Statement on Regulatory Burden, 21693-21698 [2019-09960]

Agencies

• Farm Credit Administration

[Federal Register Volume 84, Number 94 (Wednesday, May 15, 2019)]
[Rules and Regulations]
[Pages 21693-21698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09960]



[[Page 21693]]

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FARM CREDIT ADMINISTRATION

12 CFR Chapter VI

RIN 3052-AD24


Statement on Regulatory Burden

AGENCY: Farm Credit Administration.

ACTION: Final notice of intent.

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SUMMARY: This document is part of the Farm Credit Administration's 
(FCA, our, or we) initiative to consider the appropriateness of the 
requirements we impose on Farm Credit System (FCS or System) 
institutions, including the Federal Agricultural Mortgage Corporation 
(Farmer Mac). On May 18, 2017, we requested public comments, and this 
document responds to those comments.

DATES: May 15, 2019.

FOR FURTHER INFORMATION CONTACT: Gaylon J. Dykstra, Senior Policy 
Analyst, Office of Regulatory Policy, Farm Credit Administration, 
McLean, VA 22102-5090, (703) 883-4322, TTY (703) 883-4056; or Mary 
Alice Donner, Senior Counsel, Office of General Counsel, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-
4056.

SUPPLEMENTARY INFORMATION:

I. Objective

    The objective of this final notice is to inform the public of our 
response to the comments submitted to us regarding our request to 
identify regulations that they considered burdensome, ineffective, 
duplicative, or not based on law.

II. Background

    On May 18, 2017, we published a document in the Federal Register 
inviting the public to comment on our regulations that may duplicate 
other requirements, are ineffective, are not based on law, or impose 
burdens that are greater than the benefits received.\1\ We received 
letters from Farm Credit East, ACA; Capital Farm Credit, ACA; CoBank, 
ACB; the Farm Credit Council; and the Institute for Policy Integrity at 
the New York University School of Law. The letters commented on 
regulations concerning: Governance, lending, capital, investments, 
borrower rights and other FCA regulations and guidance. In addition, 
the Institute for Policy Integrity encouraged FCA to stay focused on 
its mandate to identify outdated, unnecessary, ineffective, or net 
costly regulations for repeal, replacement, or modification and not to 
instead prioritize recently promulgated and overwhelmingly cost-benefit 
justified rules identified by industry commenters.
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    \1\ See 82 FR 22762.
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    This document discusses the comments raised about FCA regulations 
and FCA activities. Many of the comments concern changes that we cannot 
implement because they are inconsistent with the Farm Credit Act of 
1971, as amended (Act), safety and soundness, and/or other FCA guidance 
or position. Some comments raise issues that are the subject of 
existing regulatory projects scheduled for consideration by FCA as set 
forth in our 2019 Regulatory Projects Plan, which is available on the 
FCA website, and those issues will be addressed in the planned 
regulatory projects. In other cases, commenters identify issues that 
need further evaluation before we can consider whether changes are 
appropriate.

III. Comments That Did Not Result in Regulatory Changes

A. Examinations

    Comment: Given the strong financial performance and credit quality 
of many institutions, the agency should consider lengthening the time 
between exams for highly rated institutions. This would not only reduce 
costs at the institution level, but also allow FCA to better leverage 
its own resources as well as reduce its own costs.
    FCA Response: We cannot make the recommended change because it 
conflicts with statute. Section 5.19 of the Act requires that ``except 
for Federal land bank associations, each institution of the System 
shall be examined by Farm Credit Administration examiners at such times 
as the Board may determine, but in no event less than once during each 
18-month period.'' Therefore, we cannot extend the time between 
examinations to longer than 18 months. However, we would like to note 
that despite the mandated examination cycle, we very much do leverage 
our resources, as suggested in the comment. We do this through our 
risk-based examination approach, wherein resources are allocated based 
on an institution's risk profile, and our use of off-site, electronic 
data throughout the examination process.

B. E-Sign Notifications

    Comment: We encourage the agency to reconsider the exceptions to 
``E-Sign'' notifications, and in particular those in Subpart D of part 
617. We note that E-Sign notifications of adverse credit decisions are 
permitted under ECOA regulations.
    FCA Response: The FCA E-Sign Regulations comply with Public Law 
106-229--Electronic Signatures in Global and National Commerce Act. 
This law has not changed since we published the FCA's E-Sign 
Regulations; therefore, we are unable to make any revisions.

