Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 27483 

9See 2 U.S.C. 1532(a). 

10 12 U.S.C. 4802(a). 

11 5 U.S.C. 801(a)(3). 

12 5 U.S.C. 804(2). 

rule that includes a Federal mandate 

that may result in the expenditure by 

State, local, and tribal governments, in 

the aggregate, or by the private sector, of 

$100 million or more in any one year. 

However, the UMRA does not apply to 

final rules for which a general notice of 

proposed rulemaking was not 

published.9 Consistent with section 

553(b)(B) of the APA, the OCC has 

determined for good cause that general 

notice and opportunity for public 

comment is unnecessary because the 

rule makes a technical change to update 

a physical mailing address for the OCC’s 

CAG and does not alter any substantive 

standard, and, therefore, the OCC is not 

issuing a notice of proposed rulemaking. 

Accordingly, the OCC has not prepared 

an economic analysis of the rule under 

the UMRA. 

F. Riegle Community Development and 

Regulatory Improvement Act of 1994 

Pursuant to section 302(a) of the 

Riegle Community Development and 

Regulatory Improvement Act of 1994,10

in determining the effective date and 

administrative compliance requirements 

for new regulations that impose 

additional reporting, disclosure, or other 

requirements on insured depository 

institutions, the OCC must consider, 

consistent with the principles of safety 

and soundness and the public interest: 

(1) Any administrative burdens that the 

final rule places on depository 

institutions, including small depository 

institutions and customers of depository 

institutions, and (2) the benefits of the 

final rule. This final rule does not 

impose additional reporting, disclosure, 

or other requirements on an insured 

depository institution. Therefore, 

section 302(a) of the Riegle Community 

Development and Regulatory 

Improvement Act of 1994 does not 

apply to this final rule. 

G. The Congressional Review Act 

Before a rule can take effect, the 

Congressional Review Act (CRA), 5 

U.S.C. 801 et seq., provides that the 

OCC must submit to Congress and to the 

Comptroller General the rule along with 

a report indicating whether it is a 

‘‘major rule.’’ In general, if a rule is a 

‘‘major rule,’’ the CRA provides that 

unless Congress enacts a joint resolution 

of disapproval, the rule takes effect the 

later of: (1) 60 Days after Congress 

receives the required report or 

publication of the rule in the Federal 

Register, whichever is later; or (2) the 

date the rule would otherwise take 

effect.11 The CRA defines a ‘‘major rule’’ 

as any rule that the Administrator of the 

Office of Information and Regulatory 

Affairs (OIRA) of the Office of 

Management and Budget finds has 

resulted in or is likely to result in (1) an 

annual effect on the economy of 

$100,000,000 or more; (2) a major 

increase in costs or prices for 

consumers, individual industries, 

Federal, State, or local government 

agencies, or geographic regions, or (3) a 

significant adverse effect on 

competition, employment, investment, 

productivity, innovation, or the ability 

of United States-based enterprises to 

compete with foreign-based enterprises 

in domestic and export markets.12

OIRA has determined that this final 

rule is not a major rule. As required by 

the CRA, the OCC will submit the final 

rule and other appropriate reports to 

Congress and the Government 

Accountability Office for review. 

List of Subjects in 12 CFR Part 14 

Banks, banking, Consumer protection, 

Insurance, National banks, Reporting 

and recordkeeping requirements. 

Office of the Comptroller of the 

Currency 

For the reasons set out in the 

preamble, 12 CFR part 14 is amended as 

follows: 

PART 14—CONSUMER PROTECTION 

IN SALES OF INSURANCE 

■ 1. The authority citation for part 14 

continues to read as follows: 

Authority: 12 U.S.C. 1 et seq., 24(Seventh), 

92, 93a, 1462a, 1463, 1464, 1818, 1831x, and 

5412(b)(2)(B). 

■ 2. Appendix A to part 14 is revised to 

read as follows: 

Appendix A to Part 14—Consumer 

Grievance Process 

Any consumer who believes that any bank, 

Federal savings association, or any other 

person selling, soliciting, advertising, or 

offering insurance products or annuities to 

the consumer at an office of the bank or 

Federal savings association, or on behalf of 

the bank or Federal savings association, has 

violated the requirements of this part should 

contact the Customer Assistance Group, 

Office of the Comptroller of the Currency, 

(800) 613–6743, P.O. Box 53570, Houston, 

TX 77052, or www.helpwithmybank.gov. 

Benjamin W. McDonough, 

Senior Deputy Comptroller and Chief 

Counsel, Office of the Comptroller of the 

Currency. 

[FR Doc. 2022–09860 Filed 5–6–22; 8:45 am] 

BILLING CODE 4810–33–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 329 

Liquidity Risk Measurement Standards 

CFR Correction 

This rule is being published by the 

Office of the Federal Register to correct 

an editorial or technical error that 

appeared in the most recent annual 

revision of the Code of Federal 

Regulations. 

In Title 12 of the Code of Federal 

Regulations, parts 300 to 346, revised as 

of January 1, 2022, make the following 

corrections: 

§ 329.22 [Corrected] 

■ 1. Amend § 329.22 in paragraphs 

(a)(2) introductory text, (a)(2)(ii), (a)(4), 

and (a)(5), by removing the text ‘‘’’ in its 

place wherever it appears.’’ wherever it 

appears. 

§ 329.40 [Corrected] 

■ 2. Amend § 329.40 in paragraph (a) by 

adding the words ‘‘An FDIC-supervised 

institution’’ to the beginning of the first 

sentence. 

[FR Doc. 2022–09989 Filed 5–6–22; 8:45 am] 

BILLING CODE 0099–10–P 

FARM CREDIT ADMINISTRATION 

12 CFR Parts 611, 615, 620, 621, 628, 

and 630 

RIN 3052–AD36 

Implementation of the Current 

Expected Credit Losses Methodology 

for Allowances, Related Adjustments 

to the Tier 1/Tier 2 Capital Rule, and 

Conforming Amendments 

AGENCY: Farm Credit Administration. 

ACTION: Final rule. 

SUMMARY: The Farm Credit 

Administration (FCA or Agency) is 

amending certain regulations to address 

changes in U.S. generally accepted 

accounting principles (U.S. GAAP). 

These amendments modify FCA’s 

capital and other regulations, including 

certain regulatory disclosure 

requirements. 

DATES: The final rule is effective on 

January 1, 2023. 

FOR FURTHER INFORMATION CONTACT:

Technical information: Ryan Leist, 

LeistR@fca.gov, Associate Director, 

Operations, Management, and 

Accounting Team, Corbin West, WestC@

fca.gov, Policy Analyst (capital 

markets), or Jeremy R. Edelstein, 


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27484 Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 

1The Federal Agricultural Mortgage Corporation 

(Farmer Mac) was chartered in 1987 as a Farm 

Credit System institution. Farmer Mac operates 

secondary market activities for agricultural real 

estate mortgage loans, rural housing mortgage loans, 

rural utility cooperative loans, and agriculture and 

rural development loans guaranteed by the United 

States Department of Agriculture (USDA). The FCA 

has a separate set of capital regulations, at subpart 

B of part 652, that apply to Farmer Mac. This 

rulemaking does not affect Farmer Mac, and the use 

of the term ‘‘System institution’’ in this preamble 

and rule does not include Farmer Mac. 

2The Funding Corporation was established 

pursuant to section 4.9 of the Farm Credit Act of 

1971, as amended, and is owned by all System 

banks. The Funding Corporation is the fiscal agent 

and disclosure agent for the System. The Funding 

Corporation is responsible for issuing and 

marketing debt securities to finance the System’s 

loans, leases, and operations and for preparing and 

producing the System’s financial results. 

3 12 U.S.C. 2001–2279cc. The Act is available at 

www.fca.gov under ‘‘Laws and regulations’’ and 

‘‘Statutes.’’ 

4See 84 FR 49684. Section 621.3 requires System 

institutions to prepare financial statements in 

accordance with U.S. GAAP (referred to as GAAP 

in FCA regulations), except as otherwise directed by 

statutory and regulatory requirements. Previously, 

FCA had issued an informational memorandum 

providing initial information on the new accounting 

standard. See Informational Memorandum, New 

Accounting Standard on Financial Instruments— 

Credit Losses, dated September 1, 2016. 

5FCA regulation § 628.2 defines System 

institution, for capital rule purposes, as a System 

bank, an association, and any other institution 

chartered by the FCA that the FCA determines 

should be subject to FCA’s capital rules. 

6The FBRAs are the Office of the Comptroller of 

the Currency, the Board of Governors of the Federal 

Reserve System, and the Federal Deposit Insurance 

Corporation. 

7See FBRA’s final CECL rule at 84 FR 4222 

(February 14, 2019). FCA staff met with System 

representatives during the development of FCA’s 

proposed rule to seek their input on certain issues. 

The questions discussed were similar to the 

questions asked in the preamble to the FBRAs’ 

proposed CECL rule (83 FR 22312, May 14, 2018). 

FCA staff considered this input in developing the 

proposed rule. 

8See 85 FR 17723 (March 31, 2020) (interim final 

rule); 85 FR 61577 (September 30, 2020) (final rule). 

EdelsteinJ@fca.gov, Associate Director, 

Finance and Capital Markets Team, 

Office of Regulatory Policy, (703) 883– 

4414, TTY (703) 883–4056; or 

ORPMailbox@fca.gov; 

or 

Legal information: Jennifer Cohn, 

CohnJ@fca.gov, Assistant General 

Counsel, Office of General Counsel, 

(720) 213–0440, TTY (703) 883–4056. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

A. Objectives of the Final Rule 

B. Background 

C. Overview of Changes to U.S. GAAP 

D. Regulatory Capital 

II. Summary of the Proposal 

A. Proposed Revisions to the Capital Rules 

To Reflect the Change in U.S. GAAP 

B. Summary of Comments Received on the 

Proposal 

III. Final Rule 

A. Revisions to the Capital Rules To Reflect 

the Change in U.S. GAAP 

1. Introduction of Adjusted Allowances for 

Credit Losses as a Newly Defined Term 

2. Definition of Carrying Value 

i. Available-for-Sale Debt Securities 

ii. Purchased Credit Deteriorated Assets 

B. CECL Transition Provision 

C. ‘‘Safe Harbor’’ Deemed Prior Approval 

To Make Cash Distributions 

D. Disclosures and Regulatory Reporting 

E. Conforming Changes to Other FCA 

Regulations 

1. Final Rule Change for Vintage Year 

Disclosure 

2. Conforming Changes Adopted as 

Proposed 

F. Effective Date 

G. Supervisory Guidance on the ACL 

IV. Regulatory Analysis 

A. Regulatory Flexibility Act 

B. Congressional Review Act 

I. Introduction 

A. Objectives of the Final Rule 

FCA’s objectives in adopting this rule 

are to: 

• Ensure the Farm Credit System’s 

(System) capital requirements, 

including certain regulatory disclosures, 

reflect the current expected credit losses 

methodology (CECL), which revises the 

accounting for credit losses under U.S. 

