51586 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

1550–0072. Respondents/recordkeepers 

are not required to respond to any 

collection of information unless it 

displays a currently valid OMB control 

number. 

B. Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act, OTS certifies 

that this final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The rule makes various changes to OTS 

application and reporting requirements 

that reduce regulatory burdens on all 

savings associations, including small 

savings associations. These changes will 

not have a significant impact on small 

institutions. Accordingly, OTS has 

determined that regulatory flexibility 

analysis is not required. 

C. Executive Order 12866 

The Director of OTS has determined 

that this final rule does not constitute a 

‘‘significant regulatory action’’ for 

purposes of Executive Order 12866. 

D. Unfunded Mandates Reform Act of 

1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995, Pub. L. 

104–4 (Unfunded Mandates Act) 

requires an agency to prepare a 

budgetary impact statement before 

promulgating a rule that includes a 

federal mandate that may result in 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year. If a budgetary impact 

statement is required, section 205 of the 

Unfunded Mandates Act also requires 

an agency to identify and consider a 

reasonable number of regulatory 

alternatives before promulgating a rule. 

The final rule makes various changes 

that should reduce regulatory burdens 

on all savings associations. Accordingly, 

OTS has determined that this rule will 

not result in expenditures by State, 

local, and tribal governments, or by the 

private sector, of $100 million or more 

and that a budgetary impact statement is 

not required. 

List of Subjects 

12 CFR Part 506 

Reporting and recordkeeping 

requirements. 

12 CFR Part 516 

Administrative practice and 

procedure, Reporting and recordkeeping 

requirements, Savings associations. 

12 CFR Part 528 

Advertising, Aged, Civil rights, Credit, 

Equal employment opportunity, Fair 

housing, Home mortgage disclosure, 

Individuals with disabilities, Marital 

status discrimination, Mortgages, 

Religious discrimination, Reporting and 

recordkeeping requirements, Savings 

associations, Sex discrimination, Signs 

and symbols. 

12 CFR Parts 543 and 544 

Reporting and recordkeeping 

requirements, Savings associations. 

12 CFR Part 545 

Accounting, Consumer protection, 

Credit, Electronic funds transfers, 

Investments, Reporting and 

recordkeeping requirements, Savings 

associations. 

12 CFR Parts 552 and 563b 

Reporting and recordkeeping 

requirements, Savings associations, 

Securities. 

12 CFR Part 559 

Reporting and recordkeeping 

requirements, Savings associations, 

Subsidiaries. 

12 CFR Part 563 

Accounting, Advertising, Crime, 

Currency, Investments, Reporting and 

recordkeeping requirements, Savings 

associations, Securities, Surety bonds. 

12 CFR Part 567 

Capital, Reporting and recordkeeping 

requirements, Savings associations. 

12 CFR Part 574 

Administrative practice and 

procedure, Holding companies, 

Reporting and recordkeeping 

requirements, Savings associations, 

Securities. 

12 CFR Part 575 

Administrative practice and 

procedure, Capital, Holding companies, 

Reporting and recordkeeping 

requirements, Savings associations, 

Securities. 

Authority and Issuance 

■ Accordingly, the interim final rule 

amending 12 CFR parts 506, 516, 528, 

543, 544, 545, 552, 559, 563, 563b, 567, 

574, and 575, which was published at 

69 FR 68239 on November 24, 2004, is 

adopted as final with the following 

changes: 

PART 545—FEDERAL SAVINGS 

ASSOCIATIONS—OPERATIONS 

■ 1. The authority citation for part 545 

continues to read as follows: 

Authority: 12 U.S.C. 1462a, 1463, 1464, 

and 1828. 

■ 2. Amend § 545.93 by redesignating 

paragraph (b)(3)(iii) as paragraph 

(b)(3)(iv) and adding a new paragraph 

(b)(3)(iii) to read as follows: 

§ 545.93 Application and notice 

requirements for branch and home offices. 

