Title IV Conservators, Receivers, and Voluntary Liquidations; Priority of Claims-Joint and Several Liability, 54527-54529 [E7-18968]
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Federal Register / Vol. 72, No. 186 / Wednesday, September 26, 2007 / Rules and Regulations
general, a significant adverse comment
would raise an issue serious enough to
warrant a substantive response from the
agency in a notice-and-comment
proceeding.
The FCA believes that these
amendments fit the category of rules
appropriate for direct final rulemaking.
These changes merely clarify that
holders of subordinated debt, which is
subordinate to general creditors by
definition and by the terms of the
subordinated debt instruments, are
entitled to payment in a liquidation
only after general creditors are paid. For
these reasons, the FCA does not
anticipate that there will be significant
adverse comment on this rulemaking.
Nonetheless, in keeping with the
recommended procedures, the FCA is
providing a 30-day period from
publication during which members of
the public may comment on the rule. If
significant adverse comment is received
during the comment period, we will
publish a notice of withdrawal of the
relevant provisions of this rule that will
also indicate how further rulemaking
will proceed. If no significant adverse
comment is received, the FCA will
publish a notice of the effective date
under section 5.17(c)(1) of the Act.
Subpart B—Receivers and
Receiverships
FARM CREDIT ADMINISTRATION
I
2. Amend § 627.2745 by adding a new
paragraph (i) to read as follows:
RIN 3052–AC16
§ 627.2745 Priority of claims—
associations.
Title IV Conservators, Receivers, and
Voluntary Liquidations; Priority of
Claims—Joint and Several Liability
12 CFR Part 627
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*
*
*
*
(i) All claims that, by their terms, are
subordinated in whole or in part to the
claims of general creditors, other than
distributions covered under
§ 627.2755(b). Such claims shall receive
the priority specified in the written
instruments that evidence the claims
and, to the extent that the written
documents provide different priorities
for different categories of such claims,
each category shall be considered a class
of claims for purposes of § 627.2755(a).
3. Amend § 627.2750 by adding a new
paragraph (j) to read as follows:
I
§ 627.2750
Priority of claims—banks.
V. Regulatory Flexibility Act
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), the FCA hereby certifies that
this rule will not have a significant
economic impact on a substantial
number of small entities. Each of the
banks in the System, considered
together with its affiliated associations,
has assets and annual income in excess
of the amounts that would qualify them
as small entities. Therefore, System
institutions are not ‘‘small entities’’ as
defined in the Regulatory Flexibility
Act.
*
*
*
*
(j) All claims that, by their terms, are
subordinated in whole or in part to the
claims of general creditors, other than
distributions covered under
§ 627.2755(b). Such claims shall receive
the priority specified in the written
instruments that evidence the claims
and, to the extent that the written
documents provide different priorities
for different categories of such claims,
each category shall be considered a class
of claims for purposes of § 627.2755(a).
I
List of Subjects in 12 CFR Part 627
Agriculture, Banks, Banking, Claims,
Rural areas.
For the reasons stated in the preamble,
we amend part 627 of chapter VI, title
12 of the Code of Federal Regulations to
read as follows:
I
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PART 627—TITLE IV CONSERVATORS,
RECEIVERS, AND VOLUNTARY
LIQUIDATIONS
1. The authority citation for part 627
continues to read as follows:
I
Authority: Secs. 4.2, 5.9, 5.10, 5.17, 5.51,
5.58, 5.61 of the Farm Credit Act (12 U.S.C.
2183, 2243, 2244, 2252, 2277a, 2277a–7,
2277a–10).
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54527
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4. Amend § 627.2752 by adding a new
paragraph (h) to read as follows:
§ 627.2752 Priority of claims—other Farm
Credit institutions.
Farm Credit Administration.
Final rule.
AGENCY:
ACTION:
SUMMARY: The Farm Credit
Administration (FCA, Agency, we),
issues this final rule amending the
priority of claims regulations to provide
priority of claims rights to Farm Credit
System (System, FCS, Farm Credit)
banks if they make payments under a
reallocation agreement to holders of
consolidated and System-wide
obligations on behalf of a defaulting
System bank. The final rule also
clarifies that payments to a class of
claims will be on a pro rata basis.
DATES: Effective Date: This regulation
will be effective 30 days after
publication in the Federal Register
during which either or both Houses of
Congress are in session. We will publish
a notice of the effective date in the
Federal Register.
FOR FURTHER INFORMATION CONTACT:
Christopher D. Wilson, Policy Analyst,
Office of Regulatory Policy, Farm
Credit Administration, McLean, VA
22102–5090, (703) 883–4414, TTY
(703) 883–4434, or
Rebecca S. Orlich, Senior Counsel,
Office of General Counsel, Farm
Credit Administration, McLean, VA
22102–5090, (703) 883–4020, TTY
(703) 883–4020.
SUPPLEMENTARY INFORMATION:
I. Objectives
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*
*
*
*
(h) All claims that, by their terms, are
subordinated in whole or in part to the
claims of general creditors, other than
distributions covered under
§ 627.2755(b). Such claims shall receive
the priority specified in the written
instruments that evidence the claims
and, to the extent that the written
documents provide different priorities
for different categories of such claims,
each category shall be considered a class
of claims for purposes of § 627.2755(a).
Our objectives in this final rule are to:
• Provide System banks that make
payments under a reallocation
agreement to holders of consolidated
and System-wide obligations of a
defaulting bank the same priority of
claims rights they would have for
payments made under statutory joint
and several calls by the FCA; and
• Clarify that claims in the same class
will receive payments on a pro rata
basis if there are insufficient assets in a
receivership to pay the entire class in
full.
Dated: September 20, 2007.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
[FR Doc. E7–18965 Filed 9–25–07; 8:45 am]
II. Background
System associations obtain funding by
means of direct loans from their
affiliated Farm Credit banks. The banks
in turn obtain their funding primarily by
BILLING CODE 6705–01–P
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A. Joint and Several Liability Under the
Act
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Federal Register / Vol. 72, No. 186 / Wednesday, September 26, 2007 / Rules and Regulations
issuing System-wide obligations to
investors through the Federal Farm
Credit Banks Funding Corporation
(Funding Corporation).1 The banks’
authority to issue System-wide
obligations is provided in section 4.2(d)
of the Farm Credit Act of 1971, as
amended (Act).2 Currently, all of the
System’s joint funding is through
System-wide obligations.3
Investors in consolidated and Systemwide obligations have three levels of
repayment sources. The first level is a
bank’s own primary liability under
section 4.4(a)(2)(A) of the Act 4 for its
portion of any consolidated or Systemwide obligation. The second level is
payments made by the Farm Credit
System Insurance Corporation (FCSIC)
under section 4.4(d) of the Act if a bank
is unable to pay its portion of liability
on consolidated or System-wide
obligations. The third level is joint and
several calls made by FCA on
nondefaulting banks under section
4.4(a)(2) of the Act in proportion to each
bank’s proportionate share of the
aggregate available collateral 5 held by
all nondefaulting banks, or in
proportion to each bank’s remaining
assets if the aggregate available
collateral does not fully satisfy the
insured obligations of the defaulting
bank. The Act provides subrogation
rights to both the banks and the FCSIC
for payments of insured obligations
made on behalf of a defaulting bank
under sections 4.4(a)(2)(E) 6 and
5.61(c)(1),7 respectively.
B. Proposed Rule
We proposed an amendment to the
priority of claims rule in response to a
rmajette on PROD1PC64 with RULES
1 The
Funding Corporation is the fiscal agent of
the System established under section 4.9 of the
Farm Credit Act of 1971, as amended (12 U.S.C.
2160).
2 12 U.S.C. 2153(d).
3 12 U.S.C. 2153(c).
4 12 U.S.C. 2155(a)(2)(A).
5 A bank’s ‘‘available collateral’’ is defined in
section 4.4(a)(2)(C) as ‘‘the amount (determined at
the close of the last calendar quarter ending before
such call) by which a bank’s collateral * * *
exceeds the collateral required to support the bank’s
outstanding notes, bonds, debentures, and other
similar obligations.’’
