located;
(iii) The general purposes for which the corporation is formed;
(iv) The general powers of the corporation;
(v) The procedures under which each bank may become a stockholder;
(vi) The procedures by which bylaws may be adopted and amended;
(vii) The title, par value, various voting rights, and authorized amount of each class of stock to be issued by the corporation, and the procedures by which each class may be retired;
(viii) The notice, quorum, and vote required for shareholder action on various matters;
(ix) The procedures for the merger, voluntary liquidation, or dissolution of the corporation or the distribution of corporate assets;
(x) The standards and procedures for the application and distribution of corporate earnings;
(xi) The duration of the corporation, if other than perpetual;
(xii) A requirement, which shall be binding on all stockholders, that in the event of insolvency of the service corporation, such stockholder will pay, at the direction of the Governor, the valid claims of the creditors of the corporation;
(xiii) A requirement that contracts between participating banks and the corporation include a provision requiring such banks to share in the resulting liability of the corporation in the event of insolvency, if such sharing would be equitable in the judgment of the Governor.
(4) The proposed bylaws.
(5) The proposed amounts and sources of capitalization and operating funds.
(6) Any agreements between the organizing banks relating to the organization or the operation of the corporation.
(7) Any other supporting documentation as may be requested by the Governor of the Farm Credit Administration.
(c) Approval. The Governor may condition the issuance of a charter as he deems appropriate and for good cause may deny the application. Upon approval by the Governor of a completed application, which shall be kept on file at the Farm Credit Administration, the Governor shall issue a charter to the service corporation which shall thereupon become a body corporate and a Federal instrumentality.
(d) Amendment of Articles of Incorporation. The articles of incorporation of a service corporation may be amended in either of two ways:
(1) The board of directors of the corporation may request the Governor to amend the articles of incorporation by sending with its request a certified resolution of the board of directors of the service corporation and stating:
(i) The section(s) to be amended;
(ii) The reason for the amendment;
(iii) The language of the articles of incorporation provision, as amended; and
(iv) That the requisite shareholder approval has been obtained. This request shall be subject to the approval of the Governor as stated in paragraphs (a) and (c) of this section.
(2) The Governor may at any time make any and all changes in the articles of incorporation that he deems necessary and appropriate for the accomplishment of the purposes of the Act.
13. Part 611 is amended by adding § 611.1160 to read as follows:
§ 611.1160 Incorporated and unincorporated service organizations.
Service corporations and unincorporated service organizations shall be subject to applicable Regulations for the Banks and Associations of the Farm Credit System.
* * * * *
(Sec. 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. 81-33438 Filed 11-20-81; 8:45 am]
BILLING CODE 6705-01-M