Farm Credit § 627.2710

Credit Drive, McLean, VA 22102–5090, 703– Subpart C—Conservators and 883–4056, 703–883–4444 (TDD). [57 FR 13638, Apr. 17, 1992. Redesignated at 62 627.2770 Conservators. FR 4441, Jan. 30, 1997, as amended at 62 FR 627.2775 Appointment of a conservator. 4451, Jan. 30, 1997] 627.2780 Powers and duties of conservators. § 626.6030 Complaints. 627.2785 Inventory, examination, audit, and reports to stockholders. (a) Complaints regarding discrimina- 627.2790 Final discharge and release of the tion in lending by a Farm Credit insti- conservator. tution under the Fair Housing Act shall be referred to the Assistant Sec- Subpart D—Voluntary retary for Fair Housing and Equal Op- 627.2795 Voluntary liquidation. portunity, United States Department 627.2797 Preservation of equity. of Housing and Urban Development, Washington, DC 20410, and to the Office AUTHORITY: Secs. 4.2, 5.9, 5.10, 5.17, 5.51, of Congressional and Public Affairs, 5.58, 5.61 of the Farm Credit Act (12 U.S.C. 2183, 2243, 2244, 2252, 2277a, 2277a–7, 2277a–10). Farm Credit Administration, McLean, Virginia 22102–5090. SOURCE: 57 FR 46482, Oct. 9, 1992, unless (b) Complaints regarding discrimina- otherwise noted. tion in lending by a Farm Credit insti- tution under the Equal Credit Oppor- Subpart A—General tunity Act shall be referred to the Of- fice of Congressional and Public Af- § 627.2700 General—applicability. fairs, Farm Credit Administration, The provisions of this part shall McLean, Virginia 22102–5090. apply to conservatorships, receiver- [57 FR 13639, Apr. 17, 1992. Redesignated at 62 ships, and voluntary . FR 4441, Jan. 30, 1997] [63 FR 5724, Feb. 4, 1998] PART 627—TITLE IV CONSERVA- § 627.2705 Definitions. TORS, RECEIVERS, AND VOL- For purposes of this part the fol- UNTARY LIQUIDATIONS lowing definitions apply: (a) Act means the Farm Credit Act of Subpart A—General 1971, as amended. (b) Farm Credit institution(s) or institu- Sec. tion(s) means all associations, , 627.2700 General—applicability. 627.2705 Definitions. service chartered under 627.2710 Grounds for appointment of con- title IV of the Act, the Federal Farm servators and receivers. Credit Banks Funding , and 627.2715 Action for removal of conservator the Farm Credit System Financial As- or receiver. sistance Corporation. (c) Conservator means the Farm Cred- Subpart B—Receivers and it System Insurance Corporation act- 627.2720 Appointment of receiver. ing in its capacity as conservator. 627.2725 Powers and duties of the receiver. (d) Insurance Corporation means the 627.2726 Treatment by the conservator or re- Farm Credit System Insurance Cor- ceiver of financial assets transferred in poration. connection with a securitization or par- (e) Receiver means the Insurance Cor- ticipation. poration acting in its capacity as re- 627.2730 Preservation of equity. ceiver. 627.2735 Notice to holders of uninsured ac- counts and stockholders. [57 FR 46482, Oct. 9, 1992, as amended at 75 FR 627.2740 ’ claims. 35968, June 24, 2010] 627.2745 Priority of claims—associations. 627.2750 Priority of claims—banks. § 627.2710 Grounds for appointment of 627.2752 Priority of claims—other Farm conservators and receivers. Credit institutions. 627.2755 Payment of claims. (a) Upon a determination by the 627.2760 Inventory, audit, and reports. Farm Credit Administration Board of 627.2765 Final discharge and release of the the existence of one or more of the fac- receiver. tors set forth in paragraph (b) of this

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section, with respect to any , asso- (6) The institution is unable to make ciation, or other institution of the Sys- a timely payment of principal or inter- tem, the Farm Credit Administration est on any insured obligation (as de- Board may, in its discretion, appoint a fined in section 5.51(3) of the Act) conservator or receiver for such insti- issued by the institution individually, tution. After January 5, 1993, the Insur- or on which it is primarily liable. ance Corporation shall be the sole enti- [51 FR 32443, Sept. 12, 1986, as amended at 54 ty to be appointed as conservator or re- FR 1148, Jan. 12, 1989. Redesignated and ceiver. amended at 46487, Oct. 9, 1992; 63 FR 39229, (b) The grounds for the appointment July 22, 1998; 81 FR 49779, July 28, 2016] of a conservator or receiver for a Sys- tem institution are: § 627.2715 Action for removal of con- servator or receiver. (1) The institution is insolvent, in that the assets of the institution are Upon the appointment of a conser- less than its obligations to creditors vator or receiver for a Farm Credit in- and others, including its members. For stitution by the Farm Credit Adminis- purposes of determining , tration Board pursuant to § 627.2710 of ‘‘obligations to members’’ shall not in- this part, the institution may, within clude or allocated equities held 30 days of such appointment, bring an by current or former borrowers. action in the United States District (2) There has been a substantial dis- Court for the judicial district in which sipation of the assets or earnings of the the home office of the institution is lo- cated, or in the United States District institution due to the violation of any Court for the District of Columbia, for , rule, or regulation, or the conduct an order requiring the Farm Credit Ad- of an unsafe or unsound practice; ministration Board to remove such (3) The institution is in an unsafe or conservator or receiver and, if the unsound condition to transact busi- charter has been canceled, to rescind ness, including having insufficient cap- the cancellation of the charter. Not- ital or otherwise. For purposes of this withstanding any other provision of regulation, ‘‘unsafe