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FARM CREDIT SYSTEM INSURANCE CORPORATION

POLICY STATEMENT CONCERNING ASSISTANCE

DATED: JULY 12, 2023 

Background

The Farm Credit System Insurance Corporation (Corporation or FCSIC), in its sole 

discretion, is authorized under section 5.61(a) of the Farm Credit Act of 1971, as amended 

(Act), 12 U.S.C. 2277a-10(a), to provide, on such terms and conditions as the Corporation’s 

Board of Directors may prescribe stand-alone assistance in the form of loans, asset or debt 

security purchases, assumption of liabilities, or contributions to: 

a) prevent the placing of a Farm Credit System institution1 into receivership, 

b) restore the institution to normal operation, or

c) reduce the risk to the Corporation posed by the institution when severe financial 

conditions threaten the stability of a significant number of other institutions or

System institutions possessing significant financial resources.

2

The Corporation’s Board of Directors may also prescribe assistance to facilitate a merger or 

consolidation of a “qualifying” troubled System institution with another Systeminstitution

through loans, loan guarantees, asset or debt security purchases, assumption of liabilities, 

contributions, or any combination thereof. A “qualifying” troubled System institution is an 

institution that is:

a) in receivership,

b) in danger of being placed in receivership, or

c) an institution that, when severe financial conditions exist that threaten the stability of 

a significant number of System institutions or of System institutions possessing 

significant financial resources, requires assistance to lessen the risk to the 

Corporation posed by such System institution under such threat of instability.3

Pursuant to section 5.61(a)(3) of the Act, FCSIC may not provide assistance unless the 

means of providing assistance is the least costly means of providing the assistance by the 

Farm Credit Insurance Fund of all possible alternatives available to the Corporation, 

including liquidation.

4 In making this determination, the Corporation is authorized to gather 

1 Section 5.61(a) of the Act uses the terms “insured System bank” and “bank” but the Act also specifies under 

section 5.61(e), 12 U.S.C. 2277a-10(e), that such terms also include production credit associations and other 

associations making direct loans under the authority provided under section 7.6 of the Act, 12 U.S.C. 2279b. 

Consequently, the terms “troubled System institution,” “troubled System bank,” or “troubled System association” 

are used to refer to those institutions specified in sections 5.61(a) and 5.61(e) of the Act, 12 U.S.C. 2277a-10(a) 

and 2277a-10(e). 2 FCSIC is also authorized to provide assistance to bridge System banks under section 5.61C(h)(7). This policy 

statement does not apply to the provision of assistance in those circumstances. 3 See Act, section 5.61(a)(2)(B), 12 U.S.C. 2277a-10(a)(2)(B). 4 The cost of liquidation shall be made as of the earliest of: (1) The date on which a conservator is appointed for 

the institution, (2) the date on which a receiver is appointed for the institution, or (3) the date on which the 

Corporation makes any determination to aid the institution. See Act,section 5.61(a)(3)(C)(ii)(I-III), 12 U.S.C.
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information necessary to perform the least-cost test5 and shall (1) evaluate alternatives on a 

present-value basis, using a reasonable discount rate, (2) document the evaluation and the 

assumptions on which the evaluation is based, and (3) retain the documentation for not less 

than 5 years.6

Policy Statement

The Corporation will consider assistance in accordance with the requirements of the Farm Credit 

Act. Any FCSIC discretionary provision of financial assistance must be consistent with and in 

support of FCSIC’s statutory purpose to insure the timely payment of principal and interest to 

investors in insured Farm Credit System bank securities. Any assistance proposal may be 

submitted either directly from a troubled System institution, from System institutions seeking 

to acquire or assist a troubled System institution, or from the System banks to stem a 

liquidity crisis. When considering assistance proposals received from System institutions, the 

Corporation will: 

• Maintain flexibility and readiness to respond appropriately on a case-by-case basis; 

• Establish a transparent process that independently considers all relevant information; 

• Ensure supervisory bank involvement in any assistance request for an association; 

• Grant assistance only when there is sufficient information available to justify assistance in 

accordance with the least-cost test; and

• Coordinate with FCA on troubled institutions prior to granting assistance. 

