FOR IMMEDIATE RELEASE
Banking Associations Seek Answers on SEC Registration
Washington, D.C. (Oct. 19, 2004) - The four major banking trade associations representing stockholders of the Federal Home Loan Banks have sent a second letter to the Federal Housing Finance Board asking again for definitive answers to questions involving the registration of FHLBank securities with the Securities and Exchange Commission.
In a letter to FHFB Chairman Alicia Castaneda, the groups said, "As representatives of stockholders, we are greatly concerned that the unintended consequences of registration could have a profound effect on the safety and soundness of the system and its ability to fulfill its mission." The letter was signed by the Independent Community Bankers of America, the Financial Services Roundtable, America's Community Bankers and the American Bankers Association.
The associations reaffirmed their support for full disclosure and their willingness to work with the Finance Board. They asked the Finance Board "to remain fully involved in the process of resolving the outstanding issues with the SEC and, if necessary, defer the date by which each of the FHLBanks is required to file a registration statement with the SEC until these issues are resolved."
The FHFB was urged by the trade groups to be a party to negotiations with the SEC on specific issues: "A clarification of whether there will be common, consistent provisions among all no-action letters and interpretations; the concern that unique interests or operations of one FHLBank should not control the others; and the vital need for the FHLBanks' primary regulator to play a role in establishing any precedents in this area."
The trade groups said they were "very concerned that SEC registration will be required to be accomplished by all of the FHLBanks prior to the implementation of the capital plans. We strongly urge you to reconsider the required effective date for registration to give all of the FHLBanks the time necessary to fully implement their capital plans."
In another area, the groups said: "We continue to have questions about effects of the required disclosures on the underlying principle of joint and several liability of the system. We are concerned that the requirement that the primary obligor of the issuances be identified could result in differential cost of funds, market disruption or other unintended consequences, including misleading or confusing 8-K reports. This issue must be addressed."
The groups also urged the FHFB to "take an active role with the SEC in definitively resolving accounting and disclosure issues both through ongoing engagement and written understandings." Specifically, the groups asked the FHFB to work with the SEC to grant relief from several requirements of the Sarbanes-Oxley Act to accommodate the cooperative nature and statutory board structures of the Bank System. The associations also called for greater certainty of the accounting treatment in the registrations of the FHLBanks.
The groups directed similar questions to Castaneda in August, but did not get responses to the specific issues. They sponsored the Federal Home Loan Bank Forum in September to identify these and other issues of common concern to stockholders of the system.
"The system's stockholders support full disclosure, but as was evident to the Forum, they remain concerned about the details of the requirements and how they will be applied to the FHLBanks notwithstanding direct and indirect representations made by the SEC and FHFB staff," the groups said. "While a number of questions and concerns are articulated in this letter, we would like to work with FHFB staff to reach an understanding of the requirements and try to avoid any unintended consequences."
The full text of the letter is available at /files/PDFs/fhfb1015.pdf.