Loan Policies and Operations, 89280-89286 [2023-27929]
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Ocean, and the Gulf of Mexico. This
district shall have 10 members and 10
alternates.
(b) [Reserved]
■ 11. In § 905.120, revise paragraphs (d)
and (e) and remove paragraphs (f) and
(g).
The revisions read as follows:
§ 905.120
Nomination procedure.
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*
*
*
*
(d) At each meeting each eligible
person may cast one vote for each of the
persons to be nominated to represent
the district or group, as the case may be.
(e) Voting may be by written ballot. If
written ballots are used, all ballots shall
be delivered by the chairman or the
secretary of the meeting to the agent of
the Secretary. If written ballots are not
used, the committee’s representative
shall deliver to the Secretary’s agent a
listing of each person nominated and a
count of the number of votes cast for
each nominee for grower member and
alternate. Said representative shall also
provide the agent the register of eligible
voters present at each meeting, a listing
of each person nominated, and the
number of votes cast.
■ 12. In § 905.150, revise paragraph (d)
to read as follows:
§ 905.150 Eligibility requirements for
public member and alternate member.
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*
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*
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(d) The public member should be
nominated by the Citrus Administrative
Committee and should serve a 2-year
term which coincides with the term of
office of grower members of the
Committee.
Erin Morris,
Associate Administrator, Agricultural
Marketing Service.
[FR Doc. 2023–28315 Filed 12–26–23; 8:45 am]
BILLING CODE P
FARM CREDIT ADMINISTRATION
12 CFR Parts 614 and 620
RIN 3052–AD54
Loan Policies and Operations
Farm Credit Administration.
Final rule.
AGENCY:
ACTION:
The Farm Credit
Administration (FCA, we, or our) is
amending regulations governing young,
beginning, and small farmers and
ranchers (YBS). The final rule clarifies
the responsibilities of funding banks in
the review and approval of direct lender
association YBS programs, strengthens
funding bank internal controls, and
bolsters YBS business planning.
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SUMMARY:
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This regulation will be effective
the later of February 1, 2024, or at least
30 days after publication in the Federal
Register during which either or both
Houses of Congress have been in
session. We will publish a notice of the
effective date in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Technical information: Jessica
Tomlinson-Potter, Senior Policy
Analyst, Office of Regulatory Policy,
(703) 819–4667, TTY (703) 883–4056,
potterj@fca.gov or Legal information:
Hazem Isawi, Senior Attorney, Office of
General Counsel, (703) 883–4022, TTY
(703) 883–4056, isawih@fca.gov.
SUPPLEMENTARY INFORMATION:
DATES:
I. Objectives of the Final Rule
The objectives of this final rule are to:
• Increase direct lender associations’
YBS activity to a diverse population of
borrowers;
• Reinforce the supervisory
responsibilities of the funding banks,
authorized by section 4.19 of the Farm
Credit Act; and
• Require each direct lender
association to enhance the strategic plan
for their YBS program.
When developing YBS programs,
direct lender associations should
consider marketing to all populations of
YBS farmers and ranchers. Underserved
communities and groups can be
overlooked or excluded from marketing
efforts and education outreach, leaving
out a potential borrowing base.
Underserved groups include those
who have been subjected to racial,
ethnic, or gender prejudice because of
their identity as members of the group
without regard to their individual
qualities. Examples of underserved
communities include, but are not
limited to, Black or African American,
American Indian and Alaskan Native,
Hispanic, Asian and Pacific Islander,
LGBTQIA+, women, veterans, and
persons with disabilities. These are
examples of communities with a high
potential for individuals who may fall
into the Y, B, and/or S categories of
borrowers, and direct lender
associations should target such
communities specifically to reach the
entire universe of potential borrowers.
Underserved communities can often be
reached in schools and universities,
professional and social organizations, at
community gatherings, and local events.
Every effort should be made to reach
the entire universe of potential Y, B, and
S borrowers. Direct lender associations
should also work with their local Farm
Service Agency representatives to assist
the Farm Credit System with its
directive to serve all creditworthy Y, B,
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and S borrowers by breaking down
bureaucratic barriers to entry.
II. Background
The Farm Credit Act of 1971, as
amended (Act),1 establishes the Farm
Credit Administration as the safety and
soundness regulator of the Farm Credit
System (FCS or System). As stated in
the FCA Strategic Plan for FYs 2018–
2023, our mission is to ensure that
System institutions are safe, sound, and
dependable sources of credit and related
services for all creditworthy and eligible
persons in agriculture and rural
America. The System has a unique
mission to serve YBS farmers and
ranchers. Section 4.19 of the Act 2
requires each direct lender association
to establish a program to furnish sound
and constructive credit and related
services to YBS farmers and ranchers.
We continue to believe the System’s
YBS mission is important to enable
small and start-up farmers and ranchers
to make successful entries into
agricultural production. Also, we
believe it is important to ensure
marketing and outreach efforts include
all eligible and creditworthy persons,
with specific outreach to achieve
diversity and inclusion. The System’s
YBS mission is also critical to facilitate
the transfer of agricultural operations
from one generation to the next. We
remain committed to ensuring the
System fulfills its important mission to
YBS farmers and ranchers.
We published a proposed rule on June
16, 2022 (NPRM), recommending
updates to FCA’s YBS regulations,
which were last updated almost 20
years ago. This final rule largely adopts
the proposal with certain changes made
in response to comments, with a
particular focus on reducing an
increased administrative burden.
Comment letters, along with our
responses are discussed below.
III. Comments and Our Responses
The comment period ended August
15, 2022. We received 67 comment
letters. Most comments came from
System institutions or persons affiliated
with the System, with one letter from
the Farm Credit Council (Council)
acting on behalf of its membership. We
also received three letters from trade
groups representing commercial
banking.
Most commenters requested we
withdraw the proposed rule and keep
the existing regulations in place. Some
commenters offered solutions to bolster
practices such as continued
1 Public
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collaboration with FCA and System
workgroups without changes to the
existing regulation. Commenters stated
that the rule was administratively
burdensome, human capital intensive,
difficult for smaller direct lenders to
implement, and did not achieve the
shared goal of increasing YBS activity.
We also received comments in
support of the proposed rule that agreed
with the framework and accountability
the rule requires, stating the rule
changes should be done with more than
incremental progress in mind. Another
comment supported the idea of
increased reporting.
Specific Issues
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A. YBS Program Uniformity
System commenters expressed
concern that the prospect of a YBS
rating system and the proposed
requirements relating to funding bank
oversight may encourage all YBS
programs to ‘‘look alike’’ or to fit into a
‘‘cookie cutter’’ mold. While one of the
proposed rule’s stated objectives was to
provide elements that will be evaluated
as part of a rating system to measure
year-over-year YBS progress, we did not
propose to create any such rating system
itself through the rulemaking. For
clarity, however, this final rule omits
rating system matters in its statement of
objectives.
Next, we disagree that the proposed
changes to bank oversight
responsibilities will lead to ‘‘cookie
cutter’’ YBS programs. We have long
encouraged direct lender associations to
tailor YBS programs to serve the specific
needs of borrowers in the different
lending territories. Existing FCA
regulation § 614.4165(c), which is
redesignated paragraph (d) in this final
rule, states that each direct lender
association ‘‘must establish a program to
provide sound and constructive credit
and services to YBS farmers and
ranchers in its territory.’’ The reference
to ‘‘its territory’’ illustrates that each
YBS program should reflect the credit
and service needs of YBS borrowers
within that lending territory. While this
rulemaking enhances and strengthens
bank oversight responsibilities and
direct lender association YBS program
standards, it does not prescribe or
encourage uniformity of content among
YBS programs. We continue to expect
varying approaches among the direct
lender associations, appropriate to the
needs of borrowers in each lending
territory.
B. Definitions [§ 614.4165(a)]
The proposed rule had no substantive
changes to the definitions in current
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paragraph (a). We proposed grammatical
changes, including removing the word
‘‘and’’ between farmers and ranchers,
and adjusting punctuation. We received
one comment on the definition of a
‘‘beginning’’ farmer; however, that term
is not defined in regulatory text. The
definitions in paragraph (a) will be
finalized as proposed.
C. Farm Credit Banks Oversight
[Proposed § 614.4165(b)]
Commenters frequently raised
concerns on the topic of bank oversight.
Two non-System commenters supported
the concept of increased bank oversight,
stating they would like to see reform in
reporting and tracking, and that they
believe bank review and approval will
help with this. System commenters
opposed increased bank oversight for a
variety of reasons, which will be
discussed as they relate to each section
of the rule text. The proposed preamble
stated that we believed funding banks
were in a unique position to know the
YBS activities of their affiliated direct
lender associations and see how those
associations respond to the needs of
their respective borrowers. Commenters
strongly disagreed, stating funding
banks do not have ‘‘boots on the
ground’’ and are not familiar with local
YBS markets and needs. We considered
this feedback as we drafted the final
rule, which removes certain elements of
the proposed bank oversight
requirements.
Proposed paragraph (b)(1) required
each bank, among other things, to adopt
written policies directing direct lender
associations to establish YBS programs,
ensure direct lender association
coordination with others, and report to
FCA. A bank trade group commented
that the proposed rule lacked a
requirement for direct involvement or
representation of YBS farmers and
ranchers in the process of creating and
reviewing YBS programs. To address
this, the commenter recommended that
each bank be directed to adopt a written
policy requiring the bank and any
affiliated direct lender association to
form a committee comprised of local
YBS farmers and ranchers. The
commenter further recommended that
these committees be vested with
authority over YBS programs,
independent of the board of directors of
each institution. We decline to adopt
this recommendation because it is
outside the scope of the proposal.