6 Section 4.4(a)(2)(E) provides: ‘‘Any System bank
that, pursuant to a call by the [FCA], makes a
payment of principal or interest to the holder of any
consolidated or System-wide obligations issued on
behalf of another System bank shall be subrogated
to the rights of the holder against such other bank
to the extent of such payment.’’
7 Section 5.61(c) provides: ‘‘On the payment to an
owner of an insured obligation issued on behalf of
an insured System bank in receivership, the [FCSIC]
shall be subrogated to all rights of the owner against
the bank to the extent of the payment. * * *
Subrogation * * * shall include the right on the
part of the [FCSIC] to receive the same dividends
from the proceeds of the assets of the bank as would
have been payable to the owner on a claim for the
insured obligation.’’
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15:42 Sep 25, 2007
Jkt 211001
petition by System banks to provide the
same subrogation rights to banks for
making joint and several payments on
insured obligations under a reallocation
agreement that the banks would receive
if they made payments under section
4.4(a)(2) of the Act. In recent years, the
banks have discussed the benefits and
feasibility of using a methodology for
paying joint and several calls based on
the proportion of total System-wide debt
on which each nondefaulting bank is
primarily liable. The banks have
explored the possibility of entering into
a reallocation agreement among
themselves to pay a defaulting bank’s
maturing insured obligations as the
Farm Credit Insurance Fund is nearing
exhaustion but before statutory joint and
several calls are triggered. The banks
have informed us that, while they have
generally agreed on the outlines of an
agreement for payment based on
individual banks’ outstanding Systemwide debt, a key to an agreement is that
payments made would be entitled to the
same payment rights as if the banks had
made the payments under a statutory
joint and several call. Such an
agreement would be subject to Agency
approval.
The proposed revision to the priority
of claims rule as well as the amendment
to clarify the related payment of claims
regulation on pro rata payments were
published in the Federal Register on
March 12, 2007.8 The proposals had a
60-day comment period that ended on
May 11, 2007. The proposals are
described in Part III below.
C. Comments on Proposed Rule
We received three comments: One
from the Farm Credit Council (FCC) on
behalf of all System institutions, and
two others from System banks. All of
the commenters fully supported the
revision to the priority of claims rule as
proposed and did not suggest any
changes. Furthermore, the FCC letter
stated that it offered no objections to our
proposal to clarify that payments to a
class of claims would be on a pro rata
basis if there are insufficient funds to
pay the class in full.
One commenter also asked us to
consider a rulemaking to add
subordinated debt to the list of claims
priority categories in part 627. At
present, the liquidation priority of
subordinated debt is not expressly
addressed in our regulations. We agree
that it is appropriate to specify the
liquidation priority of claims of
subordinated debtholders and are
8 See 72 FR 10939. See the preamble of this
proposal for more in-depth discussion of the banks’
joint and several liability under the Act.
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Fmt 4700
Sfmt 4700
issuing a direct final rule on that subject
concurrent with this final rule.
III. Description of Final Rule
Section 627.2750—Priority of Claims—
Banks
Section 627.2750 sets forth the
priority of claims for banks in
liquidation. Existing paragraph (h)
provides for payment of claims of
holders of consolidated and Systemwide obligations and of other System
banks arising from their payments made
under statutory joint and several calls.
In the proposed rule, we proposed to
revise this paragraph to include all
claims of other System banks arising
from their payments of consolidated and
System-wide obligations under a
reallocation agreement that is in writing
and approved by the Agency. We adopt
this provision as final.
Section 627.2755—Payment of Claims
Existing § 627.2755 contains several
priority of claims provisions that apply
to some or all types of System
institutions that may be placed in
receivership by the FCA under part 627
of our regulations.9 In the proposed
rule, we proposed to amend paragraph
(a) by removing language limiting the
pro rata distribution requirement to
association receiverships. This will
clarify that, in all System institution
receiverships, if there are insufficient
funds to pay a class of claims in full,
payments to such class must be on a pro
rata basis. We adopt this provision as
final.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), the FCA hereby certifies that the
rule will not have a significant
economic impact on a substantial
number of small entities. Each of the
banks in the System, considered
together with its affiliated associations,
has assets and annual income in excess
of the amounts that would qualify them
as small entities. Therefore, System
institutions are not ‘‘small entities’’ as
defined in the Regulatory Flexibility
Act.
