Proposed Rule2022-12803
Loan Policies and Operations
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 16, 2022
Issuing agencies
Farm Credit Administration
Abstract
The purpose of the proposed rule is to increase direct lender associations' Young, Beginning, and Small farmer and rancher (YBS) activity and reinforce the supervisory responsibilities of the funding banks, authorized by section 4.19 of the Farm Credit Act. The proposed rule requires direct lender associations to adopt an independent strategic plan for their YBS program. The direct lender association's funding bank will approve each YBS strategic plan, annually. The direct lender association's YBS strategic plan must contain specific elements that will be evaluated as part of a rating system to measure year-over- year internal progress. The rating system will enable the Farm Credit Administration (FCA) to compare the success of the direct lender association's extension of credit and services to the YBS borrowing population to its peers both within and outside its bank district.
Full Text
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<title>Federal Register, Volume 87 Issue 116 (Thursday, June 16, 2022)</title>
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[Federal Register Volume 87, Number 116 (Thursday, June 16, 2022)]
[Proposed Rules]
[Pages 36261-36266]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12803]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 614 and 620
RIN 3052-AD54
Loan Policies and Operations
AGENCY: Farm Credit Administration.
ACTION: Proposed rule.
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SUMMARY: The purpose of the proposed rule is to increase direct lender
associations' Young, Beginning, and Small farmer and rancher (YBS)
activity and reinforce the supervisory responsibilities of the funding
banks, authorized by section 4.19 of the Farm Credit Act. The proposed
rule requires direct lender associations to adopt an independent
strategic plan for their YBS program. The direct lender association's
funding bank will approve each YBS strategic plan, annually. The direct
lender association's YBS strategic plan must contain specific elements
that will be evaluated as part of a rating system to measure year-over-
year internal
[[Page 36262]]
progress. The rating system will enable the Farm Credit Administration
(FCA) to compare the success of the direct lender association's
extension of credit and services to the YBS borrowing population to its
peers both within and outside its bank district.
DATES: You may send us comments on or before August 15, 2022.
ADDRESSES: We offer a variety of methods for you to submit comments.
For accuracy and efficiency, commenters are encouraged to submit
comments by email or through FCA's website. As facsimiles (fax) are
difficult for us to process and achieve compliance with section 508 of
the Rehabilitation Act, as amended, we are no longer accepting comments
submitted by fax. Regardless of the method you use, 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#ed9f888ac08e828080ad8b8e8cc38a829b"><span class="__cf_email__" data-cfemail="493b2c2e642a262424092f2a28672e263f">[email protected]</span></a>.
<bullet> FCA website: <a href="https://www.fca.gov">https://www.fca.gov</a>. Click inside the ``I
want to . . .'' field near the top of the page; select ``comment on a
pending regulation'' from the dropdown menu; and click ``Go.'' This
takes you to an electronic public comment form.
<bullet> Mail: Autumn R. Agans, Deputy Director, Office of
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive,
McLean, VA 22102-5090.
You may review copies of comments we receive at our office in
McLean, Virginia, by appointment by contacting the Office of Regulatory
Policy contact listed below, or on our website at <a href="https://www.fca.gov">https://www.fca.gov</a>.
Once you are on the website, click inside the ``I want to . . .'' field
near the top of the page; select ``find comments on a pending
regulation'' from the dropdown menu; and click ``Go.'' This will take
you to the Comment Letters page where you can select the regulation for
which you would like to read the public comments. We will show your
comments as submitted, including any supporting data provided, but for
technical reasons we may omit items such as logos and special
characters. Identifying information that 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: Technical information: Jessica Potter,
Senior Policy Analyst, Office of Regulatory Policy, (703) 819-4667, TTY
(703) 883-4056, <a href="/cdn-cgi/l/email-protection#f1819e858594839bb1979290df969e87"><span class="__cf_email__" data-cfemail="fb8b948f8f9e8991bb9d989ad59c948d">[email protected]</span></a>.
