ICBA Policy Resolution: Federal Home Loan Banks


  • 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.
  • Many community banks rely on the FHLBanks’ mortgage programs for access to the secondary market. While this access point should be preserved, ICBA is concerned about proposals that would rely exclusively on the FHLBanks as the sole secondary market aggregators for community banks. Advances should remain the FHLBanks’ primary focus.
  • Mortgage loans sold to the FHLBs through their Acquired Member Assets (AMA) programs should receive qualified mortgage (QM) safe harbor status similar to those loans sold to or eligible to be sold to the GSEs.
  • ICBA opposes any legislation or administrative action that will permit any new types of non-depository lenders to access any FHLBank program or service either directly or indirectly. This includes any captive insurance entities owned by non-bank lenders.


The vast majority of community banks are FHLB members and are active advance users or look to advances 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. Community banks depend on their FHLBs for liquidity, asset/liability management, and match funding for 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. 

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.

In 2016 the FHFA adopted a final rule modifying the membership criteria for insurance companies to be eligible for FHLB membership. The final rule stated that captive insurance companies were not considered eligible to be members of the FHLB system and would need to exit the system by 2021. As those captive insurers exit the system, some FHLB districts may be negatively impacted from loss of revenue from advances to those entities. Recently, some FHLB districts have permitted the sale of captive insurer charters and FHLB membership to other non-bank entities such as mortgage REITs or non-bank lenders who wish to have access to the FHLB’s low cost advances. This has generated significant concern among some of the FHLB districts and community bank members. ICBA is concerned that expanding FHLB membership to non-bank entities could change the low risk profile of the FHLB system which could lead to higher costs for advances. Additionally, any losses from these non-bank entities would impact the entire FHLB system and its members. Given the risks noted above, ICBA opposes any legislation or administrative action that would permit these entities to gain membership in the system.

ICBA believes that any change that would allow non-bank entities into the FHLB system should be thoroughly debated by Congress.

Staff Contact: Ron Haynie