§ 70.144 Definition of "borrower". For the purposes of the sentence in section 42(a) (3) of the Farm Credit Act of 1933, as amended (12 U.S.C. 1134d), which reads: In addition, each borrower as defined by the Farm Credit Administration for purposes of this sentence, shall be required to invest quarterly in class C stock an amount equal to not less than 10 nor more than 25 per centum, as prescribed by the board of directors of the bank with the approval of the Farm Credit Administration, of the amount of interest payable by it to the bank during the calendar quarter. the word "borrower" is defined as any farmers' cooperative association which is primarily liable to a bank for cooperatives for the repayment of a loan made by the bank pursuant to section 7 of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e), on or after January 1, 1956, or for the repayment of such a loan made before that date, which, in whole or in part, has been changed by agreement to conform to Title I of the Farm Credit Act of 1955. § 70.149 Dividends on class B stock; application on loans in default. Dividends payable by any bank for cooperatives to a borrower whose indebtedness to the bank is in default may, in the discretion of the bank, be applied to reduce such indebtedness. § 70.153 Cancellation and retirement of stock of defaulting borrowers; authorized cancellation and retirement. In any case where the debt of a borrower to a bank for cooperatives is in default, such bank may retire and cancel all or part of the stock of the bank owned by the defaulting borrower (except class B stock issued with the provision that the bank shall have no statutory lien thereon which has not been specially pledged to the bank by the holder as additional collateral for the holder's indebtedness to the bank) at the fair book value thereof (not exceeding par), in total or partial liquidation of the debt, if: (a) The borrower has been declared bankrupt; (b) The borrower has had a substantial part of its property placed in the hands of a receiver; (c) The borrower has ceased operations, regardless of whether its charter has been surrendered; or (d) In the judgment of the bank, the indebtedness of the borrower to the bank is uncollectible. § 70.154 Same; application of proceeds. The proceeds of stock so retired and canceled shall be applied against outstanding indebtedness of the defaulting borrower, including principal, interest, and accounts receivable, in such manner as the loan committee (or executive committee) of the bank shall determine. § 70.155 Same; order of cancellation. When the cancellation and retirement of less than all of the stock in the bank owned by the borrower is required for total liquidation of the debt, stock issued before January 1, 1956, and stock having the same rights and subject to the same limitations issued on and after that date, shall be retired first, then class B stock shall be retired, and finally class C stock shall be retired. The oldest outstanding shares of class B stock or class C stock, as the case may be, shall be retired ahead of shares issued as of later dates in the event that the cancellation of less than all of the shares of that class owned by the borrower is required. § 70.156 Same; defaulting direct borrower of Central Bank. When a direct loan of a borrower from the Central Bank is in default and the borrower owns an amount of class C stock in a district bank on account of such direct loan (and the circumstances are such that the Central Bank is, or, if the borrower owned stock in the Central Bank, would be, entitled under § 70.153 to retire and cancel stock of the Central Bank owned by the borrower), the Central Bank, after the retirement of the stock of the Central Bank owned by the borrower, if any, may retire and cancel at the fair book value thereof (not exceeding par) all or a part of the class C stock of the Central Bank owned by the district bank which corresponds to the class C stock of the district bank owned by the borrower on account of such direct loan, in total or partial liquidation of the debt. The district bank shall simultaneously cancel and retire the equivalent class C stock of the district bank owned by the borrower. § 70.161 Patronage refunds and allocated reserves. For the purposes of subsection (b) of section 36 of the Farm Credit Act of 1933, as amended (12 U.S.C. 11341), relating to patronage refunds, the word "borrowers" is defined as all farmers' cooperative associations which, during any part of the fiscal year for which patronage refunds are declared, were primarily liable for the repayment of loans made by a bank for cooperatives pursuant to section 7 of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e): Provided, That, if the bylaws of a bank so provide, this definition shall not include any association which files with the bank, prior to the beginning of a fiscal year, a written refusal to accept patronage refunds for said year. § 70.162 Allocations of surplus and contingency reserves; district banks. Net savings of a district bank for cooperatives which are placed in the surplus account or set aside as contingency reserves at the end of any fiscal year, as provided in section 