or unsound condi- subpart B or C of this part, the institu- tion’’ shall include, but shall not be tion’s board of directors is empowered limited to, the following conditions: to meet subsequent to such appoint- (i) [Reserved] ment and authorize the filing of an ac- (ii) For associations, a by the tion for removal. An action for removal association of one or more terms of its may be authorized only by such insti- general financing agreement with its tution’s board of directors. affiliated bank that the Farm Credit Administration determines to be a ma- Subpart B—Receivers and terial default. Receiverships (iii) For all institutions, permanent capital of less than one-half the min- § 627.2720 Appointment of receiver. imum required level for the institu- (a) The Farm Credit Administration tion. Board may, in its discretion, appoint (iv) [Reserved] ex parte and without notice a receiver (v) For associations, stock impair- for any Farm Credit institution in ac- ment. cordance with the grounds for appoint- (4) The institution has committed a ment set forth in § 627.2710 of this part. willful violation of a final cease-and- (b) The receiver appointed for a Farm desist order issued by the Farm Credit Credit institution shall be the Insur- Administration Board; or ance Corporation. (5) The institution is concealing its (c) Upon the appointment of the In- books, papers, records, or assets, or is surance Corporation as receiver, the refusing to submit its books, papers, Chairman of the Farm Credit Adminis- records, assets, or other material relat- tration Board shall immediately notify ing to the affairs of the institution for the institution, and its district bank in inspection to any examiner or to any the case of an association, and shall lawful agent of the Farm Credit Ad- publish a notice of the appointment in ministration Board. the FEDERAL REGISTER.

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(d) In the case of the voluntary or in- (1) Exercise all powers as are con- voluntary liquidation of an associa- ferred upon the officers and directors of tion, the district bank shall institute the institution under law and the char- appropriate measures to minimize the ter, articles, and bylaws of the institu- adverse effect of the liquidation on tion. those borrowers whose loans are pur- (2) Take any action the receiver con- chased by or otherwise transferred to siders appropriate or expedient to another System institution. carry on the of the institution (e) Upon the issuance of the order during the process of liquidating its as- placing a Farm Credit institution into sets and winding up its affairs. liquidation and appointing the Insur- (3) Extend credit to existing bor- ance Corporation as receiver, all rowers as necessary to honor existing rights, privileges, and powers of the commitments and to effectuate the board of directors, officers, and em- purposes of the . ployees of the institution shall be vest- (4) Borrow such sums as necessary to ed exclusively in the receiver. The effectuate the purposes of the receiver- Farm Credit Administration Board ship. may simultaneously, or any time (5) Pay any sum the receiver deems thereafter, cancel the charter of the in- necessary or advisable to preserve, con- stitution. serve, or protect the institution’s as- sets or or rehabilitate or im- [57 FR 46482, Oct. 9, 1992, as amended at 63 FR prove such property and assets. 5724, Feb. 4, 1998] (6) Pay any sum the receiver deems § 627.2725 Powers and duties of the re- necessary or advisable to preserve, con- ceiver. serve, or protect any asset or property on which the institution has a or (a) General. (1) Upon appointment as in which the institution has a financial receiver, the receiver shall take posses- or property interest, and pay off and sion of a Farm Credit institution pur- discharge any , claims, or charges suant to 12 U.S.C. 2183 and § 627.2710 of of any nature against such property. this part in order to wind up the busi- (7) Investigate any matter related to ness operations of such institution, col- the conduct of the business of the insti- lect the owed to the institution, tution, including, but not limited to, liquidate its property and assets, pay any claim of the institution against its creditors, and distribute the re- any individual or entity, and institute maining proceeds to stockholders. The appropriate legal or other proceedings receiver is authorized to exercise all to prosecute such claims. powers necessary to the efficient ter- (8) Institute, prosecute, maintain, de- mination of an institution’s operation fend, intervene, and otherwise partici- as provided for in this subpart. pate in any legal proceeding by or (2) Upon its appointment as receiver, against the institution or in which the the receiver automatically succeeds institution or its creditors or members to— have any interest, and represent in (i) All rights, titles, powers and privi- every way the institution, its mem- leges of the institution and of any bers, and creditors. stockholder, officer, or director of such (9) Employ attorneys, accountants, institution with respect to the institu- appraisers, and other professionals to tion and the assets of the institution; give advice and assistance to the re- and ceivership generally or on particular (ii) Title to the books, records, and matters, and pay their retainers, com- assets of any previous conservator or pensation, and expenses, including liti- other legal custodian of such institu- gation costs. tion. (10) Hire any agents or employees (3) The receiver of a Farm Credit in- necessary for proper administration of stitution serves as the trustee of the the receivership. receivership estate and conducts its op- (11) Execute, acknowledge, and de- erations for the benefit of the creditors liver, in person or through a general or and stockholders of the institution. specific delegation, any instrument (b) Specific powers. The receiver may: necessary for any authorized purpose,

