Source: http://www.fca.gov/preambles_historical.nsf/4da2e7d1cb5aee2a852565a8006489ba/31452c68c7b05def852568270063eb7a?OpenDocument
Timestamp: 2013-05-21 04:02:46
Document Index: 74435902

Matched Legal Cases: ['art 611', 'art 611', 'art 611', 'art 611', 'art 611', 'ART 611', 'art 611']

53 FR 16934
Title:	PROPOSED RULE--Organization; Conservatorships and Receiverships--12 CFR Part 611	Issue Date:	05/12/1988
Federal Register Cite:	53 FR 16934
Organization; Conservatorships and Receiverships ACTION: Proposed rule. SUMMARY: The Agricultural Credit Act of 1987 enacted on January 6, 1988, amended the provisions of the Farm Credit Act relating to conservatorships and receiverships. The Farm Credit Administration (FCA) Board proposes, for public comment, revisions to its regulations governing receiverships and conservatorships to conform the regulations to changes made by the 1987 Act, which require that the power specified therein be exercised by the FCA Board as opposed to the FCA or the Chairman, and to make other technical corrections. DATE: Comments must be received by June 13, 1988. ADDRESS: Comments should be submitted in writing, in triplicate, to Anne E. Dewey, General Counsel, Farm Credit Administration, McLean, VA 22102-5090. Copies of all communications received will be available for examination by interested parties in the Office of General Counsel, Farm Credit Administration.
FOR FURTHER INFORMATION CONTACT: Eldon Stoehr, Regional Director, Northeast Region, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4251, TDD (703) 883-4444, or Joanne P. Ongman, Attorney, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444. TEXT: SUPPLEMENTARY INFORMATION: Sections 101, 110, 201, 306, 401, and 431 of the Agricultural Credit Act of 1987 (Pub. L. 100-233) (1987 Act) amended certain provisions of the Farm Credit Act of 1971 (Act) relating to the appointment and conduct of conservatorships and receiverships. The FCA proposes revisions to 12 CFR Part 611, Subparts K, L, M, and N to conform these regulations to the amended statutory requirements. The FCA Board proposes to amend 12 CFR Part 611 Subparts K, L, M, and N to conform these regulations to changes made by the 1987 Act which require that the powers specified therein be exercised by the FCA Board, as opposed to FCA or the Chairman. These changes are incorporated in the Act as amendments to sections 1.3(b) and 4.12. Section 201 of the 1987 Act amended the Act by adding a new Title VI which provides for the establishment of the Farm Credit System Assistance Board. New section 6.6 provides that if FCA determines a condition(s) set forth in section 4.12(b) of the Act is met, the Farm Credit System Assistance Board may direct FCA to appoint a conservator, or may request the FCA Board to initiate action to appoint a receiver. The FCA proposes revising � 611.1156(a) to reflect this authority. The proposed regulations will amend the second sentence in � � 611.1167(b), 611.1175(b), and 611.1182(b) to delete the provision under which the Farm Credit Administration, as opposed to a certified public accountant, would conduct an audit of an institution in receivership. Prior amendments to the Act have deleted the FCA's express authority to audit institutions. Section 306 of the 1987 Act amends � 4.12(b) of the Act by adding a sixth ground for appointment of a conservator or receiver for a Farm Credit System (System) institution. Under this provision, a receiver or conservator can be appointed by the FCA if the institution defaults on the payment of principal or interest on an insured obligation as defined in � 5.51(3) of the Act. The proposed regulations will amend � 611.1156 by adding a new paragraph (b)(6) which sets forth this additional ground. The 1987 Act repealed the provisions under which the Farm Credit System Capital Corporation was chartered and operated. Therefore; � � 611.1165(a), 611.1170(h); and 611.1180(f) are amended by deleting reference to the Farm Credit System Capital Corporation. The FCA Board proposes adding � � 611.1162(c), 611.1167(d), 611.1172(c), and 611.1174(f) to address the retirement of "eligible borrower stock" in an institution in liquidation. The proposed amendments will implement the provisions