ABA to FCA: Proposed Rule Changes Could Destabilize Financial Markets

ABA told the Farm Credit Administration today that proposed changes to regulatory capital rules could potentially destabilize financial markets and increase risks to the safety and soundness of Farm Credit System institutions.

In a letter to the FCA, the association raised concern about changes that suggest patronage refunds and other cash distributions could be paid without FCA approval. ABA requested that any final regulation should make clear “that an FCS institution cannot distribute cash that would breach its conservation buffer.”

The association also took issue with changes that would allow retirement of an institution’s stock without specific FCA approval, writing that stock retirement “should be strictly limited to protect the safety and soundness of FCS institutions.” ABA added that “the proposal would still leave FCS institutions subject to very lax requirements concerning stock redemptions compared to those applicable to commercial banks, who must maintain the ability to compete with FCS institutions.”