Federal Register / Vol. 74, No. 205 / Monday, October 26, 2009 / Proposed Rules 54935 

(ii) Clauses that require a greater 

number of swine to be delivered as the 

contract continues. 

(iii) Other clauses that provide for 

expansion in the numbers of swine to be 

delivered. 

(5) Maximum estimates of swine. The 

packer’s estimate of the maximum total 

number of swine that potentially could 

be delivered to each plant within each 

of the following 12 calendar months, if 

any or all of the types of expansion 

clauses identified in accordance with 

the requirement in paragraph (c)(4) of 

this section are executed. The estimate 

of maximum potential deliveries must 

be reported for all existing contracts by 

contract type as defined in § 206.1. 

(d) What if a contract does not specify 

the number of swine committed? To 

meet the requirements of paragraphs 

(c)(3) and (c)(5) of this section, the 

packer must estimate expected and 

potential deliveries based on the best 

information available to the packer. 

Such information might include, for 

example, the producer’s current and 

projected swine inventories and 

planned production. 

(e) When do I change previously 

reported estimates? Regardless of any 

estimates for a given future month that 

may have been previously reported, 

current estimates of deliveries reported 

as required by paragraphs (c)(3) and 

(c)(5) of this section must be based on 

the most accurate information available 

at the time each report is prepared. 

(f) Where and how do I send my 

monthly report? Each packer must 

submit monthly reports required by this 

section by either of the following two 

methods: 

(1) Electronic report. Information 

reported under this section may be 

reported by electronic means, to the 

maximum extent practicable. Electronic 

submission may be by any form of 

electronic transmission that has been 

determined to be acceptable to the 

Administrator. To obtain current 

options for acceptable methods to 

submit information electronically, 

contact GIPSA through the Internet on 

the GIPSA Web site (http:// 

www.gipsa.usda.gov) or at USDA 

GIPSA, Suite 317, 210 Walnut Street, 

Des Moines, Iowa 50309. 

(2) Printed report. Each packer may 

deliver its printed monthly report to 

USDA GIPSA, Suite 317, 210 Walnut 

Street, Des Moines, Iowa 50309. 

(g) What information from monthly 

reports will be made available to the 

public and when and how will the 

information be made available to the 

public? 

(1) Availability. GIPSA will provide a 

monthly report of estimated deliveries 

by contract types as reported by packers 

in accordance with this section, for 

public release on the first business day 

of each month. The monthly reports will 

be available on the Internet on the 

GIPSA Web site (http:// 

www.gipsa.usda.gov) and at USDA 

GIPSA, Suite 317, 210 Walnut Street, 

Des Moines, Iowa 50309. 

(2) Regions. Information in the report 

will be aggregated and reported by 

geographic regions. Geographic regions 

will be defined in such a manner to 

provide as much information as possible 

while maintaining confidentiality in 

accordance with section 251 of the 

Agricultural Marketing Act (7 U.S.C. 

1636) and may be modified from time to 

time. 

(3) Reported information. The 

monthly report will provide the 

following information: 

(i) The existing contract types for each 

geographic region. 

(ii) The contract types currently being 

made available to additional producers 

or available for renewal to currently 

contracted producers in each geographic 

region. 

(iii) The sum of packers’ reported 

estimates of the total number of swine 

committed by contract for delivery 

during the next 6 and 12 months 

beginning with the month the report is 

published. The report will indicate the 

number of swine committed by 

geographic reporting region and by 

contract type. 

(iv) The types of conditions or 

circumstances as reported by packers 

that could result in expansion in the 

numbers of swine to be delivered under 

the terms of expansion clauses in the 

contracts at any time during the 

following 12 calendar months. 

(v) The sum of packers’ reported 

estimates of the maximum total number 

of swine that potentially could be 

delivered during each of the next 6 and 

12 months if all expansion clauses in 

current contracts are executed. The 

report will indicate the sum of 

estimated maximum potential deliveries 

by geographic reporting region and by 

contract type. 

(h) Where and how do I file a waiver 

request? The waiver request must be 

submitted in writing and include a 

statement that the packer does not 

procure swine using marketing 

agreements. The packer must send the 

waiver request to the GIPSA Regional 

Office in Des Moines, Iowa. If the 

waiver request is approved, GIPSA will 

inform the packer in writing that it has 

been granted a waiver for 12 months 

following the date of receipt of the 

waiver request unless the status of the 

packer changes during that year. The 

packer will be notified to submit the 

information required in this part if it 

begins using marketing agreements 

during the waiver period or if GIPSA 

determines that the packer utilizes 

marketing agreements. 

J. Dudley Butler, 

Administrator, Grain Inspection, Packers and 

Stockyards Administration. 

[FR Doc. E9–25570 Filed 10–23–09; 8:45 am] 

BILLING CODE 3410–KD–P 

FARM CREDIT ADMINISTRATION 

12 CFR Chapter VI 

RIN 3052–AC39 

Statement on Regulatory Burden 

AGENCY: Farm Credit Administration. 