or
Legal information: Hazem Isawi, Senior Attorney, Office of General
Counsel, (703) 883-4022, TTY (703) 883-4056, <a href="/cdn-cgi/l/email-protection#5d342e3c2a34351d3b3e3c733a322b"><span class="__cf_email__" data-cfemail="ee879d8f998786ae888d8fc0898198">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Objectives
The objectives of this proposed rule are to:
<bullet> Increase direct lender associations' YBS activity;
<bullet> Reinforce the supervisory responsibilities of the funding
banks, authorized by section 4.19 of the Farm Credit Act;
<bullet> Require each direct lender association to adopt an
independent strategic plan for their YBS program; and,
<bullet> Provide elements that will be evaluated as part of a
rating system to measure year-over-year YBS progress, allowing FCA to
compare the success of the direct lender association to its peers with
regard to extension of credit and services to the YBS borrowing
population.
II. Background
The Farm Credit System (System) is the oldest of the financial
Government-sponsored enterprises (GSEs). The objective of the System is
to improve the income and well-being of American farmers and ranchers
by furnishing sound, adequate, and constructive credit and closely-
related services to them, their cooperatives, and selected farm-related
businesses.\1\ The System has a unique mission to serve YBS farmers and
ranchers. Section 4.19 of the Farm Credit Act of 1971, as amended
(Act),\2\ requires each System association to establish a program to
furnish sound and constructive credit and related services to YBS
farmers and ranchers. In addition, each affiliated association's YBS
program is subject to review and approval by their respective funding
bank, which must report annually to FCA on the operations and
achievements of their associations' programs.
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\1\ 12 U.S.C. 2001.
\2\ 12 U.S.C. 2207.
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YBS farmers and ranchers, like all those in agriculture, face a
wide range of challenges, including access to capital and credit; the
impact of rising costs on profitability; urbanization and the
availability of resources like land, water, and labor; globalization;
and competition from larger or more established farms. Although all
agricultural producers face these challenges, the hurdles that YBS
farmers and ranchers face are often greater due to their lack of an
agricultural production history, inexperience in production
agriculture, low capital position, or limited credit history. The FCA
continues to believe the System's YBS mission is important to enable
small and start-up farmers and ranchers to make successful entries into
agricultural production. Also, FCA believes it is important to ensure
marketing and outreach efforts include all eligible and creditworthy
persons, with specific outreach toward diversity and inclusion. The
System's YBS mission is also critical to facilitate the transfer of
agricultural operations from one generation to the next. FCA remains
committed to ensuring the System fulfills its important mission to YBS
farmers and ranchers.
Since FCA's YBS regulation was first implemented in 1981, the
agency has periodically strengthened the YBS framework through
regulatory amendments,\3\ Board policy statements, bookletters, exam
manual updates, public statements, and other initiatives to promote
compliance and to highlight the System's efforts to provide service to
YBS farmers and ranchers. In recent years, a focus on YBS has been a
regular feature of FCA strategic and performance plans. Nonetheless,
there remain opportunities for further improvement.
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\3\ The regulation was last amended in 2004. 69 FR 16460 (Mar.
30, 2004).
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Pursuant to existing regulations, FCA receives YBS program
information through associations' operational and strategic business
plans.\4\ To meet the requirements of the regulation, these plans must
discuss forward-looking information such as program objectives, annual
quantitative and qualitative targets, and proposed methods to ensure
credit and services are provided in a safe and sound manner.\5\
However, as part of the existing planning process, there is no
requirement for associations to report on past performance. Without
this assessment, plans are unlikely to target deficient areas (e.g.,
outreach, budget resources, terms of extended credit) for improvement.
This information would help the funding banks and FCA to identify
trends. For these reasons, we believe associations should include
assessments of their past performance in their YBS plans.
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\4\ 12 CFR 614.4165(e).
\5\ 12 CFR 614.4165(c)(1)-(4).
