Pub. 6 2017 Issue 8

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 22 BERT ELY’S FARM CREDITWATCH® The Four FCS Banks are Commercial Banks??? A CCORDING TO A recent press release issued by the on-line magazine Global Finance, the four FCS banks are among the world’s 50 safest commercial banks. AgriBank was ranked #19, CoBank #25, AgFirst #28, and Farm Credit Bank of Texas #30. The press release stated that the banks on its list of the safest commercial banks “were selected through an evaluation of long-term foreign currency ratings — from Moody’s, Standard & Poor’s, and Fitch.” Apart from their equity capital, the FCS banks are almost entirely funded with debt issued by the Federal Farm Credit Banks Funding Corporation and are jointly and severally liable for that debt. Global Finance, though, did not acknowledge that fact nor the fact that the four FCS banks are GSEs implicitly backed by the federal government, they also are the beneficiaries of a $10 billion cost-free line-of-credit from the U.S. Treasury. Five U.S. bank holding companies also made the top-50 list — U.S. Bancorp (21), BNY Mellon (40), State Street (43), Northern Trust (44), and Wells Fargo (49). It is absolutely appalling that Global Finance fails to understand that the FCS banks are not commercial banks, but worse, when I pointed out that rather obvious fact to the editors at Global Finance, they would not acknowledge it. More troubling, when CoBank touted its inclusion the list of Global Finance’s 50 safest banks in this news release, it failed to note that its outstanding debt is raised for it by the Funding Corporation and that it was erroneously included in Global Finance’s companion list of the world’s safest commercial banks. CoBank’s failure to publicly state it should not be characterized as a commercial bank is a tacit admission that it does not mind being viewed by Global Finance’s readers as a commercial bank. Worse, for at least the last six years, CoBank news releases have cited it as being ranked by Global Finance as one of the world’s safest banks without pointing out the magazine’s error in characterizing it a commercial bank. If CoBank has no objection to repeatedly being called a commercial bank, then it should be regulated as if it were a commercial bank. Trying to set the record straight, I emailed the editors at Global Finance to explain that the FCS banks are not commercial banks and that they are largely funded by the unranked Funding Corporation. On Sep. 29, Andrea Fiano, Global Finance’s editor, emailed a substantive reply, but he failed to address my central complaint — the magazine's characterization of the FCS banks as commercial banks when they clearly are not. Worse, on Oct. 6, Global Finance published a list of the “Safest 25 Commercial Banks In The World,” which is merely the top 25 banks from its earlier list of the 50 safest commercial banks.