ACTION: Final notice of intent. 

SUMMARY: This notice of intent is part of 

the Farm Credit Administration’s (FCA, 

Agency, or we) initiative to reduce 

regulatory burden for Farm Credit 

System (FCS or System) institutions. 

Several System institutions responded 

to our June 2008 notice of intent 

inviting comments on FCA regulations 

that may duplicate other requirements, 

are ineffective, or impose burdens that 

are greater than the benefits received. In 

response to some of those comments, we 

plan to publish a direct final rule 

separately in the Federal Register to 

make technical changes and corrections 

to some of our regulations. This notice 

of intent responds to the comments that 

address regulatory projects we have 

identified for FCA consideration and 

regulations we are not changing at this 

time. 

FOR FURTHER INFORMATION, CONTACT: 

Jacqueline R. Melvin, Policy Analyst, 

Office of Regulatory Policy, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4498, TTY 

(703) 883–4434; or 

Mary Alice Donner, Senior Attorney, 

Office of General Counsel, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4020, TTY 

(703) 883–4020. 

I. Background 

On June 23, 2008, we published a 

notice of intent in the Federal Register 

inviting the public to comment on FCA 

regulations that may duplicate other 

requirements, are ineffective, or impose 

burdens that are greater than the 

benefits received. See 73 FR 35361. We 

specifically requested comments on 

regulations concerning (1) assessment 

and apportionment of administrative 

expenses, (2) loan policies and 


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operations, (3) leasing, (4) borrower 

rights, (5) general provisions, and (6) 

nondiscrimination in lending. In 

addition, we received comments on 

regulations concerning (1) organization, 

(2) standards of conduct and referral of 

known and or suspected criminal 

violations, (3) eligibility and scope of 

financing, and (4) grounds for 

appointment of conservators and 

receivers. 

We received letters from AgFirst Farm 

Credit Bank (AgFirst); AgriBank, FCB 

(AgriBank); CoBank, ACB (CoBank); 

Farm Credit Bank of Texas (FCBT); and 

the Farm Credit Council (FCC) 

containing comments covering a range 

of FCA regulations. The purpose of this 

notice of intent is to inform the public 

of regulations commented on that will 

not be changed in connection with this 

regulatory burden project. Some of the 

regulations will be retained without 

amendment because they implement 

statutory requirements or safety and 

soundness measures that cannot be 

changed or need significant further 

evaluation before we can consider 

whether changes are appropriate. Many 

of these comments are the same or 

similar to those we received and 

considered (but did not implement) in 

the past. Other comments concern 

regulations that will not be changed as 

part of this regulatory initiative because 

they are the subject of other regulatory 

initiatives. For example, since June 

2008, we have published proposed rules 

on director elections and effective 

interest rates. Some comments 

concerning those issues will be 

considered by the Agency in the 

development of the respective final rule, 

but not in this regulatory burden notice. 

FCA’s Regulatory Performance Plan 

(RPP) projects those rules going final in 

December 2009 and January 2010, 

respectively. See http://www.fca.gov/ 

law/perf_plan.html. Also, a number of 

the issues raised by commenters are the 

subject of other regulatory projects 

scheduled for consideration by the FCA 

as set forth in the RPP and FCA’s 

semiannual Unified Agenda of 

Regulatory and Deregulatory Actions 

published at www.reginfo.gov. Those 

comments will be considered as part of 

the regulatory process of those projects. 

The following section summarizes the 

comments we received on regulations 

that (1) we cannot change or are not 

proposing to change at this time, or (2) 

we will consider in regulatory projects 

that have been identified by the FCA. 

II. Regulations That We Are Not 

Proposing To Change at This Time 

A. Organization—Director Elections 

Comments: AgriBank stated that our 

regulations governing director elections 

inappropriately create the impression 

that FCA, as an arm’s-length regulator, 

is the party most capable of determining 

how the owners of an institution should 

choose their representatives on a board 

of directors. Further, AgriBank stated 

that stockholders should be allowed to 

nominate and elect directors in any 

manner they deem appropriate, as 

provided in the Farm Credit Act of 

1971, as amended (Act), so long as 

whatever process they choose provides 

for fair and equitable representation for 

all stockholders. 

FCA Response: The FCA published a 

proposed rule at 74 FR 17612 on April 

16, 2009, that would amend FCA rules 

on System bank and association director 

elections and other voting procedures. 

The comment will be addressed in that 

rulemaking. We are planning to issue a 

final rule early next year. 