C. Outside Director

    Comment: Section 611.220(a)(1) currently precludes an ``outside'' 
director from serving on the board of an FCA chartered Service 
Corporation. We believe this provision is more restrictive than is 
required by the Act (which, as you know, only requires a bank or 
association to have one outside director). As long as the prospective 
bank or association director candidate is not a director of another 
institution at the time of his selection, the Act's requirement is 
satisfied.
    Additionally, the arbitrary prohibition on outside directors 
serving on service corporations is contrary to the spirit of the Act 
(creating a ``second class'' of directors), and counterproductive in 
terms of keeping qualified directors from serving on service 
corporation boards.
    FCA Response: The comment is seeking to allow an outside director 
to simultaneously serve on two boards of directors--a System 
institution and a service corporation. We cannot make the recommended 
change because it conflicts with statute. Section 1.4 of the Act 
requires that ``at least one member shall be elected by the other 
directors, which member shall not be a director, officer, employee, or 
stockholder of a System institution.'' Section 4.27 of the Act provides 
that a service organization chartered by FCA is a Farm Credit System 
institution. We also believe that independence of the outside director 
is critical. We note that some service corporations are jointly owned 
by several System institutions, and service on the service corporation 
board could impair the independence of the outside director of the bank 
or association.

D. Unincorporated Business Entities (UBE)

    Comment: Eliminate the regulatory approval process for formation of 
UBEs pursuant to Sec.  611.1155 and address compliance through the 
examination process.
    FCA Response: We are not persuaded by the comment that a change is 
needed. The UBE rule includes a notice-only provision in Sec.  611.1154 
to simplify the process and avoid unnecessary administrative burdens 
and costs when investing in UBEs whose activities we have experience in 
overseeing. For investments in any other UBEs, we continue to believe 
that it is prudent to

[[Page 21694]]

have System institutions get our pre-approval to avoid the burden and 
cost associated with reversing investments that we later deem to be 
inappropriate, unsafe or unsound, or contrary to law through the 
examination process. FCA will, however, consider whether additional 
categories of UBE investments could be included in the notice-only 
provisions to reduce burden on System institutions.

E. Aquatic Related Businesses Industry

    Comment: Farm Credit may currently finance ``farm related 
businesses'' as eligible entities in the agriculture sector, and should 
also be permitted to finance related businesses which support the 
commercial fishing industry. Commercial fishing is the economic 
backbone of many rural communities in some parts of the nation, and 
producers and harvesters of seafood are themselves very dependent on 
many types of infrastructure for their long-term viability. FCA 
regulations that address ``related businesses'' should be modified to 
match overall lending authorities (for Farmers, Ranchers and Aquatic 
Producers and Harvesters) so that financing for ``fishing related 
businesses'' is specifically permitted.
    FCA Response: We responded to this comment in past Regulatory 
Burden Notices. Our latest response was ``[w]ith respect to aquatic-
related services, sections 1.9(2), 1.11(c)(1), and 2.4(a)(3) of the Act 
authorize title I and II System lenders to extend credit to businesses 
that furnish farm-related services to farmers and ranchers directly 
related to their on-farm operation needs. The Act does not reference 
financing businesses that furnish aquatic-related services to aquatic 
producers and harvesters. We are closely following this topic.'' \2\ 
Although our position on this issue remains unchanged, we continue to 
follow any interest or developments on this topic.
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    \2\ See 79 FR 42238 (July 21, 2014).
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F. Other Financing Institutions (OFI)

    Comment: Modify Sec.  614.4120 to allow System banks and individual 
OFI customers to develop financing agreements that are independent of 
the Agricultural Credit Association financing structure and allows them 
to have a general financing agreement that meets the unique needs and 
varying organizational structures of OFIs. Additionally, Sec.  
614.4130(b) should be modified to allow for the delivery to the FCA of 
all documents related to the GFA within 30 days of execution.
    FCA Response: We are not persuaded by the comment that a change is 
needed. FCA regulation 614.4120 requires the board of directors of each 
System bank to adopt policies and procedures governing the making of 
direct loans for direct lender associations and OFIs. While the term 
general financing agreement is the same term used for both direct 
lending associations and OFIs, the regulations do not require that they 
be the same or similar, only that the adopted policies and procedures 
prescribe lending policies and loan underwriting standards that are 
consistent with sound financial and credit practices.
    The request in the comment to increase the document delivery 
deadline to 30 days lacks any justification or support. The deadline in 
Sec.  614.4130(b) currently is 10 business days after execution of the 
documents. The need for the requested change is not readily apparent, 
especially given that the documents could easily be submitted to FCA 
electronically. Nonetheless, while we are not making any change at this 
time, we may consider the request as part of a future regulatory 
project.

