General Provisions; Operating and Strategic Business Planning, 30280-30285 [2011-12786]

Agencies

• Farm Credit Administration

[Federal Register Volume 76, Number 101 (Wednesday, May 25, 2011)]
[Proposed Rules]
[Pages 30280-30285]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-12786]


=======================================================================
-----------------------------------------------------------------------

FARM CREDIT ADMINISTRATION

12 CFR Part 618

RIN 3052-AC66


General Provisions; Operating and Strategic Business Planning

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

-----------------------------------------------------------------------

[[Page 30281]]

SUMMARY: The Farm Credit Administration (FCA, we or us) proposes to 
amend its regulation requiring the board of directors of each Farm 
Credit System (FCS or System) institution to adopt an operational and 
strategic business plan (business plan) to include, among other things, 
an emphasis on diversity and inclusion. The proposed amendment would 
require each plan to contain a human capital plan that includes 
strategies and actions to achieve diversity and inclusion within the 
institution's workforce, management and governance structure, and an 
assessment of the progress the institution has made in accomplishing 
these strategies and actions; assesses the strengths and weaknesses of 
the institution's workforce, management and governance structure; and 
describes the institution's workforce and management succession 
programs. In addition, each plan would be required to include a 
marketing plan to, among other things, further the objective that the 
FCS be responsive to the credit needs of all eligible and creditworthy 
agricultural producers and other eligible persons with specific 
attention to diversity and inclusion.

DATES: You may send comments on or before July 25, 2011.

ADDRESSES: We offer a variety of methods for you to submit your 
comments. For accuracy and efficiency reasons, commenters are 
encouraged to submit comments by e-mail or through the FCA's Web site. 
As facsimiles (fax) are difficult for us to process and achieve 
compliance with section 508 of the Rehabilitation Act, we are no longer 
accepting comments submitted by fax. Regardless of the method you use, 
please do not submit your comment multiple times via different methods. 
You may submit comments by any of the following methods:
     E-mail: Send us an e-mail at reg-comm@fca.gov.
     FCA Web site: http:[sol][sol]www.fca.gov. Select ``Public 
Commenters,'' then ``Public Comments'' and follow the directions for 
``Submitting a Comment.''
     Federal eRulemaking Portal: 
http:[sol][sol]www.regulations.gov. Follow the instructions for 
submitting comments.
     Mail: Gary K. Van Meter, Acting Director, Office of 
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, VA 22102-5090.
    You may review copies of comments we receive at our office in 
McLean, Virginia, or from our Web site at http:[sol][sol]www.fca.gov. 
Once you are in the Web site, select ``Public Commenters,'' then 
``Public Comments'' and follow the directions for ``Reading Submitted 
Public Comments.'' We will show your comments as submitted but, for 
technical reasons, we may omit items such as logos and special 
characters. Identifying information that you provide, such as phone 
numbers and addresses, will be publicly available. However, we will 
attempt to remove e-mail addresses to help reduce Internet spam.

FOR FURTHER INFORMATION CONTACT: 

Jacqueline R. Melvin, Policy Analyst, Office of Regulatory Policy, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4498, TTY (703) 
883-4434, or
Jennifer A. Cohn, Senior Counsel, Office of General Counsel, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 
883-4020.

SUPPLEMENTARY INFORMATION:

I. Objectives

    The objectives of this proposed amendment are to:
     Ensure that each System institution understands that 
promoting diversity and inclusion is critical to the institution's 
long-term success;
     Internalize diversity and inclusion into the corporate 
culture of each System institution;
     Ensure that each System institution develops strategies 
and actions to achieve diversity and inclusion within its workforce, 
management and governance structure, and assesses progress towards 
accomplishing these strategies and actions; assesses the strengths and 
weaknesses of its current workforce, management and governance 
structure; and considers succession planning; and
     Ensure that each System institution considers how it will 
further the objective of being responsive to the credit needs of all 
eligible and creditworthy agricultural producers and other eligible 
persons with specific attention to diversity and inclusion.

