Source: http://www.thefederalregister.com/d.p/2010-07-08-2010-16457
Timestamp: 2013-05-25 21:05:20
Document Index: 144702136

Matched Legal Cases: ['art 7114', 'art 3944', 'art 6726', 'art 140', 'art 5250', 'art 1739', 'art 30206', 'art 514', 'art 9740', 'art 180', 'art 615', 'art 208', 'art 225', 'art 325', 'art 225', 'art 208', 'art 325']

14 CFR Part 7114 CFR Part 3944 CFR Part 6726 CFR Part 140 CFR Part 5250 CFR Part 1739 CFR Part 30206 CFR Part 514 CFR Part 9740 CFR Part 180	Federal Register: July 8, 2010 (Volume 75, Number 130)
DOCID: fr08jy10-31
FR Doc 2010-16457
CFR Citation: 12 CFR Part 615
RIN ID: RIN 3052-AC61
NOTICE: Part IV
DOCUMENT ACTION: Advance notice of proposed rulemaking.
SUBJECT CATEGORY: Funding and Fiscal Affairs, Loan Policies and Operations, and Funding Operations; Capital Adequacy; Capital Components--Basel Accord Tier 1 and Tier 2 DATES: You may send comments on or before November 5, 2010.
DOCUMENT SUMMARY: The Farm Credit Administration (FCA or we) is considering the promulgation of Tier 1 and Tier 2 capital standards for Farm Credit System (FCS or System) institutions. The Tier 1/Tier 2 capital structure would be similar to the capital tiers delineated in the Basel Accord that the other Federal financial regulatory agencies have adopted for the banking organizations they regulate. We are seeking comments to facilitate the development of this regulatory capital framework, including new minimum riskbased and leverage ratio capital requirements that take into consideration both the System's cooperative structure of primarily wholesale banks owned by retail lender associations that are, in turn, owned by their member borrowers, and the System's status as a Governmentsponsored enterprise.
SUMMARY: Farm Credit Administration
Table of Contents I. Objective II. Summary and List of Questions A. Introduction B. The Farm Credit System C. The FCA's Current Capital Regulations D. List of Questions
III. The Tier 1/Tier 2 Capital Framework Under Consideration by the FCA and Associated Questions A. The Tier 1/Tier 2 Capital Structure Within a Broader Context
1. Discussion of Bank and Association Differences 2. Limits and Minimums 3. The Permanent Capital Standard B. The Individual Components of Tier 1 and Tier 2 Capital 1. Tier 1 Capital Components 2. Tier 2 Capital Components C. Regulatory Adjustments IV. Additional Background A. The October 2007 ANPRM B. Description of FCA's Current Capital Requirements
C. Overview of the Tier 1/Tier 2 Capital Framework 1. The Current Tier 1/Tier 2 Capital Framework 2. Proposed Changes to the Current Tier 1/Tier 2 Framework I. Objective The objective of this advance notice of proposed rulemaking (ANPRM) is to seek public comments to help us formulate proposed regulations that would: 1. Promote safe and sound banking practices and a prudent level of regulatory capital for System institutions; 2. Minimize differences, to the extent appropriate, in regulatory capital requirements between System institutions \1\ and federally regulated banking organizations; \2\
\1\ For the purposes of this ANPRM, ``System institutions'' include System banks and associations but do not include service organizations or the Federal Agricultural Mortgage Corporation (Farmer Mac).
\2\ Banking organizations include commercial banks, savings associations, and their respective holding companies. 3. Improve the transparency of System capital for System stockholders, investors, and the public; and 4. Foster economic growth in agriculture and rural America through the effective allocation of System capital. II. Summary and List of Questions
In October 2007, the FCA published an ANPRM on the risk weighting of assetsthe denominator in our riskbased core surplus, total surplus, and permanent capital ratios; a possible leverage ratio, and a possible early intervention framework (October 2007 ANPRM).\3\ The comment letter we received in December 2008 from the Federal Farm Credit Banks Funding Corporation on behalf of the System (System Comment Letter) focused primarily on the numerators of those regulatory capital ratios.\4\ The System urged us to replace the core surplus and total surplus capital standards with a ``Tier 1/Tier 2'' capital framework consistent with the Basel Accord (Basel I) and the other Federal financial regulatory agencies' (FFRAs \5\) guidelines to help provide a level playing field for the System in competing with commercial banks in accessing the capital markets. Furthermore, the System recommended that we replace our net collateral ratio (NCR), which is applicable only to [[Page 39393]]
banks, with a nonriskbased leverage ratio applicable to all System institutions. We have responded to a number of issues and comments raised in the System Comment Letter in drafting this ANPRM. \3\ 72 FR 61568 (October 31, 2007).
\4\ Comment letter dated December 19, 2008, from Jamie Stewart, President and CEO, Federal Farm Credit Banks Funding Corporation, on behalf of the System. This letter and its attachments are available in the ``Public Comments'' section under ``Capital AdequacyBasel AccordANPRM'' at http://www.fca.gov.
\5\ We refer collectively to the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) as the other ``Federal financial regulatory agencies'' or FFRAs. Basel I is a twotiered capital framework for measuring capital adequacy that was first published in 1988 by the Basel Committee on Banking Supervision.\6\ Tier 1 capital, or core capital, consists of the highest quality capital elements that are permanent, stable, and immediately available to absorb losses and includes common stock, noncumulative perpetual stock, and retained earnings. Tier 2 capital, or supplementary capital, includes general loanloss reserves, hybrid instruments such as cumulative stock and perpetual debt, and subordinated debt. Basel I established a minimum 4percent Tier 1 risk
based capital ratio and an 8percent total riskbased capital ratio (Tier 1 + Tier 2).
\6\ Basel I has been updated several times since 1988. The Basel Committee's documents are available at http://www.bis.org/bcbs/ index/htm. In December 2009, the Basel Committee published a consultative document (Basel Consultative Proposal) that proposes fundamental reforms to the current Tier 1/Tier 2 capital framework.\7\ The Basel Committee's primary aims are to improve the banking sector's ability to absorb shocks arising from financial and economic stress, to mitigate spillover risk from the financial sector to the broader economy, and to increase bank transparency and disclosures. The Basel Committee intends to develop a set of new capital and liquidity standards by the end of 2010 to be phased in by the end of 2012. Although the FFRAs have discretion whether or not to adopt the new standards, they are members of the Basel Committee and have encouraged the public to review and comment on the Basel Committee's proposals. Consequently, we believe it is important for the FCA to consider the Basel Consultative Proposal in formulating new capital standards for System institutions, and we encourage commenters on our ANPRM also to review and consider the Basel Committee's proposals.
