Adapting Farm Credit for tech and regulation shifts in banking

The Farm Credit System fills a unique and specific role within the financial services ecosystem—supporting the continuous credit needs of U.S. farmers, ranchers, producers, and their rural communities. Along with the rest of the financial services industry, the Farm Credit System has been evolving, adopting technology, managing risks, and partnering with those that strive to innovate how they do business. 

While Farm Credit operates differently in certain aspects, the hyper change that the commercial banking industry is going through—especially in the risk and regulatory space—will ultimately find its way to Farm Credit.

Cybersecurity

The cybersecurity risk management rule, which proposes revisions to 12 CFR Part 609 of the information technology regulation, will require Farm Credit associations to conduct an annual risk assessment and develop a detailed cyber risk plan approved by their board to address identified risk and vulnerabilities.  

• Do you know the key threats your association faces and the associated level of risk exposure based on the controls you have in place and the vendors you use? 
• Have you conducted business impact assessments to understand the criticality of your assets and plan for potential incident response scenarios? 
• Is your Board—as owners and customers—aware of leading practices to protect the association as well as their own business against cyberattacks?

Data collection and reporting

Amendment 1071 to the ECOA impacts “covered institutions,” Farm Credits and banks alike, lending to small businesses and thus requiring them to collect additional application data about demographics and then submit specific reports to examiners. To do this, associations will need to be able to answer questions like these: 

• What percentage of your customer base will be classified as a small business (gross revenue under $5 million for the preceding fiscal year)?
• What channels can small business customers apply for credit and how will each process need to be adjusted to collect the necessary information?
• What’s in place to control data flow and prevent credit approvers from accessing protected demographic information?
• Can your loan origination system and processes support new application data fields and updated retention guidelines? Are your system and processes flexible enough to adapt to future changes in the regulation? 

YBS program metrics

In addition to heightened reporting requirements for small business credit applications, there will also be further reporting changes around the Young, Beginning, and Small Farmers (YBS) program. Associations can expect their funding bank to be more involved in reviewing YBS progress as the proposal to 12 CFR parts 614 and 620 will require associations to have an independent strategic plan with metrics to measure progress.

• Are you clear on the updated metrics that need to be collected and where the data will flow from to support that aggregation for measuring progress?
• Do you have a documented strategic plan in place to concisely communicate how your association is supporting and measuring progress with YBS? Have you considered collaborating with other associations and leveraging shared technology to foster and support your strategy?

Having worked closely with Farm Credit associations nationwide, we possess a deep understanding of the unique challenges and opportunities that the Farm Credit System encounters. Our combination of specialized insights and extensive experience in commercial banking positions us well to assist in addressing imminent risk and compliance challenges. Our goal is to support Farm Credit in effectively navigating the evolving regulatory landscape—ensuring a secure and compliant approach that aligns with its mission.