II. Importance of Human Capital and Marketing Plans

    Planning is critical to the success of any organization, including 
FCS institutions.\1\ As stated in EM-515 of FCA's Examination Manual 
(EM), ``In its simplest terms, planning is the process of determining: 
(1) [W]here the institution is; (2) where it would like to be; and (3) 
how it plans to get there.'' \2\ The EM recognizes several benefits of 
effective planning, including that it provides a better approach to 
decision-making because it minimizes the element of surprise and 
maximizes the ability to manage change effectively and provides a basis 
for monitoring and measuring performance. The proposed amendment would 
require each institution to include a human capital plan and marketing 
plan as a part of its operational and strategic business plan required 
under Sec.  618.8440.
---------------------------------------------------------------------------

    \1\ The application of the amendment to Sec.  618.8440 does not 
apply to Farmer Mac. FCA has a provision in Sec.  652.60 that 
applies to Farmer Mac's business planning requirements.
    \2\ Our EM is currently in the revision process. Accordingly, 
any citations to or quotes from the EM are subject to change. 
However, we do not expect that we will retract any of the ideas we 
express on planning.
---------------------------------------------------------------------------

    We recognize that many institutions are developing human capital 
and marketing plans, either as part of formulating their business plans 
or separately, but some institutions may not have a formalized process 
for developing human capital (including succession) or marketing plans. 
Formally incorporating the human capital and marketing plan 
requirements into an institution's business plan recognizes the 
importance of planning for the future of the institution.

III. Embracing Diversity and Inclusion Is Vital to the Future of the 
FCS

    One of the key elements we are proposing--for both the human 
capital and the marketing plan--is the element of diversity and 
inclusion. Institutions would have to consider diversity and inclusion 
within their workforce, management and leadership as well as in their 
outreach to all eligible and creditworthy persons within their 
territories.
    The United States--including its farming communities and rural 
areas--is becoming increasingly diverse. The pool of eligible and 
creditworthy borrowers includes men and women from a variety of racial 
and ethnic backgrounds. It includes young farmers, as well as older 
ones. It consists of producers with small, part-time operations, as 
well as producers with thousands of acres and millions of dollars in 
gross income. It also consists of producers who operate within local 
food systems, which typically involve small farmers producing 
heterogeneous organic or specialty crops, and short supply chains in 
which farmers also perform marketing functions, including storage, 
packaging, transportation, distribution and advertising. According to 
the 2007 U.S. Census of Agriculture, most farms that sell directly to 
consumers are small farms with less than $50,000 in total farm sales 
and are

[[Page 30282]]

located in or near metropolitan counties.\3\
---------------------------------------------------------------------------

    \3\ The information in this paragraph concerning local food 
systems can be found at https://www.ers.usda.gov/Publications/ERR97/ERR97_ReportSummary.pdf.
---------------------------------------------------------------------------

    The 2007 Census of Agriculture found that of the 2.2 million farms 
in the United States, 370,000 had a principal operator--the person who 
is in charge of day-to-day decisions--that was not a white male. 
Between 2002 and 2007, farm operators who were women, American Indian, 
Asian, Black and Hispanic/Latino increased.\4\ Clearly, agriculture in 
America is becoming more diverse.
---------------------------------------------------------------------------

    \4\ The information in this paragraph can be found at https://www.agcensus.usda.gov.
---------------------------------------------------------------------------

    If the FCS is to continue as a strong and vibrant supporter of 
agriculture in America, it must develop specific marketing plans to 
reach all potential borrowers, including those in market segments that 
may currently be underserved. In addition, in order to effectively 
reach and serve these potential borrowers, each institution will have 
to ensure that its staff and boards of directors reflect the diversity 
of its chartered territory. Unless System institutions commit to 
embracing diversity and inclusion in lending, employment and 
governance, they risk losing market share and relevance in the 
marketplace.
    In addition to this ``business case'' for diversity and inclusion, 
section 1.1(b) of the Farm Credit Act of 1971, as amended (Act), 
requires the System to be inclusionary in its lending. Section 1.1(b) 
provides that the System was established as a ``permanent system of 
credit for agriculture which will be responsive to the credit needs of 
all types of agricultural producers having a basis for credit. * * *'' 
As a Government-sponsored enterprise (GSE), the System has a statutory 
obligation to serve all types of eligible and creditworthy persons.\5\
---------------------------------------------------------------------------

    \5\ Congress has expressly imposed diversity and inclusion 
requirements on the housing GSEs. The Housing and Economic Recovery 
Act of 2008 requires the Federal National Mortgage Association 
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie 
Mac) and the Federal Home Loan Banks to promote diversity and the 
inclusion of women and minorities in all activities including, but 
not limited to, their management, employment and contracting. Public 
Law 110-289, 122 Stat. 2643, section 1116. The Federal Housing 
Finance Agency recently adopted a regulation implementing this 
requirement. 75 FR 81395 (Dec. 28, 2010).
---------------------------------------------------------------------------

IV. Current Efforts of the FCS To Advance Diversity and Inclusion

    Many System institutions have already taken steps in the area of 
diversity and inclusion. Some of these steps are explicitly designed to 
increase diversity and inclusion, while others may have enhanced 
diversity and inclusion as a consequence. These measures are a good 
foundation for the planning that this proposed amendment would require.

A. Young, Beginning, and Small (YBS) Farmer Activities

    In 1980, Congress added section 4.19 to the Act. This provision 
requires each System association to prepare a program for furnishing 
sound and constructive credit and related services to YBS farmers and 
ranchers.\6\ Because YBS farmers and ranchers can include women and/or 
members of minority, socially disadvantaged, and other traditionally 
underserved groups, System YBS programs may often include service to 
these groups as part of the overall YBS population. Although the 
programs may not have the explicit objective of advancing customer 
diversity and inclusion, many of the program activities institutions 
engage in for YBS education, marketing and outreach could also be 
catalysts for diversity and inclusion.
---------------------------------------------------------------------------

    \6\ FCA's implementing regulation is at 12 CFR 614.4165. We 
provide guidance in FCA Bookletter BL-040.
---------------------------------------------------------------------------

B. Section 4.38 of the Act

    Section 4.38 of the Act requires all System institutions with more 
than 20 employees to ``establish and maintain an affirmative action 
program that applies the affirmative action standards otherwise applied 
to contractors of the Federal government.'' As stated in EM-530:

    In general, an acceptable [affirmative action program (AAP)] 
plan must include an analysis of areas where the institution is 
deficient in the utilization of minority groups and women. The [AAP] 
plan also should set goals and timetables to which the institution's 
good faith efforts must be directed to correct deficiencies in 
utilizing minorities and women at all levels and in all segments of 
its work force.

This AAP plan requirement yields information about each institution's 
utilization of women and minorities in its workforce. It does not, 
address the larger issues of diversity and inclusion, but it does 
provide a sound basis and foundation for a comprehensive human capital 
plan.

C. FCS Diversity Workgroup

    The System established a Diversity Workgroup (Workgroup) in 2006 to 
increase diversity awareness, promote understanding of inclusiveness, 
and serve as a diversity resource within the System. The Workgroup 
recognizes the business case for diversity and inclusion; the 
Workgroup's belief is that fulfillment of its mission will assist the 
System in being more responsive to marketplace needs, strengthen its 
public position and contribute to enhanced workplace engagement. Since 
its founding, the Workgroup has sponsored a diversity conference, 
several training workshops, speakers, outreach and communications; 
furthermore, it is in the process of developing a longer-term work 
plan. The Workgroup has publicized the successful bottom line business 
results that institutions that embrace diversity and inclusion have 
achieved. We encourage all System institutions to support and work 
closely with the Workgroup to achieve a more inclusive workforce and 
borrower base.

D. Current Diversity and Inclusion Activities of Institutions

    Some System institutions are already taking significant actions to 
assure their future success by reaching out to increase the diversity 
of their employees and customers. They recognize that a cultural and 
workforce transformation is required to grow their lending. 
Institutions have taken steps such as the following:
     Adding minority staffing to reflect the demographics of 
their territories, recognizing that new customers want to do business 
with lenders that understand their language and culture;
     Producing sales materials and providing financial and 
business training in various languages spoken in their chartered 
territories;
     Marketing through ethnic business and community 
organizations;
     Marketing to Hispanic/Latino communities via Web sites 
that have information translated into Spanish;
     Conducting diversity and inclusion education and training 
sessions for their directors, managers and employees;
     Establishing diversity and inclusion councils;
     Recruiting new employees through female and minority 
organizations;
     Establishing mentoring relationships with new employees, 
particularly women and minorities from different ethnic groups and 
backgrounds;
     Creating career tracks to ensure that all employees have 
the opportunity to ascend into positions of management and leadership;
     Partnering with minority youth development organizations; 
and
     Closely analyzing the demographics of their marketplace to 
understand that outreach to minority and other underserved producers 
can lead to tremendous growth.