B. Standards of Conduct and Referral of 

Known or Suspected Criminal 

Violations—Joint Officers 

Comments: The FCC stated that the 

FCA should consider revising 

§ 612.2157 prohibiting employment of 

joint officers by a System bank and one 

of its affiliated associations because 

some System institutions have noted 

that there may be situations in which 

the best ‘‘business case’’ practice for 

cost-effective operations could be the 

use of joint officers. AgriBank stated 

that § 612.2157 prohibits joint officers of 

a Farm Credit bank and an association 

in the same district and that such a 

prohibition prevents a Farm Credit bank 

and association from voluntarily 

combining some or all of the operations 

of the two entities to achieve greater 

efficiency. AgriBank commented that 

this regulation prevents the members/ 

owners of these institutions, and their 

elected directors, from determining the 

manner in which they choose to operate 

these interdependent institutions. 

FCA Response: On May 13, 1994, the 

FCA published a final rule at 59 FR 

24889 prohibiting bank officers from 

being employed by an association in its 

district to preserve the integrity and 

independence of the supervisory 

process. However, employees other than 

officers may serve jointly provided each 

institution appropriately reflects the 

expense of such employees in its 

financial statements. As illustrated in its 

Unified Agenda, the FCA is conducting 

a review of its Standard of Conduct 

regulations. In that review, we will 

consider whether and when waivers of 

certain standards of conduct provisions 

may be permitted. This comment will be 

considered as part of that review. 

C. Eligibility and Scope of Financing— 

Financing for Farm-Related Service 

Businesses 

Comments: The FCC stated that we 

should consider a revision to § 613.3020 

regarding eligibility for farm-related 

service financing. The FCC believes that 

the Act allows FCA considerable 

discretion in defining the types of 

businesses eligible to be considered 

‘‘farm-related’’ services and that the 50- 

percent requirement for full financing is 

too restrictive. To support its comment, 

the FCC stated that in many cases 

involving farm-related businesses the 

service component is so interwoven 

with the product being provided that an 

attempt to distinguish the service 

amount from the value of the product 

can be arbitrary. The FCC also stated 

that the FCA should include ‘‘aquaticrelated’’ service providers as eligible for 

System financing and that the FCA 

should undertake a comprehensive 

review of the statutory authority, 

removing any impediments to eligibility 

for System financing that is not based 

on the Act. 

FCA Response: This request is beyond 

the scope of regulatory burden and, 

while we are not proposing any changes 

to our regulations at this time, we will 

consider this comment in any future 

reviews of § 613.3020. 

D. Loan Policies and Operations 

Comments: We received numerous 

comments on part 614 regarding FCA 

regulations on loan policies and 

operations. The FCC stated that we 

should review § 614.4040 in regard to 

the required amortization period for 

intermediate-term loans and that loan 

terms should be based on sound lending 

practices, the borrower’s credit strength, 

and the cash flow analysis of the 

operation. AgriBank stated that while 

FCA regulations limit the amortization 

of intermediate-term loans to 15 years, 

the Act does not. AgriBank added that 

prohibiting amortization over a period 

greater than 15 years prevents 

production credit associations (PCAs) 

from being able to meet the needs of 

creditworthy borrowers who desire such 

terms. AgriBank further stated that 

§ 614.4040(a) provides that a PCA 

intermediate-term loan may not be made 

solely for the purpose of acquiring 

unimproved real estate, and that this 

restriction has no statutory basis and 

creates inconsistency in that it does not 

apply in situations where the real estate 


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offered as security is presently owned 

by the borrower. 

FCA Response: The Act does not 

explicitly address amortization limits. 

The FCA may conduct a review to 

determine if its regulations concerning 

intermediate-term loans should be 

updated. If such a review is conducted, 

it would include FCA rules concerning 

amortization. However, we are not 

proposing any changes at this time. 

Comments: The FCBT stated that 

§ 614.4165(b) requires Farm Credit 

banks to develop policies that direct 

associations to establish young, 

beginning, and small (YBS) farmers and 

ranchers programs that ensure 

coordination with other System 

institutions and other governmental and 

private sources of credit and provide 

reports to the funding bank. Section 

614.4165(c) requires YBS programs to 

contain other minimum components, 

including a mission statement, 

quantitative targets, qualitative goals, 

and methods to ensure safety and 

soundness. Paragraph (d) provides for 

the supervising bank to review 

association programs, but only with 

respect to the requirements of paragraph 

(c) and not those of paragraph (b). The 

FCBT comments that this distinction 

does not appear to be consistent with 

the Act, serves no apparent purpose, 

and results in a confusing and 

burdensome differentiation in the 

bank’s approval process. The FCBT 

further stated that the bank’s approval of 

the association’s program should be 

based on compliance with the bank’s 

policy as provided in the statute. 

FCA Response: We believe Congress 

intended that YBS programs be 

developed by the System lenders who 

have the most knowledge of their 

territories. The review and approval 

requirement is mandated by statute, and 

we developed this section to allow each 

direct lender association the maximum 

flexibility in creating a YBS program 

that takes into consideration the 

economy and demographics of its 

territory, as well as its risk-bearing 

capacity. The review and approval 

requirement was limited in response to 

comments from System institutions 

received during the notice and comment 

period for § 614.4165. The rule 

recognizes the changing relationship 

between the funding banks and their 

affiliated associations, and that 

associations operate much more 

independently from their funding 

banks. Therefore, we are not proposing 

any changes to our regulations at this 

time. 

