Pub. 5 2010-2011

www.nebankers.org 14 Extraordinary Service for Extraordinary Members. regulation of derivatives activities, leaving that job to the FCA. As of March 31, 2010, all five FCS banks and two FCS associations each had more than $10 billion of assets, with AgriBank, the largest, at $65 billion. Are Mergers Afoot Among FCS Banks? Over the last 25 years, the number of banks within the FCS has shrunk from 37 to just five, ranging in size from AgriBank’s $65 billion down to the Texas Farm Credit Bank with $14 billion of assets. Apart from CoBank’s substantial direct lending, the five banks primarily lend to the FCS as- sociations located in the districts served by the banks. While the last FCS bank merger took place in 2003, numerous rumors of additional mergers have occurred in recent years. The FCA gave credence to those rumors on July 8 when it adopted a policy statement (Bookletter 063) “containing guidance for [FCS] banks to use when preparing merger proposals to submit to the FCA.” This Bookletter presumably is not an academic exercise but was issued in anticipation of a forthcoming merger. Among other matters, the Bookletter addresses “size- concentration risk” and “intra-systemoperational risk.” The Bookletter notes that “concentrating assets and funding in a single bank’s business model may unduly stress the Farm Credit Insurance Fund and the statutory joint and several liability of the remaining banks.” Also, “a bank merger may concentrate significant influence, management decision making, and authority in the resulting bank. This may af- fect existing coordination mechanisms within the [FCS] on a variety of operational matters.” Translation: Additional mergers among FCS banks may create a behemoth that will overpower the FCA’s ability to effectively regulate it. Given the extent to which the FCA already caters to the wishes of the FCS, such as expanding the FCS’ off-farm lending powers and not publishing enforcement orders, a further concentration of assets within an FCS bank or two argues for bringing the entire FCS under the Financial Stability Oversight Council. Report FCS Lending Abuses Bankers are continuing to send Farm Credit Watch (FCW) reports of FCS lending abuses such as FCS loans for rural estates, weekend getaways, and hunting preserves. E-mail reports of similar lending abuses in your market to green-acres@ely-co.com. Please provide as much detail as possible about any loan that violates the spirit, if not the law, governing FCS lending. Farm Credit Watch Free to ABA Members If your bank belongs to the American Bankers Association (ABA), you can enjoy a FREE e-mail subscription to FCW or you can read it monthly online at www.aba.com . To receive FCW by e-mail or to manage your subscription, visit ABA E-Mail Bulletins at www.aba.com and check or uncheck the appropriate boxes. For other inquiries, please contact Barbara McCoy at the ABA at 800-BANKER. Z To contact Bert Ely, e-mail bert@ely-co.com; fax (703) 836-1403; phone (703) 836-4101; or mail PO Box 320700, Alexandria, Va. 22320. Q Huge Exemptions Additional mergers among FCS banks may create a behemoth that will overpower the FCA’s ability to effectively regulate it. It ’ s Time to Grow Again . Growth takes deep roots and the right environment. Nebraska’s banks have both. We’re here to help you get the most out of your potential. www.woodsaitken.com DENVER LINCOLN OMAHA WASHINGTON, D.C.