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As noted, a direct lender association's funding bank serves a role
in YBS plan development. Indeed, the Act assigns to the banks the role
of reviewing and approving their affiliated direct lender associations'
YBS plans.\6\ Given this,
[[Page 36263]]
and to parallel what is required of direct lender associations, we
believe funding banks should implement internal controls that establish
clear lines of responsibility for approving, reviewing, and monitoring
of their affiliated associations' YBS reporting and activities.
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\6\ 12 U.S.C. 2207(a).
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On August 12, 2021, the FCA Board Chairman announced the agency's
work on a proposed YBS rule. The statement noted that while the System
has made consistent efforts to serve YBS farmers, the average age of
American farmers has continued to rise.\7\ On November 8, 2021, FCA and
the University of Nebraska-Lincoln held a symposium to enhance YBS
decision-making at System institutions. More recently, on March 23,
2022, FCA and Colorado State University (CSU) co-hosted a national
forum on serving the credit and related needs of YBS farmers and
ranchers. The event covered a range of topics of interest to YBS
producers and their lenders, with presentations by top industry
stakeholders, experts from CSU, Farm Credit System representatives, and
local agricultural producers.
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\7\ The Department of Agriculture (USDA) reported in 2017 that
the average age of U.S. farm producers was 57.5 years, up 1.2 years
from 2012. USDA National Agricultural Statistics Service (NASS),
2017 Census of Agriculture.
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III. Section-by-Section Analysis
A. Overview
FCA proposes revisions to our regulations located in 12 CFR
614.4165 to reinforce the supervisory responsibilities of the funding
banks, require each direct lender association to adopt an independent
strategic plan for its YBS program, and provide elements that will be
evaluated as part of a rating system to measure year-over-year YBS
progress. This proposed rule reflects FCA's expectation of bolstering
YBS program planning and increasing both lending and non-lending YBS
activity. FCA also proposes to revise Sec. 620.5(k)(2) to update
referencing.
B. Definitions [Proposed Sec. 614.4165(a)]
No substantial changes are proposed for the definitions in
paragraph (a). We propose grammatical changes, including removing the
word ``and'' between ``farmers'' and ``ranchers,'' and adjusting
punctuation. Similar changes are made to the term throughout the
regulatory text.
C. Farm Credit Banks Oversight [Proposed Sec. 614.4165(b)]
We propose changing the paragraph heading in paragraph (b) from
``Farm Credit bank policies'' to ``Farm Credit banks oversight.'' While
direct lender associations have autonomy from their funding banks,
section 4.19(a) of the Act clearly states that YBS programs are subject
to bank review and approval. As such, this paragraph is more
appropriately titled to include such oversight. We believe funding
banks are in a unique position to know the YBS activities of all their
affiliated direct lender associations and see how those associations
respond to the needs of their respective borrowers. Funding banks can
use this knowledge to encourage associations to enhance their YBS
programs through best practice sharing among their direct lender
associations. Further, funding banks serve as the YBS data collection
center for their direct lender associations and, ultimately, are
responsible for reporting to FCA. As a result of this structure and
crucial data reporting, funding banks are positioned not only to help
FCA in our YBS oversight but also to provide assistance to associations
seeking to bolster their YBS programs.
Proposed paragraph (b)(1)(i) requires each funding bank to adopt
written policies that direct their affiliated associations to establish
an annual strategic YBS plan. The creation of a YBS strategic plan is
explained further in the discussion about proposed paragraph (c). Since
a strategic plan is a newly-proposed requirement for direct lender
associations, it is appropriate that the bank adopt written policies
directing affiliated associations to establish a plan. It is also
consistent with the statutory structure of section 4.19 of the Act,
which requires associations to have YBS programs ``under policies'' of
Farm Credit Bank boards. We propose grammatical edits to the reference
to ``young, beginning, and small farmers, ranchers, and producers or
harvesters of aquatic products,'' which will continue to be referred to
in the shorthand as ``YBS farmers and ranchers'' or ``YBS.''
