[Federal Register Volume 82, Number 202 (Friday, October 20, 2017)]
[Rules and Regulations]
[Pages 48758-48760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22721]


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FARM CREDIT ADMINISTRATION

12 CFR Part 607

RIN 3052-AD30


Assessment and Apportionment of Administrative Expenses

AGENCY: Farm Credit Administration.

ACTION: Direct final rule.

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SUMMARY: The Farm Credit Administration (FCA or we) issues this direct 
final rule adopting technical amendments to eliminate language that is 
obsolete, confusing, and unnecessary to determine the annual assessment 
amount of Farm Credit System institutions.

DATES: If no significant adverse comment is received on or before 
November 20, 2017, this regulation shall become effective no earlier 
than the expiration of 30 days after publication in the Federal 
Register during which either or both Houses of Congress are in session. 
We will publish notice of the effective date in the Federal Register.

ADDRESSES: For accuracy and efficiency reasons, please submit comments 
by email or through the FCA's Web site. We do not accept comments 
submitted by facsimile (fax), as faxes are difficult for us to process 
in compliance with section 508 of the Rehabilitation Act. Please do not 
submit your comment multiple times via different methods. You may 
submit comments by any of the following methods:
    <bullet> Email: Send us an email at <a href="/cdn-cgi/l/email-protection#205245470d434f4d4d604643410e474f56"><span class="__cf_email__" data-cfemail="087a6d6f256b676565486e6b69266f677e">[email protected]</span></a>.
    <bullet> FCA Web site: http://www.fca.gov. Select ``Public 
Commenters,'' then ``Public Comments,'' and follow the directions for 
``Submitting a Comment.''
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Mail: Barry F. Mardock, Deputy Director, Office of 
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, VA 22102-5090.
    You may review copies of all comments we receive at our office in 
McLean, Virginia, or from our Web site at http://www.fca.gov. Once you 
are in the Web site, select ``Public Commenters,'' then ``Public 
Comments,'' and follow the directions for ``Reading Submitted Public 
Comments.'' We will show your comments as submitted, but for technical 
reasons we may omit items such as logos and special characters. 
Identifying information you provide, such as phone numbers and 
addresses, will be publicly available. However, we will attempt to 
remove email addresses to help reduce Internet spam.

FOR FURTHER INFORMATION CONTACT: 
    Jeremy R. Edelstein, Senior Policy Analyst, Office of Regulatory 
Policy, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-
4497, TTY (703) 883-4056; or
    Jennifer A. Cohn, Senior Counsel, Office of General Counsel, Farm 
Credit Administration, McLean, VA 22102-5090, (303) 696-9737, TTY (703) 
883-4056.

SUPPLEMENTARY INFORMATION:

I. Objective

    The objective of this direct final rule is to eliminate confusion 
in the definition of ``average risk-adjusted asset base'' in Sec.  
607.2(b), which is used to determine the annual assessment amount of 
System institutions, by:
    <bullet> Removing an obsolete and unnecessary reference to FCA's 
call report schedule; and
    <bullet> Clarifying the effect of mergers and consolidations based 
on current accounting practices and deleting obsolete language relating 
to transfers of direct lending authority.

II. Discussion

    Effective January 1, 2017, the FCA published the Tier 1/Tier 2 
Framework; Final Rule (new capital rule).\1\ The new capital rule, in 
pertinent part, revised the risk-weights that determine the risk-
adjusted asset base (the denominator) of the permanent capital ratio 
that Farm Credit System (System) institutions must compute. The average 
risk-adjusted asset base of a System bank, association, or designated 
other System entity is used to determine its annual assessment of funds 
to cover FCA's expenses.\2\ Existing Sec.  607.2(b) defines and 
specifies how to calculate ``average risk-adjusted asset base'' in four 
different ways, depending on when the institution was formed and how 
many quarters of risk-adjusted assets are available. All these 
variations, however, define ``average risk-adjusted asset base'' using 
the regulatory definition of ``risk-adjusted asset base'' and with 
reference to risk-adjusted assets as reported on each quarterly Call 
Report Schedule RC-G.
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    \1\ 81 FR 48720, July 28, 2016.
    \2\ See 12 CFR part 607.
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    The FCA significantly revised and relabeled its call report 
schedules in connection with the new capital rule. An institution's 
permanent capital ratio denominator--its average risk-adjusted asset 
base--is no longer reported in Call Report Schedule RC-G. Accordingly, 
FCA is revising the definition of ``average risk-adjusted asset base'' 
in Sec.  607.2(b) to remove the references to Call Report Schedule RC-
G. Because call report schedules are subject to change outside of the 
regulatory process, the revised definition does not refer to a call 
report schedule. Rather, revised Sec.  607.2(b) defines ``average risk-
adjusted asset base'' with reference to the average daily risk-adjusted 
assets as of the last day of the quarter and without reference to the 
call report schedule. Because average daily risk-adjusted assets can be 
determined under FCA's regulations, the reference to the

