
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: 12USC2277a-4]

 
                       TITLE 12--BANKS AND BANKING
 
                     CHAPTER 23--FARM CREDIT SYSTEM
 
          SUBCHAPTER V--FARM CREDIT ADMINISTRATION ORGANIZATION
 
            Part E--Farm Credit System Insurance Corporation
 
Sec. 2277a-4. Premiums


(a) Amount in Fund not exceeding secure base amount

                           (1) In general

        If at the end of any calendar year the aggregate of amounts in 
    the Farm Credit Insurance Fund does not exceed the secure base 
    amount, subject to paragraph (2), the annual premium due from any 
    insured System bank for the calendar year shall be equal to the sum 
    of--
            (A) the annual average principal outstanding for such year 
        on loans made by the bank that are in accrual status, excluding 
        the guaranteed portions of government-guaranteed loans provided 
        for in subparagraph (C), multiplied by 0.0015;
            (B) the annual average principal outstanding for such year 
        on loans made by the bank that are in nonaccrual status, 
        multiplied by 0.0025; and
            (C)(i) the annual average principal outstanding for such 
        year on the guaranteed portions of Federal Government-guaranteed 
        loans made by the bank that are in accrual status, multiplied by 
        0.00015; and
            (ii) the annual average principal outstanding for such year 
        on the guaranteed portions of State government-guaranteed loans 
        made by the bank that are in accrual status, multiplied by 
        0.0003.

                        (2) Reduced premiums

        The Corporation, in the sole discretion of the Corporation, may 
    reduce by a percentage uniformly applied to all insured System banks 
    the annual premium due from each insured System bank during any 
    calendar year, as determined under paragraph (1).

             (3) ``Government-guaranteed loans'' defined

        As used in this section and section 2020(b) of this title, the 
    term ``government-guaranteed loans'' means loans or credits, or 
    portions of loans or credits, that are guaranteed--
            (A) by the full faith and credit of the United States 
        Government or any State government;
            (B) by an agency or other entity of the United States 
        Government whose obligations are explicitly guaranteed by the 
        United States Government; or
            (C) by an agency or other entity of a State government whose 
        obligations are explicitly guaranteed by such State government.

(b) Amount in Fund exceeding secure base amount

    At any time the aggregate of amounts in the Farm Credit Insurance 
Fund exceeds the secure base amount, the Corporation shall reduce the 
annual premium due from each insured System bank, as determined under 
subsection (a)(1) of this section, by a percentage determined by the 
Corporation so that the aggregate of the premiums payable by all System 
banks is sufficient to ensure that the aggregate of amounts in the Farm 
Credit Insurance Fund after such premiums are paid is not less than the 
secure base amount at such time.

(c) Secure base amount

    For purposes of this part, the term ``secure base amount'' means, 
with respect to any point in time, 2 percent of the aggregate 
outstanding insured obligations of all insured System banks at such time 
(adjusted downward to exclude an amount equal to the sum of (1) 90 
percent of the guaranteed portions of principal outstanding on Federal 
Government-guaranteed loans in accrual status made by such banks and (2) 
80 percent of the guaranteed portions of principal outstanding on State 
government-guaranteed loans in accrual status made by such banks, as 
determined by the Corporation), or such other percentage of the 
aggregate amount as the Corporation in its sole discretion determines is 
actuarially sound to maintain in the Insurance Fund taking into account 
the risk of insuring outstanding insured obligations.

(d) Determination of principal outstanding

    For the purpose of subsections (a), (c), and (e) of this section, 
the principal outstanding on all loans made by an insured System bank 
shall be determined based on all loans made--
        (1) by any production credit association, or any other 
    association making direct loans under authority provided under 
    section 2279b of this title, that is able to make such loans because 
    such association is receiving, or has received, funds provided 
    through the insured System bank;
        (2) by any bank, company, institution, corporation, union, or 
    association described in section 2015(b)(1)(B) of this title, that 
    is able to make such loans because such entity is receiving, or has 
    received, funds provided through the insured System bank; and
        (3) by such insured System bank (other than loans made to any 
    party described in paragraph (1) or (2)).