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and any instrument executed under § 627.2726 Treatment by the conser- this paragraph shall be valid and effec- vator or receiver of financial assets tive as if it had been executed by the transferred in connection with a institution’s officers by authority of securitization or participation. its board of directors. (a) Definitions. For the purposes of (12) Sell for cash or otherwise any this section, the following definitions mortgage, deed of trust, chose in ac- apply: tion, note contract, judgment or de- Beneficial interest means or eq- cree, stock, or debt owed to the institu- uity (or mixed) interests or obligations tion, or any property (real or personal, of any type issued by a special purpose tangible or intangible). entity that entitle their holders to re- (13) Purchase or lease office space, ceive payments that depend primarily automobiles, furniture, equipment, and on the cash flow from financial assets supplies, and purchase insurance, pro- owned by the special purpose entity. fessional, and technical services nec- Financial asset means cash or a con- essary for the conduct of the receiver- tract or instrument that conveys to ship. one entity a contractual right to re- (14) Release any assets or property of ceive cash or another financial instru- any nature, regardless of whether the ment from another entity. subject of pending litigation, and repu- Participation means the transfer or diate, with cause, any lease or execu- assignment of an undivided interest in tory contract the receiver considers all or part of a loan or a lease from a seller, known as the ‘‘lead’’, to a buyer, burdensome. known as the ‘‘participant’’, without (15) Settle, release, or obtain release recourse to the lead, pursuant to an of, for cash or other consideration, agreement between the lead and the claims and demands against or in favor participant. Without recourse means of the institution or receiver. that the participation is not subject to (16) Pay, out of the assets of the in- any agreement that requires the lead stitution, all expenses of the receiver- to repurchase the participant’s interest ship and all costs of carrying out or ex- or to otherwise compensate the partici- ercising the rights, powers, privileges, pant due to a default on the underlying and duties as receiver. obligation. (17) Pay out of the assets of the insti- Securitization means the issuance by a tution all approved claims of indebted- special purpose entity of beneficial in- ness in accordance with priorities es- terests: tablished in this subpart. (1) The most senior class of which at (18) Take all actions and have such the time of issuance is rated in one of rights, powers, and privileges as are the four highest categories assigned to necessary and incident to the exercise long-term debt or in an equivalent of any specific power. short-term category (within either of (19) Take such actions, and have such which there may be sub-categories or additional rights, powers, privileges, gradations indicating relative stand- immunities, and duties as the Farm ing) by one or more nationally recog- Credit Administration Board author- nized statistical rating organizations, or izes by order or by amendment of any order or by regulation. (2) Which are sold in transactions by an issuer not involving any public of- (c) Authority to pay claims. The re- fering for purposes of section 4 of the ceiver of a bank is also empowered to Securities Act of 1933 (15 U.S.C. 77d), as pay claims of holders of notes, bonds, amended, or in transactions exempt debentures, or other obligations issued from registration under such Act pur- by the bank under 12 U.S.C. 2153(c) or suant to Regulation S thereunder (or (d) in accordance with procedures spec- any successor regulation). ified by the Insurance Corporation pur- Special purpose entity means a trust, suant to § 627.2740(d) of this part. corporation, or other entity demon- strably distinct from the Farm Credit institution that is primarily engaged

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in acquiring and holding (or transfer- securitization agreement or participa- ring to another special purpose entity) tion agreement executed by a Farm financial assets, and in activities re- Credit institution solely because such lated or incidental thereto, in connec- agreement does not meet the ‘‘contem- tion with the issuance by such special poraneous’’ requirement of section purpose entity (or by another special 5.61(d) of the Act. purpose entity that acquires financial (g) This section may be repealed or assets directly or indirectly from such amended by the Farm Credit Adminis- special purpose entity) of beneficial in- tration, but any such repeal or amend- terests. ment shall not apply to any transfers (b) The receiver shall not, by exercise of financial assets made in connection of its authority to repudiate contracts with a securitization or participation under § 627.2725(b)(2) and (b)(14), re- that was in effect before such repeal or claim, recover, or recharacterize as modification. property of the institution or the re- ceivership any financial assets trans- [70 FR 55515, Sept. 22, 2005] ferred by a Farm Credit institution in connection with a securitization or § 627.2730 Preservation of equity. participation, provided that such (a) Except as provided for upon final transfer meets all