\7\ ``Basel Consultative Proposals to Strengthen the Resilience of the Banking Sector,'' December 17, 2009. The document is available at http://www.bis.org/publ/bcbs164.htm. B. The Farm Credit System The Farm Credit System (FCS or System) is a federally chartered network of borrowerowned lending cooperatives and related service organizations. Cooperatives are organizations that are owned and controlled by their members who use the cooperatives' products or services. The System was created by Congress in 1916 as a farm real estate lender and was the first Governmentsponsored enterprise (GSE); in subsequent years, Congress expanded the System to include production credit, cooperative, rural housing, and other types of lending. The mission of the FCS is to provide sound and dependable credit to its member borrowers, who are American farmers, ranchers, producers or harvesters of aquatic products, their cooperatives, and certain farm
related businesses and rural utility cooperatives. The FCA is the System's independent Federal regulator that examines and regulates System institutions for safety and soundness and mission compliance. The System's enabling statute is the Farm Credit Act of 1971, as amended (Act).\8\
\8\ 12 U.S.C. 20012279cc. The Act is available at http:// www.fca.gov under ``FCA Handbook.'' The System is composed of 88 associations that are direct retail lenders; four Farm Credit Banks that are primarily wholesale lenders to the associations; an Agricultural Credit Bank (CoBank, ACB) that makes retail loans to cooperatives as well as wholesale loans to associations; and a few service organizations.\9\ Each System bank has a district, or lending territory, which includes the territories of the affiliated associations that it funds; CoBank, in addition, lends to cooperatives nationwide. There are currently two types of System association structures: Agricultural credit associations (ACAs) that are holding companies with subsidiary production credit associations (PCAs) and Federal land credit associations (FLCAs), and standalone FLCAs. PCAs make short and intermediateterm operating or production or rural housing loans, and FLCAs make real estate mortgage loans and longterm rural housing loans. ACAs have the authorities of both PCAs and FLCAs.
\9\ This is the System's structure as of April 30, 2010. Farmer Mac, which is a corporation and federally chartered instrumentality, is also an institution in the System. The FCA has a separate set of capital regulations that apply to Farmer Mac, and the questions in this ANPRM do not pertain to Farmer Mac's regulations. The five banks collectively own the Federal Farm Credit Banks Funding Corporation (Funding Corporation), which is the fiscal agent for the System banks and is responsible for issuing and marketing Systemwide debt securities in domestic and global capital markets. The proceeds from the securities are used by the banks to fund their lending and other operations, and the banks are jointly and severally liable on the debt.
C. The FCA's Current Capital Regulations
The FCA currently has three riskbased minimum capital standards: A 3.5percent core surplus ratio (CSR), a 7percent total surplus ratio (TSR), and a 7percent permanent capital ratio (PCR).\10\ Congress added a definition of ``permanent capital'' to the Act in 1988 and required the FCA to adopt riskbased permanent capital standards for System institutions. The FCA adopted permanent capital regulations in 1988 and, in 1997, added core surplus and total surplus capital standards for banks and associations, as well as a nonriskbased net collateral ratio (NCR) for banks.\11\ Since then, we have made only minor changes to these regulations. \10\ See 12 CFR 615.52015216 and 615.53015336.
\11\ See 53 FR 39229 (October 6, 1988) and 63 FR 39229 (July 22, 1998). Permanent capital is defined primarily by statute and includes current earnings, unallocated and allocated earnings, stock (other than stock retirable on repayment of the holder's loan or at the discretion of the holder, and certain stock issued before October 1988), surplus less allowance for losses, and other debt or equity instruments that the FCA determines appropriate to be considered permanent capital. Core surplus contains the highest quality capital, similar (but not identical) to Basel I's Tier 1 capital and generally consists of unallocated retained earnings, certain allocated surplus, and noncumulative perpetual preferred stock less, for associations, the association's net investment in its affiliated bank. Total surplus generally contains most of the components of permanent capital but excludes stock held by borrowers as a condition of obtaining a loan and certain other instruments that are routinely and frequently retired by institutions. Section IV of this ANPRM provides more detailed information for readers who are not familiar with our regulatory capital requirements; the FCA's October 2007 ANPRM and comments; and Basel I and the Basel Consultative Proposal.
D. List of Questions
This ANPRM poses questions on the possible promulgation of regulatory capital standards based on Basel I and the FFRAs' guidelines while keeping in mind the reforms being proposed by the Basel Committee. It is tailored to account for the memberowner cooperative structure and GSE mission of the System. The questions are listed [[Page 39394]]
below and followed by a full discussion in Section III.
1. We seek comments on the different ways System banks and associations retain and distribute capital, how their borrowers influence the System institution's retention and distribution of capital, and how such differences should be captured in a new regulatory capital framework. Should we adopt separate and tailored regulatory capital standards for banks and associations? Why or why not? 2. We seek comments on ways to address bank and association interdependent relationships in the new regulatory capital framework. Should we establish an upper Tier 1 minimum standard for banks and associations? Why or why not? If so, what capital items should be included in upper Tier 1, and should bank requirements differ from association requirements? 3. We seek comments on ways to ensure that the majority of Tier 1 and total capital is retained earnings and capital held by or allocated to an institution's borrowers. Should we establish specific regulatory restrictions on thirdparty capital? Why or why not? If so, should there be different restrictions for banks and associations?
4. We seek comments on the role that permanent capital will play in a new regulatory capital framework. Should we replace any regulatory limits and/or restrictions based on permanent capital with a new limit based on Tier 1 or total capital? If so, what should the new limits and/or restrictions be? Also, we ask for comments on how, or whether, to reconcile the sum of Tier 1 and Tier 2 (e.g., total capital) with permanent capital. 5. We seek comments on other types of allocated surplus or stock in the System that could be considered unallocated retained earnings (URE) equivalents under a new regulatory capital framework. We ask commenters to explain how these other types of allocated surplus or stock are equivalent to URE. 6. We seek comments on ways to limit reliance on noncumulative perpetual preferred stock (NPPS) as a component included in Tier 1 capital while avoiding the downward spiral effect that can occur when other elements of Tier 1 capital decrease. 7. We seek comments to help us develop a capital regulatory mechanism that would allow System institutions to include allocated surplus and member stock in Tier 1 capital. Using the table titled ``System Institutions Capital Distributions Restrictions and Reporting Requirements'' as an example, what risk metrics would be appropriate to classify a System institution as Category 1, Category 2, or Category 3? What percentage ranges would be appropriate for each risk metric under each category? We also seek comments on the increased restrictions and/
or reporting requirements listed in Category 2 and Category 3.