* * * * * 

(b) * * * 

(3) * * * 

(iii) If you intend to change the 

location of an existing office, you posted 

a notice of your intent in a prominent 

location in the existing office to be 

relocated. You must post the notice for 

30 days from the date of publication of 

the initial public notice described in 

paragraph (b)(3)(ii) of this section. 

* * * * * 

■ 3. Amend § 545.95 by revising the 

heading and adding a new paragraph 

(b)(1)(iii) to read as follows: 

§ 545.95 What processing procedures 

apply to my home or branch office 

application or notice? 

* * * * * 

(b) * * * 

(1) * * * 

(iii) OTS will review the application 

or notice under the National 

Environmental Policy Act (42 U.S.C. 

3421 et seq.) and the National Historic 

Preservation Act (16 U.S.C. 470). 

* * * * * 

Dated: August 25, 2005. 

By the Office of Thrift Supervision. 

John M. Reich, 

Director. 

[FR Doc. 05–17334 Filed 8–30–05; 8:45 am] 

BILLING CODE 6720–01–P 

FARM CREDIT ADMINISTRATION 

12 CFR Part 615 

RIN 3052–AC22 

Funding and Fiscal Affairs, Loan 

Policies and Operations, and Funding 

Operations; Investments, Liquidity, 

and Divestiture 

AGENCY: Farm Credit Administration. 

ACTION: Final rule. 

SUMMARY: The Farm Credit 

Administration (FCA, we, or our) issues 

this final rule amending our liquidity 

reserve requirement for the banks of the 

Farm Credit System (System) to ensure 

the banks have adequate liquidity. The 

final rule increases the minimum 

liquidity reserve requirement to 90 days, 

increases the eligible investment limit to 

35 percent of total outstanding loans 

and requires Farm Credit banks to 

develop and maintain liquidity 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51587 

1Farm Credit banks use the Federal Farm Credit 

Banks Funding Corporation (Funding Corporation) 

to issue and market System-wide debt securities. 

The Funding Corporation is owned by the Farm 

Credit banks. 

2 58 FR 63034 (November 30, 1993). 

3The System’s liquidity position was 174 days at 

March 31, 2005. See Farm Credit System Quarterly 

Information Statement, at 21 (May 9, 2005). 

contingency plans. These enhanced 

requirements will improve the ability of 

Farm Credit banks to supply agricultural 

credit in all economic situations. 

DATES: This regulation will be effective 

30 days after the publication in the 

Federal Register during which either or 

both Houses of Congress are in session. 

We will publish a notice of the effective 

date in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Wade Wynn, Financial Analyst, Office 

of Regulatory Policy, Farm Credit 

Administration, McLean, VA 22102–

5090, (703) 883–4498; TTY (703) 883–

4434; or 

Laura McFarland, Senior Attorney, 

Office of General Counsel, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4020, TTY 

(703) 883–4020. 

SUPPLEMENTARY INFORMATION: 

I. Objectives 

The objectives of this rule are to: 

• Ensure Farm Credit banks have 

adequate liquidity in the case of market 

disruption or other extraordinary 

situations; 

• Improve the flexibility of Farm 

Credit banks to meet liquidity reserve 

requirements; 

• Strengthen the safety and 

soundness of Farm Credit banks; and 

• Enhance the ability of the System to 

supply credit to agriculture and rural 

America in all economic conditions. 

II. Background 

Congress created the System as a 

government-sponsored enterprise (GSE) 

to provide a permanent, stable, and 

reliable source of credit and related 

services to American agriculture and 

aquatic producers. Farm Credit banks 

obtain funds to provide this financing 

through System-wide debt securities.1 If 

access to the debt market becomes 

temporarily impeded, Farm Credit 

banks must have enough liquidity to 

continue operations and pay maturing 

obligations. 

