Proposed Rule2024-19805
Loans to Similar Entities
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
September 6, 2024
Issuing agencies
Farm Credit Administration
Abstract
The Farm Credit Administration (FCA, our, or we) issues this advanced notice of proposed rulemaking (ANPRM), so interested members of the public may have the opportunity to provide input on how FCA should amend pivotal aspects of its similar entity lending regulations. More specifically, we are focusing on whether and how these regulations could better implement statutory provisions requiring similar entities to engage in activities that are "functionally similar" to the activities of eligible borrowers. We also seek comments about how FCA can ensure that our similar entity regulations are more closely aligned with the Farm Credit System's (FCS or System) statutory mission to serve agriculture, aquaculture, and specific activities in rural America. Additionally, we request comments pertaining to the determination of whether an entity, or entities within a corporate family can simultaneously qualify as both an eligible borrower and similar entity, as well as on the use of "other extensions of credit" and "other technical and financial assistance" within the similar entity lending authority. We intend to use the comments that we receive from this ANPRM to craft a proposed rule to enhance the clarity and guidance of our similar entity regulations.
Full Text
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<title>Federal Register, Volume 89 Issue 173 (Friday, September 6, 2024)</title>
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[Federal Register Volume 89, Number 173 (Friday, September 6, 2024)]
[Proposed Rules]
[Pages 72759-72763]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-19805]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 89, No. 173 / Friday, September 6, 2024 /
Proposed Rules
[[Page 72759]]
FARM CREDIT ADMINISTRATION
12 CFR Part 613
RIN 3052-AD58
Loans to Similar Entities
AGENCY: Farm Credit Administration.
ACTION: Advanced notice of proposed rulemaking.
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SUMMARY: The Farm Credit Administration (FCA, our, or we) issues this
advanced notice of proposed rulemaking (ANPRM), so interested members
of the public may have the opportunity to provide input on how FCA
should amend pivotal aspects of its similar entity lending regulations.
More specifically, we are focusing on whether and how these regulations
could better implement statutory provisions requiring similar entities
to engage in activities that are ``functionally similar'' to the
activities of eligible borrowers. We also seek comments about how FCA
can ensure that our similar entity regulations are more closely aligned
with the Farm Credit System's (FCS or System) statutory mission to
serve agriculture, aquaculture, and specific activities in rural
America. Additionally, we request comments pertaining to the
determination of whether an entity, or entities within a corporate
family can simultaneously qualify as both an eligible borrower and
similar entity, as well as on the use of ``other extensions of credit''
and ``other technical and financial assistance'' within the similar
entity lending authority. We intend to use the comments that we receive
from this ANPRM to craft a proposed rule to enhance the clarity and
guidance of our similar entity regulations.
DATES: You may send comments on or before December 5, 2024.
ADDRESSES: For accuracy and efficiency, please submit comments by email
or through FCA's website. We do not accept comments submitted by fax
because faxes are difficult to process. Also, please do not submit
comments multiple times; submit your comment only once, using one of
the following methods:
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2b594e4c06484446466b4d484a054c445d"><span class="__cf_email__" data-cfemail="3547505218565a5858755356541b525a43">[email protected]</span></a>.
<bullet> Use the public comment form on our website:
1. Go to <a href="https://www.fca.gov">https://www.fca.gov</a>.
2. Click inside the ``I want to . . .'' field near the top of the
page.
3. Select ``comment on a pending regulation'' from the dropdown
menu.
4. Click ``Go.'' This takes you to the comment form.
<bullet> Send the comment by mail to the following:
Autumn R. Agans, Deputy Director, Office of Regulatory Policy, Farm
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
We post all comments on the FCA website. We will show your comments
as submitted, including any supporting information; however, for
technical reasons, we may omit items such as logos and special
characters. Personal 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.
To review comments on our website, go to <a href="https://www.fca.gov">https://www.fca.gov</a> and
follow these steps:
1. Click inside the ``I want to . . .'' field near the top of the
page.
2. Select ``find comments on a pending regulation'' from the
dropdown menu.
3. Click ``Go.'' This will take you to a list of regulatory
projects.
4. Select the project in which you're interested. If we have
received comments on that project, you will see a list of links to the
individual comments.
You may also review comments at the FCA office in McLean, Virginia.
Please call us at (703) 883-4056 or email us at <a href="/cdn-cgi/l/email-protection#5d2f383a703e3230301d3b3e3c733a322b"><span class="__cf_email__" data-cfemail="760413115b15191b1b3610151758111900">[email protected]</span></a> to
make an appointment.