(e) Allocation to System institutions of excess reserves

     (1) Establishment of Allocated Insurance Reserves Accounts

        There is hereby established in the Farm Credit Insurance Fund an 
    Allocated Insurance Reserves Account--
            (A) for each insured System bank; and
            (B) subject to paragraph (6)(C), for all holders, in the 
        aggregate, of Financial Assistance Corporation stock.

                            (2) Treatment

        Amounts in any Allocated Insurance Reserves Account shall be 
    considered to be part of the Farm Credit Insurance Fund.

                       (3) Annual allocations

        If, at the end of any calendar year, the aggregate of the 
    amounts in the Farm Credit Insurance Fund exceeds the average secure 
    base amount for the calendar year (as calculated on an average daily 
    balance basis), the Corporation shall allocate to the Allocated 
    Insurance Reserves Accounts the excess amount less the amount that 
    the Corporation, in its sole discretion, determines to be the sum of 
    the estimated operating expenses and estimated insurance obligations 
    of the Corporation for the immediately succeeding calendar year.

                       (4) Allocation formula

        From the total amount required to be allocated at the end of a 
    calendar year under paragraph (3)--
            (A) 10 percent of the total amount shall be credited to the 
        Allocated Insurance Reserves Account established under paragraph 
        (1)(B), subject to paragraph (6)(C); and
            (B) there shall be credited to the Allocated Insurance 
        Reserves Account of each insured System bank an amount that 
        bears the same ratio to the total amount (less any amount 
        credited under subparagraph (A)) as the average principal 
        outstanding for the 3-year period ending on the end of the 
        calendar year on loans made by the bank that are in accrual 
        status bears to the average principal outstanding for the 3-year 
        period ending on the end of the calendar year on loans made by 
        all insured System banks that are in accrual status (excluding, 
        in each case, the guaranteed portions of government-guaranteed 
        loans described in subsection (a)(1)(C) of this section).

      (5) Use of funds in Allocated Insurance Reserves Accounts

        To the extent that the sum of the operating expenses of the 
    Corporation and the insurance obligations of the Corporation for a 
    calendar year exceeds the sum of operating expenses and insurance 
    obligations determined under paragraph (3) for the calendar year, 
    the Corporation shall cover the expenses and obligations by--
            (A) reducing each Allocated Insurance Reserves Account by 
        the same proportion; and
            (B) expending the amounts obtained under subparagraph (A) 
        before expending other amounts in the Fund.

               (6) Other disposition of Account funds

        (A) In general

            As soon as practicable during each calendar year beginning 
        more than 8 years after the date on which the aggregate of the 
        amounts in the Farm Credit Insurance Fund exceeds the secure 
        base amount, but not earlier than January 1, 2005, the 
        Corporation may--
                (i) subject to subparagraphs (D) and (F), pay to each 
            insured System bank, in a manner determined by the 
            Corporation, an amount equal to the lesser of--
                    (I) 20 percent of the balance in the insured System 
                bank's Allocated Insurance Reserves Account as of the 
                preceding December 31; or
                    (II) 20 percent of the balance in the bank's 
                Allocated Insurance Reserves Account on the date of the 
                payment; and

                (ii) subject to subparagraphs (C), (E), and (F), pay to 
            each System bank and association holding Financial 
            Assistance Corporation stock a proportionate share, 
            determined by dividing the number of shares of Financial 
            Assistance Corporation stock held by the institution by the 
            total number of shares of Financial Assistance Corporation 
            stock outstanding, of the lesser of--
                    (I) 20 percent of the balance in the Allocated 
                Insurance Reserves Account established under paragraph 
                (1)(B) as of the preceding December 31; or
                    (II) 20 percent of the balance in the Allocated 
                Insurance Reserves Account established under paragraph 
                (1)(B) on the date of the payment.

        (B) Authority to eliminate or reduce payments

            The Corporation may eliminate or reduce payments during a 
        calendar year under subparagraph (A) if the Corporation 
        determines, in its sole discretion, that the payments, or other 
        circumstances that might require use of the Farm Credit 
        Insurance Fund, could cause the amount in the Farm Credit 
        Insurance Fund during the calendar year to be less than the 
        secure base amount.