In 1993, we issued § 615.5134 

requiring each Farm Credit bank to 

maintain a liquidity reserve sufficient to 

fund operations for approximately 15 

days.2 We also issued § 615.5132 

restricting eligible investments of Farm 

Credit banks to 30 percent of total 

outstanding loans. The investment limit 

authorizes Farm Credit banks to hold 

eligible investments for the purposes of 

(1) Maintaining a liquidity reserve (2) 

managing surplus short-term funds, and 

(3) managing interest rate risk. The 

liquidity reserve provision ensures the 

safety and soundness of Farm Credit 

banks, protecting the System from 

potential market disruptions, and the 

investment limit prevents Farm Credit 

banks from using their GSE status to 

borrow favorably from the capital 

markets and accumulate large 

investment portfolios for arbitrage 

activities. To supplement the regulatory 

minimum liquidity reserve, and to 

respond to market conditions and 

expectations, the Farm Credit banks 

entered into a voluntary Common 

Minimum Liquidity Standard (CMLS) 

agreement to maintain at least 90 days 

of liquidity. All Farm Credit banks 

currently exceed the voluntary 

minimum liquidity reserve 

requirement.3

On November 16, 2004, we published 

a proposed rule (69 FR 67070) to 

increase the minimum liquidity reserve 

requirement to 90 days and raise the 

maximum eligible investment limit to 

35 percent of total outstanding loans. 

We also proposed that Farm Credit 

banks develop and maintain 

contingency plans to ensure the most 

effective use of the liquidity reserve and 

to address potential liquidity shortfalls 

in the event of market disruptions. This 

final rule addresses the comments 

received on the proposed rule. 

III. Comments and Our Response 

We received 5 comments on our 

proposed rule from three Farm Credit 

banks, the Farm Credit Council (FCC) 

representing its membership, and the 

American Bankers Association (ABA). 

We also received one comment from a 

Farm Credit bank as part of our 

regulatory burden initiative. All 

commenters supported increasing the 

liquidity reserve requirement. However, 

the ABA objected to raising the 

investment limit, while System 

commenters asked us to further increase 

or remove the limit. System commenters 

also asked us to clarify other aspects of 

our proposed rule. 

We discuss those aspects, along with 

the individual comments associated 

with our proposed changes, and our 

response below. Commenters also 

responded to our request for comments 

on the existing rule for disposing of 

ineligible investments, which we 

discuss separately below. 

Those areas of the proposed rule that 

did not receive comments are finalized 

as proposed. 

A. Investment Purposes [§ 615.5132] 

The FCC and Farm Credit banks 

generally agreed with increasing the 

eligible investment limit, but also urged 

us to remove the limit. One Farm Credit 

bank stated that the investment limit 

was arbitrary and does not provide the 

System with adequate flexibility. 

Another argued that the limit constrains 

the bank’s ability to achieve a higher 

level of liquidity if necessary. The FCC 

commented that investment limits 

should be set by the bank’s board of 

directors and not by regulation. The 

FCC argued that an effective risk 

management program provides a better 

framework for controlling risk and a 

regulatory investment limit places an 

artificial and unnecessary burden on the 

System with no resulting benefit. Three 

Farm Credit banks alternatively 

suggested investment limits of 40 and 

50 percent of total outstanding loans if 

the limit is not removed. One Farm 

Credit bank further recommended, as an 

alternative to a 40-percent investment 

limit, to include unused commitments 

with total outstanding loans when 

calculating the percentage of 

investments. 

The ABA opposed increasing the 

investment limit. The ABA argued that 

the Farm Credit banks have been able to 

successfully fund their individual 

liquidity reserves under the current 

investment limit. The ABA commented 

that the increase would allow the 

System to accumulate larger investment 

portfolios to further arbitrage profits, 

thereby diverting financial resources 

away from farmers, ranchers, and rural 

homeowners. The ABA also commented 

that a higher investment limit is 

unnecessary because the System is a 

GSE and, during times of systemic 

stress, investors generally flock to safer 

investments, including GSE debt 

securities. 

We disagree that an eligible 

investment limit is unnecessary or that 

the increase is inappropriate. We 

believe an investment limit ensures 

agricultural loans comprise the greatest 

portion of the System’s assets, thereby 

fulfilling its mission of financing 

agriculture and rural America. We limit 

total eligible investments to prevent 

Farm Credit banks from engaging in 

inappropriate investment activities that 

are incompatible with their GSE status. 

