Letter to FCA on the Proposed Regulatory Capital Rules - Tier 1/Tier 2 Framework

Jeremy R. Edelstein, Associate Director
Office of Regulatory Policy,
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102–5090

Ladies and Gentlemen:

The American Bankers Association (ABA) appreciates this opportunity to provide our views on several aspects of the Proposal, which would revise the regulatory capital framework applicable to institutions of the Farm Credit System (FCS). ABA is concerned that certain aspects of the Proposal would increase risks to the safety and soundness of FCS institutions and their ability to absorb losses, potentially destabilizing financial markets. In addition, certain aspects of the proposal depart from the regulatory capital framework of the Federal banking agencies, which would create or exacerbate competitive inequities in agricultural lending. Specifically, ABA believes the Proposal:

• Suggests that patronage refunds and other cash distributions could be paid without FCA approval, without regard to increases in an institution’s overall size and other aspects of its risk profile compared to the prior year; and
• Would permit retirement of certain CET1 capital without FCA approval, without regard to emerging risks or other conditions that warrant the exercise of supervisory oversight.

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