conditions for sale distribution of the assets of the insti- treatment under generally tution, no capital stock, participation accepted accounting principles, other certificates, equity reserves, or other than the ‘‘legal isolation’’ condition as allocated equities of an institution in it applies to institutions for which the receivership shall be issued, allocated, FCSIC may be appointed as receiver retired, sold, distributed, transferred, which is addressed by this section. assigned, or applied against any indebt- (c) Paragraph (b) of this section shall edness of the owners of such equities. not apply unless the Farm Credit insti- (b) Notwithstanding paragraph (a) of tution received adequate consideration this section, eligible borrower stock for the transfer of financial assets at shall be retired in accordance with sec- the time of the transfer, and the docu- tion 4.9A of the Act. mentation effecting the transfer of fi- nancial assets reflects the intent of the [57 FR 46482, Oct. 9, 1992, as amended at 63 FR parties to treat the transaction as a 5724, Feb. 4, 1998] sale, and not as a secured borrowing, for accounting purposes. § 627.2735 Notice to holders of unin- sured accounts and stockholders. (d) Paragraph (b) of this section shall not be construed as waiving, limiting, (a) Upon the placing of an institution or otherwise affecting the power of the in liquidation, the receiver shall imme- receiver to disaffirm or repudiate any diately notify every borrower who has agreement imposing continuing obliga- an uninsured account (voluntary or in- tions or duties upon the institution in voluntary) as described in § 614.4175 of receivership. this chapter that the funds ceased (e) Paragraph (b) of this section shall earning interest when the receivership not be construed as waiving, limiting was instituted and will be applied or otherwise affecting the rights or against the outstanding indebtedness powers of the receiver to take any ac- of any loans of such borrower unless, tion or to exercise any power not spe- within 15 days of such notice, the bor- cifically limited by this section, in- rower directs the receiver to otherwise cluding, but not limited to, any rights, apply such funds in the manner pro- powers or remedies of the receiver re- vided for in existing loan documents. garding transfers taken in contempla- (b) As soon as practicable after the tion of the institution’s insolvency or receiver takes possession of the insti- with the intent to hinder, delay, or de- tution, the receiver shall notify, by fraud the institution or the creditors of first class mail, each holder of stock such institution, or that is a fraudulent and participation certificates of the transfer under applicable law. following matters: (f) The receiver shall not seek to (1) The number of shares such holder avoid an otherwise legally enforceable owns;

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(2) That the stock and other equities the priorities established in this sub- of the institution may not be retired or part and in such manner and amounts transferred until the liquidation is as the receiver deems appropriate. In completed, whereupon the receiver will the event the institution has a claim distribute a liquidating dividend, if against a of the institution, any, to the owners of such equities; and the receiver shall offset the amount of (3) Such other matters as the re- such claim against the claim asserted ceiver or the Farm Credit Administra- by such creditor. tion deems necessary. (d) The claims of holders of notes, [57 FR 46482, Oct. 9, 1992, as amended at 75 FR bonds, debentures, or other obligations 35968, June 24, 2010] issued by a bank under 12 U.S.C. 2153 (c) or (d) shall be made, if deemed nec- § 627.2740 Creditors’ claims. essary or appropriate, in accordance (a) The receiver shall publish with procedures formulated by the In- promptly a notice to creditors to surance Corporation. In the formula- present their claims against the insti- tion of such procedures, the Insurance tution, with proof thereof, to the re- Corporation shall consult with the ceiver by a date specified in the notice, Farm Credit Administration. which shall be not less than 90 calendar days after the first publication. The § 627.2745 Priority of claims—associa- notice shall be republished approxi- tions. mately 30 days and 60 days after the The following priority of claims shall first publication. The receiver shall apply to the distribution of the assets promptly send, by first class mail, a of an association in liquidation: similar notice to any creditor shown on (a) All costs, expenses, and debts in- the institution’s books at the credi- curred by the receiver in connection tor’s last address appearing thereon. with the administration of the receiv- Claims filed after the specified date ership. shall be disallowed, except as the re- ceiver may approve them for full or (b) Administrative expenses of the as- partial payment from the institution’s sociation, provided that such expenses assets remaining undistributed at the were incurred within 60 days prior to time of approval. the receiver’s taking possession, and (b) The receiver shall allow any that such expenses shall be limited to claim that is timely received and reasonable expenses incurred for serv- proved to the receiver’s satisfaction. ices actually provided by accountants, The receiver may disallow in whole or attorneys, appraisers, examiners, or in part any creditor’s claim or claim of management companies, or reasonable security, preference, or priority which expenses incurred by employees which is not proved to the receiver’s satisfac- were authorized and reimbursable tion or is not