Frequently Asked Questions
Here you can find answers to some of the questions most often asked about the Funding Corporation and the Farm Credit System. If you can't find the answer you're looking for, please feel free to contact us.
What is the Farm Credit System?
The Farm Credit System is a nationwide network of borrower-owned lending institutions and specialized service organizations. Established by Congress in 1916, the System is the oldest American government-sponsored enterprise. Throughout its long history, the System’s mission has remained the same: to support rural communities and agriculture with reliable, consistent credit and financially related services, today and tomorrow.
Currently, there are four System Banks (three Farm Credit Banks and one Agricultural Credit Bank) that provide funds and support services to 58 locally owned Farm Credit Associations and numerous cooperatives nationwide. As of December 2022, approximately 46 percent of all U.S. farm business debt was funded by the Farm Credit System (source: USDA Economic Research Service).
What is the Funding Corporation?
The Federal Farm Credit Banks Funding Corporation functions as the fiscal agent for the four System Banks. In this role, we issue, market and handle the Farm Credit Debt Securities in order to generate funds for the System's lending operations. The Funding Corporation, which is located in the greater New York City area, was established by Congress and is owned by the System Banks.
The Funding Corporation is responsible for establishing, subject to Farm Credit Administration approval, the amounts, maturities, rates of interest, terms and conditions of participation by the System Banks in each issue of Farm Credit Debt Securities. The conditions of participation by the System Banks in each issue of Farm Credit Debt Securities are prescribed in an agreement between the Funding Corporation and the System Banks. We currently use a selling group of banks and securities Dealers to offer Farm Credit Debt Securities around the world.
The Funding Corporation also provides consulting, accounting and financial reporting services for the System Banks and acts as the System's financial spokesperson. We are responsible for financial disclosure and the release of public information concerning the financial condition and performance of the System as a whole.
In these two roles as fiscal agent and financial spokesperson, we support the responsible stewardship of System resources while aiding investors in making smart financial decisions that meet their goals.
What types of investors purchase Farm Credit Debt Securities?
Our selling group distributes Farm Credit Debt Securities on a worldwide basis to all types of investors, including but not limited to investment managers, public entities, commercial banks, corporations, insurance companies, pension funds and official institutions.
What is the credit rating of the Farm Credit Debt Securities?
Moody's Investors Service has assigned a rating of Aaa with a negative outlook to the long-term debt of the System and a rating of P-1 to the short-term debt of the System. Standard & Poor's Ratings Service has assigned a rating of AA+ with a stable outlook to the long-term debt of the System and a rating of A-1+ to the short-term debt of the System. Fitch Ratings has assigned a rating of AA+ to the long-term debt of the System with a stable outlook and F1+ to the short-term debt of the System. The Funding Corporation understands a number of factors contributed to these ratings, including: the Farm Credit System's status as a Government-sponsored enterprise, which results from its public mission and ties to the federal government; the traditionally strong governmental support of the agricultural sector; and the System's strong financial performance in recent years, including favorable earnings and strong capital ratios.
Who are the System Banks?
Do Farm Credit System institutions accept deposits?
The System Banks and Associations are not legally authorized to accept deposits. The Banks principally obtain their funds through the issuance of Systemwide Debt Securities offered by the Funding Corporation. The Associations obtain a substantial majority of the funds for their lending operations through borrowings from their affiliated Bank.
How is the Farm Credit System capitalized?
The System continues to build capital through net income earned and retained, and to a lesser extent, preferred stock issuance. Retained earnings is the most significant component of capital for the Farm Credit System. Capital stock or participation certificates (non-voting equity investment) required to be purchased by member/borrowers, in accordance with the Farm Credit Act, is an additional source of capital for the System.
What are the Farm Credit System’s liquidity requirements?
The Farm Credit System is regulated by the Farm Credit Administration (FCA). The FCA has set forth liquidity requirements for the System banks to maintain a three-tiered liquidity reserve, plus a supplemental liquidity buffer, with an overall minimum of 90 days of liquidity.
What is the Insurance Fund?
