PRIA, Government Policy, Made Personal

Summary

Lets Farm Credit Banks and direct lender associations join in loans that other lenders make to "similar entities." "Participate" means to share in a loan (as defined elsewhere). A "similar entity" is someone who cannot get a Farm Credit loan but does the same kinds of business as eligible borrowers, earning most of their income or holding most assets in those same activities. They can join these loans, but with limits: no more than 10% of the bank’s or association’s capital in participations tied to one credit risk (this 10% can be raised if stockholders agree and rules allow); no single participation or combined System participations can be 50% or more of a loan’s principal; total participations outstanding can’t exceed 15% of the bank’s or association’s assets; and they cannot participate in loans of the types in sections 2019(b) or 2075(a)(2).

Title 12, §2206a

Banks and Banking, Source: USLM XML via OLRC

(a)Definitions

As used in this section: (1) Participate and participation

(2)Similar entity

The term “similar entity” means a person that—

(A)is not eligible for a loan from the Farm Credit Bank or association; and

(B)has operations that are functionally similar to a person that is eligible for a loan from the Farm Credit Bank or association in that the person derives a majority of the income of the person from, or has a majority of the assets of the person invested in, the conduct of activities that are functionally similar to the activities that are conducted by an eligible person.

(b)Loan participation authority

Notwithstanding any other provision of this chapter, any Farm Credit Bank or direct lender association chartered under this chapter may participate in any loan of a type otherwise authorized under subchapter I or II made to a similar entity by any person in the business of extending credit, except that a Farm Credit Bank or direct lender association may not participate in a loan under this section if—

(1)the participation would cause the total amount of all participations by the Farm Credit Bank or association under this section involving a single credit risk to exceed 10 percent (or the applicable higher lending limit authorized under regulations issued by the Farm Credit Administration if the stockholders of the respective Farm Credit Bank or association so approve) of the total capital of the Farm Credit Bank or association;

(2)the participation by the Farm Credit Bank or association would equal or exceed 50 percent of the principal of the loan or, when taken together with participations in the loan by other Farm Credit System institutions, would cause the cumulative amount of the participations by all Farm Credit System institutions in the loan to equal or exceed 50 percent of the principal of the loan;

(3)the participation would cause the cumulative amount of participations that the Farm Credit Bank or association has outstanding under this section to exceed 15 percent of the total assets of the Farm Credit Bank or association; or

(4)the loan is of the type authorized under section 2019(b) or 2075(a)(2) of this title.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2002—Subsec. (a)(1). Pub. L. 107–171, § 5401(b)(1), substituted “2122(11)(B)(iii) of this title” for “2122(11)(B)(iv) of this title”. Subsec. (c). Pub. L. 107–171, § 5401(b)(2), struck out heading and text of subsec. (c). Text read as follows: “(1) In general.—With respect to a similar entity that is eligible to borrow from a bank for cooperatives under subchapter III of this chapter, the authority of a Farm Credit Bank or association to participate in a loan to the entity under this section shall be subject to the prior approval of the bank for cooperatives having, at the time the loan is made, the greatest loan volume in the State in which the headquarters office of the similar entity is located. “(2) Terms and conditions.—Approval under paragraph (1) may be granted on an annual basis and under such terms and conditions as may be agreed on between the Farm Credit Bank or association, as the case may be, and the bank for cooperatives granting the approval. “(3) Approval by supervising farm credit bank.—An association may not participate in a loan to a similar entity under this section without the approval of the supervising Farm Credit Bank of the association.”

§2206a Authority of Farm Credit Banks and Direct Lender Associations to Participate in Loans to Similar Entities for Risk Management Purposes

Summary

Title 12, §2206a

Notes & Related Subsidiaries

Editorial Notes

Amendments

Citations & Metadata