FOR IMMEDIATE RELEASE
ICBA Asks FHFB to Retain FHLBank Disclosure Oversight
Washington, D.C. (Jan. 20, 2004) - The Independent Community Bankers of America told the Federal Housing Finance Board that it is the best agency to oversee the financial disclosures of the Federal Home Loan Banks. The ICBA expressed its views in a comment letter regarding the FHFB's proposed rule that would require each FHLBank to register a class of its securities under the Securities Exchange Act of 1934.
"We believe that the FHFB can and should develop a regime of enhanced disclosures using Section 12(i) of the Exchange Act Amendments of 1964. When establishing this provision, Congress recognized the uniqueness of financial institutions and that it was appropriate for their primary regulator to regulate and oversee their securities disclosures," wrote ICBA Chairman C.R. (Rusty) Cloutier, president and CEO of MidSouth Bank, Lafayette, La., a $400 million-asset publicly traded community bank. "Our position is that while the FHFB should look to the SEC to set disclosure rules, the FHFB should be responsible for applying and enforcing them as appropriate for the FHLBanks."
ICBA believes that given the FHFB's extensive and unique knowledge of the FHLBank system and FHLBank system Combined Reports, the FHFB is both the appropriate regulator to continue to supervise the Combined Report disclosure, and the appropriate regulator to supervise individual FHLBank disclosures on which the Combined Report disclosures depend.
"In our view it would be far more efficient and effective to increase the FHFB's resources for disclosure oversight than to pass the responsibility to the SEC that has no expertise or experience related to the FHLBank system," ICBA wrote.
Unlike other entities, the equity capital of the system is created by statute and is 100 percent owned by its financial institution members. FHLBank stock is not publicly traded and does not fluctuate in value. The stock is issued and redeemed at par. Typically, when FHLBank members buy and sell FHLBank stock it is not a decision based on their perception of its appreciation potential, but rather it is linked to their usage of the FHLBank system and their stock balance can change daily. This makes the FHLBanks very different from Fannie Mae and Freddie Mac, government-sponsored enterprises that have agreed to voluntarily register their common stock, and other companies that have publicly traded stock.
"ICBA strongly supports full, accurate, transparent disclosures for the FHLBank system," said Cloutier. "These requirements should be administered by their safety and soundness regulator, the FHFB, which has in depth knowledge of the FHLBank system that the SEC does not."