GAAP; and 

• Ensure conforming amendments to 

other regulations accurately reference 

credit losses. 

B. Background 

In 1916, Congress created the System 

to provide permanent, stable, affordable, 

and reliable sources of credit and 

related services to American agricultural 

and aquatic producers.1 As of January 1, 

2022, the System consists of three Farm 

Credit Banks, one agricultural credit 

bank, 64 agricultural credit associations, 

one Federal land credit association, 

several service corporations, and the 

Federal Farm Credit Banks Funding 

Corporation (Funding Corporation). 

System banks (including both the Farm 

Credit Banks and the agricultural credit 

bank) issue Systemwide consolidated 

debt obligations in the capital markets 

through the Funding Corporation,2

which enables the System to extend 

short-, intermediate-, and long-term 

credit and related services to eligible 

borrowers. Eligible borrowers include 

farmers, ranchers, aquatic producers 

and harvesters, their cooperatives, rural 

utilities, exporters of agricultural 

commodities products, farm-related 

businesses, and certain rural 

homeowners. The System’s enabling 

statute is the Farm Credit Act of 1971, 

as amended (Act).3

On September 23, 2019, FCA 

published in the Federal Register a 

notice of proposed rulemaking 

(proposed rule or proposal) seeking 

public comment on revisions to certain 

regulations to address changes to credit 

loss accounting under U.S. GAAP.4 In 

particular, FCA proposed to amend 

certain rules to reflect the Financial 

Accounting Standards Board’s (FASB) 

issuance of Accounting Standards 

Update (ASU) No. 2016–13, Financial 

Instruments—Credit Losses, Topic 326, 

Measurement of Credit Losses on 

Financial Instruments (ASU 2016–13). 

FASB’s new accounting standard for 

credit losses applies to all System 

institutions.5

ASU 2016–13 introduces CECL, 

which replaces the incurred loss 

methodology for financial assets 

measured at amortized cost. This update 

is discussed in more detail in the next 

section, Overview of Changes to U.S. 

GAAP. FCA proposed to revise the tier 

1/tier 2 capital rule in part 628 to 

distinguish which credit loss 

allowances under the new accounting 

standard would be eligible for inclusion 

in a System institution’s regulatory 

capital. 

FCA’s tier 1/tier 2 capital rule in part 

628 are similar to the standardized 

approach capital rules the Federal 

banking regulatory agencies (FBRAs) 6

adopted for the banking organizations 

they regulate (U.S. Rule), while taking 

into account the cooperative structure 

and the organization of the System. 

FCA’s proposed CECL rule was similar 

to the FBRAs’ final CECL rule, which 

was published in February 2019.7

Unlike the CECL rule adopted by the 

FBRAs, FCA did not propose a phasein of the day-one impacts of CECL on 

regulatory capital ratios. The CECL 

Transition Provision section below 

discusses why a transition period for 

System institutions is unnecessary and 

would create undue burden and 

complexity. 

As part of efforts to address the 

disruption of economic activity in the 

United States caused by the spread of 

COVID–19, the FBRAs adopted a second 

CECL transition provision.8 This second 

CECL transition provided banking 

organizations that were required to 

adopt CECL for purposes of U.S. GAAP 

on January 1, 2020, the option to delay, 

for up to two years, an estimate of 

CECL’s impact on regulatory capital, 

followed by a three-year transition 

period (i.e., a five-year transition period 

in total). 

As discussed below, FCA received 

four comment letters on the proposed 


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Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 27485 

9ASU 2016–13 covers measurement of credit 

losses on financial instruments and includes three 

subtopics within Topic 326: (i) Subtopic 326–10 

Financial Instruments—Credit Losses—Overall; (ii) 

Subtopic 326–20: Financial Instruments—Credit 

Losses—Measured at Amortized Cost; and (iii) 

Subtopic 326–30: Financial Instruments—Credit 

Losses—Available-for-Sale Debt Securities. 

10 ‘‘Other extensions of credit’’ includes trade and 

reinsurance receivables, and receivables that relate 

to repurchase agreements and securities lending 

agreements. ‘‘Off-balance sheet credit exposures’’ 

includes off-balance sheet credit exposures not 

accounted for as insurance, such as loan 

commitments, standby letters of credit, and 

financial guarantees. Note that credit losses for offbalance sheet credit exposures that are 

unconditionally cancellable by the issuer are not 

recognized under CECL. 

11The System currently holds limited PCI assets, 

which have generally been acquired through 

business combinations. FCA does not believe the 

amount of PCD assets in the System after the 

adoption of CECL will be materially different. 

12A PBE that is not an SEC filer includes: (1) An 

entity that has issued securities that are traded, 

listed, or quoted on an over-the-counter market, or 

(2) an entity that has issued one or more securities 

that are not subject to contractual restrictions on 

transfer and is required by law, contract, or 

regulation to prepare U.S. GAAP financial 

statements (including footnotes) and make them 

publicly available periodically. For further 

information on the definition of a PBE, refer to ASU 

No. 2013–12, Definition of a Public Business Entity, 

issued in December 2013. Since, as discussed 

above, the Funding Corporation is the System’s 

fiscal and disclosure agent, the CECL effective date 

for the System is based on its effective date for the 

Funding Corporation. The Funding Corporation 

satisfies the definition of a PBE that is not an SEC 

filer. 

13See FASB ASU 2019–10 Financial 

Instruments—Credit Losses (Topic 326), Derivatives 

and Hedging (Topic 815), and Leases (Topic 842) 

Effective Dates, issued in November 2019. 

14 If FASB were to amend the effective date again, 

System implementation may similarly be delayed. 

15These capital ratios are specified in § 628.10. 

rule. These comments, together with 

FCA’s responses to those comments, are 

addressed in the Final Rule section 

below. FCA is finalizing most 

provisions as proposed. However, FCA 

is making changes to certain provisions 

in response to comments, as discussed 

below. 

C. Overview of Changes to U.S. GAAP 

In June 2016, FASB issued ASU No. 

2016–13, Topic 326, Financial 

Instruments—Credit Losses,9 which 

revises the accounting for credit losses 

under U.S. GAAP. In pertinent part, 

ASU No. 2016–13: 

• Introduces CECL, which replaces 

the incurred loss methodology for 

financial assets measured at amortized 

cost; 

• Introduces the term purchased 

credit deteriorated (PCD) assets, which 

replaces the term purchased credit 

impaired (PCI) assets; 

• Modifies the treatment of credit 

losses on available-for-sale (AFS) debt 

securities; and 

• Requires certain disclosures of 

credit quality indicators by year of 

origination (or vintage). 

CECL differs from the incurred loss 

methodology in several key respects. 

CECL requires System institutions to 

recognize lifetime expected credit losses 

for financial assets measured at 

amortized cost, not just those credit 

losses that have been incurred as of the 

reporting date. CECL also requires the 

incorporation of reasonable and 

supportable forecasts in developing an 

estimate of lifetime expected credit 

losses, while maintaining the current 

requirement for System institutions to 

consider past events and current 

conditions. Furthermore, the probable 

threshold for recognition of allowances 

in accordance with the incurred loss 

methodology is removed under CECL. 

Estimating expected credit losses over 

the life of an asset under CECL, 

including consideration of reasonable 

and supportable forecasts, results in 

earlier recognition of credit losses than 

under the existing incurred loss 

methodology. 

In addition, CECL replaces multiple 

impairment approaches in existing U.S. 

GAAP. CECL allowances will cover a 

broader range of financial assets than 

allowance for loan losses (ALL) under 

the incurred loss methodology. Under 

the incurred loss methodology, in 

general, ALL covers credit losses on 

loans held for investment and lease 

financing receivables, with additional 

allowances for certain other extensions 

of credit and allowances for credit 

losses on certain off-balance sheet credit 

exposures (with the latter allowances 

presented as a liability).10 These 

exposures will be within the scope of 

CECL. In addition, CECL covers credit 

losses on held-to-maturity (HTM) debt 

securities. 

As mentioned above, ASU No. 2016– 

13 also introduces PCD assets as a 

replacement for PCI assets. The PCD 

asset definition covers a broader range 

of assets than the PCI asset definition. 

CECL requires System institutions to 

estimate and record credit loss 

allowances for a PCD asset at the time 

of purchase. The credit loss allowance 

is then added to the purchase price to 

determine the amortized cost basis of 

the asset for financial reporting 

purposes. Post-acquisition increases in 

credit loss allowances on PCD assets 

will be established through a charge to 

earnings. This is different from the 

current treatment of PCI assets, for 

which System institutions are not 

permitted to estimate and recognize 

credit loss allowances at the time of 

purchase. Rather, in general, credit loss 

allowances for PCI assets are estimated 

after the purchase only if there is 

deterioration in the expected cash flows 

from the assets.11

ASU No. 2016–13 also introduces 

new requirements for AFS debt 

securities. The new accounting standard 

requires a System institution to 

recognize credit losses on individual 

AFS debt securities through credit loss 

allowances, rather than through direct 

write-downs, as is currently required 

under U.S. GAAP. AFS debt securities 

will continue to be measured at fair 

value, with changes in fair value not 

related to credit losses recognized in 

other comprehensive income. Credit 

loss allowances on an AFS debt security 

are limited to the amount by which the 

security’s fair value is less than its 

amortized cost. 

Upon adoption of CECL, a System 

institution will record a one-time 

adjustment to its credit loss allowance 

as of the beginning of its fiscal year of 

adoption equal to the difference, if any, 

between the amount of credit loss 

allowance required under the incurred 

loss methodology and the amount of 

credit loss allowance required under 

CECL. Except for PCD assets, the 

adjustment to credit loss allowance 

would be recognized with offsetting 

entries to deferred tax assets (DTAs), if 

appropriate, and to the fiscal year’s 

beginning retained earnings. 