Moreover, because Farm Credit is a
cooperative system run by memberborrowers who elect their respective
System institutions’ boards of directors,
YBS farmers and ranchers are
structurally situated to be heard and
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represented at the board level. We also
note that as a matter of practice, many
direct lender associations have various
YBS committees and advisory groups
that provide input and are involved in
program development. We do not
believe this additional involvement and
representation from YBS farmers and
ranchers is necessary at the bank level
given the current involvement of
member borrowers in System
governance at their direct lender
associations.
Proposed paragraph (b)(1)(i) required
each funding bank to adopt written
policies that direct their affiliated direct
lender associations to establish an
annual strategic YBS plan. While we did
not receive comments on this specific
paragraph, we received many comments
on the YBS strategic plan itself, which
are addressed in section D. Direct lender
association YBS strategic plan. Because
the proposal for an independent YBS
strategic plan is not being adopted in
this final rule, the requirement for bank
policy direction on such plan has been
removed.
The proposed rule redesignated
paragraph (b)(2) of the current
regulation as paragraph (b)(1)(ii). The
text of this coordination requirement
remained unchanged, but nonetheless
we received three comments from the
System stating it is unclear how much
coordination between organizations is
acceptable and how coordination can be
objectively evaluated. Although these
comments are outside the scope of the
proposal’s substantive changes,
coordination efforts are generally
sufficient if they accomplish the
objective that YBS programs ‘‘shall
assure that such credit and services are
available in coordination with other
institutions of the Farm Credit System
serving the territory and with other
governmental and private sources of
credit.’’ Act § 4.19(a). We expect that
specific coordination efforts will be
devised on an institution-by-institution
basis. Paragraph (b)(1)(ii) will be
finalized as proposed.
Proposed paragraph (b)(1)(iii)
required each bank to establish a policy
to direct each affiliated direct lender
association to submit a YBS strategic
plan and any other information
regarding its YBS program deemed
necessary by the bank. We received two
System comments and one comment
from the Council on this requirement. In
summary, the comments stated that
‘‘any other information deemed
necessary by the bank’’ was vague,
arbitrary, and therefore burdensome.
There was concern over inconsistency
of requirements between the banks and
the stifling of creativity for the direct
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lender. Further, there was commenter
concern on the relationship with the
direct lender and bank being damaged,
with various reasons listed. We received
many comments on the strategic YBS
plan itself, which are addressed in that
section. Because we are not adopting the
proposal’s requirement for an
independent YBS strategic plan, we are
removing proposed paragraph (b)(1)(iii)
from this final rule.
Proposed paragraph (b)(1)(iv) is
redesignated as paragraph (b)(1)(iii) and
finalized as proposed. Although we only
proposed a redesignation from the
current paragraph (b)(4) and a
replacement of ‘‘agency’’ for ‘‘FCA,’’ we
still received four comments.
Commenters agreed that no changes
were needed to the data reporting
requirement of ‘‘complete and accurate’’
in the rule text, but they did mention
concerns surrounding subjectivity of
criteria, which has not been a material
issue in the past. Commenters did not
provide reasons this would be a concern
going forward.
A trade group for commercial banks
commented that ‘‘achievements’’ may be
interpreted as denoting completion and
success. The commenter stated that
since success should not be presumed,
we should add ‘‘shortfalls’’ as an
element for the bank to report on in
addition to ‘‘operations’’ and
‘‘achievements.’’ We decline to adopt
this specific change because paragraph
(c)(2)(ii) as finalized requires the
operational and strategic business plan
to discuss variances and reasons for the
results. We expect that both positive
and negative variances will be discussed
in the plan. Reporting of negative
variances thus addresses the
commenter’s suggestion.
We received 46 comments on
proposed paragraph (b)(2). Two
commenters supported funding bank
oversight and approval while the rest
opposed this requirement. Those in
favor wanted to see reform in reporting
and tracking and believed that bank
oversight would help in that area. They
stated that oversight and accountability
are necessary, and this rule is a step in
the right direction for critical
accountability.
Those opposed to the proposed
changes relating to funding bank
oversight raised the following issues:
• cost and administrative burden;
• negative impacts on cooperative
structure and local control;
• no appeal or resolution process;
• expansion of current funding bank
duties;
• lack of funding bank personnel
expertise regarding individual YBS
markets;
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• biased, preferential, or inconsistent
evaluation among the four funding
banks;
• lack of guidance on goal standards
or what is considered acceptable/
successful;
• no value added to YBS programs;
• homogenization of YBS programs
resulting from a ‘‘uniform’’ bank
approval process; and
• exam findings and communication
to the System not warranting increased
bank oversight.
To address these comments, we made
changes to the rule by:
• removing the requirement for an
independent YBS strategic plan and
associated funding bank approval and
review,
• providing that funding bank review
and approval shall solely be to
determine whether the YBS program
contains all required components,
• updating the reference from
paragraph (c) in the current regulation
to paragraph (d) in the final rule, and
• stating that funding bank
communication of an incomplete plan
must be in writing and sent to FCA
within 30 days.
The statute provides that association
YBS programs are ‘‘[u]nder the policies
of the Farm Credit Bank board,’’ and
that ‘‘[e]ach program shall be subject to
review and approval by the supervising
bank.’’ The System’s comments and
representations about funding bank lack
of expertise, staff knowledge and
capability with respect to YBS programs
suggest there is room for the banks to
improve their capabilities in this area.
As in the existing regulation, banks
will still be required to review and
approve each direct lender association’s
YBS program. This rule clarifies that
such review and approval must be
performed annually. We find this
requirement complements—and is
logically connected to—the bank’s
responsibility for creating and
submitting the operations and
achievements report to FCA.
Specifically, annual review and
approval of direct lender association
YBS programs will give each bank a
better understanding of the programs in
their territories and ultimately result in
more accurate reporting to FCA.
To address concerns about the scope
of bank review, however, we are
revising the regulatory text so that
review and approval shall solely be to
determine whether the YBS program
contains the components of finalized
paragraph (d). As a result, the finalized
text more closely tracks the scope of
review specified in the current
regulation. Notwithstanding the
revision, we encourage open dialogue
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between the bank and direct lender to
continually improve program content.
With slight changes from the
proposal, this final rule provides that
where a bank concludes a YBS program
is incomplete, it must communicate that
fact in writing to both the direct lender
association and FCA within 30 days.
Proposed paragraph (b)(3) required
internal controls. Since banks are the
main YBS reporting entity to FCA,
having a strong internal control
environment is critical to safety and
soundness. We received four comments
from the System, the Council, and a
commercial bank trade group. The
commercial bank trade group stated
that, in the past, internal controls over
YBS data reporting processes have been
weak. They stated this resulted in
inaccurate reporting to FCA. They went
on to state weak reporting is a concern
they’d like to see addressed. The System
and Council stated that establishing new
internal controls will create redundancy
and inefficiencies. As discussed in
sections above and below, direct lenders
are not required to have an independent
YBS strategic plan in the finalized rule.
Therefore, bank internal control
requirements in the proposed rule for
direct lender YBS plans have been
removed. The Council commented that
banks should be able to rely on the
internal controls of the direct lender.
The bank’s responsibilities for review
and approval of YBS programs and data
compilation and reporting to FCA are
independent of direct lenders. For this
reason, it is necessary that each bank
has internal controls over the processes
they perform, just as direct lenders do.
Each organization in the System should
have internal controls over their
respective YBS responsibilities.
D. Direct Lender Association YBS
Strategic Plan [Proposed § 614.4165(c)]
Proposed paragraph (c)(1) required
each direct lender association to adopt
an independent 3-year YBS strategic
plan to guide the direct lender’s
required YBS program. We received 31
comments on this requirement from the
System and a commercial bank trade
group, all of whom were opposed for a
variety of reasons.
Many stated that YBS borrowers are
critical to the System’s sustainability,
are an integral part of direct lender’s
operations, and are a key component of
the overall business plan. As such, YBS
components are woven into almost
every aspect of a direct lender’s annual
business plan. Commenters went on to
say that YBS borrowers should be
considered in the context of the whole
business and included as part of the
overall business plan rather than
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separated out. The FCS commenters
stated that creating an independent plan
outside of the business plan would
create disconnected, redundant, and
unnecessary administrative burdens.
The FCS commenters noted that staff’s
time could better be used serving YBS
borrowers directly rather than
duplicating the business plans.
We considered this input and will not
finalize the requirement for an
independent YBS strategic plan. We
agree that YBS is an integral part of
direct lenders’ operations and should be
incorporated as part of overall business
planning. The intent of our proposal
was that an independent planning
document would put increased
emphasis on YBS. However, the same
goal can be achieved without creating a
separate document. It is our intent that
direct lenders give thoughtful
consideration into their strategic
lending to YBS borrowers, in both
current and potential markets.
While we are not changing the
existing requirement for a 3-year
planning period in the operational and
strategic business plan, we still received
comments on this area. Some
commenters stated that a 3-year plan is
not reasonable given volatility and
uncertainty, making future years a
guess. We believe it is important to be
forward looking and innovative in
strategic business planning. Three years
has been established as a minimum
planning period. We continue to believe
that three years is appropriate for
planning. Some commenters stated the
requirement to adopt a 3-year plan
within 30 days after the commencement
of the year is not enough time to analyze
the past year’s data and conflicts with
other business planning activity. While
we understand that the period around
the new calendar year may be
particularly busy, the timeframe for
adoption of the plan is specified in the
existing regulation, and we have not
proposed a change in this regard. We
believe the new calendar year continues
to be an appropriate time to conclude
activity and begin reporting processes.
Paragraph (c)(2) of the proposed rule
required that the strategic plan must
detail the operations of the YBS
program including all components in
paragraph (d). We received no
comments specific to this section. This
requirement has been combined into the
finalized (c)(1).