36(a) of the Farm Credit Act of 1933, as amended (12 U.S.C. 11341), shall be allocated to all farmers' cooperative associations which during any part of the fiscal year were primarily liable to the bank for the repayment of loans made by the bank pursuant to section 7 of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e): Provided, That, if the bylaws of a bank so provide, no allocation shall be made to any association which files with the bank prior to the beginning of a fiscal year a written refusal to accept such allocations for said year. Allocations shall be made in the proportion that the amount of interest accrued on the loans of each borrower bears to the total interest accrued on the loans of all borrowers during the fiscal year, and shall be recorded on the books of the bank as allocations for such fiscal year. § 70.163 Same; Central Bank. Net savings of the Central Bank for Cooperatives which are placed in the surplus account or set aside as contingency reserves at the end of any fiscal year, as provided in section 36(a) of the Farm Credit Act of 1933, as amended (12 U.S.C. 11347), shall be allocated to the district banks for cooperatives in whose loans the Central Bank owned participations during any part of the fiscal year and to all farmers' cooperative associations which during any part of the fiscal year were primarily liable to the Central Bank for the repayment of direct loans made by the Central Bank pursuant to section 7 of the Agricultural Marketing Act as amended (12 U.S.C. 1141e); Provided, That, if the bylaws of the bank so provide, no allocation shall be made to any association which files with the bank prior to the beginning of a fiscal year a written refusal to accept such allocations for said year. Allocations shall be made in the proportion that the total interest accrued on the participations of the Central Bank in loans of each district bank and the total interest accrued on the loans of each direct borrower from the Central Bank bears to the total interest accrued on all participations and all direct loans during the fiscal year, and shall be recorded on the books of the Central Bank as allocations for such fiscal year. § 70.164 Same; lien on allocated surplus. Each bank for cooperatives shall have a first lien on all the amounts allocated to each borrower as additional collateral for any indebtedness of such borrower to the bank. § 70.165 Same; cancellation and retirement of allocations of surplus of defaulting borrowers. In any case where the debt of the borrower is in default and the bank is authorized under § 70.153 to cancel and retire stock in the bank and apply the proceeds on the indebtedness, the bank may retire and cancel all or part of the allocations to the defaulting borrower in total or partial liquidation of the debt, as the case may be, but such allocations shall not be so retired and canceled until all stock of the bank owned by the borrower has been retired and canceled. All allocations of surplus to a defaulting borrower shall be retired and canceled before any allocations of contingency reserves to such borrower are retired and canceled. § 70.165a Cancellation and retirement of stock and other equities of borrower in liquidation or dissolution. In the case of liquidation or dissolution of any present or former borrower from a bank for cooperatives, the bank may retire and cancel any capital stock or allocated surplus or contingency reserves or other equity interest in the bank owned by such borrower at the fair book value thereof, not exceeding par, as hereinafter indicated. (a) The bank has reasonable assurance that the liquidation or dissolution is or soon will be completed and that the business of the borrower is not being continued in circumstances in which it would be appropriate and feasible for the successor to acquire and hold the interests of its predecessor in the bank. (b) The retirement of stock and other equities of any such borrower would not unduly affect the financial position of the bank. (c) Any such retirement shall be subject to authorization as follows: (1) Whenever the total amount of equities to be retired in any one case is $5,000 or less the Executive or Loan Committee of the bank may approve the retirement when authorized to do so by the Board of Directors; (2) Whenever the total amount of equities to be retired in any one case is in excess of $5,000 but does not exceed $25,000, retirement may be made only upon prior approval of the Board of Directors; and (3) Whenever the total amount of equities to be retired in any one case is in excess of $25,000, retirement may be made only upon prior approval of the Board of Directors, subject to approval of the Farm Credit Administration. (d) At the same time, corresponding shares of stock which the regional bank was required to purchase in the Central Bank shall also be retired. (e) A report of any retirements made hereunder showing the name of the association and the amount of separate equities retired for each shall be forwarded to the Director of Cooperative Bank Service at the end of each quarter. (Sec. 6, 47 Stat. 14, as amended; 12 U.S.C. 665. Supplements sec. 36, 48 Stat. 263, as amended by sec. 2(3), 75 Stat. 758; 12 U.S.C. 1134/(d)) [26 F.R. 10267, Nov. 2, 1961] Sec. PART 72-CENTRAL BANK FOR APPLICATION FOR ISSUE 72.1 Approval by Farm Credit Administration. 