FOR FURTHER INFORMATION CONTACT:
Technical Information: Luke Gallegos, Senior Policy Analyst, Office
of Regulatory Policy, Farm Credit Administration, McLean, VA 22102-
5090, (703) 883-4414, TTY (703) 883-4056, or <a href="/cdn-cgi/l/email-protection#c8879a9885a9a1a4aaa7b088aeaba9e6afa7be"><span class="__cf_email__" data-cfemail="89c6dbd9c4e8e0e5ebe6f1c9efeae8a7eee6ff">[email protected]</span></a>; or
Legal Information: Richard Katz, Senior Counsel, Office of General
Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-
4085, TTY (703) 883-4056, or
Karen Hunter, Attorney Advisor, Office of General Counsel, Farm
Credit Administration, McLean, VA 22102-5090, (703) 883-4147, TTY (703)
883-4056.
SUPPLEMENTARY INFORMATION:
I. Objective
The purpose of this ANPRM is to gather public input on how FCA
might revise similar entity regulations to:
<bullet> Clarify what activities of similar entities would be
considered ``functionally similar'' to the activities of eligible
borrowers, as the statute requires.
<bullet> Determine how similar entity transactions are consistent
with the System's mission.
<bullet> Ensure eligibility determination for prospective similar
entities belonging to corporate families that have parents,
subsidiaries, affiliates, and other related entities is consistently
applied.
<bullet> Clarify what is required to support and document the
determination of a prospective borrower as a qualified similar entity.
<bullet> Determine what financial instruments, including bonds,
might qualify as ``other extensions of credit'' and ``other technical
and financial assistance'' within the statutory and regulatory similar
entity provisions.
II. Background
Sections 3.1(11)(B) and 4.18A of the Farm Credit Act of 1971, as
amended (Act), authorize banks for cooperatives,\1\ Farm Credit Banks,
and direct lender associations to participate in loans to similar
entities. Congress added these sections granting this authority in 1992
and 1994.
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\1\ With one exception, all provisions of the Act governing
title III banks only refer to ``bank(s) for cooperatives.'' Section
7.0 of the Act allows Farm Credit Banks and banks for cooperative to
merge. FCA regulations designate such merged banks as ``agricultural
credit banks.'' Before the Agricultural Credit Act of 1987 added
section 7.0 to the Act, there were 12 regional banks for
cooperatives and a Central Bank for Cooperatives. Over time, all 13
banks for cooperatives merged into CoBank, which is the only FCS
institution operating under title III of the Act. Several Farm
Credit Banks also merged into CoBank, which now is the only
agricultural credit bank in the FCS.
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Section 502 of the Farm Credit Banks and Associations Safety and
Soundness Act of 1992 \2\ added Section 3.1(11)(B), which granted FCS
banks operating
[[Page 72760]]
under title III of the Act authority to participate in loans that non-
System lenders originated for similar entities under certain
conditions. In 1994, section 5 of the Farm Credit System Agricultural
Export and Risk Management Act \3\ added 4.18A, which expanded similar
entity authority to System banks and associations that operate under
titles I and II of the Act.
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\2\ See Public Law 102-552, 502, 106 Stat. 4130, (Oct. 28,
1992).
\3\ See Public Law 103-376, 5, 108 Stat. 3498, (Oct. 19, 1994).
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The similar entity provisions of the Act authorize FCS banks and
associations to participate in multi-lender credits that non-System
lenders originate for parties who are not eligible for loans from
System lending institutions. Under the statute, qualified similar
entities derive a majority of their income from, or have a majority of
their assets invested in, the conduct of activities that are
functionally similar to the activities of eligible borrowers. The
applicable statutory provisions also specify that each System bank or
association may participate in any loan of the type that it is
authorized to make under titles I, II, or III of the Act, respectively.
As explained in greater detail below, section 3.1(11)(B)(iii) of the
Act establishes a broad and unique definition of ``participate'' and
``participation'' that applies only to similar entity transactions in
which System lenders engage. Finally, similar entity participations are
subject to: (1) an obligor limit of 10 percent of an FCS institution's
total capital for a single credit risk, (2) a limit of less than 50
percent of the principal amount of each loan in which System lenders,
individually, or collectively participate, and (3) a portfolio cap of
15 percent of the total assets of each System bank or association.
