Federal Home Loan Bank System

FHFA is responsible for ensuring that the Federal Home Loan Banks operate in a financially safe and sound fashion, remain adequately capitalized and able to raise funds in the capital markets, and operate in a manner consistent with their housing finance mission.

To carry out these statutory duties, FHFA has implemented a program of FHLBank supervision to conduct on-site annual examinations and off-site monitoring of the FHLBanks and the Office of Finance.

Examination and Supervision

FHFA examines each FHLBank and the Office of Finance annually. We have designated a separate examiner-in-charge for each FHLBank and the Office of Finance who serves as the principal point of contact for the management of examination issues at the assigned FHLBank.

Annual examinations are conducted by an examiner-in-charge and a team of examiners plus financial analysts, economists, and accountants. In addition, our examiners visit the FHLBanks between examinations to follow up on examination findings and discuss emerging issues.

FHFA examiners collaborate with FHFA analysts, modelers, economists, accountants, and attorneys in carrying out the supervision of the FHLBanks.

Our off-site monitoring program includes reviews of monthly and quarterly financial reports and information submitted to FHFA, FHLBank board and committee minutes, data on FHLBank investments, and financial statements and reports filed with the Securities and Exchange Commission.

We also monitor debt issuance activities of the Office of Finance and track financial market trends. We review FHLBank documents, such as the board of directors’ compensation packages for each FHLBank, and analyze responses to a wide array of periodic and ad hoc information and data requests, including an annual survey of FHLBank collateral and collateral management practices, data on collateral securing advances made to individual insurance company members, unsecured credit data, liquidity, and periodic data on the FHLBanks' holdings of private-label MBS.

Section 20 of the Federal Home Loan Bank Act (12 USC 1440) requires each Federal Home Loan Bank (FHLBank) to be examined at least annually.

Learn more about how FHFA conducts its examinations by reading our Examination Manual and our Housing Finance Commission Program.

A Risk-based Approach

FHFA examiners carry out a risk-based safety and soundness supervision program that assesses the FHLBanks’ condition and performance, governance, credit risk, market risk, and operational risk. These interdependent assessments provide FHFA with the basis for assigning a composite examination rating. The Division of FHLBank Regulation provides oversight and ensures coordination among all mission-critical examination and monitoring functions. These functions include programs for safety and soundness examinations, Affordable Housing Program (AHP) examinations, examination and supervisory policy and program development, FHLBank analysis, risk modeling, risk monitoring and information management, and risk analysis and research. Each of these programs contributes to a comprehensive assessment of the safety and soundness and the AHP effectiveness of the FHLBanks.

FHFA examiners use a risk-based approach to supervision. Risk-based supervision is designed to

• identify existing and potential risks that could adversely affect a regulated entity,

• evaluate the overall integrity and effectiveness of each regulated entity’s risk management systems and controls, and

• determine compliance with laws and regulations applicable to the regulated entity.

Communicating and Obtaining Results

Examiners communicate all findings to management and any matters requiring attention to the FHLBank’s board of directors and management. In addition, examiners obtain a commitment from the board and management to correct significant deficiencies in a timely manner and then verify the effectiveness of corrective actions. FHFA’s examination ratings system is known as CAMELSO.

Historical Information: 2008 and Before

Additional Resources