[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: 12CFR611.1130]



[Page 69-70]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 611_ORGANIZATION--Table of Contents

 

             Subpart H_Rules for Inter-System Fund Transfers

 

Sec. 611.1130  Inter-System transfer of funds and equities.





    (a) Section 5.17(a)(6) of the Act authorizes the FCA to regulate the 

borrowing, repayment, and transfer of funds and equities between 

institutions of the System, including banks, associations, and service 

organizations organized under the Act. This section sets forth the 

circumstances and procedures under which the FCA may direct such a 

transfer of funds and equities based on its determination with respect 

to the financial condition of one or more institutions of the System. 

For purposes of this section, the term ``bond'' refers to long-term 

notes, bonds, debentures, or other similar obligations, or short-term 

discount notes issued by one or more banks pursuant to section 4.2 of 

the Act.

    (b) The FCA may direct a transfer of funds or equities by one or 

more banks of the System to another bank of the System where it 

determines that:

    (1) The receiving institution will not be able to make payments of 

principal or interest on bonds for which it is primarily liable within 

the meaning of section 4.4(a) of the Act; or

    (2) The common or preferred stock, participation certificates, or 

allocated equities of the receiving institution have a book value less 

than their par or stated values; or

    (3) The total bonds outstanding for which the receiving institution 

is primarily liable exceed 20 times the combined capital and surplus 

accounts of the bank; or

    (4) Based on application to it of one or more of the following 

ratios, the receiving institution is not financially viable in that it 

will not be able to continue to extend new or additional credit or 

financial assistance to its eligible borrowers:

    (i) The ratio of stock to earned net worth (including legal reserve, 

unallocated and reserved surplus, undistributed earnings, and allowance 

for losses) exceeds 2 to 1;

    (ii) The ratio of the outstanding bonds to capital and surplus 

exceeds 15 to 1;

    (iii) Nonearning assets (any noninterest-bearing assets, including 

but not limited to cash, noninterest-earning loans, net fixed assets, 

other property owned, accrued interest receivable, and accounts 

receivable) exceed 15 percent of total assets;

    (iv) Lendable net worth (interest-earning assets less interest-

bearing liabilities) is zero or less.

    (c) The FCA may direct a transfer of funds or equities between two 

or more Federal land bank associations or two or more production credit 

associations



[[Page 70]]



in district where it determines that such transfer:

    (1) Is necessary to provide financial support to the district bank 

in which those associations are stockholders based on application of the 

criteria to the bank as set forth in paragraph (b) of this section; or

    (2) Is necessary to provide financial support to one or more other 

like associations in the district based on application of the criteria 

set forth in paragraph (b)(2) or (b)(4) of this section to the 

associations, provided that in applying paragraph (b)(4)(ii) of this 

section the ratio of outstanding indebtedness to capital and surplus of 

the receiving association(s) shall not exceed 9 to 1; or

    (3) Is an integral part of a plan that has been adopted by other 

institutions of the System, and approved by the FCA, under which those 

institutions will extend financial assistance to the district bank in 

which those associations are stockholders.

    (d) A direction by the FCA for a transfer of funds or equities 

pursuant to this section shall be signed by the Chairman and shall 

establish the amount, timing, duration, repayment, and other terms of 

assessments necessary to accomplish such transfer, taking into 

consideration the financial condition of each institution to be 

assessed. Where the FCA directs a transfer of funds or equities between 

associations under paragraph (c) (1) or (2) of this section, it may 

authorize the district bank in which such associations are stockholders 

to accomplish the necessary assessments through debits and credits to 

the accounts of the bank.



[50 FR 36986, Sept. 11, 1985. Redesignated at 51 FR 8666, Mar. 13, 1986, 

as amended at 51 FR 41945, Nov. 20, 1986; 58 FR 48790, Sept. 20, 1993; 

59 FR 21643, Apr. 26, 1994]