8. We seek comments on whether the FCA should count a portion of the allowance for loan losses (ALL) as regulatory capital. We also seek information on how losses for unfunded commitments equate to ALL and why they should be included as regulatory capital. We ask commenters to take into consideration the Basel Consultative Proposal and any recent changes to FFRA regulations in relation to the amount or percentage of ALL includible in Tier 2 capital. 9. We seek comments on the treatment of cumulative perpetual and termpreferred stock as Tier 2 capital subject to the same conditions imposed by the FFRAs. 10. We seek comments on authorizing System institutions to include a portion of unrealized holding gains on availableforsale (AFS) equity securities as regulatory capital. We ask commenters to provide specific examples of how this component of Tier 2 capital would be applicable to System institutions. 11. We seek comments on the treatment of intermediateterm preferred stock and subordinated debt as Tier 2 capital and conditions for their inclusion in Tier 2 capital. 12. We seek comments on how to develop a regulatory mechanism to make a type of perpetual preferred stock that can be continually redeemed (referred to as H stock by most associations that have issued it) more permanent and stable so that the stock may qualify as Tier 2 capital. 13. We seek comments on the regulatory adjustments in our current regulations that we expect to incorporate into the new regulatory capital framework. We also seek comments on the regulatory capital treatment for positions in securitizations that are downgraded and are no longer eligible for the ratingsbased approach under the new regulatory capital framework.
III. The Tier 1/Tier 2 Capital Framework Under Consideration by the FCA and Associated Questions The table below displays the possible treatment of the System's capital components under a framework that is consistent with the FFRAs' current Tier 1/Tier 2 capital framework. We anticipate that the Basel Consultative Proposal could lead to significant changes to this framework, and we ask commenters to take the Basel Committee's proposals into consideration when answering the questions in this ANPRM. Capital element Comments Tier 1 Capital
URE & URE Equivalents........ We may create the term ``URE
equivalents'' and ask commenters to help
us identify types of allocated surplus
and/or stock that would constitute URE equivalents.
Noncumulative Perpetual We may limit NPPS to an amount less than
Preferred Stock (NPPS). 50 percent of Tier 1 capital. We seek
comments on ways to limit NPPS as Tier 1
capital while avoiding the downward
spiral effect that can occur when other
elements of Tier 1 capital decrease.
Allocated Surplus and Member We may treat most forms of allocated
Stock. surplus and member stock as Tier 1
capital, provided System institutions
are subject to a regulatory mechanism
that would give the FCA the additional
ability to effectively monitor and, if
necessary, take actions that would
restrict, suspend, or prohibit capital
distributions before a System
institution reaches its regulatory
capital minimums. We ask commenters to
help us develop this mechanism. Tier 2 Capital
Association's Excess We may treat the amount of an
Investment in the Bank. association's investment that is in
excess of its bank requirement, whether
counted by the bank or the association, as Tier 2 capital.
Allowance for Loan Losses We have not determined whether any
(ALL). portion of ALL should be treated as Tier
2 capital. We seek comments as to why
the FCA should count a portion of ALL as regulatory capital. [[Page 39395]]
Cumulative Perpetual We may adopt the definitions, criteria
Preferred Stock and Long and/or limits consistent with future
Term Preferred Stock. revisions to the Basel Accord and FFRA
guidelines. We also may adopt aggregate
thirdparty capital limits that are unique to the System.
Unrealized Holding Gains on This element is currently addressed in
AFS Securities. the FFRAs' guidelines but is subject to
change. We seek comment on the
appropriate treatment of this element
and specific examples of how this
application would affect System institutions.
Intermediateterm Preferred We may adopt the definitions, criteria
Stock and Subordinated Debt. and/or limits consistent with future
revisions to the Basel Accord and FFRA
Association Continuously We view this element as a 1day term
Redeemable Preferred Stock. instrument that would not currently
qualify as Tier 1 or Tier 2 capital. We
seek comments to help us develop a
regulatory mechanism that would make the
stock sufficiently permanent to be
included in Tier 2 capital. Regulatory Adjustments
We may apply most of the deductions currently in our egulations to the
new regulatory capital ratios. However, in view of the Basel
Consultative Proposal, we are considering reflecting the net effect of
accumulated other comprehensive income in the new regulatory capital ratios..
A. The Tier 1/Tier 2 Capital Structure Within a Broader Context 1. Discussion of Bank and Association Differences We established core surplus and total surplus standards in 1997 to ensure System institutions would have a more stable capital cushion that would provide some protection to System institutions, investors, and taxpayers; reduce the volatility of capital in relation to borrower stock retirements; and ensure that the institutions always maintain a sufficient amount of URE to absorb losses. Our determinations were influenced, in part, by what we learned in the 1980s when the System experienced severe financial problems.\12\ At that time, the System was employing an averagecost pricing strategy that caused System loans to be priced below rates offered by other lenders when interest rates were high (e.g., in the early 1980s) and above rates offered by other lenders when interest rates fell (e.g., in the mid1980s). When the System's rates were no longer competitive, many higher quality borrowers who could easily find credit elsewhere began to leave the System. Those who left early in the crisis were able to have the institution retire their stock at par, which at that time was around 5 to 10 percent of the loan (or some borrowers simply paid down their loans to an amount equal to their stock), causing capital and loan portfolio quality to drop sharply at many associations.
\12\ This discussion presents a simplified explanation of the System's financial problems in the 1980s. See 60 FR 38521 (July 27, 1995) and 61 FR 42092 (August 13, 1996) for a more comprehensive discussion. These Federal Register documents are available at http:/
/www.fca.gov. To find them, go to the home page and click on ``Law & Regulations,'' then ``FCA Regulations,'' then ``Public Comments,'' then ``View Federal Register Documents.'' Some association boards had the legal discretion to suspend stock retirements but did not do so, perhaps to help their borrowers in times of distress but also to avoid sending a message to remaining and potential borrowers that borrower stock was risky. The result was that, in many cases, these actions left remaining stockholders bearing the brunt of more severe association losses. We concluded from these events that associations needed to build surplus cushions to be able to continue retiring borrower stock on a routine basis and to reduce the volatility associated with borrower stock retirements, and our 1997 regulations have effectively required associations to establish such cushions. System banks and associations retain and distribute capital differently. For this reason, we will consider whether to establish separate and tailored regulatory capital standards for banks and for associations as we construct a new regulatory capital framework.