Additionally, we disagree that a higher 

investment limit is unnecessary. The 

combination of an increased minimum 

liquidity reserve requirement and 

investment limit is designed to address 

51588 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

4The FCA has recently authorized, as eligible 

investments under § 615.5140(e), pilot missionrelated investment programs that are not subject to 

the regulatory investment limit of § 615.5132. 

Instead, the authorizations provide for a separate, 

additional investment limit for the duration of the 

pilot program. Because the investments are limited 

to mission-related investments, we believe they are 

compatible with the System’s GSE status. See 

‘‘Investments in Rural America’Pilot Investment 

Programs,’’ FCA Informational Memorandum 

(January 11, 2005). 

5 ‘‘Guidelines for Using Derivative Products,’’

FCA Bookletter BL–023 (October 31, 1995) and 63 

FR 33281. 

situations where the System’s access to 

the debt market becomes temporarily 

impeded. We recognize the Farm Credit 

banks have been successful at 

maintaining appropriate levels of 

liquidity and managing their balance 

sheets under the existing investment 

limit and current, favorable market 

conditions. However, a larger liquidity 

reserve requirement, without a 

corresponding increase in the 

investment limit, could constrain the 

ability of Farm Credit banks to manage 

operations under different market 

conditions. Under more adverse market 

conditions, Farm Credit banks may not 

be able to increase their days of 

liquidity through extending the duration 

of debt without incurring substantial 

cost. The higher investment limit 

provides each Farm Credit bank 

additional flexibility to meet the larger 

liquidity reserve requirement and to 

effectively manage their balance sheets 

in all economic conditions. 

Similarly, we reject the suggestions 

for a higher investment limit than the 

one proposed.4 Increasing the eligible 

investment limit to 35 percent is 

appropriate given the six-fold increase 

in the minimum liquidity reserve 

requirement. We believe a 5-percent 

higher investment limit addresses the 

90-day minimum liquidity reserve 

requirement without compromising the 

System’s responsibility to finance 

agriculture. Should an emergency 

situation arise when greater investments 

are necessary, Farm Credit banks may 

request FCA approval to temporarily 

increase the investment limit under 

§ 615.5136(a). 

The ABA commented that increasing 

the investment limit allows Farm Credit 

banks more room to engage in risky onbalance sheet maturity mismatching. 

The ABA stated that FCA should take 

steps to reduce the System’s 

dependence on hedge counterparties. 

Specifically, the ABA noted that the 

System, by using derivative 

instruments, has been transforming 

longer-term debt in the 1-to-5 year 

repricing interval into shorter-term debt 

in the 0-to-6 month repricing interval. 

The ABA argues that an investment 

limit increase allows even more room to 

engage in extreme maturity 

mismatching, creating the potential for 

gambling on interest-rate swings. 

We do not agree with the commenter 

that the Farm Credit banks have used 

their investment authority to engage in 

inappropriate activity. The 

transformation of longer-term debt into 

shorter-term debt using interest rate 

swaps correlates with the Farm Credit 

banks’ voluntary initiative to increase 

liquidity reserves. The Farm Credit 

banks have collectively increased total 

earning assets and decreased interestbearing liabilities in the 0-to-6 month 

bucket to increase days of liquidity. The 

System has also increased the issuance 

of synthetic variable rate-debt to 

compensate for the mismatch. 

We have previously stated that any 

speculative use of derivatives would be 

considered an unsafe and unsound 

banking practice.5 We recognize that 

derivative financial instruments are 

useful risk management tools to hedge 

against interest rate and liquidity risk 

and are an essential part of any interest 

rate risk management program. Each 

Farm Credit bank is required to 

establish and maintain investment 

policies that limit counterparty risk in 

investments and financial derivatives. 

We require each Farm Credit bank to 

establish interest rate risk exposure 

limits, to determine criteria to comply 

with the limits, to identify and analyze 

causes of risk, and to conduct interest 

rate shock tests. Our examination staff 

reviews these policies and monitors 

interest rate risk in Farm Credit banks, 

including counterparty risk in financial 

derivatives. We have the appropriate 

safeguards in place to effectively 

regulate Farm Credit banks without 

inhibiting their ability to successfully 

serve agriculture and rural America. 