Comments: AgriBank stated that our 

current definition of ‘‘small’’ farmers, 

ranchers, or producers or harvesters of 

aquatic products (as set forth in revised 

bookletter BL–040, issued on August 10, 

2007) should be modified to be 

consistent with small borrower 

reporting utilized by the commercial 

lending industry, which is based on 

loan size rather than borrower annual 

gross farm sales. To support its 

comment, AgriBank stated that in 

adopting a loan size approach to small 

business and small farm reporting, the 

Office of the Comptroller of the 

Currency, the Federal Deposit Insurance 

Corporation, and the Federal Reserve 

Board concluded that the risk of 

inaccuracy is limited because loan size 

approximately correlates with the size 

of a business or farm borrower. 

FCA Response: The FCA has defined 

YBS borrowers in a manner to minimize 

burden on the System lenders by using 

characteristics such as age, number of 

years farming, and gross farm sales. 

These characteristics are most relevant 

to farming and are consistent with the 

definition of small farmer used by the 

United States Department of 

Agriculture. We believe our definition 

of small farmer is the least burdensome 

one to meet the purposes of, and 

measure performance under, section 

4.19 of the Act. Therefore, we are not 

proposing any changes to our definition 

at this time. 

Comment: CoBank stated that the FCA 

should amend the definition of 

‘‘interests in loans’’ in § 614.4325(a)(1) 

to make clear that it includes not only 

whole loans, but also participation 

interests since both types of interests 

qualify as ‘‘interests in loans.’’ 

FCA Response: The FCA’s definition 

of ‘‘interests in loans’’ is ownership 

interests in the principal amount, 

interest payments, or any aspect of a 

loan transaction and transactions 

involving a pool of loans, including 

servicing rights. We specifically address 

loan participations in § 614.4330, and to 

amend the definition of ‘‘interests in 

loans’’ to include loan participations 

would create redundancies and overlap 

between the regulatory provisions that 

could lead to confusion and contribute 

to regulatory burden. Therefore, we are 

not proposing any changes to our 

regulations at this time. 

Comments: The FCC stated that the 

existing requirements in § 614.4325(e) 

for each institution to make an 

independent judgment on the 

creditworthiness of the borrower may 

not be cost-effective, and there may be 

alternative methods of making 

appropriate credit decisions regarding 

purchase of a participation, particularly 

in cases involving a pool of loans. 

AgriBank stated that System institutions 

should be permitted to underwrite loan 

participations on a composite analysis 

basis where the purchase of a group or 

pool of loans would determine the 

extent of analysis required. AgriBank 

stated that the analysis could entail 

evaluation of the originator’s or lead 

lender’s underwriting policies and loanservicing procedures; assessment of 

financial and operating statements; and 

review of loan pool characteristics such 

as secured/unsecured, term, 

amortization, minimum/maximum size, 

minimum ownership by pool 

administrator, industry concentrations, 

source of loans, pricing strategy, and 

reporting requirements. 

FCA Response: The overarching intent 

of this regulation remains safety and 

soundness of the System institutions. 

While we believe that the commenter’s 

suggestion with respect to loan pools 

may be worthy of further review, more 

research is necessary; therefore, we are 

not proposing any changes to our 

regulations at this time. 

Comments: CoBank stated that the 

FCA should consider adding a provision 

in loan purchases and sales similar to 

§ 614.4325(h) that explicitly authorizes 

loan sales, including participations, 

through the use of agents as well. To 

support its comment, CoBank stated that 

the FCA has expressly allowed agency 

relationships where one System 

institution performs various functions 

(e.g., underwriting and approval) as 

agent for a second originating System 

institution if the loan is designated for 

sale to the agent and as long as they are 

based on standards set forth in board 

policies and in agreements between two 

System institutions. 

FCA Response: The authority of an 

FCS institution to purchase loans is not 

commensurate with its authority to sell 

loans. For example, section 1.5(16) of 

the Act authorizes a Farm Credit bank 

to sell interests in loans to non-System 

institutions, but authorizes the bank to 

purchase or sell interests in loans to 

System institutions. Further, a System 

institution has additional fiduciary 

responsibilities when it purchases 

loans. For example, § 614.4325(e) 

requires a purchasing System institution 

to make an independent judgment on 

the creditworthiness of the borrower, 

which judgment may not be delegated to 

any person not employed by the 

institution. Section 614.4325(h) 

addresses the use of an agent to perform 

some of the unique responsibilities of 

the purchasing System institution. 