In proposed paragraph (c)(3)(i), direct
lenders were required to analyze
performance from the previous year in
achieving components of their YBS
program listed in proposed paragraph
(d). We received a comment from a
banking trade group that analyzing only
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performance and effectiveness but not
identifying areas to improve upon is not
a balanced approach. While we
understand the commenter’s point, it is
our expectation that direct lenders take
a balanced approach when analyzing
performance. If a goal is not achieved,
it must still be reported on.
Proposed paragraph (c)(3)(ii) received
no comments. We redesignated and
finalized it as paragraph (c)(2)(ii).
Proposed paragraph (c)(3)(iii) received
no comments, and we redesignated and
finalized it as paragraph (c)(2)(iii). We
replaced the word, ‘‘efforts,’’ with
‘‘qualitative factors and quantitative
goals.’’ We added the words, ‘‘expand
access to,’’ which derived from
proposed paragraph (c)(3)(iv).
We received seven comments from
the FCS opposing proposed paragraph
(c)(3)(iv). The requirement proposed
that direct lenders assess the
effectiveness in providing efforts
resulting in credit provided to new and
expanding YBS operations. Commenters
discussed the high subjectivity of such
data and stated they are unclear how
effectiveness is measured. Examples
were given of a person attending a
seminar and several years later
becoming a borrower. How would direct
lenders track and record such activity?
Commenters stated databases are not
currently in place to collect such data
and it is cost prohibitive with little
value added to create a database.
Commenters also believed that tracking
this data provided no value to YBS
borrowers. After assessing comments,
we added the words ‘‘and expand access
to’’ which derived from proposed
paragraph (c)(3)(iv) to finalized
paragraph (c)(3)(iii) and removed the
other requirements of proposed
paragraph (c)(3)(iv). We believe that
tracking such data and identifying how
direct lender association YBS programs
are assisting and expanding access to
credit and education for YBS farmers
and ranchers does provide value to YBS
farmers and ranchers by strengthening
and improving lender’s YBS programs.
To comply with this provision, direct
lenders must assess how their YBS
program components assist and expand
access to credit and education for YBS
farmers and ranchers.
E. Direct Lender Association YBS
Program [Proposed § 614.4165(d)]
We received one comment on
proposed paragraph (d) from a
commercial banking trade group in
support of the requirement. There were
no opposing comments. The comment
stated that the components have been
long awaited and both qualitative and
quantitative factors play important roles
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in YBS lending. Paragraph (d) is
finalized as proposed.
We received one comment from a
commercial banking trade group
regarding the mission statement
requirement in proposed paragraph
(d)(1)(i)(A). The commenter stated that
the mission statement should explicitly
recognize the importance of YBS and
ensure support at the direct lender level.
We believe the requirement is
satisfactory as drafted in accomplishing
this purpose, and finalized it as
proposed.
Proposed paragraph (d)(1)(i)(B) is
finalized as proposed. We received two
comments on the direct lender internal
controls requirement in proposed
paragraph (d)(1)(i)(B). One System
commenter stated that adding internal
controls adds additional time, energy,
and costs to reporting. Internal controls
are an existing requirement that direct
lenders should already have in place.
Another commenter asked that internal
controls clarify the extent to which staff
must take stakeholder input into
account. While encouraged, the rule
does not require stakeholder input, nor
is it necessarily a component of an
internal controls system.
There was one comment from a
commercial banking trade group,
supporting the use of credit
enhancement tools. Proposed paragraph
(d)(1)(ii)(A) is finalized as proposed.
Proposed paragraph (d)(1)(ii)(B) is
finalized as proposed. It requires credit
and related services coordination with
System institutions, governmental and
private sources. This is a continuation
of requirements in existing paragraph
(c)(3)(ii). We received nine comments
on this requirement. One comment from
a commercial banking trade group
supported third-party coordination on
credit and related services. Eight
commenters, all from the System,
opposed this existing requirement.
Commenters stated that where direct
lender associations are over-chartered
within the same market, coordination
efforts will entice competition rather
than healthy collaboration. Another
System commenter stated that the
prospect of interterritorial competition
was untenable and would potentially
damage their association and members.
Some commenters stated that
collaboration is already occurring, and a
regulatory requirement is not needed.
System commenters were worried that
this requirement may be interpreted by
funding banks to force best practices for
one lender onto another lender, even if
the practices may not apply or work, to
achieve bank approval. Commenters
stated that statutory borrower rights
requirements were not in the
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commercial banks’ interest and, as such,
posed a barrier to coordination. Another
commenter mentioned that agencies
such as FSA or other national YBS
organizations already experience time
constraints. When multiple direct
lender associations request
collaboration at the same time,
particularly in over-chartered areas or
small towns, these resource issues will
be compounded. Lastly a commenter
stated that the System does not have an
adequate portal to capture and highlight
the depth of the collaboration efforts
that occur. As an existing requirement,
we have seen the importance and
benefit of third-party coordination. The
requirement leaves the option open to
direct lenders in choosing with which
parties they coordinate. We understand
that some relationships work better than
others. Nonetheless, we encourage
direct lenders to continue outreach and
third-party coordination, for the
betterment of YBS farmers and ranchers.
Proposed paragraph (d)(1)(iii) is
finalized as proposed. It requires
implementation of outreach programs,
which may include marketing and
education. This is a continuation of
requirements in existing paragraph
(c)(3)(iii). We received seven comments
on this requirement. One comment from
a commercial banking trade group
supported minimum requirements for
marketing, outreach, and education. Six
commenters, all from the System,
opposed this existing requirement.
Commenters stated that the rule is silent
on criteria to determine effectiveness
and that measuring effectiveness is
subjective. One commenter stated that it
would frustrate and confuse potential
customers and business partners when a
direct lender comes to an event with
predetermined measurers for
effectiveness. Another commenter asked
if the board, management, or banks
would be determining the effectiveness
of activities, going on to say that this
requirement is redundant and
burdensome. In the existing
requirement, the agency has not
identified material weaknesses with
direct lenders implementing effective
outreach, marketing, and educational
programs.
We are unclear as to why carrying this
requirement forward into the finalized
rule would be burdensome. Results have
shown for a direct lender YBS program
to be successful, it is critical to have
more components than merely the
extension of credit. Some of these
components include marketing to
underserved segments, providing new
borrower education, and listening to
feedback from YBS farmers and
ranchers.
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Proposed paragraph (d)(2)(i) strikes
the word ‘‘reasonably’’ and is finalized
as proposed. It requires using reliable
demographic data in developing
quantitative goals, along with
identifying the sources of the data. We
received seven comments on this
requirement. One comment from a
commercial banking trade group stated
that quantitative goals must be bolstered
with additional requirements and that
more than one goal should be used. This
commenter did not like basing the
understanding of goals on reasonably
reliable demographic data and stated
that sources should be recognized and
not arbitrary. The six opposing
commenters were all from the System.
Commenters who opposed this
requirement shared concerns on the
term ‘‘reasonably reliable,’’ saying it
provides uncertainty and results in
highly subjective interpretations, asking
who is to have final determination if the
data is reasonably reliable or not.
Validation of such data and timeliness
were also raised as concerns. Opposing
commenters stated validating data
would raise significant time and
resource concerns. They also stated that
USDA census data is several years old
before release, not making it the most
up-to-date and reliable. Commenters
questioned whether direct lenders
would be expected to contract with
third parties while awaiting USDA data
availability to meet this requirement.
Opposing commenters also raised
concerns that requiring additional
quantitative goals will increase the
potential for compromises to be made to
existing programs that are effective as a
means to meet new goals, adding that
there is no incentive for direct lenders
to set aggressive goals which may not be
met and then result in a lower FCA
rating. We believe that striking the word
‘‘reasonably’’ addresses these
comments. Reliable data is a key
component in developing effective
goals. It is our expectation that the
direct lender associations obtain the
best data available to them when
developing goals.
Proposed paragraphs (d)(2)(i)(A),
(d)(2)(i)(B), (d)(2)(i)(C), and (d)(2)(i)(D)
are finalized as proposed. They identify
the minimum quantitative goals that a
direct lender must establish annually.
These requirements carry over
unchanged from existing paragraphs
(c)(2)(i) through (iv). We received one
comment from a commercial banking
trade group on proposed paragraphs
(d)(2)(i)(A) through (C), stating the goals
are arbitrary and unmoored and should
be bolstered with additional
requirements. We did strengthen this
existing requirement by requiring direct
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lenders to use at least one of the goal
categories listed as opposed to the
existing requirement that states that
such targets may include one of the goal
categories listed. Historically, direct
lenders rarely used categories other than
those listed in the regulation. Keeping
the same categories ensures that data
can be compared consistently over a
range of time periods. Further, databases
are already in place in the System to
track these categories, which helps
minimize regulatory burden and costs.
We note these are only minimums and
some direct lenders can and do use a
combination of these goals or other
categories.
Proposed paragraph (d)(2)(i)(D),
pertaining to goals for capital committed
to loans made to YBS borrowers, is
finalized as proposed. It is an
unchanged requirement compared with
existing paragraph (c)(2)(iv), however,
we did receive two opposing comments
from a commercial bank trade group and
the System. Both commenters had
similar observations that the
requirement was arbitrary and
unmoored. One commenter went on to
say there is a lack of criteria to
determine how much capital a direct
lender should allocate to YBS. There
was concern that both FCA and the
funding bank will have difficulty
determining where a program is
deficient in the capitalization goal. The
final rule does not require direct lenders
to have a capital goal. Paragraph (d)(2)
only requires each direct lender to have
one of the listed goals, not all.
Nonetheless, we believe a capital
commitment is a best practice and is
one method of allowing direct lenders to
serve YBS borrowers who may have a
higher risk profile, while at the same
time mitigating the lender’s overall risk
in the credit relationship.
