[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: 12CFR614.4900]



[Page 141-142]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 614_LOAN POLICIES AND OPERATIONS--Table of Contents

 

Subpart Q_Banks for Cooperatives and Agricultural Credit Banks Financing 

                           International Trade

 

Sec. 614.4900  Foreign exchange.



    (a) Before a bank for cooperatives or an agricultural credit bank 

may engage in any financial transaction which transports monetary 

instruments from any place within the United States to or through any 

place outside the United States or to any place within the United 

States, the bank must have policies adopted by the bank's board of 

directors governing such transactions and must have established bank 

procedures to safeguard the interests of the stockholders of the bank in 

regard to such transactions.

    (b) Under policies adopted by the bank's board of directors, a bank 

for cooperatives or an agricultural credit bank may engage in currency 

exchange activities necessary to service individual transactions that 

may be financed under the regulations authorizing export, import, and 

other internationally related credit and financial services. These 

currency exchange activities shall not include any loans or commitments 

intended to finance speculative futures transactions by eligible 

borrowers in foreign currencies. The bank may engage, on behalf of the 

eligible borrowers or on its own behalf, in bona fide hedging 

transactions and positions, where such transactions or positions 

normally reduce risks in the conduct and management of international 

financial activities. The



[[Page 142]]



bank's policies should include established guidelines for:

    (1) Net overnight positions, by currency.

    (2) Maturity distribution, by currency, of foreign currency assets, 

liabilities, and foreign exchange contracts.

    (3) Outstanding contracts with individual customers and banks.

    (4) Credit approval procedures safeguarding against delivery or 

settlement risk.

    (5) Total value of outstanding contracts--spot and forward.

    (c) A bank for cooperatives or an agricultural credit bank is 

responsible for its compliance with the laws of the United States in 

regard to reporting requirements of the Department of the Treasury 

pertaining to currency exchange activities and international transfers 

of monetary instruments.

    (d) A bank for cooperatives or an agricultural credit bank engaged 

in foreign exchange trading shall have written policies describing the 

scope of trading activity authorized, delegation of authority, types of 

services offered, trading limits, reporting requirements, and internal 

accounting controls.

    (e) The bank's trading guideline policies should provide for 

reporting procedures adequate to inform management properly of trading 

activities and to facilitate detection of lack of compliance with policy 

directives.

    (f) The bank's policies shall establish foreign exchange delivery 

limits for eligible customers with relationship to the customer's 

financial capability to bear the financial risks assumed. The bank will 

be expected to maintain documentary evidence that a customer's delivery 

exposure is reasonable, and that responsible bank officers routinely 

review outstanding delivery exposure of individual customers.

    (g) The bank's personnel policies shall include written standards of 

conduct for those involved with foreign exchange activities, including 

the following which should be prohibited:

    (1) Trading with entities affiliated with the bank or with members 

of the board of directors.

    (2) Foreign exchange and deposit transactions with other bank 

employees.

    (3) Personal business relationships with foreign exchange and money 

brokers with whom the bank deals.

    (h) The bank's policies should provide detailed instructions 

regarding the need for bank officers to disclose the limits of 

responsibility and liability of the bank when it holds positions or 

executes contracts for the account of eligible parties. The bank's 

policies regarding the respective procedures should provide reasonable 

assurance that reports on trading activities are current and complete, 

and that the opportunity for concealment of unauthorized transactions is 

kept at the absolute minimum.

    (i) The banks for cooperatives and agricultural credit banks shall 

use the Funding Corporation for purposes of trading foreign exchange. 

All foreign exchange transactions shall be made by the Funding 

Corporation on behalf of the banks consistent with instructions received 

from the respective banks.

    (j) Guidelines (b) through (i) of this section will not apply if a 

bank purchases or sells foreign exchange through a commercial bank and 

has no foreign exchange risk exposure.



[46 FR 51879, Oct. 22, 1981, as amended at 55 FR 24887, June 19, 1990; 

62 FR 4445, Jan. 30, 1997]