After Congress granted similar entity authority to the System, FCA
enacted a new implementing regulation, Sec. 613.3300.\4\ Our similar
entity regulation closely aligns with the text of sections 3.1(11)(B)
and 4.18A of the Act. Similar entity lending is unique to the FCS and
involves a complex and multi-faceted process to properly determine if
an applicant qualifies for similar entity status. With this in mind,
FCA decided to initiate a rulemaking to provide further direction as to
which borrowers and activities fall within the System's similar entity
authority, and to provide clearer guidance to all stakeholders. This
ANPRM is the first stage of this rulemaking, which seeks public comment
to assist FCA in clarifying the intricacies involved in determining
whether an applicant qualifies as a similar entity.
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\4\ See 60 FR 47103 (Sept. 11, 1995); 61 FR 42902 (Aug. 13,
1996); 62 FR 4429 (Jan. 30, 1997).
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Our regulation, Sec. 613.3300(b), establishes three criteria for a
similar entity transaction. The first part of this regulatory provision
states that a Farm Credit bank or direct lender association may
``participate'' in a similar entity transaction with a non-FCS lender.
As defined in Sec. 613.3300(a)(1), the term ``participate'' or
``participation,'' for the purpose of similar entity lending, refers to
multi-lender transactions including syndications, assignments, loan
participations, subparticipations, other forms of the purchase, sale,
or transfer of interest in loans, or other extensions of credit, or
other technical and financial assistance. Therefore, for a similar
entity transaction to enter the System it must be a participation as
defined above, and System banks and associations must participate with
one or more non-FCS lenders. Additionally, the System institution(s)
participation interest in the transaction must not, at any time, equal
or exceed 50 percent of the principal amount.
The second criterion that Sec. 613.3300(b) establishes for any
similar entity transaction is that a prospective borrower is ineligible
to receive a loan from a System bank or association under part 613,
subparts A and B. This part of Sec. 613.3300(b) derives from Sec.
613.3300(a)(2), which defines a similar entity as an ineligible party
whose operations are functionally similar to the activities of eligible
borrowers. The functionally similar activity is the foundational
component for determining whether an ineligible party qualifies as a
similar entity. System banks and associations that want to participate
in such credits must engage in considerable analysis, support, and
documentation to mitigate associated risks including, but not limited
to, credit, reputational, legal, and financial.
The third criterion that Sec. 613.3300(b) establishes for a
similar entity transaction is that the loan purpose must be similar to
those for which an eligible borrower could obtain financing from the
participating FCS institution. This part relates to the similar entity
definition in Sec. 613.3300(a)(2), which ties a similar entity's
activities to those performed by an eligible FCS borrower.
III. Request for Comments
We request and encourage any interested person to submit comments
on the questions below, and we ask that you support your comments with
relevant information, data, or examples. We remind commenters that
their comment letters and supporting documentation will be available to
the public.
We have organized our questions to address the following: (1) the
appropriate criteria used to determine whether the activities of a
similar entity are ''functionally similar'' to those of eligible
borrowers, (2) the extent to which a prospective similar entity's
activities are consistent with the FCS's statutory mission to extend
credit and provide related services to agriculture and other eligible
borrowers in rural communities, (3) the complexities of determining
eligibility for corporate families that have parents, subsidiaries,
affiliates, and other related entities, and (4) the appropriate scope
of ``other extensions of credit or other technical and financial
assistance'' within similar entity lending authorities.
A. Functionally Similar Activity
As explained earlier, the term ``similar entity'' is defined in the
Act as a person or entity \5\ that is not eligible for a loan from a
Farm Credit bank or association but has operations that are
functionally similar to a person who is eligible for a loan from the
Farm Credit bank or association. In addition, the person or entity is
required to derive a majority of its income from, or have a majority of
its assets invested in, the conduct of activities that are functionally
similar to the activities that are conducted by an eligible person.
There are essentially two parts to this definition:
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\5\ As defined in 4.18A of the Act. See FCA Regulation Sec.
613.3000(a)(3) for the definition of a person. Section 3.1(11)(B) of
the Act includes the term ``entity'' in the definition.
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1. The ``majority of income or assets invested'' requirement, which
refers to the similar entity (ineligible party).
2. The ``conduct of activities that are performed by eligible
borrowers'' requirement, which refers to the ineligible party's
operations that are functionally similar to the activities of eligible
Farm Credit borrowers.
For a person or entity to qualify as a similar entity, both parts
of the definition must be met. The first part of the definition is
clear on the qualification requirement to derive a majority of its
income from, or have a majority of its assets, invested in functionally
similar activities. The common, everyday meaning of the term
``majority'' is an amount that is greater than 50 percent.\6\ However,
we would
[[Page 72761]]
like to receive your input on what criteria should be used to determine
what qualifies an activity as ``functionally similar.''
