Management of ineligible investments and reservation of authority to require divestiture.

§ 615.5143 Management of ineligible investments and reservation of authority to require divestiture. (a) Investments ineligible when purchased. Investments that do not satisfy the eligibility criteria set forth in § 615.5140(a) or (b) or investments FCA had not approved under § 615.5140(e), as applicable, at the time of purchase are ineligible. System institutions must not purchase ineligible investments. If the institution determines that it has purchased an ineligible investment, it must notify FCA within 15 calendar days after the determination. The institution must divest of the investment no later than 60 calendar days after determining that the investment is ineligible unless FCA approves, in writing, a plan that authorizes the institution to divest the investment over a longer period. Until the institution divests of the ineligible investment: (1) A Farm Credit bank must not use the ineligible investment to satisfy its liquidity requirement(s) under § 615.5134; (2) The institution must include the ineligible investment in the portfolio limit calculation defined in § 615.5132 or § 615.5140(b)(4), as applicable; and (3) A Farm Credit bank must exclude the ineligible investment as collateral under § 615.5050. (b) Investments that no longer satisfy investment eligibility criteria. If the institution determines that an investment (that satisfied the eligibility criteria set forth in § 615.5140(a) or (b), as applicable, when purchased) no longer satisfies the criteria, or that an investment that FCA approved pursuant to § 615.5140(e), no longer satisfies the conditions of approval, the institution may continue to hold the investment, subject to the following requirements: (1) The institution must notify FCA within 15 calendar days after such determination; (2) A Farm Credit bank must not use the ineligible investment to satisfy its liquidity requirement(s) under § 615.5134; (3) The institution must include the ineligible investment in the portfolio limit calculation defined in § 615.5132 or § 615.5140(b)(4), as applicable; (4) A Farm Credit bank may continue to include the investment as collateral under § 615.5050 at the lower of cost or market value; and (5) The institution must develop a plan to reduce the investment's risk to the institution. (c) Reservation of authority. FCA retains the authority to require the institution to divest of any investment at any time for failure to comply with § 615.5132(a) or § 615.5140(a), (b), or (e), or for safety and soundness reasons. The timeframe set by FCA will consider the expected loss on the transaction (or transactions) and the effect on the institution's financial condition and performance. [83 FR 27503, June 12, 2018; 83 FR 30833, July 2, 2018]