12 U.S. Code § 2154a - Capitalization of System institutions
Subject to approval by shareholders under subsection (c)(2), each bank and association shall adopt bylaws, developed by its board of directors, that provide for the capitalization of the institution in accordance with subsection (c)(1).
Except as provided in paragraph (2), the board of directors of a System institution may not reduce the permanent capital of the institution through the payment of patronage refunds or dividends, or the retirement of stock if, after or due to such action, the permanent capital of the institution would thereafter fail to meet the minimum capital adequacy standards established under section 2154(a) of this title.
Paragraph (1) shall not apply to the payment of noncash patronage refunds by any institution exempt from Federal income tax if the entire refund paid qualifies as permanent capital. Notwithstanding paragraph (1), any System institution subject to Federal income tax may pay patronage refunds partially in cash as long as the cash portion of the refund is the minimum amount required to qualify the refund as a deductible patronage distribution for Federal income tax purposes and the remaining portion of the refund paid qualifies as permanent capital.
The Farm Credit Administration may issue a directive that requires compliance with subsection (d), to the board of directors of any System institution that fails to comply therewith.
Notwithstanding any other provision of this section, in the case of a loan sold to a secondary market under subchapter VIII, paragraph (1) shall apply regardless of whether the bank or association retains a subordinated participation interest in a loan or pool of loans or contributes to a cash reserve.
Subject to subparagraph (B) and notwithstanding any other provision of this section, if a loan designated for sale under paragraph (1)(A) is not sold into a secondary market during the 180-day period that begins on the date of the designation, the voting stock or participation certificate purchase requirement that would otherwise apply to the loan in the absence of a bylaw provision described in paragraph (1)(A) shall be effective.
The bylaws adopted by a bank or association under subsection (b) may provide that if a loan described in subparagraph (A) is sold into a secondary market after the end of the 180-day period described in the subparagraph, all outstanding voting stock or participation certificates held by the borrower with respect to the loan shall, subject to subsection (d)(1), be retired.
This section shall not be construed to affect the provisions of this chapter that confer on System institutions a lien on borrower stock or other equities and the privilege to retire or cancel such stock or other equities for application against the indebtedness on a defaulted or restructured loan.
To the extent that any provision of this section is inconsistent with any other provision of this chapter (other than section 2162 of this title), the provision of this section shall control.
2008—Subsec. (c)(1)(D)(ii) to (iv). Pub. L. 110–246, § 5403(b), added cl. (ii) and redesignated former cls. (ii) and (iii) as (iii) and (iv), respectively.
1996—Subsecs. (f) to (h). Pub. L. 104–105 added subsec. (f) and redesignated former subsecs. (f) and (g) as (g) and (h), respectively.
1992—Subsec. (a)(1). Pub. L. 102–552 amended par. (1) generally. Prior to amendment, par. (1) read as follows: “The term ‘permanent capital’ means current year retained earnings, allocated and unallocated earnings, all surplus (less allowances for losses), and stock issued by a System institution, except stock that—
“(A) may be retired by the holder thereof on repayment of the holder’s loan, or otherwise at the option or request of the holder; or
“(B) is protected under section 2162 of this title or is otherwise not at risk.”
Subsec. (c)(1)(D)(i). Pub. L. 100–399, § 301(c)(1), substituted “producers or” for “producers, or”.
Subsec. (c)(1)(G). Pub. L. 100–399, § 301(c)(2), substituted “voting stock issued” for “stock issued”.
Subsec. (c)(1)(H). Pub. L. 100–399, § 301(d), inserted “, except as otherwise provided in this section” after “the borrower”.
Subsec. (c)(1)(I). Pub. L. 100–399, § 301(e), struck out “standards issued under” after “established under”.
Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of Title 7, Agriculture.