timely received and shall under a pre-existing expense reim- notify the claimant of the disallowance bursement policy, that, in the opinion and reason therefor. Sending the notice of the receiver, are of benefit to the re- of disallowance by first class mail to ceivership, and shall not include wages the claimant’s address appearing on or salaries of employees of the associa- the proof of claim shall be sufficient tion. notice. The disallowance shall be final, (c) If authorized by the receiver, unless, within 30 days after the notice claims for wages and salaries, includ- of disallowance is mailed, the claimant ing vacation pay, earned prior to the files a written request for payment re- appointment of the receiver by an em- gardless of the disallowance. The re- ployee of the association whom the re- ceiver shall reconsider any claim upon ceiver determines it is in the best in- the timely request of the claimant and terest of the receivership to engage or may approve or disapprove such claim retain for a reasonable period of time. in whole or in part. (d) If authorized by the receiver, (c) Creditors’ claims that are allowed claims for wages and salaries, includ- shall be paid by the receiver from time ing vacation pay, earned prior to the to time, to the extent funds are avail- appointment of the receiver, up to a able therefor and in accordance with maximum of three thousand dollars

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($3,000) per person as adjusted for infla- ceiver’s taking possession, and that tion, by an employee of the association such expenses shall be limited to rea- not engaged or retained by the re- sonable expenses incurred for services ceiver. The adjustment for inflation actually provided by accountants, at- shall be the percentage by which the torneys, appraisers, examiners, or man- Consumer Price Index (as prepared by agement companies, or reasonable ex- the Department of Labor) for the cal- penses incurred by employees which endar year preceding the appointment were authorized and reimbursable of the receiver exceeds the Consumer under a pre-existing expense reim- Price Index for the calendar year 1992. bursement policy, that, in the opinion (e) All claims for taxes. of the receiver, are of benefit to the re- (f) All claims of creditors, including ceivership, and shall not include wages the district bank, which are secured by or salaries of employees of the bank. assets or equities of the association in (c) If authorized by the receiver, accordance with applicable Federal or claims for wages and salaries, includ- State law. ing vacation pay, earned prior to the (g) All claims of the district bank appointment of the receiver by an em- other than those provided for in para- ployee of the bank whom the receiver graph (f) of this section, based on the determines it is in the best interest of financing agreement between the asso- the receivership to engage or retain for ciation and the bank, including inter- a reasonable period of time. est accrued before and after the ap- (d) If authorized by the receiver, pointment of the receiver, minus any claims for wages and salaries, includ- setoff for stock or other equity of the ing vacation pay, earned prior to the district bank owned by the association appointment of the receiver, up to a made in accordance with this para- maximum of three thousand dollars graph or paragraph (f) of this section. ($3,000) per person as adjusted for infla- Prior to making such setoff, the dis- tion, by an employee of the bank not trict bank must obtain the approval of engaged or retained by the receiver. the Farm Credit Administration Board The adjustment for inflation shall be for the retirement of such equities. the percentage by which the Consumer (h) All claims of general creditors. Price Index (as prepared by the Depart- (i) All claims that, by their terms, ment of Labor) for the calendar year are subordinated in whole or in part to preceding the appointment of the re- the claims of general creditors, other ceiver exceeds the Consumer Price than distributions covered under Index for the calendar year 1992. § 627.2755(b). Such claims shall receive (e) All claims for taxes. the priority specified in the written in- (f) All claims of creditors which are struments that evidence the claims secured by specific assets or equities of and, to the extent that the written doc- the bank, with priority of conflicting uments provide different priorities for claims of creditors within this same different categories of such claims, class to be determined in accordance each category shall be considered a with priorities of applicable Federal or class of claims for purposes of State law. § 627.2755(a). (g) All claims of holders of bonds [57 FR 46482, Oct. 9, 1992, as amended at 72 FR issued by the bank individually to the 54527, Sept. 26, 2007] extent such are collateralized in ac- cordance with 12 U.S.C. 2154. § 627.2750 Priority of claims—banks. (h) All claims of holders of consoli- The following priority of claims shall dated and System-wide bonds and all apply to the distribution of the assets claims of the other Farm Credit banks of a bank in liquidation: arising from their payments on con- (a) All costs, expenses, and debts in- solidated and System-wide bonds pur- curred by the receiver in connection suant to 12 U.S.C. 2155 or pursuant to with the administration of the receiv- an agreement among the banks to re- ership. allocate the payments, provided the (b) Administrative expenses of the agreement is in writing and approved bank, provided that such expenses were by the Farm Credit Administration. incurred within 60 days prior to the re- (i) All claims of general creditors.

