ICBA - Advocacy - ICBA Policy Resolutions for 2016<br>ICBA Priorities for 2016

ICBA Policy Resolutions for 2016
ICBA Priorities for 2016



  • If FCS lenders continue efforts to expand into non-farm lending markets, then ICBA urges Congress to either abolish the FCS, or at a minimum restrict the FCS to its historical mission of serving the agricultural marketplace.
  • ICBA adamantly opposes the FCS’s expansionist agenda to allow FCS lenders to become the equivalent of commercial banks while retaining their GSE status and inherent tax and funding advantages.
  • The Farm Credit Act (Act) should further define and narrowly target FCS lending activities to refocus on serving bona-fide farmers and ranchers and young, beginning, and small farmers and their farmer-owned cooperatives.
  • FCS lenders should be subject to taxes when they exceed a given asset threshold, when they lend to large borrowers, or if they engage in any non-farm lending activities.
  • ICBA strenuously opposes the successor to the Farm Credit Administration’s “Rural Community Investments” proposal, withdrawn in November 2013, but now adopted via regulatory guidance under the guise of FCA’s “case-by-case approval” of “investments” authority.
  • FCS lenders should only be allowed to purchase loans or loan pools of failed banks from the FDIC as a purchaser of last resort. The FCS should be required to work with commercial banks as a funding source.
  • The three-person board of the FCA, the FCS’s regulator, should include a member of a federal banking agency or the U.S. Treasury Department to ensure public transparency and accountability.
  • The FCA should be required to engage in joint rulemaking with federal banking agencies when proposing regulations that could involve allowing non-farm lending activities for FCS lenders.
  • Mergers of large FCS entities should be limited to curtail the concentration of financial assets within the System and preserve more localized service. All mergers should be subject to the same approval procedures as required for associations to exit the System.
  • The FCA should require greater transparency of FCS activities and should publish instances of illegal FCS lending, both past and present, and any exemptions granted for such lending.
  • FCS institutions should be required to register a class of stock with the Securities and Exchange Commission (SEC) and provide full disclosure required by the Securities Exchange Act of 1934.
  • The FCS should be subject to regulations equivalent to those that apply to community banks and the housing GSEs, including oversight by the Consumer Financial Protection Bureau.
  • FCS institutions should be subject to regulatory capital requirements that are more stringent than those that apply to community banks, consistent with their status as a government sponsored enterprises ultimately backed by U.S. taxpayers.


Farm Credit System lenders enjoy an unfair advantage over rural community banks in competing for loans by leveraging their tax and funding advantages as a government sponsored enterprise (GSE). The FCS is unique in this regard as the only GSE that competes directly against private sector lenders at the retail level. FCS was chartered by Congress to serve bona fide farmers and ranchers, but has in recent years sought numerous non-farm lending powers in an effort to compete directly with commercial banks for non-farm customers. These vast and broad new powers would essentially make FCS institutions the functional combination of commercial banks and tax-exempt credit unions, but with intrinsic GSE tax and funding advantages. While the FCS’s legislative proposals were not included in recent farm bills, FCS has sought to push its legislative agenda through its compliant and accommodating regulator, the Farm Credit Administration (FCA).

Farm Credit Administration’s Aggressive Agenda. In addition to the broad consumer, housing, and business lending legislative proposals advocated by the FCS, the FCA proposed a “Rural Community Investments” regulation intended to allow non-farm financing of “investment” projects. This very broad proposal would allow FCS institutions to finance otherwise illegal lending provided it is labeled as investments, including non-agricultural business loans, manufacturing, apartment complexes, dental facilities, doctors’ and lawyers’ offices, and many other loans prohibited by law. Though the RCI proposal was nominally withdrawn, it now appears to be embodied in FCA’s ‘case-by-case’ approval regime as announced in FCA’s September 2013 Guidance memo. FCA has not made any plans for public transparency of the “investments” approved under this authority.

FCA has also inappropriately changed the definition of “rural” to apply to localities within metropolitan statistical areas (MSAs) if any other federal program defines these areas as “rural” areas.

In recent years, FCA has allowed various deposit-taking programs by FCS lenders that siphon local funds out of rural communities and has expanded the FCS mission without informing the public. In addition, on several occasions, FCA has violated the Administrative Procedures Act. The cumulative impact of these changes represents a dramatic departure from FCS’s historic mission and congressional intent – to serve bona-fide farmers and ranchers, farm cooperatives and farm related businesses that provide on-farm services – and these abuses have no basis in the law or legislative history.

ICBA Opposes Consolidation Trend Within the Farm Credit System. FCS should either be dismantled if they continue seeking to become non-farm lenders or be refocused as a wholesale funding source for community banks serving agriculture and provide more of a correspondent banking function. Many FCS associations have merged in recent years, resulting in several large multi-state regional lenders. Significant additional mergers could occur going forward. Any future mergers should abide by the FCA's "termination" regulations, and FCA should publicly explain any mergers between geographically distant or separated associations. Large, multi-state or regional FCS entities enjoy tax advantages allowing them to siphon away high-quality loans from much smaller community banks. These tax advantages include exemptions from paying taxes on real estate and mortgage loans, avoidance of state and local taxes and state franchise taxes, exemption of mortgage recording fees and exemption from taxes on retained earnings. These exemptions provide a huge advantage over community banks, whether C corporations or Subchapter S Corporations, in their ability to facilitate new growth.

Reform of Farm Credit Administration Governance. Congress should reform the FCA by requiring that one FCA board seat be held by a representative of a federal banking regulator or the Treasury Department. The FCA should refocus its regulatory actions on increasing the safety and soundness of FCS institutions and mission oversight in lieu of proposals to expand FCS powers. Any FCA proposal allowing FCS non-farm lending activities should be subject to joint rule-making with federal banking regulators and should trigger taxes equivalent to those paid by a C corporation.

More Disclosure and Transparency Needed. Since the FCS is a GSE, each Farm Credit System bank should be required to register a class of its equity securities with the SEC under the Securities Exchange Act of 1934 to be consistent with Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Like other GSEs, FCS institutions should also be required to comply with the disclosure requirements of the Act by preparing and filing appropriate reports including audited financial statements.

Regulatory Capital Consistent with Taxpayer Risk. ICBA provisionally supports the Farm Credit Administration’s proposed capital rule for FCS institutions, issued in late 2014, which would significantly revise regulatory capital requirements, enhance capital transparency, and allow for easier comparison with the Basel III capital framework to which community banks are subject. However, because the FCS is a GSE with the implicit backing of U.S. taxpayers, regulatory capital requirements should be more stringent, not comparable to, those that apply to community banks. The FCA proposed rule should be considered an initial step rather than an end point.

Staff Contact: Mark Scanlan

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