
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 12USC2154]

 
                       TITLE 12--BANKS AND BANKING
 
                     CHAPTER 23--FARM CREDIT SYSTEM
 
     SUBCHAPTER IV--PROVISIONS APPLICABLE TO TWO OR MORE CLASSES OF 
                       INSTITUTIONS OF THE SYSTEM
 
                             Part A--Funding
 
Sec. 2154. Capital adequacy of banks and institutions


(a) Minimum levels of capital

    The Farm Credit Administration shall cause System institutions to 
achieve and maintain adequate capital by establishing minimum levels of 
capital for such System institutions and by using such other methods as 
the Farm Credit Administration deems appropriate. The Farm Credit 
Administration may establish such minimum level of capital for a System 
institution as the Farm Credit Administration, in its discretion, deems 
to be necessary or appropriate in light of the particular circumstances 
of the System institution.

(b) Failure to maintain minimum levels; directives; plans for achieving 
        minimum levels; proposals affecting compliance

    (1) Failure of a System institution to maintain capital at or above 
its minimum level as established under subsection (a) of this section 
may be deemed by the Farm Credit Administration, in its discretion, to 
constitute an unsafe and unsound practice within the meaning of this 
chapter.
    (2) In addition to, or in lieu of, any other action authorized by 
law, including paragraph (1), the Farm Credit Administration may issue a 
directive to a System institution that fails to maintain capital at or 
above its required level as established under subsection (a) of this 
section. Such directive may require the System institution to submit and 
adhere to a plan acceptable to the Farm Credit Administration describing 
the means and timing by which the System institution shall achieve its 
required capital level, but may not require merger or consolidation 
without a majority vote of the voting stockholders or the contributors 
to the guaranty fund of the institution.
    (3) The Farm Credit Administration may consider such System 
institution's progress in adhering to any plan required under paragraph 
(2) whenever such System institution, or an affiliate thereof, seeks the 
requisite approval of the Farm Credit Administration for any proposal 
that would divert earnings, diminish capital, or otherwise impede such 
System institution's progress in achieving its minimum capital level. 
The Farm Credit Administration may deny such approval where it 
determines that such proposal would adversely affect the ability of the 
System institution to comply with such plan.

(c) Enhancement of capital adequacy of banks

    Each bank shall have on hand at the time of issuance of any note, 
bond, debenture, or other similar obligation and at all times thereafter 
maintain, free from any lien or other pledge, notes and other 
obligations representing loans made under this chapter or real or 
personal property acquired in connection with loans made under this 
chapter, obligations of the United States or any agency thereof direct 
or fully guaranteed, other bank assets (including marketable securities) 
approved by the Farm Credit Administration, or cash, in an aggregate 
value equal to the total amount of notes, bonds, debentures, or other 
similar obligations outstanding for which the bank is primarily liable.

(Pub. L. 92-181, title IV, Sec. 4.3, Dec. 10, 1971, 85 Stat. 611; Pub. 
L. 99-205, title I, Sec. 101(3), Dec. 23, 1985, 99 Stat. 1678; Pub. L. 
100-233, title III, Sec. 304, title VIII, Secs. 804(a)(3), 805(q), Jan. 
6, 1988, 101 Stat. 1621, 1715, 1716; Pub. L. 100-399, title VII, 
Sec. 702(b), Aug. 17, 1988, 102 Stat. 1006.)