List of Subjects in 12 CFR Part 627
Agriculture, Banks, Banking, Claims,
Rural areas.
For the reasons stated in the preamble,
we are amending part 627 of chapter VI,
I
9 We note that part 627 of FCA’s regulations does
not apply to the Federal Agricultural Mortgage
Corporation, also known as Farmer Mac.
Regulations applicable to Farmer Mac are in parts
650–655 of FCA’s regulations.
E:\FR\FM\26SER1.SGM
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Federal Register / Vol. 72, No. 186 / Wednesday, September 26, 2007 / Rules and Regulations
title 12 of the Code of Federal
Regulations to read as follows:
PART 627—TITLE IV CONSERVATORS,
RECEIVERS, AND VOLUNTARY
LIQUIDATIONS
1. The authority citation for part 627
continues to read as follows:
I
Authority: Secs. 4.2, 5.9, 5.10, 5.17, 5.51,
5.58, 5.61 of the Farm Credit Act (12 U.S.C.
2183, 2243, 2244, 2252, 2277a, 2277a–7,
2277a–10).
Subpart B—Receivers and
Receiverships
2. Revise § 627.2750(h) to read as
follows:
I
§ 627.2750
Priority of claims—banks.
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*
*
*
*
(h) All claims of holders of
consolidated and System-wide bonds
and all claims of the other Farm Credit
banks arising from their payments on
consolidated and System-wide bonds
pursuant to 12 U.S.C. 2155 or pursuant
to an agreement among the banks to
reallocate the payments, provided the
agreement is in writing and approved by
the Farm Credit Administration.
*
*
*
*
*
§ 627.2755
[Amended]
3. Amend § 627.2755(a) by removing
the words ‘‘described in § 627.2745’’ in
the last sentence.
I
Dated: September 20, 2007.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
[FR Doc. E7–18968 Filed 9–25–07; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 25
[Docket No. NM367 Special Conditions No.
25–363–SC]
Special Conditions: Boeing Model 787–
8 Airplane; Tire Debris Penetration of
Fuel Tank Structure
Federal Aviation
Administration (FAA), DOT.
ACTION: Final special conditions.
rmajette on PROD1PC64 with RULES
AGENCY:
SUMMARY: These special conditions are
issued for the Boeing Model 787–8
airplane. This airplane will have novel
or unusual design features when
compared to the state of technology
envisioned in the airworthiness
standards for transport category
airplanes. These novel or unusual
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design features include wing fuel tanks
constructed of carbon fiber composite
materials. For these design features, the
applicable airworthiness regulations do
not contain adequate or appropriate
safety standards. These special
conditions contain the additional safety
standards that the Administrator
considers necessary to establish a level
of safety equivalent to that established
by the existing standards. Additional
special conditions will be issued for
other novel or unusual design features
of the Boeing Model 787–8 airplanes.
DATES: Effective Date: October 26, 2007.
FOR FURTHER INFORMATION CONTACT:
Mike Dostert, FAA, Propulsion/
Mechanical Systems, ANM–112,
Transport Airplane Directorate, Aircraft
Certification Service, 1601 Lind
Avenue, SW., Renton, Washington
98057–3356; telephone (425) 227–2132;
facsimile (425) 227–1320.
SUPPLEMENTARY INFORMATION:
Background
On March 28, 2003, Boeing applied
for an FAA type certificate for its new
Boeing Model 787–8 passenger airplane.
The Boeing Model 787–8 airplane will
be an all-new, two-engine jet transport
airplane with a two-aisle cabin. The
maximum takeoff weight will be
476,000 pounds, with a maximum
passenger count of 381 passengers.
Type Certification Basis
Under provisions of Title 14 Code of
Federal Regulations (CFR) 21.17, Boeing
must show that Boeing Model 787–8
airplanes (hereafter referred to as ‘‘the
787’’) meet the applicable provisions of
14 CFR part 25, as amended by
Amendments 25–1 through 25–117,
except §§ 25.809(a) and 25.812, which
will remain at Amendment 25–115. If
the Administrator finds that the
applicable airworthiness regulations do
not contain adequate or appropriate
safety standards for the 787 because of
a novel or unusual design feature,
special conditions are prescribed under
provisions of 14 CFR 21.16.
