12 C.F.R. Subpart A—Related Services
Title 12 - Banks and Banking
Source: 60 FR 34099, June 30, 1995, unless otherwise noted.
For the purposes of this subpart, the following definitions shall apply: (a) Program means the method or procedures used to deliver a related service. This distinguishes the particulars of how a related service will be provided from the type of activity or concept. (b) Related service means any service or type of activity provided by a System bank or association that is appropriate to the recipient's operations, including control of related financial matters. The term “related service” includes, but is not limited to, technical assistance, financial assistance, financially related services and insurance, but does not include lending or leasing activities. (c) System banks and associations means Farm Credit Banks, agricultural credit banks, banks for cooperatives, agricultural credit associations, production credit associations, Federal land bank associations, Federal land credit associations, and service corporations formed pursuant to section 4.25 of the Act. [60 FR 34099, June 30, 1995, as amended at 69 FR 43514, July 21, 2004 (a) Farm Credit Banks and associations may offer related services appropriate to on-farm and aquatic operations to persons eligible to borrow as defined in §§613.3000 (a) and (b), 613.3010, and 613.3300 of this chapter. (b) Banks for cooperatives may offer related services to entities eligible to borrow as defined in §§613.3100, 613.3200, and 613.3300 of this chapter. (c) Agricultural credit banks may offer related services appropriate to on-farm and aquatic operations of persons eligible to borrow specified in paragraph (a) of this section and may offer related services to entities eligible to borrow as specified in paragraph (b) of this section. (d) Service corporations formed pursuant to section 4.25 of the Act may offer related services to persons eligible to borrow from the owners of the service corporation, pursuant to paragraphs (a), (b), (c), and (e) of this section. (e) System banks and associations may provide related services to recipients that do not otherwise meet the requirements of this section in connection with loan applications, loan servicing, and other transactions between these recipients and persons eligible to borrow as defined in paragraphs (a), (b), or (c) of this section, as long as the service provided is requested by an eligible borrower or necessary to the transaction between the parties. Such services include, but are not limited to, fee appraisals of agricultural assets provided to any Federal agency, commercial banks, and other lenders. [60 FR 34099, June 30, 1995, as amended at 62 FR 4450, Jan. 30, 1997; 69 FR 43514, July 21, 2004] (a) Authorities. System banks and associations may only offer related services that meet the criteria specified in this regulation and are authorized by the FCA. (b) New service proposals. (1) A System bank or association that proposes or intends to offer a related service that the FCA has not previously authorized must submit to the FCA, in writing, a proposal that includes a description of the service, a statement of how it meets the regulatory definition of “related services” in §618.8000(b), and the risk analysis cited in §618.8020(b)(3). The FCA will evaluate the proposed service based on the information submitted, and may also consider whether there are extenuating circumstances or other compelling reasons that justify the proposed service or support a determination that the service is not authorized. This evaluation will focus primarily on Systemwide issues rather than on institution or program-specific factors. (2) When authorizing a proposed related service, at its discretion, the FCA may impose special conditions or limitations on any related service or program to offer a related service. (3) At its discretion the FCA may, at any time during its evaluation of a proposed related service, publish the proposed related service in the (4) Within 60 days of the FCA receiving a completed proposal, including any additional information the FCA may require, the FCA will act on the request to authorize a new service. The FCA shall approve the request, deny the request, or publish the service for public comment in the (5) Within the time period established in paragraph (b)(4) of this section, the FCA shall notify the requesting institution of its actions. Following notification of the requesting institution, the FCA will notify all System banks and associations of its determination on the proposed service by bookletter or other means. If a service is not authorized, the reasons for denial will be included in the notifications to the System and the requesting institution. (c) Previously authorized services. (1) For related services that have been authorized by the FCA, any System bank or association may develop a program and subsequently offer the related service to eligible recipients, subject to any special conditions or institutional limits placed by the FCA. These programs will be subject to review and evaluation during the examination and enforcement process. (2) The FCA shall make available to all System banks and associations a list of such related services (“related services list” or “list”) and will update the list in accordance with paragraph (b)(5) of this section. The list will contain the following: (i) A description of each related service; and (ii) The types of institutions authorized to offer each type of related service; (iii) Identification of any special conditions on how the related service may be offered. The special conditions and description of the service will be fully detailed in FCA's notice to System institutions under paragraph (b)(5) of this section. (3) At least 10 business days prior to implementing a related service program already on the list, the System