Title 12, Banks and BankingRelease 119-110
§2279bb–1 Risk-based Capital Levels
Title 12 › CHAPTER 23 — FARM CREDIT SYSTEM › SUBCHAPTER VIII — AGRICULTURAL MORTGAGE SECONDARY MARKET › Part B — Regulation of Financial Safety and Soundness of Federal Agricultural Mortgage Corporation › § 2279bb–1
Summary
The Director of the Office of Secondary Market Oversight must write a risk-based capital test for the Corporation. The test must show how much capital the Corporation needs to stay positive over a 10-year stress period that includes big loan losses and interest-rate moves. For credit risk, the test must cover losses on pools of qualified loans that match the worst loss rates seen in contiguous U.S. areas holding at least 5 percent of the U.S. population for at least 2 years, and it must treat rural utility loans using loss rates like those for electric and telephone facility loans. For interest-rate risk, the test assumes Treasury rates move in the first 12 months by no more than the lesser of 50 percent (compared to the prior 12-month average) or 600 basis points and then stay at that level. When making the test, the Director must account for different farm loan types, Treasury terms, geographic and commodity diversification rules, certain retained interests, prior Corporation tests, and any written information the Corporation gave during the 180-day period starting December 13, 1991. The Director will review and may change the test after the 8-year period starting December 13, 1991, and must give the Corporation time to raise capital if classification changes. The required capital equals the test result (adjusted for currency risk) plus 30 percent more to cover management and operations. The rules must be public, detailed enough for others to use, and the Director must make the statistical model available to the public for a reasonable fee.
Full Legal Text
Title 12, §2279bb–1
Banks and Banking, Source: USLM XML via OLRC
(a)Risk-based capital test
The Director of the Office of Secondary Market Oversight shall, by regulation, establish a risk-based capital test under this section for the Corporation. When applied to the Corporation, the risk-based capital test shall determine the amount of regulatory capital for the Corporation that is sufficient for the Corporation to maintain positive capital during a 10-year period in which both of the following circumstances occur:
(1)Credit risk
(A)In general
With respect to securities representing an interest in, or obligations backed by, a pool of qualified loans owned or guaranteed by the Corporation and other obligations of the Corporation, losses on the underlying qualified loans occur throughout the United States at a rate of default and severity (based on any measurements of default reasonably related to prevailing industry practice in determining capital adequacy) reasonably related to the rate and severity that occurred in contiguous areas of the United States containing an aggregate of not less than 5 percent of the total population of the United States that, for a period of not less than 2 years (as established by the Director), experienced the highest rates of default and severity of agricultural mortgage losses, in comparison with such rates of default and severity of agricultural mortgage losses in other such areas for any period of such duration, as determined by the Director.
(B)Rural utility loans
With respect to securities representing an interest in, or obligation backed by, a pool of qualified loans described in section 2279aa(7)(C) of this title owned or guaranteed by the Corporation, losses occur at a rate of default and severity reasonably related to risks in electric and telephone facility loans (as applicable), as determined by the Director.
(2)Interest rate risk
Interest rates on Treasury obligations of varying terms increase or decrease over the first 12 months of such 10-year period by not more than the lesser of (A) 50 percent (with respect to the average interest rates on such obligations during the 12-month period preceding the 10-year period), or (B) 600 basis points, and remain at such level for the remainder of the period. This paragraph may not be construed to require the Director to determine interest rate risk under this paragraph based on the interest rates for various long-term and short-term obligations all increasing or all decreasing concurrently.
(b)Considerations
(1)Establishment of test
In establishing the risk-based capital test under subsection (a)—
(A)the Director shall take into account appropriate distinctions based on various types of agricultural mortgage products, varying terms of Treasury obligations, and any other factors the Director considers appropriate;
(B)the Director shall conform loan data used in determining credit risk to the minimum geographic and commodity diversification standards applicable to pools of qualified loans eligible for guarantee;
(C)the Director may take into account retained subordinated participating interests under section 2279aa–6(b)(2) of this title (as in effect before February 10, 1996);
(D)the Director may take into account other methods or tests to determine credit risk developed by the Corporation before December 13, 1991; and
(E)the Director shall consider any other information submitted by the Corporation in writing during the 180-day period beginning on December 13, 1991.