In addition to the applicable
airworthiness regulations and special
conditions, the 787 must comply with
the fuel vent and exhaust emission
requirements of 14 CFR part 34 and the
noise certification requirements of 14
CFR part 36. The FAA must also issue
a finding of regulatory adequacy
pursuant to section 611 of Public Law
92–574, the ‘‘Noise Control Act of
1972.’’
The FAA issues special conditions, as
defined in 14 CFR 11.19, under § 11.38,
and they become part of the type
certification basis under § 21.17(a)(2).
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54529
Special conditions are initially
applicable to the model for which they
are issued. Should the type certificate
for that model be amended later to
include any other model that
incorporates the same or similar novel
or unusual design feature, the special
conditions would also apply to the other
model under § 21.101.
Novel or Unusual Design Features
The 787 will incorporate a number of
novel or unusual design features.
Because of rapid improvements in
airplane technology, the applicable
airworthiness regulations do not contain
adequate or appropriate safety standards
for these design features. These special
conditions for the 787 contain the
additional safety standards that the
Administrator considers necessary to
establish a level of safety equivalent to
that established by the existing
airworthiness standards.
The 787 will use carbon fiber
composite materials for most of the
wing fuel tank structure. The ability of
aluminum wing skins, as has been
conventionally used, to resist
penetration or rupture when impacted
by tire debris is understood from
extensive experience. The ability of
carbon fiber composite material to resist
these hazards has not been established.
There are no current airworthiness
standards specifically addressing this
hazard for all the exposed wing
surfaces.
The FAA issues these special
conditions to maintain the level of
safety envisioned in the existing
airworthiness standards by establishing
a standard for resistance to potential tire
debris impacts to the 787 contiguous
wing surfaces.
Discussion
Historically, accidents have resulted
from uncontrolled fires caused by fuel
leaks following penetration or rupture of
the lower wing by fragments of tires or
from uncontained engine failure.
In one incident, in Honolulu, Hawaii,
a tire on a Boeing Model 747 burst and
tire debris penetrated a fuel tank access
cover, causing a substantial fuel leak.
Takeoff was aborted and passengers
were evacuated down the emergency
chutes into pools of fuel which
fortunately had not ignited. This
accident highlighted deficiencies in the
then-existing title 14 CFR part 25
regulations pertaining to fuel retention
following impact to fuel tanks by tire
fragments.
After a subsequent Boeing Model 737
accident in Manchester, England, in
which a fuel tank access panel was
penetrated by engine debris, the FAA
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]]>Agencies
[Federal Register Volume 72, Number 186 (Wednesday, September 26, 2007)]
[Rules and Regulations]
[Pages 54527-54529]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-18968]
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FARM CREDIT ADMINISTRATION
12 CFR Part 627
RIN 3052-AC16
Title IV Conservators, Receivers, and Voluntary Liquidations;
Priority of Claims--Joint and Several Liability
AGENCY: Farm Credit Administration.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Farm Credit Administration (FCA, Agency, we), issues this
final rule amending the priority of claims regulations to provide
priority of claims rights to Farm Credit System (System, FCS, Farm
Credit) banks if they make payments under a reallocation agreement to
holders of consolidated and System-wide obligations on behalf of a
defaulting System bank. The final rule also clarifies that payments to
a class of claims will be on a pro rata basis.
DATES: Effective Date: This regulation will be effective 30 days after
publication in the Federal Register during which either or both Houses
of Congress are in session. We will publish a notice of the effective
date in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Christopher D. Wilson, Policy Analyst, Office of Regulatory Policy,
Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4414, TTY
(703) 883-4434, or
Rebecca S. Orlich, Senior Counsel, Office of General Counsel, Farm
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703)
883-4020.
SUPPLEMENTARY INFORMATION:
I. Objectives
Our objectives in this final rule are to:
Provide System banks that make payments under a
reallocation agreement to holders of consolidated and System-wide
obligations of a defaulting bank the same priority of claims rights
they would have for payments made under statutory joint and several
calls by the FCA; and
Clarify that claims in the same class will receive
payments on a pro rata basis if there are insufficient assets in a
receivership to pay the entire class in full.