[[Page 30283]]


According to institutions that have taken actions such as these, 
material increases in loan volume, net earnings, return on equity and 
assets, operating efficiency, cost efficiency and staff retention have 
resulted.
    With this proposed amendment, we believe that all System 
institutions should take actions such as those listed above. The United 
States is becoming more diverse, and any lending institution that fails 
to include all potential customers in its outreach runs a serious risk, 
in the long run, of not being a vital source of financing in America.

V. What is diversity and inclusion?

    Diversity should not be viewed as a list of demographic criteria. 
Rather, diversity is best thought of as the inclusion of all 
individuals of varying race, ethnicity, sexual orientation, age, 
disability, social class, religious and ideological beliefs. Where a 
particular institution needs to focus its attention depends on the 
nature of its territory and what groups have traditionally been 
underrepresented or underserved.
    Diversity and inclusion in employment focus on using the talents of 
people of different backgrounds, experiences, and perspectives to 
improve the workforce environment and productivity. These differences 
have a strong influence on how individuals approach challenges and 
solve problems, make decisions and identify opportunities.
    Diversity and inclusion in lending focus on looking beyond the 
traditional customer base to ensure that all eligible and creditworthy 
persons have access to credit and related financial services. Examples 
of non-traditional customers may include women and minorities who 
operate traditional farm businesses as well as those who operate within 
local food systems.
    Diverse employees and/or effective outreach and marketing programs 
could aid the System in reaching new customers. For example, diverse 
employees may more effectively reach diverse borrowers, thereby 
widening the pool of potential customers. Moreover, diverse employees 
bring different perspectives to an organization and may develop more 
creative and innovative products and services, which can also increase 
the customer base.

VI. Overcoming Barriers to Advancing Diversity and Inclusion

    Many different kinds of barriers to achieving diversity and 
inclusion may exist. Some may not fully appreciate the business 
opportunity that diversity and inclusion can provide. Others may 
recognize the opportunity but may not know what steps to take to 
further diversity and inclusion.
    In Section IV. above, we discuss specific steps institutions have 
taken in furtherance of diversity and inclusion. In Section VII. below, 
we discuss the requirements of the proposed amendment that we believe 
will advance diversity and inclusion. In this section, we provide more 
conceptual suggestions for bringing about the institutional cultural 
change that is necessary to achieve diversity and inclusion.

A. Include Diversity and Inclusion in the Mission Statement

    Including diversity and inclusion in an institution's mission 
statement is a key element in informing stakeholders about the 
institution's business philosophy and how it will operate.
    As stated by a leading diversity Web site, although corporate 
mission statements may seem simple on the surface, they are an 
important clue as to how a company operates and what its core values 
are. ``Given the increasing diversity of the American [workforce] and 
the multicultural consumer base, companies that express a commitment to 
[workforce], marketplace and supplier diversity and inclusion will 
attract the most talented employees and gain loyal investors and 
customers.'' \7\
---------------------------------------------------------------------------

    \7\ Diversity, Inc.'s fifth edition of The Business Case for 
Diversity dated April 2, 2006. Retrieved online at https://diversityinc.com/content/1757/article/208/.
---------------------------------------------------------------------------

    A company should use its mission statement to develop trust among 
its varied constituencies of employees, customers, shareholders and 
other stakeholders--suppliers, members of the community and anyone else 
who has an interest in or is affected by the company's operations and 
policies. References in a mission statement to ``inclusive,'' 
``diverse,'' ``nondiscrimination,'' ``integrity'' and ``trust'' may 
communicate that the company is committed to respecting people and 
adhering to its own values.
    Diversity and inclusion in the mission statement are essential to 
communicating an institution's commitment to these principles; however, 
it will not, on its own, be sufficient in creating a diverse and 
inclusive environment in the institution's culture. The suggestions 
that follow provide ideas for how institutions can instill diversity 
and inclusion into their culture.

B. Promote Inclusiveness, Not Just Diversity

    Increasing diversity--recruiting from underrepresented groups--is 
only part of what is necessary to create an organization in which all 
individuals have a sense of value. An employer's efforts must also be 
focused on inclusiveness, which involves intentional, ongoing 
engagement of diversity and inclusion within organizations, removal of 
hidden barriers and recognition of unconscious bias. Inclusiveness is 
not just about numbers; it is also about creating an inclusive 
organizational culture.
    Members of majority groups may feel excluded from diversity and 
inclusion initiatives because they feel like those initiatives have 
nothing to do with them. Or they may even feel threatened by a change 
in the status quo. If this is the case, diversity and inclusion will 
not occur.
    Members of the majority group, particularly those in influential or 
leadership positions, must be part of making the workforce reflect the 
demographics of their market segment (or segmentation). If the majority 
group decides that change must happen, it will happen quickly. 
Moreover, this group's hands-on involvement will send a powerful 
message to the rest of the organization about the importance of 
diversity and inclusion.\8\
---------------------------------------------------------------------------