bank or association must notify the FCA Office of Examination field office responsible for examining that institution in writing and provide it with a description of the proposed related service program. (a) The board of directors of each System bank or association providing related services must adopt a policy addressing related services. The policy shall include clearly stated purposes, objectives, and operating parameters for offering related services and a requirement that each service offered be consistent with the institution's business plan and long-term strategic goals. Such policy shall also be subject to review under an appropriate internal control policy. (b) All related services must be offered to recipients on an optional basis. If the institution requires a related service as a condition to borrow, it must inform the recipient that the related service can be obtained from the institution or from any other person or entity offering the same or similar related services. (c) All fees for related services must be separately identified from loan interest charges and disclosed to the recipient of the service prior to providing or implementing the service. For every related service program a System bank or association provides, it must document program feasibility. The feasibility analysis shall include the following: (a) Support for the determination that the related service is authorized; and (b) An overall cost-benefit analysis that demonstrates program feasibility, taking into consideration the following items: (1) An analysis of how the program relates to or promotes the institution's business plan and strategic goals, and whether offering the service is consistent with the long-term goals described in its capital plan; (2) An analysis of the expected financial returns of the program which, at a minimum, must include an evaluation of market, pricing, competition issues, and expected profitability. This analysis should include an explanation of how the program will contribute to the overall financial health of the institution; and (3) An analysis of the risk in the program, including: (i) An evaluation of the operational costs and risks involved in offering the program, such as management and personnel requirements, training requirements, and capital outlays; (ii) An evaluation of the financial liability that may be incurred as a result of offering the program and any insurance or other measures that are necessary to minimize these risks; and (iii) An evaluation of the conflicts of interest, whether real or perceived, that may arise as a result of offering the program and any steps that are necessary to eliminate or appropriately manage these conflicts. (a) Prior to an association offering a related service program for the first time or offering a service that it did not offer during the most recently completed business cycle (generally 1 year), the board of directors of the funding bank must verify that the association has performed a feasibility analysis pursuant to §618.8020. The bank review is limited to a determination that the feasibility analysis is complete and that the analysis establishes that it is feasible for the association to provide the program. Any conclusion by the bank that the feasibility analysis is incomplete or fails to demonstrate program feasibility must be fully supported and communicated to the association in writing within 60 days of its submission to the bank. (b) Prior to a service corporation offering a service for the first time or offering a service that it did not offer during the most recently completed business cycle (generally 1 year), the owners of the service corporation must verify that the service corporation has performed a feasibility analysis pursuant to §618.8020. If the owners all agree, one bank with a significant ownership interest can be delegated this responsibility. [60 FR 34099, June 30, 1995; 60 FR 42029, Aug. 15, 1995] (a) System banks and associations may offer related services outside their chartered territories subject to the following conditions: (1) The System bank or association obtains consent from all chartered institutions currently offering the same type of service in the territory in which the service is to be provided; or (2) If no System bank or association is currently offering the same type of service in the territory, then the out-of-territory institution must obtain the consent of at least one direct lender institution chartered in the territory in which the related service is to be provided. (3) The consent obtained pursuant to paragraphs (a)(1) and (a)(2) of this section shall be in the form of a written agreement with specific terms and conditions including timeframes. (b) System banks and associations providing out-of-territory services must fulfill all requirements of subparts A and B of this part 618. (c) An institution that consents to another bank or association providing a related service in its chartered territory must meet the requirements of this section, but need not comply with the other requirements of subparts A and B of this part 618, unless the program consented to imposes a financial obligation on the consenting institution. If a financial obligation exists, then the consenting institution must comply with §§618.8015, 618.8020 and 618.8025. (d) Service corporations must follow the requirements of this section in offering related services out-of-territory. A service corporation cannot consent to an out-of-territory institution providing services in its chartered territory.
Title 12: Banks and Banking
PART 618—GENERAL PROVISIONS
Subpart A—Related Services
§ 618.8000 Definitions.
§ 618.8005 Eligibility.
§ 618.8010 Related services authorization process.
§ 618.8015 Policy guidelines.
§ 618.8020 Feasibility requirements.
§ 618.8025 Feasibility reviews.
§ 618.8030 Out-of-territory related services.