G. Updated Financial Information

    Comment: Section 614.4150 does not specifically direct institutions 
to annually request updated financial information from customers. 
However, anecdotal evidence suggests that this is a requirement from 
the Office of Examination. This issue dates back to the credit crisis 
of the 1980s. Hopefully, we are past the time when this requirement is 
appropriate on any kind of an ``across the board'' basis.
    FCA Response: We agree with the comment that an ``across the 
board'' basis for updating financial information is not appropriate. In 
fact, we took this position in 1997 when we removed the requirement for 
annual updating of financial information from the regulations. Instead, 
current regulations require that System institution boards and 
management adopt written policies and procedures that set the standards 
for updating borrower financial information. These standards, along 
with their implementation, are then the basis for evaluating how well 
the board and management is managing the institution.
    We further address this issue in an Informational Memorandum dated, 
March 29, 2011, Loan Underwriting Standards--Borrower Financial 
Information. In this memorandum, we convey our expectations regarding 
the collection of borrower financial information and the impact of this 
information on loan underwriting standards. This Informational 
Memorandum is available on our website, www.fca.gov, under the `Laws 
and regulations' heading.

H. Loan Participation

    Comment: The requirements for evidencing an independent credit 
judgement by a purchaser of a loan participation from another System 
institution are unduly burdensome. Of course, each institution needs to 
be accountable for the loans, including purchases of participations, in 
their portfolio. Some form of simplified credit summary, or other 
analysis by a credit officer of the purchasing institution should be 
adequate to satisfy the requirements for an independent decision.
    FCA Response: This issue was thoroughly studied when we finalized 
this regulation, and our analysis has not changed.\3\ In fact, one of 
the points we made in the preamble was that ``Section 614.4325(e) does 
not require the participating institution to prepare a lengthy analysis 
or to compile separate documentation from the originating or lead 
lender. However, Sec.  614.4325(e) requires the purchasing institution 
to perform an objective, independent, and thorough analysis when it 
makes a loan decision.'' An institution cannot delegate its independent 
credit decision. However, we continue to believe that this regulation 
provides flexibility for an institution to streamline the decision-
making process and documentation of the decision, while ensuring that 
it fulfills its duty to protect institution assets.
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    \3\ See 57 FR 38237 (Aug. 24, 1992).
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I. Purchase of Whole Loans

    Comment: We again urge FCA to reconsider its prohibition on the 
purchase of whole loans by System institutions. Several years ago, FCA 
took the step to recognize the purchase of 100% participations in 
loans. Allowing System institutions to purchase whole loans would be of 
real benefit to farmers and ranchers in their financial planning, 
without increasing the credit exposure to the System over that created 
by the purchase of participations.
    FCA Response: We plan to address this issue in part through a 
notice of proposed rulemaking regarding those portions of commercial 
bank loans with unconditional guarantees by the U.S. Department of 
Agriculture. Depending upon the outcome of that regulatory project, 
those transactions may be considered investments due to the way in 
which they are offered for sale and resale.

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    For whole loans that cannot be considered investments, we are not 
considering a change. Section 614.4325(b) prohibits a FCS institution 
from purchasing any interest in a loan from an institution that is not 
a FCS institution except to pool or securitize loans, purchase a 
participation interest under its lending authority and purchase loans 
from the FDIC.

