[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: 12CFR611.1270]



[Page 82-83]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 611_ORGANIZATION--Table of Contents

 

           Subpart P_Termination of System Institution Status

 

Sec. 611.1270  Repayment of obligations--terminating bank.



    (a) General rule. If your institution is a terminating bank, you 

must pay or make adequate provision for the payment of all outstanding 

debt obligations, and provide for your responsibility for any probable 

contingent liabilities identified.

    (b) Satisfaction of primary liability on consolidated or Systemwide 

obligations. After consulting with the other Farm Credit banks, the 

Funding Corporation, and the FCSIC, you must pay or make adequate 

provision for payment of your primary liability on consolidated or 

Systemwide obligations in a method that we deem acceptable. Before we 

make a final decision on your proposal and as we deem necessary, we may 

consult with the other Farm Credit banks, the Funding Corporation, and 

the FCSIC.

    (c) Satisfaction of joint and several liability and liability for 

interest on individual obligations. (1) You and the other Farm Credit 

banks must enter into an agreement, which is subject to our approval, 

covering obligations issued under section 4.2 of the Act and outstanding 

on the termination date. The agreement must specify how you and your 

successor institution will make adequate provision for the payment of 

your joint and several liability to holders of obligations other than 

those obligations on which you are primarily liable, in the event we 

make calls for payment under section 4.4 of the Act. You and your 

successor institution must also provide for your liability under section 

4.4(a)(1) of the Act to pay interest on the individual obligations 

issued by other System banks. As a part of the agreement, you must also 

agree that your successor institution



[[Page 83]]



will provide ongoing information to the Funding Corporation to enable it 

to fulfill its funding and disclosure duties. The Funding Corporation 

may, at its option, be a party to the agreement to the extent necessary 

to fulfill its duties with respect to financing and disclosure.

    (2) If you and the other Farm Credit banks are unable to reach 

agreement within 90 days before the proposed termination date, we will 

specify the manner in which you will make adequate provision for the 

payment of the liabilities in question and how we will make joint and 

several calls for those obligations outstanding on the termination date.

    (3) Notwithstanding any other provision in these regulations, the 

successor institution will be jointly and severally liable for 

consolidated and Systemwide debt outstanding on the termination date 

(other than the obligations on which you are primarily liable). The 

successor institution will also be liable for interest on other banks' 

individual obligations as described in section 4.4(a)(1) of the Act and 

outstanding on the termination date. The termination application must 

include evidence that the successor institution will continue to be 

liable for consolidated and Systemwide debt and for interest on other 

banks' individual obligations.

    (d) Payment to the FAC. (1) Before termination, you must pay to the 

FAC the amounts required by section 6.9(e)(3)(C)(ii) of the Act and by 

subparagraphs (c)(5)(E)(i) and (d)(1)(C)(iv) of section 6.26 of the Act. 

To make the calculations for section 6.26, you must include your retail 

loan volume, the retail loan volume of the associations that are 

terminating with you, and the retail loan volume of the affiliated 

associations that continue their direct lending relationships with the 

successor institution, but you must not include the retail loan volume 

of associations that reaffiliate with another bank and transfer or repay 

their direct loan on or before termination.

    (2) The FAC must make the present value estimations, subject to our 

approval, based on an appropriate discount rate. The appropriate 

discount rate is the non-interest-bearing U.S. Treasury security rate 

for securities with a maturity as near as possible to the period 

remaining until your obligations under this paragraph would be due (but 

before the due date).

    (3) If your bank or your predecessor bank has redeemed early any 

preferred stock issued to the FAC, we may require you to confirm in 

writing that your successor institution will assume responsibility for 

any and all of your contingent liabilities under any FAC-preferred stock 

redemption agreement and indemnification agreement.