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\6\ Under the rules of statutory construction developed by the
Federal courts, words of a statute are interpreted according to
their ``ordinary, contemporary, common meaning,'' unless Congress
clearly expressed a different intent. See Pioneer Investment Service
Co. v. Brunswick Associates Ltd Partnership, 507 U.S. 380, 388
(1993) Since Congress did not prescribe a specific definition of
``majority'' of income or assets for functionally similar borrowers,
we would interpret this term in accordance with its ordinary,
contemporary, common meaning. Therefore, majority would mean most of
the income derived or most of the assets must be invested in
activities that are functionally similar to eligible borrowers.
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The term ``functionally similar'' refers to the function of
activities performed by an ineligible person or entity which are
consistent with the activities performed by an eligible borrower. The
activities related to the scope of financing for which an eligible
borrower can receive financing tie directly back to the requirements
set forth in FCA Regulation Part 613, subpart A and B, except for rural
home financing (Sec. 613.3030).\7\ The function of activities
performed by a qualified similar entity are intended to align with the
requirements under titles I, II, and III of the Act. Therefore, the
differentiating factor between a similar entity and eligible borrower
is in the eligibility status of the person or entity. For example, a
person or entity that primarily processes or markets agricultural
product(s) but does not meet the throughput or ownership requirements
set forth in FCA regulation Sec. 613.3010, would sufficiently qualify
the ``functionally similar'' activity aspect of a similar entity
through their processing or marketing of agricultural products.\8\
However, if the same person or entity primarily processes and markets
non-agricultural products, the activity does not seem ``functionally
similar'' to the activities of eligible borrowers and, therefore, would
not qualify as a similar entity. An entity that is neither a
cooperative, nor its affiliated entity, but has activities that are
functionally similar to processing and marketing, supply, or business
service cooperatives (or their subsidiaries or affiliates) under Sec.
613.3100(a)(1) could qualify as a similar entity depending on the
connection of these activities to farmers, ranchers, or producers/
harvesters of aquatic products.\9\ We note that a prospective similar
entity applicant that predominantly engages in activities or operations
that are not functionally similar to the activities of eligible
farmers, ranchers, aquatic producers and harvesters, their
cooperatives, farm-related service business, or rural utilities, would
not qualify for FCS credit under section 3.1(11)(B) or 4.18A of the
Act, and Sec. 613.3300.
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\7\ Section 4.18A(b)(4) of the Act specifically states that
borrowers who are not eligible for non-farm rural homes under
sections 1.11(b) and 2.4(a)(2) of the Act do not qualify as similar
entities. This is also reflected in FCA's similar entity regulation,
Sec. 613.3300(b), which does not cross-reference Sec. 613.3030,
which governs eligibility and scope of financing for rural
homeowners who are not farmers or ranchers.
\8\ Determining whether processing and marketing activities of
prospective similar entities are functionally similar to those of
eligible borrowers may depend, to some extent, on how close the
activities are to basic processing of raw agricultural commodities.
For example, most restaurants and grocery stores that primarily
engage in the retail sale of finished food products to consumers,
most likely, would not derive most of their income from, or have
most of their assets invested in activities that are functionally
similar to those of eligible borrowers.
\9\ This example is specific to title III cooperative lending
and is not intended to speak to title I or II lending authorities
(i.e., FCA regulations Sec. Sec. 613.3010 and 613.3020).
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As noted above, we seek your input on what activities could
determine functional similarity when evaluating whether an applicant
qualifies as a similar entity. As such, we seek comment on the
following questions:
1. What quantitative and qualitative criteria are being used or
being considered for determining a ``functionally similar'' activity of
an eligible borrower?
2. Could there be different factors based on market segments (e.g.,
industry, commodity, regional markets, etc.) that would necessitate
differentiating criteria used to determine a ``functionally similar''
activity? If so, what factors should be considered?
3. How far could an activity (such as processing and marketing,
including packaging), be removed from agricultural production and
harvesting, and basic processing of raw products and still qualify as a
``functionally similar'' activity of a similar entity?
4. What would be the most effective way to document how the
activities of both an eligible borrower and a similar entity are
determined to be functionally similar?