    \8\ See, Practical Steps for Engaging White Men in Diversity and 
Inclusiveness Efforts. Retrieved online at https://www.centerforlegalinclusiveness.org/clientuploads/NALP%20September%202010_Nalty.pdf.
---------------------------------------------------------------------------

C. Make Diversity and Inclusion Part of the Corporate Culture

    The boards of directors, chief executive officers, and senior 
management have the authority to create a corporate culture that is 
reflective of the demography of the constituents working and doing 
business in the institution's territory. Establishing diversity and 
inclusion at the highest level of the organization is only the 
beginning of a successful program. By continuously reinforcing 
diversity and inclusion initiatives and holding management accountable, 
the institution can create an environment of inclusion and acceptance.

VII. The Proposed Amendments

    The proposed amendments to our regulations would require each 
institution to adopt a human capital plan--a plan that would 
strategically address diversity and inclusion as well as other 
specified matters--as part of its business plan. The regulation would

[[Page 30284]]

also require each institution to adopt a marketing plan that assesses 
how the institution will further the Act's objective that the System be 
responsive to the credit needs of all types of agricultural producers 
having a basis for credit. Both of these plans would have to be 
included in the operational and strategic business plan required under 
Sec.  618.8440 of our regulations.
    Before we discuss the specific requirements of the proposed 
amendments, we want to reiterate our views of diversity and inclusion. 
Diversity is best thought of as the inclusion of all individuals of 
varying race, ethnicity, sexual orientation, age, disability, social 
class, religious and ideological beliefs, rather than simply as a list 
of demographic criteria. Where a particular institution needs to focus 
its attention depends on the nature of its territory and what groups 
have traditionally been underrepresented or underserved.

A. Section 618.8440(b)(7)--Human Capital Plan

    Proposed Sec.  618.8440(b)(7) would require institutions to include 
a human capital plan in their operational and strategic business plan.
    Proposed Sec.  618.8440(b)(7)(i) would require the human capital 
plan to include strategies and actions to achieve diversity and 
inclusion within the institution's workforce, management and governance 
structure and an assessment of the progress the institution has made 
towards accomplishing these strategies and actions.
    Proposed Sec.  618.8440(b)(7)(ii) would require the human capital 
plan to describe the institution's current workforce, management and 
governance structure and to assess their strengths and weaknesses. We 
believe such an assessment is a prudent human resources management 
practice that every employer should engage in to ensure long-term 
success. We expect that institutions are already undertaking such 
assessments.
    Proposed Sec.  618.8440(b)(7)(iii) would require the human capital 
plan to describe the institution's workforce and management succession 
programs. We believe that prudent succession planning is necessary to 
ensure the long-term success of an institution.
    These requirements would complement the guidance that has long been 
provided in FCA's EM-530, which states that a sound human resources 
management plan must address the areas in which an institution will 
grow, decline or change as a result of alterations to the institution's 
mission and function and how such alterations will affect staffing 
needs. Management succession plans should address levels ranging from 
middle management to the chief executive officer. The succession plan 
should be in writing and should include strategies for preparing 
candidates for succession.
    This proposed regulation would not specify the content of 
succession plans, but it would require that the succession planning be 
described in writing as part of an institution's human capital plan. We 
would continue to use our examination function to ensure that the 
succession plan is adequate.
    We discussed above many of the strategies an institution could 
employ to achieve diversity and inclusion in its workforce, including 
its management. There are many resources that institutions can use to 
learn more about how to advance diversity and inclusion in their 
workplaces. We encourage all institutions to take advantage of these 
resources.
    We also want to draw attention to FCA Bookletter BL-009,\9\ which 
addresses the authority of Farm Credit banks and associations to 
appoint directors. In BL-009, we stated that bank and association 
boards of directors may appoint directors--both outside directors and 
``other appointed directors'' (stockholders who are appointed)--for 
specific public policy purposes, such as facilitating diversity. We 
encourage all institutions to consider appointing directors for this 
purpose when feasible.\10\
---------------------------------------------------------------------------

