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Federal Register / Vol. 86, No. 188 / Friday, October 1, 2021 / Rules and Regulations
July 2016.6 The objectives of the 2017
Capital Rule were:
To modernize capital requirements while ensuring that institutions continue to hold enough regulatory capital to fulfill their mission as a Government-sponsored enterprise GSE;
To ensure that the Systems capital requirements are comparable to the Basel III framework and the standardized approach in the U.S. Rule, but also to ensure that the rules take into account the cooperative structure and the organization of the System;
To make System regulatory capital requirements more transparent; and To meet the requirements of section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Dodd-Frank Act.7
To date, FCA believes the 2017
Capital Rule has met, and continues to meet, these stated objectives.8
On December 22, 2016, the FCA
Board adopted FCA BookletterBL
068Tier 1/Tier 2 Capital Framework Guidance Capital Bookletter.9 The Capital Bookletter provided guidance to ensure System institutions had the necessary information to correctly implement the requirements of the 2017
Capital Rule. The Capital Bookletter included clarification and technical fixes on 18 separate items. The Capital Bookletter also stated our intention to incorporate some of these items into the regulation in a future rulemaking project.
C. Summary of the Proposed Rule On September 10, 2020,10 FCA
published in the Federal Register a notice of proposed rulemaking seeking public comment on revisions to our regulatory capital requirements to incorporate some of the guidance in the Capital Bookletter, with various adjustments,11 as well as other revisions, as follows:
Eliminate the stand-alone capital requirements for Farm Credit Leasing 6 81 FR 49720 July 28, 2016. The rule was effective January 1, 2017.
7 Public Law 111203, 124 Stat. 1376 2010.
8 For a comprehensive discussion of the 2017
Capital Rule, see 81 FR 49720 July 28, 2016. FCAs capital requirements can be found at Parts 615 and 628 of FCA Regulations.
9 A copy of the Capital Bookletter can be found at www.fca.gov, under Laws & Regulations and Bookletters.
10 See 85 FR 55786 September 10, 2020.
11 FCA adjusted some of the guidance provided in the Capital Bookletter to address concerns identified through ongoing monitoring and examination of the requirements of the 2017 Capital Rule. Specific elements of the Capital Bookletter as incorporated into the rule are detailed in the Substantive Revisions and the Clarifying and Other Revisions sections of this preamble.

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Services Corporation Farm Credit Leasing or FCL;
Change the computation of the lending and leasing limit base in 614.4351, by using total capital instead of permanent capital in the calculation 12 and eliminating the exceptional treatment of certain purchased stock in 614.4351a1;
Simplify Safe Harbor provisions that determine when System institutions have deemed prior approval from FCA to distribute cash payments;
Revise and clarify certain criteria that capital instruments must meet to be included in common equity tier 1
CET1 and tier 2 capital;
Further clarify when the holding period starts for certain Common Cooperative Equities included in CET1
or tier 2 capital; and Amend the requirement to adopt an annual board resolution with respect to prior approval requirements and the minimum holding periods for certain equities included in CET1 or tier 2
capital.
We additionally proposed technical revisions to:
Amend the definitions of Collateral agreement, Eligible margin loan, Qualifying master netting agreement QMNA, and Repo-style transaction to incorporate amendments made to these definitions in the U.S.
Rule;
Amend 615.5220a6 to replace references to parts 615 and 628 with a general reference to FCA regulations;
Make certain amendments to 620.5 to ensure institutions report financial information as we intended;
Clarify the appropriate riskweighting of cash and gold bullion held in a System institutions own vaults;
Correct securitization formulas as provided in the Capital Bookletter;
Specify the deductions and adjustments required for calculating the requirement in 628.10 that at least 1.5
percent of the 4 percent tier 1 leverage ratio minimum must consist of unallocated retained earnings URE and URE equivalents;
Revise the deductions required under existing 628.22a6 to include allocated equity investments in System service corporations;
Add to the regulation certain guidance in the call report instructions on the treatment of accruals of patronage or dividend payables or receivables recorded prior to the governing board declaration or resolution;
12 Total capital is defined at 628.2. Permanent capital is defined at 615.5201.

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Clarify certain requirements for regulatory capital disclosures of System banks in 620.3, 628.62c, and 628.63b4; and Clarify that institutions may retire minimum amounts of statutory borrower stock without prior approval from FCA so long as, after the retirement, the institution continues to comply with all minimum regulatory capital requirements. The proposal also provided clarification and guidance on continuously redeemable preferred stock or H Stock, responded to a letter received from the Farm Credit Council addressing various capital related topics, and sought comment on potential changes to FCAs existing permanent capital regulations.
D. General Summary of Comments Received FCA received seven comment letters on the proposed rule.13 The Farm Credit Council, a trade association representing System institutions, submitted a letter on behalf of its membership after soliciting comments from all institutions System Comment Letter.14
Two System banks 15 and three System associations 16 also submitted individual comment letters in support of the System Comment Letter. One System association, Compeer Financial, ACA Compeer, raised additional concerns. The American Bankers Association ABA, a trade association representing the U.S. banking industry, submitted the remaining comment letter.17 We address the comments in the preamble sections that follow.
The System Comment Letter stated that the Farm Credit Council and its members generally support the proposed rule, including provisions that incorporate the Capital Bookletter and call report instructions, but that certain aspects of the proposal were 13 The comment letters for the proposed rule are available at www.fca.gov. Once you are on the website, click the I want to . . . field near the top of the page; select find comments on a pending regulation from the drop down menu; and click Go; then select CapitalTier 1/Tier 2 Capital FrameworkClean UpNPRM.
14 See Letter from Charles Dana, General Counsel, Farm Credit Council November 6, 2020.
15 See Letter from Thomas E. Halverson, President and Chief Executive Officer, CoBank, ACB
November 9, 2020; Letter from Barbara Kay Stille, Chief Administrative Officer and General Counsel, AgriBank, FCB November 9, 2020.
16 See Letter from Northwest Farm Credit Services, FLCA and PCA November 6, 2020; Letter from Steve Zagar, Senior Vice President Chief Financial Officer, Farm Credit Mid-America, ACA
November 9, 2020; Letter from Jase Wagner, Chief Financial Officer CFO, Compeer Financial, ACA
November 5, 2020.
17 See Letter from Hu A. Benton, Vice President, Banking Policy, American Bankers Association November 9, 2020.

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