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FHLBs Estimate Costs of SEC Registration

NOVEMBER 14, 2003


FHLBs Estimate Costs of SEC Registration

Registration with the Security and Exchange Commission could cost the Federal Home Loan Banks $300 million to $500 million per year according to a study commissioned by the FHLB Presidents Conference. The costs would result from the need for increased liquidity in the FHLB system to mitigate a possible disruption in debt issuance as a consequence of SEC oversight of FHLB data. Annual compliance costs could run $5 million to $8 million per year after initial filing costs.

The study also suggests that SEC registration itself may adversely affect the market's perception of the system's status as a government sponsored enterprise. The absence of a requirement to register with the SEC has traditionally been viewed as one element defining GSE status. As much as three months' time may be required for investors to adjust their perceptions of the system's debt, costing it up to $750 million.

The Federal Housing Finance Board, which has been calling for SEC registration for the FHLBs, strongly disagreed with the study's findings, saying they were "highly speculative." The FHFB stated that it is more likely that SEC registration will have no material effect on the system's liquidity.