    \9\ Dated December 15, 2006.
    \10\ We also note that Sec.  611.325(d)(1) of FCA regulations 
directs institution nominating committees, which submit slates of 
eligible borrowers wishing to run for stockholder-elected director 
positions, to ``endeavor to ensure representation from all areas of 
[an institution's territory] and as nearly as possible, all types of 
agriculture practiced within the territory.'' This regulation 
implements a specific requirement of section 4.15 of the Act. As an 
institution's borrower base becomes more diverse, nominating 
committees should consider seeking out qualified and representative 
borrowers of diverse backgrounds.
---------------------------------------------------------------------------

B. Section 618.8440(b)(8)--Marketing Plan

    Proposed Sec.  618.8440(b)(8) would require each institution to 
include a marketing plan in its operational and strategic business 
plan. The marketing plan would have to include specific steps the 
institution will take to further the objective of the Act, set forth in 
section 1.1(b), that the System be responsive to the credit needs of 
all types of agricultural producers having a basis for credit. The 
marketing plan would have to include, at a minimum, the following:
     A description of the institution's chartered territory by 
geographic region, types of agriculture practiced, and market segment; 
and
     Strategies and actions to provide the institution's 
products and services to all creditworthy and eligible persons with 
specific attention towards diversity and inclusion within each market 
segment, and an assessment of the progress the institution is making 
towards accomplishing these strategies and actions.
    In order to be able to describe its chartered territory, and to 
understand whom it should be striving to reach, an institution must 
know the characteristics and market segmentation of its territory. 
Market segmentation is the identification of portions of the market 
that are different from one another and can include, but is not limited 
to, geographic or demographic segmentation or types of agriculture 
practiced. Market segmentation allows a business to better satisfy the 
needs of its potential customers.\11\
---------------------------------------------------------------------------

    \11\ The NetMBA Business Knowledge Center's Web site provides a 
discussion of market segmentation. Retrieved at https://www.netmba.com/marketing/market/segmentation/.
---------------------------------------------------------------------------

    A vast amount of demographic information, down to the county level, 
is available on the Web sites of the Census of Agriculture,\12\ the 
U.S. Census Bureau,\13\ and the United States Department of 
Agriculture's Economic Research Service.\14\ In addition to information 
about women and minorities, institutions should also consider non-
traditional local food systems. Producers in all of these groups may be 
underserved.
---------------------------------------------------------------------------

    \12\ https://www.agcensus.usda.gov.
    \13\ https://www.census.gov.
    \14\ https://www.ersusda.gov/data/ruralatlas.
---------------------------------------------------------------------------

    Once an institution knows its marketplace, it must then formulate 
strategies and actions to provide the institution's products and 
services to all creditworthy and eligible persons. As discussed above, 
one strategy should be to ensure the institution's workforce and boards 
of directors generally reflect the demographics and other 
characteristics of its territory. Institutions should be especially 
mindful of employee characteristics--such as not speaking languages 
other than English--that can pose high barriers to doing business with 
potential borrowers.
    Marketing plans should include grassroots outreach activities and 
education efforts that market to underserved populations regarding 
business and financial planning and leadership and loan programs for 
persons who are creditworthy and eligible to borrow.

[[Page 30285]]

    System institutions should also continue to demonstrate their 
commitment to diversity and inclusion through ongoing training and 
workshops that reinforce leadership's and management's commitment to 
new markets. These activities can be viewed as opportunities for 
leadership and management to educate the workforce on the negative 
consequences of unconscious bias that may stifle or reverse diversity 
and inclusion initiatives.
    The marketing plan must also assess the progress the institution 
has made in accomplishing its strategies and actions to serve all 
creditworthy and eligible persons within each market segment.
    It may be difficult for institutions to measure the success of 
their outreach in some respects, because the Equal Credit Opportunity 
Act (ECOA) currently precludes creditors from asking most applicants 
for information such as race, ethnicity or gender (even if that 
information is collected by an independent third party after the loan 
decision has been made).\15\ In the recent Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act), however, Congress 
amended the ECOA to require financial institutions (including FCS 
institutions) to ask all business applicants applying for credit 
whether they are women-owned, minority-owned or small businesses.\16\ 
Although the requirement will technically be effective on the 
``designated transfer date'' of the Dodd-Frank Act, which has been 
established by the Secretary of the Treasury as July 21, 2011, 
implementing regulations to be adopted by the Consumer Financial 
Protection Bureau will specify when compliance should begin.
---------------------------------------------------------------------------