Because System institutions are not 

subject to the same regulatory and 

statutory requirements, or the same 

fiduciary responsibilities, when they 

sell loans, a provision parallel to 

§ 614.4325(h) for sales of loans is 


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unwarranted. Loans and interests in 

loans may be sold in accordance with 

each institution’s lending authorities as 

set forth in part 614, subpart A. Use of 

an agent in the sale of loans would be 

permissible subject to subpart A and to 

the institution’s own lending authorities 

and policies. Therefore, we believe that 

additional regulations addressing the 

use of agents in the sale of loans are 

unnecessary. 

Comments: AgriBank stated that FCA 

should remove the provision in 

§ 614.4325(h) that obligates a funding 

bank that serves as agent in a 

transaction to purchase all loans from 

the association if the association 

determines that the loan does not 

comply with the terms of the agency 

agreement or the association’s loanunderwriting standards. AgriBank 

commented that the purchase obligation 

creates a perpetual contingent liability 

on the funding bank’s balance sheet and 

that it serves no useful purpose and 

imposes an unacceptable burden. 

AgriBank suggested that, in the 

alternative, the regulation should be 

amended to require the association’s 

exercise of this ‘‘put’’ option within a 

specified period or not more than 12 

months, sufficient time to allow the 

association to make its determination. 

FCA Response: Section 614.4325(h)(4) 

provides that if an association’s funding 

bank serves as its agent, the agency 

agreement must provide that the 

association can terminate the agreement 

upon no more than 60 days notice to the 

bank and that the association may, in its 

discretion, require the bank to purchase 

from the association any interest in a 

loan that the association determines 

does not comply with the terms of the 

agency agreement or the association’s 

loan-underwriting standards. This 

provision ensures safety and soundness 

by providing a remedy to an association 

injured by a bank’s breach of the agency 

agreement and minimizes any possible 

effect of an unequal bargaining position 

between a bank and an association. 

While we are not proposing any changes 

to the regulations at this time, we may 

consider future rulemaking or guidance 

that would put a time limit on the 

exercise of the ‘‘buyback’’ option if it 

would facilitate the accounting of the 

selling bank. 

Comments: CoBank stated that 

§ 614.4335(b) should be amended to 

address the stock purchase requirement 

that impacts loans designated at closing 

for sale (either a 100-percent whole or 

a 100-percent participation interest, 

including loans closed under an agency 

agreement under which the FCS agent 

would purchase a 100-percent 

participation or whole loan immediately 

after loan closing). CoBank also stated 

that the regulation should be amended 

to permit bylaws to provide that the 

minimum stock purchase requirement 

shall not apply to these types of 

transactions (similar to how secondary 

market sales are addressed). CoBank 

commented that such an amendment 

would address the administrative 

burden of requiring a $1,000 purchase of 

an originating lender’s equity by 

customers whose only contact with the 

originating lender thereafter will be 

minimal or nonexistent. 

FCA Response: Section 4.3A(f)(1) of 

the Act allows a bank or association’s 

bylaws to provide, in the case of a loan 

that is designated, at the time the loan 

is made, for sale into a secondary 

market, that no voting stock or 

participation certificate purchase 

requirement shall apply to the borrower 

for the loan. The regulatory language is 

parallel to the statutory authority, and to 

make the change suggested would 

require further inquiry and notice and 

comment rulemaking. It is beyond the 

scope of this regulatory burden 

initiative, and while we may consider 

this change in future guidance or 

rulemaking, we are not proposing any 

changes to our regulations at this time. 

Comment: CoBank commented that 

the FCA should amend § 614.4337(a) to 

permit the disclosure to borrowers to be 

made by the purchasing institution with 

the written consent of the selling 

institution. In the alternative, CoBank 

suggested that the regulations should 

require the selling institution to copy 

the purchasing institution on its 

disclosure to the borrower to ensure that 

the purchasing institution can meet its 

obligations. 

FCA Response: The originator of a 

loan is accountable to the borrower for 

the disclosure requirements of 

§ 614.4337(a). The Act requires that 

System banks and associations issue 

voting stock or participation certificates 

to borrowers and that System ‘‘qualified 

lender’’ institutions provide borrower 

rights to certain borrowers. These 

institutions are in the best position to 

explain the impact of the sale on these 

matters. The selling and purchasing 

institutions can work out notice 

requirements in the purchase agreement 

as they deem appropriate. Therefore, we 

are not proposing any changes to this 

regulation at this time. 

Comments: The FCC commented that 

existing rules regarding loan approval 

authority should be re-evaluated 

(§§ 614.4460–4470) to reflect both 

structural changes in the System 

(reference to the ‘‘district board’’), as 

well as the relationship between banks 

and affiliated associations. The FCC 

further commented that direct lender 

associations already have extensive 

procedures for ‘‘official’’ loans, in terms 

of loan underwriting, credit 

administration, and internal review and 

reporting, and that a regulatory 

requirement for bank approval of these 

loans conflicts with the debtor-creditor 

relationship between the bank and an 

association. AgriBank commented that 

System banks should be removed from 

the loan approval process for loans 

made by an association to designated 

parties because, as direct lenders, 

associations are fully capable of 

administering their own loan approval 

processes and implementing 

appropriate internal controls, including 

reporting of loan approval actions to 

their boards of directors. 

