§2279bb–1 Risk-based capital levels

Summary

The Director of the Office of Secondary Market Oversight must make a rule that tests how much capital the Corporation needs. The rule must make sure the Corporation would keep positive capital through a 10-year stress period. That period includes (1) heavy losses on pools of qualified loans across the U.S. at rates like those seen in the worst contiguous areas that together contain at least 5 percent of the U.S. population for at least 2 years, and (2) losses like those in electric and telephone facility loan pools. It also assumes Treasury interest rates change over the first 12 months by no more than the smaller of 50 percent (compared to the prior year average) or 600 basis points and then stay at that level. When making the test, the Director must account for different farm loan products, different Treasury terms, and follow the minimum geographic and commodity diversification rules for eligible loan pools. The Director may consider certain retained interests, older credit methods used before December 13, 1991, and any written information the Corporation gave within the 180-day period starting December 13, 1991. Eight years after December 13, 1991, the Director must review and may change the test and, if changes affect enforcement levels, give the Corporation a reasonable time to raise capital. The required capital equals the test result adjusted for foreign exchange risk plus an extra 30 percent for management and operations risk. The Director must publish the proposed rule for public comment, include specific methods and variables (for example, loss severity, interest income, loan-to-value, taxes, yield curves, defaults, prepayments, and pool performance), make the test reproducible by others, and make the statistical model(s) available to the public for a reasonable fee.