72.2 72.3 72.4 72.5 72.6 72.7 72.8 CUSTODIANSHIP OF COLLATERAL Custodian and Acting Custodian. Classifications of collateral. Segregation and safeguarding of col- Holding of cash and Government se- Deposits and withdrawals of col- Sec. 72.10 72.11 Disposition of collateral and subcollateral in the event of default on Central Bank for Cooperatives debentures. Accounts and reports. Audits. LOST, STOLEN, DESTROYED, MUTILATED, OR 72.12 DEFACED DEBENTURES Authorization for relief. Affidavit. Bond of indemnity. Additional evidence. 72.13 SOURCE: 72.1 to 72.18 contained in FCA Order 503, 14 F. R. 5913, Sept. 29, 1949, except as otherwise noted. CROSS REFERENCE: For other regulations applicable to debentures issued by the Central Bank for Cooperatives, see Part 73 of this subchapter. § 72.1 APPLICATION FOR ISSUE Approval by Farm Credit Administration. The Ceneral Bank shall make written application to the Farm Credit Administration for approval of each issue of debentures. No debentures shall be issued without approval of the Farm Credit Administration in writing. Before approving each issue of debentures, the Farm Credit Administration shall have a statement in writing by the Custodian of Collateral for debentures of the Central Bank for Cooperatives that, as of the effective date of the issuance, the collateral held by him or for his account securing debentures of the Central Bank, including the issue for which application is being made, will be adequate according to law and the rules and regulations of the Farm Credit Administration. § 72.2 CUSTODIANSHIP OF COLLATERAL Custodian and Acting Custodian. The Chief, Collateral Section, Farm Credit Administration, shall serve, ex officio, as Custodian of collateral for debentures issued by the Central Bank for Cooperatives individually. The Chief, Securities Section, Farm Credit Administration, shall serve, ex officio, as Acting Custodian of collateral for debentures issued by the Central Bank for Cooperatives individually, in the event the said Custodian is unable to serve for any reason. The operating titles when so serving shall be Custodian and Acting Custodian, respectively. [19 F. R. 9172, Dec. 24, 1954] § 72.3 Bonding of Custodian and Acting Custodian. The Custodian and the Acting Custodian shall be covered under a fidelity bond with a corporate surety on the approved list of the Treasury Department and in the amounts of $50,000 and $25,000, respectively, to insure the faithful performance of their duties and provide against financial loss. § 72.4 Classifications of collateral. The Custodian shall accept, either originally or by substitution, collateral of the following classifications: (a) Seasonal loans consisting of: (2) Operating capital loans. by Commodity Credit Corporation documents. (b) Term loans consisting of: (c) Participations in loans of classifications (a) and (b) made by the district banks for cooperatives or any of them. (d) Direct loans to the district banks for cooperatives or any of them. (e) Cash or direct obligations of the United States. § 72.5 Segregation and safeguarding of collateral. The Custodian shall maintain exclusive possession of collateral, other than cash and United States Government obligations, which directly secures Central Bank for Cooperatives debentures. He shall keep the collateral which is in his immediate custody separate and apart from all other property held by him either for himself or for others, and he shall keep it in a suitable vault or other recognized place of safe deposit. § 72.6 Holding of cash and Government securities. Cash collateral shall be kept by the Custodian on deposit in a symbol account with the Treasurer of the United States, and collateral consisting of direct obligations of the United States shall be kept by him in a safekeeping account with a Federal reserve bank or branch or with the Treasurer of the United States, both types of accounts to be subject to the order of the Governor of the Farm Credit Administration. § 72.7 Deposits and withdrawals of collateral. (a) Each deposit of collateral with the Custodian shall be accompanied by a specific assignment to him in trust of such collateral. All the collateral shall be held by him, or for his account, in trust for the joint, ratable benefit of all owners of Central Bank for Cooperatives debentures outstanding irrespective of the dates of issue of such debentures. No duty or responsibility shall be assumed by or imposed upon the Custodian to determine the values, genuineness, or legal sufficiency of any collateral deposited with him, but he shall be satisfied that (1) such collateral is of the character authorized by law and appears to be legal and sufficient on its face; and (2) the collateral assigned to him is at all times not less in amount than the amount of debentures outstanding. (b) Except as provided in § 72.9, the Custodian shall release to the Central Bank for Cooperatives any collateral requested by it which is not needed for meeting the collateral requirements specified by law, and any