        (C) Reimbursement for Financial Assistance Corporation stock

            (i) Sufficient funding

                Notwithstanding paragraph (4)(A), on provision by the 
            Corporation for the accumulation in the Account established 
            under paragraph (1)(B) of funds in an amount equal to 
            $56,000,000 (in addition to the amounts described in 
            subparagraph (F)(ii)), the Corporation shall not allocate 
            any further funds to the Account except to replenish the 
            Account if funds are diminished below $56,000,000 by the 
            Corporation under paragraph (5).
            (ii) Wind down and termination

                (I) Final disbursements

                    On disbursement of $53,000,000 (in addition to the 
                amounts described in subparagraph (F)(ii)) from the 
                Allocated Insurance Reserves Account, the Corporation 
                shall disburse the remaining amounts in the Account, as 
                determined under subparagraph (A)(ii), without regard to 
                the percentage limitations in subclauses (I) and (II) of 
                subparagraph (A)(ii).
                (II) Termination of Account

                    On disbursement of $56,000,000 (in addition to the 
                amounts described in subparagraph (F)(ii)) from the 
                Allocated Insurance Reserves Account, the Corporation 
                shall close the Account established under paragraph 
                (1)(B) and transfer any remaining funds in the Account 
                to the remaining Allocated Insurance Reserves Accounts 
                in accordance with paragraph (4)(B) for the calendar 
                year in which the transfer occurs.

        (D) Distribution of payments received

            Not later than 60 days after receipt of a payment made under 
        subparagraph (A)(i), each insured System bank, in consultation 
        with affiliated associations of the insured System bank, and 
        taking into account the direct or indirect payment of insurance 
        premiums by the associations, shall develop and implement an 
        equitable plan to distribute payments received under 
        subparagraph (A)(i) among the bank and associations of the bank.

        (E) Exception for previously reimbursed associations

            For purposes of subparagraph (A)(ii), in any Farm Credit 
        district in which the funding bank has reimbursed 1 or more 
        affiliated associations of the bank for the previously 
        unreimbursed portion of the Financial Assistance Corporation 
        stock held by the associations, the funding bank shall be deemed 
        to be the holder of the shares of Financial Assistance 
        Corporation stock for which the funding bank has provided the 
        reimbursement.

        (F) Initial payment

            Notwithstanding subparagraph (A), the initial payment made 
        to each payee under subparagraph (A) shall be in such amount 
        determined by the Corporation to be equal to the sum of--
                (i) the total of the amounts that would have been paid 
            if payments under subparagraph (A) had been authorized to 
            begin, under the same terms and conditions, in the first 
            calendar year beginning more than 5 years after the date on 
            which the aggregate of the amounts in the Farm Credit 
            Insurance Fund exceeds the secure base amount, and to 
            continue through the 2 immediately subsequent years;
                (ii) interest earned on any amounts that would have been 
            paid as described in clause (i) from the date on which the 
            payments would have been paid as described in clause (i); 
            and
                (iii) the payment to be made in the initial year 
            described in subparagraph (A), based on the amount in each 
            Account after subtracting the amounts to be paid under 
            clauses (i) and (ii).

(Pub. L. 92-181, title V, Sec. 5.55, as added Pub. L. 100-233, title 
III, Sec. 302, Jan. 6, 1988, 101 Stat. 1612; amended Pub. L. 100-399, 
title III, Sec. 302(c)-(e), Aug. 17, 1988, 102 Stat. 994; Pub. L. 101-
220, Sec. 6(a), Dec. 12, 1989, 103 Stat. 1879; Pub. L. 104-105, title 
II, Sec. 215(a)(1), (2)(A), (b), (c), Feb. 10, 1996, 110 Stat. 175, 176, 
179.)