FCA Response: Sections 614.4460 and 

614.4470 of our regulations require a 

funding bank to approve all loans that 

it and its associations make to 

designated parties. On April 24, 1995, 

the FCA issued a rulemaking 

eliminating certain prior approvals by 

the FCA as an arm’s-length regulator. 

See 60 FR 20008. Given the passage of 

time, it may be appropriate to update 

this section and review the loan 

approval process in general. This effort 

would take place in the context of 

guidance or a rulemaking and is beyond 

the scope of this regulatory burden 

initiative. 

Comments: CoBank stated that the 

requirement in § 614.4550 that prohibits 

banks from funding an ‘‘other financing 

institution (OFI)’’ outside of its 

chartered territory unless proper 

notification is granted to the bank 

chartered to serve the territory is 

unnecessarily restrictive. CoBank also 

stated that because it is not always clear 

when an ‘‘application’’ is received 

(could be in stages, withdrawn, 

resubmitted later, etc.), a dispute could 

result between the two banks as to 

whether the notice was properly and 

timely given. CoBank further states that 

a fairer and much more workable 

standard would be that a bank could not 

enter into a funding relationship with 

an OFI outside of its territory until 45 

days after notification of its intent to 

commence funding to allow ample time 

for the ‘‘in territory’’ bank to seek its 

business. 

FCA Response: Section 614.4550 

states that a Farm Credit bank or 

agricultural credit bank cannot fund, 

discount, or extend other similar 

financial assistance to an OFI that 

maintains its headquarters or has more 

than 50 percent of its outstanding loan 

volume to eligible borrowers who 

conduct agricultural or aquatic 

operations in the chartered territory of 


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another Farm Credit bank unless it 

notifies such bank in writing within 5 

business days of receiving the OFI’s 

application for financing. The FCA has 

previously received similar comments 

from System institutions concerning the 

5-day written notice requirement. As we 

have previously responded, the 5-day 

notice requirement has no relationship 

to the credit approval process, and 

providing written notice to another bank 

within 5 days should not be costly or 

difficult for any bank that receives 

applications from OFIs outside its 

chartered territory. We would expect a 

bank to make a good faith effort to 

determine when notification should be 

made, and although we may consider 

future guidance to this effect, we are not 

proposing any changes to the regulation 

at this time. 

Comment: CoBank states that it sees 

no reason for a prohibition on two or 

more Farm Credit banks simultaneously 

funding an OFI. 

FCA Response: In the past, we 

acknowledged that System arguments 

against this ban may have some merit, 

but determined that policy concerns 

justify the FCA’s decision to retain it. 

Generally, each FCS association receives 

all its funding from one Farm Credit 

bank, and therefore, the ban on two or 

more Farm Credit banks simultaneously 

funding the same OFI is consistent. 

Further consideration of this issue is 

outside the scope of regulatory burden. 

E. Leasing—Stock Purchase 

Requirements 

Comment: CoBank requested that the 

stock purchase requirement exception 

in § 616.6700 be amended to apply to 

the Farm Credit Leasing Services 

Corporation (Leasing Corporation) or its 

legal successor, upon merger or 

dissolution of the Leasing Corporation. 

The Leasing Corporation is wholly 

owned by CoBank, and CoBank has 

considered other structures for it. 

FCA Response: Section 616.6700 

provides each System institution 

making an equipment lease must require 

the lessee to buy or own stock or a 

participation certificate in the 

institution making the lease, but 

provides an exception from this 

requirement for the Leasing 

Corporation. The FCA agrees that the 

exception may also apply to the Leasing 

Corporation’s legal successor, but will 

make that determination if and when 

the Leasing Corporation’s structure is 

changed. 

F. Borrower Rights 

Comments: The FCBT stated that the 

borrower rights requirements of 

§ 617.7015(c) regarding loan sales are 

unduly restrictive, particularly with 

respect to parties who have a junior lien 

or other interest in the loan. The FCBT 

further states that while the 

requirements of this regulation could 

perhaps be justified for some sales to 

third parties who have no prior interest 

in or liability on the loan, it is difficult 

to see how the policies of the Act are 

served by imposing borrower rights 

obligations to junior lien holders or 

family members who may have cosigned 

or furnished collateral for a borrower’s 

loan. 