J. Public Disclosure About OFIs

    Comment: FCA Regulation Sec.  614.4595 requires the banks to 
receive written approval from the OFI before publicly disclosing its 
name, address, and internet address. It also requires a bank to adopt 
and maintain policies and procedures relating to OFI public 
disclosures. This requirement is unnecessary, excessively prescriptive, 
not required in law and burdens banks to maintain a policy that 
detracts from meaningful board oversight. Disclosure of name, address 
and internet address is not a regulatory matter and it is better left 
to the banks and OFIs to decide within the lending relationship.
    FCA Response: We are not persuaded by the comment that a change is 
needed. The regulation provides that a Farm Credit Bank or agricultural 
credit bank may disclose to members of the public the name, address, 
telephone number, and internet website of an OFI only if the OFI 
consents in writing. We continue to believe the regulation is necessary 
to deal with this issue and is not unduly burdensome. In addition, we 
continue to believe that the OFI, and not the FCS bank, should be the 
party to decide whether its information is made public as designed in 
the regulation.

K. Special Collateral Requirements

    Comment: The Special Collateral Requirements for post-closing 
certification, after the issuance of a standard title insurance policy 
and compliance with customary loan closing procedures, are duplicative 
and unnecessary. With this requirement, the System institution is being 
asked to effectively ``re-certify'' the work that the title insurance 
company has been paid to perform. The title insurance company has 
agreed to insure the risks that this regulation is designed to 
mitigate, which makes this requirement burdensome.
    FCA Response: We are not persuaded by the comment that a change is 
needed. The Act requires that long-term mortgage loans be secured by 
first liens on real estate as may be prescribed by regulations of the 
FCA. Section 615.5060 provides institutions one of two methods to 
validate the institution's first lien position: Attorney lien 
certification or title insurance policy. Choosing to use a title 
insurance policy creates obvious additional fiduciary responsibilities 
for the institution such as: Ensuring that the title insurance company 
is licensed, ensuring that the final policy meets the institution's 
specifications, and ensuring that the insured amount at least equals 
the outstanding loan balance. We do not view verifying that a policy is 
valid, adequate, and proper as ``re-certifying'' the work of the title 
insurance company, but simply good business practice to ensure 
compliance with the first lien requirement of the Act.

L. Public-Private Partnership Investments

    Comment: The approval process for public-private partnership 
investments, such as community health care facilities, would better 
serve rural America if it were streamlined. The current case-by-case 
approval process significantly hinders the development of critical 
projects in rural communities. The commenters recommend that FCA 
streamline the approval process for investments in public-private 
partnerships that benefit rural communities and modify the regulation 
to specifically allow the purchase of community facility bonds as 
mission-related investments.
    FCA Response: FCA has developed a process to expedite and 
streamline case-by-case requests that meet certain criteria. Many 
requests for community health care facilities are handled on an 
expedited basis. We continue to consider other ways to streamline the 
process for FCA consideration of case-by-case investment requests.

M. Interest Rate Disclosures

    Comment: The regulations require System Institutions to disclose 
rate changes when the rates are tied to a widely published external 
index (i.e., prime rate or LIBOR); however, the intent of permitting 
such interest rates is transparency. Borrowers can determine their rate 
by numerous published sources. To require notification by System 
institutions of rate changes as outlined by the regulation is 
unnecessary and burdensome.
    FCA Response: We cannot make the recommended change because it 
conflicts with statute. Section 4.13(a)(4) of the Act requires 
qualified lenders to provide borrowers, for all loans not subject to 
the Truth in Lending Act (15 U.S.C. 1601 et seq.), ``meaningful and 
timely disclosure'' of any change in the interest rate applicable to 
the borrower's loan within a ``reasonable time after the effective 
date'' of a change. Given that notification of a change in interest 
rate is a statutory requirement, removing the regulation is not an 
option. Nevertheless, we believe the regulation provides for 
significant flexibility by allowing for notifications to be made ``as 
part of the borrower's first regularly scheduled billing statement 
affected by the rate change.'' In other words, only the billing 
statements need to reflect the rate changes that occurred during the 
billing period and a separate notice is not required. Further, the 
status of LIBOR continuing as an index for loans is uncertain, and 
loans may need to be indexed to a replacement. Given uncertainty over 
the replacement, including whether it will be as widely published and 
available as LIBOR, we do not believe that this would be an appropriate 
time to consider any lessening of disclosure requirements for indexed 
loans.