                               Amendments

    1996--Subsec. (a). Pub. L. 104-105, Sec. 215(a)(1)(A), substituted 
``If at the end of any calendar year the aggregate of amounts in the 
Farm Credit Insurance Fund does not exceed the secure base amount, 
subject to paragraph (2), the annual premium due from any insured System 
bank for the calendar year'' for ``Until the aggregate of amounts in the 
Farm Credit Insurance Fund exceeds the secure base amount, the annual 
premium due from any insured System bank for any calendar year''.
    Subsec. (a)(2), (3). Pub. L. 104-105, Sec. 215(a)(1)(B), (C), added 
par. (2) and redesignated former par. (2) as (3).
    Subsec. (b). Pub. L. 104-105, Sec. 215(a)(2)(A), substituted ``Farm 
Credit Insurance Fund'' for ``Insurance Fund'' in two places, and 
``subsection (a)(1) of this section'' for ``subsection (a) of this 
section'', and struck out ``for the following calendar year'' after 
``each insured System bank''.
    Subsec. (d). Pub. L. 104-105, Sec. 215(c), in introductory 
provisions, substituted ``subsections (a), (c), and (e) of this 
section'' for ``subsections (a) and (c) of this section'' and ``an 
insured System bank'' for ``a Farm Credit Bank'', and in pars. (1) 
through (3), substituted ``insured System bank'' for ``Farm Credit 
Bank''.
    Subsec. (e). Pub. L. 104-105, Sec. 215(b), added subsec. (e).
    1989--Subsec. (a). Pub. L. 101-220, Sec. 6(a)(1), added subsec. (a) 
and struck out former subsec. (a) which read as follows: ``Until the 
aggregate of amounts in the Farm Credit Insurance Fund exceeds the 
secure base amount, the annual premium due from any insured System bank 
for any calendar year shall be equal to the sum of--
        ``(1) the annual average principal outstanding for such year on 
    loans made by the bank that are in accrual status, multiplied by 
    0.0015; and
        ``(2) the annual average principal outstanding for such year on 
    loans made by the bank that are in nonaccrual status, multiplied by 
    0.0025.''
    Subsec. (b). Pub. L. 101-220, Sec. 6(a)(2), inserted ``, as 
determined under subsection (a) of this section,'' after ``calendar 
year''.
    Subsec. (c). Pub. L. 101-220, Sec. 6(a)(3), inserted ``(adjusted 
downward to exclude an amount equal to the sum of (1) 90 percent of the 
guaranteed portions of principal outstanding on Federal Government-
guaranteed loans in accrual status made by such banks and (2) 80 percent 
of the guaranteed portions of principal outstanding on State government-
guaranteed loans in accrual status made by such banks, as determined by 
the Corporation)'' after ``such time''.
    Subsec. (d). Pub. L. 101-220, Sec. 6(a)(4), in introductory 
provisions, substituted ``subsections (a) and (c) of this section'' for 
``subsection (a) of this section'' and struck out ``intermediate term'' 
after ``outstanding on all'', inserted par. (1), and struck out former 
par. (1) which read as follows: ``by the production credit associations 
in the district in which such bank is located;''.
    1988--Subsec. (d). Pub. L. 100-399, Sec. 302(c), substituted in 
introductory provisions ``intermediate term loans made by a Farm Credit 
Bank'' for ``loans made by a Federal intermediate credit bank''.
    Subsec. (d)(2). Pub. L. 100-399, Sec. 302(d), (e), substituted 
``section 2015(b)(1)(B) of this title'' for ``section 2074(a)(2) of this 
title'' and ``Farm Credit Bank'' for ``Federal intermediate credit 
bank''.
    Subsec. (d)(3). Pub. L. 100-399, Sec. 302(e), substituted ``Farm 
Credit Bank'' for ``Federal intermediate credit bank''.


                    Effective Date of 1989 Amendment

    Amendment by Pub. L. 101-220 effective for insurance premiums due to 
the Farm Credit System Insurance Corporation under this chapter on or 
after Jan. 1, 1990, based on the loan volume of each bank for each 
calendar year beginning with calendar year 1989, and effective for the 
calculation of the initial premium payment required under section 2277a-
5(c) of this title, see section 6(c) of Pub. L. 101-220, set out as a 
note under section 2020 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-399 effective immediately after amendment 
made by section 401 of Pub. L. 100-233, which was effective 6 months 
after Jan. 6, 1988, see section 1001(b) of Pub. L. 100-399, set out as a 
note under section 2002 of this title.