In the event the Corporation exercises its discretion to provide assistance, in most cases 

assistance would be provided to the supervisory bank, regardless of whether the troubled 

System institution is a bank or an association.

If the Corporation determines it is appropriate based on the facts and circumstances 

surrounding the request, the Corporation will provide System institutions the opportunity to 

submit any information, including information on the cost to the Farm Credit Insurance Fund 

(Insurance Fund) of a liquidation. The Corporation will then conduct a least-cost test to 

determine whether the cost of providing assistance is less costly to the Insurance Fund than 

the cost of liquidating a System institution. If the cost to the Insurance Fund of providing 

assistance is less than the cost of liquidation, and the Corporation, in its sole discretion, 

approves assistance, the Corporation will enter into an agreement with the System institution 

receiving assistance. 

2277a-10(a)(3)(C)(ii)(I-III). 5 See Act, sections 5.58(8) and 5.59(b), 12 U.S.C. 2277a-7(8) and 2277a-8(b). The Corporation will accord such 

other System institutions as the Corporation determines to be appropriate the opportunity to submit information 

relating to the determination. See Act, section 5.61(a)(3)(A), 12 U.S.C. 2277a-10(a)(3)(A). 6 See Act, section 5.61(a)(3)(B), 12 U.S.C. 2277a-10(a)(3)(B). 
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Assistance Proposals 

Assistance proposals can include requests for loans, loan guarantees, loss-sharing 

arrangements, asset or debt security purchases, assumption of liabilities, or cash 

contributions. The Corporation will consider the nature of the financial assistance requested 

on a case-by-case basis and may alter the form or amount of assistance as part of its 

determination. FCSIC shall consider the following criteria when assessing assistance 

proposals:

1) Financial condition and performance criteria to better understand the problem that 

caused the need for assistance, including the rationale for seeking assistance;

2) The type and amount of assistance needed, as well as a reasonable repayment plan. 

3) Fee arrangements with attorneys, accountants, consultants, and other parties 

incident to the request for assistance (or projected costs for these arrangements);

4) Reasonable projections to assess the future viability of the institution after 

assistance has been provided. This would include earnings projections and a 

capital restoration plan to achieve adequate capitalization. Earnings projections 

and the capital restoration plan must include the impact of repayment of

assistance;

5) A business plan that would implement written policies and procedures designed 

to guide operations safely and soundly and to correct the problems that caused 

the need for assistance. The plan should include an internal control system to 

monitor ongoing performance with measurable criteria and an operating budget, 

including compensation arrangements covering directors and senior officers. 

The business plan should also provide sufficient information to allow the 

Corporation to evaluate the adequacy of managerial resources of the institution 

in accordance with the Act. Plans to continue the service and compensation of 

directors and senior officers must be pre-approved by the Corporation before it 

provides assistance and until assistance isrepaid;7 and

6) Analysis of the effect of assistance on shareholders, uninsured creditors 

(e.g., impairment on subordinated debt), other System institutions and the 

financial markets. If the troubled System institution is an association, the 

analysis should include the impact on its funding bank’s ability to continue 

meeting its insured obligations.

The Corporation’s assessment of assistance requests should incorporate internal FCSIC staff 

analysis, FCA examination reports, as well as information provided in assistance proposals. 

Assistance proposals that contain robust information and explanation to address each of the 

above criteria will facilitate FCSIC staff’s review and assessment. FCSIC staff should not

recommend the provision of assistance if the proposal does not: 

• Include, for stand-alone assistance, a detailed analysis of how such assistance will 

return the troubled System institution to a financially viable, self-sustaining 

7 See Act, section 5.61(a)(3)(D).
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operation, 

• Demonstrate, when the proposed assistance is to facilitate a merger, that the 

continuing System institution can safely and soundly absorb the financial and 

operational impact that will result from the merger, and

• Include, in the event the assistance is for an association, an explanation and analysis 

of why the association’s supervisory bank is either unable or unwilling to provide

the necessary assistance itself.