F. Annual Report Information
Concerning YBS [Proposed
§ 620.5(k)(2)]
We received no comments on the
renumbering changes in proposed
§ 620.5(k)(2). It will be finalized as
proposed.
G. Other Matters
One system commenter concluded
that because the NPRM states that ‘‘YBS
components will no longer be required
as part of § 618.8440,’’ FCA is
impermissibly trying to modify
§ 618.8440 through the proposed rule.
No part of this rulemaking revises
§ 618.8440 or changes its requirements.
Our statement in the NPRM merely
observed the effect of the proposed
deletion of paragraph (e) of § 614.4165,
which requires each direct lender
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association’s YBS program targets and
goals to be included in its operational
and strategic business plan (as
separately required under § 618.8440).
In any case, since the final rule does not
adopt the proposed rule’s wholesale
deletion of paragraph (e) of § 614.4165,
and instead moves it with minor
changes to paragraph (c)(1), the
substantive requirement to include YBS
program components in the operational
and strategic business plan will remain
intact. As a result, the commenter’s
concern is addressed.
IV. Regulatory Flexibility Act and
Congressional Review Act
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), FCA hereby certifies that this
final rule will not have a significant
economic impact on a substantial
number of small entities. Each of the
banks in the Farm Credit System,
considered together with its affiliated
direct lender associations, has assets
and annual income in excess of the
amounts that would qualify them as
small entities. Therefore, Farm Credit
System institutions are not ‘‘small
entities’’ as defined in the Regulatory
Flexibility Act.
Under the provisions of the
Congressional Review Act (5 U.S.C. 801
et seq.), the Office of Management and
Budget’s Office of Information and
Regulatory Affairs has determined that
this final rule is not a ‘‘major rule,’’ as
the term is defined at 5 U.S.C. 804(2).
List of Subjects
12 CFR Part 614
Agriculture, Banking, Banks, Flood
insurance, Foreign trade, Reporting and
recordkeeping requirements, Rural
areas.
12 CFR Part 620
Accounting, Agriculture, Banking,
Banks, Reporting and recordkeeping
requirements, Rural areas.
PART 614—LOAN POLICIES AND
OPERATIONS
1. The authority citation for part 614
continues to read as follows:
ddrumheller on DSK120RN23PROD with RULES1
■
Authority: Secs. 1.3, 1.5, 1.6, 1.7, 1.9, 1.10,
1.11, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13, 2.15,
3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12,
4.12A, 4.13B, 4.14, 4.14A, 4.14D, 4.14E, 4.18,
4.18A, 4.19, 4.25, 4.26, 4.27, 4.28, 4.36, 4.37,
5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 7.8, 7.12, 7.13,
8.0, 8.5 of the Farm Credit Act (12 U.S.C.
2011, 2013, 2014, 2015, 2017, 2018, 2019,
2071, 2073, 2074, 2075, 2091, 2093, 2094,
2097, 2121, 2122, 2124, 2128, 2129, 2131,
2141, 2149, 2183, 2184, 2201, 2202, 2202a,
2202d, 2202e, 2206, 2206a, 2207, 2211, 2212,
2213, 2214, 2219a, 2219b, 2243, 2244, 2252,
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15:06 Dec 26, 2023
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2279a, 2279a–2, 2279b, 2279c–1, 2279f,
2279f–1, 2279aa, 2279aa–5); 12 U.S.C. 2121
note; 42 U.S.C. 4012a, 4104a, 4104b, 4106,
and 4128.
2. Section 614.4165 is revised to read
as follows:
■
§ 614.4165 Young, beginning, and small
farmers and ranchers.
(a) Definitions.
(1) For purposes of this subpart, the
term ‘‘credit’’ includes:
(i) Loans made to farmers, ranchers,
and producers or harvesters of aquatic
products under title I or II of the Act;
and
(ii) Interests in participations made to
farmers, ranchers, and producers or
harvesters of aquatic products under
title I or II of the Act.
(2) For purposes of this subpart, the
term ‘‘services’’ includes:
(i) Leases made to farmers, ranchers,
and producers or harvesters of aquatic
products under title I or II of the Act;
and
(ii) Related services to farmers,
ranchers, and producers or harvesters of
aquatic products under title I or II of the
Act.
(b) Farm Credit banks oversight.
(1) Each Farm Credit Bank and
Agricultural Credit Bank must adopt
written policies that direct:
(i) The board of each affiliated direct
lender association to establish a
program to provide sound and
constructive credit and related services
to young, beginning, and small farmers,
ranchers, and producers or harvesters of
aquatic products (YBS farmers and
ranchers or YBS);
(ii) Each affiliated direct lender
association to include in its YBS
program provisions ensuring
coordination with other System
institutions in the territory and other
governmental and private sources of
credit; and
(iii) The bank to provide the FCA a
complete and accurate annual report
summarizing the YBS program
operations and achievements of its
affiliated direct lender associations.
(2) Annually, the YBS program of
each direct lender association must be
reviewed and approved by its funding
bank, provided review and approval
shall solely be to determine whether the
YBS program contains all required
components as set forth in paragraph (d)
of this section. Any conclusion by the
bank that a YBS program is incomplete
must be communicated in writing to the
direct lender association and to the FCA
within 30 days.
(3) Each Farm Credit Bank and
Agricultural Credit Bank must
implement internal controls for
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89285
requirements in paragraphs (b)(1)(iii)
and (b)(2) of this section.
(c) Direct lender association YBS
plan.
(1) YBS program components outlined
in paragraph (d) of this section must be
included in each direct lender
association’s operational and strategic
business plan for at least the succeeding
3 years (as set forth in § 618.8440 of this
chapter).
(2) The YBS portion of the operational
and strategic business plan must:
(i) Analyze the direct lender
association’s performance in the
previous year toward achieving the
components in paragraph (d) of this
section;
(ii) Discuss variances and reasons for
the results; and
(iii) Identify how the qualitive factors
and quantitative goals in paragraph (d)
of this section assist and expand access
to credit and education for YBS farmers
and ranchers.
(d) Direct lender association YBS
programs. The board of directors of each
direct lender association must establish
a program to provide sound and
constructive credit and services to YBS
farmers and ranchers in its territory.
Each YBS program must operate in a
safe and sound manner and within the
direct lender association’s risk-bearing
capacity, while meeting the unique
needs of YBS farmers and ranchers.
Such a program must include the
following minimum components:
(1) Qualitative factors—
(i) Corporate governance.
(A) A mission statement describing
program objectives and specific means
for achieving such objectives.
(B) Internal controls that establish
clear lines of responsibility for YBS
strategic plan development and the
corresponding YBS program
implementation, tracking YBS program
performance, and YBS quarterly
reporting to the direct lender
association’s board of directors.
(ii) Credit and related services.
(A) Efforts to offer credit and related
services, either directly or in
coordination with others, that are
responsive to the needs of the YBS
farmers and ranchers in the territory.
Examples include customized loan
underwriting standards, loan guarantee
programs, fee waivers, or other credit
enhancements commensurate with the
credit risk approved by the board of
directors.
(B) Coordination with other System
institutions in the territory and other
governmental and private sources who
offer credit and services to YBS farmers
and ranchers.
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Federal Register / Vol. 88, No. 247 / Wednesday, December 27, 2023 / Rules and Regulations
(iii) Marketing, outreach, and
education. Implementation of effective
outreach programs to attract and retain
YBS farmers and ranchers, which may
include the use of advertising
campaigns, educational programs, and
advisory committees comprised of YBS
farmers and ranchers and/or a YBS
mentoring program to better serve and
understand the needs of this lending
segment.
(2) Quantitative goals—
(i) Annual quantitative goals. Annual
quantitative goals for credit to YBS
farmers and ranchers based on an
understanding of reliable demographic
data for the lending territory. Direct
lender associations must identify the
sources of data used to establish the
goals. Such goals must include at least
one of the following:
(A) Loan volume and loan number
goals for YBS farmers and ranchers in
the territory;
(B) Percentage goals representative of
the demographics for YBS farmers and
ranchers in the territory;
(C) Percentage goals for loans made to
new borrowers qualifying as YBS
farmers and ranchers in the territory; or
(D) Goals for capital committed to
loans made YBS farmers and ranchers in
the territory.
(ii) Board of directors approval and
review. Goals must be approved by the
direct lender association’s board of
directors and reviewed quarterly with
adjustments made as needed.
PART 620—DISCLOSURE TO
SHAREHOLDERS
3. The authority citation for part 620
continues to read as follows:
■
Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17,
5.19 of the Farm Credit Act (12 U.S.C. 2154,
2154a, 2207, 2243, 2252, 2254); sec. 424, Pub.
L. 100–233, 101 Stat. 1568, 1656 (12 U.S.C.
2252 note); sec. 514, Pub. L. 102–552, 106
Stat. 4102, 4134.
4. Revise § 620.5 (k)(2) to read as
follows:
■
§ 620.5 Contents of the annual report to
shareholders.
ddrumheller on DSK120RN23PROD with RULES1
*
*
*
*
*
(k) * * *
(2) Each direct lender association
must provide a description of its YBS
program, including a status report on
each program component as set forth in
§ 614.4165 (d) of this chapter and the
definitions of ‘‘young,’’ ‘‘beginning,’’
and ‘‘small’’ farmers and ranchers. The
discussion must provide such other
information necessary for a
comprehensive understanding of the
direct lender association’s YBS program
and its results.
*
*
*
*
*
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Dated: December 14, 2023.
Ashley Waldron,
Secretary, Farm Credit Administration.
[FR Doc. 2023–27929 Filed 12–26–23; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2023–2153; Project
Identifier MCAI–2023–00688–T; Amendment
39–22611; AD 2023–23–09]
RIN 2120–AA64
Airworthiness Directives; Embraer S.A.
(Type Certificate Previously Held by
Yabora˜ Indu´stria Aerona´utica S.A.;
Embraer S.A.) Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule; request for
comments.
