§2162 — Title 12 Banks and Banking | U.S. Code

Summary

When a Farm Credit System bank or association pays back eligible borrower shares, it must pay the full original (par) value. That rule does not stop institutions from canceling or using par value of borrower shares to cover a loan in default, from canceling shares under other specific rules, or from applying frozen share value against debts tied to certain liquidations. If an institution is liquidated and cannot pay, the Farm Credit System Insurance Corporation, acting as receiver, must pay the same par value and may use money from the Farm Credit Insurance Fund to do so. Borrower stock means voting and nonvoting stock, participation certificates, allocated equities, and similar items. Eligible borrower stock covers shares outstanding on January 6, 1988; shares issued after that date but before either stockholder approval of new capitalization rules or 9 months after January 6, 1988; shares frozen in liquidations after January 1, 1983 but before January 6, 1988; and shares retired for less than par in such liquidations. An institution means a bank or association in the System. Par value means the stock’s stated or face value, though certain participation certificates or allocated equities retired out of order to cover defaults may be discounted to reflect present value.

Title 12, §2162

Banks and Banking — Source: USLM XML via OLRC

(a)Notwithstanding any other section of this chapter, each institution of the Farm Credit System, when retiring eligible borrower stock in accordance with this chapter, shall retire such stock at par value.

(b)This section does not affect the authority of any institution of the Farm Credit System—

(1)to retire or cancel borrower stock at par value for application against a loan in default;

(2)to cancel borrower stock at par value under section 2202b of this title; or

(3)to apply, against any outstanding indebtedness to a System association arising out of or in connection with a liquidation referred to in subsection (d)(2), the par value of borrower stock frozen in such liquidation.

(c)(1)If an institution is unable to retire eligible borrower stock at par value due to the liquidation of the institution, the Farm Credit System Insurance Corporation, acting as receiver, shall retire such stock at par value as would have been retired in the ordinary course of business of the institution.

(2)The Farm Credit System Insurance Corporation shall use such funds from the Farm Credit Insurance Fund as are sufficient to carry out this section.

(d)For purposes of this section:

(1)The term “borrower stock” means voting and nonvoting stock, equivalent contributions to a guaranty fund, participation certificates, allocated equities, and other similar equities that are subject to retirement under a revolving cycle issued by any System institution and held by any person other than any System institution.

(2)The term “eligible borrower stock” means borrower stock that—

(A)is outstanding on January 6, 1988;

(B)is issued or allocated after January 6, 1988, but prior to the earlier of—

(i)in the case of each bank and association, the date of approval, by the stockholders of such bank or association, of the capitalization requirements of the institution in accordance with section 2154a of this title; or

(ii)the date that is 9 months after January 6, 1988;

(C)was, after January 1, 1983, but before January 6, 1988, frozen by an institution that was placed in liquidation; or

(D)was retired at less than par value by an institution that was placed in liquidation after January 1, 1983, but before January 6, 1988.

(3)The term “institution” means a bank or association chartered under this chapter.

(4)The term “par value” means—

(A)in the case of stock, par value;

(B)in the case of participation certificates and other equities and interests not described in subparagraph (C), face or equivalent value; or

(C)in the case of participation certificates and allocated equities subject to retirement under a revolving cycle but that a System institution elects to retire out of order for application against a loan in default or otherwise as provided in this chapter, par or face value discounted, at a rate determined by the institution, to reflect the present value of the equity or interest as of the date of such retirement.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 4.9A of Pub. L. 92–181, which authorized a central reserve for Farm Credit System, was classified to section 2161 of this title and was repealed by Pub. L. 100–399, § 101(a).

Amendments

2018—Subsec. (c). Pub. L. 115–334 inserted par. (1) designation and heading before “If an institution”, substituted “the Farm Credit System Insurance Corporation, acting as receiver,” for “the receiver of the institution” and “business of the institution.” for “business of the institution, and—”, added par. (2), and struck out former pars. (1) and (2) which read as follows: “(1) during the 5-year period beginning on January 6, 1988, the Assistance Board shall direct the Financial Assistance Corporation to provide the receiver with sufficient funds to enable the receiver to carry out this subsection; and “(2) after such 5-year period, the Farm Credit System Insurance Corporation shall provide the receiver with sufficient funds from the Farm Credit Insurance Fund to enable the receiver to carry out this subsection.” 1988—Subsec. (a). Pub. L. 100–399, § 101(b), struck out provision that an institution whose capital stock is impaired coordinate retirement of stock under this section with the activities of the Assistance Board and the Financial Assistance Corporation. Subsec. (c). Pub. L. 100–399, § 101(c), inserted “stock” in subsec. heading and amended text generally. Prior to amendment, text read as follows: “If an institution is unable to retire eligible borrower stock at par value due to the freezing of such stock during a liquidation of the institution, the receiver of the institution shall retire such stock at par value as would have been retired in the ordinary course of business of the institution and the Financial Assistance Corporation, on request of the Assistance Board, shall provide the receiver with sufficient funds to enable the receiver to carry out this subsection.” Subsec. (d)(2)(B). Pub. L. 100–399, § 101(d), in introductory provision substituted “issued or allocated” for “required to be purchased, and is purchased, as a condition of obtaining a loan made” and in cl. (i) substituted “section 2154a of this title” for “section 4.9B”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–399 effective as if enacted immediately after enactment of Pub. L. 100–233, which was approved Jan. 6, 1988, see section 1001(a) of Pub. L. 100–399, set out as a note under section 2002 of this title.

§2162 Protection of borrower stock