System banks do not routinely retire their stock in the ordinary course of business or revolve surplus in the same manner as associations. At the present time, each bank has established a ``required investment,'' \13\ which may consist of both purchased stock and allocated surplus, for each of its affiliated associations.\14\ This required investment, which is generally a percentage of the association's direct loan outstanding from the bank, can fluctuate within a bank board's established range depending upon the bank's capital needs. The bank's bylaws usually require an association that falls short of the required investment to purchase additional stock in the bank.\15\ In most cases, the banks make little distinction between purchased stock and allocated surplus.
\13\ See Section III.B.1.c. for a more detailed discussion of the bank's required investment.
\14\ We are generalizing about how banks retain and distribute capital. In practice, each bank has its own unique policies and practices for retaining and distributing capital. For example, one bank distributes patronage to its associations in the form of either cash or stock, and the associations' investments consist only of bank stock. This bank retires its stock over a long period of time, depending upon its capital needs.
\15\ See Section III.B.2.a. for a more detailed discussion of the excess investment. Associations make a greater distinction between borrower stock and the surplus they allocate to borrowers.\16\ Borrower stock held by retail borrowers as a condition of obtaining a loan is routinely retired by the association at par when the borrower pays off or pays down the loan. Some associations allocate earnings, and others do not. Some associations do not have allocated equity revolvement plans and distribute patronage only in the form of cash on an annual basis.\17\ Other associations do not have allocated equity revolvement plans but distribute some patronage in the form of nonqualified or qualified allocated equities on a regular basis; they generally determine how such equity will be distributed on an ad hoc or annual basis after assessing market conditions. Still other associations have equity revolvement plans and distribute earnings as either cash or nonqualified or qualified allocated equities consistent with the plan; however, they have the power to withhold or suspend cash distributions to respond to changing economic and financial conditions.
\16\ See Section III.B.1.c. for a more detailed discussion of association borrower stock and allocated surplus.
\17\ All associations are required to have capital plans, but these plans may or may not include regular allocated equity revolvement plans. The cooperative structure and operations of System associations are significantly different from a typical corporate structure in that a borrower's [[Page 39396]]
expectation of patronage distributions can and does influence the permanency and stability of association stock and allocated surplus. In addition, a System bank's retention and distribution of bank stock and bank surplus are different from those of associations for a number of reasons, including the tax implications and the fact that an association cannot easily find debt financing from sources other than the bank. We are asking commenters to consider the unique structure and practices of System banks and associations, the characteristics and expectations of their borrowers, and how such characteristics and expectations can impact the stability and permanency of stock and surplus. Question 1: We seek comments on the different ways System banks and associations retain and distribute capital, how their borrowers influence the System institution's retention and distribution of capital, and how such differences should be captured in a new regulatory capital framework. Should we adopt separate and tailored regulatory capital standards for banks and associations? Why or why not?
2. Limits and Minimums
The current regulatory capital minimums imposed by the FFRAs include a 4percent Tier 1 riskbased capital ratio, an 8percent minimum total riskbased capital ratio with the amount of Tier 2 components limited to the amount of Tier 1, and a 4percent minimum Tier 1 nonriskbased leverage ratio. These standards could change as a result of efforts to revise the riskbased capital ratios and introduce a nonriskbased leverage ratio that may integrate offbalance sheet items as outlined in the Basel Consultative Proposal. We are also considering an ``upper Tier 1'' minimum consistent with the Basel Committee's proposed common equity standard. An upper Tier 1 minimum would ensure that the predominant form of a System institution's Tier 1 capital consists of the highest quality capital elements. Finally, we are studying thirdparty capital limits that take into consideration the System's GSE charter and cooperative form of organization.\18\ These limits and/or minimums for System banks may differ from the limits and minimums for associations.
\18\ Thirdparty capital is capital issued to parties who are not borrowers of the System institution and are not other System institutions. Existing thirdparty regulatory capital in System institutions includes both preferred stock and subordinated debt. a. Upper Tier 1 Minimum Upper Tier 1 in a commercial banking context is typically referred to as ``tangible common equity''; it is the highest quality portion of a commercial bank's Tier 1 capital and consists of common stockholder's equity and retained earnings. A commercial bank's upper Tier 1 capital, or tangible common equity, is the most permanent and stable capital available to absorb losses to ensure it continues as a going concern. The FRB's and FDIC's regulatory guidelines state that the dominant form of Tier 1 capital should consist of common stockholder's equity and retained earnings.\19\ Upper Tier 1 in a System lending institution context would not necessarily have the equivalent components of tangible common equity at a commercial bank. The FCA's position has been that borrower stock and many forms of allocated surplus are generally less permanent, stable and available to absorb losses than URE and URE equivalents \20\ because suspension of patronage distributions and stock retirements can have negative effects on the institution's relationship with its existing and prospective customers. We currently restrict all forms of allocated equities includible in core surplus to 2 percentage points \21\ of the 3.5percent CSR unless a System institution has at least 1.5 percent of uncommitted, unallocated surplus and noncumulative perpetual preferred stock.\22\
\19\ FRB guidelines for state member banks are in 12 CFR part 208, App. A, II.A.1. FRB guidelines for bank holding companies (BHCs) are in 12 CFR part 225, App. A, II.A.1.c(3). FDIC guidelines for state nonmember banks are in 12 CFR part 325, App. A, I.A.1(b).
\20\ URE is earnings not allocated as stock or distributed through patronage refunds or dividends. URE equivalents are other forms of surplus that have the same or very similar characteristics of permanence (i.e., low expectation of redemption), stability and availability to absorb losses as URE.
\21\ In other words, if an institution has at least 1.5 percent of uncommitted, unallocated surplus and noncumulative perpetual preferred stock, it may include qualifying allocated equities in core surplus in excess of 2 percentage points.