    \15\ Regulation B (12 CFR Part 202), at Sec.  202.5(b). 
Regulation B implements the ECOA. Regulation B, Sec.  202.13, 
provides an exception to this prohibition. This provision requires 
creditors to ask about an applicant's race, ethnicity, sex, marital 
status, and age from all applicants for credit primarily for the 
purchase or refinancing of a dwelling occupied or to be occupied by 
the applicant as a principal residence, where the extension of 
credit will be secured by the dwelling.
    \16\ Public Law 111-203, section 1071(a).
---------------------------------------------------------------------------

    Moreover, a significant amount of information about borrowers is 
available even today. Institutions should certainly know if they are 
serving borrowers in languages other than English--if they have the 
capability to serve those borrowers. They should have demographic 
information about borrowers receiving Farm Service Agency-guaranteed 
socially disadvantaged farmer and rancher loans, which are available to 
members of groups whose members have been subject to racial, ethnic, or 
gender prejudice because of their group membership, including American 
Indians or Alaskan Natives, Asians, Blacks or African Americans, Native 
Hawaiians or other Pacific Islanders, Hispanics/Latinos and women. And 
they should know if they are serving non-traditional customers who 
operate within local food systems producing organic or specialty crops. 
Reaching members of all of these groups will enhance an institution's 
marketplace diversity.

VIII. Conclusion

    The FCA Board acknowledges that the System, under the guidance of 
the Diversity Workgroup, is engaging in many initiatives to address 
diversity and inclusion within its workforce and reach out to the 
diverse base of persons eligible to borrow from the System. Diversity 
and inclusion is a never-ending process that needs the support and 
direction of each institution's leaders and management. With that 
support and direction, diversity and inclusion can become a normal 
business practice that is intrinsically rewarding for all individuals 
doing and seeking business with the institution. Institution leaders 
and managers must be creators and innovators to make diversity and 
inclusion a part of the routine dialogue with the workforce and 
customers. Ultimately, each institution must review its past practices, 
assess its current practices, and make the right adjustments going 
forward to ensure that it remains relevant and fulfills its GSE mission 
in the current and future financial markets.

IX. 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 proposed 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 618

    Agriculture, Archives and records, Banks, banking, Insurance, 
Reporting and recordkeeping requirements, Rural areas, Technical 
assistance.

    For the reasons stated in the preamble, part 618 of chapter VI, 
title 12 of the Code of Federal Regulations is proposed to be amended 
as follows:

PART 618--GENERAL PROVISIONS

    1. The authority citation for part 618 continues to read as 
follows:

    Authority:  Secs. 1.5, 1.11, 1.12, 2.2, 2.4, 2.5, 2.12, 3.1, 
3.7, 4.12, 4.13A, 4.25, 4.29, 5.9, 5.10, 5.17 of the Farm Credit Act 
(12 U.S.C. 2013, 2019, 2020, 2073, 2075, 2076, 2093, 2122, 2128, 
2183, 2200, 2211, 2218, 2243, 2244, and 2252).

Subpart J--Internal Controls

    2. Amend Sec.  618.8440(b) by adding new paragraphs (b)(7) and 
(b)(8) as follows:


Sec.  618.8440  Planning.

* * * * *
    (b) * * *
    (7) A human capital plan that includes, at a minimum, the 
following:
    (i) Strategies and actions to achieve diversity and inclusion 
within the institution's workforce, management and governance structure 
and an assessment of the progress the institution has made in 
accomplishing these strategies and actions;
    (ii) A description of the institution's current workforce, 
management and governance structure and an assessment of their 
strengths and weaknesses; and
    (iii) A description of the institution's workforce and management 
succession programs.
    (8) A marketing plan that strategically addresses how the 
institution will further the objective of the Act, set forth in section 
1.1(b) of the Act, that the System be responsive to the credit needs of 
all types of agricultural producers having a basis for credit. The 
marketing plan must include, at a minimum, the following:
    (i) A description of the institution's chartered territory by 
geographic region, types of agriculture practiced and market segment; 
and
    (ii) Strategies and actions to provide the institution's products 
and services to all creditworthy and eligible persons with specific 
attention towards diversity and inclusion within each market segment, 
and an assessment of the progress the institution has made in 
accomplishing these strategies and actions.

    Dated: May 19, 2011.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2011-12786 Filed 5-24-11; 8:45 am]
BILLING CODE 6705-01-P