additional collateral requirements specified by the Farm Credit Administration, for outstanding debentures of the Central Bank for Cooperatives. Further, except as provided in § 72.9, the Custodian shall release to the Central Bank for Cooperatives any collateral held by him or for his account upon the substitution of cash or other collateral of the character authorized by law sufficient in amount to maintain the collateral requirements specified, as mentioned in paragraph (a) of this section. Subcollateral, consisting of all valuable items securing collateral which directly secures outstanding Central Bank for Cooperatives debentures, shall be held either by the Custodian, a farm loan registrar, a district bank for cooperatives, the Central Bank for Cooperatives, or a local custodian employed by the latter institution. When subcollateral is not held by the Custodian, he shall be furnished with a statement by the holder that it is held for the Custodian's account, and with periodic reports by the holder of the subcollateral thus held. [FCA Order 509, 15 F. R. 1581, Mar. 22, 1950] $72.9 Disposition of collateral and sub collateral in the event of default on Central Bank for Cooperatives debentures. In the event of default by the Central Bank for Cooperatives in the payment of principal or interest on any of its debentures, all collateral and subcollateral held by or for the Custodian shall automatically with the occurrence of the default be held subject to the order of the Governor of the Farm Credit Administration for the protection of debenture holders, and the withdrawal and substitution provisions of § 72.7 shall be suspended. § 72.10 Accounts and reports. The Custodian shall keep a separate account of all his transactions relating to Central Bank for Cooperatives debentures and the collateral security, and shall furnish such reports and other documents as may be required by the Governor of the Farm Credit Administration. The books and records of the Custodian and the collateral held by him relating to Central Bank for Cooperatives debentures shall be audited at least once each year by the Examination Division of the Farm Credit Administration. LOST, STOLEN, DESTROYED, MUTILATED, OR DEFACED DEBENTURES § 72.12 Authorization for relief. Whenever a debenture or a coupon detached from a debenture is lost, stolen, destroyed, or so mutilated or defaced as to impair its value to the owner, the Deputy Governor and Director of Cooperative Bank Service may authorize the issuance of a new debenture or payment for the coupon at maturity, upon the owner's compliance with the requirements set forth in §§ 72.13 through 72.18. Wherever the term "owner" is used in said sections, it shall be deemed to include the authorized representative of the owner. § 72.13 Application. In the event of the loss, theft, destruction, mutilation, or defacement of a debenture or coupon, the owner should file an application with the Deputy Governor and Director of Cooperative Bank Service for the issuance of another debenture or for payment of the coupon at maturity. Such application must be The owner of the debenture or coupon which has been lost, stolen, destroyed, mutilated, or defaced shall furnish to the Deputy Governor and Director of Cooperative Bank Service his affidavit duly acknowledged before a notary public or other officer authorized by law to administer oaths, setting forth: (a) That he is the lawful owner of such debenture or coupon and that he is legally entitled to its possession; (b) A complete identification of such debenture or coupon including serial number, date of issue, face amount, date of maturity, and interest rate; (c) A detailed statement of the circumstances surrounding the loss, theft, destruction, mutilation, or defacement of such debenture or coupon; (d) A statement that the affidavit is made for the purpose of obtaining a new debenture or payment for the coupon at maturity and an undertaking that should the original debenture or coupon come into the possession or control of the deponent, he will immediately surrender it to the Deputy Governor and Director of Cooperative Bank Service. § 72.15 Bond of indemnity. (a) The owner of a lost, stolen, or destroyed debenture or coupon, or his authorized representative, shall also furnish to the Deputy Governor and Director of Cooperative Bank Service a bond of indemnity in a penal amount equal to 110 percent of the principal and interest to maturity of the said debenture, or equal to 110 percent of the face amount of said coupon, with corporate surety satisfactory to the Deputy Governor and Director of Cooperative Bank Service and with conditions to indemnify and save harmless the Farm Credit Administration and the Central Bank for Cooperatives and any and all of their officers, employees, or representatives, from all liability, loss, claims, or demands arising in any manner by reason or on account of the debenture or coupon concerning which relief is requested. (b) The owner of a mutilated or defaced debenture or coupon shall, before relief is granted, surrender such debenture or coupon or as much thereof as remains to the Deputy Governor and Director of Cooperative Bank Service |