Paragraph (b)(3) of the existing regulation requires each funding
bank to adopt written policies that direct each affiliated direct
lender association to provide a YBS operations and achievements report
to the funding bank. Proposed paragraph (b)(1)(iii) replaces references
to the operations and achievements reports with the proposed YBS
strategic plan, along with any other information deemed necessary by
the bank. The strategic plan should contain the elements previously
submitted in the operations and achievements reports; thus, the intent
of the requirement continues forward through the YBS strategic plan.
Receiving the YBS strategic plan should also aid the funding bank in
its oversight role as described previously, as well as supplementing
data collection and reporting. In paragraph (b)(1)(iv), we propose a
grammatical change from ``agency'' to ``FCA.'' We propose moving the
review and approval requirements from existing paragraph (d) to
proposed paragraph (b)(2). The existing regulation requires bank review
and approval of each direct lender association's YBS program, but
limits the review and approval to a determination that the YBS program
contains required elements as set forth in existing paragraph (c). With
the proposed requirement of a YBS strategic plan, we also propose
adding bank review and approval of such plan. Further, we propose that
the bank's review ensure all elements in proposed paragraphs (c) and
(d) are contained in the plan and program, and remove existing
limitations on the bank to only review for the presence of the required
elements. This would provide funding banks with the opportunity to
become more involved with their respective associations' efforts to
enhance YBS programs.
Existing paragraph (f) requires internal controls for direct lender
associations. In paragraph (b)(3), we propose that banks also have
internal controls in place to establish clear lines of responsibility
in fulfilling their role regarding direct lender association YBS
strategic plans, programs, and reporting. In the past, internal
controls over YBS data reporting processes have been weak, resulting in
inaccurate reporting to FCA. As the primary collectors, reviewers, and
submitters of YBS data, internal controls are key to the funding banks'
ability to provide reliable data. As with every area of operations, a
strong internal control environment is essential.
D. Direct Lender Association YBS Strategic Plan [Proposed Sec.
614.4165(c)]
The existing YBS regulation requires the YBS program to be included
in the direct lender association's annual operational and strategic
business plan under Sec. 618.8440. Proposed paragraph (c) requires the
adoption of an independent strategic plan specific to the direct lender
association's YBS program. While direct lender associations have long
been required to have a YBS program, limited emphasis has been placed
on strategically planning, analyzing, and assessing such a program.
Just as most direct lender associations require YBS borrowers to submit
a business plan for their operation, we believe that business
[[Page 36264]]
planning is important when it comes to YBS programs. Direct lender
associations plan their YBS programs to varying degrees. This proposed
strategic plan requirement will add consistency to longer-term planning
and program development at each institution, while also requiring
performance analysis, all of which should strengthen the direct lender
association's YBS program.
The Farm Credit System, as a GSE, maintains a special
responsibility to YBS, which is a mission-critical lending segment. For
this reason, we propose the creation of an independent document that
stands alone and separate from the operational and strategic business
plan. Similar to the operational and strategic business plan required
by Sec. 618.8440, we propose that the YBS strategic plan must be
forward looking by 3 years and submitted no later than 30 days after
the commencement of each calendar year. This should allow direct lender
associations to complete their entire planning process at one time.
We propose that the YBS strategic plan contain minimum elements
detailed in proposed paragraph (d). Paragraph (e) of the existing
regulation requires targets and goals be included in the direct lender
association's strategic operational plan for the succeeding 3 years. We
propose moving this requirement to paragraph (c)(2), and instead of
including such goals in the operational and strategic business plan,
they will be included in the standalone YBS strategic plan. YBS
components will no longer be required as part of Sec. 618.8440.
Further, we propose that the YBS strategic plan analyze
performance. It is important for the direct lender association to use
actual results when setting goals and developing the future years' YBS
program. We also propose that the direct lender association discuss
variances that occurred between actual performance and goals and
provide the reasons for such variances. This analysis should also be
helpful in ensuring the YBS program is relevant and appropriately
serving the needs of the YBS segment. In proposed paragraph
(c)(3)(iii), we propose that the YBS strategic plan identify how the
efforts of the direct lender association, through its YBS program, are
assisting YBS farmers and ranchers with receiving both credit and
education. Also, under proposed paragraph (c)(3)(iv), we propose that
the YBS strategic plan also assess the effectiveness in providing
credit and services. This should discuss how the direct lender
association's YBS planning, and program efforts are resulting in new
and expanding YBS borrower operations and how the credit is being
provided to these YBS borrowers.
