Agricultural Loan Loss Amortization

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 324

RIN 3067-AB77

Agricultural Loan Loss Amortization

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: As part of the FDIC's systematic review of its regulations and

written policies under section 303(a) of the Riegle Community

Development and Regulatory Improvement Act of 1994 (CDRI), the FDIC is

removing its regulation governing agricultural loan loss amortization.

This action is needed to eliminate the regulation when it becomes

obsolete on January 1, 1999.

EFFECTIVE DATE: January 1, 1999.

FOR FURTHER INFORMATION CONTACT: Robert W. Walsh, Manager, Planning and

Program Development, (202) 898-6896, Division of Supervision; Susan van

den Toorn, Counsel, (202) 898-8707, Legal Division, FDIC, 550 17th

Street, N.W., Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION: The FDIC is conducting a systematic review

of its regulations and written policies. Section 303(a) of the CDRI (12

U.S.C. 4803(a)) requires each federal banking agency to streamline and

modify its regulations and written policies in order to improve

efficiency, reduce unnecessary costs, and eliminate unwarranted

constraints on credit availability. Section 303(a) also requires each

federal banking agency to remove inconsistencies and outmoded and

duplicative requirements from its regulations and written policies.

As part of this review, the FDIC is removing 12 CFR part 324. This

action is appropriate because the regulation implemented legislation

which permitted agricultural banks to amortize qualified agricultural

loan losses incurred only between 1984 and 1991 with a resulting

amortization period not to exceed seven years. Consequently, this

regulation will become obsolete at the end of the permissible

amortization period. Therefore, the FDIC is eliminating the rule

effective January 1, 1999. The Office of the Comptroller of the

Currency (OCC), as part of its Regulation Review Program, has

previously reviewed its regulation on Agricultural Loan Loss

Amortization, 12 CFR part 35, and determined that the regulation

becomes obsolete on January 1, 1999. The OCC issued a proposed rule on

February 8, 1995 (60 FR 7467) and a final rule on May 24, 1995 (60 FR

27401) to remove its regulation on January 1, 1999. The Federal Reserve

Board (FRB) has under consideration a similar proposal with regard to

12 CFR 208.15.

Title VIII of the Competitive Equality Banking Act of 1987 (Act),

Pub. L. 100-86, 101 Stat. 635 (1987), added 12 U.S.C. 1823(j) in an

attempt to alleviate some of the financial pressures then facing

agricultural banks. In particular, 12 U.S.C. 1823(j) permits an

agricultural bank to amortize over a period not to exceed seven years:

(1) Any loss on a qualified agricultural loan that the bank would

otherwise be required to show on its annual financial statement for any

year between December 31, 1983, and January 1, 1992; and (2) any loss

resulting from the reappraisal of property that the bank owned or

acquired between January 1, 1983, and January 1, 1992, in connection

with a qualified agricultural loan. The FDIC implemented this statutory

provision by promulgating 12 CFR part 324 with a final rule published

on November 2, 1987 (52 FR 41968). Pursuant to section 1823(j)(3) of

the Act, the OCC and the FRB issued substantively similar regulations.

See, 12 CFR part 35 and 12 CFR 208.15 respectively.

Because the statute requires that a loss occur on or before

December 31, 1991, to qualify, and that the amortization period may not

exceed seven years, the program becomes obsolete on January 1,

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1999. Reflecting this fact, the FDIC's rule requires that loans under

the program must be fully amortized by December 31, 1998. 12 CFR

324.3(b).

In light of the statutory termination of the agricultural loan loss

amortization program, the FDIC is removing 12 CFR part 324, effective

January 1, 1999, to obviate the need for any regulatory action in the

future. Prior to that date, an annotation to part 324 in title 12 of

the Code of Federal Regulations would indicate the effective date for

removal of the part.

Exemption from Public Notice and Comment

The FDIC believes that it is unnecessary to seek public comment on

this rule because the agricultural loan loss amortization program

becomes obsolete by operation of law on January 1, 1999. Accordingly,

the rule is being adopted in final, rather than proposed, form with a

protracted effective date that will coincide with cessation of the

statutory program.

Regulatory Flexibility Act

Pursuant to section 605(b) of the Regulatory Flexibility Act (5

U.S.C. 605(b)), the FDIC hereby certifies that this regulation will not

have a significant economic impact on a substantial number of small

entities because only three institutions are affected. Accordingly, a

regulatory flexibility analysis is not required. This regulation has no

material impact on insured depository institutions and state nonmember

banks, regardless of size.

Paperwork Reduction Act

The collection of information contained in 12 CFR 324.7 has been

approved by the Office of Management and Budget (OMB) under OMB Control

Number 3064-0091. This final rule will remove as unnecessary, for the

reasons set forth in the preamble, that collection of information

effective January 1, 1999.

List of Subjects in 12 CFR Part 324

Accounting, Agriculture, Banks, Banking, State nonmember banks,

Reporting and recordkeeping requirements.

Authority and Issuance

For the reasons set out in the preamble, and under the authority of

12 U.S.C. 1823(j), chapter III of title 12 of the Code of Federal

Regulations is amended as follows:

PART 324--[REMOVED]

1. Part 324 is removed effective January 1, 1999.

By Order of the Board of Directors.

Dated at Washington, D.C., this 17th day of June, 1996.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 96-16724 Filed 6-28-96; 8:45 am]

BILLING CODE 6714-01-P