AGENCY:
The FAA is adopting a new
airworthiness directive (AD) for all
Embraer S.A. Model ERJ 190–400
airplanes. This AD was prompted by a
report of unexpected wear on the wing
hinge bearing assembly of the aileron
surfaces found during the functional test
of the aileron control system backlash.
This AD requires repetitive inspections
of the press-fitted bushings of the wing
ailerons for migration and broken
sealant, measurements of the distance
between the aileron surfaces and hinge
fittings, functional checks of the
backlash of the wing aileron control
system, and all applicable related
investigative and corrective actions, as
specified in an Ageˆncia Nacional de
Aviac¸a˜o Civil (ANAC) AD, which is
incorporated by reference. The FAA is
issuing this AD to address the unsafe
condition on these products.
DATES: This AD is effective January 11,
2024.
The Director of the Federal Register
approved the incorporation by reference
of certain publications listed in this AD
as of January 11, 2024.
The FAA must receive comments on
this AD by February 12, 2024.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
regulations.gov. Follow the instructions
for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
SUMMARY:
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W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
AD Docket: You may examine the AD
docket at regulations.gov under Docket
No. FAA–2023–2153; or in person at
Docket Operations between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays. The AD docket
contains this final rule, the mandatory
continuing airworthiness information
(MCAI), any comments received, and
other information. The street address for
Docket Operations is listed above.
Material Incorporated by Reference:
• For material incorporated by
reference in this AD, contact National
Civil Aviation Agency (ANAC),
Aeronautical Products Certification
Branch (GGCP), Rua Dr. Orlando
Feirabend Filho, 230—Centro
Empresarial Aquarius—Torre B—
Andares 14 a 18, Parque Residencial
Aquarius, CEP 12.246–190—Sa˜o Jose´
dos Campos—SP, Brazil; phone 55 (12)
3203–6600; email pac@anac.gov.br;
website anac.gov.br/en/. You may find
this material on the ANAC website at
sistemas.anac.gov.br/certificacao/DA/
DAE.asp.
• You may view this service
information at the FAA, Airworthiness
Products Section, Operational Safety
Branch, 2200 South 216th St., Des
Moines, WA. For information on the
availability of this material at the FAA,
call 206–231–3195. It is also available at
regulations.gov under Docket No. FAA–
2023–2153.
FOR FURTHER INFORMATION CONTACT:
Joshua Bragg, Aviation Safety Engineer,
FAA, 1600 Stewart Avenue, Suite 410,
Westbury, NY 11590; phone: 817–222–
5366; email joshua.k.bragg@faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
The FAA invites you to send any
written data, views, or arguments about
this final rule. Send your comments to
an address listed under ADDRESSES.
Include ‘‘Docket No. FAA–2023–2153;
Project Identifier MCAI–2023–00688–T’’
at the beginning of your comments. The
most helpful comments reference a
specific portion of the final rule, explain
the reason for any recommended
change, and include supporting data.
The FAA will consider all comments
received by the closing date and may
amend this final rule because of those
comments.
Except for Confidential Business
Information (CBI) as described in the
following paragraph, and other
E:\FR\FM\27DER1.SGM
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Agencies
[Federal Register Volume 88, Number 247 (Wednesday, December 27, 2023)]
[Rules and Regulations]
[Pages 89280-89286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27929]
=======================================================================
-----------------------------------------------------------------------
FARM CREDIT ADMINISTRATION
12 CFR Parts 614 and 620
RIN 3052-AD54
Loan Policies and Operations
AGENCY: Farm Credit Administration.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Farm Credit Administration (FCA, we, or our) is amending
regulations governing young, beginning, and small farmers and ranchers
(YBS). The final rule clarifies the responsibilities of funding banks
in the review and approval of direct lender association YBS programs,
strengthens funding bank internal controls, and bolsters YBS business
planning.
DATES: This regulation will be effective the later of February 1, 2024,
or at least 30 days after publication in the Federal Register during
which either or both Houses of Congress have been in session. We will
publish a notice of the effective date in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Technical information: Jessica
Tomlinson-Potter, Senior Policy Analyst, Office of Regulatory Policy,
(703) 819-4667, TTY (703) 883-4056, [email protected] or Legal
information: Hazem Isawi, Senior Attorney, Office of General Counsel,
(703) 883-4022, TTY (703) 883-4056, [email protected].
SUPPLEMENTARY INFORMATION:
I. Objectives of the Final Rule
The objectives of this final rule are to:
Increase direct lender associations' YBS activity to a
diverse population of borrowers;
Reinforce the supervisory responsibilities of the funding
banks, authorized by section 4.19 of the Farm Credit Act; and
Require each direct lender association to enhance the
strategic plan for their YBS program.
When developing YBS programs, direct lender associations should
consider marketing to all populations of YBS farmers and ranchers.
Underserved communities and groups can be overlooked or excluded from
marketing efforts and education outreach, leaving out a potential
borrowing base.
Underserved groups include those who have been subjected to racial,
ethnic, or gender prejudice because of their identity as members of the
group without regard to their individual qualities. Examples of
underserved communities include, but are not limited to, Black or
African American, American Indian and Alaskan Native, Hispanic, Asian
and Pacific Islander, LGBTQIA+, women, veterans, and persons with
disabilities. These are examples of communities with a high potential
for individuals who may fall into the Y, B, and/or S categories of
borrowers, and direct lender associations should target such
communities specifically to reach the entire universe of potential
borrowers. Underserved communities can often be reached in schools and
universities, professional and social organizations, at community
gatherings, and local events.
Every effort should be made to reach the entire universe of
potential Y, B, and S borrowers. Direct lender associations should also
work with their local Farm Service Agency representatives to assist the
Farm Credit System with its directive to serve all creditworthy Y, B,
and S borrowers by breaking down bureaucratic barriers to entry.
II. Background
The Farm Credit Act of 1971, as amended (Act),\1\ establishes the
Farm Credit Administration as the safety and soundness regulator of the
Farm Credit System (FCS or System). As stated in the FCA Strategic Plan
for FYs 2018-2023, our mission is to ensure that System institutions
are safe, sound, and dependable sources of credit and related services
for all creditworthy and eligible persons in agriculture and rural
America. The System has a unique mission to serve YBS farmers and
ranchers. Section 4.19 of the Act \2\ requires each direct lender
association to establish a program to furnish sound and constructive
credit and related services to YBS farmers and ranchers.
---------------------------------------------------------------------------
\1\ Public Law 92-181, 85 Stat. 583.
\2\ 12 U.S.C. 2207.
---------------------------------------------------------------------------
We continue to believe the System's YBS mission is important to
enable small and start-up farmers and ranchers to make successful
entries into agricultural production. Also, we believe it is important
to ensure marketing and outreach efforts include all eligible and
creditworthy persons, with specific outreach to achieve diversity and
inclusion. The System's YBS mission is also critical to facilitate the
transfer of agricultural operations from one generation to the next. We
remain committed to ensuring the System fulfills its important mission
to YBS farmers and ranchers.
We published a proposed rule on June 16, 2022 (NPRM), recommending
updates to FCA's YBS regulations, which were last updated almost 20
years ago. This final rule largely adopts the proposal with certain
changes made in response to comments, with a particular focus on
reducing an increased administrative burden. Comment letters, along
with our responses are discussed below.
III. Comments and Our Responses
The comment period ended August 15, 2022. We received 67 comment
letters. Most comments came from System institutions or persons
affiliated with the System, with one letter from the Farm Credit
Council (Council) acting on behalf of its membership. We also received
three letters from trade groups representing commercial banking.
Most commenters requested we withdraw the proposed rule and keep
the existing regulations in place. Some commenters offered solutions to
bolster practices such as continued
[[Page 89281]]
collaboration with FCA and System workgroups without changes to the
existing regulation. Commenters stated that the rule was
administratively burdensome, human capital intensive, difficult for
smaller direct lenders to implement, and did not achieve the shared
goal of increasing YBS activity.
We also received comments in support of the proposed rule that
agreed with the framework and accountability the rule requires, stating
the rule changes should be done with more than incremental progress in
mind. Another comment supported the idea of increased reporting.
Specific Issues
A. YBS Program Uniformity
System commenters expressed concern that the prospect of a YBS
rating system and the proposed requirements relating to funding bank
oversight may encourage all YBS programs to ``look alike'' or to fit
into a ``cookie cutter'' mold. While one of the proposed rule's stated
objectives was to provide elements that will be evaluated as part of a
rating system to measure year-over-year YBS progress, we did not
propose to create any such rating system itself through the rulemaking.
For clarity, however, this final rule omits rating system matters in
its statement of objectives.
Next, we disagree that the proposed changes to bank oversight
responsibilities will lead to ``cookie cutter'' YBS programs. We have
long encouraged direct lender associations to tailor YBS programs to
serve the specific needs of borrowers in the different lending
territories. Existing FCA regulation Sec. 614.4165(c), which is
redesignated paragraph (d) in this final rule, states that each direct
lender association ``must establish a program to provide sound and
constructive credit and services to YBS farmers and ranchers in its
territory.'' The reference to ``its territory'' illustrates that each
YBS program should reflect the credit and service needs of YBS
borrowers within that lending territory. While this rulemaking enhances
and strengthens bank oversight responsibilities and direct lender
association YBS program standards, it does not prescribe or encourage
uniformity of content among YBS programs. We continue to expect varying
approaches among the direct lender associations, appropriate to the
needs of borrowers in each lending territory.
B. Definitions [Sec. 614.4165(a)]
The proposed rule had no substantive changes to the definitions in
current paragraph (a). We proposed grammatical changes, including
removing the word ``and'' between farmers and ranchers, and adjusting
punctuation. We received one comment on the definition of a
``beginning'' farmer; however, that term is not defined in regulatory
text. The definitions in paragraph (a) will be finalized as proposed.