B. Similar Entity Consistency With FCS Mission
Congress established the similar entity authority to provide System
institutions and non-System lenders with a tool to manage risk.\10\ By
lending to similar entities, System institutions can reduce geographic,
industry, or individual borrower concentrations in their portfolios,
and improve the results of their operations. The limits placed on
System banks and associations in the Act reinforce the expectation that
this authority be used prudently and thoughtfully. The similar entity
authority should not diminish the System's primary mission as a lender
to American farmers, ranchers, aquatic producers and harvesters, their
cooperatives, and other eligible borrowers in rural America.
Consistency between the similar entity's functionally similar activity
and loan purposes that align with the FCS mission is a fundamental
component in determining similar entity qualification, as well as
significantly reducing the System's potential exposure to reputation
risk. Consistency with the FCS mission and reduction of reputation risk
exposure can be accomplished when the functionally similar activity and
loan purpose demonstrate a clear direct benefit to American agriculture
or certain activities in rural America and is appropriately documented.
We would like to receive your input on the connection between similar
entity lending authorities and the FCS mission.
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\10\ A passage in the legislative history states, ``the act
authorizes member lenders of the Farm Credit System--a government-
sponsored enterprise (GSE)--and the Nation's private banks to
participate together in multi-lender transactions for the purpose of
improving loan management capability and reducing concentration of
risk.'' See statement by Sen. Leahy Cong. Rec. S 14235 (Oct. 5,
1994).
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When a similar entity's functionally similar operation(s) consist
of producing, processing, or marketing a commodity or product, the
expectation would be that an FCS bank or association evaluate how this
activity advances the System's statutory mission to extend credit to
American agriculture. This evaluation would include an assessment of a
prospective similar entity's product mix, product ingredients, or
inputs to ensure there is a primary benefit to American agriculture. A
person or entity that primarily processes or markets product(s) that
may not necessarily be considered agricultural products at face-value
but contain agricultural ingredients (e.g., beverages, further
processed foods, and other consumer packaged goods, etc.) may still
qualify as a similar entity depending on the ingredients or inputs of
the product. For example, a similar entity's operation whose
functionally similar activity is producing a snack food that contains
ingredients that are both primarily agricultural products (i.e., milk,
wheat, soy) and primarily sourced from U.S. farmers \11\ would likely
be considered a direct benefit to American agriculture. However, if the
total ingredients of the product (e.g., snack foods, soft drinks, or
energy drinks) are not primarily agricultural ingredients, or if those
same
[[Page 72762]]
agricultural ingredients were primarily sourced from non-U.S. farmers,
there may be a question regarding the direct benefit to American
agriculture.
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\11\ This would include sourcing directly from agricultural
producers or food hubs, cooperatives, and other entities that market
or store agricultural goods directly from producers.
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Another area where the FCS's mission focuses on a direct benefit to
rural America arises in lending to rural utilities under sections
3.7(f) and 3.8(b)(1)(A) of the Act. Both sections of the Act require
the utility to serve rural areas in America. Section 3.7(f) authorizes
lending to entities for the purpose of installing, maintaining,
expanding, improving, and operating water and waste disposal facilities
in rural areas \12\ with populations of 20,000 inhabitants or less.
Section 3.8(b)(1)(A) authorizes lending to an electric or
telecommunications utility that has received a loan, loan commitment,
or loan guarantee from the Rural Utilities Service (RUS) or is eligible
for such credit under the Rural Electrification Act of 1936 (REA). When
a utility does not provide electric, telecommunications, water, or
waste management services in rural areas, questions most likely will
arise about whether a title III bank is fulfilling its statutory
mission to extend credit in America's rural communities.
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\12\ More specifically, pursuant to section 3.7(f), a rural area
is defined as ``all territory of a state that is not within the
outer boundary of any city or town having a population of more than
20,000 based on the latest decennial census of the United States.''
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The FCS is committed to the success of American agriculture through
its support of rural communities and agriculture with reliable and
consistent credit and financial services. Section 1.1 of the Act
acknowledges the need for credit in rural areas and states the
objective of improving the income and well-being of American farmers
and ranchers. As mentioned in subsection (A) above, the functionally
similar activity directly ties the ineligible person or entity to an
eligible borrower and the FCS mission. As such, we seek comment on the
following questions:
1. What criteria would indicate that a similar entity's
functionally similar operation(s) is most likely to benefit American
agriculture or other activities in rural communities that are
consistent with the lending authorities of FCS banks and associations?
a. What criteria and controls should we consider in a prospective
rulemaking to ensure that similar entity lending is consistent with the
scope of financing for loans to eligible borrowers?