E. Direct Lender Association YBS Program [Proposed Sec. 614.4165(d)]
We propose redesignating existing paragraph (c) as paragraph (d)
and reorganizing and revising its containing paragraphs. The YBS
strategic plan outlined in proposed paragraph (c) will guide the
development and implementation of the direct lender association's YBS
program.
We propose moving language in existing paragraph (c)(4) that reads,
``safe and sound manner and within a direct lender association's risk-
bearing capacity,'' to the main body of paragraph (d). In addition to
the requirement that each YBS program must operate in a safe and sound
manner within the direct lender association's risk-bearing capacity,
such operation must be done ``while meeting the unique needs of YBS
farmers and ranchers.'' There can be actual and perceived risk in
lending to the YBS segment. These borrowers often lack certain credit
elements such as abundant repayment capacity, liquidity, or
collateralization. Generally, loans to YBS borrowers can be made in a
safe and sound manner despite some increased risk relative to non-YBS
borrowers.
Next, we propose adding paragraph headings to paragraphs (d)(1)
(``Qualitative factors''), (d)(1)(i) (``Corporate governance''),
(d)(1)(ii) (``Credit and related services''), (d)(1)(iii) (``Marketing,
outreach, and education''), and (d)(2) (``Quantitative goals''). We
propose moving the mission statement requirement in existing paragraph
(c)(1) to proposed paragraph (d)(1)(i)(A), as a component of the
Corporate Governance. Other than relocation, the requirement has not
changed. We also propose moving the internal control requirement in
existing paragraph (f) of current regulations to proposed paragraph
(d)(1)(i)(B) and adding to its coverage the YBS strategic plan. We
propose moving the related services requirement in existing paragraph
(c)(3)(i) to proposed paragraph (d)(1)(ii)(A), and moving coordination
requirements in existing paragraph (c)(3)(ii) to proposed paragraph
(d)(1)(ii)(B). We also propose streamlining this requirement by
striking the words, ``take full advantage of opportunities for
coordinating,'' and replacing it with ``coordination.'' We propose to
move outreach requirements in existing paragraph (c)(3)(iii) to
proposed paragraph (d)(1)(iii). We propose minor changes to this
requirement by replacing ``Implement'' with ``Implementation'' and
adding the word ``retain.'' Further, we propose adding the
consideration of a YBS mentoring program to the list of examples of
outreach programs to better serve and understand the needs of this
lending segment.
Within proposed paragraph (d)(2), we propose replacing instances of
``targets'' with ``goals'' to be more consistent with the terminology
used in the remainder of the quantitative text section. We also propose
adding the requirement that direct lender associations identify the
sources of data used to establish the goals. Lastly, we propose
replacing ``targets may'' with ``goals must.'' The regulatory text in
proposed paragraphs (d)(2)(i)-(ii) remains the same as existing
paragraphs (c)(2)(i)-(iv).
F. Annual Report Information Concerning YBS [Proposed Sec.
620.5(k)(2)]
FCA proposes to revise Sec. 620.5(k)(2) to update referencing.
Specifically, we propose to change the paragraph's cross-reference from
Sec. 614.4165(c) to instead point to Sec. 614.4165(d) which reflects
the proposed reordering of text in that section. The rest of Sec.
620.5(k)(2) remains unchanged.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), FCA hereby certifies that the proposed 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
12 CFR Part 614
Agriculture, Banks, banking, Flood insurance, Foreign trade,
Reporting and recordkeeping requirements, Rural areas.
12 CFR Part 620
Accounting, Agriculture, Banks, banking, Reporting and
recordkeeping requirements, Rural areas.