  GAO Reports on Risk-Based Insurance Premiums, Access to Association 
            Capital, Supplemental Premiums, and Consolidation

    Pub. L. 102-552, title II, Sec. 204, Oct. 28, 1992, 106 Stat. 4106, 
as amended by Pub. L. 104-316, title I, Sec. 106(e), Oct. 19, 1996, 110 
Stat. 3831, provided that:
    ``(a) In General.--The Comptroller General of the United States may 
investigate, review, and evaluate the feasibility and appropriateness, 
and report to the Committee on Agriculture of the House of 
Representatives and the Committee on Agriculture, Nutrition, and 
Forestry of the Senate, on the advantages and disadvantages of providing 
the Farm Credit System Insurance Corporation with--
        ``(1) the authority to directly or indirectly assess 
    associations to ensure that all System capital is available to 
    prevent losses to investors, including a study of--
            ``(A) the effects of direct assessments by the Insurance 
        Corporation on associations, including interest rate charges to 
        borrowers;
            ``(B) the effects of requiring that banks pass along the 
        cost of insurance premiums to owner associations and other 
        financing institutions having a discount relationship with the 
        bank;
            ``(C) the effects of requiring owner associations to 
        purchase stock in the district bank, if needed, to prevent a 
        bank from having to return to the Insurance Corporation for 
        financial assistance once the assistance has been given;
            ``(D) the effects of the purchase of stock from funds of the 
        association (through funds obtained from other than the district 
        bank) or allowing the bank to increase the direct line of credit 
        to the association in order to fund the purchase; and
            ``(E) the effect that authorizing the Insurance Corporation 
        to assess the association could have on the association's 
        incentives for building capital;
        ``(2) the authority to collect supplemental insurance premiums 
    under certain circumstances, including a study of--
            ``(A) the possibility of the Insurance Fund being depleted 
        more rapidly than it could be replenished under the current 
        premium structure;
            ``(B) the effects of the depletion under alternate economic 
        scenarios and the probability of the occurrence of each of those 
        scenarios;
            ``(C) the effects on capital accumulation and interest rates 
        of levying a supplemental premium; and
            ``(D) limitations on any authority to levy supplemental 
        premiums and the underlying basis for the limitations; and
        ``(3) the authority to establish an insurance premium rate 
    structure that would take into account, on an institution-by-
    institution basis, asset quality risk, interest rate risk, earnings, 
    and capital.
    ``(b) Report on Consolidation.--
        ``(1) In general.--The Comptroller General of the United States 
    shall evaluate and report to the Committee on Agriculture of the 
    House of Representatives and the Committee on Agriculture, 
    Nutrition, and Forestry of the Senate on whether there are likely to 
    be benefits to farmer and rancher borrowers of the Farm Credit 
    System institutions of merging the 10 district Farm Credit Banks 
    (and the Federal Intermediate Credit Bank of Jackson) into fewer 
    regional Farm Credit Banks.
        ``(2) Factors.--In preparing the report, the Comptroller General 
    shall consider--
            ``(A) the potential reduction in services to farmers and 
        ranchers;
            ``(B) the potential benefits of jointly providing services 
        to farmers and ranchers among these proposed regional districts;
            ``(C) any economy of scale effects on a district-by-district 
        basis;
            ``(D) the potential impact on the cooperative nature of the 
        Farm Credit System;
            ``(E) the potential impact on bank and association 
        relationships; and
            ``(F) the potential impact on System-wide bond issuances.
    ``(c) Potential Savings.--The Comptroller General of the United 
States shall evaluate and report to the appropriate committees of 
Congress on the potential savings to the Farm Credit System and its 
shareholders that might occur if System institutions and the Farm Credit 
Administration were required to comply with General Services 
Administration standards for office space, furniture, and equipment.
    ``(d) Deadline.--The reports required under this section shall be 
provided to Congress not later than 12 months after the date of 
enactment of this Act [Oct. 28, 1992].''

                  Section Referred to in Other Sections

    This section is referred to in sections 2020, 2277a-5 of this title.