C. Farm Credit Banks Oversight [Proposed Sec. 614.4165(b)]
Commenters frequently raised concerns on the topic of bank
oversight. Two non-System commenters supported the concept of increased
bank oversight, stating they would like to see reform in reporting and
tracking, and that they believe bank review and approval will help with
this. System commenters opposed increased bank oversight for a variety
of reasons, which will be discussed as they relate to each section of
the rule text. The proposed preamble stated that we believed funding
banks were in a unique position to know the YBS activities of their
affiliated direct lender associations and see how those associations
respond to the needs of their respective borrowers. Commenters strongly
disagreed, stating funding banks do not have ``boots on the ground''
and are not familiar with local YBS markets and needs. We considered
this feedback as we drafted the final rule, which removes certain
elements of the proposed bank oversight requirements.
Proposed paragraph (b)(1) required each bank, among other things,
to adopt written policies directing direct lender associations to
establish YBS programs, ensure direct lender association coordination
with others, and report to FCA. A bank trade group commented that the
proposed rule lacked a requirement for direct involvement or
representation of YBS farmers and ranchers in the process of creating
and reviewing YBS programs. To address this, the commenter recommended
that each bank be directed to adopt a written policy requiring the bank
and any affiliated direct lender association to form a committee
comprised of local YBS farmers and ranchers. The commenter further
recommended that these committees be vested with authority over YBS
programs, independent of the board of directors of each institution. We
decline to adopt this recommendation because it is outside the scope of
the proposal. Moreover, because Farm Credit is a cooperative system run
by member-borrowers who elect their respective System institutions'
boards of directors, YBS farmers and ranchers are structurally situated
to be heard and represented at the board level. We also note that as a
matter of practice, many direct lender associations have various YBS
committees and advisory groups that provide input and are involved in
program development. We do not believe this additional involvement and
representation from YBS farmers and ranchers is necessary at the bank
level given the current involvement of member borrowers in System
governance at their direct lender associations.
Proposed paragraph (b)(1)(i) required each funding bank to adopt
written policies that direct their affiliated direct lender
associations to establish an annual strategic YBS plan. While we did
not receive comments on this specific paragraph, we received many
comments on the YBS strategic plan itself, which are addressed in
section D. Direct lender association YBS strategic plan. Because the
proposal for an independent YBS strategic plan is not being adopted in
this final rule, the requirement for bank policy direction on such plan
has been removed.
The proposed rule redesignated paragraph (b)(2) of the current
regulation as paragraph (b)(1)(ii). The text of this coordination
requirement remained unchanged, but nonetheless we received three
comments from the System stating it is unclear how much coordination
between organizations is acceptable and how coordination can be
objectively evaluated. Although these comments are outside the scope of
the proposal's substantive changes, coordination efforts are generally
sufficient if they accomplish the objective that YBS programs ``shall
assure that such credit and services are available in coordination with
other institutions of the Farm Credit System serving the territory and
with other governmental and private sources of credit.'' Act Sec.
4.19(a). We expect that specific coordination efforts will be devised
on an institution-by-institution basis. Paragraph (b)(1)(ii) will be
finalized as proposed.
Proposed paragraph (b)(1)(iii) required each bank to establish a
policy to direct each affiliated direct lender association to submit a
YBS strategic plan and any other information regarding its YBS program
deemed necessary by the bank. We received two System comments and one
comment from the Council on this requirement. In summary, the comments
stated that ``any other information deemed necessary by the bank'' was
vague, arbitrary, and therefore burdensome. There was concern over
inconsistency of requirements between the banks and the stifling of
creativity for the direct
[[Page 89282]]
lender. Further, there was commenter concern on the relationship with
the direct lender and bank being damaged, with various reasons listed.
We received many comments on the strategic YBS plan itself, which are
addressed in that section. Because we are not adopting the proposal's
requirement for an independent YBS strategic plan, we are removing
proposed paragraph (b)(1)(iii) from this final rule.
Proposed paragraph (b)(1)(iv) is redesignated as paragraph
(b)(1)(iii) and finalized as proposed. Although we only proposed a
redesignation from the current paragraph (b)(4) and a replacement of
``agency'' for ``FCA,'' we still received four comments. Commenters
agreed that no changes were needed to the data reporting requirement of
``complete and accurate'' in the rule text, but they did mention
concerns surrounding subjectivity of criteria, which has not been a
material issue in the past. Commenters did not provide reasons this
would be a concern going forward.
A trade group for commercial banks commented that ``achievements''
may be interpreted as denoting completion and success. The commenter
stated that since success should not be presumed, we should add
``shortfalls'' as an element for the bank to report on in addition to
``operations'' and ``achievements.'' We decline to adopt this specific
change because paragraph (c)(2)(ii) as finalized requires the
operational and strategic business plan to discuss variances and
reasons for the results. We expect that both positive and negative
variances will be discussed in the plan. Reporting of negative
variances thus addresses the commenter's suggestion.
We received 46 comments on proposed paragraph (b)(2). Two
commenters supported funding bank oversight and approval while the rest
opposed this requirement. Those in favor wanted to see reform in
reporting and tracking and believed that bank oversight would help in
that area. They stated that oversight and accountability are necessary,
and this rule is a step in the right direction for critical
accountability.
Those opposed to the proposed changes relating to funding bank
oversight raised the following issues:
cost and administrative burden;
negative impacts on cooperative structure and local
control;
no appeal or resolution process;
expansion of current funding bank duties;
lack of funding bank personnel expertise regarding
individual YBS markets;
biased, preferential, or inconsistent evaluation among the
four funding banks;
lack of guidance on goal standards or what is considered
acceptable/successful;
no value added to YBS programs;
homogenization of YBS programs resulting from a
``uniform'' bank approval process; and
exam findings and communication to the System not
warranting increased bank oversight.
To address these comments, we made changes to the rule by:
removing the requirement for an independent YBS strategic
plan and associated funding bank approval and review,
providing that funding bank review and approval shall
solely be to determine whether the YBS program contains all required
components,
updating the reference from paragraph (c) in the current
regulation to paragraph (d) in the final rule, and
stating that funding bank communication of an incomplete
plan must be in writing and sent to FCA within 30 days.
The statute provides that association YBS programs are ``[u]nder
the policies of the Farm Credit Bank board,'' and that ``[e]ach program
shall be subject to review and approval by the supervising bank.'' The
System's comments and representations about funding bank lack of
expertise, staff knowledge and capability with respect to YBS programs
suggest there is room for the banks to improve their capabilities in
this area.
As in the existing regulation, banks will still be required to
review and approve each direct lender association's YBS program. This
rule clarifies that such review and approval must be performed
annually. We find this requirement complements--and is logically
connected to--the bank's responsibility for creating and submitting the
operations and achievements report to FCA. Specifically, annual review
and approval of direct lender association YBS programs will give each
bank a better understanding of the programs in their territories and
ultimately result in more accurate reporting to FCA.
To address concerns about the scope of bank review, however, we are
revising the regulatory text so that review and approval shall solely
be to determine whether the YBS program contains the components of
finalized paragraph (d). As a result, the finalized text more closely
tracks the scope of review specified in the current regulation.
Notwithstanding the revision, we encourage open dialogue between the
bank and direct lender to continually improve program content.
With slight changes from the proposal, this final rule provides
that where a bank concludes a YBS program is incomplete, it must
communicate that fact in writing to both the direct lender association
and FCA within 30 days.
Proposed paragraph (b)(3) required internal controls. Since banks
are the main YBS reporting entity to FCA, having a strong internal
control environment is critical to safety and soundness. We received
four comments from the System, the Council, and a commercial bank trade
group. The commercial bank trade group stated that, in the past,
internal controls over YBS data reporting processes have been weak.
They stated this resulted in inaccurate reporting to FCA. They went on
to state weak reporting is a concern they'd like to see addressed. The
System and Council stated that establishing new internal controls will
create redundancy and inefficiencies. As discussed in sections above
and below, direct lenders are not required to have an independent YBS
strategic plan in the finalized rule. Therefore, bank internal control
requirements in the proposed rule for direct lender YBS plans have been
removed. The Council commented that banks should be able to rely on the
internal controls of the direct lender. The bank's responsibilities for
review and approval of YBS programs and data compilation and reporting
to FCA are independent of direct lenders. For this reason, it is
necessary that each bank has internal controls over the processes they
perform, just as direct lenders do. Each organization in the System
should have internal controls over their respective YBS
responsibilities.
D. Direct Lender Association YBS Strategic Plan [Proposed Sec.
614.4165(c)]
Proposed paragraph (c)(1) required each direct lender association
to adopt an independent 3-year YBS strategic plan to guide the direct
lender's required YBS program. We received 31 comments on this
requirement from the System and a commercial bank trade group, all of
whom were opposed for a variety of reasons.
Many stated that YBS borrowers are critical to the System's
sustainability, are an integral part of direct lender's operations, and
are a key component of the overall business plan. As such, YBS
components are woven into almost every aspect of a direct lender's
annual business plan. Commenters went on to say that YBS borrowers
should be considered in the context of the whole business and included
as part of the overall business plan rather than
[[Page 89283]]
separated out. The FCS commenters stated that creating an independent
plan outside of the business plan would create disconnected, redundant,
and unnecessary administrative burdens. The FCS commenters noted that
staff's time could better be used serving YBS borrowers directly rather
than duplicating the business plans.
We considered this input and will not finalize the requirement for
an independent YBS strategic plan. We agree that YBS is an integral
part of direct lenders' operations and should be incorporated as part
of overall business planning. The intent of our proposal was that an
independent planning document would put increased emphasis on YBS.
