Collapse to view only § 2279bb. Definitions
- § 2279bb. Definitions
- § 2279bb-1. Risk-based capital levels
- § 2279bb-2. Minimum capital level
- § 2279bb-3. Critical capital level
- § 2279bb-4. Enforcement levels
- § 2279bb-5. Mandatory actions applicable to level II
- § 2279bb-6. Supervisory actions applicable to level III
- § 2279bb-7. Repealed.
§ 2279bb. Definitions
For purposes of this part:
(1) Compensation
(2) Core capital
The term “core capital” means, with respect to the Corporation, the sum of the following (as determined in accordance with generally accepted accounting principles):
(A) The par value of outstanding common stock.
(B) The par value of outstanding preferred stock.
(C) Paid-in capital.
(D) Retained earnings.
(3) Director
(4) Office
(5) Regulatory capital
(6) State
(Pub. L. 92–181, title VIII, § 8.31, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1871.)
§ 2279bb–1. Risk-based capital levels
(a) Risk-based capital test
The Director of the Office of Secondary Market Oversight shall, by regulation, establish a risk-based capital test under this section for the Corporation. When applied to the Corporation, the risk-based capital test shall determine the amount of regulatory capital for the Corporation that is sufficient for the Corporation to maintain positive capital during a 10-year period in which both of the following circumstances occur:
(1) Credit risk
(A) In general
(B) Rural utility loans
(2) Interest rate risk
(b) Considerations
(1) Establishment of test
In establishing the risk-based capital test under subsection (a)—
(A) the Director shall take into account appropriate distinctions based on various types of agricultural mortgage products, varying terms of Treasury obligations, and any other factors the Director considers appropriate;
(B) the Director shall conform loan data used in determining credit risk to the minimum geographic and commodity diversification standards applicable to pools of qualified loans eligible for guarantee;
(C) the Director may take into account retained subordinated participating interests under section 2279aa–6(b)(2) of this title (as in effect before February 10, 1996);
(D) the Director may take into account other methods or tests to determine credit risk developed by the Corporation before December 13, 1991; and
(E) the Director shall consider any other information submitted by the Corporation in writing during the 180-day period beginning on December 13, 1991.
(2) Revising test
(c) Risk-based capital level
For purposes of this part, the risk-based capital level for the Corporation shall be equal to the sum of the following amounts:
(1) Credit and interest rate risk
(2) Management and operations risk
(d) Specified contents
(1) In general
The regulations establishing the risk-based capital test under this section shall—
(A) be issued by the Director for public comment in the form of a notice of proposed rulemaking, to be first published after the expiration of the period referred to in subsection (a); and
(B) contain specific requirements, definitions, methods, variables, and parameters used under the risk-based capital test and in implementing the test (such as loan loss severity, float income, loan-to-value ratios, taxes, yield curve slopes, default experience, prepayment rates, and performance of pools of qualified loans).
(2) Specificity
(e) Availability of model
(Pub. L. 92–181, title VIII, § 8.32, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1871; amended Pub. L. 102–552, title III, § 308(b)(3), Oct. 28, 1992, 106 Stat. 4116; Pub. L. 104–105, title I, §§ 109(b)(3), 113, Feb. 10, 1996, 110 Stat. 165, 166; Pub. L. 110–234, title V, § 5406(d), May 22, 2008, 122 Stat. 1159; Pub. L. 110–246, § 4(a), title V, § 5406(d), June 18, 2008, 122 Stat. 1664, 1920; Pub. L. 115–334, title V, § 5411(48), Dec. 20, 2018, 132 Stat. 4685.)
§ 2279bb–2. Minimum capital level
(a) In generalExcept as provided in subsection (b), for purposes of this part, the minimum capital level for the Corporation shall be an amount of core capital equal to the sum of
(1) 2.75 percent of the aggregate on-balance sheet assets of the Corporation, as determined in accordance with generally accepted accounting principles; and
(2) 0.75 percent of the aggregate off-balance sheet obligations of the Corporation, which, for the purposes of this part, shall include
(A) the unpaid principal balance of outstanding securities that are guaranteed by the Corporation and backed by pools of qualified loans;
(B) instruments that are issued or guaranteed by the Corporation and are substantially equivalent to instruments described in subparagraph (A); and
(C) other off-balance sheet obligations of the Corporation.
(b) Transition period
(1) In generalFor purposes of this part, the minimum capital level for the Corporation—
(A) prior to January 1, 1997, shall be the amount of core capital equal to the sum of—
(i) 0.45 percent of aggregate off-balance sheet obligations of the Corporation;
(ii) 0.45 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and
(iii) 2.50 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2);
(B) during the 1-year period ending December 31, 1997, shall be the amount of core capital equal to the sum of—
(i) 0.55 percent of aggregate off-balance sheet obligations of the Corporation;
(ii) 1.20 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and
(iii) 2.55 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2);
(C) during the 1-year period ending December 31, 1998, shall be the amount of core capital equal to—
(i) if the Corporation’s core capital is not less than $25,000,000 on January 1, 1998, the sum of—(I) 0.65 percent of aggregate off-balance sheet obligations of the Corporation;(II) 1.95 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and(III) 2.65 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2); or
(ii) if the Corporation’s core capital is less than $25,000,000 on January 1, 1998, the amount determined under subsection (a); and
(D) on and after January 1, 1999, shall be the amount determined under subsection (a).