The effective date of ASU No. 2016– 

13 varies for different financial 

institutions. The original effective date 

for public business entities (PBEs) that 

are not Securities and Exchange 

Commission (SEC) filers, such as the 

Funding Corporation,12 was the fiscal 

year beginning after December 15, 2020, 

including interim periods within that 

fiscal year, and that was the timeframe 

in effect when FCA published the 

proposed CECL rule. After publication, 

on October 18, 2019, FASB amended the 

effective dates of certain major 

accounting standards, including ASU 

No. 2016–13. Specifically, for entities 

such as the Funding Corporation, ASU 

No. 2016–13 is effective for fiscal years 

beginning after December 15, 2022, 

including interim periods within those 

fiscal years.13 System institutions will 

implement the new standard on January 

1, 2023, and Systemwide combined 

financial statements for the quarter 

ending March 31, 2023, will reflect the 

new standard.14

D. Regulatory Capital 

Changes necessitated by CECL to a 

System institution’s retained earnings, 

DTAs, and allowances will affect the 

institution’s regulatory capital ratios.15


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16FCA’s capital rules refer to ‘‘unallocated 

retained earnings (URE)’’ rather than ‘‘retained 

earnings.’’ Section 628.2 defines URE as 

‘‘accumulated net income that a System institution 

has not allocated to a member-borrower.’’ This 

preamble uses the term ‘‘retained earnings,’’ 

because that is the term used in CECL and in U.S. 

GAAP more generally. For purposes of this 

preamble, ‘‘retained earnings’’ has the same 

meaning as ‘‘URE.’’ 

17However, as discussed above, allowances 

recognized on PCD assets upon adoption of CECL 

and upon later purchases of PCD assets generally 

would not reduce the System institution’s earnings, 

retained earnings, or CET1 capital. 

18 DTAs arising from temporary differences in 

relation to net operating loss carrybacks are riskweighted at 100 percent under § 628.32(l)(3). DTAs 

that arise from net operating loss and tax credit 

carryforwards, net of any related valuation 

allowances and net of deferred tax liabilities in 

accordance with § 628.22(e), are deducted from 

CET1 capital under § 628.22(a)(3). All other DTAs 

are risk-weighted at 100 percent under 

§ 628.32(l)(5). DTAs are immaterial at most System 

institutions. 

19See Accounting Standards Codification Topic 

740, ‘‘Income Taxes.’’ 

20Under § 628.2, any amount of ALL greater than 

the 1.25 percent limit is deducted from 

standardized total risk-weighted assets. 

21This exclusion of credit loss allowances on 

PCD assets and AFS debt securities is what 

differentiates AACL from the term allowance for 

credit losses (ACL), which is used by the FASB in 

ASU 2016–13 and which applies to both financial 

assets and AFS debt securities. Consistent with the 

proposal and as described in the following sections, 

the AACL definition includes only those 

allowances that have been charged against earnings 

or retained earnings. 

22See existing § 628.20(d)(3). 

23Section 628.63 requires System banks to 

disclose items such as capital structure, capital 

adequacy, credit risk, and credit risk mitigation. 

24System Workgroups Letter dated November 22, 

2019. 

25CoBank Letter dated November 20, 2019. 

26Northwest Letter dated November 15, 2019. 

27Capital Letter dated October 18, 2019. 

Specifically, retained earnings are a key 

component of a System institution’s 

common equity tier 1 (CET1) capital.16

An increase in a System institution’s 

allowances, including those estimated 

under CECL, generally will reduce the 

institution’s earnings or retained 

earnings, and therefore its CET1 

capital.17

Depending on the nature of the 

difference, DTAs arising from temporary 

differences (temporary difference DTAs) 

are included in a System’s institution’s 

risk-weighted assets or are deducted 

from CET1 capital.18 Increases in 

allowances generally give rise to 

increases in temporary difference DTAs 

that will partially offset the reduction in 

earnings or retained earnings.19 Under 

§ 628.20(d)(3), the ALL is included in a 

System institution’s tier 2 capital up to 

1.25 percent of its standardized total 

risk-weighted assets (as defined in 

§ 628.2) not including any amount of the 

ALL.20

II. Summary of the Proposal 

A. Proposed Revisions to the Capital 

Rules To Reflect the Change in U.S. 

GAAP 

To address the forthcoming 

implementation of changes to U.S. 

GAAP resulting from the FASB’s 

issuance of ASU No. 2016–13 and to 

improve consistency between FCA’s 

capital rules and U.S. GAAP, FCA 

proposed to amend the capital rules in 

part 628 to identify which credit loss 

allowances under the new accounting 

standard would be eligible for inclusion 

in a System institution’s regulatory 

capital. Because FCA’s capital rules are 

generally similar to the U.S. Rule, FCA’s 

proposed CECL rule was generally 

similar to the FBRAs’ final CECL rule. 

In particular, FCA proposed to add 

adjusted allowances for credit losses 

(AACL) as a newly defined term in its 

capital rules. Under the proposal, AACL 

included credit loss allowances related 

to financial assets, except for allowances 

for PCD assets and AFS debt 

securities.21 AACL was eligible under 

the proposal for inclusion in a System 

institution’s tier 2 capital subject to the 

current limit for including ALL in tier 

2 capital under the capital rules.22 The 

proposed rule provided separate capital 

treatment for allowances associated 

with AFS debt securities and PCD assets 

that would apply to System institutions 

upon adoption of ASU 2016–13. Unlike 

the CECL rule adopted by the FBRAs, 

FCA did not propose a phase-in of the 

day-one impacts of CECL on regulatory 

capital ratios. 

FCA’s proposed rule also revised 

capital disclosure requirements that 

apply to System banks following their 

adoption of CECL 23 and made 

conforming amendments to other 

regulations so they refer to credit loss 

allowance and reflect the 

implementation of ASU No. 2016–13. 

B. Summary of Comments Received on 

the Proposal 

FCA received four comment letters on 

the proposed rule: One letter from the 

Funding Corporation on behalf of the 

System’s Accounting Standards and 

CECL Workgroups (System Workgroups 

Letter); 24 one letter from CoBank, ACB 

(CoBank Letter), a System bank; 25 and 

one letter each from Northwest Farm 

Credit Services, an Agricultural Credit 

Association (Northwest Letter) 26 and 

Capital Farm Credit, ACA (Capital 

Letter),27 both System associations. All 

commenters generally supported many 

significant aspects of the proposed rule 

and expressed similar comments. 

CoBank expressly stated it supported 

the System Workgroups Letter. The two 

associations offered comments 

consistent with certain aspects of the 

System Workgroups Letter. 

All commenters supported FCA’s new 

defined term ‘‘Adjusted Allowances for 

Credit Losses’’ and the modification to 

the definition of ‘‘carrying value.’’ All 

the commenters also supported the 

existing limit on the inclusion of the 

allowance in tier 2 capital of 1.25 

percent of risk-weighted assets. 

All commenters asked FCA to follow 

U.S. GAAP for disclosure and reporting 

requirements, including the conforming 

amendments FCA proposed, rather than 

introducing specific disclosures 

different than those required by U.S. 

GAAP. In addition, all commenters 

suggested the rule should contain a 

general reference to the effective date 

required by U.S. GAAP rather than 

specifying an effective date. 

All commenters believe FCA should 

adopt an optional transition period for 

the day-one impact CECL may have on 

institutions’ regulatory capital to align 

more closely with the approach taken by 

the FBRAs. Additionally, all 

commenters asked FCA to exclude any 

day-one impact of CECL from the yearover-year change in CET1 capital 

referred to in § 628.20(f)(5)(ii), to avoid 

a negative impact on an institution’s 

ability to make capital distributions, 

including the payment of patronage. 

III. Final Rule 

As discussed above, FCA’s capital 

rules are similar to the U.S. Rule, while 

taking into account the cooperative 

structure and the organization of the 

System. This final rule is similar in 

many respects to the FBRAs’ CECL rule. 

A. Revisions to the Capital Rules To 

Reflect the Change in U.S. GAAP 

1. Introduction of Adjusted Allowances 

for Credit Losses as a Newly Defined 

Term 

FCA is adopting as final, without 

change from the proposal, the proposed 

definition of the new capital term 

AACL. As proposed, FCA is revising the 

capital rules to reflect the revised 

accounting standard for credit losses 

under U.S. GAAP as it relates to System 

institutions’ calculation of regulatory 

capital ratios. The new capital term 

AACL, which replaces the existing term 

ALL, applies to all System institutions. 

FCA is also adopting without change 

its proposal, consistent with the 

treatment of ALL under FCA’s existing 

capital rules, to make amounts of AACL 

eligible for inclusion in an institution’s 

tier 2 capital up to 1.25 percent of the 

institution’s standardized total riskweighted assets not including any 

amount of the AACL. 


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28 84 FR 49684, 49687 (September 23, 2019). 

29CECL requires consideration of current and 

future expected economic conditions to estimate 

allowances. To an extent, these conditions will not 

be known until closer to a System institution’s 

CECL adoption date. 

All commenters supported the new 

defined term AACL and the 

continuation of the existing limit on the 

inclusion of the allowance in tier 2 

capital. 

CECL allowances cover a broader 

range of financial assets than the ALL 

under the incurred loss methodology. 

Under FCA’s existing capital rules, ALL 

includes valuation allowances that have 

been established through a charge 

against earnings to cover estimated 

credit losses on loans or other 

extensions of credit as determined in 

accordance with U.S. GAAP. Under 

CECL, credit loss allowances represent 

an accounting valuation account, 

measured as the difference between the 

financial assets’ amortized cost basis 

and the amount expected to be collected 

on the financial assets (i.e., lifetime 

credit losses). Thus, AACL includes 

allowances for expected credit losses on 

HTM debt securities and lessors’ net 

investments in leases that have been 

established to adjust these assets to 

amounts expected to be collected, as 

determined in accordance with U.S. 

GAAP. AACL also includes allowances 

for expected credit losses on off-balance 

sheet credit exposures not accounted for 

as insurance, as determined in 

accordance with U.S. GAAP. As 

described below, however, credit loss 

allowances related to AFS debt 

securities and PCD assets are not 

included in the definition of AACL. 