N. Purchase of Insurance

    Comment: Section 4.29 of the Act requires a written notice to 
customers that the purchase of insurance (when required as condition to 
obtain the loan) through the lender is optional. Section 618.8040(b) 
should be revised to eliminate the requirement for a separate, written 
statement.
    FCA Response: We are not persuaded by the comment that a change is 
needed. We continue to believe that a written notice that is separately 
signed by the member or borrower is necessary to carry out 
Congressional intent. We also continue to believe that our position 
outlined in the preamble to the existing regulation continues to be 
appropriate: ``provide documentation to refute any potential 
allegations that borrowers were coerced into purchasing insurance 
offered by banks or associations.''

O. Human Capital and Marketing Plans

    Comment: The requirements of Sec. Sec.  618.8440(b)(7) and (b)(8) 
pertaining to human capital and marketing plans are excessively 
prescriptive and detailed without any corresponding benefit to the 
institutions or mission achievement. Specifically, the regulations 
required significant detail in both the human capital and marketing 
plans that goes beyond what is appropriate for inclusion, even at a 
summary level, in a business plan. To reduce burden and requirements 
that are duplicative in nature, the FCA should generalize the human 
capital and marketing plan requirements.
    FCA Response: We are not persuaded by the comment that a change is 
needed. These two regulatory sections were specifically written to 
minimize any

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regulatory burden and require the minimum strategies and actions needed 
to develop these sections of the business plan. We do not believe that 
these requirements rise to the level of ``significant detail'' and that 
they go ``beyond what is appropriate for inclusion in a business 
plan.''
    We continue to believe that these human capital and marketing 
planning regulatory requirements are critical to institution 
operations. Human capital and marketing plans are opportunities to lay 
out the institution's demographics and address strategies to make 
progress in diversity and inclusion as a vital component of its 
corporate culture and being more responsive to the credit needs of all 
eligible and creditworthy agricultural producers and other eligible 
persons.

P. Syndications and Participations Study

    Comment: The reporting requirements for the syndication and 
participations study are burdensome and manually intensive, time 
consuming, and do not augment internal management's tools. FCA should 
evaluate the data gathered to date for the syndication and 
participations study and determine the usefulness of gathering 
additional data in the future.
    FCA Response: We agree that less reporting is now adequate compared 
to what we originally required. Consequently, we reduced the reporting 
from quarterly to annually beginning in 2018. We are also evaluating 
more streamlined ways in which the annual data could be provided to 
FCA. However, we continue to believe that collecting the data is 
necessary for the analysis of the complex issues being considered 
through the loan syndication study.

Q. Voting Requirements

    Comment: Proxy voting requirements should be removed when using 
mail ballots. The use of digital processes are more efficient, and the 
proxy method required is cumbersome to stockholders, which encourages 
them not to vote.
    FCA Response: A proxy authorizes someone to attend a meeting 
instead of the voting stockholder and take actions, including casting a 
vote if there will be in-person voting, with the same authority as the 
stockholder granting the proxy. Our existing regulations in part 609 
and 611 allow proxies to be delivered electronically to those 
individual shareholders who have consented to e-commerce for voting 
events. However, electronic communications in voting events, including 
proxies, must satisfy the same confidentiality and security 
requirements when paper, and not electronics, are used.

R. Floor Nominations

    Comment: Section 611.326 specifies the procedures to use for 
allowing floor nominations at association annual meetings. The System 
recognizes that floor nominations are required in accord with the Farm 
Credit Act. However, the current procedures are unwieldy, cumbersome, 
time-consuming and costly. Moreover, they actually undermine the 
existing nomination committee process, and FCA guidance and can impede 
the ability of stockholders to make an informed voting decision. They 
make compliance with disclosure requirements difficult for both the 
institution and the nominee. Associations should have increased 
flexibility to adopt procedures that maintain the ability for floor 
nominations, while facilitating compliance with disclosure and voting 
procedures.
    FCA Response: We are not persuaded by the comment that a change is 
needed. This issue was thoroughly studied when we finalized this 
regulation, and our analysis has not changed.\4\ We believe that the 
procedures outlined in the rule are consistent with the statutory 
requirement and that the comment raises issues that we considered in 
the rulemaking.
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    \4\ See 75 FR 18726 (Apr. 12, 2010).
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IV. Comments That We Will Address in Existing Regulatory Projects

A. E-Commerce

    Comment: FCA should revise its E-commerce definition to be 
consistent with the definition used generally in the marketplace. The 
current application of the FCA regulatory definition is overly broad 
and results in an expansive application by examiners, application 
beyond what is required by E-commerce laws, and creates an unnecessary 
burden on FCS institutions.
    FCA Response: Our Cybersecurity Workgroup is reviewing the E-
commerce regulations, including whether the term ``E-Commerce'' is 
outdated. The Workgroup is considering whether the terminology of ``E-
Commerce'' should be removed from FCA Regulations and replaced with the 
word ``Information Technology''.

