Title 12, Banks and BankingRelease 119-102
§2127 Guaranty Fund Subscriptions in Lieu of Stock
Title 12 › CHAPTER 23 — FARM CREDIT SYSTEM › SUBCHAPTER III — BANKS FOR COOPERATIVES › Part A — Banks for Cooperatives › § 2127
Summary
If a cooperative can't hold bank stock under state law, the bank must make it put the same dollar amount into a guaranty fund or keep that sum from the loan and credit it to the cooperative. Those payments count as bank stock, and the cooperative and the bank have the same rights and duties as 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
Aug 21, 2026
Release point: 119-102