
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: 12USC2254]

 
                       TITLE 12--BANKS AND BANKING
 
                     CHAPTER 23--FARM CREDIT SYSTEM
 
          SUBCHAPTER V--FARM CREDIT ADMINISTRATION ORGANIZATION
 
             Part B--Farm Credit Administration Organization
 
Sec. 2254. Examinations


(a) Scope and frequency of examinations; power, authority, and liability 
        of examiners

    Except for Federal land bank associations, each institution of the 
System shall be examined by Farm Credit Administration examiners at such 
times as the Board may determine, but in no event less than once during 
each 18-month period. Each Federal land bank association shall be 
examined by Farm Credit Administration examiners at such times as the 
Farm Credit Administration Board may determine, except that each such 
association shall be examined at least once every three years. Such 
examinations may include, if appropriate, but are not limited to, an 
analysis of credit and collateral quality and capitalization of the 
institution, and appraisals of the effectiveness of the institution's 
management and application of policies governing the carrying out of 
this chapter and regulations of the Farm Credit Administration and 
servicing all eligible borrowers. Examination of banks shall include an 
analysis of the compensation paid to the chief executive officer and the 
salary scales of the employees of the bank. At the direction of the 
Board, Farm Credit Administration examiners also shall make examinations 
of the condition of any organization, other than federally regulated 
financial institutions, to, for, or with which any institution of the 
System contemplates making a loan or discounting paper. For the purposes 
of this chapter, examiners of the Farm Credit Administration shall be 
subject to the same requirements, responsibilities, and penalties as are 
applicable to examiners under the National Bank Act [12 U.S.C. 21 et 
seq.], the Federal Reserve Act [12 U.S.C. 221 et seq.], and Federal 
Deposit Insurance Act [12 U.S.C. 1811 et seq.], and other provisions of 
law and shall have the same powers and privileges as are vested in such 
examiners by law.

(b) Annual report of condition

    (1) Each institution of the System shall make and publish an annual 
report of condition as prescribed by the Farm Credit Administration. 
Each such report shall contain financial statements prepared in 
accordance with generally accepted accounting principles, except with 
respect to any actions taken by any banks of the System under section 
2159(b) of this title, and contain such additional information as the 
Farm Credit Administration by regulation may require. Notwithstanding 
the provisions of the preceding sentence and any other provision of this 
chapter, for the period July 1, 1986, through December 31, 1988, the 
institutions of the Farm Credit System may, on the prior approval of the 
Farm Credit Administration and subject to such conditions as it may 
establish, capitalize annually their provision for losses that is in 
excess of one-half of 1 percent of loans outstanding and amortize such 
capitalized amounts over a period not to exceed 20 years. Such financial 
statements of System institutions shall be audited by an independent 
public accountant.
    (2) In accordance with the regulations of the Farm Credit 
Administration, for the period ending December 31, 1992, System 
institutions are authorized to use the authorities contained in the 
third sentence of paragraph (1) except as otherwise provided in section 
2278a-6 of this title.
    (3) Any preferred stock issued under section 2278b-7 of this title 
shall be subordinated to, and impaired before, other stock or equities 
of the institution.

(c) Report of examination of noncomplying institution; publication; 
        notice of intention

    The Farm Credit Administration may publish the report of examination 
of any System institution that does not, before the end of the 120th day 
after the date of notification of the recommendations and suggestions of 
the Farm Credit Administration, based on such examination, comply with 
such recommendations and suggestions to the satisfaction of the Farm 
Credit Administration. The Farm Credit Administration shall give notice 
of intention to publish in the event of such noncompliance at least 90 
days before such publication. Such notice of intention may be given any 
time after such notification of recommendations and suggestions.