For the reasons set out in the preamble, FCA proposes to amend 12
CFR parts 614 and 620 as follows:
[[Page 36265]]
PART 614--LOAN POLICIES AND OPERATIONS
0
1. The authority citation for part 614 continues to read as follows:
Authority: Secs. 1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 1.11, 2.0, 2.2,
2.3, 2.4, 2.10, 2.12, 2.13, 2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10,
3.20, 3.28, 4.12, 4.12A, 4.13B, 4.14, 4.14A, 4.14D, 4.14E, 4.18,
4.18A, 4.19, 4.25, 4.26, 4.27, 4.28, 4.36, 4.37, 5.9, 5.10, 5.17,
7.0, 7.2, 7.6, 7.8, 7.12, 7.13, 8.0, 8.5 of the Farm Credit Act (12
U.S.C. 2011, 2013, 2014, 2015, 2017, 2018, 2019, 2071, 2073, 2074,
2075, 2091, 2093, 2094, 2097, 2121, 2122, 2124, 2128, 2129, 2131,
2141, 2149, 2183, 2184, 2201, 2202, 2202a, 2202d, 2202e, 2206,
2206a, 2207, 2211, 2212, 2213, 2214, 2219a, 2219b, 2243, 2244, 2252,
2279a, 2279a-2, 2279b, 2279c-1, 2279f, 2279f-1, 2279aa, 2279aa-5);
12 U.S.C. 2121 note; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
2. Section 614.4165 is revised to read as follows:
Sec. 614.4165 Young, beginning, and small (YBS) farmers and ranchers.
(a) Definitions. (1) For purposes of this subpart, the term
``credit'' includes:
(i) Loans made to farmers, ranchers, and producers or harvesters of
aquatic products under title I or II of the Act; and
(ii) Interests in participations made to farmers, ranchers, and
producers or harvesters of aquatic products under title I or II of the
Act.
(2) For purposes of this subpart, the term ``services'' includes:
(i) Leases made to farmers, ranchers, and producers or harvesters
of aquatic products under title I or II of the Act; and
(ii) Related services to farmers, ranchers, and producers or
harvesters of aquatic products under title I or II of the Act.
(b) Farm Credit banks oversight. (1) Each Farm Credit Bank and
Agricultural Credit Bank must adopt written policies that direct:
(i) The board of each affiliated direct lender association to
establish an annual strategic plan, which includes the details of a
program to provide sound and constructive credit and related services
to young, beginning, and small farmers, ranchers, and producers or
harvesters of aquatic products (YBS farmers and ranchers or YBS);
(ii) Each affiliated direct lender association to include in its
YBS program provisions ensuring coordination with other System
institutions in the territory and other governmental and private
sources of credit;
(iii) Each affiliated direct lender association to submit to its
funding bank its annual YBS strategic plan as described in paragraph
(c) of this section and any other information regarding its YBS
program, as described in paragraph (d) of this section, deemed
necessary by the bank to meet the requirements of this paragraph (b);
and
(iv) The bank to provide the FCA a complete and accurate annual
report summarizing the YBS program operations and achievements of its
affiliated direct lender associations.
(2) Annually, the direct lender association's YBS strategic plan
and program are subject to the review and approval of its funding bank.
The funding bank's review and approval must determine if the YBS
strategic plan and program contain all required components as set forth
in paragraphs (c) and (d) of this section. Any conclusion by the bank
that a YBS strategic plan or program is deficient must be communicated
to the direct lender association in writing.
(3) The Farm Credit Banks and Agricultural Credit Bank must
implement internal controls that establish clear lines of
responsibility for approving, reviewing, and monitoring of affiliated
direct lender association YBS strategic plans, programs, and reporting.
(c) Direct lender association YBS strategic plan. (1) No later than
30 days after the commencement of each calendar year, the board of
directors of each direct lender association must adopt a 3-year YBS
strategic plan to develop and guide its YBS program. The YBS strategic
plan is an independent document submitted to the FCA along with the
annual operational and strategic business plan required by Sec.
618.8440 of this chapter.