of � 4.9A(c), as added by the 1987 Act, which provide for the protection of "eligible borrower stock" (as defined in section 4.9A(d)) at par value during a liquidation. The FCA Board proposes an amendment to � � 611.1162 and 611.1172 to implement the provisions of the 1987 Act which authorize System institutions to issue preferred stock to the Farm Credit System Financial Assistance Corporation. The proposed amendments will clarify that those authorities can be exercised notwithstanding the general prohibition against the issuance of stock by the System institution in receivership. New section 4.37 of the 1971 Act contains requirements related to the disposition of certain borrower accounts in a System institution during the liquidation of an institution. Prior to enactment of section 4.37, the possibility existed that funds which a borrower had deposited with a Farm Credit System institution as a prepayment on a loan or otherwise, may not have been recoverable by the borrower if the System institution was placed in liquidation. Section 4.37 requires the funds deposited in uninsured voluntary or involuntary accounts to be applied as payment of or against the borrower's loan. The FCA Board proposes a new regulation � 611.1166 to implement this statutory requirement. The proposed regulation requires the receiver to apply funds that are held in an uninsured account against the indebtedness of the borrower, unless the borrower directs the receiver to otherwise apply such funds in the manner provided for in the existing loan documents. Conforming and renumbering changes are made to � � 611.1166, 611.1167, 611.1168 and 611.1169. The FCA Board is also proposing in a separate document published, elsewhere in this issue of the Federal Register amendments to the borrower rights regulations at 12 CFR 614.4513 which further explain the authority of institutions to have uninsured voluntary and involuntary accounts. The FCA Board proposes the deletion of � 611.1174(c) which contains a procedure for the assignment of joint and several liability on bonds when a System bank is placed in receivership. The FCA Board determined that this process is adequately outlined in section 4.4 of the Act, and that this regulation should be deleted since it does not effectively implement the requirements of joint and several liability. In addition, the new provisions of Title V of the Act provide for the insurance of System obligations. Conforming and renumbering changes are also made to � 611.1174 (d), (e), and (f). The redesignated paragraph (d) is amended to incorporate this change by including a reference to section 4.4 of the Act. The FCA Board proposes a technical amendment to eliminate reference to � 617.7090 which relates to the examination of institutions in liquidation. That section would be eliminated under proposed amendments to FCA examination regulations, to be published in the near future. List of Subjects in 12 CFR Part 611 Agriculture, Banks, Banking, Organization and functions (Government agencies), Rural areas. For the reasons stated in the preamble, Part 611 of Chapter VI, Title 12, of the Code of Federal Regulations is proposed to be amended as follows: PART 611 -- ORGANIZATION 1. The authority citation for Part 611 continues to read as follows: Authority: 12 U.S.C. 2031, 2091, 2182, 2183, 2243, 2244, 2250, 2252.
Subpart K -- Appointment of Conservators and Receivers � 611.1155 [Amended] 2. Section 611.1155 is amended by adding the word "Board" after "Farm Credit Administration" in the first sentence. 3. Section 611.1156 is amended by revising paragraph (a) to read as follows: � 611.1156 Grounds for appointment of conservators and receivers. (a) Upon a determination by the Farm Credit Administration Board of the existence of one or more of the factors set forth in paragraph (b) of this section, with respect to any bank, association, or other institution of the System, the Farm Credit Administration Board may, at its discretion, appoint a conservator or receiver for such institution. Upon a determination by the Farm Credit Administration Board of the existence of one or more of the factors set forth in paragraph (b) of this section, the Farm Credit System Assistance Board may direct the Farm Credit Administration Board to appoint a conservator and may request the Farm Credit Administration Board to appoint a receiver. * * * * * 4. Section 611.1156 (b)(4) and (b)(5) are amended by adding the word "Board" after "Farm Credit Administration" each place it appears. 