                               Amendments

    1988--Subsec. (b)(2). Pub. L. 100-233, Sec. 804(a)(3), struck out 
subpar. (A) designation and struck out subpar. (B) which read as 
follows: ``Any directive issued under this paragraph, including plans 
submitted pursuant thereto, shall be enforceable under the provisions of 
section 2267 of this title to the same extent as an effective and 
outstanding order issued under section 2261 of this title that has 
become final.''
    Subsec. (c). Pub. L. 100-233, Sec. 805(q), which directed the 
amendment of subsec. (c) by substituting ``direct or fully guaranteed'' 
for ``direct of fully guaranteed'' was repealed by Pub. L. 100-399, 
Sec. 702(b). See Construction of 1988 Amendment note below.
    Pub. L. 100-233, Sec. 304, amended subsec. (c) generally. Prior to 
amendment, subsec. (c) read as follows: ``Each bank shall have on hand 
at the time of issuance of any long-term notes, bonds, debentures, or 
other similar obligations and at all times thereafter maintain, free 
from any lien or other pledge, notes and other obligations representing 
loans made under the authority of this chapter, obligations of the 
United States or any agency thereof direct or fully guaranteed, other 
readily marketable securities approved by the Farm Credit 
Administration, or cash, in an aggregate value equal to the total amount 
of long-term notes, bonds, debentures, or other similar obligations 
outstanding for which the bank is primarily liable.''
    1985--Pub. L. 99-205 substituted ``Capital adequacy of banks and 
associations'' for ``Aggregate of obligations; collateral'' in section 
catchline.
    Subsec. (a). Pub. L. 99-205 amended subsec. (a) generally. Prior to 
amendment, subsec. (a) read as follows: ``No issue of long-term notes, 
bonds, debentures, or other similar obligations by a bank or banks shall 
be approved in an amount which, together with the amount of other bonds, 
debentures, long-term notes, or other similar obligations issued and 
outstanding, exceeds twenty times the capital and surplus of all the 
banks which will be primarily liable on the proposed issue, or such 
lesser amount as the Farm Credit Administration shall establish by 
regulation.''
    Subsecs. (b), (c). Pub. L. 99-205 added subsec. (b) and redesignated 
former subsec. (b) as (c).


                    Effective Date of 1985 Amendment

    Amendment by Pub. L. 99-205 effective thirty days after Dec. 23, 
1985, see section 401 of Pub. L. 99-205, set out as a note under section 
2001 of this title.


                     Construction of 1988 Amendment

    Section 702(b) of Pub. L. 100-399 provided that section 805(q) of 
Pub. L. 100-233, cited as a credit to this section, is repealed and that 
subsec. (c) of this section shall be applied and administered as if such 
section had not been enacted.


                   Minimum Capital Adequacy Standards

    Section 301(a) of Pub. L. 100-233, as amended by Pub. L. 100-399, 
title III, Sec. 301(a), Aug. 17, 1988, 102 Stat. 993, provided that:
    ``(1) In general.--
        ``(A) Establishment.--Within 120 days after the date of the 
    enactment of this Act [Jan. 6, 1988], the Farm Credit Administration 
    shall issue regulations under section 4.3(a) of the Farm Credit Act 
    of 1971 (12 U.S.C. 2154(c) [12 U.S.C. 2154(a)]) that establish 
    minimum permanent capital adequacy standards for Farm Credit System 
    institutions.
        ``(B) Basis for establishment.--The standards established under 
    subparagraph (A) shall apply to an institution based on the 
    financial statements of the institution prepared in accordance with 
    generally accepted accounting principles.
        ``(C) Ratio of capital to assets.--The standards established 
    under subparagraph (A) shall specify fixed percentages representing 
    the ratio of permanent capital of the institution to the assets of 
    the institution, taking into consideration relative risk factors as 
    determined by the Farm Credit Administration.
        ``(D) Phase-in period.--The standards established under 
    subparagraph (A) shall be phased in during the 5-year period 
    beginning on the date of the enactment of this Act [Jan. 6, 1988].
    ``(2) Emergency power not available.--The Farm Credit Administration 
shall not invoke the emergency provisions of section 5.17(c)(2) of the 
Farm Credit Act of 1971 (12 U.S.C. 2251(c)(2) [12 U.S.C. 2252(c)(2)]) 
with respect to the issuance of the regulations required under paragraph 
(1)(A).
    ``(3) Prohibitions during transition period.--During the 5-year 
period specified in paragraph (1)(D), the Farm Credit Administration 
shall not initiate any receivership, conservatorship, liquidation, or 
enforcement action against any System institution certified to issue 
preferred stock under section 6.27 of the Farm Credit Act of 1971 (as 
added by section 201 of this Act) [12 U.S.C. 2278b-7], solely because of 
the failure of such institution to meet minimum permanent capital 
adequacy standards unless such action is recommended or concurred in by 
the Farm Credit System Assistance Board established under section 6.0 of 
such Act (as added by section 201 of this Act) [12 U.S.C. 2278a].
    ``(4) Permanent capital.--For purposes of this subsection, the term 
`permanent capital' has the same meaning given that term in section 
4.3A(a)(1) of the Farm Credit Act of 1971 [12 U.S.C. 2154a(a)(1)].''

                  Section Referred to in Other Sections

    This section is referred to in sections 2153, 2154a, 2155, 2267, 
2268, 2278b-6 of this title.