However, the same goal can be achieved without creating a separate
document. It is our intent that direct lenders give thoughtful
consideration into their strategic lending to YBS borrowers, in both
current and potential markets.
While we are not changing the existing requirement for a 3-year
planning period in the operational and strategic business plan, we
still received comments on this area. Some commenters stated that a 3-
year plan is not reasonable given volatility and uncertainty, making
future years a guess. We believe it is important to be forward looking
and innovative in strategic business planning. Three years has been
established as a minimum planning period. We continue to believe that
three years is appropriate for planning. Some commenters stated the
requirement to adopt a 3-year plan within 30 days after the
commencement of the year is not enough time to analyze the past year's
data and conflicts with other business planning activity. While we
understand that the period around the new calendar year may be
particularly busy, the timeframe for adoption of the plan is specified
in the existing regulation, and we have not proposed a change in this
regard. We believe the new calendar year continues to be an appropriate
time to conclude activity and begin reporting processes.
Paragraph (c)(2) of the proposed rule required that the strategic
plan must detail the operations of the YBS program including all
components in paragraph (d). We received no comments specific to this
section. This requirement has been combined into the finalized (c)(1).
In proposed paragraph (c)(3)(i), direct lenders were required to
analyze performance from the previous year in achieving components of
their YBS program listed in proposed paragraph (d). We received a
comment from a banking trade group that analyzing only performance and
effectiveness but not identifying areas to improve upon is not a
balanced approach. While we understand the commenter's point, it is our
expectation that direct lenders take a balanced approach when analyzing
performance. If a goal is not achieved, it must still be reported on.
Proposed paragraph (c)(3)(ii) received no comments. We redesignated
and finalized it as paragraph (c)(2)(ii). Proposed paragraph
(c)(3)(iii) received no comments, and we redesignated and finalized it
as paragraph (c)(2)(iii). We replaced the word, ``efforts,'' with
``qualitative factors and quantitative goals.'' We added the words,
``expand access to,'' which derived from proposed paragraph (c)(3)(iv).
We received seven comments from the FCS opposing proposed paragraph
(c)(3)(iv). The requirement proposed that direct lenders assess the
effectiveness in providing efforts resulting in credit provided to new
and expanding YBS operations. Commenters discussed the high
subjectivity of such data and stated they are unclear how effectiveness
is measured. Examples were given of a person attending a seminar and
several years later becoming a borrower. How would direct lenders track
and record such activity? Commenters stated databases are not currently
in place to collect such data and it is cost prohibitive with little
value added to create a database. Commenters also believed that
tracking this data provided no value to YBS borrowers. After assessing
comments, we added the words ``and expand access to'' which derived
from proposed paragraph (c)(3)(iv) to finalized paragraph (c)(3)(iii)
and removed the other requirements of proposed paragraph (c)(3)(iv). We
believe that tracking such data and identifying how direct lender
association YBS programs are assisting and expanding access to credit
and education for YBS farmers and ranchers does provide value to YBS
farmers and ranchers by strengthening and improving lender's YBS
programs. To comply with this provision, direct lenders must assess how
their YBS program components assist and expand access to credit and
education for YBS farmers and ranchers.
E. Direct Lender Association YBS Program [Proposed Sec. 614.4165(d)]
We received one comment on proposed paragraph (d) from a commercial
banking trade group in support of the requirement. There were no
opposing comments. The comment stated that the components have been
long awaited and both qualitative and quantitative factors play
important roles in YBS lending. Paragraph (d) is finalized as proposed.
We received one comment from a commercial banking trade group
regarding the mission statement requirement in proposed paragraph
(d)(1)(i)(A). The commenter stated that the mission statement should
explicitly recognize the importance of YBS and ensure support at the
direct lender level. We believe the requirement is satisfactory as
drafted in accomplishing this purpose, and finalized it as proposed.
Proposed paragraph (d)(1)(i)(B) is finalized as proposed. We
received two comments on the direct lender internal controls
requirement in proposed paragraph (d)(1)(i)(B). One System commenter
stated that adding internal controls adds additional time, energy, and
costs to reporting. Internal controls are an existing requirement that
direct lenders should already have in place. Another commenter asked
that internal controls clarify the extent to which staff must take
stakeholder input into account. While encouraged, the rule does not
require stakeholder input, nor is it necessarily a component of an
internal controls system.
There was one comment from a commercial banking trade group,
supporting the use of credit enhancement tools. Proposed paragraph
(d)(1)(ii)(A) is finalized as proposed.
Proposed paragraph (d)(1)(ii)(B) is finalized as proposed. It
requires credit and related services coordination with System
institutions, governmental and private sources. This is a continuation
of requirements in existing paragraph (c)(3)(ii). We received nine
comments on this requirement. One comment from a commercial banking
trade group supported third-party coordination on credit and related
services. Eight commenters, all from the System, opposed this existing
requirement. Commenters stated that where direct lender associations
are over-chartered within the same market, coordination efforts will
entice competition rather than healthy collaboration. Another System
commenter stated that the prospect of interterritorial competition was
untenable and would potentially damage their association and members.
Some commenters stated that collaboration is already occurring, and a
regulatory requirement is not needed. System commenters were worried
that this requirement may be interpreted by funding banks to force best
practices for one lender onto another lender, even if the practices may
not apply or work, to achieve bank approval. Commenters stated that
statutory borrower rights requirements were not in the
[[Page 89284]]
commercial banks' interest and, as such, posed a barrier to
coordination. Another commenter mentioned that agencies such as FSA or
other national YBS organizations already experience time constraints.
When multiple direct lender associations request collaboration at the
same time, particularly in over-chartered areas or small towns, these
resource issues will be compounded. Lastly a commenter stated that the
System does not have an adequate portal to capture and highlight the
depth of the collaboration efforts that occur. As an existing
requirement, we have seen the importance and benefit of third-party
coordination. The requirement leaves the option open to direct lenders
in choosing with which parties they coordinate. We understand that some
relationships work better than others. Nonetheless, we encourage direct
lenders to continue outreach and third-party coordination, for the
betterment of YBS farmers and ranchers.
Proposed paragraph (d)(1)(iii) is finalized as proposed. It
requires implementation of outreach programs, which may include
marketing and education. This is a continuation of requirements in
existing paragraph (c)(3)(iii). We received seven comments on this
requirement. One comment from a commercial banking trade group
supported minimum requirements for marketing, outreach, and education.
Six commenters, all from the System, opposed this existing requirement.
Commenters stated that the rule is silent on criteria to determine
effectiveness and that measuring effectiveness is subjective. One
commenter stated that it would frustrate and confuse potential
customers and business partners when a direct lender comes to an event
with predetermined measurers for effectiveness. Another commenter asked
if the board, management, or banks would be determining the
effectiveness of activities, going on to say that this requirement is
redundant and burdensome. In the existing requirement, the agency has
not identified material weaknesses with direct lenders implementing
effective outreach, marketing, and educational programs.
We are unclear as to why carrying this requirement forward into the
finalized rule would be burdensome. Results have shown for a direct
lender YBS program to be successful, it is critical to have more
components than merely the extension of credit. Some of these
components include marketing to underserved segments, providing new
borrower education, and listening to feedback from YBS farmers and
ranchers.
Proposed paragraph (d)(2)(i) strikes the word ``reasonably'' and is
finalized as proposed. It requires using reliable demographic data in
developing quantitative goals, along with identifying the sources of
the data. We received seven comments on this requirement. One comment
from a commercial banking trade group stated that quantitative goals
must be bolstered with additional requirements and that more than one
goal should be used. This commenter did not like basing the
understanding of goals on reasonably reliable demographic data and
stated that sources should be recognized and not arbitrary. The six
opposing commenters were all from the System. Commenters who opposed
this requirement shared concerns on the term ``reasonably reliable,''
saying it provides uncertainty and results in highly subjective
interpretations, asking who is to have final determination if the data
is reasonably reliable or not. Validation of such data and timeliness
were also raised as concerns. Opposing commenters stated validating
data would raise significant time and resource concerns. They also
stated that USDA census data is several years old before release, not
making it the most up-to-date and reliable. Commenters questioned
whether direct lenders would be expected to contract with third parties
while awaiting USDA data availability to meet this requirement.
Opposing commenters also raised concerns that requiring additional
quantitative goals will increase the potential for compromises to be
made to existing programs that are effective as a means to meet new
goals, adding that there is no incentive for direct lenders to set
aggressive goals which may not be met and then result in a lower FCA
rating. We believe that striking the word ``reasonably'' addresses
these comments. Reliable data is a key component in developing
effective goals. It is our expectation that the direct lender
associations obtain the best data available to them when developing
goals.
Proposed paragraphs (d)(2)(i)(A), (d)(2)(i)(B), (d)(2)(i)(C), and
(d)(2)(i)(D) are finalized as proposed. They identify the minimum
quantitative goals that a direct lender must establish annually. These
requirements carry over unchanged from existing paragraphs (c)(2)(i)
through (iv). We received one comment from a commercial banking trade
group on proposed paragraphs (d)(2)(i)(A) through (C), stating the
goals are arbitrary and unmoored and should be bolstered with
additional requirements. We did strengthen this existing requirement by
requiring direct lenders to use at least one of the goal categories
listed as opposed to the existing requirement that states that such
targets may include one of the goal categories listed. Historically,
direct lenders rarely used categories other than those listed in the
regulation. Keeping the same categories ensures that data can be
compared consistently over a range of time periods. Further, databases
are already in place in the System to track these categories, which
helps minimize regulatory burden and costs. We note these are only
minimums and some direct lenders can and do use a combination of these
goals or other categories.
