1. (a) Definitions for this section—(1) Transfer of capital means any payment or forbearance by a Farm Credit Bank or agricultural credit bank (collectively, bank) to an affiliated association, including but not limited to:

   1. (i) The purchase of nonvoting stock or participation certificates;
   2. (ii) The payment of cash;
   3. (iii) Debt forgiveness or reduction;
   4. (iv) Interest rate concessions or interest-free loans;
   5. (v) The transfer of loans at other than fair market value;
   6. (vi) The reduction or elimination of standard loan servicing or other fees; and
   7. (vii) The assumption of operating or other expenses, such as legal fees or insurance premiums.
   8. (2) Preferential transfer of capital means a transfer of capital that is not available to all similarly situated affiliated associations.
   9. (3) Nonroutine transfer of capital means a transfer of capital that is not available in the ordinary course of business.

2. (b) Considerations for preferential or nonroutine transfers of capital. Before authorizing a preferential or nonroutine transfer of capital, a bank board of directors must take into account and document whether:

   1. (1) The transfer of capital is in the best interests of all of the shareholders;
   2. (2) The bank will be able to achieve its capital adequacy and business plan goals after making the transfer of capital; and
   3. (3) The transfer of capital is the “least cost” alternative available and will enable the association to maintain sound, adequate, and constructive service to borrowers.
3. (c) Notification requirements. At least 30 days before making a preferential or nonroutine transfer of capital to an affiliated association, banks must provide shareholders and the Chief Examiner of the Farm Credit Administration with a description of the transfer and the documentation required by paragraph (b) of this section.

[64 FR 49961, Sept. 15, 1999]