b. Under what circumstances would an activity such as processing/
marketing or packaging be allowed to deviate away from being related to
American agricultural goods or products?
c. What consideration should be given to the ingredients of a
similar entity's product(s) to ensure benefit to American agriculture?
i. What percentage of ingredients from the product(s) being
produced should be composed of agricultural inputs?
ii. What percentage of sourced ingredients or inputs should come
from U.S. farmers, ranchers, or producers of aquatic products?
iii. Under what circumstances could primarily sourcing ingredients
from outside the U.S. benefit American agriculture?
d. To what extent could a water or waste facility that operates in
areas with more than 20,000 inhabitants pursuant to the requirements of
3.7(f) qualify as a similar entity? What limitations should be required
to ensure that such lending is compatible with the FCS mission to
provide water and waste facilities in rural communities?
e. To what extent could an electric or telecommunications utility
that is not eligible to borrow under section 3.8(b)(1)(A) of the Act
qualify as a similar entity?
f. To what degree do utilities that are not directly eligible under
title III need to provide public utility services to rural communities
to be considered a similar entity?
2. What would be the most effective way to document how a similar
entity's functionally similar activities/operations benefit either
American agriculture or rural communities?
C. Parents, Subsidiaries, and Affiliates
Sections 3.1(11)(B)(ii) and 4.18A of the Act provide the authority
for System institutions to participate in loans to a similar entity.
``Similar entity'' is defined as an entity that is not eligible for a
loan from a Farm Credit bank or association but is functionally similar
to an eligible entity. We note that it is difficult to envision a
situation in which a singular entity can be both an eligible borrower
and a similar entity at the same time.
Many legal entities are in corporate families that have parents,
subsidiaries, affiliates, and other related entities. We are exploring
whether more clarity is needed in the similar entity regulation to
properly determine which entities in a multi-organizational structure
qualify as similar entities. As such, we seek comment on the following
questions:
1. Under what circumstances could a single entity simultaneously
qualify as both an eligible borrower and similar entity (ineligible
party)?
2. Under what circumstances could an entity in a corporate family
(multi-organizational structure) qualify as a similar entity if another
entity within the same corporate family is eligible to borrow, and vice
versa? Please explain your reasoning and provide supporting information
and suggestions.
3. What criteria or requirements (e.g., corporate, operational, or
financial interdependence) should our regulations place on the various
entities in corporate families to ensure that the System only extends
credit to qualified similar entities that meet the income, asset, and
functionally similar requirements of the Act?
D. Incorporation of ``Other Extensions of Credit'' Within Similar
Entity Lending Authorities
Section 3.1(11)(B)(iii) of the Act refers to multi-lender
transactions which include, ``other extensions of credit, or other
technical and financial assistance'' under the definition of
``participate'' or ``participation'' for similar entity credits.
We ask for your input on what may fall within the interpretation of
``other extensions of credit'' and ``other technical and financial
assistance,'' including specifically whether and when bonds may be
included as part of ``other extensions of credit.'' As such, we seek
comment on the following questions:
1. What factors would your institutions consider as part of the
credit evaluation process if participating in bonds through similar
entity authorities?
a. What is the difference, if any, in the factors or credit
evaluation process that should be considered if purchasing bonds on the
secondary market versus participating in direct offerings?
b. How would you ensure compliance with the similar entity
qualification and loan purpose requirements as outlined in Sec.
613.3300(b)?
c. If purchased on the secondary market, how would you monitor
compliance with the statutory lending limits in Sec. 613.3300(c) and
ensure the selling party is a non-FCS lender with authority to extend
credit?
2. Are there any instruments, other than bonds, that would qualify
as ``other extensions of credit'' that FCS institutions are utilizing,
or are considering utilizing, within the similar entity lending
authorities?
a. If so, what types of financial instruments are being used or
considered?
b. What is the existing, or proposed structure of such instruments
and what criteria and controls are being, or could be used to ensure
safety and soundness?
3. What would qualify as ``other technical and financial
assistance'' that
[[Page 72763]]
FCS institutions are utilizing, or considering utilizing, within the
similar entity lending authorities?
Miscellaneous
Finally, are there any other issues pertaining to similar entity
lending authorities that you think should be addressed in the next
phases of this rulemaking that we have not raised in this ANPRM?
Dated: August 29, 2024.
Ashley Waldron,
Secretary to the Board, Farm Credit Administration.
[FR Doc. 2024-19805 Filed 9-5-24; 8:45 am]
BILLING CODE 6705-01-P
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