The System has an insurance fund to insure the timely payment of principal and interest on Farm Credit Debt Securities, to the extent funds are available. Also, the provisions of the Farm Credit Act providing for joint and several liability of the System Banks cannot be invoked until the amounts in the Farm Credit Insurance Fund have been exhausted. However, because of other mandatory and permissive uses of the Insurance Fund specified in the Farm Credit Act, there is no assurance that there will be sufficient funds available in the Insurance Fund.
The Farm Credit System Insurance Corporation administers the Insurance Fund. The Insurance Corporation is a Government-controlled corporation that was established in the late 1980s. The Insurance Corporation is administered by a board of directors consisting of the Farm Credit Administration Board.
To achieve or maintain the Insurance Fund at the statutorily defined "secure base amount" of 2% of aggregate insured debt obligations (or such other percentage as the Insurance Corporation determines is actuarially sound), the Insurance Corporation has the authority to assess premiums on the System Banks. When the amount of the Insurance Fund exceeds the secure base amount, the Insurance Corporation is required to reduce the premiums, but it must ensure that reduced premiums are sufficient to maintain the level of the Insurance Fund at the secure base amount.
What types of Farm Credit Debt Securities does the System issue?
The System, unlike commercial banks and other depository institutions, obtains funds for its lending operations primarily from the sale of Farm Credit Debt Securities. The System Banks, through the Funding Corporation, currently offer the following types of Farm Credit Debt Securities:
For a discussion of various risks, tax and other considerations, as well as terms and conditions related to each of these types of Farm Credit Debt Securities, review the appropriate offering circular.
Does the U.S. Government guarantee Farm Credit Debt Securities?
No. Farm Credit Debt Securities are the general unsecured joint and several obligations of the System Banks only. In the event of a default by a System Bank on an insured debt obligation for which that System Bank is primarily liable, the Farm Credit System Insurance Corporation must expend amounts in the Farm Credit Insurance Fund to the extent necessary to insure the timely payment of principal of and interest on the debt obligation. The provisions of the Farm Credit Act providing for joint and several liability of the System Banks on the debt obligation cannot be invoked until the amounts in the Insurance Fund have been exhausted.
However, because of other mandatory and permissive uses of the Insurance Fund specified in the Farm Credit Act, there is no assurance that there will be sufficient funds available in the Insurance Fund.
Where can I buy Federal Farm Credit Banks Consolidated Systemwide Debt Securities?
Most major banks and securities dealers have access to Farm Credit Debt Securities, which are sold in primary and secondary capital markets globally. The Funding Corporation works directly with certain banks and securities dealers including minority, women, disabled, and veteran owned firms to issue Farm Credit Debt Securities.
Where can I find the status of my Farm Credit bonds and notes?
Information on the status of specific securities can be found using our Debt Securities Search.
What is the tax status of the Farm Credit Debt Securities?
Under the Farm Credit Act, Farm Credit Debt Securities and the interest thereon are exempt from state, local and municipal income taxes. Provisions of several statutes that are analogous to the relevant tax exemption provisions of the Farm Credit Act have been construed by certain state courts as not exempting securities similar to the Farm Credit Debt Securities or interest thereon from nondiscriminatory franchise taxes or other nonproperty taxes imposed on corporations. Interest on the Farm Credit Debt Securities is not exempt from federal income taxation. In addition, gain from the sale or disposition of Farm Credit Debt Securities or their transfer by inheritance, gift, or other means is not exempt from federal taxation, and generally is not exempt from state, local or municipal taxation. Additional information regarding the tax consequences of purchasing, holding and disposing of the Farm Credit Debt Securities is contained in the applicable offering circular. Holders and persons considering the purchase of the Farm Credit Debt Securities should consult with their own tax advisors regarding the tax consequences of holding Farm Credit Debt Securities in their particular situation.
Does the Farm Credit System issue an environmental, social and governance (ESG) report?