The Corporation reserves the right to request additional information as needed to conduct the 

least-cost test.

The Least-Cost Test

The Corporation will conduct a least-cost test to determine whether providing assistance to a 

troubled System institution is less costly to the Insurance Fund than liquidating the 

institution.8 In conducting the least cost test, Corporation staff shall use a four-step approach 

as follows:

First, determine the estimated liquidation value of the troubled System institution. In making 

this determination, the Corporation will use its examination authority under section 5.59(b) 

of the Act, 12 U.S.C. 2277a-8(b), to collect information from the troubled System institution 

to calculate the estimated liquidation value of the troubled System institution. This 

information must, at a minimum, include specific data elements as determined by 

Corporation staff to conduct a present-value analysis of the troubled System institution’s 

assets, using a reasonable discount rate. As required by the Act, the troubled System 

institution must provide the Corporation all information necessary to perform a least-cost 

determination.

Second, the Corporation must reasonably estimate whether the liquidation of the troubled 

System institution(s) creates a loss to the Insurance Fund. Since the Insurance Fund was

primarily established to insure the timely payment of principal and interest on System bank 

insured debt obligations, a loss to the Insurance Fund occurs when a System bank defaults on 

an insured obligation and the Corporation must use the Insurance Fund to pay maturing

obligations. To conduct the least-cost test, the Corporation must consider whether the 

troubled System institution’s failure will impair a System bank’s ability to pay its insured 

debt obligations. If, however, the Corporation reasonably estimates that the funding bank 

can sufficiently absorb an association’s estimated losses, there would be no cost to the 

Insurance Fund and little basis for the Corporation to provide assistance. 

In conducting this analysis FCSIC staff shall consider all potential direct and indirect losses, 

to the extent they can be reasonably estimated, to the Insurance Fund. Direct losses include 

the estimated losses to the Insurance Fund from the liquidation of a troubled System 

institution. Indirect losses to the Insurance Fund include the consequent effects of liquidating 

8 This section does not apply to liquidity assistance in exigent market circumstances, since, as noted below, there would 

be no cost to the Insurance Fund.
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a troubled System institution. Indirect losses to the Insurance Fund could result from the 

following scenarios:

• Meaningful increase in the risk of bank default on insured obligations due to direct 

note losses from a troubled association; 

• Higher levels of risk in association direct notes due to a general broad decline in loan 

and collateral values caused by the liquidation of a considerable amount of 

agricultural loans in a relatively short period of time; 

• Ongoing losses and capital deterioration at System banks due to a substantial and 

sustained increase in the cost of funds for System banks resulting from a troubled 

System institution being placed into receivership; 

• Ongoing losses and capital deterioration incurred by a System bank due to the loss of 

significant revenue and capital resulting from district association failures and the 

inability of the bank to recoup such losses from remaining district associations; and

• The liquidation of one troubled System institution causes another System institution 

to default on its insured debt obligations.

We expect System banks to provide the Corporation with sufficient information and analysis 

to demonstrate that indirect losses to the Insurance Fund will result from the liquidation of a 

System bank or association. 

Third, the Corporation must determine the type and amount of assistance. The cost of 

providing assistance will depend upon the structure of the assistance. For example, the 

Corporation’s purchase or servicing of distressed assets from a troubled System institution 

may cost the Insurance Fund more than providing the institution a loan with a repayment 

plan. If the assistance can be structured with a repayment feature, it is likely to be the least 

costly means of providing assistance of all possible alternatives available to the Corporation. 

Moreover, if other System institutions are willing to contribute some of their funds to the 

troubled System institution to reduce the cost of providing assistance, the Corporation will 

factor this amount into its least-cost test and assistance determination.

The final step in the least-cost test is to compare the cost of liquidation to the cost of 

providing assistance. If the cost of providing assistance from the Insurance Fund is less than 

the cost of liquidating a troubled System institution (to the Insurance Fund), the 

Corporation’s Board of Directors, in its discretion, may approve assistance to the troubled 

System institution. As required by statute, the Corporation shall use the information it 

receives during its least-cost determination to evaluate the alternatives, document the 

evaluation and the assumptions on which the evaluation is based, and retain the 

documentation for not less than 5 years.

