FHLB at 100: PACB, banking groups warn FHFA not to disrupt liquidity source for community banks

The Federal Housing Finance Agency issued its long-awaited review of the Federal Home Loan Banks system. While banking groups review the recommendations, several warned the agency not to disrupt FHLB as an important liquidity source for community banks.

The report contained about 50 recommendations that require administrative, regulatory, or legislative action. The FHFA said it will update the mission statement of the FHLB system to reflect the primary goals of providing stable liquidity to FHLB members and supporting housing and community development. Another would provide metrics and thresholds for measuring the achievement of that mission.

The agency also plans to require that certain members have at least 10 percent of their assets in residential mortgage loans or equivalent mission assets on an ongoing basis to remain eligible for FHLB financing. It is not clear, however, which members this will affect. Further, the report called upon Congress to decide whether FHLB membership ought to be expanded to non-bank lenders and REITs.

Independent Community Bankers of America President and CEO Rebeca Romero Rainey urged the FHFA to ensure any actions it takes on the Federal Home Loan Bank System do not disrupt this important source of liquidity for community banks. In a statement, Romero-Rainey stated:

“As the FHFA considers rulemakings, guidance, and legislative recommendations to improve the ability of the 11 FHLBs to fulfill their mission, the agency must not:

  • Compromise the system’s cooperative structure
  • Allow participation by unregulated nonbanks
  • Restrict large banks from membership
  • Place additional restrictions on community bank members
  • Consolidate the system without the grassroots leadership of its member-owners.”



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