FHFA Proposes Modifying Federal Home Loan Bank Liquidity Requirements

Posted: Oct 09 2024

The Federal Housing Finance Agency has announced a proposed rule to amend its regulation on Federal Home Loan Bank capital requirements to modify limits on FHLBank extensions of unsecured credit in their on- and off-balance sheet and derivative transactions. The agency said the change will provide the FHLBanks with more flexibility in liquidity management.

Currently, overnight federal funds are excluded from the more restrictive “general limit” on unsecured credit to a single counterparty and are limited only by the higher “overall limit,” according to FHFA. The proposed rule would add interest-bearing deposit accounts, or IBDAs, and other authorized overnight investments to that exclusion, which may provide greater flexibility and improved cost to yield than overnight federal funds. It also clarifies terms for the FHLBanks to determine limits on unsecured credit to counterparties.

“These modernizations will create more flexibility for the FHLBanks in their liquidity management, which will allow them to better serve their members, particularly during periods of market stress,” FHFA Director Sandra Thompson said.

Public comments on the proposed rule are due 60 days after publication in the Federal Register.

To read more, visit: https://www.fhfa.gov/regulation/federal-register/proposed-rulemaking/unsecured-credit-limits-for-federal-home-loan-banks