[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR652.15]



[Page 313]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 652_FEDERAL AGRICULTURAL MORTGAGE CORPORATION FUNDING AND FISCAL 

AFFAIRS--Table of Contents

 

                     Subpart A_Investment Management

 

Sec. 652.15  Interest rate risk management and requirements.



    (a) The board of directors of Farmer Mac must provide effective 

oversight (direction, controls, and supervision) to the interest rate 

risk management program and must be knowledgeable of the nature and 

level of interest rate risk taken by Farmer Mac.

    (b) The management of Farmer Mac must ensure that interest rate risk 

is properly managed on both a long-range and a day-to-day basis.

    (c) The board of directors of Farmer Mac must adopt an interest rate 

risk management policy that establishes appropriate interest rate risk 

exposure limits based on the Corporation's risk-bearing capacity and 

reporting requirements in accordance with paragraphs (d) and (e) of this 

section. At least annually, the board of directors, or a designated 

subcommittee of the board, must review the policy. Any changes to the 

policy must be approved by the board of directors. You must report any 

changes to the policy to FCA's Office of Secondary Market Oversight 

within 10 business days of adoption.

    (d) The interest rate risk management policy must, at a minimum:

    (1) Address the purpose and objectives of interest rate risk 

management;

    (2) Identify and analyze the causes of interest rate risks within 

Farmer Mac's existing balance sheet structure;

    (3) Require Farmer Mac to measure the potential impact of these 

risks on projected earnings and market values by conducting interest 

rate shock tests and simulations of multiple economic scenarios at least 

quarterly;

    (4) Describe and implement actions needed to obtain Farmer Mac's 

desired risk management objectives;

    (5) Document the objectives that Farmer Mac is attempting to achieve 

by purchasing eligible investments that are authorized by Sec. 652.35 

of this subpart;

    (6) Require Farmer Mac to evaluate and document, at least quarterly, 

whether these investments have actually met the objectives stated under 

paragraph (d)(4) of this section;

    (7) Identify exception parameters and post approvals needed for any 

exceptions to the policy's requirements;

    (8) Describe delegations of authority; and

    (9) Describe reporting requirements, including exceptions to policy 

limits.

    (e) At least quarterly, Farmer Mac's management must report to the 

Corporation's board of directors, or a designated subcommittee of the 

board, describing the nature and level of interest rate risk exposure. 

Any deviations from the board's policy on interest rate risk must be 

specifically identified in the report and approved by the board, or a 

designated subcommittee of the board.