\22\ The NCUA has taken a similar position as it considers adopting a Tier 1/Tier 2 regulatory capital framework for the institutions it regulates. The NCUA has also proposed a retained earnings minimum for corporate credit unions to help prevent the downstreaming of the losses to the credit unions they serve. See 74 FR 65209 (December 9, 2009). As noted above, the Basel Committee is considering establishing a new common equity standard \23\ and has described the characteristics that instruments must have to qualify as common equity. Instruments such as member stock and surplus in cooperative financial institutions must also have these characteristics to be included in common equity. The FCA will take into account these characteristics as it considers an upper Tier 1 standard for System institutions.
\23\ See paragraph 87 of the Basel Consultative Proposal.
We are also considering an upper Tier 1 minimum to address interdependency risk within the System. Because of their financial and operational interdependence, financial problems at one System institution can spread to other System institutions. An upper Tier 1 capital requirement could help moderate these interdependent relationships if it contains uncommitted, high quality, lossabsorbing capital that protects the investors of a System institution from its own financial problems as well as from the financial problems of other System institutions. A commercial bank that needs additional upper Tier 1 capital may have the ability to issue additional common stock to investors without any direct impact on its customers. System institutions have fewer options to increase their highest quality capital, and exercising these options could have negative effects on their member borrowers in adverse situations. For example, if a System bank suffers severe losses and needs to replenish capital, its only options might be to reduce or suspend patronage distributions to its affiliated associations or to increase its associations' minimum required investments in the bank, or both. Since an association depends, to some extent, on the earnings distributions it receives from its bank, the association would have less income to purchase additional capital to support its struggling bank. The association might have to use its earnings from its own operations to recapitalize the bank instead of making cash patronage distributions to its borrowers or capitalizing new loans. The bank's financial weakness could spur the association to try to reaffiliate with another System bank; however, as the System Comment Letter points out,\24\ associations cannot easily reaffiliate with another funding bank or voluntarily liquidate or terminate System status under a stressed bank financial scenario. A sufficient amount of upper Tier 1 capital at the bank that consists of unallocated capital would help cushion the bank losses that can negatively impact the associations and their borrowers. It would protect the association's investment and reduce the likelihood that the bank will raise the association's capital requirement at a [[Page 39397]] time when the association is least able to afford it.
\24\ See footnote 4 above.
Upper Tier 1 requirements at associations would also protect the borrowers' investments in the institution. Associations with financial problems might not have additional capital to meet the bank's required investment, and the bank might, in turn, try to obtain additional capital from healthier associations to ensure the bank remains adequately capitalized. Because of these interdependent relationships, it is possible that weaker associations could pull down healthier associations. An adequate amount of upper Tier 1 capital at the associations would help protect the borrower's investment from losses resulting from these interdependent relationships. If the FCA determines that borrower stock and allocated surplus can be treated in part or in whole as Tier 1 capital (depending upon appropriate regulatory mechanisms as discussed below), we may establish an upper Tier 1 minimum at both the banks and the associations to protect against systemic risks outside the control of the System institution. The upper Tier 1 requirement for System banks might be different from the requirement for associations. For example, an upper Tier 1 minimum at the banks might include only URE and URE equivalents to protect the associations' required investments in the bank. An upper Tier 1 minimum at the associations might include some forms of allocated surplus but exclude other forms of allocated surplus and most or all borrower stock.\25\
\25\ We discuss the individual components of System capital in more detail below in Section III.B. Question 2: We seek comments on ways to address bank and association interdependent relationships in the new regulatory capital framework. Should we establish an upper Tier 1 minimum for banks and associations? Why or why not? If so, what capital items should be included in upper Tier 1, and should bank requirements differ from association requirements?
b. ThirdParty Capital Limits
System institutions capitalize themselves primarily with member stock and surplus. System institutions are also authorized to raise capital from thirdparty investors who are not borrowers of the System. Thirdparty capital may include various kinds of hybrid capital instruments such as preferred stock and subordinated debt. While diverse sources of capital improve a System institution's riskbearing capacity and, to a certain extent, improve corporate governance through increased market discipline, the FCA believes that too much thirdparty capital would compromise the cooperative nature and GSE status of the System. Consequently, we have imposed limits on the amount of third
party capital that is includible in a System institution's regulatory capital.\26\
\26\ The FCA currently limits NPPS to 25 percent of core surplus outstanding and imposes aggregate thirdparty regulatory capital limits of the lesser of 40 percent of permanent capital outstanding or 100 percent of core surplus outstanding. We also limit the inclusion of term preferred stock and subordinated debt to 50 percent of core surplus outstanding. (Institutions can issue third
party stock or subordinated debt in excess of these limits but cannot count it in their regulatory capital.) The FCA agrees with the position of the Basel Committee that the predominant form of capital should be stable, permanent, and of the highest quality. While NPPS provides loss absorbency in a going concern, it absorbs losses only after member stock and surplus have been depleted. Since member stock and surplus rank junior to NPPS, it is more difficult for a System institution to raise additional capital from its patrons during periods of adversity if it holds a significant amount of NPPS. Furthermore, while dividends can be waived and do not accumulate to future periods, System bank issuers of NPPS, like commercial banks, appear to have strong economic incentives not to waive dividends since doing so would send adverse signals to the market.\27\ Additionally, unlike customers of commercial banks, the customers of System institutions are impacted when System institutions are prohibited from paying patronage because they skipped dividends on preferred stock. For these reasons, we are considering maintaining limits on thirdparty capital in both Tier 1 and total capital to ensure that member stock and surplus remain the predominant form of System capital.\28\
\27\ Market analysts might perceive a financial institution to be in worse financial condition when it waives preferred stock dividends, because it implies that the institution has previously eliminated its common stock dividends (or, in the case of a cooperative, its patronage).
\28\ See also the discussion in Section III.B.1.b.
Question 3: We seek comments on ways we can ensure that the majority of Tier 1 and total capital is retained earnings and capital held by or allocated to an institution's borrowers. Should we establish specific regulatory restrictions on thirdparty capital? Why or why not? If so, should there be different restrictions for banks and associations?
3. The Permanent Capital Standard
Permanent capital is defined by statute to include stock issued to System borrowers and others, allocated surplus, URE, and other types of debt or equity instruments that the FCA determines is appropriate to be considered permanent capital, but expressly excludes ALL.\29\ The Act imposes a permanent capital requirement and, therefore, it will remain part of the System's regulatory capital framework. The FCA will continue to enforce any restrictions or other requirements prescribed in the Act relating to the permanent capital standard. (One such restriction prohibits a System institution from distributing patronage or paying dividends (with specific exceptions) or retiring stock if the institution fails to meet its minimum permanent capital standard.) \30\ \29\ Section 4.3A(a) of the Act (12 U.S.C. 2154a(a)).
