Our Position

Reform and Refocus the Farm Credit System

Position

  • Farm Credit System (FCS) lenders enjoy unfair competitive advantages over rural community banks, leveraging their tax and funding advantages as government sponsored enterprises (GSEs) to siphon the best loans from community banks’ loan portfolios. The FCS’s abusive tactic of undercutting market pricing to obtain the best loans jeopardizes the viability of many community banks and the economic strength of the thousands of rural communities they serve.
  • ICBA strenuously opposes the Farm Credit Administration’s (FCA’s) initiative to allow FCS to engage in non-farm financing labeled as investments or investment bonds. This initiative is a successor to the “Rural Community Investments” proposal, which was previously withdrawn.
  • ICBA rejects legislation proposed by the Farm Credit Council to allow blanket approval authority of these FCS “investments” without FCA’s case-by-case review and approval.
  • ICBA opposes allowing FCS lenders to become the equivalent of rural banks with powers to establish checking and savings accounts, take deposits, or establish a consumer-oriented deposit insurance plan within the FCA. FCS lenders also must not have access to the Federal Reserve’s ACH system for clearing electronic credit and debit transfers.
  • ICBA opposes expansion of FCS authorities and supports legislative and regulatory provisions to ensure FCS’s adherence to its historical mission of serving bona fidefarmers and ranchers and a limited number of businesses that provide on-farm services.
  • Congress should reform the FCS’s ‘similar entity’ authorities by which FCS lenders make loans to large non-rural and publicly traded corporations.

Background

Community Banks Serve Rural America. Community banks are four times more likely to operate offices in rural counties and remain the only banking presence in over one-third of all U.S. counties. There are over 1100 agricultural banks (25 percent of portfolios in agriculture). While community banks hold 25 percent of total banking industry assets, they make nearly 90 percent of the banking industry’s farm loans.

In 2021, agricultural loans were extended by over 4,000 banks while 67 FCS institutions held agricultural loans. However, the FCS now holds 22 percent more farm loans than banks due to their rapid growth in tax-free real estate lending, which increased by 45 percent and $45 billion between 2015 to 2020, a growth rate over twice that of commercial banks. Congress should pass legislation similar to ECORA (H.R. 1977 / S. 2202) from the previous Congress (to be renamed the “Access to Credit for our Rural Economy Act of 2023” (ACRE) in the 118th Congress) to address this disparity.

Farm Credit System. As the only GSE competing directly against private lenders the FCS was granted tax and funding advantages by Congress to serve bona-fidefarmers and ranchers and a narrow group of farm-related businesses that provide on-farm services.

Through its regulator, the FCS has sought non-farm lending opportunities through “investment bonds” even though such lending exceeds the constraints of the Farm Credit Act. The FCS also seeks blanket authority to approve their “investments” in lieu of obtaining their regulator’s approval. ICBA opposes granting the FCS’s blanket approval authorities.

Congress should reform and refocus the FCS’s authorities in order to limit FCS’s non-farm and non-statutory lending.

Staff Contact

Mark K. Scanlan

SVP, Agriculture and Rural Policy

ICBA

[email protected]

Ag News

ICBA Announces 2019 Community Banking Policy Priorities

April 29, 2019

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Washington, D.C. (April 29, 2019)—The Independent Community Bankers of America® (ICBA) today announced its top legislative and regulatory priorities for 2019. ICBA made the announcement at the 2019 ICBA Capital Summit in Washington, where nearly 1,000 ICBA community bankers this week are pressing policymakers to advance top advocacy priorities.

“Ensuring the economic well-being of our communities, and protecting our customers, is cornerstone to the shared values of community banking,” said ICBA Chairman Preston L. Kennedy, president and CEO of Zachary Bancshares Inc. in Zachary, La. “Alongside ICBA’s Community Focus 2020 policy platform, ICBA’s policy priorities will serve as our guiding light as we advocate on behalf of community banking and local communities—always aiming to tailor federal policies to the unique circumstances of community banks and the customers and communities we serve.”

Approved by ICBA’s Policy Development Committee and board of directors, which is made up of community bankers from coast to coast, ICBA’s top priorities for 2019 include:

RELIEF FROM CRUSHING REGULATORY BURDEN: Building on the success of the landmark S. 2155 regulatory reform law with additional relief from ICBA’s Community Focus 2020 platform to help community banks support local economies.

DATA SECURITY, PRIVACY, AND FRAUD: Supporting a national data security breach-and-notification standard and ensuring all participants in the payments system, including merchants, are subject to Gramm-Leach-Bliley Act-like data security standards.

CYBERSECURITY: Ensuring federal cybersecurity policies recognize existing community bank mandates, supporting voluntary information sharing and industry initiatives such as .BANK and Sheltered Harbor, and expanding prudential regulators’ supervision to include core processors and credit bureaus.

BANK SECRECY ACT AND ENFORCEMENT: Promoting a more efficient Bank Secrecy Act regime and strongly supporting the collection of beneficial ownership information by the appropriate government agency at the time an entity is formed.

HOUSING-FINANCE REFORM AND THE GOVERNMENT-SPONSORED ENTERPRISES: Supporting housing-finance reform that preserves market liquidity and stability while ending the destructive sweep of Fannie Mae and Freddie Mac earnings.

TAX-EXEMPT CREDIT UNIONS: Urging Congress to end the credit union industry’s unwarranted federal tax subsidy and opposing expanded powers for credit unions as long as they remain exempt from taxation and the Community Reinvestment Act.

COMMUNITY REINVESTMENT ACT: Supporting fair, equitable, consistent, and transparent implementation of the Community Reinvestment Act.

CONSUMER FINANCIAL PROTECTION BUREAU: Supporting legislation that ensures accountability at the Consumer Financial Protection Bureau by replacing single-director governance with a five-member commission and promoting greater participation by the prudential banking regulators.

REGULATORY CAPITAL: Setting the Community Bank Leverage Ratio at 8 percent—rather than the 9 percent proposed by regulators—to allow additional well-capitalized community banks to elect this simplified capital measure established by Congress.

PAYMENTS ACCESS AND GOVERNANCE: Urging the Federal Reserve to achieve ubiquitous, nationwide access to safe and efficient faster payments for all financial institutions and their customers.

FINTECH BANK CHARTERS: Continue raising concerns with the Office of the Comptroller of the Currency’s special-purpose national bank charter for fintech companies and urging the OCC not to proceed without explicit statutory authority from Congress.

SEPARATION OF BANKING AND COMMERCE: Urging the Federal Deposit Insurance Corp. to impose a moratorium on industrial loan corporation deposit-insurance applications and Congress to close the ILC loophole to maintain the longstanding U.S. policy of separating banking and commerce.

REFORMING THE FARM CREDIT SYSTEM: Opposing the Farm Credit System’s abuse of its tax-advantaged status and supporting reforms requiring the FCS to adhere to its mission of serving bona fide farmers and ranchers.

TAX POLICY: Supporting tax laws that promote robust economic activity, a vibrant community banking sector, and saving and investment.

CANNABIS BANKING: Advocating federal legislation establishing a safe harbor from federal sanctions for banks that serve cannabis-related businesses in states where cannabis is legal under state law.

For more information, view the comprehensive list of ICBA’s 2019 Policy Resolutions or visit www.icba.org.

About ICBA

The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 52,000 locations nationwide, community banks constitute 99 percent of all banks, employ more than 760,000 Americans and are the only physical banking presence in one in five U.S. counties. Holding more than $4.9 trillion in assets, $3.9 trillion in deposits, and $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org

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