For the reasons discussed above, this 

section of the rule is adopted as 

proposed. In so doing, we emphasize 

that the original purpose of our 

investment limit remains unchanged. 

B. Liquidity Reserve Requirement 

1. Liquidity Reserve Calculation 

[§ 615.5134(a)] 

All commenters supported increasing 

the minimum liquidity reserve 

requirement from approximately 15 

days to 90 days, adding a rating element 

to investments used to fund the 

liquidity reserve, and the method of 

discounting those investments to reflect 

market value in the event of liquidation. 

One Farm Credit bank asked that all 

investment grade securities be included 

in the liquidity reserve, not just highly 

rated investments. This same 

commenter asked for clarification on the 

eligibility of Federal Agricultural 

Mortgage Corporation (FAMC) 

agricultural mortgage-backed securities 

for liquidity purposes. 

We believe a regulatory minimum 

liquidity reserve should be funded with 

highly rated investments, which are 

generally more liquid, less volatile, and 

can be quickly converted to cash 

without significant loss. We therefore 

finalize investment rating requirements 

as proposed. FAMC securities may not 

be used to fund a Farm Credit bank’s 

liquidity reserve. FAMC securities, 

while not listed in § 615.5140, are 

identified as eligible investments under 

§ 615.5174. However, § 615.5174(c)(3) 

specifically states that FAMC securities 

may not be used to maintain a Farm 

Credit bank’s liquidity reserve. This 

prohibition addresses the concern of 

concentration risk. If the System had 

real or perceived credit problems due to 

a crisis in the agricultural economy and 

could not access the market at 

reasonable rates, those same economic 

factors may also adversely affect the 

price and liquidity of FAMC securities. 

System commenters additionally 

requested clarification of the meaning of 

the regulatory language ‘‘maturing 

obligations and other borrowings of the 

bank.’’ They also asked whether 

proceeds from System debt issuances 

are applied to the liquidity reserve on 

the trade date or settlement date. 

In response to these requests, we are 

adding clarifying language to the final 

rule. The final rule clarifies that 

‘‘maturing obligations and other 

borrowings of the bank’’ excludes both 

interest receivable and interest payable, 

since interest received generally offsets 

interest due. The liquidity reserve 

calculation should be a simple 

procedure that excludes both interest 

receivable and interest payable. The 

final rule also clarifies that proceeds 

from debt issuances are to be applied to 

the liquidity reserve on the contractual 

trade date. While many longer-term 

System debt issuances do not trade and 

settle on the same date, the risk of 

settlement default is extremely low. The 

Funding Corporation enters into a 

contractual agreement with selling 

group members on the trade date with 

the firm expectation of receiving cash 

from System debt issuances on the 

settlement date. As trades are made, the 

selling group members are contractually 

obligated to deliver cash to the Funding 

Corporation on the settlement date. In 

the event of a systemic market 

disruption, cash proceeds from debt 

issuances are as likely to be delayed as 

are payments of maturing obligations. 

Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 51589 

The FCC further requested we explain 

what the maturity date would be for 

obligations that have embedded ‘‘put’’

and ‘‘call’’ options, which give an 

investor or a Farm Credit bank the 

option to redeem an obligation before 

the contractual maturity date. We expect 

Farm Credit banks to use, for liquidity 

reserve calculations, the earlier of: the 

obligation’s contractual maturity date, 

the ‘‘call date’’ for which the call option 

has been executed, or the ‘‘put date’’ for 

securities. 

Although we received no comments 

on the frequency of calculating the 

liquidity reserve, we are adding 

language to the final rule to clarify that 

Farm Credit banks must satisfy the 90- 

day minimum liquidity reserve 

requirement on a daily basis. Farm 

Credit banks are expected to calculate 

the liquidity reserve on a daily basis to 

ensure compliance. 

2. Discounts [§ 615.5134(c)] 

The ABA supported discounting 

assets used to fund the liquidity reserve. 

The FCC asked us to clarify how floating 

rate debt securities, which exceed 

contractual cap rates, are discounted. 