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(j) All claims that, by their terms, ceiver. The adjustment for inflation are subordinated in whole or in part to shall be the percentage by which the the claims of general creditors, other Consumer Price Index (as prepared by than distributions covered under the Department of Labor) for the cal- § 627.2755(b). Such claims shall receive endar year preceding the appointment the priority specified in the written in- of the receiver exceeds the Consumer struments that evidence the claims Price Index for the calendar year 1992. and, to the extent that the written doc- (e) All claims for taxes. uments provide different priorities for (f) All claims of creditors which are different categories of such claims, secured by specific assets or equities of each category shall be considered a the institution, with priority of con- class of claims for purposes of flicting claims of creditors within this § 627.2755(a). same class to be determined in accord- [57 FR 46482, Oct. 9, 1992, as amended at 72 FR ance with priorities of applicable Fed- 54527, 54529 Sept. 26, 2007] eral or State law. (g) All claims of general creditors. § 627.2752 Priority of claims—other Farm Credit institutions. (h) All claims that, by their terms, are subordinated in whole or in part to The following priority of claims shall the claims of general creditors, other apply to the distribution of the assets than distributions covered under of an institution, other than a bank or § 627.2755(b). Such claims shall receive association, in liquidation: the priority specified in the written in- (a) All costs, expenses, and debts in- struments that evidence the claims curred by the receiver in connection and, to the extent that the written doc- with the administration of the receiv- uments provide different priorities for ership. different categories of such claims, (b) Administrative expenses of the in- stitution, provided that such expenses each category shall be considered a were incurred within 60 days prior to class of claims for purposes of the receiver’s taking possession, and § 627.2755(a). that such expenses shall be limited to [57 FR 46482, Oct. 9, 1992, as amended at 72 FR reasonable expenses incurred for serv- 54527, Sept. 26, 2007] ices actually provided by accountants, attorneys, appraisers, examiners, or § 627.2755 Payment of claims. management companies, or reasonable (a) All claims of each class described expenses incurred by employees which in § 627.2745, § 627.2750, or § 627.2752 of were authorized and reimbursable this part, respectively, shall be paid in under a pre-existing expense reim- full, or provisions shall be made for bursement policy, that, in the opinion such payment, prior to the payment of of the receiver, are of benefit to the re- any claim of a lesser priority. If there ceivership, and shall not include wages are insufficient funds to pay in full any or salaries of employees of the institu- class of claims described, distribution tion. on such class shall be on a pro rata (c) If authorized by the receiver, basis. claims for wages and salaries, includ- (b) Following the payment of all ing vacation pay, earned prior to the claims, the receiver shall distribute appointment of the receiver by an em- the remainder of the assets of the insti- ployee of the institution whom the re- tution to the owners of stock, partici- ceiver determines it is in the best in- pation certificates, and other equities terest of the receivership to engage or in accordance with the priorities for retain for a reasonable period of time. impairment set forth in the bylaws of (d) If authorized by the receiver, the institution. claims for wages and salaries, includ- ing vacation pay, earned prior to the (c) Notwithstanding this section, eli- appointment of the receiver, up to a gible borrower stock shall be retired in maximum of three thousand dollars accordance with section 4.9A of the ($3,000) per person as adjusted for infla- Act. tion, by an employee of the institution [57 FR 46482, Oct. 9, 1992, as amended at 72 FR not engaged or retained by the re- 54529, Sept. 26, 2007]

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§ 627.2760 Inventory, audit, and re- be returned to normal operations, the ports. Farm Credit Administration Board (a) As soon as practicable after tak- may turn the institution over to such ing possession of an institution, the re- management as the Farm Credit Ad- ceiver shall make an inventory of the ministration Board may direct. assets and liabilities as of the date pos- (b) The conservator shall exercise all session was taken. powers necessary to continue the ongo- (b) The institution in receivership ing operations of the institution, to shall be audited on an annual basis by conserve and preserve the institution’s a certified public accountant selected assets and property, and otherwise pro- by the receiver. tect the interests of the institution, its (c) With respect to each receivership, stockholders, and creditors as provided the receiver shall make an annual ac- in this subpart. counting or report, as appropriate, available upon request to any stock- § 627.2775 Appointment of a conser- holder of the institution in receiver- vator. ship or any member of the public, with (a) The Farm Credit Administration a copy provided to the Farm Credit Ad- Board may appoint ex parte and with- ministration. out notice a conservator for any Farm (d) Upon the final liquidation of the Credit institution provided that one or institution, the receiver shall send to more of the grounds for appointment as each stockholder of record a report set forth in § 627.2710 exist. summarizing the disposition of the as- (b) Upon the appointment of a con- sets of the receivership and claims servator, the Chairman of the Farm against the receivership. Credit Administration shall imme- diately notify the institution and, in § 627.2765 Final discharge and release the case of an association, the district of the receiver. bank, and notice of the appointment After the receiver has made a final shall be published in the FEDERAL REG- distribution