As the FBRAs have said they are 

doing for the banking organizations that 

they regulate, FCA intends to monitor 

the impacts of this 1.25 percent limit on 

regulatory capital and System 

institution lending practices after the 

final rule is effective. FCA’s ongoing 

monitoring will include the review of 

data, including data provided by System 

institutions. FCA will also monitor the 

FBRAs’ actions in this area. FCA will 

consider the information it is 

monitoring in determining whether a 

further change to the FCA’s capital 

rules’ treatment of AACL might be 

warranted. To the extent FCA 

determines further revisions to the 

capital rules are necessary, the Agency 

would seek comment through a separate 

proposal. 

2. Definition of Carrying Value 

FCA is adopting as final, without 

change from the proposal, a revision to 

the definition of carrying value. Under 

the existing definition at § 628.2, 

carrying value means, with respect to an 

asset, the value of the asset on the 

balance sheet as determined in 

accordance with U.S. GAAP. Under the 

final rule, and consistent with the 

FBRAs’ final CECL rule, the definition 

of carrying value is revised to add a 

provision that, for all assets other than 

AFS debt securities and PCD assets, the 

carrying value is not reduced by any 

associated credit loss allowance. All 

commenters supported this proposed 

revision to the definition of carrying 

value. 

i. Available-for-Sale Debt Securities 

Current accounting standards require 

a System institution to make an 

individual assessment of each of its AFS 

debt securities and take a direct writedown for credit losses when such a 

security is other-than-temporarily 

impaired. The amount of the writedown is charged against earnings, which 

reduces CET1 capital and results in a 

reduction in the same amount to the 

carrying value of the AFS debt security. 

ASU 2016–13 revises the accounting for 

credit impairment of AFS debt 

securities by requiring System 

institutions to determine whether a 

decline in fair value below an AFS debt 

security’s amortized cost resulted from 

a credit loss, and to record any such 

credit impairment through earnings 

with a corresponding allowance. 

Similar to the current regulatory 

treatment of credit-related losses for 

other-than-temporary impairment, 

under the final rule all credit losses 

recognized on AFS debt securities will 

correspondingly affect CET1 capital and 

reduce the carrying value of the AFS 

debt security. Since the carrying value 

of an AFS debt security is its fair value, 

which would reflect any credit 

impairment, credit loss allowances for 

AFS debt securities required under the 

new accounting standard are not eligible 

for inclusion in a System institution’s 

tier 2 capital. 

ii. Purchased Credit Deteriorated Assets 

The final rule maintains the 

requirement that valuation allowances 

be fully charged against earnings in 

order to be eligible for inclusion in tier 

2 capital. The final rule, however, 

excludes PCD allowances from being 

included in tier 2 capital; rather, a 

System institution will calculate the 

carrying value of PCD assets net of 

allowances. 

Under the new accounting standard, 

PCD assets are acquired individual 

financial assets (or acquired groups of 

financial assets with shared risk 

characteristics) that, as of the date of 

acquisition and as determined by an 

acquirer’s assessment, have experienced 

a more-than-insignificant deterioration 

in credit quality since origination. The 

new accounting standard will require 

System institutions to estimate expected 

credit losses that are embedded in the 

purchase price of a PCD asset and 

recognize these amounts as an 

allowance as of the date of acquisition. 

As such, the initial allowance amount 

for a PCD asset recorded on a System 

institution’s balance sheet will not be 

established through a charge to 

earnings. Including allowances in tier 2 

capital that have not been charged 

against earnings would diminish the 

quality of regulatory capital. Postacquisition increases in allowances for 

PCD assets will be established through 

a charge against earnings. 

Accordingly, the final regulation 

provides that valuation allowances 

charged to retained earnings, in 

accordance with U.S. GAAP (i.e., the 

allowances required at CECL adoption), 

are eligible for inclusion in tier 2 

capital. This treatment of PCD assets, in 

effect, will reduce a System institution’s 

standardized total risk weighted assets, 

similar to the proposed treatment for 

credit loss allowances for AFS debt 

securities. 

Consistent with FCA’s proposal and 

with the FBRAs’ final CECL rule, this 

final rule does not allow System 

institutions to bifurcate PCD allowances 

to include post-acquisition allowances 

in the definition of AACL. As discussed 

in the preamble to the proposed rule, 

FCA is concerned a bifurcated approach 

could create undue complexity and 

burden for System institutions and 

believes requiring System institutions to 

calculate the carrying value of PCD 

assets net of allowances appropriately 

accounts for post-acquisition allowances 

in the calculation of regulatory capital.28

FCA received no comments concerning 

not allowing a bifurcated approach. 

B. CECL Transition Provision 

Unlike the FBRAs’ final CECL rule, 

FCA did not propose and is not 

adopting an optional phase-in of the 

day-one impacts of CECL on regulatory 

capital ratios. The FBRAs included an 

optional transition period for banking 

organizations to reduce the potential 

day-one adverse impacts CECL may 

have on a banking organization’s 

regulatory capital ratios. The FBRAs 

included this transition period because 

of concerns that some banking 

organizations might face difficulties in 

capital planning because of uncertainty 

about the economic environment at the 

time of CECL adoption.29

All commenters asked FCA to adopt 

an optional transition period for the 


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30 In response to a specific question from FCA on 

the matter, none of the commenters asked FCA to 

adopt a mandatory transition provision. 

31System Workgroups Letter and Northwest 

Letter. 

32System Workgroups Letter and Capital Letter. 

33No commenters provided analysis to support 

their position. In the proposed rule, FCA requested 

analysis that would support a transition period or 

alternatives to a transition period that might 

accommodate institutions in their implementation 

of the CECL requirements. 

34For the same reasons, FCA declines to adopt 

the second, COVID-related transition period the 

FBRAs adopted in 2020. In addition, FCA notes that 

transition period applied only to banking 

organizations that were required to implement 

CECL on January 1, 2020. 

35While each System bank has different strategies 

and asset compositions, in general, the direct note 

to associations and investments comprise a majority 

of each banks’ assets. Given these assets held at 

System banks (and their anticipated allowance 

levels under CECL), FCA anticipates all banks will 

maintain regulatory capital compliance. 

36As noted above, FCA issued an informational 

memorandum in 2016 titled ‘‘New Accounting 

Standard on Financial Instruments—Credit Losses.’’ 

This informational memorandum specifically 

encouraged System institutions to plan and prepare 

for CECL’s potential impact on capital and included 

seven items for System institutions to consider for 

the measurement, transition, and implementation of 

CECL. Institutions that have heeded this planning 

guidance have had ample opportunity to prepare 

themselves for CECL’s day-one impact. 

37See Call Report Schedule RC Balance Sheet. 

38FCA also reviewed allowance ratios provided 

by the FBRAs as of June 30, 2021, which compared 

allowances for banking organizations that had 

already adopted CECL and allowance ratios for 

banking organizations that were still under the 

incurred loss model. 

39The Funding Corporation reported strong credit 

quality in the combined System’s loan portfolio 

with loans classified as Acceptable and Other 

Assets Especially Mentioned at 98.1 percent on 

December 31, 2021, compared to 97.5 percent on 

December 31, 2020. See 2021 Annual Information 

Statement of the Farm Credit System, March 1, 

2022. 

40As noted in FCA’s preamble to the proposed 

tier 1/tier 2 capital rule, FCA changed items from 

the U.S. Rule as appropriate to account for the 

differences between System institutions and 

banking organizations regulated by the FBRAs. See 

79 FR 52814 (September 4, 2014). 

41As an example, the U.S. Rule provided for 

phase-in and transitional periods of certain 

regulatory deductions and adjustments, minority 

interests, and temporary inclusions of nonqualifying instruments. The FBRAs provided these 

transitional periods, in part, to provide banking 

organizations they regulate sufficient time to build 

capital to meet the new requirements. See 79 FR 

52814 (September 4, 2014). 

day-one impact CECL may have on an 

institution’s regulatory capital to more 

closely align with the approach adopted 

by the FBRAs.30 Two commenters stated 

that FCA should follow its own 

objective in the capital rules that 

became effective January 1, 2017, which 

was to ensure the System’s capital 

requirements were comparable to the 

Basel III framework and the U.S. Rule.31

Two commenters asserted that FCA’s 

statement in the preamble to the 

proposed rule that all institutions will 

be sufficiently capitalized to absorb the 

day-one impacts of CECL is not 

supported by firm estimates.32

Additionally, all commenters stated that 

as of their comment submission date, 

System institutions had not yet fully 

implemented CECL and were not able to 

definitively assess possible capital 

impacts of the implementation.33

FCA disagrees with these 

commenters. As when FCA proposed 

this rule, FCA continues to believe a 

transition provision is unnecessary for 

any System institution. First, even 

without a transition period, FCA 

expects all institutions will be 

sufficiently capitalized to absorb the 

day-one impact of CECL for the purpose 

of complying with regulatory capital 

requirements. Second, FCA’s capital 

requirements are comparable to the 

Basel III framework and the U.S. Rule 

even without an optional phase-in 

period. Finally, adopting an optional 

phase-in period would create significant 

operational burden and complexity with 

no corresponding benefit to the safety 

and soundness of System institutions.34

The first reason a transition period is 

not necessary is because even without 

one, FCA expects all institutions will be 

sufficiently capitalized to absorb the 

day-one impact of CECL for the purpose 

of complying with regulatory capital 

requirements. FCA expects allowances 

estimated under CECL will likely 

increase at most System institutions, 

causing CET1 capital (including 

retained earnings) to decrease and tier 2 

capital to increase. Total capital, which 

is generally the most constraining 

capital ratio for associations, would 

remain largely unchanged. For System 

banks, where the tier 1 leverage ratio is 

generally the most constraining capital 

ratio, FCA expects credit losses under 

CECL to result in little to no change for 

bank allowance levels.35 FCA continues 

to believe all System institutions will 

continue to comply with regulatory 

capital ratios and buffers without a 

transition period.36

Contrary to the commenters’ 

assertions, FCA’s expectations for the 

day-one impact of CECL are supported 

by firm estimates. For the proposed rule, 

FCA analyzed allowance amounts from 

the Uniform Reports of Financial 

Condition and Performance (Call 

Report) for all System institutions under 

various stress scenarios.37 For the final 

rule, FCA analyzed allowance amounts 

from updated Call Report data for all 

System institutions and completed a 

review of select System institutions’ 

model development and 

implementation of CECL.38

Additionally, since the proposed rule 

comment period closed, regulatory 

capital levels remain satisfactory, 

indicating the System is well positioned 

to absorb the day-one impact of CECL. 