(d) Duties of Farm Credit Administration

    On receipt of a request made under section 2277a-8(b)(1)(B) of this 
title with respect to a System institution, the Farm Credit 
Administration shall--
        (1) furnish for the confidential use of the Farm Credit System 
    Insurance Corporation reports of examination of the institution and 
    other reports or information on the institution; and
        (2)(A) examine, or obtain other information on, the institution 
    and furnish for the confidential use of the Farm Credit System 
    Insurance Corporation the report of the examination and such other 
    information; or
        (B) if the Farm Credit Administration Board determines that 
    compliance with the request would substantially impair the ability 
    of the Farm Credit Administration to carry out the other duties and 
    responsibilities of the Farm Credit Administration under this 
    chapter, notify the Board of Directors of the Farm Credit System 
    Insurance Corporation that the Farm Credit Administration will be 
    unable to comply with the request.

(Pub. L. 92-181, title V, Sec. 5.19, formerly Sec. 5.20, Dec. 10, 1971, 
85 Stat. 623; renumbered Sec. 5.19 and amended Pub. L. 99-205, title II, 
Sec. 203(a), Dec. 23, 1985, 99 Stat. 1693; Pub. L. 99-509, title I, 
Sec. 1037, Oct. 21, 1986, 100 Stat. 1878; Pub. L. 100-233, title II, 
Sec. 205(b), title IV, Sec. 432(b), Jan. 6, 1988, 101 Stat. 1607, 1661; 
Pub. L. 100-399, title II, Sec. 204, title IV, Sec. 416(c), Aug. 17, 
1988, 102 Stat. 993, 1004; Pub. L. 101-624, title XVIII, Sec. 1843(b), 
Nov. 28, 1990, 104 Stat. 3836; Pub. L. 102-552, title V, Secs. 512, 
513(b), Oct. 28, 1992, 106 Stat. 4133, 4134; Pub. L. 104-105, title II, 
Sec. 213, Feb. 10, 1996, 110 Stat. 175.)


                            Prior Provisions

    A prior section 5.19 of Pub. L. 92-181 was classified to section 
2253 of this title prior to repeal by Pub. L. 99-205, title II, 
Sec. 202(a), Dec. 23, 1985, 99 Stat. 1693.

                       References in Text

    The National Bank Act, referred to in subsec. (a), is act June 3, 
1864, ch. 106, 13 Stat. 99, as amended, which is classified principally 
to chapter 2 (Sec. 21 et seq.) of this title. For complete 
classification of this Act to the Code, see References in Text note set 
out under section 38 of this title.
    The Federal Reserve Act, referred to in subsec. (a), is act Dec. 23, 
1913, ch. 6, 38 Stat. 251, as amended, which is classified principally 
to chapter 3 (Sec. 221 et seq.) of this title. For complete 
classification of this Act to the Code, see References in Text note set 
out under section 226 of this title and Tables.
    The Federal Deposit Insurance Act, referred to in subsec. (a), is 
act Sept. 21, 1950, ch. 967, Sec. 2, 64 Stat. 873, as amended, which is 
classified generally to chapter 16 (Sec. 1811 et seq.) of this title. 
For complete classification of this Act to the Code, see Short Title 
note set out under section 1811 of this title and Tables.


