Types of CFI eligible collateral— Definitions of ‘‘small business loans,’’ ‘‘small farm loans’’ and ‘‘small agri- business loans’’. Proposed § 950.1 defined the terms ‘‘small business loans,’’ ‘‘small farm loans’’ and ‘‘small agri-business loans’’ using a loan size approach and an alternative business (or farm) size approach. Specifically, loans below a prescribed aggregate amount— $1 million for small business loans, and $500,000 for small farm loans and small agri-business loans—were considered a proxy for business (or farm) size based on the loan size standards established by regulation of the agencies comprising the Federal Financial Institutions Examination Council (FFIEC),3 and met the proposed definitions. See 57 FR 54235 (Nov. 17, 1992). As discussed in the SUPPLEMENTARY INFORMATION section of the proposed rule, these aggregate loan size limits were derived from the FFIEC requirement that financial institutions report to their primary regulators small business loans of up to $1 million and small farm loans of up to $500,000. See id. Loans above these aggregate loan size limits would not meet the proposed definitions, unless business data specific to the borrowing enterprise (annual gross receipts or number of employees) showed that the borrower met the eligibility standards for a small business (or farm) concern under the Small Business Administrations (SBA) regulations. See 13 CFR part 121. As discussed in the SUPPLEMENTARY INFORMATION section of the proposed rule, the business size approach provides greater accuracy, but may result in costs that deter CFI members from fully employing Banks as a funding source for loans to small businesses and small farms. The loan size approach is less precise, but has the advantage of lower implementation costs, since it involves information already available to Federally regulated financial institutions in the reports they are required to file with their primary federal regulator. In the SUPPLEMENTARY INFORMATION section of the proposed rule, the Finance Board stated that the proposed definitions represented an appropriate compromise between these two approaches that would allow CFI members to use Bank System funding to finance small businesses and small farms, as authorized by the Modernization Act. See Modernization Act, section 604(a)(5)(C). The Finance Board requested comment on whether 3 FFIEC is a formal interagency body empowered to prescribe uniform principals, standards, and report forms for the federal examination...