The Farm Credit banks made no 

individual comments on the discounts. 

We are adding language to the final 

rule to clarify that floating rate debt 

security coupons meeting or exceeding 

a contractual cap rate are treated as a 

fixed rate debt security and discounted 

at 90 percent. Any floating rate debt 

security that is below the contractual 

cap rate is discounted at 95 percent. 

3. Other Comments—Eligible 

Investments [§ 615.5140] 

Our proposed rule addressed the 

liquidity of Farm Credit banks; it did 

not address the eligible investment 

categories used to fund the liquidity 

reserve. However, we received 

comments from the FCC and two Farm 

Credit banks on existing eligible 

investments under § 615.5140. The 

commenters recommended changes to 

individual investment limits and the 

inclusion of additional investment 

authorities. The FCC and one Farm 

Credit bank specifically recommended 

allowing loans supported by GSE-issued 

long-term standby purchase 

commitments (LTSPCs) to fund the 

liquidity reserve. The FCC explained 

that they consider loans supported by 

GSE-issued LTSPCs as liquid assets 

suitable for the liquidity reserve. 

This final rulemaking does not change 

§ 615.5140, nor add loans that are credit 

enhanced by GSE LTSPCs to the list of 

items that may be used to fund the 

liquidity reserve. However, we intend to 

reconsider the issue of loans covered by 

GSE-issued LTSPCs, as well as the 

§ 615.5140 list of eligible investments, 

in future rulemaking. 

The System commenters also 

recommended changing the 

requirements for independently 

verifying the purchase and sale of 

investments under § 615.5133(f); obligor 

limits under § 615.5140(d)(1); and stress 

testing under § 615.5141. The FCC and 

a Farm Credit bank commented that 

§ 615.5133(f) adds an unnecessary cost 

with no resulting benefit. One Farm 

Credit bank recommended modifying 

the stress-testing requirements of 

mortgage-backed securities under 

§ 615.5141 to allow testing on a 

portfolio basis instead of on individual 

securities. This same commenter 

suggested specific obligor limits under 

§ 615.5140(d)(1). We are not addressing 

these comments in this final 

rulemaking, but intend to address them 

in future rulemakings. 

C. Liquidity Contingency Plan [new 

§ 615.5134(d)] 

Only the ABA commented on the 

proposed requirement that each Farm 

Credit bank develop a contingency plan 

to ensure the most effective use of the 

liquidity reserve. The ABA supported 

establishment of such a plan. We adopt 

this section of the rule as proposed. 

D. Disposal of Ineligible Investments 

[§ 615.5143] 

We asked for comments on whether 

we should change our existing 

divestiture regulation for those 

situations when general economic 

conditions cause investments to become 

ineligible or when eligibility may be 

restored. The ABA commented that the 

existing requirements are sufficient, 

pointing out that Farm Credit banks may 

submit individualized plans to divest 

themselves of investments that become 

ineligible after acquisition. The FCC 

commented that mandatory divestiture 

should be eliminated when investments 

become ineligible due to credit 

downgrades or failed stress tests. The 

FCC recommended replacing the 

existing rule with a requirement that 

banks develop a plan to deal with 

investments that become ineligible. 

Three Farm Credit banks recommended 

the mandatory divestiture provision be 

eliminated and replaced with a general 

requirement that Farm Credit banks 

develop their own procedures for 

handling ineligible investments. One 

bank recommended the rule distinguish 

between investments that are ineligible 

when acquired and those that later 

become ineligible. 

We reviewed the comments submitted 

and appreciate the perspectives shared. 

We are taking the comments under 

advisement and may propose changes to 

this area of our regulations in the future. 

IV. Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

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

et seq.), FCA hereby certifies the rule 

will not have a significant economic 

impact on a substantial number of small 

entities. Each of the Farm Credit banks, 

considered with its affiliated 

associations, has assets and annual 

income over the amounts that would 

qualify them as small entities. 

Therefore, System institutions are not 

‘‘small entities’’ as defined in the 

Regulatory Flexibility Act. 