FCA Response: Borrower rights were 

created to protect the borrower from 

foreclosure by providing the borrower 

the opportunity to restructure a 

distressed loan. Borrower rights are part 

of the agricultural credit extended by 

the FCS and belong to the borrower, not 

the lender. It is therefore the borrower’s 

choice whether to relinquish these 

rights to facilitate a loan sale. Thus, we 

do not believe the decision to waive or 

otherwise relinquish borrower rights 

should be made when the borrower is in 

an unequal bargaining position to the 

lender. As such, §§ 617.7010 and 

617.7015 provide limited circumstances 

when a borrower is in a sufficiently 

equal bargaining position in which to 

waive these rights. In the case of loan 

sales to nonqualified lenders, our rule 

requires the lender to either make 

provisions for the borrower to 

relinquish borrower rights at the time of 

loan making or to obtain the borrower’s 

release before the loan is sold. We do 

not believe there is a basis for 

distinguishing junior lien holders or 

holders of other interests in the loan 

with regard to borrower rights. 

Comment: The FCC commented that 

the statutory requirements for disclosure 

of effective interest rates is less 

restrictive than the regulation and that 

the FCA should consider the use of 

standardized representative examples 

regarding the impact of stock purchase 

on effective interest rates. 

FCA Response: Section 4.13(a)(3) of 

the Act states that, at loan closing, the 

purchase of borrower stock must be 

disclosed as a cost of the credit in 

determining the effective rate of interest 

on a loan. Section 617.7125(a) states 

that a qualified lender must calculate 

the effective interest rate (EIR) on a loan 

using the discounted cash flow method, 

showing the effect of time on the value 

of money. Accordingly, we believe that 

in order for borrower disclosure to be 

‘‘meaningful,’’ as is required by statute, 

the disclosure should take into account 

the specific loan for which the 

disclosure is being provided. The EIR 

disclosure should be derived from the 

interest rate and related charges 

applicable to the loan being made to the 

borrower. We are not proposing changes 

responsive to this comment at this time. 

Comments: The FCBT stated that the 

regulatory disclosure requirements in 

§ 617.7135(a) and (b) could be 

simplified for FCS institutions without 

materially harming the interest of 

borrowers if the notification of changes 

in the interest rate was the same for all 

loans, whether or not the rate is tied to 

an external index. The FCBT also stated 

that where an interest rate is based on 

a widely published external index plus 

a spread, disclosure of a change of rate 

should not be required merely when the 

index changes, but should be required 

only when the change of rate is caused 

by a change in the spread. AgFirst stated 

that where the loan transaction is priced 

with the use of an external index added 

to a set margin, no additional disclosure 

should be required as the lender has not 

modified the interest rate. AgFirst also 

stated that the cost of mailing the 

notifications places institutions at a 

competitive disadvantage relative to 

other lenders that are not required to 

disclose changes unless resulting from a 

modified margin. AgFirst further stated 

that the additional notification does not 

provide the borrower any more 

information than is already available in 

financial journals or news Web sites for 

the current value of the index. The FCC 

believes the disclosure procedures for 

rate change notices on loans with an 

external index can be streamlined. 

FCA Response: On June 19, 2009, we 

published a proposed rule amending 

our EIR regulation regarding interest 

rate changes. See 74 FR 29143. 

Comments discussed above will be 

considered by the FCA during that 

rulemaking project. 

G. General Provisions 

Comment: The FCBT stated that the 

requirement in § 618.8025(a) for a Farm 

Credit bank’s board of directors to verify 

that a System association has performed 

a feasibility analysis before offering a 

related service is beyond the Act, is 

burdensome, and accomplishes very 

little that could not be performed by 

FCA. 

FCA Response: Section 2.5 of the Act 

authorizes a PCA to offer related 

services as determined feasible by the 

board of directors of a Farm Credit bank. 

Section 2.12(15) of the Act authorizes a 

Federal land bank association to offer 

related services that it determines, with 

Farm Credit bank approval, are feasible. 

Thus, a Farm Credit bank has a statutory 

role in the determination of whether a 

related service program is feasible for an 

association to offer. Therefore, we are 


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54940 Federal Register / Vol. 74, No. 205 / Monday, October 26, 2009 / Proposed Rules 

not proposing any changes to our 

regulations at this time. 

Comment: The FCBT commented that 

the regulatory requirement in 

§ 618.8040(b)(9) is not required by the 

Act and may be viewed as an imposition 

on the borrower. Section 618.8040(b)(9) 

prohibits a bank or association from 

conditioning the extension of credit or 

other provision of service on the 

purchase of insurance sold or endorsed 

by a bank or association. At the time 

insurance is offered, a bank or 

association must present a written 

notice that the service is optional, and 

the borrower must sign the notice. 

FCA Response: Section 4.29(b)(1) of 

the Act requires FCA regulations to 

provide that in any case in which 

insurance is required as a condition for 

a loan or other financial assistance from 

a bank or association, notice be given 

that it is not necessary to purchase the 

insurance from the bank or association 

and that the borrower has the option of 

obtaining the insurance elsewhere. The 

signed notice gives effect to this 

statutory requirement and we do not 

believe it imposes an undue burden on 

the bank, association, or the borrower. 

Thus, the FCA believes it is important 

to continue this requirement and we are 

not proposing any changes in our 

regulations at this time. 