(2) At a minimum, the strategic plan must detail the operations of
the YBS program, including all components in paragraph (d) of this
section. Goals outlined in paragraph (d)(2) of this section must be
included in each direct lender association's YBS strategic plan
covering at least the succeeding 3 years.
(3) The YBS strategic plan must:
(i) Analyze the association's performance in the previous year
toward achieving the components in paragraph (d) of this section;
(ii) Discuss variances and reasons for the results;
(iii) Identify how the efforts in paragraph (d) of this section
assist YBS farmers and ranchers with both receiving credit and
education; and
(iv) Assess the direct lender association's effectiveness in
providing these efforts that result in new and expanding YBS operations
to which credit is now provided.
(d) Direct lender association YBS programs. The board of directors
of each direct lender association must establish a program to provide
sound and constructive credit and services to YBS farmers and ranchers
in its territory. Each YBS program must operate in a safe and sound
manner and within the direct lender association's risk-bearing
capacity, while meeting the unique needs of YBS farmers and ranchers.
Such a program must include the following minimum components:
(1) Qualitative factors--(i) Corporate governance.
(A) A mission statement describing program objectives and specific
means for achieving such objectives.
(B) Internal controls that establish clear lines of responsibility
for YBS strategic plan development and the corresponding YBS program
implementation, tracking YBS program performance, and YBS quarterly
reporting to the association's board of directors.
(ii) Credit and related services. (A) Efforts to offer credit and
related services, either directly or in coordination with others, that
are responsive to the needs of the YBS farmers and ranchers in the
territory. Examples include customized loan underwriting standards,
loan guarantee programs, fee waivers, or other credit enhancements
commensurate with the credit risk approved by the board of directors.
(B) Coordination with other System institutions in the territory
and other governmental and private sources who offer credit and
services to YBS farmers and ranchers.
(iii) Marketing, outreach, and education. Implementation of
effective outreach programs to attract and retain YBS farmers and
ranchers, which may include the use of advertising campaigns,
educational programs, and advisory committees comprised of YBS farmers
and ranchers and/or a YBS mentoring program to better serve and
understand the needs of this lending segment.
(2) Quantitative goals--(i) Annual quantitative goals. Annual
quantitative goals for credit to YBS farmers and ranchers based on an
understanding of reasonably reliable demographic data for the lending
territory. Direct lender associations must identify the sources of data
used to establish the goals. Such goals must include at least one of
the following:
(A) Loan volume and loan number goals for YBS farmers and ranchers
in the territory;
(B) Percentage goals representative of the demographics for YBS
farmers and ranchers in the territory;
[[Page 36266]]
(C) Percentage goals for loans made to new borrowers qualifying as
YBS farmers and ranchers in the territory; or
(D) Goals for capital committed to loans made YBS farmers and
ranchers in the territory.
(ii) Board of directors approval and review. Goals must be approved
by the direct lender association's board of directors and reviewed
quarterly with adjustments made as needed.
PART 620--DISCLOSURE TO SHAREHOLDERS
0
3. The authority citation for part 620 continues to read as follows:
Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17, 5.19 of the Farm
Credit Act (12 U.S.C. 2154, 2154a, 2207, 2243, 2252, 2254); sec. 424
of Pub. L. 100-233, 101 Stat. 1568, 1656; sec. 514 of Pub. L. 102-
552, 106 Stat. 4102.
0
4. Revise Sec. 620.5(k)(2) to read as follows:
Sec. 620.5 Contents of the annual report to shareholders.
* * * * *
(k) * * *
(2) Each direct lender association must provide a description of
its young, beginning, and small (YBS) farmers and ranchers program,
including a status report on each program component as set forth in
Sec. 614.4165(d) of this chapter and the definitions of ``young,''
``beginning,'' and ``small'' farmers and ranchers. The discussion must
provide such other information necessary for a comprehensive
understanding of the direct lender association's YBS program and its
results.
* * * * *
Dated: June 9, 2022.
Ashley Waldron,
Secretary, Farm Credit Administration Board.
[FR Doc. 2022-12803 Filed 6-15-22; 8:45 am]
BILLING CODE 6705-01-P
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