Liquidity Assistance in Exigent Market Circumstances

FCSIC may provide short-term liquidity assistance during exigent market circumstances 

where there is a broad, disruption across U.S. credit markets that originates external to and 
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independent of the System. The Corporation considers the provision of liquidity assistance 

in exigent market circumstances to meet the statutory authority of Section 5.61(a)(1)(C) to 

reduce the risk to the Corporation posed by the institution when severe financial conditions 

threaten the stability of a significant number of System institutions or System institutions 

possessing significant financial resources. When such short-term liquidity assistance is 

provided to a System bank as an appropriately collateralized loan, the Corporation has 

determined that such assistance satisfies the least-cost test required by Section 5.61(a)(3) of 

the Act because the cost to the Insurance Fund of providing the assistance is expected to be 

zero. Additionally, in the context of providing only short-term liquidity assistance in exigent 

market circumstances, the Corporation will consider the adequacy of managerial resources 

and the continued service of any bank director or senior ranking officer approval 

requirements of Section 5.61(a)(3)(D) as satisfied. FCSIC shall maintain procedures for the 

provision of liquidity assistance in exigent market circumstance and provide periodic training 

for/consultation with System banks on the application of the procedures. 

FCSIC currently has an annually renewable $10 billion line of credit with the Federal 

Financing Bank (FFB), which allows FCSIC to provide additional liquidity assistance to 

System banks than is otherwise available from the Insurance Fund. FCSIC will use the same 

liquidity assistance procedures whether or not it needs to borrow additional funds from the 

FFB. Draws under the FFB line of credit may only be made during periods of exigent 

market circumstances.9

 FCSIC staff shall make all practicable efforts to maintain a line of 

credit with the FFB. FCSIC’s issuance of an obligation to the FFB to access that line of 

credit also satisfies the least-cost test required by Section 5.61(a)(3) of the Act because the 

cost to the Insurance Fund of providing assistance is expected to be zero.10

Assistance Agreements

If the Corporation provides assistance, it will enter into an agreement with the System 

institution receiving assistance. In instances where a System association is receiving 

assistance, the agreement will be among the Corporation, the System association and the 

association’s supervisory bank. The Corporation, in consultation with FCA, will determine 

the terms and conditions of the agreement on a case-by-case basis and may include limits on 

(or prior approval of) the types or amounts of activities the institution can engage in while 

assistance is outstanding. For example, assistance agreements might include capital 

restoration plans that include the impact of assistance repayment, repayment terms that 

recoup the costs associated with providing assistance, and limits on concentration risk, 

patronage and dividend payments, executive compensation, and certain types of expenses. 

Assistance agreements may also provide the Corporation the right to have a representative 

attend the institution’s board meetings.

9 Additionally, in order to draw on the FFB line, FCSIC must certify that it would be extremely doubtful that: (1) the 

Federal Farm Credit Banks Funding Corporation can issue new System-wide insured debt obligations, and (2) one 

or more System banks will be able to repay maturing System-wide insured debt obligations without selling 

available liquidity reserves at a material loss.

10 FCSIC Board of Director Resolution dated September 23, 2013, notes that the principal and interest paid by FCSIC 

to the FFB will be equal or less than the principal and interest FCSIC receives from the System Bank(s) to whom 

FCSIC lends the funds received from the FFB.
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Each assistance agreement will be subject to the Corporation’s Board of Directors’ approval. 

While assistance agreements are outstanding, the Corporation will use its examination 

authority to monitor compliance with the agreement. Moreover, the Corporation will require 

the System institution receiving assistance to certify and publicly disclose compliance with 

the agreement requirements, including the disclosure of any instances of material 

noncompliance with the agreement.

Procedures

This Policy Statement shall be supported by procedures that provide detailed instructions and 

guidance to FCSIC staff on the evaluation and provision of liquidity assistance in exigent 

market circumstance, and any other assistance procedures as determined by the Chief 

Operating Officer.