B. Criminal Referral Form

    Comment: FCA requires reports of known or suspicious criminal 
activity through the use of FCA's Criminal Referral Form (CRF). This 
referral form is unique to FCA and not integrated with FinCEN's 
Suspicious Activity Reporting (SAR) system that is used by law 
enforcement and Federal prosecutors to fight financial crimes. CoBank 
voluntarily complies with SAR filing requirements. As a result, FCA's 
requirement to use an FCA CRF is burdensome and confusing to criminal 
enforcement authorities in those situations when CoBank files a SAR and 
is required by FCA to also file an FCA CRF. Importantly, the SAR form 
provides effectively and efficiently the same information contained in 
the FCA CRF for use by law enforcement. FCA should eliminate this 
burden and accept the SAR form instead of the FCA CRF in those 
instances where reporting is provided under FinCEN filing requirements.
    FCA Response: Our Criminal Referral Workgroup is considering 
whether FCA should issue guidance to provide clarification on this 
issue.

C. Criminal Referral Form Threshold

    Comment: FCA requires the reporting of ``Any known or suspected 
criminal activity involving a financial transaction in which the 
institution was used as a conduit for such criminal activity (such as 
money laundering/structuring schemes)'' without any threshold or test 
for substance. To provide consistency in requirements applicable to 
commercial banks for the filing of SARs, the FCA should implement a 
$5,000 threshold for filing an FCA CFR when the suspect is known and 
$25,000 when the suspect is unknown.
    FCA Response: Our Criminal Referral Workgroup is considering 
whether we should provide guidance to clarify this issue.

D. Amortization Limits

    Comment: Production credit association and agricultural credit 
association loan authorities should be updated to reflect current 
System structure. There is no statutory basis to maintain restrictions 
on production credit association real estate lending, or that loans 
amortize within a period of 15 years, or whether the customer already 
owns the land or is purchasing it. Amortization and repayment should be 
a matter of appropriate credit administration, not regulation.
    FCA Response: We plan to address this comment in conjunction with 
the amortization limits project that is listed on our Regulatory 
Projects Plan and Unified Agenda. The project will address the 
amortization limits for loans made under the production credit 
association authority.

[[Page 21697]]

E. Liquidity Reserves

    Comment: Section 615.5134(d) describes specific, extensive 
requirements for each System bank to maintain its liquidity reserve. 
All System banks maintain liquidity reserves well in excess of 
regulatory requirements. The imposition of an additional 
``marketability study'' for each bank is unduly burdensome and ignores 
the facts and circumstances of each bank's portfolio. FCA should look 
at both the quantity and quality of the bank's liquidity reserve, as 
well as its actual experience with execution of transactions to decide 
whether a study is necessary, rather than imposing an arbitrary 
requirement to conduct a study that is both costly and of little, if 
any, value.
    FCA Response: We incorporated this comment into our study of the 
Liquidity Coverage Ratio.

F. Borrower Rights

    Comment: The requirements for adverse action should be amended to 
use the same terminology as that used in Regulation B.
    FCA Response: We plan to address this comment in conjunction with 
the borrower rights project that is listed on our Regulatory Projects 
Plan and Unified Agenda. As part of this project, we will study the 
similarities and differences between the Regulation B requirements and 
our adverse action regulations.

V. Comments That Need Further Evaluation

    As noted above, some of the regulatory burden issues raised need 
further evaluation before we can consider whether changes are 
appropriate.

A. Scope of Lending

    Comment: The Agency has not updated the Scope of Lending 
regulation, Sec.  613.3005, since 1997. Farming and who is considered a 
full-time farmer have continued to evolve over this time. Many farmers, 
regardless of the size of the farming operation, have multiple sources 
of off-farm income, but still devote a significant amount of time to 
farming. This is particularly true with the Young, Beginning and Small 
Farmer segment, which the System is directed to serve. FCA guidance in 
regard to financing of legal entities with 100% ownership by eligible 
farmers needs to be updated to reflect the variety of modern legal 
structures used in agricultural production.
    FCA Response: The comment correctly points out that the FCA has not 
recently updated this regulation. However, further evaluation is needed 
before we can consider whether the recommended changes are appropriate. 
We will consider this recommendation in any future review of this 
regulation.