[[Page 48759]]

call report schedule is unnecessary.\3\ In the current version of the 
call report as of the date of this technical amendment, the denominator 
of the permanent capital ratio (average daily risk-adjusted assets) is 
reported at Line 8a of Schedule RC-R.1, but this location is subject to 
change.\4\
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    \3\ In the rare circumstance that an institution was unable to 
submit a call report, it could, for assessment purposes, calculate 
and provide the same data outside of the call report.
    \4\ By Informational Memorandum dated June 16, 2017, the FCA 
informed System banks and associations about the changes to the 
assessment calculation in the capital rules and about the changes to 
the call report schedules relevant to assessments.
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    In addition, we revise Sec.  607.2(b)(3) and (b)(4) to clarify, 
based on current accounting practices, that mergers result in 
continuing institutions and consolidations result in newly formed 
institutions.\5\ We also revise these two paragraphs to remove obsolete 
provisions governing transfers of direct lending authority, since we do 
not expect any future transfers of direct lending authority.\6\ 
Finally, we make minor grammatical changes throughout Sec.  607.2(b).
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    \5\ Section 621.3(a) requires System institutions to prepare 
financial statements and reports in accordance with generally 
accepted accounting principles (GAAP).
    \6\ Section 7.6 of the Farm Credit Act of 1971, as amended, 12 
U.S.C. 2279b, authorized Federal land banks and merged banks to 
transfer their direct lending authority to System associations, and 
all associations now have direct lending authority.
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    These changes are technical in nature and have no substantive 
effect. This rule will have no impact on the formula used to calculate 
an institution's assessment amount. Moreover, this rule does not change 
the definition of ``average risk-adjusted asset base'' other than to 
remove obsolete and unnecessary references, clarify the effect of 
mergers and consolidations, and correct minor grammatical errors.

III. Direct Final Rule

    We are amending the definition of ``average risk-adjusted asset 
base'' in Sec.  607.2(b) by a direct final rulemaking. The 
Administrative Conference of the United States recommends direct final 
rulemaking for Federal agencies to enact noncontroversial regulations 
on an expedited basis, without the usual notice and comment period.\7\ 
This process enables us to reduce the time and resources we need to 
develop, review, and publish a final rule while still affording the 
public an adequate opportunity to comment or object to the rule.
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    \7\ Recommendation 95-4, referencing the Administrative 
Procedure Act ``good cause'' exemption at 5 U.S.C. 553(b)(B), 
adopted June 15, 1995.
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    In a direct final rulemaking, we notify the public that the rule 
will become final on a specified date unless we receive a significant 
adverse comment during the comment period. A significant adverse 
comment is one where the commenter explains why the rule would be 
inappropriate (including challenges to its underlying premise or 
approach), ineffective, or unacceptable without a change. In general, a 
significant adverse comment would raise an issue serious enough to 
warrant a substantive response from the FCA in a notice-and-comment 
proceeding.
    We believe that a direct final rulemaking is the appropriate method 
for amending Sec.  607.2(b) because the changes are technical in nature 
and do not substantively alter the rights or responsibilities of any 
party. We do not anticipate there will be significant adverse comments. 
If, however, we receive a significant adverse comment during the 
comment period, we will publish a notice of withdrawal of the relevant 
provisions of this rule that will also indicate how further rulemaking 
will proceed. If we receive no significant adverse comments, we will 
publish notice of the effective date of the rule following the required 
congressional waiting period under section 5.17(c)(1) of the Farm 
Credit Act of 1971, as amended.

IV. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), the FCA hereby certifies that the direct final 
rule will not have a significant economic impact on a substantial 
number of small entities. Each of the banks in the Farm Credit 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, Farm Credit System institutions are not ``small 
entities'' as defined in the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 607

    Accounting, Agriculture, Banks, banking, Reporting and 
recordkeeping requirements, Rural areas.

    For the reasons stated in the preamble, part 607 of chapter VI, 
title 12 of the Code of Federal Regulations is amended as follows:

PART 607--ASSESSMENT AND APPORTIONMENT OF ADMINISTRATIVE EXPENSES

0
1. The authority citation for part 607 continues to read as follows:

    Authority: Secs. 5.15, 5.17 of the Farm Credit Act (12 U.S.C. 
2250, 2252) and 12 U.S.C. 3025.

0
2. Section 607.2 is amended by revising paragraph (b) to read as 
follows:


Sec.  607.2  Definitions.

* * * * *
    (b) Average risk-adjusted asset base means the average of the risk-
adjusted asset base (as defined in Sec.  615.5201 of this chapter) of 
banks, associations, and designated other System entities, calculated 
as follows:
    (1) For a bank, association, or designated other System entity with 
four quarters of risk-adjusted assets as of June 30 of each year, the 
sum of the average daily risk-adjusted assets as of the last day of the 
quarter for the most recent four quarters immediately preceding each 
September 15, divided by four;
    (2) Except as provided in paragraphs (b)(3) and (b)(4) of this 
section, for a bank, association, or designated other System entity 
with less than four quarters of risk-adjusted assets as of June 30 of 
each year, the sum of the average daily risk-adjusted assets as of the 
last day of the quarter for the quarters in which it was in existence 
immediately preceding September 15, divided by the number of quarters 
in which it was in existence immediately preceding September 15;
    (3) For a bank, association, or designated other System entity that 
is the continuing institution after a merger of existing institutions 
or a newly formed institution formed through a consolidation of 
existing institutions and that has less than four quarters of risk-
adjusted assets as of June 30 of each year, the sum of the average 
daily risk-adjusted assets as of the last day of the quarter for the 
most recent four quarters immediately preceding September 15 for all 
the institutions that were merged or consolidated, divided by four;
    (4) For a bank, association, or designated other System entity 
chartered during the period July 1 through September 30 of each year 
that is not the continuing institution after a merger of existing 
institutions or a newly formed institution formed through a 
consolidation of existing institutions, the total of the average daily 
risk-adjusted assets as of the last day of the quarter ending September 
30.
* * * * *


[[Page 48760]]


    Dated: October 16, 2017.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2017-22721 Filed 10-19-17; 8:45 am]
 BILLING CODE 6705-01-P


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