II. Background
A. Joint and Several Liability Under the Act
System associations obtain funding by means of direct loans from
their affiliated Farm Credit banks. The banks in turn obtain their
funding primarily by
[[Page 54528]]
issuing System-wide obligations to investors through the Federal Farm
Credit Banks Funding Corporation (Funding Corporation).\1\ The banks'
authority to issue System-wide obligations is provided in section
4.2(d) of the Farm Credit Act of 1971, as amended (Act).\2\ Currently,
all of the System's joint funding is through System-wide
obligations.\3\
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\1\ The Funding Corporation is the fiscal agent of the System
established under section 4.9 of the Farm Credit Act of 1971, as
amended (12 U.S.C. 2160).
\2\ 12 U.S.C. 2153(d).
\3\ 12 U.S.C. 2153(c).
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Investors in consolidated and System-wide obligations have three
levels of repayment sources. The first level is a bank's own primary
liability under section 4.4(a)(2)(A) of the Act \4\ for its portion of
any consolidated or System-wide obligation. The second level is
payments made by the Farm Credit System Insurance Corporation (FCSIC)
under section 4.4(d) of the Act if a bank is unable to pay its portion
of liability on consolidated or System-wide obligations. The third
level is joint and several calls made by FCA on nondefaulting banks
under section 4.4(a)(2) of the Act in proportion to each bank's
proportionate share of the aggregate available collateral \5\ held by
all nondefaulting banks, or in proportion to each bank's remaining
assets if the aggregate available collateral does not fully satisfy the
insured obligations of the defaulting bank. The Act provides
subrogation rights to both the banks and the FCSIC for payments of
insured obligations made on behalf of a defaulting bank under sections
4.4(a)(2)(E) \6\ and 5.61(c)(1),\7\ respectively.
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\4\ 12 U.S.C. 2155(a)(2)(A).
\5\ A bank's ``available collateral'' is defined in section
4.4(a)(2)(C) as ``the amount (determined at the close of the last
calendar quarter ending before such call) by which a bank's
collateral * * * exceeds the collateral required to support the
bank's outstanding notes, bonds, debentures, and other similar
obligations.''
\6\ Section 4.4(a)(2)(E) provides: ``Any System bank that,
pursuant to a call by the [FCA], makes a payment of principal or
interest to the holder of any consolidated or System-wide
obligations issued on behalf of another System bank shall be
subrogated to the rights of the holder against such other bank to
the extent of such payment.''
\7\ Section 5.61(c) provides: ``On the payment to an owner of an
insured obligation issued on behalf of an insured System bank in
receivership, the [FCSIC] shall be subrogated to all rights of the
owner against the bank to the extent of the payment. * * *
Subrogation * * * shall include the right on the part of the [FCSIC]
to receive the same dividends from the proceeds of the assets of the
bank as would have been payable to the owner on a claim for the
insured obligation.''
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B. Proposed Rule
We proposed an amendment to the priority of claims rule in response
to a petition by System banks to provide the same subrogation rights to
banks for making joint and several payments on insured obligations
under a reallocation agreement that the banks would receive if they
made payments under section 4.4(a)(2) of the Act. In recent years, the
banks have discussed the benefits and feasibility of using a
methodology for paying joint and several calls based on the proportion
of total System-wide debt on which each nondefaulting bank is primarily
liable. The banks have explored the possibility of entering into a
reallocation agreement among themselves to pay a defaulting bank's
maturing insured obligations as the Farm Credit Insurance Fund is
nearing exhaustion but before statutory joint and several calls are
triggered. The banks have informed us that, while they have generally
agreed on the outlines of an agreement for payment based on individual
banks' outstanding System-wide debt, a key to an agreement is that
payments made would be entitled to the same payment rights as if the
banks had made the payments under a statutory joint and several call.
Such an agreement would be subject to Agency approval.
The proposed revision to the priority of claims rule as well as the
amendment to clarify the related payment of claims regulation on pro
rata payments were published in the Federal Register on March 12,
2007.\8\ The proposals had a 60-day comment period that ended on May
11, 2007. The proposals are described in Part III below.
