THE FEDERAL HOME LOAN BANK SYSTEM
- The Federal Home Loan Banks (FHLBs) must remain a strong, stable, reliable source of funding for community banks.
- The FHLBs’ special functions and purposes must be recognized and maintained under the Federal Housing Finance Agency (FHFA).
- The regional structure and cooperative nature of the FHLB system must be maintained as they best address the diverse needs of community bank members.
- The FHFA should not reimpose a housing mission asset test on community financial institutions.
The vast majority of community banks are FHLB members and are active advance users or look to them as an alternative source of liquidity. Throughout the financial crisis, the FHLBs continued to provide advances to their members without disruption, while other segments of the capital markets ceased to function. Daily, community banks depend on their FHLBs for liquidity, asset/liability management and to enable them to match fund longer term loans. ICBA will work to ensure that as the administration and Congress consider changes to the housing finance system, the FHLBs remain a healthy, stable, reliable source of funding, liquidity and other products to serve the needs of all member-owners and help them provide lendable funds for the local communities they serve.
Regulation. The FHLBs are under the Federal Housing Finance Agency (FHFA) which also regulates Fannie Mae and Freddie Mac. The FHLBs have a unique mission, ownership, operational and capital structure which must be recognized by their regulator. The FHFA should not go forward with any regulations that would reimpose a mission asset test on community financial institutions. Congress removed the asset test for these institutions recognizing their need to serve small businesses and agriculture in addition to providing credit for mortgage finance.
System Structure. The FHLB system is owned and governed by its members and any move towards consolidation should develop from the grass roots level, based on what members perceive to be the best operational and/or geographic structure for their district FHLB to meet their needs. The regional structure of the FHLB system must be maintained as it best addresses the diverse needs of community bank members. The cooperative nature of the system also must be maintained with membership having a strong voice in governance. ICBA recognizes the need for both large and small institution membership and the benefits both bring to, and derive from, the system.
Staff Contact: Ron Haynie