McLEAN, Va., Nov. 19, 2021 — At its monthly meeting yesterday, the Farm Credit Administration board approved a bookletter (PDF) providing guidance to Farm Credit System (FCS) institutions on the sound governance of wholesale funding and related processes.
For FCS banks, the bookletter provides guidance on the following topics:
- Funds transfer pricing
- Bank patronage practices
- Loan product offerings
- Cost allocations in wholesale pricing
- Bank risk assessment
- Bank supervisory responsibilities
- Disclosure responsibilities
- Intra-district coordination
- Board education
For an FCS association contemplating a change in its wholesale funding arrangement with its bank, the guidance advocates thorough analysis of the costs, benefits, advantages, and disadvantages of any such change. It encourages associations to fully consider the needs of all stakeholders.
As a network of wholesale funding banks and affiliated associations, the Farm Credit System has unique governance needs, which this bookletter addresses. It stresses the significance of the relationship between an FCS funding bank and its affiliated associations in meeting the Farm Credit System’s mission. It also emphasizes the need for sound and transparent governance of wholesale funding practices.
The bookletter communicates FCA’s expectation that governance of wholesale funding and related processes should be guided by the cooperative operating philosophy outlined in section 1.1 of the Farm Credit Act and emphasized in FCA Board Policy Statement 80, Cooperative Operating Philosophy – Serving the Members of Farm Credit System Institutions.