Title 12 — Banks and BankingRelease 119-73
§2127 Guaranty fund subscriptions in lieu of stock
Title 12 › Chapter CHAPTER 23— - FARM CREDIT SYSTEM › Subchapter SUBCHAPTER III— - BANKS FOR COOPERATIVES › Part Part A— - Banks for Cooperatives › § 2127
Summary
If a cooperative cannot legally own stock in its bank under state law, the bank must require the cooperative to put an equal amount into a guaranty fund or may take that sum from the loan and credit it to the fund. That guaranty-fund amount counts as the stock and gives the same rights and obligations as owning the bank stock.
Full Legal Text
Title 12, §2127
Banks and Banking — Source: USLM XML via OLRC
If any cooperative association is not authorized under the laws of the State in which it is organized to take and hold stock in a bank for cooperatives, the bank shall, in lieu of any requirement for stock purchase, require the association to pay into or have on deposit in a guaranty fund, or the bank may retain out of the amount of the loan and credit to the guaranty fund account of the borrower, a sum equal to the amount of stock which the association would otherwise be required to own. Each reference to stock of the banks for cooperatives in this chapter shall include such guaranty fund equivalents. The holder of the guaranty fund equivalent and the bank shall each be entitled to the same rights and obligations with respect thereto as the rights and obligations associated with the class or classes of stock involved.
Reference
Citations & Metadata
Citation
12 U.S.C. § 2127
Title 12 — Banks and Banking
Last Updated
Apr 6, 2026
Release point: 119-73