List of Subjects in 12 CFR Part 615 

Accounting, Agriculture, Banks, 

Banking, Government securities, 

Investments, Rural areas. 

■ For the reasons stated in the preamble, 

part 615 of chapter VI, title 12 of the 

Code of Federal Regulations is amended 

as follows: 

PART 615—FUNDING AND FISCAL 

AFFAIRS, LOAN POLICIES AND 

OPERATIONS, AND FUNDING 

OPERATIONS 

■ 1. The authority citation for part 615 

continues 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, 6.20, 6.26, 

8.0, 8.3, 8.4, 8.6, 8.7, 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, 2278b, 2278b–6, 

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

2279aa–7, 2279aa–8, 2279aa–10, 2279aa–12); 

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

1608. 

Subpart E—Investment Management 

§ 615.5131 [Amended] 

■ 2. Amend § 615.5131 by: 

■ a. Removing paragraph (b) and 

redesignating existing paragraphs (c) 

through (m) as paragraphs (b) through 

(l), consecutively; and 

■ b. Removing the reference 

‘‘§ 615.5131(i)’’ and adding in its place, 

the reference ‘‘§ 615.5131(h)’’ in 

paragraph (a). 

■ 3. Revise § 615.5132 to read as 

follows: 

§ 615.5132 Investment purposes. 

Each Farm Credit bank is allowed to 

hold eligible investments, listed under 

§ 615.5140, in an amount not to exceed 

35 percent of its total outstanding loans, 

to comply with the liquidity reserve 

requirement of § 615.5134, manage 

51590 Federal Register / Vol. 70, No. 168 / Wednesday, August 31, 2005 / Rules and Regulations 

surplus short-term funds, and manage 

interest rate risk under § 615.5135. 

■ 4. Amend § 615.5134 by revising 

paragraphs (a) and (c) and by adding 

new paragraph (d) to read as follows: 

§ 615.5134 Liquidity reserve requirement. 

(a) Each Farm Credit bank must 

maintain a liquidity reserve, discounted 

in accordance with paragraph (c) of this 

section, sufficient to fund 90 days of the 

principal portion of maturing 

obligations and other borrowings of the 

bank at all times. The liquidity reserve 

may only be funded from cash, 

including cash due from traded but not 

yet settled debt, and the eligible 

investments under § 615.5140. Money 

market instruments, floating, and fixed 

rate debt securities used to fund the 

liquidity reserve must be backed by the 

full faith and credit of the United States 

or rated in one of the two highest 

NRSRO credit categories. If not rated, 

the issuer’s NRSRO credit rating, if one 

of the two highest, may be used. 

* * * * * 

(c) The liquid assets of the liquidity 

reserve are discounted as follows: 

(1) Multiply cash and overnight 

investments by 100 percent. 

(2) Multiply money market 

instruments and floating rate debt 

securities that are below the contractual 

cap rate by 95 percent of the market 

value. 

(3) Multiply fixed rate debt securities 

and floating rate debt securities that 

meet or exceed the contractual cap rate 

by 90 percent of the market value. 

(4) Multiply individual securities in 

diversified investment funds by the 

discounts that would apply to the 

securities if held separately. 

(d) Each Farm Credit bank must have 

a contingency plan to address liquidity 

shortfalls during market disruptions. 

The board of directors must review the 

plan each year, making all needed 

changes. Farm Credit banks may 

incorporate these requirements into 

their § 615.5133 investment 

management policies. 

Subpart F—Property, Transfers of 

Capital, and Other Investments 

§ 615.5174 [Amended] 

■ 5. Amend § 615.5174 by removing the 

reference ‘‘§ 615.5131(g)’’ and adding in 

its place, the reference ‘‘§ 615.5131(f)’’

in paragraph (a). 

Dated: August 25, 2005. 

Jeanette C. Brinkley, 

Secretary, Farm Credit Administration Board. 

[FR Doc. 05–17266 Filed 8–30–05; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 3 

RIN 2900–AL12 

Exceptions to Definition of Date of 

Receipt Based on Natural or Man-Made 

Disruption of Normal Business 

Practices 

AGENCY: Department of Veterans Affairs. 