In addition, the credit quality of the 

System’s combined loan portfolio 

remains strong as of December 31, 

2021.39

Based on these reviews, unless 

existing and future expected economic 

conditions significantly deteriorate after 

publication of this rule and before the 

January 1, 2023, effective date of this 

rule, FCA expects all institutions will be 

sufficiently capitalized to absorb the 

day-one impact of CECL for the purpose 

of complying with regulatory capital 

requirements. More specifically, FCA 

continues to believe the regulatory 

capital ratios of all System 

institutions—CET1; tier 1; total capital; 

and tier 1 leverage—will remain above 

the regulatory minimums and buffers 

after the implementation of CECL, even 

without a transition period. FCA 

considered this analysis as part of its 

determination not to provide an 

optional transition period for System 

institutions. 

The second reason a transition period 

is not necessary is that FCA disagrees 

with the commenters’ position that not 

adopting an optional phase-in period 

would diverge from FCA’s capital rule 

objective to ensure the System’s capital 

requirements are comparable to the 

Basel III framework and the U.S. Rule. 

FCA views comparability as ensuring 

the overall regulatory outcome of FCA’s 

capital requirements are comparable 

with the U.S. Rule as appropriate, taking 

into account the differences between 

System institutions and banking 

organizations subject to the U.S. Rule.40

While many requirements in FCA’s 

capital rules are similar or identical to 

requirements in the U.S. Rule, 

comparability does not mean every 

provision and requirement in the U.S. 

Rule should be incorporated into FCA’s 

capital rules. FCA’s minimum capital 

requirements ensure the quality and 

quantity of capital are comparable to 

that of the U.S. Rule and reflect 

principles outlined in the Basel III 

framework, ensuring an overall uniform 

standard of capital quality that is 

consistent and transparent. 

In adopting the tier 1/tier 2 capital 

rule in 2016, FCA did not adopt the 

majority of phase-in and transitional 

periods that were included in the U.S. 

Rule.41 At the time, FCA determined 

most of these transitional and phase-in 

periods were not needed to give System 

institutions sufficient time to come into 


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42FCA did provide a phase-in period of 3 years 

for the 2.5 percent capital conservation buffer. See 

81 FR 49720, 49721 (July 28, 2016). 

43See Federal Financial Institutions Examination 

Council Supplemental Instructions: Interim Final 

Rules and Notice Issued March 2020, Revision 3: 

2020 CECL Transition Provision. 

44As noted above, FCA issued an informational 

memorandum in 2016 titled ‘‘New Accounting 

Standard on Financial Instruments—Credit Losses’’ 

which included seven items for System institutions 

to consider for the measurement, transition, and 

implementation of CECL. System institutions were 

specifically encouraged to plan and prepare for 

CECL’s potential impact on capital. 

45Note that amendments to the capital rule 

published at 86 FR 54347 (October 1, 2021) and 

effective on January 1, 2022, made a minor revision 

to this provision that does not change the comment 

or FCA’s response. 

46See Call Report Schedule RI–D Changes in Net 

Worth. 

compliance with the new rules.42 FCA’s 

analysis at the time evidenced that all 

System institutions would exceed the 

minimum regulatory capital ratios on 

the effective date of the rule. Since 

January 1, 2017, the effective date of the 

rule, as FCA expected, System capital 

levels have remained satisfactory and all 

System institutions have exceeded all 

minimum regulatory capital 

requirements as well as applicable 

capital conservation and leverage buffer 

requirements. 

In general, banking organizations 

regulated by the FBRAs may have a 

larger day-one impact from adopting 

CECL and a phase-in may be more 

appropriate to ensure their regulatory 

capital compliance. The lending 

operations of many of these banking 

organizations—including unsecured 

lending such as credit cards—have 

historically caused banking 

organizations to experience higher 

credit losses (as a percentage of loans) 

than System institutions. In contrast to 

many banking organizations, the System 

lends primarily to agriculture and other 

eligible borrowers in rural areas. 

Approximately 50 percent of the 

System’s combined loan portfolio is in 

real estate mortgage and rural 

residential real estate loans. These real 

estate loans are generally long-term and 

well-secured, and they are generally 

expected to have lower credit losses 

than commercial real estate loans. 

The final reason an optional transition 

period is not needed is that it would 

lead to unnecessary complexity and 

operational burden. An optional 

transition period would require changes 

to existing Call Report schedules that 

would require institutions to change 

existing reporting processes each year of 

the transition period. For example, new, 

more complex calculations would be 

necessary for each year of the transition 

period (based on the percentage of the 

transition amount allowed for the year) 

for reporting items such as retained 

earnings, average assets, AACL, and 

other assets. The Call Report would also 

need to be updated to reflect new 

temporary line items such as the CECL 

transition amount.43

If System institutions were not 

sufficiently capitalized to absorb the 

day-one impact of CECL, FCA believes 

the complexity and operational burden 

of an optional transition period might be 

warranted to provide relief from 

regulatory capital requirements. 

However, all System institutions are 

expected to be sufficiently capitalized to 

absorb the day-one impact and comply 

with regulatory capital requirements 

without an optional transition period. 

An optional transition period could 

also be difficult to implement and 

maintain for System institutions in 

districts that make use of common 

standardized applications for computing 

and reporting regulatory capital. A 

transition period utilized by some 

institutions in such districts but not by 

others would appear to complicate 

supporting the common reporting 

platforms for those institutions. In 

addition, allowing an optional transition 

period would create a lack of 

comparability among System 

institutions’ capital levels. 

The commenters asked FCA to state in 

this final rule that the Agency will work 

with individual institutions to provide 

regulatory relief similar to a transition 

period if the day-one impacts of CECL 

cause a significant impact to an 

individual institution’s regulatory 

capital ratios. FCA confirms the Agency 

will work with individual institutions if 

the day-one impact of CECL causes 

them not to comply with the regulatory 

capital requirements but does not 

commit to granting relief. As stated in 

the preamble to the proposed rule, if 

closer to the adoption of CECL its dayone impact threatens regulatory capital 

compliance, FCA may consider options 

to reduce the unanticipated impacts of 

implementing CECL. The type of action 

would depend on, among other factors, 

the significance of CECL’s impact on an 

individual institution, the institution’s 

capital strategy, business planning, and 

implementation efforts,44 and how 

widespread the issue is throughout the 

System. 

For these reasons, FCA declines to 

adopt a transition period for the day-one 

impact CECL may have on an 

institution’s regulatory capital. 

C. ‘‘Safe Harbor’’ Deemed Prior 

Approval To Make Cash Distributions 

All commenters asked FCA to exclude 

any day-one CECL impacts from 

§ 628.20(f)(5)(ii). 

Section 628.20(f) requires System 

institutions to obtain prior approval 

from FCA before making any cash 

distributions of capital included in tier 

1 or tier 2 capital. FCA’s ‘‘safe harbor’’ 

deemed prior approval provisions, at 

§ 628.20(f)(5), provide that System 

institutions are deemed to have prior 

approval from FCA to distribute cash 

payments as long as certain conditions 

are met. One of the conditions, in 

§ 628.20(f)(5)(ii), stipulates that, after 

any such cash payments have been 

declared and defined by resolution of 

the board, the dollar amount of CET1 

capital at quarter-end equals or exceeds 

the dollar amount of CET1 capital on 

the same quarter-end in the previous 

calendar year.45

Commenters believe FCA should 

exclude the day-one impacts CECL will 

have on the dollar amount of CET1 

capital from compliance with this 

condition so that CECL implementation 

would not impact a System institution’s 

ability to make cash capital 

distributions, including patronage 

payments, under the ‘‘safe harbor.’’ 

Commenters seek this exclusion so the 

existing deemed prior approval process 

would continue without interruption. 

FCA disagrees with this request for 

several reasons. First, FCA believes it is 

unlikely the day-one impact would 

result in CET1 capital declining to the 

same level of CET1 capital on March 31, 

2022 (the quarter-end of the prior year). 

The ‘‘safe harbor’’ essentially limits 

System institutions (without express 

FCA prior approval) to distributing net 

income for the current quarter (in which 

the distribution is declared and defined 

by resolution of the board) and the prior 

3 quarters. 

In practice, System institutions rarely 

make capital distributions—including 

paying dividends on preferred stock, 

making cash patronage payments, or 

redeeming or revolving equities—that 

equal net income for the current quarter 

and prior 3 quarters. Rather, in the last 

three years, System associations have 

reported, on average, distributing at 

least 40 percent of their net income in 

cash patronage.46 This means the 

overwhelming majority of associations 

have had sufficient capacity both to pay 

cash patronage and to build capital. 

FCA continues to expect System 

boards to give significant thought to 

capital distribution decisions and how 

they impact overall capitalization of 

their institution, especially regarding a 

cash payment that equals 12-months of 

net income. In the unlikely event 

CECL’s day-one impact reduces CET1 


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47Section 628.20(f)(2) and (3) provide that at least 

30 days prior to the intended action, a System 

institution must submit a request for approval to 

FCA for a 30-day review period before it takes the 

intended action. The request is deemed to be 

granted if FCA does not notify the System 

institution to the contrary before the end of the 30- 

day review period. While the prior approval 

provisions under § 628.20(f)(2) and (3) do not 

require any supporting documentation, institutions 

that have material declines in CET1 capital due to 

the day-one impact of CECL may want to provide 

the following supporting documentation in any 

prior approval request related to CECL’s 

implementation: (1) The institution’s historical 

trends and current projections for capital growth 

through earnings retention, (2) average cash 

patronage payments over the last 3 years, (3) 

projected cash patronage payments over the 

institution’s current planning horizon, and (4) the 

most recent allowance analysis/study under CECL. 

48ASU No. 2016–13 removes impairment 

approaches and related terminology, including 

replacing the term ALL with ACL. 

49 Governing the contents of the annual report to 

shareholders. 

50 Governing the contents of the annual report to 

investors. 

51See §§ 620.5(g)(1)(iv)(B) and 630.20(g)(1)(ii)(B). 