5. Section 611.1156 is amended by adding a new paragraph (b)(6) to read as follows: (b) * * * (6) The institution is unable to make a timely payment of principal or interest on any insured obligation (as defined in section 5.51(3) of the Act) issued by the institution individually, or on which it is primarily liable. � 611.1157 [Amended] 6. Section 611.1157(a) is amended by removing the words "Chairman of the" in the first sentence and adding the word "Board" after "Farm Credit Administration" the second, third, fourth, and fifth place it appears. 7. Section 611.1157(b) is amended by removing the words "Chairman of the" in the first sentence and adding the word "Board" after "Farm Credit Administration" the second place it appears. � 611.1158 [Amended] 8. Section 611.1158 is amended by adding the word "Board" after "Farm Credit Administration" each place it appears. Subpart L -- Liquidation of Associations � 611.1160 [Amended] 9. Section 611.1160(a) is amended by adding the word "Board" after "Farm Credit Administration" and removing the word "Chairman" and adding in its place the word "Board". 10. Section 611.1160(b) is amended by adding the word "Board" after "Farm Credit Administration". 11. Section 611.1160(e) is amended by adding the word "Board" after "Farm Credit Administration" the second place it appears and by removing the word "Chairman" and adding in its place the word "Board". 12. Section 611.1160 (f) and (g) is amended by removing the word "Chairman" and adding in its place the word "Board" each place it appears. � 611.1161 [Amended] 13. Section 611.1161 is amended by adding the word "Board" after "Farm Credit Administration" the first place it appears in the introductory paragraph. 14. Section 611.1161(s) is amended by adding the word "Board" after "Farm Credit Administration". 15. Section 611.1162(b) is amended by adding the word "Board" after "Farm Credit Administration"; and by adding new paragraphs (c) and (d) to read as follows: � 611.1162 Preservation of equity. * * * * * (c) Notwithstanding paragraphs (a) and (b) of this section, eligible borrower stock shall be retired in accordance with section 4.9A of the Act. (d) Nothing above shall affect the authority of an association in receivership to issue preferred stock in accordance with Title VI of the Act. 16. Section 611.1165(a) is revised to read as follows: � 611.1165 Sale and transfer of loans. (a) The receiver is authorized to sell loans, including any amount outstanding that was used to purchase stock or participation certificates of the association, to any commercial lending institution at fair market value (including any amount borrowed to purchase stock in the association). * * * * * � � 611.1166, 611,1167 and 611.1168 [Redesignated as � � 611.1167, 611.1168 and 611.1169] 17. Sections 611.1166, 611.1167 and 611.1168 are redesignated as � � 611.1167, 611.1168, and 611.1169, and a new � 611.1166 is added to read as follows: � 611.1166 Uninsured accounts Upon placing an institution in liquidation, the receiver shall immediately notify every borrower who has an uninsured account (voluntary or involuntary) that the funds will be applied against the outstanding indebtedness of any loans of such borrower unless, within 15 days of such notice, the borrower directs the receiver to otherwise apply such funds in the manner provided for in existing loan documents. 18. Newly redesignated � 611.1167(a)(4) is amended by adding the word "Board" after "Farm Credit Administration" and by adding a new paragraph (d) to read as follows: � 611.1167 Priority of claims. * * * * * (d) Notwithstanding this section, eligible borrower stock shall be retired in accordance with section 4.9A of the Act. 19. Newly redesignated � 611.1168(a) is amended by adding the word "Board" after "Farm Credit Administration"; and by revising paragraph (b) to read as follows: � 611.1168 Inventory, examination, audit and reports to stockholders.
