Washington, D.C. — The Federal Housing Finance Agency (FHFA) issued an Advisory Bulletin to the Federal Home Loan Bank (FHLBank) System that communicates guidance regarding the FHLBanks’ practices of providing their members with access to advances in a safe and sound manner. While credit risk management practices at the FHLBanks are generally consistent with many of the concepts included in this guidance, the Advisory Bulletin details expectations for evaluating and assessing a member’s creditworthiness when providing liquidity. It further provides guidance to the FHLBanks on coordinating with FHFA and members’ primary regulators when lending to troubled institutions, in a way that ensures the FHLBanks’ activities contribute to positive outcomes in the most difficult situations.
“Today’s Advisory Bulletin on member credit risk management promotes the FHLBank System’s ability to fulfill its function as a reliable source of liquidity throughout the economic cycle,” said FHFA Director Sandra L. Thompson. “This guidance provides clarity for the FHLBanks’ effective management of credit risk and coordination with other financial regulators so that member institutions can maintain the ability to access liquidity when needed.”
FHFA recognizes the importance of the FHLBank System’s function as a source of liquidity for its members, including small, community-based financial institutions. This role is particularly important during periods of market stress, such as during the regional bank failures of March 2023.
This Advisory Bulletin provides expectations on governance, assessment methodologies, and monitoring protocols to create common sense guardrails for managing risks to the FHLBank System. Additionally, in providing guidance for addressing troubled institutions, the Advisory Bulletin includes instructions for the FHLBanks to coordinate with members’ primary regulators. FHFA has notified the primary regulators of this guidance and the Agency’s expectation that the FHLBanks continue to be a reliable source of liquidity for their members.
Advisory Bulletin 2024-03: FHLBank Member Credit Risk Management
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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $8.4 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on X @FHFA, YouTube, Facebook, and LinkedIn.
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