52See proposed §§ 620.5(g)(1)(iv)(B) and 

630.20(g)(1)(ii)(B). 

53See §§ 620.5(f)(1)(iii)(F) and 630.20(f)(3)(v). 

54See 50 FR 34711, 34712 (August 27, 1985). 

55See 51 FR 8656 (March 13, 1986). 

56See 85 FR 66108 (October 16, 2020). See also 

17 CFR 229.1405 (Item 1405) Allowance for Credit 

Losses. 

capital to a level where an institution 

could not use the ‘‘safe harbor’’ to make 

a cash patronage distribution in line 

with prior years, the appropriateness of 

making such a cash patronage 

distribution may be questionable. 

Second, in the unlikely event CECL 

implementation would cause a System 

institution’s CET1 capital to be less than 

the same quarter-end in the previous 

calendar year, that does not preclude 

the institution from paying patronage. 

An institution that wants to pay cash 

patronage but that cannot satisfy the 

‘‘safe harbor’’ deemed prior approval 

requirements under § 628.20(f)(5) may 

request the prior approval of FCA for 

such distribution under § 628.20(f)(2) 

and (3).47 In addition, a System 

institution may allocate equities to its 

member-borrowers as a form of 

patronage without needing to satisfy any 

requirements that could be affected by 

any day-one impacts from CECL. 

D. Disclosures and Regulatory Reporting 

FCA is adopting as final the proposed 

requirement for System banks to update 

their disclosures required under 

§ 628.63 to reflect the adoption of CECL. 

Section 628.63 imposes public 

disclosure requirements for System 

banks related to the capital 

requirements contained in part 628. The 

public disclosure requirements are 

designed to provide important 

information to market participants on 

the scope of application, capital 

structure, risk exposures, risk 

assessment processes, capital adequacy 

of the bank, and techniques the bank 

uses to identify, measure, monitor, and 

control risks. The final rule replaces 

requirements to disclose ALL with 

requirements to disclose AACL. 

Additionally, the final rule updates 

references to ‘‘probable loan losses’’ and 

‘‘loan losses’’ with references to 

allowance for credit losses (ACL) 48 or 

AACL, as applicable. FCA did not 

receive any comments related to the 

proposed bank disclosure amendments 

in § 628.63. 

To reflect changes in U.S. GAAP 

concerning CECL, FCA anticipates 

revising the Call Reports in the first 

quarter of 2023. These revisions would 

specify the affected line items in the 

capital schedules and the newly defined 

term AACL. In addition, FCA intends to 

update the Call Report instructions for 

all references to ALL. 

E. Conforming Changes to Other FCA 

Regulations 

FCA is not adopting the proposed 

requirement for System institutions to 

provide a vintage year credit loss 

analysis disclosure in §§ 620.5 49 and 

630.20.50 However, the final rule adopts 

all the other proposed conforming 

changes. 

1. Final Rule Change for Vintage Year 

Disclosure 

Existing FCA regulations at §§ 620.5 

and 630.20 require that the discussion 

and analysis of risk exposures analyze 

the ALL.51 The proposal amended these 

disclosure requirements to update 

references to the ALL with the newly 

defined U.S. GAAP term ACL. The 

proposal also required a new credit loss 

analysis disclosure by vintage year.52

All commenters noted that a vintage 

year disclosure of the ACL is not 

required by U.S. GAAP. The 

commenters requested FCA not 

introduce specific disclosure 

requirements in §§ 620.5 and 630.20 

that may result in regulatory disclosures 

being different than those required by 

U.S. GAAP. The commenters believe 

removing the vintage year requirement 

would eliminate the need for FCA to 

update regulations in the event of any 

subsequent changes in U.S. GAAP. 

Because of the overlap of U.S. GAAP 

disclosures and FCA’s requirement to 

disclose the ‘‘Allowance for credit 

losses-to-loans,’’ 53 the final rule 

removes the vintage year requirements 

for the allowance analysis in 

§§ 620.5(g)(1)(iv)(B) and 

630.20(g)(1)(ii)(B), as requested by the 

commenters. However, consistent with 

the proposal, the final rule replaces the 

term ALL with ACL and requires a 

discussion of the adequacy of the 

allowance for credit losses given 

reasonable and supportable forecasts. 

2. Conforming Changes Adopted as 

Proposed 

The proposal made a conforming 

amendment to replace the key financial 

ratio ‘‘Allowance for loan losses-toloans’’ with ‘‘Allowance for credit 

losses-to-loans’’ in the selected financial 

disclosure requirement for banks and 

associations in § 620.5(f). The 

commenters requested that FCA retain 

the existing ratio. The commenters 

believe retaining the existing ratio 

would avoid the need to reconcile 

financial data included in the regulatory 

financial disclosures with the U.S. 

GAAP balance sheet. The commenters 

stated a reconciliation would become 

necessary if the allowance for offbalance sheet credit exposures, which is 

a liability for U.S. GAAP purposes, were 

included within the definitions of 

‘‘Allowance for credit losses’’ in the 

proposed rule. The commenters 

proposed as an alternative to require the 

denominator of the ratio (loans) be 

expanded to include total off-balance 

sheet credit exposures to keep the ratios 

comparable. 

FCA disagrees with the commenters’ 

suggestion and continues to believe 

System disclosures should remain 

generally consistent with those of the 

financial services industry, as they have 

been since at least 1986. FCA’s 

disclosure requirements in the annual 

report to shareholders and investors are 

similar to, though not as extensive as, 

those required by the SEC and other 

financial regulators.54 The disclosure 

reporting requirements originally 

adopted by FCA in 1986 were generally 

similar to the SEC Industry Guide 3, 

Statistical Disclosure by Bank Holding 

Companies (Industry Guide 3).55

Subsequent to FCA’s proposed CECL 

rule, the SEC updated and codified 

certain Industry Guide 3 disclosure 

requirements, including requirements 

for a similar Allowance for Credit 

Losses-to-loans ratio disclosure.56 The 

FCA continues to believe that System 

institution shareholders should have 

access to comparable disclosures made 

to shareholders of other financial 

institutions in order to enhance the 

borrower ownership and control 

mandated by the Act. 

Similarly, the proposal made a 

conforming amendment to replace the 

balance sheet line item ‘‘Allowance for 


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Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 27491 

57Commenters did not request changes to similar 

disclosure requirements in part 630. Since the 

requirements are similar, FCA considered the 

comments in connection with those requirements as 

well and, for the same reasons, declines to amend 

them. 

58 In November 2019, FASB issued ASU 2019–10 

Financial Instruments—Credit Losses (Topic 326), 

Derivatives and Hedging (Topic 815), and Leases 

(Topic 842) Effective Dates, which amended the 

effective date of CECL. 

59Existing supervisory guidance includes: FCA 

Bookletter 49, Adequacy of Farm Credit System 

Institutions’ Allowance for Loan Losses and Risk 

Funds, April 26, 2004; FCA Informational 

Memorandum, Allowance for Loan Losses, June 30, 

2009; FCA Exam Manual, Allowance for Loan 

Losses, November 17, 2015; and FCA Exam Manual, 

Corporate Governance, September 24, 2021. 

losses’’ with ‘‘Allowance for credit 

losses’’ in the selected financial 

disclosure requirement for banks and 

associations in § 620.5(f). Commenters s 

uggested FCA retain the current 

§ 620.5(f)(1)(i)(D) requirement to 

disclose the allowance for loan losses, 

rather than adopting the proposed 

requirement to disclose the allowance 

for credit losses. Commenters stated the 

new requirement could result in 

regulatory disclosure requirements that 

are different than those required by U.S. 

GAAP. 

FCA disagrees with the commenters’ 

suggestions regarding the usage of 

‘‘Allowance for credit losses’’ in 

§ 620.5(f)(1)(i)(D) as FCA believes it is 

important for users of the annual report 

to understand the amount of potential 

credit losses to which each bank and 

association may be exposed. While 

certain regulatory disclosures, such as 

the proposed § 620.5(f)(1)(i)(D), may 

require a reconciliation with U.S. 

GAAP, FCA continues to believe 

shareholders should have access to 

comparable disclosures provided to 

shareholders of other financial 

institutions. By retaining the 

conforming proposed financial 

disclosures in the final rule, System 

institutions will be required to provide 

transparent and comparable disclosures 

similar to others in the financial 

services industry.57

FCA received no comments relating to 

any other proposed conforming change 

and adopts them as proposed. 

A number of existing FCA regulations 

outside of part 628 refer to ALL or to 

‘‘loan loss.’’ As discussed above, ASU 

No. 2016–13 removes impairment 

approaches and related terminology, 

including replacing the term ALL with 

ACL. Accordingly, most of the 

conforming changes outside of part 628 

are to replace ALL or ‘‘loan loss’’ with 

ACL or ‘‘credit loss,’’ as appropriate. In 

addition, several existing regulations 

that refer to ‘‘allowance for losses’’ more 

appropriately refer to ACL. 

Most of the conforming changes to 

regulations within part 628 (as well as 

to regulations that refer to regulations 

within part 628), replace ‘‘ALL’’ with 

‘‘AACL.’’ In the capital disclosures at 

§ 628.63, the final rule replaces 

references to ‘‘probable loan losses’’ and 

‘‘loan losses’’ with ACL or AACL, as 

applicable. 

The final rule makes conforming 

changes in the following parts: 

• Part 611—Organization 

• Part 615—Funding and Fiscal Affairs, 

Loan Policies and Operations, and 

Funding Operations 

• Part 620—Disclosure to Shareholders 

• Part 621—Accounting and Reporting 

Requirements 

• Part 628—Capital Adequacy of 

System Institutions 

• Part 630—Disclosure to Investors in 

Systemwide and Consolidated Bank 

Debt Obligations of the Farm Credit 

System. 

F. Effective Date 

Under U.S. GAAP, System 

institutions are required to implement 

the new standard for purposes of 

Systemwide combined financial 

statements for the Call Report quarter 

ending March 31, 2023. Thus, the final 

rule will be effective January 1, 2023, for 

System institutions. 

All commenters recommended that 

FCA not adopt a specific effective date 

and instead include a more generic 

reference to the effective date required 

by U.S. GAAP. When FCA’s proposed 

rule was published in September of 

2019, as discussed above, CECL was 

scheduled to be effective for PBEs that 

are not SEC filers, such as the Funding 

Corporation, on January 1, 2021. After 

FCA’s proposed rule was published, 

FASB deferred the mandatory effective 

date of CECL for such entities to January 

1, 2023.58 FCA agrees with System 

commenters that this final rule should 

be effective consistent with U.S. GAAP. 