\30\ Section 4.3A(d) of the Act (12 U.S.C. 2154a(d)). Any System institution subject to Federal income tax may pay patronage refunds partially in cash as long as the cash portion of the refund is the minimum amount required to qualify the refund as a deductible patronage distribution for Federal income tax purposes and the remaining portion of the refund paid qualifies as permanent capital.
Several existing FCA regulations refer to measurements of permanent capital outstanding or PCR minimums.\31\ For example, Sec. 614.4351 sets a lending and leasing base for a System institution equal to the amount of the institution's permanent capital outstanding, with certain adjustments. Section 615.5270 permits a System institution's board of directors to delegate authority to management to retire stock as long as the PCR of the institution is in excess of 9 percent after any such retirements. Section 627.2710 sets forth the grounds for the appointment of a conservator or receiver for System institutions and defines a System institution as unsafe and unsound if its PCR is less than onehalf of the minimum required level (3.5 percent). We could retain these regulations in their current form, but it may be more appropriate to change any or all of them to fit the new regulatory capital framework.
\31\ The FCA's regulations are set forth in chapter VI, title 12 of the Code of Federal Regulations and available on the FCA's Web site under ``Laws & Regulations.'' Question 4: We seek comments on the role that permanent capital will play in the new regulatory capital framework. Should we replace any regulatory limits and/or restrictions based on permanent capital with a new limit based on Tier 1 or total capital? If so, what should the new limits and/or restrictions be? Also, we ask for comments on how, or whether, to reconcile the sum of Tier 1 and Tier 2 (e.g., total capital) with permanent capital. [[Page 39398]] B. The Individual Components of Tier 1 and Tier 2 Capital
1. Tier 1 Capital Components
We ask commenters to consider the Basel Consultative Proposal when addressing questions 5 through 7 below. The Basel Committee's proposed Tier 1 capital would include two basic components: Common equity (including current and retained earnings) and additional goingconcern capital. Common equity must be the predominant form of Tier 1 capital. Common equity is, among other things, the highest quality of capital that represents the most subordinated claim in liquidation of a bank and takes the first and, proportionately, greatest share of losses as they occur. The instrument's principal must be perpetual, and the bank must do nothing to create an expectation at issuance that the instrument will be bought back, redeemed, or canceled. Additional goingconcern capital is capital that is, among other things, subordinated to depositors and/or creditors, has fully discretionary noncumulative dividends or coupons, has no maturity date, and has no incentive to redeem.\32\
\32\ See paragraph 89 of the Basel Consultative Proposal. a. URE and URE Equivalents URE is current and retained earnings not allocated as stock or distributed through patronage refunds or dividends. It is free from any specific ownership claim or expectation of allocation, it absorbs losses before other forms of surplus and stock, and it represents the most subordinated claim in liquidation of a System institution. The FCA expects to propose to treat URE as Tier 1 capital under the new regulatory capital framework. URE equivalents are other forms of surplus that have the same or very similar characteristics of permanence (i.e., low expectation of redemption) and loss absorption as URE. For example, the System Comment Letter recommends treating association and bank nonqualified allocated surplus not subject to revolvement (NQNSR) as Tier 1 capital.\33\ In the comment letter, the System characterizes NQNSR as allocated equity on which the institution is liable for taxes in the year of allocation and which the institution does not anticipate redeeming. In addition, the institution has not revolved NQNSR outside of the context of liquidation, termination, or dissolution. The System explains that the ``member [is] aware that his ownership interest in the [institution] has increased such that, in the event of liquidation of the [institution], the member has a larger claim on the excess of assets over liabilities.'' The FCA will likely consider such NQNSR to be the equivalent of URE and expects to propose to treat it as Tier 1 capital under a new regulatory capital framework.
\33\ The associations refer to NQNSR in various ways such as ``nonqualified retained earnings'' or ``nonqualified retained surplus.'' The System Comment Letter refers to bank NQNSR as ``nonqualified allocated stock to cooperatives not subject to revolvement.'' The System recommends that the FCA treat ``PaidIn Capital Surplus'' resulting from an acquisition in a business combination as Tier 1 capital. Current accounting guidance for business combinations under U.S. generally accepted accounting principles (U.S. GAAP) \34\ requires the acquirer in a business combination to use the acquisition method of accounting. This accounting guidance applies to System institutions and became effective for all business combinations occurring on or after January 1, 2009. For transactions accounted for under the acquisition method, the acquirer must recognize assets acquired, the liabilities assumed and any noncontrolling interest in the acquired business measured at their fair value at the acquisition date. For mutual entities such as System institutions, the acquirer must recognize the acquiree's net assets as a direct addition to capital or equity in its statement of financial position, not as an addition to retained earnings.\35\
\34\ On June 30, 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification\TM\ (FASB Codification or ASC) as the single source of authoritative nongovernmental U.S. GAAP. In doing so, the FASB Codification reorganized existing U.S. accounting and reporting standards issued by the FASB and other related privatesector standard setters. More information about the FASB Codification is available at http:// asc.fasb.org/home.
\35\ This guidance was formerly included in precodification reference Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations, and is now incorporated into the FASB Codification at ASC Topic 805, Business Combinations. The System provided the FCA with three examples of potential acquisitions under FASB guidance on business combinations. In each example, the retained earnings of the acquiree are transferred to the acquirer as PaidIn Capital Surplus.\36\ Under these three scenarios, PaidIn Capital Surplus functions similarly to URE and would likely be treated as Tier 1 capital under a new regulatory capital framework. However, it is equally plausible that under other scenarios, as part of the terms of the acquisition, the acquirer might allocate some or all of the acquiree's retained earnings subject to some plan or practice of revolvement or retirement. Under such scenarios, the allocated portion may or may not qualify as Tier 1 capital. The FCA would likely look at the specific acquisition before determining whether the capital transferred in the acquisition would be Tier 1 or Tier 2 capital.