Comments: CoBank stated that FCA 

should amend § 618.8330(b) to permit 

disclosure of confidential borrower 

documents upon the issuance of an 

administrative subpoena with the 

proviso that the FCS institution may 

insist on a judge’s order if there is 

reason to believe that the request is 

inappropriate under the circumstances. 

AgFirst stated that the current process 

related to the production of documents 

during civil litigation creates 

unnecessary burdens of time and 

expense for an association, while 

affording no additional protection to the 

borrower. The FCC stated that in regard 

to the provisions of the regulations on 

confidentiality of borrower information, 

the Agency should revisit the 

requirements as they relate to issuing 

subpoenas. 

FCA Response: On August 9, 1999, 

the FCA published a direct final rule at 

64 FR 43046 that allowed a bank or 

association that is a party to litigation 

with a borrower to disclose confidential 

information, and required that if the 

government, bank or association is not 

a party to litigation, confidential 

documents or testimony may be 

produced only under the lawful order of 

a court. We believe that this 

requirement is necessary to protect 

confidentiality of borrower information 

because only the judge can impartially 

decide whether the litigant needs the 

information in the institution’s 

possession. Therefore, we do not believe 

this request warrants any change to our 

regulations at this time. 

H. Disclosure to Shareholders 

Comment: The FCC stated that the 

FCA’s regulations that allow 

associations the option of disclosing 

information regarding compensation of 

senior officers in either the annual 

report or in the annual meeting 

information statement should be 

reviewed because System banks should 

have the similar ability to disclose that 

information in some other manner to 

their stockholders. 

FCA Response: The FCA is currently 

conducting a review of compensation, 

retirement programs, and related 

benefits to consider changes addressing 

disclosure and compliance requirements 

for executive compensation, pension, 

and other benefit programs in the FCS. 

This comment will be considered in the 

course of that review. 

I. Conservators, Receivers, and 

Voluntary Liquidations 

Comments: AgriBank stated that 

§ 627.2710(b) prohibits a funding bank 

from enforcing the terms of its general 

financing agreement (GFA) upon a 

default by an association without the 

prior approval of the FCA. AgriBank 

commented that this is an unwarranted 

infringement on the bank-association 

contractual relationship that places the 

bank in the precarious position of 

entering into a lending relationship with 

an association without the ability to 

collect the indebtedness due absent the 

approval of a third-party regulator. 

FCA Response: This regulation does 

not prevent or prohibit a funding bank 

from enforcing the terms of its GFA. The 

regulation does, however, provide that 

one of the grounds for appointment of 

a receiver or conservator is a default by 

the association on one or more terms of 

its GFA with its affiliated bank if the 

FCA determines the default to be 

material. As we stated in our July 22, 

1998, rulemaking, the FCA, not the bank 

or the association, has the statutory 

authority for determining the grounds 

for appointing a conservator or receiver. 

See 63 FR 39219. We cannot delegate 

that authority to a funding bank, and we 

will be the authority that determines 

whether a default of the GFA is 

materially sufficient to warrant 

appointment of a conservator or 

receiver. Due to the significance of a 

material default of the GFA to an 

association’s financial condition and 

ability to continue operations, we 

believe that this is a material safety 

issue. Thus, we are not proposing any 

changes to our regulations at this time. 

III. Future Efforts To Reduce 

Regulatory Burden on FCS Institutions 

As noted above, we will consider 

remaining regulatory burden issues 

raised during the comment period in 

separate regulatory projects. We will 

continue our efforts to remove 

regulatory burden. However, we will 

maintain those regulations that are 

necessary to implement the Act and that 

are critical for the safety and soundness 

of the System. 

Dated: October 20, 2009. 

Roland E. Smith, 

Secretary, Farm Credit Administration Board. 

[FR Doc. E9–25668 Filed 10–23–09; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2005–19559; Directorate 

Identifier 2004–NE–03–AD] 

RIN 2120–AA64 

Airworthiness Directives; Rolls-Royce 

plc RB211 Trent 700 Series Turbofan 

Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to 

supersede an existing airworthiness 

directive (AD) for Rolls-Royce plc (RR) 

RB211 Trent 700 series turbofan 

engines. That AD currently requires 

initial and repetitive borescope 

inspections of the high pressure-andintermediate pressure (HP–IP) turbine 

internal and external oil vent tubes for 

coking and carbon buildup, and 

cleaning or replacing the vent tubes if 

necessary. This proposed AD would 

require the same actions, but would add 

additional inspections of the vent flow 

restrictor. This proposed AD results 

from further analysis that the cleaning 

of the vent tubes required by AD 2007– 

02–05 could lead to loosened carbon 

fragments, causing a blockage 

downstream in the vent flow restrictor. 

We are proposing this AD to prevent 

internal oil fires due to coking and 

carbon buildup that could cause 

uncontained engine failure and damage 

to the airplane. 

DATES: We must receive any comments 

on this proposed AD by December 28, 

2009. 


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