If FASB changes the effective date of 

CECL for System institutions, FCA will 

update the effective date of this final 

rule consistent with the System’s 

implementation date of CECL. 

G. Supervisory Guidance on the ACL 

FCA expects to issue supervisory 

guidance on the ACL and update 

existing guidance referencing ALL. 

Until that time, many concepts, 

processes, and practices detailed in 

existing supervisory guidance on the 

ALL continue to remain relevant under 

CECL. Relevant guidance includes, but 

is not limited to, information related to 

management’s responsibility for the 

allowance estimation process, the board 

of directors’ responsibility for 

overseeing management’s process, and 

the need for institutions to 

appropriately support and document 

their allowance estimates.59 Until new 

guidance is issued, institutions should 

consider the relevant sections of 

existing ALL guidance in their 

implementation of the new accounting 

standard. 

IV. Regulatory Analysis 

A. Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.), FCA hereby certifies that this 

final rule would not have a significant 

economic impact on a substantial 

number of small entities. Each of the 

banks in the System, considered 

together with its affiliated associations, 

has assets and annual income in excess 

of the amounts that would qualify them 

as small entities. Therefore, System 

institutions are not ‘‘small entities’’ as 

defined in the Regulatory Flexibility 

Act. 

B. Congressional Review Act 

Under the provisions of the 

Congressional Review Act (5 U.S.C. 801 

et seq.), the Office of Management and 

Budget’s Office of Information and 

Regulatory Affairs has determined that 

this final rule is not a ‘‘major rule’’ as 

the term is defined at 5 U.S.C. 804(2). 

List of Subjects 

12 CFR Part 611 

Agriculture, Banks, banking, Rural 

areas. 

12 CFR Part 615 

Accounting, Agriculture, Banks, 

banking, Government securities, 

Investments, Rural areas. 

12 CFR Part 620 

Accounting, Agriculture, Banks, 

banking, Reporting and recordkeeping 

requirements, Rural areas. 

12 CFR Part 621 

Accounting, Agriculture, Banks, 

banking, Reporting and recordkeeping 

requirements, Rural areas. 

12 CFR Part 628 

Accounting, Agriculture, Banks, 

banking, Capital, Government securities, 

Investments, Rural areas. 

12 CFR Part 630 

Accounting, Agriculture, Banks, 

banking, Organization and functions 

(Government agencies), Reporting and 

recordkeeping requirements, Rural 

areas. 


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27492 Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 

For the reasons stated in the 

preamble, the Farm Credit 

Administration amends parts 611, 615, 

620, 621, 628, and 630 of chapter VI, 

title 12 of the Code of Federal 

Regulations as follows: 

PART 611—ORGANIZATION 

■ 1. The authority citation for part 611 

is revised to read as follows: 

Authority: Secs. 1.2, 1.3, 1.4, 1.5, 1.12, 

1.13, 2.0, 2.1, 2.2, 2.10, 2.11, 2.12, 3.0, 3.1, 

3.2, 3.3, 3.7, 3.8, 3.9, 4.3A, 4.12, 4.12A, 4.15, 

4.20, 4.25, 4.26, 4.27, 4.28A, 5.9, 5.17, 5.25, 

7.0–7.3, 7.6–7.13, 8.5(e) of the Farm Credit 

Act (12 U.S.C. 2002, 2011, 2012, 2013, 2020, 

2021, 2071, 2072, 2073, 2091, 2092, 2093, 

2121, 2122, 2123, 2124, 2128, 2129, 2130, 

2154a, 2183, 2184, 2203, 2208, 2211, 2212, 

2213, 2214, 2243, 2252, 2261, 2279a–2279a– 

3, 2279b–2279f–1, 2279aa–5(e)); secs. 411 

and 412, Pub. L. 100–233, 101 Stat. 1568, 

1638, as amended by secs. 403 and 404, Pub. 

L. 100–399, 101 Stat. 989, 999 (12 U.S.C. 

2071 note and 2202 note). 

§ 611.515 [Amended] 

■ 2. Amend § 611.515(b)(6)(ii)(E) by 

removing the word ‘‘loan’’ and adding 

in its place the word ‘‘credit’’. 

§ 611.1122 [Amended] 

■ 3. Amend § 611.1122 by: 

■ a. Removing in paragraph (e)(6)(iii) 

the word ‘‘loan’’ and adding in its place 

the word ‘‘credit’’; and 

■ b. Removing in paragraph (e)(10) the 

words ‘‘loan losses’’ and adding in their 

place the words ‘‘credit losses’’ 

wherever they appear. 

§ 611.1130 [Amended] 

■ 4. Amend § 611.1130(b)(4)(i) by 

removing the words ‘‘allowance for 

losses’’ and adding in their place the 

words ‘‘allowance for credit losses’’. 

§ 611.1223 [Amended] 

■ 5. Amend § 611.1223(c)(23)(ii) by 

removing the words ‘‘allowance for 

losses’’ and adding in their place the 

words ‘‘allowance for credit losses’’. 

§ 611.1250 [Amended] 

■ 6. Amend § 611.1250(b)(5)(i)(B) by 

removing the words ‘‘loan losses’’ and 

adding in their place the words ‘‘credit 

losses’’. 

§ 611.1255 [Amended] 

■ 7. Amend § 611.1255(b)(5)(i)(B) by 

removing the words ‘‘general allowance 

for losses’’ and adding in their place the 

words ‘‘general allowance for credit 

losses’’. 

PART 615—FUNDING AND FISCAL 

AFFAIRS, LOAN POLICIES AND 

OPERATIONS, AND FUNDING 

OPERATIONS 

■ 8. The authority citation for part 615 

is revised to read as follows: 

Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 

2.2, 2.3, 2.4, 2.5, 2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 

4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17, 8.0, 8.3, 8.4, 

8.6, 8.8, 8.10, 8.12 of the Farm Credit Act (12 

U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 

2074, 2075, 2076, 2093, 2122, 2128, 2132, 

2146, 2154, 2154a, 2160, 2202b, 2211, 2243, 

2252, 2279aa, 2279aa–3, 2279aa–4, 2279aa–6, 

2279aa–8, 2279aa–10, 2279aa–12); sec. 

301(a), Pub. L. 100–233, 101 Stat. 1568, 1608, 

as amended by sec. 301(a), Pub. L. 103–399, 

102 Stat 989, 993 (12 U.S.C. 2154 note); sec. 

939A, Pub. L. 111–203, 124 Stat. 1326, 1887 

(15 U.S.C. 78o–7 note). 

§ 615.5050 [Amended] 

■ 9. Amend § 615.5050 by: 

■ a. Removing in paragraph (c)(1) the 

words ‘‘allowance for loan losses’’ and 

adding in their place the words 

‘‘allowance for credit losses’’; and 

■ b. Removing in paragraphs (c)(2) 

through (4) the words ‘‘allowance for 

losses’’ and adding in their place the 

words ‘‘allowance for credit losses’’. 

§ 615.5132 [Amended] 

■ 10. Amend § 615.5132(a) by removing 

the words ‘‘loan loss adjustments’’ and 

adding in their place the words ‘‘credit 

loss adjustments’’. 

§ 615.5140 [Amended] 

■ 11. Amend § 615.5140(b)(4)(ii) by 

removing the words ‘‘loan loss’’ and 

adding in their place the words ‘‘credit 

loss’’. 

§ 615.5200 [Amended] 

■ 12. Amend § 615.5200(c)(4) by adding 

the word ‘‘credit’’ before ‘‘losses’’. 

§ 615.5201 [Amended] 

■ 13. Amend § 615.5201 by removing 

the words ‘‘allowance for loan losses’’ 

and adding in their place the words 

‘‘adjusted allowance for credit losses’’ in 

the definition of ‘‘Risk-adjusted asset 

base’’. 

§ 615.5351 [Amended] 

■ 14. Amend § 615.5351(d) by adding 

the word ‘‘credit’’ before ‘‘loss’’. 

PART 620—DISCLOSURE TO 

SHAREHOLDEERS 

■ 15. The authority citation for part 620 

is revised to read as follows: 

Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17, 

5.19 of the Farm Credit Act (12 U.S.C. 2154, 

2154a, 2207, 2243, 2252, 2254); sec. 424, Pub. 

L. 100–233, 101 Stat. 1568, 1656 (12 U.S.C. 

2252 note); sec. 514, Pub. L. 102–552, 106 

Stat. 4102, 4134. 

■ 16. Amend § 620.5 by: 

■ a. Removing in paragraph (f)(1)(i)(D) 

the word ‘‘losses’’ and adding in its 

place the words ‘‘credit losses’’; 

■ b. Removing in paragraph (f)(1)(ii)(B) 

the words ‘‘loan losses’’ and adding in 

their place the words ‘‘credit losses’’; 

■ c. Removing in paragraph (f)(1)(iii)(F) 

the words ‘‘loan losses-to-loans’’ and 

adding in their place the words ‘‘credit 

losses-to-loans’’; 

■ d. Revising paragraph (g)(1)(iv)(B); 

and 

■ e. Removing in paragraph (g)(1)(iv)(E) 

the word ‘‘losses’’ and adding in its 

place the word ‘‘credit losses’’. 

The revision reads as follows: 

§ 620.5 Contents of the annual report to 

shareholders. 

* * * * * 

(g) * * * 

(1) * * * 

(iv) * * * 

(B) An analysis of the allowance for 

credit losses that includes the ratios of 

the allowance for credit losses to loans 

and net chargeoffs to average loans, and 

a discussion of the adequacy of the 

allowance for credit losses given 

reasonable and supportable forecasts; 

* * * * * 

PART 621—ACCOUNTING AND 

REPORTING REQUIREMENTS 

■ 17. The authority citation for part 621 

is revised to read as follows: 

Authority: Secs. 5.17, 5.19, 5.22A, 8.11 of 

the Farm Credit Act (12 U.S.C. 2183, 2202, 

2202a, 2202d, 2252, 2257a, 2279aa–11); Pub. 