(2)Revising test
Upon the expiration of the 8-year period beginning on December 13, 1991, the Director shall examine the risk-based capital test under subsection (a) and may revise the test. In making examinations and revisions under this paragraph, the Director shall take into account that, before December 13, 1991, the Corporation has not issued guarantees for pools of qualified loans. To the extent that the revision of the risk-based capital test causes a change in the classification of the Corporation within the enforcement levels established under section 2279bb–4 of this title, the Director shall waive the applicability of any additional enforcement actions available because of such change for a reasonable period of time, to permit the Corporation to increase the amount of regulatory capital of the Corporation accordingly.
(c)Risk-based capital level
For purposes of this part, the risk-based capital level for the Corporation shall be equal to the sum of the following amounts:
(1)Credit and interest rate risk
The amount of regulatory capital determined by applying the risk-based capital test under subsection (a) to the Corporation, adjusted to account for foreign exchange risk.
(2)Management and operations risk
To provide for management and operations risk, 30 percent of the amount of regulatory capital determined by applying the risk-based capital test under subsection (a) to the Corporation.
(d)Specified contents
(1)In general
The regulations establishing the risk-based capital test under this section shall—
(A)be issued by the Director for public comment in the form of a notice of proposed rulemaking, to be first published after the expiration of the period referred to in subsection (a); and
(B)contain specific requirements, definitions, methods, variables, and parameters used under the risk-based capital test and in implementing the test (such as loan loss severity, float income, loan-to-value ratios, taxes, yield curve slopes, default experience, prepayment rates, and performance of pools of qualified loans).
(2)Specificity
The regulations referred to in paragraph (1) shall be sufficiently specific to permit an individual other than the Director to apply the test in the same manner as the Director.
(e)Availability of model
The Director shall make copies of the statistical model or models used to implement the risk-based capital test under this section available for public acquisition and may charge a reasonable fee for such copies.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Codification Pub. L. 110–234 and Pub. L. 110–246 made identical
Amendments
to this section. The
Amendments
by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.
Amendments
2018—Subsec. (a). Pub. L. 115–334, § 5411(48)(A), substituted “The” for “Not sooner than the expiration of the 3-year period beginning on
February 10, 1996, the” in introductory provisions. Subsec. (a)(1)(B). Pub. L. 115–334, § 5411(48)(B), substituted “section 2279aa(7)(C)” for “section 2279aa(9)(C)”. 2008—Subsec. (a)(1). Pub. L. 110–246, § 5406(d), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B). 1996—Subsec. (a). Pub. L. 104–105, § 113(1), in first sentence, substituted “Not sooner than the expiration of the 3-year period beginning on
February 10, 1996,” for “Not later than the expiration of the 2-year period beginning on
December 13, 1991,”. Subsec. (b)(1)(C). Pub. L. 104–105, § 109(b)(3), substituted “Director may” for “Director shall” and inserted before semicolon at end “(as in effect before
February 10, 1996)”. Subsec. (b)(2). Pub. L. 104–105, § 113(2), substituted “8-year” for “5-year” in first sentence. Subsec. (d). Pub. L. 104–105, § 113(3), designated first sentence of existing provisions as par. (1), inserted heading, added subpar. (A), and designated part of first sentence as subpar. (B), designated second sentence of existing provisions as par. (2), inserted heading, and substituted “The
Regulations
referred to in paragraph (1) shall” for “The
Regulations
shall”. 1992—Subsecs. (a), (b)(1)(D). Pub. L. 102–552, § 308(b)(3)(A), substituted “
December 13, 1991” for “the date of the enactment of this section”. Subsec. (b)(1)(E). Pub. L. 102–552, § 308(b)(3)(B), substituted “
December 13, 1991” for “the date of the enactment of such Act”. Subsec. (b)(2). Pub. L. 102–552, § 308(b)(3)(A), substituted “
December 13, 1991” for “the date of the enactment of this section” in two places.
Statutory Notes and Related Subsidiaries
Effective Date
of 2008 AmendmentAmendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an
Effective Date
note under section 8701 of Title 7, Agriculture.
Reference
Citations & Metadata
Citation
12 U.S.C. § 2279bb–1
Title 12, Banks and Banking
Last Updated
Sep 22, 2026
Release point: 119-110