* * * * * (b) The association in receivership shall be examined on an annual basis by the Farm Credit Administration. The association shall be audited by a certified public accountant approved by the Farm Credit Administration at such times as the Farm Credit Administration determines. The cost of such examination and audit, as determined by the Farm Credit Administration, shall be paid from the assets of the association in receivership. * * * * * � 611.1169 [Amended] 20. Newly redesignated � 611.1169 is amended by removing the words "Chairman of the" in the first sentence; by adding the word "Board" after "Farm Credit Administration" the first and second place it appears; and by removing the words "pursuant to � 617.7090 of this chapter" in the third sentence. Subpart M -- Liquidation of Banks 21. Section 611.1170 is amended in paragraphs (a) and (b) by adding the word "Board" after "Farm Credit Administration" and in paragraphs (a), (e), (f), and (g) by removing the word "Chairman" and adding in its place the word "Board" each place it appears. 22. Section 611.1170 is amended by revising paragraph (h) to read as follows: � 611.1170 Appointment of receiver. * * * * * (h) For purposes of this subpart the term "bank" will include all banks, service corporations chartered under Title IV of the Act, the Federal Agricultural Mortgage Corporation, the Federal Farm Credit Banks Funding Corporation, and the Farm Credit System Financial Assistance Corporation. 23. Section 611.1172 is amended by adding "Board" after "Farm Credit Administration" in paragraph (b) and by adding new paragraphs (c) and (d) to read as follows: � 611.1172 Preservation of equity. * * * * * (c) Notwithstanding paragraphs (a) and (b) of this section, eligible borrower stock shall be retired in accordance with section 4.9A of the Act. (d) Nothing in this section shall affect the authority of a bank in receivership to issue preferred stock in accordance with Title VI of the Act. 24. Section 611.1174 is amended by removing paragraph (c); by redesignating paragraphs (d), (e), and (f) as paragraphs (c), (d), and (e), respectively; newly redesignated paragraph (d) is amended by removing the references to "(d)" and adding in their place, "(c)"; by revising newly redesignated paragraph (c)(5); and by adding new paragraph (f) to read as follows:
� 611.1174 Creditors' claims and priority of claims. * * * * * (c) * * * (5) All claims of holders of consolidated and Systemwide bonds and claims of the other System banks arising from their payments pursuant to section 4.4 of the Act. * * * * * (f) Notwithstanding this section, eligible borrower stock shall be retired in accordance with section 4.9A of that Act. 25. Section 611.1175 is amended by revising paragraph (b) to read as follows: � 611.1175 Inventory, examination, audit, and reports to stockholders. * * * * * (b) The bank in receivership shall be examined on an annual basis by the Farm Credit Administration. The bank shall be audited by a certified public accountant approved by the Farm Credit Administration at such times as the Farm Credit Administration determines. The cost of such examination and audit, as determined by the Farm Credit Administration, shall be paid from the assets of the bank in receivership. * * * * * � 611.1176 [Amended] 26. Section 611.1176 is amended by removing the word "Chairman" and adding in its place, the word "Board" in the first sentence; by adding the word "Board" after "Farm Credit Administration" the second place it appears; and by removing the words "pursuant to � 617.7090 of this chapter" in the third sentence. Subpart N -- Conservators and Conservatorships of Banks and Associations 27. Section 611.1180 is amended in paragraph (a) by adding the word "Board" after "Farm Credit Administration"; and in paragraphs (d) and (e) by removing the word "Chairman" and adding in its place the word "Board"; and paragraph (f) is revised to read as follows: � 611.1180 Appointment of a conservator. * * * * * (f) For purposes of this subpart "System institution" will mean all banks, associations, service corporations chartered under Title IV of the Act, the Federal Agricultural Mortgage Corporation, the Farm Credit Banks Funding Corporation, and the Farm Credit System Financial Assistance Corporation. � 611.1181 [Amended] 28. Section 611.1181 is amended in paragraphs (b) and (c)(1) by adding the word "Board" after "Farm Credit Administration". 29. Section 611.1182 is amended in paragraph (a) by adding the word "Board" after "Farm Credit Administration" the first place it occurs and by revising paragraph (b) to read as follows: � 611.1182 Inventory, examination, audit, and reports to stockholders. * * * * * (b) The institution in conservatorship shall be examined by the Farm Credit Administration on an annual basis. The institution shall also be audited by a certified public accountant approved by the Farm Credit Administration at such times as the Farm Credit Administration may determine. The cost of such examination and audit, as determined by the Farm Credit Administration, shall be paid from the assets of the institution in conservatorship unless otherwise ordered by the Farm Credit Administration. * * * * * Dated: May 4, 1988. David A. Hill, Secretary, Farm Credit Administration Board. [ Doc. 88-10190 Filed 5-11-88; 8:45 am] BILLING CODE 6705-01-M