(2) Designated on-balance sheet assetsFor purposes of this subsection, the designated on-balance sheet assets of the Corporation shall be—
(A) the aggregate on-balance sheet assets of the Corporation acquired under section 2279aa–6(d) of this title; and
(B) the aggregate amount of qualified loans purchased and held by the Corporation under section 2279aa–3(c)(13) of this title.
(Pub. L. 92–181, title VIII, § 8.33, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1873; amended Pub. L. 104–105, title I, § 114, Feb. 10, 1996, 110 Stat. 166; Pub. L. 115–334, title V, § 5411(49), Dec. 20, 2018, 132 Stat. 4685.)
§ 2279bb–3. Critical capital level
For purposes of this part, the critical capital level for the Corporation shall be an amount of core capital equal to 50 percent of the total minimum capital amount determined under section 2279bb–2 of this title.
(Pub. L. 92–181, title VIII, § 8.34, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1874; amended Pub. L. 104–105, title I, § 115, Feb. 10, 1996, 110 Stat. 167.)
§ 2279bb–4. Enforcement levels
(a) In generalThe Director shall classify the Corporation, for purposes of this part, according to the following enforcement levels:
(1) Level IThe Corporation shall be classified as within level I if the Corporation—
(A) maintains an amount of regulatory capital that is equal to or exceeds the risk-based capital level established under section 2279bb–1 of this title; and
(B) equals or exceeds the minimum capital level established under section 2279bb–2 of this title.
(2) Level IIThe Corporation shall be classified as within level II if—
(A) the Corporation—
(i) maintains an amount of regulatory capital that is less than the risk-based capital level; and
(ii) equals or exceeds the minimum capital level; or
(B) the Corporation is otherwise classified as within level II under subsection (b) of this section.
(3) Level IIIThe Corporation shall be classified as within level III if—
(A) the Corporation—
(i) does not equal or exceed the minimum capital level; and
(ii) equals or exceeds the critical capital level established under section 2279bb–3 of this title; or
(B) the Corporation is otherwise classified as within level III under subsection (b) of this section.
(4) Level IVThe Corporation shall be classified as within level IV if the Corporation—
(A) does not equal or exceed the critical capital level; or
(B) is otherwise classified as within level IV under subsection (b) of this section.
(b) Discretionary classificationIf at any time the Director determines in writing (and provides written notification to the Corporation and the Farm Credit Administration) that the Corporation is taking any action not approved by the Director that could result in a rapid depletion of core capital or that the value of the property subject to mortgages securitized by the Corporation or property underlying securities guaranteed by the Corporation, has decreased significantly, the Director may classify the Corporation—
(1) as within level II, if the Corporation is otherwise within level I;
(2) as within level III, if the Corporation is otherwise within level II; or
(3) as within level IV, if the Corporation is otherwise within level III.
(c) Quarterly determination
(d) NoticeUpon determining under subsection (b) or (c) that the Corporation is within level II or III, the Director shall provide written notice to the Congress and to the Corporation—
(1) that the Corporation is within such level;
(2) that the Corporation is subject to the provisions of section 2279bb–5 or 2279bb–6 of this title, as applicable; and
(3) stating the reasons for the classification of the Corporation within such level.
(Pub. L. 92–181, title VIII, § 8.35, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1874; amended Pub. L. 104–105, title I, § 116, Feb. 10, 1996, 110 Stat. 168; Pub. L. 115–334, title V, § 5411(50), Dec. 20, 2018, 132 Stat. 4685.)
§ 2279bb–5. Mandatory actions applicable to level II
(a) Capital restoration plan
(b) Restriction on dividends
(c) Reclassification from level II to level III
The Director shall immediately reclassify the Corporation as within level III (and the Corporation shall be subject to the provisions of section 2279bb–6 of this title), if—
(1) the Corporation is within level II; and
(2)
(A) the Corporation does not submit a capital restoration plan that is approved by the Director; or
(B) the Director determines that the Corporation has failed to make, in good faith, reasonable efforts necessary to comply with such a capital restoration plan and fulfill the schedule for the plan approved by the Director.
(d) Effective date
(Pub. L. 92–181, title VIII, § 8.36, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1876.)
§ 2279bb–6. Supervisory actions applicable to level III
(a) Mandatory supervisory actions
(1) Capital restoration plan
(2) Restrictions on dividends
(A) Prior approval
If the Corporation is classified as within level III, the Corporation—
(i) may not make any payment of dividends that would result in the Corporation being reclassified as within level IV; and
(ii) may make any other payment of dividends only if the Director approves the payment before the payment.
(B) Standard for approval
(3) Reclassification from level III to level IV
The Director shall immediately reclassify the Corporation as within level IV if—
(A) the Corporation is classified as within level III; and
(B)
(i) the Corporation does not submit a capital restoration plan that is approved by the Director; or
(ii) the Director determines that the Corporation has failed to make, in good faith, reasonable efforts necessary to comply with such a capital restoration plan and fulfill the schedule for the plan approved by the Director.
(b) Discretionary supervisory actions
In addition to any other actions taken by the Director (including actions under subsection (a)), the Director may, at any time, take any of the following actions if the Corporation is classified as within level III:
(1) Limitation on increase in obligations
(2) Limitation on growth
(3) Prohibition on dividends
(4) Acquisition of new capital
(5) Restriction of activities
(6) Conservatorship
(c) Effective date
(Pub. L. 92–181, title VIII, § 8.37, as added Pub. L. 102–237, title V, § 503(b)(2), Dec. 13, 1991, 105 Stat. 1876.)
§ 2279bb–7. Repealed. Pub. L. 115–334, title V, § 5411(51), Dec. 20, 2018, 132 Stat. 4685