Proposed paragraph (d)(2)(i)(D), pertaining to goals for capital
committed to loans made to YBS borrowers, is finalized as proposed. It
is an unchanged requirement compared with existing paragraph
(c)(2)(iv), however, we did receive two opposing comments from a
commercial bank trade group and the System. Both commenters had similar
observations that the requirement was arbitrary and unmoored. One
commenter went on to say there is a lack of criteria to determine how
much capital a direct lender should allocate to YBS. There was concern
that both FCA and the funding bank will have difficulty determining
where a program is deficient in the capitalization goal. The final rule
does not require direct lenders to have a capital goal. Paragraph
(d)(2) only requires each direct lender to have one of the listed
goals, not all. Nonetheless, we believe a capital commitment is a best
practice and is one method of allowing direct lenders to serve YBS
borrowers who may have a higher risk profile, while at the same time
mitigating the lender's overall risk in the credit relationship.
F. Annual Report Information Concerning YBS [Proposed Sec.
620.5(k)(2)]
We received no comments on the renumbering changes in proposed
Sec. 620.5(k)(2). It will be finalized as proposed.
G. Other Matters
One system commenter concluded that because the NPRM states that
``YBS components will no longer be required as part of Sec.
618.8440,'' FCA is impermissibly trying to modify Sec. 618.8440
through the proposed rule. No part of this rulemaking revises Sec.
618.8440 or changes its requirements. Our statement in the NPRM merely
observed the effect of the proposed deletion of paragraph (e) of Sec.
614.4165, which requires each direct lender
[[Page 89285]]
association's YBS program targets and goals to be included in its
operational and strategic business plan (as separately required under
Sec. 618.8440). In any case, since the final rule does not adopt the
proposed rule's wholesale deletion of paragraph (e) of Sec. 614.4165,
and instead moves it with minor changes to paragraph (c)(1), the
substantive requirement to include YBS program components in the
operational and strategic business plan will remain intact. As a
result, the commenter's concern is addressed.
IV. Regulatory Flexibility Act and Congressional Review Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), FCA hereby certifies that this final rule will not
have a significant economic impact on a substantial number of small
entities. Each of the banks in the Farm Credit System, considered
together with its affiliated direct lender associations, has assets and
annual income in excess of the amounts that would qualify them as small
entities. Therefore, Farm Credit System institutions are not ``small
entities'' as defined in the Regulatory Flexibility Act.
Under the provisions of the Congressional Review Act (5 U.S.C. 801
et seq.), the Office of Management and Budget's Office of Information
and Regulatory Affairs has determined that this final rule is not a
``major rule,'' as the term is defined at 5 U.S.C. 804(2).
List of Subjects
12 CFR Part 614
Agriculture, Banking, Banks, Flood insurance, Foreign trade,
Reporting and recordkeeping requirements, Rural areas.
12 CFR Part 620
Accounting, Agriculture, Banking, Banks, Reporting and
recordkeeping requirements, Rural areas.
PART 614--LOAN POLICIES AND OPERATIONS
0
1. The authority citation for part 614 continues to read as follows:
Authority: Secs. 1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 1.11, 2.0, 2.2,
2.3, 2.4, 2.10, 2.12, 2.13, 2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10,
3.20, 3.28, 4.12, 4.12A, 4.13B, 4.14, 4.14A, 4.14D, 4.14E, 4.18,
4.18A, 4.19, 4.25, 4.26, 4.27, 4.28, 4.36, 4.37, 5.9, 5.10, 5.17,
7.0, 7.2, 7.6, 7.8, 7.12, 7.13, 8.0, 8.5 of the Farm Credit Act (12
U.S.C. 2011, 2013, 2014, 2015, 2017, 2018, 2019, 2071, 2073, 2074,
2075, 2091, 2093, 2094, 2097, 2121, 2122, 2124, 2128, 2129, 2131,
2141, 2149, 2183, 2184, 2201, 2202, 2202a, 2202d, 2202e, 2206,
2206a, 2207, 2211, 2212, 2213, 2214, 2219a, 2219b, 2243, 2244, 2252,
2279a, 2279a-2, 2279b, 2279c-1, 2279f, 2279f-1, 2279aa, 2279aa-5);
12 U.S.C. 2121 note; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
2. Section 614.4165 is revised to read as follows:
Sec. 614.4165 Young, beginning, and small farmers and ranchers.
(a) Definitions.
(1) For purposes of this subpart, the term ``credit'' includes:
(i) Loans made to farmers, ranchers, and producers or harvesters of
aquatic products under title I or II of the Act; and
(ii) Interests in participations made to farmers, ranchers, and
producers or harvesters of aquatic products under title I or II of the
Act.
(2) For purposes of this subpart, the term ``services'' includes:
(i) Leases made to farmers, ranchers, and producers or harvesters
of aquatic products under title I or II of the Act; and
(ii) Related services to farmers, ranchers, and producers or
harvesters of aquatic products under title I or II of the Act.
(b) Farm Credit banks oversight.
(1) Each Farm Credit Bank and Agricultural Credit Bank must adopt
written policies that direct:
(i) The board of each affiliated direct lender association to
establish a program to provide sound and constructive credit and
related services to young, beginning, and small farmers, ranchers, and
producers or harvesters of aquatic products (YBS farmers and ranchers
or YBS);
(ii) Each affiliated direct lender association to include in its
YBS program provisions ensuring coordination with other System
institutions in the territory and other governmental and private
sources of credit; and
(iii) The bank to provide the FCA a complete and accurate annual
report summarizing the YBS program operations and achievements of its
affiliated direct lender associations.
(2) Annually, the YBS program of each direct lender association
must be reviewed and approved by its funding bank, provided review and
approval shall solely be to determine whether the YBS program contains
all required components as set forth in paragraph (d) of this section.
Any conclusion by the bank that a YBS program is incomplete must be
communicated in writing to the direct lender association and to the FCA
within 30 days.
(3) Each Farm Credit Bank and Agricultural Credit Bank must
implement internal controls for requirements in paragraphs (b)(1)(iii)
and (b)(2) of this section.
(c) Direct lender association YBS plan.
(1) YBS program components outlined in paragraph (d) of this
section must be included in each direct lender association's
operational and strategic business plan for at least the succeeding 3
years (as set forth in Sec. 618.8440 of this chapter).
(2) The YBS portion of the operational and strategic business plan
must:
(i) Analyze the direct lender association's performance in the
previous year toward achieving the components in paragraph (d) of this
section;
(ii) Discuss variances and reasons for the results; and
(iii) Identify how the qualitive factors and quantitative goals in
paragraph (d) of this section assist and expand access to credit and
education for YBS farmers and ranchers.
(d) Direct lender association YBS programs. The board of directors
of each direct lender association must establish a program to provide
sound and constructive credit and services to YBS farmers and ranchers
in its territory. Each YBS program must operate in a safe and sound
manner and within the direct lender association's risk-bearing
capacity, while meeting the unique needs of YBS farmers and ranchers.
Such a program must include the following minimum components:
(1) Qualitative factors--
(i) Corporate governance.
(A) A mission statement describing program objectives and specific
means for achieving such objectives.
(B) Internal controls that establish clear lines of responsibility
for YBS strategic plan development and the corresponding YBS program
implementation, tracking YBS program performance, and YBS quarterly
reporting to the direct lender association's board of directors.
(ii) Credit and related services.
(A) Efforts to offer credit and related services, either directly
or in coordination with others, that are responsive to the needs of the
YBS farmers and ranchers in the territory. Examples include customized
loan underwriting standards, loan guarantee programs, fee waivers, or
other credit enhancements commensurate with the credit risk approved by
the board of directors.
(B) Coordination with other System institutions in the territory
and other governmental and private sources who offer credit and
services to YBS farmers and ranchers.
[[Page 89286]]
(iii) Marketing, outreach, and education. Implementation of
effective outreach programs to attract and retain YBS farmers and
ranchers, which may include the use of advertising campaigns,
educational programs, and advisory committees comprised of YBS farmers
and ranchers and/or a YBS mentoring program to better serve and
understand the needs of this lending segment.
(2) Quantitative goals--
(i) Annual quantitative goals. Annual quantitative goals for credit
to YBS farmers and ranchers based on an understanding of reliable
demographic data for the lending territory. Direct lender associations
must identify the sources of data used to establish the goals. Such
goals must include at least one of the following:
(A) Loan volume and loan number goals for YBS farmers and ranchers
in the territory;
(B) Percentage goals representative of the demographics for YBS
farmers and ranchers in the territory;
(C) Percentage goals for loans made to new borrowers qualifying as
YBS farmers and ranchers in the territory; or
(D) Goals for capital committed to loans made YBS farmers and
ranchers in the territory.
(ii) Board of directors approval and review. Goals must be approved
by the direct lender association's board of directors and reviewed
quarterly with adjustments made as needed.
PART 620--DISCLOSURE TO SHAREHOLDERS
0
3. The authority citation for part 620 continues to read as follows:
Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17, 5.19 of the Farm
Credit Act (12 U.S.C. 2154, 2154a, 2207, 2243, 2252, 2254); sec.
424, Pub. L. 100-233, 101 Stat. 1568, 1656 (12 U.S.C. 2252 note);
sec. 514, Pub. L. 102-552, 106 Stat. 4102, 4134.
0
4. Revise Sec. 620.5 (k)(2) to read as follows:
Sec. 620.5 Contents of the annual report to shareholders.
* * * * *
(k) * * *
(2) Each direct lender association must provide a description of
its YBS program, including a status report on each program component as
set forth in Sec. 614.4165 (d) of this chapter and the definitions of
``young,'' ``beginning,'' and ``small'' farmers and ranchers. The
discussion must provide such other information necessary for a
comprehensive understanding of the direct lender association's YBS
program and its results.
* * * * *
Dated: December 14, 2023.
Ashley Waldron,
Secretary, Farm Credit Administration.
[FR Doc. 2023-27929 Filed 12-26-23; 8:45 am]
BILLING CODE 6705-01-P