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###### Farm Credit Administration

          - RIN 3052-AC64

# AGENCY:

Farm Credit Administration.

# ACTION:

Notice of approval of the draft joint and several liability reallocation agreement.

# SUMMARY:

The Farm Credit Administration (FCA or we) is announcing that it has given approval of a Joint and Several Liability Reallocation Agreement (Agreement) to be entered into by all of the banks (System Banks) of the Farm Credit System (Farm Credit or System) and the Federal Farm Credit Banks Funding Corporation (Funding Corporation). The Agreement is designed to establish a procedure for non-defaulting banks to pay maturing System-wide debt on behalf of defaulting banks prior to a statutory joint and several call by the FCA.

# FOR FURTHER INFORMATION CONTACT:

Chris Wilson, Financial Analyst, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4204, TTY (703) 883-4434, or Rebecca S. Orlich, Senior Counsel, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-4020.

# SUPPLEMENTARY INFORMATION:

                    The FCA published the draft Agreement in the                     **Federal Register**                     on August 18, 2010 (75 FR 51061) with a request for public comment. The draft Agreement had a 30-day comment period that ended on September 17, 2010. See 75 FR 51061 for the text of the entire Agreement, along with our preamble describing the background of the Agreement and providing other information. We received no public comments on the Agreement.                

                    The Agreement is a voluntary agreement by the System Banks and the Funding Corporation that uses a debt-based formula to allocate payments of non-defaulting banks should a System bank default on a maturing insured consolidated or System-wide debt obligation and the amount of the default exceeds the amount available in the Farm Credit Insurance Fund to pay defaulted insured debt obligations. The parties to the draft Agreement submitted it to the FCA for approval under § 627.2750(h) of our regulations and also requested the Farm Credit System Insurance Corporation (FCSIC) to provide an expression of non-objection to the Agreement. The FCSIC insures consolidated and System-wide obligations using funds in the Farm Credit Insurance Fund. The Agreement will terminate if the FCA withdraws its approval, and the FCA retains full authority and responsibility to invoke statutory joint and several calls as prescribed under section 4.4(a)(2) and (d) of the Farm Credit Act of 1971, as amended (Act).[1]                                          The FCA and the FCSIC are not parties to the Agreement.                

                    The System Banks and Funding Corporation are also making conforming amendments to the Market Access Agreement (MAA) by adding three new sections to it. The conforming amendments are merely to ensure that provisions in the MAA do not prevent necessary payments under the Agreement. The FCA will publish the conforming MAA amendments in a separate                     **Federal Register**                     document.                

                    The FCA believes that holders of System-wide debt obligations are unlikely to be harmed by this Agreement. The Agreement could create                           ( print page 64728)                        the potential for building more capital at the bank level. After giving the public notice with the opportunity to comment and receiving no comments, the FCA Board has approved the draft Agreement in accordance with § 627.2750(h) of our regulations. The FCA's approval of the draft Agreement is conditioned on the board of directors of each bank and the Funding Corporation approving the Agreement and the FCSIC providing an expression of non-objection to the Agreement. The Agreement cannot be modified or amended without our approval.                

Neither the Agreement (upon its effective date) nor our approval of it will in any way restrict or qualify the FCA's authority to exercise our powers, rights, and duties as a regulator or, as stated above, to invoke joint and several liability provisions under the Act. Furthermore, the Agreement does not provide any grounds or basis for challenging the FCA's or the FCSIC's actions with respect to the creation or conduct of conservatorships or receiverships. Finally, the FCA retains the right to modify or revoke its approval of the Agreement at any time.

Dated: October 14, 2010.

Roland E. Smith,

Secretary, Farm Credit Administration Board.

# Footnotes

1.                             12 U.S.C. 2155(a)(2) and (d).                    
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[FR Doc. 2010-26434 Filed 10-19-10; 8:45 am]

BILLING CODE 6705-01-P