L. 102–552, 106 Stat. 4102, 4134. 

§ 621.5 [Amended] 

■ 18. Amend § 621.5 by removing the 

word ‘‘loan’’ and adding in its place the 

word ‘‘credit’’ in the section heading 

and paragraphs (a) and (b). 

§ 621.8 [Amended] 

■ 19. Amend § 621.8(c)(2) by removing 

the word ‘‘loan’’ and adding in its place 

the word ‘‘credit’’. 

PART 628—CAPITAL ADEQUACY OF 

SYSTEM INSTITUTIONS 

■ 20. The authority citation for part 628 

is revised to read as follows: 

Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 

2.2, 2.3, 2.4, 2.5, 2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 

4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17, 8.0, 8.3, 8.4, 

8.6, 8.8, 8.10, 8.12 of the Farm Credit Act (12 

U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 

2074, 2075, 2076, 2093, 2122, 2128, 2132, 

2146, 2154, 2154a, 2160, 2202b, 2211, 2243, 

2252, 2279aa, 2279aa–3, 2279aa–4, 2279aa–6, 

2279aa–8, 2279aa–10, 2279aa–12); sec. 


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Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 27493 

301(a), Pub. L. 100–233, 101 Stat. 1568, 1608, 

as amended by sec. 301(a), Pub. L. 103–399, 

102 Stat 989, 993 (12 U.S.C. 1254 note); sec. 

939A, Pub. L. 111–203, 124 Stat. 1326, 1887 

(15 U.S.C. 78o–7 note). 

■ 21. Amend § 628.2 by: 

■ a. Adding in alphabetical order a 

definition for ‘‘Adjusted allowances for 

credit loss (AACL)’’; 

■ b. Removing the definition of 

‘‘Allowances for loan losses (ALL)’’; and 

■ c. Adding a sentence at the end of the 

definition of ‘‘Carrying value’’; 

■ d. Revising paragraph (2) of the 

definition of ‘‘Standardized total riskweighted assets’’. 

The additions and revision reads as 

follows: 

§ 628.2 Definitions. 

* * * * * 

Adjusted allowances for credit losses 

(AACL) means valuation allowances that 

have been established through a charge 

against earnings or retained earnings for 

expected credit losses on financial 

assets measured at amortized cost and a 

lessor’s net investment in leases that 

have been established to reduce the 

amortized cost basis of the assets to 

amounts expected to be collected as 

determined in accordance with GAAP. 

For purposes of this part, adjusted 

allowances for credit losses includes 

allowances for expected credit losses on 

off-balance sheet credit exposures not 

accounted for as insurance as 

determined in accordance with GAAP. 

Adjusted allowances for credit losses 

excludes allowances created that reflect 

credit losses on purchased credit 

deteriorated assets and available-for-sale 

debt securities. 

* * * * * 

Carrying value * * * For all assets 

other than available-for-sale debt 

securities or purchased credit 

deteriorated assets, the carrying value is 

not reduced by any associated credit 

loss allowance that is determined in 

accordance with GAAP. 

* * * * * 

Standardized total risk-weighted 

assets * * * 

(2) Any amount of the System 

institution’s adjusted allowance for 

credit losses that is not included in tier 

2 capital. 

* * * * * 

§ 628.20 [Amended] 

■ 22. Amend § 628.20(d)(3) by removing 

the word ‘‘ALL’’ and adding in its place 

the word ‘‘AACL’’ wherever it appears. 

§ 628.22 [Amended] 

■ 23. Amend § 628.22(c) by removing 

the word ‘‘ALL’’ in footnote 6 and 

adding in its place the word ‘‘AACL’’. 

■ 24. Amend § 628.63(c) in Table 5 by 

revising entries (a)(5), (e)(5), and (g) and 

footnote 6 to read as follows: 

§ 628.63 Disclosures. 

* * * * * 

(c) * * * 

TABLE 5 TO § 628.63 1—CREDIT RISK: GENERAL DISCLOSURES

Qualitative Disclosures ............................ (a) * * * 

(5) Description of the methodology that the System bank uses to estimate its adjusted allowance for 

credit losses, including statistical methods used where applicable; 

* * * * * * * 

(e) * * * 

(5) The balance in the adjusted allowance for credit losses at the end of each period according to 

GAAP; and 

* * * * * * * 

(g) Reconciliation of changes in adjusted allowance for credit losses.6

* * * * * * * 

1This Table 5 does not cover equity exposures, which should be reported in Table 9 of this section. 

* * * * * * * 6The reconciliation should include the following: A description of the allowance; the opening balance of the allowance; charge-offs taken 

against the allowance during the period; amounts provided (or reversed) for estimated credit losses during the period; any other adjustments (for 

example, exchange rate differences, business combinations, acquisitions and disposals of subsidiaries), including transfers between allowances; 

and the closing balance of the allowance. Charge-offs and recoveries that have been recorded directly to the income statement should be disclosed separately. 

* * * * * 

PART 630—DISCLOSURE TO 

INVESTORS IN SYSTEMWIDE AND 

CONSOLIDATED BANK DEBT 

OBLIGATIONS OF THE FARM CREDIT 

SYSTEM 

■ 25. The authority citation for part 630 

is revised to read as follows: 

Authority: Secs. 4.2, 4.9, 5.9, 5.17, 5.19 of 

the Farm Credit Act (12 U.S.C. 2153, 2160, 

2243, 2252, 2254); sec. 424, Pub. L. 100–233, 

101 Stat. 1568, 1656 (12 U.S.C. 2252 note); 

sec. 514, Pub. L. 102–552, 106 Stat. 4102, 

4134. 

■ 26. Amend § 630.20 by: 

■ a. Removing in paragraph (f)(1)(ii) the 

word ‘‘losses’’ and adding in its place 

the words ‘‘credit losses’’; 

■ b. Removing in paragraphs (f)(2)(iii) 

and (f)(3)(v) the words ‘‘loan losses’’ and 

adding in their place the words ‘‘credit 

losses’’; and 

■ c. Revising paragraph (g)(1)(ii)(B). 

The revision reads as follows: 

§ 630.20 Contents of the annual report to 

investors. 

* * * * * 

(g) * * * 

(1) * * * 

(ii) * * * 

(B) An analysis of the allowance for 

credit losses to loans and net chargeoffs 

to average loans and a discussion of the 

adequacy of the allowance for credit 

losses given reasonable and supportable 

forecasts. 

* * * * * 

■ 27. Revise appendix A to part 630 to 

read as follows: 

Appendix A to Part 630—Supplemental 

Information Disclosure Guidelines 

Supplemental information required by 

§§ 630.20(m) and 630.40(e) shall contain, at 

a minimum, the current year financial data 

for the components listed in the following 

tables and be presented in the columnar 

format illustrated in the following tables: 


khammond on DSKJM1Z7X2PROD with RULES
27494 Federal Register / Vol. 87, No. 89 / Monday, May 9, 2022 / Rules and Regulations 

TABLE A—SUPPLEMENTAL BALANCE SHEET INFORMATION

Banks 1 Associations 2

Financial 

assistance 

corporation 

Eliminations 

Combined 

without 

insurance 

fund 3

Insurance fund 

and related 

combination 

entries 

Combined 

with insurance 

fund 

Cash and investments.

Net loans.

Restricted assets.

Other Assets.

Total assets.

Total liabilities.

Protected borrower capital 4.

Restricted capital.

Capital stock and surplus.

Total liabilities, protected borrower capital, 

and capital stock and surplus.

1Provided combined financial data of all FCS banks, including any consolidated subsidiaries of the banks. 

2Provide association-only combined financial data of all FCS associations. 

3Provide the combined financial data of all columns on the left. 

4Any item that is no longer applicable, e.g., protected borrower stock, may be omitted. 

TABLE B—SUPPLEMENTAL INCOME STATEMENT INFORMATION

Banks 1 Associations 2

Financial 

assistance 

corporation 

Eliminations 

Combined 

without 

insurance 

fund 3

Insurance fund 

and related 

combination 

entries 

Combined with 

insurance fund 

Net interest income.

Provision for credit losses.

Other income.

Other expenses.

Net Income.

1Provide combined financial data of all FCS banks, including any consolidated subsidiaries of the banks. 

2Provide association-only combined financial data of all FCS associations. 

3Provide the combined financial data of all columns on the left. 

Dated: April 20, 2022. 

Ashley Waldron, 

Secretary, Farm Credit Administration Board. 

[FR Doc. 2022–08832 Filed 5–6–22; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2022–0511; Project 

Identifier AD–2022–00397–T; Amendment 

39–22043; AD 2022–10–05] 

RIN 2120–AA64 

Airworthiness Directives; Gulfstream 

Aerospace Corporation Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; request for 

comments. 

SUMMARY: The FAA is superseding 

Airworthiness Directive (AD) 2020–05– 

12, which applied to all Gulfstream 

Aerospace Corporation Model GVII– 

G500 and GVII–G600 airplanes. AD 

2020–05–12 required revising the 

existing airplane flight manual (AFM) to 

incorporate revised limitations and 

procedures. This AD was prompted by 

reports of two landing incidents in 

which the alpha limiter engaged in the 

landing flare in unstable air, resulting in 

high rate of descent landings and 

damage to the airplanes. This AD retains 

certain requirements, and also adds and 

replaces certain AFM sections with 

more restrictive limitations and 

procedures. The FAA is issuing this AD 

to address the unsafe condition on these 

products. 

DATES: This AD is effective May 9, 2022. 

The Director of the Federal Register 

approved the incorporation by reference 

of certain publications listed in this AD 

as of March 13, 2020 (85 FR 14562, 

March 13, 2020). 

The FAA must receive comments on 

this AD by June 23, 2022. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this final rule, contact Gulfstream 

Aerospace Corporation, Technical 

Publications Dept., P.O. Box 2206, 

Savannah, GA 31402–2206; telephone 

800–810–4853; fax 912–965–3520; email 

pubs@gulfstream.com; internet http://

www.gulfstream.com/customer-support. 

You may view this service information 

at the FAA, Airworthiness Products 

Section, Operational Safety Branch, 

2200 South 216th St., Des Moines, WA. 

For information on the availability of 

this material at the FAA, call 206–231– 

3195. It is also available at https://

www.regulations.gov by searching for 

and locating Docket No. FAA–2022– 

0511. 

Examining the AD Docket 

You may examine the AD docket at 

https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2022–0511; or in person at Docket 

Operations between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The AD docket contains this 


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