B. Release of Borrower Names and Addresses

    Comment: Section 618.8310 should be omitted. With security and 
privacy of borrower information heightened, releasing borrowers' names 
and addresses conflicts with current practices and standards.
    FCA Response: Section 4.12A of the Act requires a System bank or 
association to provide to a stockholder of the bank or association a 
current list of stockholders of the bank or association not later than 
7 calendar days after the date on which the bank or association 
receives a written request for the stockholder list from the 
stockholder. This provision has been slightly revised in the most 
recent Farm Bill, and although we are not currently reviewing this 
regulation, we may consider reviewing this provision in the future.

C. Electric and Telecommunication Lending

    Comment: Make changes to Sec.  613.3100(c)(2) to reflect changes to 
the Rural Electrification Act, as amended (REA), since CoBank's lending 
authorities for electric and telecommunication borrowers are derived 
from the REA.
    FCA Response: Changes to FCA regulations in this area are not 
necessary for CoBank to implement the 2018 Farm Bill. Further 
evaluation is needed before we can consider whether regulatory changes 
are appropriate. We will consider this recommendation in any future 
review of this regulation.

D. Multiple Title Insurance Policy Ratio Amounts

    Comment: FCA regulation Sec.  615.5060(a)(2)(iii) establishing 
multiple title policy ratio amounts should be deleted. It has no legal 
validity, it does not always represent the risk profile of collateral 
and title issuers have different opinions/requirements.
    FCA Response: Further evaluation is needed before we can consider 
whether the recommended change is appropriate. We will consider this 
recommendation in any future review.

E. Annual Report to Shareholders

    Comment: Eliminate the requirement for distribution of the annual 
report in accordance with Sec.  620.4. Electronic access should be 
adequate. There is no need to mail copies of the annual report.
    Comment: The requirements of Sec.  620.6, in particular the 
provisions relating to retirement account information and travel 
reimbursement policies, are unduly burdensome and also confusing or 
even misleading to stockholders. We believe this is an area where the 
quality of the disclosures can be improved, while reducing paperwork 
and costs.
    FCA Response: Further evaluation is needed before we can consider 
whether the recommended changes are appropriate. We will consider this 
recommendation in any future review.

F. Disclosure Requirements for Sale of Borrower Stock

    Comment: Delivering a copy of the quarterly report along with 
annual report is burdensome and produces minimal value to stockholder. 
The same could be achieved by referencing location of both reports on 
website.
    FCA Response: As outlined in Sec.  615.5250, a System institution 
must provide a prospective borrower with several documents related to 
borrower stock in conjunction with obtaining a loan. We believe that 
including the annual report and most recent quarterly report in with 
the other documents is not a burden and that the benefit in helping to 
attract a prospective borrower outweighs any burden that may exist. 
Nonetheless, there may be room for modifications, but further 
evaluation is needed before we can consider whether the recommended 
change is appropriate. We will consider this recommendation in any 
future review.

G. Loan Data Reporting

    Comment: FCA has increased the amount of loan data required to be 
submitted to the agency. There is a material administrative cost to 
System institutions to update and maintain the systems to collect and 
report that information. FCA should consider the costs and benefits of 
those requirements on an institution specific basis.
    FCA Response: Further evaluation is needed before we can consider 
whether the recommended change is appropriate. We will consider this 
recommendation in any future review.

V. Future Efforts To Reduce Regulatory Burden on System Institutions

    For over 25 years, we have been making a concerted effort to remove 
regulatory burden whenever possible and will continue to do so into the 
future. However, we will maintain those regulations that are necessary 
to implement the Act and are critical for

[[Page 21698]]

the safety and soundness of the System. Our approach is intended to 
enable the System to continue to provide credit to America's farmers, 
ranchers, aquatic producers, their cooperatives and other rural 
residents.

    Dated: May 9, 2019.
Dale Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2019-09960 Filed 5-14-19; 8:45 am]
 BILLING CODE 6705-01-P