The Federal Housing Finance Agency issued an advisory bulletin to the Federal Home Loan Banks that details expectations for providing members with access to advances in a safe and sound manner.
Details: The FHFA said that while credit risk management practices at the FHLBanks are generally consistent with many concepts in the guidance, the bulletin:
Details expectations for evaluating and assessing a member’s creditworthiness when providing liquidity.
Provides guidance to the FHLBanks on coordinating with FHFA and members’ primary regulators when lending to troubled institutions.
Covers expectations on governance, assessment methodologies, and monitoring protocols to manage risks to the FHLBank system.
ICBA Response: ICBA has reached out to its FHLBank Task Force for feedback on how this advisory bulletin will affect current practices at the 11 FHLBanks and will respond to the FHFA accordingly.
ICBA View: ICBA is deeply concerned about the impact of the FHFA’s ongoing review of the FHLBank mission and its impact on the ability of the system to provide liquidity to community banks. In a recent article in American Banker (subscription required), ICBA’s Tim Roy said the FHFA does not have the authority to redefine the FHLBank mission and any change must be approved by Congress.
Request for Input: The FHFA is considering feedback from its recent request for information on the FHLBank mission. In a July comment letter, ICBA said the agency should not create additional requirements that restrict FHLBank advances to members in good standing and with eligible collateral, which would reduce the availability of mortgage credit and community development funding.
New Reporting Restrictions: After submitting its comments, ICBA issued a national news release following an FHLBank of New York message noting it would impose additional reporting requirements to align with the FHFA’s more restrictive approach to lending.
Previous Comments: Following last fall’s comprehensive FHFA report on the FHLBanks, ICBA urged the agency to ensure any new policies affecting the system do not disrupt it as a source of liquidity for community banks. ICBA also offers a high-level summary of the report outlining its views on the agency’s policy recommendations.