of the assets of the receiv- ISTER. As soon as practicable after the ership, the receivership shall be termi- conservator takes possession of the in- nated, the charter shall be canceled by stitution, the conservator shall notify, the Farm Credit Administration Board by first class mail, each holder of stock if such cancellation has not previously and participation certificates in the in- occurred, and the receiver shall be fi- stitution of the establishment of the nally discharged and released. and shall describe the effect of the conservatorship on the in- Subpart C—Conservators and stitution’s operations and on the bor- Conservatorships rower’s loan and equity holdings. (c) Upon the issuance of the order § 627.2770 Conservators. placing a Farm Credit institution in (a) The Insurance Corporation shall conservatorship, all rights, privileges, be appointed as conservator by the and powers of the members, board of Farm Credit Administration Board directors, officers, and employees of pursuant to section 4.12 of the Act and the institution are vested exclusively § 627.2710 of this part to take possession in the conservator. of an institution in accordance with (d) The conservator is responsible for the terms of the appointment. Upon ap- conserving and preserving the assets of pointment, the conservator shall direct the institution and continuing the on- the institution’s further operation going operations of the institution until the Farm Credit Administration until the conservatorship is terminated Board decides whether to place the in- by order of the Farm Credit Adminis- stitution into receivership. Upon cor- tration Board. rection or resolution of the problem or (e) The Board may, at any time, ter- condition that provided the basis for minate the conservatorship and direct the appointment and upon a deter- the conservator to turn over the insti- mination by the Farm Credit Adminis- tution’s operations to such manage- tration Board that the institution can ment as the Board may designate, in

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which event the provisions of this sub- provide the certification required in part shall no longer apply. § 621.14 of this chapter. (d) Each institution in conservator- § 627.2780 Powers and duties of con- ship must prepare and issue published servators. financial reports in accordance with (a) The conservator of an institution the provisions of part 620 of this chap- serves as the trustee of the institution ter, and the certifications and signa- and conducts its operations for the tures of the board of directors or man- benefit of the creditors and stock- agement provided for in § 620.3 of this holders of the institution. chapter must be provided by the con- (b) The conservator may, with re- servator of the institution. spect to Farm Credit institutions, exer- cise the powers that a receiver of an in- [57 FR 46482, Oct. 9, 1992, as amended at 58 FR stitution may exercise under any of the 48791, Sept. 20, 1993; 71 FR 76121, Dec. 20, 2006] provisions of § 627.2725(b) of this part, § 627.2790 Final discharge and release except paragraphs § 627.2725 (b)(2) and of the conservator. (b)(17). The provisions of § 627.2726 shall also apply to the conservator of a Farm At such time as the conservator shall Credit institution. In interpreting the be relieved of its conservatorship du- applicable paragraphs for purposes of ties, the conservator shall file a report this section, the terms ‘‘conservator’’ on the conservator’s activities with the and ‘‘conservatorship’’ shall be read for Farm Credit Administration. The con- ‘‘receiver’’ and ‘‘receivership.’’ servator shall thereupon be completely (c) The conservator may extend cred- and finally released. it to new and existing borrowers as is necessary to the continuing operation Subpart D—Voluntary Liquidation of the institution and to effectuate the purposes of the conservatorship. SOURCE: 63 FR 5725, Feb. 4, 1998, unless oth- (d) The conservator may also take erwise noted. any other action the conservator con- siders appropriate or expedient to the § 627.2795 Voluntary liquidation. continuing operation of the institu- (a) A Farm Credit institution may tion. voluntarily liquidate by a resolution of [57 FR 46482, Oct. 9, 1992, as amended at 70 FR its board of directors, but only with 55515, Sept. 22, 2005] the consent of, and in accordance with a plan of liquidation approved by, the § 627.2785 Inventory, examination, Farm Credit Administration Board. audit, and reports to stockholders. Upon adoption of such resolution to (a) As soon as practicable after tak- liquidate, the Farm Credit institution ing possession of a Farm Credit institu- shall submit the proposed voluntary tion the conservator shall make an in- liquidation plan to the Farm Credit ventory of the assets and liabilities of Administration for preliminary ap- the institution as of the date posses- proval. The Farm Credit Administra- sion was taken. One copy of the inven- tion Board, in its discretion, may ap- tory shall be filed with the Farm Cred- point a receiver as part of an approved it Administration. liquidation plan. If a receiver is ap- (b) The institution in conservator- pointed for the Farm Credit institution ship shall be examined by the Farm as part of a voluntary liquidation, the Credit Administration in accordance receivership shall be conducted pursu- with section 5.19 of the Act. The insti- ant to subpart B of this part, except to tution must also be audited by a quali- the extent that an approved plan of liq- fied public accountant in accordance uidation provides otherwise. with part 621 of this chapter. (b) If the Farm Credit Administra- (c) Each institution in conservator- tion Board gives preliminary approval ship shall prepare and file with the to the liquidation plan, the board of di- Farm Credit Administration financial rectors of the Farm Credit institution reports in accordance with the require- shall submit the resolution to liquidate ments of part 621 of this chapter. The and the liquidation plan to the stock- conservator of the institution shall holders for approval.

