12 USC 2154a - Capitalization of System institutions

U.S Code last checked for updates: May 01, 2024

§ 2154a.

Capitalization of System institutions

(a)

Definitions

As used in this section:

(1)

Permanent capital

The term “permanent capital” means—

(A)

current year retained earnings;

(B)

allocated and unallocated earnings (which, in the case of earnings allocated in any form by a System bank to any association or other recipient and retained by the bank, shall be considered, in whole or in part, permanent capital of the bank or of any such association or other recipient as provided under an agreement between the bank and each such association or other recipient);

(C)

all surplus (less allowances for losses);

(D)

stock issued by a System institution, except—

(i)

stock that may be retired by the holder of the stock on repayment of the holder’s loan, or otherwise at the option or request of the holder; or

(ii)

stock that is protected under section 2162 of this title or is otherwise not at risk; and

(E)

any other debt or equity instruments or other accounts that the Farm Credit Administration determines appropriate to be considered permanent capital.

(2)

Stock

(b)

Adoption of bylaws

(c)

Requirements of bylaws

(1)

In general

Notwithstanding any other provision of this chapter, the bylaws adopted under subsection (b)—

(A)

shall provide for such classes, par value, and amounts of the stock of the institution, the manner in which such stock shall be issued, transferred, and retired, and the payment of dividends and patronage refunds, as determined appropriate by the Board of Directors, subject to this section;

(B)

may provide for the charging of loan origination fees as determined appropriate by the Board of Directors;

(C)

shall enable the institution to meet the capital adequacy standards established under the regulations issued under section 2154(a) of this title;

(D)

shall provide for the issuance of voting stock, which may only be held by—

(i)

borrowers who are farmers, ranchers, or producers or harvesters of aquatic products, and cooperative associations eligible to borrow from System institutions under this chapter;

(ii)

persons and entities eligible to borrow from the banks for cooperatives, as described in section 2124(c)(ii) of this title;

(iii)

in the case of a Central Bank for Cooperatives, other banks for cooperatives; and

(iv)

in the case of banks other than banks for cooperatives, System associations;

(E)

shall require that—

(i)

as a condition of borrowing from or through the institution, any borrower who is entitled to hold voting stock or participation certificates shall, at the time a loan is made, acquire voting stock or participation certificates in an amount not less than $1,000 or 2 percent of the amount of the loan, whichever is less; and

(ii)

within 2 years after the loan of a borrower is repaid in full, any voting stock held by the borrower be converted to nonvoting stock;

(F)

may provide that persons who are not borrowers from the institution may hold nonvoting stock of the institution;

(G)

shall require that any holder of voting stock issued before the adoption of bylaws under this section exchange a portion of such stock for new voting stock;

(H)

do not need to provide for maximum or minimum standards of borrower stock ownership based on a percentage of the loan of the borrower, except as otherwise provided in this section;

(I)

shall permit the retirement of stock at the discretion of the institution if the institution meets the capital adequacy standards established under section 2154(a) of this title; and

(J)

shall permit stock to be transferable.

(2)

Effective date

(d)

Reduction of capital

(1)

General rule

(2)

Exceptions

(e)

Compliance

(f)

Loans designated for sale or sold into secondary market

(1)

In general

Subject to paragraph (2) and notwithstanding any other provision of this section, the bylaws adopted by a bank or association under subsection (b) may provide—

(A)

in the case of a loan made on or after February 10, 1996, that is designated, at the time the loan is made, for sale into a secondary market, that no voting stock or participation certificate purchase requirement shall apply to the borrower for the loan; and

(B)

in the case of a loan made before February 10, 1996, that is sold into a secondary market, that all outstanding voting stock or participation certificates held by the borrower with respect to the loan shall, subject to subsection (d)(1), be retired.

(2)

Applicability

(3)

Exception

(A)

In general

(B)

Retirement

(g)

Construction

(h)

Controlling authority

(Pub. L. 92–181, title IV, § 4.3A, as added Pub. L. 100–233, title III, § 301(b), Jan. 6, 1988, 101 Stat. 1608; amended Pub. L. 100–399, title III, § 301(b)–(f), Aug. 17, 1988, 102 Stat. 994; Pub. L. 102–552, title I, § 101, Oct. 28, 1992, 106 Stat. 4103; Pub. L. 104–105, title II, § 206, Feb. 10, 1996, 110 Stat. 173; Pub. L. 110–234, title V, § 5403(b), May 22, 2008, 122 Stat. 1154; Pub. L. 110–246, § 4(a), title V, § 5403(b), June 18, 2008, 122 Stat. 1664, 1916.)

cite as: 12 USC 2154a