                               Amendments

    1996--Subsec. (a). Pub. L. 104-105 substituted ``during each 18-
month period'' for ``each year'' in first sentence.
    1992--Subsec. (a). Pub. L. 102-552, Sec. 512, substituted ``may 
include, if appropriate'' for ``shall include'' in third sentence.
    Subsec. (d). Pub. L. 102-552, Sec. 513(b), added subsec. (d).
    1990--Subsec. (a). Pub. L. 101-624 inserted after third sentence 
``Examination of banks shall include an analysis of the compensation 
paid to the chief executive officer and the salary scales of the 
employees of the bank.''
    1988--Subsec. (a). Pub. L. 100-399, Sec. 416(c), substituted ``at 
least once every three years'' for ``at least once every 5 years''.
    Pub. L. 100-233, Sec. 432(b), substituted ``Except for Federal land 
bank associations, each'' for ``Each'', substituted ``the Board'' for 
``the Chairman of the Board'' in two places, and inserted after first 
sentence ``Each Federal land bank association shall be examined by Farm 
Credit Administration examiners at such times as the Farm Credit 
Administration Board may determine, except that each such association 
shall be examined at least once every 5 years.''
    Subsec. (b). Pub. L. 100-233, Sec. 205(b), designated existing 
provisions as par. (1) and added pars. (2) and (3).
    Subsec. (b)(2). Pub. L. 100-399, Sec. 204, substituted ``the third 
sentence of paragraph (1)'' for ``this section''.
    1986--Subsec. (b). Pub. L. 99-509 substituted second and third 
sentences for former second sentence which read as follows: ``Each such 
report shall contain financial statements prepared in accordance with 
generally accepted accounting principles and contain such additional 
information as the Farm Credit Administration by regulation may 
require.''
    1985--Pub. L. 99-205 in amending section generally, revised and 
restated existing provisions in subsec. (a) and added subsecs. (b) and 
(c). Prior to amendment, section read as follows: ``Except as provided 
herein, each institution of the System, and each of their agents, at 
such times as the Governor of the Farm Credit Administration may 
determine, shall be examined and audited by farm credit examiners under 
the direction of an independent chief Farm Credit Administration 
examiner, but each bank and each production credit association shall be 
examined and audited not less frequently than once each year. Such 
examinations shall include objective appraisals of the effectiveness of 
management and application of policies in carrying out the provisions of 
this chapter and in servicing all eligible borrowers. If the Governor 
determines it to be necessary or appropriate, the required examinations 
and audits may be made by independent certified public accountants, 
certified by a regulatory authority of a State, and in accordance with 
generally accepted auditing standards. Upon request of the Governor or 
any bank of the System, farm credit examiners shall also make 
examinations and written reports of the condition of any organization, 
other than national banks, to which, or with which, any institution of 
the System contemplates making a loan or discounting paper of such 
organization. For the purposes of this chapter, examiners of the Farm 
Credit Administration shall be subject to the same requirements, 
responsibilities, and penalties as are applicable to examiners under the 
National Bank Act [12 U.S.C. 21 et seq.], the Federal Reserve Act [12 
U.S.C. 221 et seq.], the Federal Deposit Insurance Act [12 U.S.C. 1811 
et seq.], and other provisions of law and shall have the same powers and 
privileges as are vested in such examiners by law.''


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-399 effective as if enacted immediately 
after enactment of Pub. L. 100-233, which was approved Jan. 6, 1988, see 
section 1001(a) of Pub. L. 100-399, set out as a note under section 2002 
of this title.


                    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.


Restraint by Federal Bank Regulatory Agencies in Overseeing Agricultural 
                                Borrowers

    Pub. L. 99-198, title XIII, Sec. 1326, Dec. 23, 1985, 99 Stat. 1540, 
provided that:
    ``(a) Congress finds and declares that--
        ``(1) high production costs and low commodity prices have 
    combined to reduce farm income to the lowest levels since the depths 
    of the Depression in the 1930's, to subject many agricultural 
    producers, through no fault of their own, to severe economic 
    hardship, and in many cases temporarily but seriously to impair 
    producers' ability to meet loan repayment schedules in a timely 
    fashion; and
        ``(2) a policy of adverse classification of agricultural loans 
    by bank examiners under these circumstances will trigger a wave of 
    foreclosures and similar actions on the part of banks, thereby 
    depressing land values and prices for agricultural facilities and 
    equipment and having a devastating effect on farmers and the banking 
    industry, and upon rural areas of the United States in general.
    ``(b) It is therefore the sense of Congress that the Federal bank 
regulatory agencies should ensure, in their examination procedures, that 
examiners exercise caution and restraint and give due consideration not 
only to the current cash flow of agricultural borrowers under financial 
stress, but to factors such as their loan collateral and ultimate 
ability to repay as well, for so long as the adverse economic effects of 
the cost-price squeeze of recent years continue to impair the ability of 
these borrowers to meet scheduled repayments on their loans.''

                  Section Referred to in Other Sections

    This section is referred to in sections 2001, 2252, 2278a-6 of this 
title.
