Frequently Asked Questions
Click on a category below for FAQs on the respective topic.
The Basics How FCSIC insurance works The Farm Credit System The Insurance Fund Premiums FCSIC operations Troubled System InstitutionsHow FCSIC insurance works
When would FCSIC make a payment to bondholders?
FCSIC is required to pay bondholders when “necessary” to insure the timely payment of the insured joint debt of the FCS banks. If a bank is holding liquid assets sufficient to pay its share of insured debt, then FCSIC payment is not “necessary.” Each FCS bank is required by FCA rules to hold investments to cover 90 days (including highest quality liquid investments sufficient to cover at least 15 days) of maturing obligations. Because of this requirement, FCS banks can pay their maturing obligations through sale of their liquidity investments even if the FCS banks are not able to sell new debt (which they typically use to pay maturing debt). Therefore, only when an FCS bank becomes insolvent — i.e., unable to meet its maturing payment obligations — will it be “necessary” for FCSIC make a payment to investors on its behalf. Default on insured debt (and insolvency) are grounds for FCA to place a bank into receivership. Similarly, the FDIC and the National Credit Union Administration (NCUA) do not make payments to their insurance beneficiaries (depositors) from their respective insurance funds until after an institution is closed and has been placed in receivership.
Does FCSIC guarantee that all insured debt will always be repaid?
No. FCSIC’s insurance is NOT a “full faith and credit guarantee” of the U.S. government. Upon a default by the insured FCS banks, FCSIC will pay claims until the Insurance Fund is exhausted. Once the Insurance Fund is exhausted, there will be a “joint and several” call on the assets of the remaining FCS banks to cover unpaid insured debt.
Does FCSIC guarantee in advance which bondholders will be repaid from its Insurance Fund?
No. Unlike deposit insurance, where existing depositors are guaranteed repayment, FCSIC does not guarantee repayment to any specific bondholders. Congress directed FCSIC to insure the “timely” payment of insured debt; this means that in the event of a default, FCSIC will pay maturing insured debts as they come due (and stop paying when the Farm Credit Insurance Fund runs out of money). Payment to individual bondholders will depend on the order in which bonds come due.
How often has FCSIC paid an Insurance claim?
Never. Since FCSIC became operational in 1993, no FCS bank has defaulted on its insured debt obligation. FCSIC believes the best way to insure timely payment of insured debt is to ensure a default never happens and therefore endeavors to protect investors by working closely with the Farm Credit Administration (FCA), the FCS’ primary regulator, to ensure a safe and sound FCS.