ACTION: Final rule. 

SUMMARY: This document affirms an 

amendment to the Department of 

Veterans Affairs (VA) adjudication 

regulation regarding the definition of 

‘‘date of receipt’’ authorizing the Under 

Secretary for Benefits to establish 

exceptions to the general rule when a 

natural or man-made event interferes 

with the channels through which the 

Veterans Benefits Administration (VBA) 

ordinarily receives correspondence, 

resulting in extended delays in receipt 

of claims, information, or evidence from 

claimants served by VBA. Currently, 

VBA receives correspondence through 

its 57 Regional Offices and through the 

Appeals Management Center, which 

develops claims on appeal to the Board 

of Veterans Appeals. The intended 

effect is to ensure that claimants served 

by the affected VBA office or offices are 

not deprived of potential entitlement to 

benefits because of unexpected delays 

or impediments not caused by the 

claimants. 

DATES: Effective date: August 31, 2005. 

FOR FURTHER INFORMATION CONTACT: 

Maya Ferrandino, Consultant, 

Regulations Staff, Compensation and 

Pension Service, Veterans Benefits 

Administration, 810 Vermont Avenue, 

NW., Washington, DC 20420, telephone 

(202) 273–7232. 

SUPPLEMENTARY INFORMATION: VA’s 

regulation addressing the date of receipt 

for purposes of benefit entitlement is 

located at 38 CFR 3.1(r), which 

implements the provisions of 38 U.S.C. 

5110, the statutory provision regarding 

effective dates of awards. On July 19, 

2004 (69 FR 42879), an interim final 

rule was published amending § 3.1(r) to 

provide that the Under Secretary for 

Benefits may establish exceptions to the 

rule governing date of receipt in 

circumstances when he or she 

determines that a natural or man-made 

disruption in the normal channels of 

communication results in one or more 

VBA offices experiencing extended 

delays in the receipt of correspondence. 

We provided a 60-day comment 

period that ended September 17, 2004. 

We received no comments. Based on the 

rationale set forth in the interim final 

rule we now affirm as a final rule the 

changes made by the interim final rule. 

Paperwork Reduction Act 

This document contains no provisions 

constituting a collection of information 

under the Paperwork Reduction Act (44 

U.S.C. 3501–3520). 

Administrative Procedure Act 

This document without any changes 

affirms amendments made by an interim 

final rule that is already in effect. 

Accordingly, we have concluded under 

5 U.S.C. 553 that there is good cause for 

dispensing with a delayed effective date 

based on the conclusion that such 

procedure is impracticable, 

unnecessary, and contrary to the public 

interest. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

of 1995 requires, at 2 U.S.C. 1532, that 

agencies prepare an assessment of 

anticipated costs and benefits before 

developing any rule that may result in 

an expenditure by State, local, or tribal 

governments, in the aggregate, or by the 

private sector of $100 million or more 

(adjusted annually for inflation) in any 

given year. This final rule would have 

no such effect on State, local, or tribal 

governments, or the private sector. 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this final rule will not have a significant 

economic impact on a substantial 

number of small entities as they are 

defined in the Regulatory Flexibility Act 

(RFA), 5 U.S.C. 601–612. Only VA 

beneficiaries could be directly affected. 

Therefore, pursuant to 5 U.S.C. 605(b), 

this final rule is exempt from the initial 

and final regulatory flexibility analysis 

requirements of sections 603 and 604. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance numbers and titles for the 

programs affected by this document are 

64.109, Veterans Compensation for 

Service-Connected Disability; and 

64.110, Veterans Dependency and 

Indemnity Compensation for ServiceConnected Death. 

List of Subjects in 38 CFR Part 3 

Administrative practice and 

procedure, Claims, Disability benefits, 

Health care, Pensions, Radioactive 

materials, Veterans, Vietnam. 

Approved: August 11, 2005. 

Gordon H. Mansfield, 

Deputy Secretary of Veterans Affairs. 

■ Accordingly, the interim final rule 

amending 38 CFR Part 3 that was