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Return to Comments
Capital - Tier1/Tier 2 Regulatory Capital Framework Proposed Rule
Type: Regulation
Federal Register Document Type: Proposed
Description:
Request that Board approve a new part 628 to FCA's regulations and amend parts 607, 614, 615 and 620 to modify the regulatory capital requirements for System Banks and associations


Text of Comment Letter
Richard Starkebaum
13360 County Road 24
Haxtun, CO 80731-9525


February 2, 2015

Barry F Mardock
Office of Regulatory Policy, Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090


Dear Barry Mardock:

We appreciate the opportunity to offer comments to the Farm Credit
Administration's proposed rule revising capital requirements for Farm
Credit System institutions.  In its proposed rule, the Agency seeks
specific comment as to whether it should retain the current risk weighting
for exposures to certain electrical cooperative assets. We strongly
encourage the Agency to continue its traditional risk weighting
methodology for loans made by Farm Credit System institutions to rural
electric cooperatives.

Since 2007, the FCA has, under its reservation of authority, "determined
that exposures to certain loans, leases, participation interests, and debt
securities (Assets) of the electric cooperative industry warrant a lower
regulatory capital risk weight".   We strongly support the FCA's decision
on this matter and encourage the Agency to maintain that position in its
new capital regulation. 

The rural electric cooperative industry is strong and serves a vital
mission in rural communities.  The availability of and cost of credit to
rural electric cooperatives is critical to our ability to continue to
fulfill our mission and serve our customers.  We are very concerned that a
decision to raise the risk weighting of loans made to electric
cooperatives by FCS institutions would hurt credit availability to the
industry and drive up the borrowing costs of cooperatives, which would
ultimately hurt rural electric rate payers.

We applaud the FCA's 2007 decision and the Agency's acknowledgement of the
"unique characteristics and lower risk profile of" the electric
cooperative industry.  In the explanation of its decision, the FCA noted
that this "lower risk profile is supported, in part, by the financial
strength and stability of the underlying member systems, the ability to
establish user rates with limited third-party oversight, and the exclusive
service territories encompassing rural America -- all of which insulate
the electric cooperative industry from many of the credit-related risks
experienced by investor-owned utilities."   The Agency referenced the
industry's minimal loss history and its sound credit ratings as further
justification.

The FCA's judgment in this matter has stood the test of time.  The
original rationale for 50% risk weighting remains valid today and is just
as important to the success of rural communities served by rural electric
cooperatives.

We appreciate the opportunity to comment and urge the FCA to continue its
current practice of applying 50% risk weighting to loans made by FCS
institutions to rural electric cooperatives.  Thank you for considering
our comment on this important matter.

Sincerely,


Richard P Starkebaum
9707747169


Attachments: