Skip to main content

  • Comment Detail

  • Date: 10/02/14
    First Name: Gary
    Last Name: Schlinkert
    Organization: West Shore Bank
    City: N/A
    State: N/A
    Attachment: N/A
    Number: RIN-2590-AA39

  • Comment

    Comments

    If a three year rolling average falls below these standards, my institution would have only one year to regain compliance, if compliance isn’t reached after a year, we will be automatically kicked out of membership. This ongoing requirement could change the way we manage our balance sheet for interest rate risk, liquidity, and decrease earnings for our institution.

    The proposed rule would require insurance companies to meet the 1% “Makes mortgages” test and require that they maintain that standard into the future. They also have leeway in the regulation to increase that standard up to 5% of assets. The result of this rule could force the FHLBI to lose most, if not all of the advances to insurance companies which now comprise approximately 60% of their advances.

    The NPR would prohibit any captive insurance companies from future FHLBI membership and kick out the existing captive insurers. Michigan has a captive insurance law that was passed by the Michigan Legislature as a potential source of jobs and tax revenue for the state. These once again are legal insurance companies, allowed by Congress to join a FHLB, and would be kicked out of membership. The FHLBI currently has three captive insurers who are mortgage REITS that invest in mortgages and use the FHLBI to fund these investments and to help manage interest rate risk. There are several other captives that are waiting to join the FHLBI and all promise to be significant borrowers and would increase the profitability of your Bank. These mortgage REITS certainly fall into the FHLB mission of supporting housing

    In summary, I am against the proposed changes.