FOR IMMEDIATE RELEASE
ICBA Asks Regulators to Lower Risk Weights to Spur Credit
Washington, D.C. (Nov. 26, 2008)—The Independent Community Bankers of America (ICBA) urged federal banking regulators to adopt a 10 percent risk weight for Federal Home Loan Bank debt, in addition to the proposed risk-weight reduction for Fannie Mae and Freddie Mac. Lowering the risk weighting for the Federal Home Loan Banks with that of Fannie and Freddie will enhance credit availability and prevent capital markets from penalizing the banks and increasing their cost of funds.
“ICBA supports the banking regulators’ proposal to reduce the risk weighting for Fannie Mae and Freddie Mac, but policymakers should include Federal Home Loan Bank debt in the risk-weight reduction,” said Ann Grochala, ICBA vice president of lending and accounting policy. “The Federal Home Loan Banks are critical in supporting financial institutions so they can lend at attractive rates to benefit their communities and stimulate the economy.”
The Federal Home Loan Banks provide funding and liquidity for more than 8,100 member banks around the country—the nation’s largest source of home mortgage and community credit. If the regulators do not lower the risk weighting for the debt securities of Federal Home Loan Banks when they do so for Fannie Mae and Freddie Mac, the markets will perceive that the Federal Home Loan Banks are riskier, despite their stronger financial condition. ICBA urged the Federal Deposit Insurance Corporation, Federal Reserve, Office of the Comptroller of the Currency and Office of Thrift Supervision to include the risk-weight reduction in their proposal to lower rates for mortgage-finance government-sponsored entities Fannie Mae and Freddie Mac.
Read ICBA’s comment letter at www.icba.org.