\36\ Since the System submitted its comment letter in December 2008, there have been several System mergers that were accounted for under the acquisition method and resulted in recording additional paidin capital similar to the System's examples. Question 5: We seek comments on other types of allocated surplus or stock in the System that could be considered URE equivalents under a new regulatory capital framework. We ask commenters to explain how these other types of allocated surplus or stock are equivalent to URE. b. Noncumulative Perpetual Preferred Stock NPPS is perpetual preferred stock that does not accumulate dividends from one dividend period to the next and has no maturity date. The noncumulative feature means that the System institution issuer has the option to skip dividends. Undeclared dividends are not carried over to subsequent dividend periods, they do not accumulate to future periods, and they do not represent a contingent claim on the System institution issuer. The perpetual feature means that the stock has no maturity date, cannot be redeemed at the option of the holder, and has no other provisions that will require future redemption of the issue. The FFRAs treat some, but not all, forms of NPPS as Tier 1 capital. For example, the FRB emphasizes that NPPS with creditsensitive dividend features generally would not qualify as Tier 1 capital.\37\ The FDIC views certain NPPS where the dividend rate escalates excessively as having more in common with limited life preferred stock than with Tier 1 capital instruments.\38\ Furthermore, the OCC, FRB, and FDIC do not include NPPS in Tier 1 capital [[Page 39399]]
if an issuer is required to pay dividends other than cash (e.g., stock) when cash dividends are not or cannot be paid, and the issuer does not have the option to waive or eliminate dividends.\39\
\37\ See 12 CFR part 225, App. A, II.A.1.c.ii(2) for BHCs and Part 208, App. A, II.A.1.b for state member banks. If the dividend rate is reset periodically based, in whole or in part, on the institution's current credit standing, it is not treated as Tier 1 capital. However, adjustable rate NPPS where the dividend rate is not affected by the issuer's credit standing or financial condition but is adjusted periodically according to a formula based solely on general market interest rates may be included in Tier 1 capital.
\38\ See 12 CFR part 325, App. B, IV.B. This is an issuance with a low initial rate that is scheduled to escalate to much higher rates in subsequent periods and become so onerous that the bank is effectively forced to call the issue.
\39\ The OTS may allow this type of NPPS to qualify as Tier 1. See 73 FR 50326 (August 26, 2008), ``Joint Report: Differences in Accounting and Capital Standards Among the Federal Banking Agencies; Report to the Congressional Basel Committees.'' As noted above, the Basel Committee is proposing to establish a set of criteria for including ``additional goingconcern capital'' such as NPPS in Tier 1 capital.\40\ We will consider these criteria in a future proposed rulemaking.
\40\ See paragraphs 88 and 89 of the Basel Consultative Proposal. Consistent with the Basel Committee's position, the FCA believes that high quality member stock and surplus should be the predominant form of Tier 1 capital. We are seeking comments on how to ensure that NPPS remains the minority of Tier 1 capital under most circumstances. We note that a specific limit on the amount of NPPS that is includible in Tier 1 capital may create a downward spiral effect in adverse situations where decreases in high quality member stock and surplus also decrease the amount of NPPS includible in Tier 1 capital.
One option would be to establish a hard limit that is something less than 50 percent of Tier 1 capital at the time of issuance. If this limit is subsequently breached due to adverse circumstances, the System institution would be required to submit a capital restoration plan to the FCA that includes increasing surplus through earnings in order to bring the percentage of NPPS in Tier 1 capital back below the limit that is imposed at the time of issuance. During such adversity, the System institution may be limited in its ability to issue additional NPPS that would qualify for Tier 1 regulatory capital treatment.
Question 6: We seek comments on ways to limit reliance on NPPS as a component of Tier 1 capital while avoiding the downward spiral effect that can occur in adverse situations as described above. c. Allocated Surplus and Member Stock
i. Overview of System Bank and Association Allocated Surplus and Member Stock Each System bank provides its affiliated associations with a line of credit, referred to as a direct note, as the primary source of funding their operations. Each association, in turn, is required to purchase a minimum amount of equity in its affiliated bank. This required investment minimum is generally a percentage of its direct note outstanding.\41\ For example, suppose a bank that has a required investment range of 2 percent to 6 percent, as set forth in its bylaws, establishes a current required investment minimum of 3 percent of an association's direct note outstanding.\42\ If the association falls short of the 3percent minimum, it would be required to purchase additional stock in the bank. If the association's investment is over the 3percent minimum, the bank would distribute (sometimes over a long period of time through a revolvement plan) or allot, for regulatory capital purposes, the ``excess investment'' back to the association.
\41\ The minimum may not be lower than the statutory minimum stock purchase requirement of $1,000 or 2 percent of the loan amount, whichever is less (section 4.3A(c)(1)(E) of the Act). The banks also have other programs in which associations and other lenders participate that require investment in the bank. We collectively refer to these investments as the bank's required minimum investment.
\42\ The bank board may increase or decrease this minimum within the required investment range from time to time, depending upon the capital needs of the bank. CoBank, ACB makes direct loans to System associations and is also a retail lender to agricultural cooperatives, rural energy, communications and water companies and other eligible entities. CoBank builds equity for its retail business using a ``target equity level'' that is similar to the required investment minimum described above.\43\ The target equity level includes the statutory minimum initial borrower investment of $1,000 or 2 percent of the loan amount, whichever is less,\44\ and equity that is built up over time through patronage distributions. The CoBank board annually determines an appropriate targeted equity level based on economic capital and strategic needs, internal capital ratio targets, financial and economic conditions, market expectations and other factors. CoBank does not automatically or immediately pay off the borrower's stock after the loan is paid in full. Rather, it retires the stock over a long period of time.\45\
\43\ For more detail on CoBank's target equity level, see CoBank's 2008 Annual Report. This document is available at http:// www.cobank.com. \44\ Section 4.3A(c)(1)(E) of the Act (12 U.S.C. 2154a(c)(1)(E)).
\45\ CoBank stated in its 2008 annual report that the target equity level is expected to be 8 percent of the 10year historical average loan volume for 2009 and remain at that level thereafter.
Borrowers from System associations are statutorily required to purchase association stock as a condition of obtaining a loan. The purchase requirement is set by the association's board and, by statute, must be at least $1,000 or 2 percent of the loan amount, whichever is less. In practice over the past two decades, association boards have set the member stock (or participation certificates for individuals or entities that cannot hold voting stock) purchase requirement at the statutory minimum and routinely retire the purchased stock when the borrower pays off his or her loan.\46\ Consequently, the borrower has a high expectation of stock retirement when his or her loan is paid off. Currently, member stock is not includible in core surplus or total surplus and makes up only a small portion of the association's capital base.
