Reform and Refocus the Farm Credit System
Tax laws should promote robust economic activity and a vibrant community banking sector and foster saving and investment. ICBA opposes any new bank-specific fees, punitive new tax levies, transaction taxes, limitations on the deductibility of FDIC premiums, or other proposals specifically targeting the financial services sector.
Take Action Today
Help advocate for community banking by writing a letter to congress.
Join the ICBA Community
Explore the ICBA Community to see discussions on this and other issues.
Position & Background
Farm Credit System (FCS) lenders enjoy unfair competitive advantages over rural community banks, leveraging their tax and funding advantages as government sponsored enterprises (GSEs) to siphon the best loans from community banks’ loan portfolios. The FCS’s abusive tactic of undercutting market pricing to obtain the best loans jeopardizes the viability of many community banks and the economic strength of the thousands of rural communities they serve.
ICBA opposes expansion of FCS authorities and supports legislative and regulatory provisions to ensure FCS’s adherence to its historical mission of serving bona fide farmers and ranchers and a limited number of businesses that provide on-farm services.
ICBA strenuously opposes the Farm Credit Administration’s (FCA’s) initiative to allow FCS to engage in non-farm financing labeled as “investments.”
ICBA objects to the broad set of FCS legislative proposals which include: broad lending authority for ‘essential community facilities’; lending to any business serving aquaculture; expanded non-farm lending via Rural Business Investment Corporations; an increase of the population size limit for FCS housing loans from 2,500 to 10,000.
ICBA opposes allowing FCS lenders to become the equivalent of rural banks with powers to establish checking and savings accounts, take deposits, or establish a consumer-oriented deposit insurance plan administered by the FCA.
FCS lenders should not have access to the Federal Reserve’s ACH system for clearing electronic credit and debit transfers.
ICBA protests the FCS’s use of so-called ‘cash management accounts,’ which are equivalent to savings and checking deposit accounts. Congress should reform the FCS’s ability to use ‘Funds Held’ accounts.
Congress should reform the FCS’s ‘similar entity’ authorities by which FCS lenders make loans to large non-rural and publicly traded corporations.
Community Banks Serve Rural America
Community banks are four times more likely to operate offices in rural counties and remain the only banking presence in over one-third of all U.S. counties. There are over 1100 agricultural banks (25 percent of portfolios in agriculture). While community banks hold 25 percent of total banking industry assets, they make nearly 80 percent of the banking industry’s farm loans.
As of the first quarter of 2025, agricultural loans were extended by approximately 3,500 banks. Only 55 FCS institutions held over $435 billion in agricultural loans. The FCS holds more agricultural real estate loans than banks due to rapid growth in tax-free real estate lending, which increased by approximately 60 percent or $69 billion between 2018 to 2024, a growth rate approximately three times that of commercial banks. To address this disparity, Congress should increase the tax excluded percentage of loans qualifying under Tax Code Section 139L (based on the Access to Credit for our Rural Economy (ACRE) Act) from 25 percent to 100 percent.
Farm Credit System
As the only GSE competing directly against private lenders, the FCS was granted tax and funding advantages by Congress to serve bona-fide farmers and ranchers and a narrow group of farm-related businesses that provide on-farm services.
Through its regulator, the FCS has sought non-farm lending opportunities through “investments” even though such financing exceeds the lending constraints of the Farm Credit Act. The FCS also seeks blanket authority to self-approve their non-farm “investments” in lieu of obtaining regulatory approval. The FCS also seeks adoption in the farm bill of several legislative proposals referenced above in addition to relaxed regulatory requirements such as less frequent examinations.
Congress should reform and refocus the FCS’s authorities in order to limit FCS’s non-farm and non-statutory lending.
Letters & Testimonies
ICBA Expert Contacts
