What is 'Bank For Cooperatives'

Bank for Cooperatives is a regional, privately-owned and government-sponsored bank which makes loans to farmer-owned marketing, supply and service cooperatives, and rural utilities. These banks are part of the Federal Farm Credit System (FFCS) which provides short-, intermediate-, and long-term loans for agricultural purposes. The Bank for Cooperatives is also known as the Agricultural Credit Bank (CoBank).

BREAKING DOWN 'Bank For Cooperatives'

The Bank for Cooperatives (CoBank) is part of the Federal Farm Credit System (FFCS), and provide important funding for the U.S. agribusiness, which is often viewed as a high-risk business by traditional lenders.

The Bank for Cooperatives' duties include the authorization to make loans and financial commitments to individuals and businesses involved in agricultural business. The bank is jointly run by its members, who share in the risks and profits from the bank's activities. Banking activities involve technical and financial assistance to members including collateral custody and offering discounting notes and other obligations. The bank is also authorized to finance U.S. agricultural exports and provide international banking and currency exchange services for farmer-owned cooperatives.

CoBank list seven cooperative principles which guide their mission and provides value to the membership.

  1. Voluntary and open membership
  2. Democratic control with one vote per member
  3. Equal member participation, which is not based on the capital invested
  4. Only enter into agreements or raise money from external sources which maintain the bank's independence
  5. Provide education, training, and information to members and the general public
  6. Work through local, national, regional, and international structures to promote the good of the members
  7. Strive for sustainable development of the communities it serves

Authorization for Bank of Cooperatives Formation

In January 2006, the U.S. government signed a law stating that every farm credit district must have a bank for cooperatives. A Bank for Cooperatives title will include the name of the city or geographical location designation. Each bank for cooperative is allowed to establish branches so long as it's authorized by the Farm Credit Administration.

The Federal Farm Credit System is a national cooperative system of banks and other associations that offer credit to farmers and agricultural businesses. The Farm Credit System provides over $304 billion in loans and other services to farmers and agriculture-related businesses.

This lending amounts to about one-third of the credit needed by those who live and work in rural America. The agency has capitalization through the issuance of bonds whose interest is free from state and local income taxes. Loans are financed primarily by the sale of debt securities issued by the Federal Farm Credit Bank.

History of CoBank

The CoBank was established by the Farm Credit Act of 1933, an act intended to increase access to credit for farmers. The act formally supervised the operation of the nation's federal land banks, Intermediate Credits Banks, Farm Loan Associations, and the Central Bank for Cooperatives. The Act was a result of President Franklin D. Roosevelt's New Deal, created to assist farmers in recovering from the Dust Bowl. 

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