The Farm Credit System does not issue an ESG report at this time. The System formed an ESG Work Group in 2021 to coordinate alignment across Farm Credit System committees, to research and recommend ESG measurement and modeling methodologies, and to ensure broad awareness of ESG activities within the Farm Credit System. The progress and findings of this work group will help us determine the potential for a consolidated, Systemwide ESG report.
How do extreme weather events impact the Farm Credit System's financial condition?
American farmers and ranchers are continuously adapting. In the face of adverse weather conditions, many producers are incorporating new technologies and sustainable best practices to increase water efficiency, decrease erosion and generally improve the resilience of their land and businesses. (Refer to the Farm Credit Council's "Climate-Smart Agriculture" customer stories to learn more.)
The negative impacts of adverse weather conditions and natural disasters on farm income may affect whether System borrowers can make timely payments on their loans. However, the System has been building a position of financial strength and stability for more than 100 years, which allows it to serve rural America during good times and bad. In addition, the System's loan portfolio is highly diversified by commodity, geography, and size. The System's strength and stability also stand to benefit investors, and the Funding Corporation and the Farm Credit System Insurance Corporation strive to protect investors' interests. (For our complete point of view on weather events and other risks, please see our most recent Information Statement.)
What regulations are in place to prevent discrimination in Farm Credit lending operations?
Farm Credit lending institutions do business in accordance with federal fair lending laws, specifically the Equal Credit Opportunity Act (the Consumer Credit Protection Act, as amended by the Equal Credit Opportunity Act Amendments of 1976). Anyone who believes they have been discriminated against is encouraged to report the situation directly to the Farm Credit Administration, which is the federal regulatory body that maintains the System and enforces borrower rights.
What is the Funding Corporation doing to promote diversity?
The Funding Corporation takes our commitment to diversity, equity and inclusion (DE&I) seriously by incorporating it into our recruitment and hiring practices. We also work to create a culture where all employees feel safe and free to be themselves. Learn how we advance DE&I in our organization.
Where can I find the Funding Corporation's governance policies?
You can read about our governance structure and access policies on our Corporate Governance page.
What are the benefits of the Farm Credit System's cooperative structure?
The cooperative structure creates benefits in two interconnected ways. First, it creates a form of leadership that prioritizes customer needs. Farm Credit borrowers become owners of their local Farm Credit institution, which gives them the right to elect peers that will represent their interests as board members. It means borrowers have a personal stake not simply in their own loan, but in the System. We believe this contributes to responsible stewardship of the System's resources.
Second, the net income generated by a cooperative can only be used in two ways: passed to customer-owners by way of cooperative dividends, which effectively lower the cost of borrowing, or retained within a Farm Credit institution as capital. The latter has enabled the System to build significant capital reserves. This ensures customers can access needed support even in difficult times and increases the System's resilience in the face of a wide variety of risks.
What is the Funding Corporation's Transparency in Coverage?
Transparency in Coverage (TIC) regulations require health insurers and group health plans to create machine readable files (MRFs) that contain the negotiated rates for in-network providers and allowed amounts derived from historical claims for out-of-network providers and make those files publicly available. A machine readable file is a digital representation of data or information in a file that can be imported or read by a computer system for further processing without human intervention. These files follow the Centers for Medicare & Medicaid Services (CMS) defined layout and are in the CMS approved format (JSON) and are not meant for a consumer-friendly search of rates, benefits, or cost sharing. Please refer to the member resources available through anthem.com for this information.
In an effort to fulfill the group health plan posting requirement, click here to access Anthem's MRF.
What is Farmer Mac?
As provided in the Farm Credit Act, the Federal Agricultural Mortgage Corporation (Farmer Mac) was established to attract new capital for the financing of agricultural real estate and to provide liquidity to agricultural lenders. The board of directors of Farmer Mac has 15 members, five of whom are elected from the System. Farmer Mac is regulated by the Farm Credit Administration and is designated by statute as a System entity. However, the accounts of Farmer Mac are not included in the combined financial statements of the System. Farmer Mac is not liable for any debt or obligation of any other System institution, and no System institution other than Farmer Mac is liable for any debt or obligation of Farmer Mac.