Pub. 2 2013 Issue 6

August 2013 19 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s The big question is why the Council is expending an enormous amount of political capital to kill say-on-pay. Perhaps the Council is trying to send a message to the FCA – don’t adopt rules we don’t like! To its credit, in response to congressional inquiries, the FCA has ex- pressed support for the rule and provided justification for its adoption. So far, though, the FCA has not publicly expressed opposition to these congressional attempts to kill say-on-pay. Given her long-standing interest in increased transparency, FCA chairman Jill Long Thompson should lead the charge in protecting the say-on-pay rule, for two reasons. First, it is a good rule because it does increase FCS transparency in the all-important area of executive compensation. Second, and perhaps more important, preserving the rule will enhance the reputation of the FCA as an independent regula- tor. Far too often the FCA is viewed, and correctly so, as serving the interests of the FCS and the Council rather than the public. FCAApproves Final Rule on Unincorporated Business Entities On May 9, the three-member FCA board of directors approved a final rule on the use of unincorporated business entities (UBE) by FCS institutions. While there are some situations where FCS use of a UBE is acceptable, this organizational form is open to abuse. UBEs are organized or chartered under state law and can be owned by one or several FCS institutions. According to an FCA news release, UBEs “may be used for the following limited business purposes:” • To hold and manage unusual and complex collateral associated with certain acquired properties, such a business the FCS lender may have foreclosed on. • To provide limited services integral to the daily internal operations of an FCS institution. • To provide functions and services necessary or expedient to the business of FCS institutions owning the UBE, except that an FCS institution may not engage in direct lending through a UBE. • To invest in rural business investment companies, or RIBCs. While UBEs can provide useful services to FCS institutions, meet other legitimate needs within the FCS, and yet operate within the confines of the Farm Credit Act (ACT) governing the FCS, there will be ample opportunity for FCS institu- tions to abuse UBEs, such as investing through RIBCs. The public must be able to closely monitor UBEs to ensure that no abuses occur. The FCA stated it will “establish standards for the proper and adequate disclosure and reporting of [FCS] UBE activity and ensure that the [FCS’s] use of UBEs remains transparent and free from conflicts of interest.” How the FCA will do that has not been established. One way the FCA could do that would be to require UBEs to file quarterly call reports, just as FCS associations and banks now do. Another step to ensure transparency and comply with the Act would be to require UBEs to publish annual reports detailing their activities. Absent these disclosures, UBEs will operate too far into the shadows of the FCS. Report FCS Lending Abuses to: green-acres@ely-co.com Bankers are continuing to send FCW reports of FCS lending abuses, such as FCS loans for rural estates, weekend getaways, and hunting preserves. Email reports of similar lending abuses in your market to: green-acres@ely-co.com . Please provide as much detail as possible about any loan which violates the spirit, if not the law, governing FCS lending. When the winds of change start blowing, you better have a warm jacket. Or a good bank. Client: Intrust If recent regulatory changes have affected the services you provide your customers, adapt and persevere by partnering with INTRUST Bank. As the Midwest-based bank with big capabilities, INTRUST Bank is your trusted source for correspondent banking services. Contact any member of our team today, and learn what we can do for you. intrustbank.com Member FDIC I ©2013 INTRUST Bank 800-732-5120 | Bruce Frost 316-383-1418 | Dan Heinz 316-383-1415 | Wes Spohr 316-383-1368 27925_Correspondent_7_5x5_KansasBanker.indd 1 1/7/13 3:36 PM