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(c) The resolution to liquidate and PART 628—CAPITAL ADEQUACY the liquidation plan shall be approved OF SYSTEM INSTITUTIONS by the stockholders if agreed to by at least a majority of the voting stock- Subpart A—General Provisions holders of the institution voting, in person or by written proxy, at a duly Sec. 628.1 Purpose, applicability, and reserva- authorized stockholders’ meeting. tions of authority. (d) The Farm Credit Administration 628.2 Definitions. Board will consider final approval of 628.3 Operational requirements for certain the liquidation plan after an affirma- exposures. tive stockholder vote on the resolution 628.4–628.9 [Reserved] to liquidate. Subpart B—Capital Ratio Requirements (e) Any subsequent amendments, and Buffers modifications, revisions, or adjust- ments to the liquidation plan shall re- 628.10 Minimum capital requirements. 628.11 Capital buffer amounts. quire Farm Credit Administration 628.12–628.19 [Reserved] Board approval. (f) The Farm Credit Administration Subpart C—Definition of Capital Board, in its discretion, reserves the 628.20 Capital components and eligibility right to terminate or modify the liq- criteria for tier 1 and tier 2 capital in- uidation plan at any time. struments. 628.21 [Reserved] § 627.2797 Preservation of equity. 628.22 Regulatory capital adjustments and (a) Immediately upon the adoption of deductions. 628.23 Limit on inclusion of third-party cap- a resolution by its board of directors to ital in total (tier 1 and tier 2) capital. voluntarily liquidate a Farm Credit in- 628.24–628.29 [Reserved] stitution, the capital stock, participa- tion certificates, equity reserves, and Subpart D—Risk-Weighted Assets— allocated equities of the Farm Credit Standardized Approach institution shall not be issued, allo- 628.30 Applicability. cated, retired, sold, distributed, trans- ferred, assigned, or applied against any RISK-WEIGHTED ASSETS FOR GENERAL CREDIT indebtedness of the owners of such eq- RISK uities. Such activities could resume if 628.31 Mechanics for calculating risk- the stockholders of the Farm Credit in- weighted assets for general credit risk. 628.32 General risk weights. stitution disapprove the resolution to 628.33 Off-balance sheet exposures. liquidate or the Farm Credit Adminis- 628.34 OTC derivative contracts. tration Board disapproves the liquida- 628.35 Cleared transactions. tion plan. In the event the resolution 628.36 Guarantees and credit derivatives: to liquidate is approved by the stock- Substitution treatment. holders of the Farm Credit institution 628.37 Collateralized transactions. and the liquidation plan is approved by RISK-WEIGHTED ASSETS FOR UNSETTLED the Farm Credit Administration Board, TRANSACTIONS the liquidation plan shall govern dis- 628.38 Unsettled transactions. position of the equities of the Farm 628.39–628.40 [Reserved] Credit institution, except that if the RISK-WEIGHTED ASSETS FOR SECURITIZATION Farm Credit institution is placed in re- EXPOSURES ceivership, the provisions of § 627.2730(a) shall govern further dis- 628.41 Operational requirements for securitization exposures. position of the equities of the Farm 628.42 Risk-weighted assets for Credit institution. securitization exposures. (b) Notwithstanding paragraph (a) of 628.43 Simplified supervisory formula ap- this section, eligible borrower stock proach (SSFA) and the gross-up ap- shall be retired in accordance with sec- proach. 628.44 Securitization exposures to which the tion 4.9A of the Act. SSFA and gross-up approach do not apply.

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