§2130 — Title 12 Banks and Banking | U.S. Code

Summary

When a cooperative bank makes a loan, a borrower who can hold voting stock must own at least one share. The bank can make the borrower buy more voting or nonvoting stock at closing or later. At closing, the extra stock required cannot be more than 10% of the loan’s face amount. The bank decides how to figure any further stock rules (for example, by loan amount, balance, or interest). If the bank sells or shares part of a loan with other financial institutions (not with other cooperative banks), the borrower does not have to buy stock for that part. The bank’s earnings are split based on how much of the loan it keeps.

Title 12, §2130

Banks and Banking — Source: USLM XML via OLRC

(a)Each borrower entitled to hold voting stock shall, at the time a loan is made by a bank for cooperatives, own at least one share of voting stock and shall be required by the bank to invest in additional voting stock or nonvoting investment stock at that time, or from time to time, as the lending bank may determine, but the requirement for investment in stock at the time the loan is closed shall not exceed an amount equal to 10 per centum of the face amount of the loan. Such additional ownership requirements may be based on the face amount of the loan, the outstanding loan balance or on a percentage of the interest payable by the borrower during any year or during any quarter thereof, or upon such other basis as the bank determines will provide adequate capital for the operation of the bank and equitable ownership thereof among borrowers.

(b)Notwithstanding the provisions of subsection (a) of this section, the purchase of stock need not be required with respect to that part of any loan made by a bank for cooperatives which it sells to or makes in participation with financial institutions other than any of the banks for cooperatives. In such cases the distribution of earnings of the bank for cooperatives shall be on the basis of the interest in the loan retained by such bank.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2018—Subsec. (a). Pub. L. 115–334 struck out at end “In the case of a direct loan by the Central Bank, the borrower shall be required to own or invest in the necessary stock in a district bank or banks and such district bank shall be required to own a corresponding amount of stock in the Central Bank, but voting stock shall be in the one district bank, designated by the Farm Credit Administration.” 1988—Subsec. (a). Pub. L. 100–233 substituted “by the bank to invest” for “by the bank with the approval of the Farm Credit Administration to invest”, “or upon such other basis as the bank determines” for “or upon such other basis as the bank, with the approval of the Farm Credit Administration, determines”, and “in a district bank or banks and such district bank shall be required” for “in a district bank or banks as may be approved by the Farm Credit Administration and such district bank shall be required”. 1980—Subsec. (a). Pub. L. 96–592 inserted provisions respecting entitlement to hold voting stock.

§2130 Ownership of Stock by Borrowers

Summary

Title 12, §2130

Notes & Related Subsidiaries

Editorial Notes

Amendments

Citations & Metadata