---------------------------------------------------------------------------
\8\ See 72 FR 10939. See the preamble of this proposal for more
in-depth discussion of the banks' joint and several liability under
the Act.
---------------------------------------------------------------------------
C. Comments on Proposed Rule
We received three comments: One from the Farm Credit Council (FCC)
on behalf of all System institutions, and two others from System banks.
All of the commenters fully supported the revision to the priority of
claims rule as proposed and did not suggest any changes. Furthermore,
the FCC letter stated that it offered no objections to our proposal to
clarify that payments to a class of claims would be on a pro rata basis
if there are insufficient funds to pay the class in full.
One commenter also asked us to consider a rulemaking to add
subordinated debt to the list of claims priority categories in part
627. At present, the liquidation priority of subordinated debt is not
expressly addressed in our regulations. We agree that it is appropriate
to specify the liquidation priority of claims of subordinated
debtholders and are issuing a direct final rule on that subject
concurrent with this final rule.
III. Description of Final Rule
Section 627.2750--Priority of Claims--Banks
Section 627.2750 sets forth the priority of claims for banks in
liquidation. Existing paragraph (h) provides for payment of claims of
holders of consolidated and System-wide obligations and of other System
banks arising from their payments made under statutory joint and
several calls. In the proposed rule, we proposed to revise this
paragraph to include all claims of other System banks arising from
their payments of consolidated and System-wide obligations under a
reallocation agreement that is in writing and approved by the Agency.
We adopt this provision as final.
Section 627.2755--Payment of Claims
Existing Sec. 627.2755 contains several priority of claims
provisions that apply to some or all types of System institutions that
may be placed in receivership by the FCA under part 627 of our
regulations.\9\ In the proposed rule, we proposed to amend paragraph
(a) by removing language limiting the pro rata distribution requirement
to association receiverships. This will clarify that, in all System
institution receiverships, if there are insufficient funds to pay a
class of claims in full, payments to such class must be on a pro rata
basis. We adopt this provision as final.
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\9\ We note that part 627 of FCA's regulations does not apply to
the Federal Agricultural Mortgage Corporation, also known as Farmer
Mac. Regulations applicable to Farmer Mac are in parts 650-655 of
FCA's regulations.
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IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), the FCA hereby certifies that the rule will not
have a significant economic impact on a substantial number of small
entities. Each of the banks in the System, considered together with its
affiliated associations, has assets and annual income in excess of the
amounts that would qualify them as small entities. Therefore, System
institutions are not ``small entities'' as defined in the Regulatory
Flexibility Act.
List of Subjects in 12 CFR Part 627
Agriculture, Banks, Banking, Claims, Rural areas.
0
For the reasons stated in the preamble, we are amending part 627 of
chapter VI,
[[Page 54529]]
title 12 of the Code of Federal Regulations to read as follows:
PART 627--TITLE IV CONSERVATORS, RECEIVERS, AND VOLUNTARY
LIQUIDATIONS
0
1. The authority citation for part 627 continues to read as follows:
Authority: Secs. 4.2, 5.9, 5.10, 5.17, 5.51, 5.58, 5.61 of the
Farm Credit Act (12 U.S.C. 2183, 2243, 2244, 2252, 2277a, 2277a-7,
2277a-10).
Subpart B--Receivers and Receiverships
0
2. Revise Sec. 627.2750(h) to read as follows:
Sec. 627.2750 Priority of claims--banks.
* * * * *
(h) All claims of holders of consolidated and System-wide bonds and
all claims of the other Farm Credit banks arising from their payments
on consolidated and System-wide bonds pursuant to 12 U.S.C. 2155 or
pursuant to an agreement among the banks to reallocate the payments,
provided the agreement is in writing and approved by the Farm Credit
Administration.
* * * * *
Sec. 627.2755 [Amended]
0
3. Amend Sec. 627.2755(a) by removing the words ``described in Sec.
627.2745'' in the last sentence.
Dated: September 20, 2007.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
[FR Doc. E7-18968 Filed 9-25-07; 8:45 am]
BILLING CODE 6705-01-P