\46\ Under section 4.3A(c)(1)(I) of the Act (12 U.S.C. 2154a(c)(1)(I)), this stock is retired at the discretion of the association. The majority of an association's regulatory capital base comes through retained earnings as either allocated surplus or URE. Allocated surplus is earnings that are distributed as patronage to an individual borrower but retained by the association as part of the member's equity in the institution. We do not consider allocated surplus that is subject to revolvement to be a URE equivalent, because the borrower has an expectation of distribution at some future point in time through a System association's equity revolvement program. These revolvement programs vary depending upon the unique circumstances of the association. Currently, allocated surplus that is subject to revolvement is a small part of the capital base of most associations.
ii. The System Comment Letter and FCA's Responses to Treating Allocated Surplus and Member Stock as Tier 1 Capital The System Comment Letter recommends that all atrisk allocated surplus and member stock be Tier 1 capital. We have categorized the System's comments into broad arguments. We respond below after each broad argument. The System's first argument is that various systems and agreements are in place to ensure the stability and permanency of allocated surplus and borrower stock. For example, while a regular practice or plan of retirement may give rise to an expectation of equity retirement, borrowers do not have the legal right to demand retirement. A System institution board has the sole discretion to suspend or stop equity distributions at any time if warranted by changing economic and financial conditions. Moreover, an institution's bylaws and capital plans put some restraints on capital distributions under certain conditions. The System also comments that the System banks and [[Page 39400]]
the Funding Corporation have entered into a Contractual Interbank Performance Agreement and a Market Access Agreement, which provide early and quick enforcement triggers to protect against a bank's weakening capital position. In addition, each bank has a General Financing Agreement (GFA) with its affiliated associations. The GFA requires each association to maintain a satisfactory borrowing base, which is a measure of capital adequacy. Thirdparty capital issuances (e.g., preferred stock and subordinated debt) have terms that prohibit the payment of outsized cash patronage dividends and stock retirements if regulatory capital ratios are breached. In our 1997 final rule on System regulatory capital, we addressed similar arguments and observed that internal systems and agreements alone do not ensure that System institutions consistently maintain sufficient amounts of high quality capital.\47\ At the time, we decided to exclude member stock from core surplus and limit the inclusion of allocated surplus to ensure that System institutions had an adequate amount of uncommitted, unallocated surplus that was not at risk at another institution and not subject to borrower expectations of retirement or revolvement. However, as we discuss below, in developing the new regulatory capital framework, the FCA is considering what regulatory mechanisms could be put into place to make allocated surplus and member stock more permanent and stable so as to qualify as Tier 1 capital.
\47\ 62 FR 4429 (January 30, 1997).
The System's second argument is that other banking organizations can treat similar equities as Tier 1 capital. For example, a Federal Home Loan Bank (FHLB) is permitted to include as ``permanent capital'' certain stock issued to commercial banks that is redeemable in cash 5 years after a commercial bank provides written notice to its FHLB.\48\ In addition, Subchapter S commercial bank corporation (Subchapter S corporation) investors have expectations of regular dividend distributions that are similar to those of System borrowers, and FFRAs permit Subchapter S corporations to treat their equities as Tier 1 capital.\49\
\48\ The System indicates in its comment that it views FHLB ``permanent capital'' as the equivalent of Tier 1 capital.
\49\ The System also noted that the FASB has recognized cooperative capital as equity even if a portion of it is redeemable. While this is true, it does not support the argument that allocated surplus and member stock should be treated as Tier 1 capital rather than Tier 2 capital. In response to the second argument, while the FHLBs are not directly comparable to System institutions, we are open to suggestions on how to apply a 5year or other time horizon to allocated surplus and member stock retirements. We note, however, that the inclusion of such stock in a FHLB's capital is mandated by statute and was not a safety and soundness determination made by the FHLB's regulator.\50\ As for Subchapter S corporation investors, while they may have expectations of equity distributions that may be similar to those of System borrowers, Subchapter S corporations do not depend on their investors to make up the customer base of the institution. Consequently, the borrowers' influence on the System institution's retention and distribution of its stock and surplus may be different from the investors' influence on Subchapter S corporation's retention and distribution of its stock and surplus.
\50\ See 12 U.S.C. 1426.
The System's third argument is that no distinction should be made between allocated surplus and URE based on cooperative principles. The System believes that cooperatives should be funded to the extent possible by current patrons on the basis of patronage. The System asserts that, if we require the majority of Tier 1 capital to be URE, the burden of capitalizing the institution is borne disproportionately by patrons who have repaid their loans and have ceased to use the credit services of the institution. The result is that current patrons enjoy the benefit the URE affords without bearing a substantial part of the burden of accumulating it. The System also contends that, from a tax perspective, retention of earnings as allocated surplus is a more efficient and less costly method of capital accumulation than URE. The single tax treatment under Subchapter T enables the cooperative to capitalize its operations from retention of patronagesourced earnings and allows such earnings to be returned to its members without additional taxation. The result is that more of the earnings derived from the patron can be utilized to capitalize the cooperative's business at a lesser cost over time to the member. The System also states its belief that limits and/or exclusions of allocated surplus from Tier 1 capital would arbitrarily discourage System institutions from operating on a cooperative basis, unduly devalue allocated surplus, and prevent System institutions from maximizing noncash patronage distributions as a component of capital management. The investment that borrowers hold in the institution would tend to remain relatively small, and without a material ownership stake in the institution, members are more likely to become disengaged from the processes of corporate governance and their crucial role in holding boards of directors accountable for poor performance. The System believes that the FCA should include all allocated surplus as Tier 1 capital. In response to this third argument, we agree with the System that it is important to consider cooperative principles in developing the new regulatory capital framework. However, as noted above, allocated surplus that is regularly revolved is less stable and permanent than URE because of the borrower's reasonable expectation of equity distributions. In the current regulatory capital framework, we have striven to balance cooperative principles with FCA's safety and soundness objectives by treat
Laurie Rea, Associate Director, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 221025090, (703) 8834232, TTY (703) 8834434, or
Chris Wilson, Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 221025090, (703) 8834204, TTY (703) 883 4434, or
Rebecca S. Orlich, Senior Counsel, Office of General Counsel, Farm Credit Administration, McLean, VA 221025090, (703) 8834020, TTY (703) 8834020.