---
kind: "section"
citation: "12 C.F.R. § 628.21"
title: "12"
number: "628.21"
heading: "Capital bylaw or board resolution to include equities in tier 1 and tier 2 capital."
url: "https://uscodex.org/cfr/12/628.21"
---

# §628.21. Capital bylaw or board resolution to include equities in tier 1 and tier 2 capital.


In order to include otherwise eligible purchased and allocated equities in tier 1 capital and tier 2 capital, the System institution must adopt a capitalization bylaw, or its board of directors must adopt a binding resolution, which resolution must be acknowledged by the board on an annual basis in the capital adequacy plan described in [§ 615.5200](/cfr/12/615.5200.md), in which the institution undertakes the following, as applicable:

- (a) The institution shall obtain prior FCA approval under [§ 628.20(f)](/cfr/12/628.20.md?p=f) before:
  - (1) Redeeming or revolving the equities included in common equity tier 1 (CET1) capital;
  - (2) Redeeming or calling the equities included in additional tier 1 capital; and
  - (3) Redeeming, revolving, or calling instruments included in tier 2 capital other than limited life preferred stock or subordinated debt on the maturity date.
- (b) The equities shall have a minimum redemption or revolvement period as follows:
  - (1) 7 years for equities included in CET1 capital, except that the statutory borrower stock described in [§ 628.20(b)(1)(x)](/cfr/12/628.20.md?p=b-1-x) may be redeemed without a minimum holding period and that equities designated as unallocated retained earnings (URE) equivalents cannot be revolved without submitting a written request to the FCA for prior approval;
  - (2) a minimum no-call, repurchase, or redemption period of 5 years for additional tier 1 capital; and
  - (3) a minimum no-call, repurchase, redemption, or revolvement period of 5 years for tier 2 capital.
- (c) The institution shall submit to FCA a written request for prior approval before:
  - (1) Redesignating URE equivalents as equities that the institution may exercise its discretion to redeem other than upon dissolution or liquidation;
  - (2) Removing equities or other instruments from CET1, additional tier 1, or tier 2 capital other than through repurchase, cancellation, redemption or revolvement; and
  - (3) Redesignating equities included in one component of regulatory capital (CET1 capital, additional tier 1 capital, or tier 2 capital) for inclusion in another component of regulatory capital.
- (d) The institution shall not exercise its discretion to revolve URE equivalents except upon dissolution or liquidation and shall not offset URE equivalents against a loan in default except as required under final order of a court of competent jurisdiction or if required under [§ 615.5290](/cfr/12/615.5290.md) in connection with a restructuring under [part 617](/cfr/12/part617.md) of this chapter.
- (e) The minimum redemption and revolvement period (holding period) for purchased and allocated equities starts on the common cooperative equity issuance date, as defined in [§ 628.2](/cfr/12/628.2.md).

## Notes

### Amendments

[86 FR 54359, Oct. 1, 2021]

### Authority

Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 2.2, 2.3, 2.4, 2.5, 2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17, 8.0, 8.3, 8.4, 8.6, 8.8, 8.10, 8.12 of the Farm Credit Act (12 U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 2074, 2075, 2076, 2093, 2122, 2128, 2132, 2146, 2154, 2154a, 2160, 2202b, 2211, 2243, 2252, 2279aa, 2279aa-3, 2279aa-4, 2279aa-6, 2279aa-8, 2279aa-10, 2279aa-12); sec. 301(a), Pub. L. 100-233, 101 Stat. 1568, 1608 as amended by sec. 301(a), Pub. L. 103-399, 102 Stat 989, 993 (12 U.S.C. 2154 note); sec. 939A, Pub. L. 111-203, 124 Stat. 1326, 1887 (15 U.S.C. 78o-7 note).

### Source

Source: 81 FR 49779, July 28, 2016, unless otherwise noted.

### Amendments

[86 FR 54359, Oct. 1, 2021]