ARLINGTON, Va.—NAFCU, in a letter to the Federal Housing Finance Agency (FHFA), urged the agency to retain the current credit risk percentage requirements for advances the Federal Home Loan Banks (FHLBs) make to their member institutions as the FHFA works to amend the FHLBs' capital requirements.
"Certain aspects of the proposed rule … may put the FHLBs' investment abilities at risk, impact the pricing of advances, and lead to inconsistent treatment of FHLB assets," wrote NAFCU Regulatory Affairs Counsel Ann Kossachev in the association's official comment letter. "NAFCU requests that the FHFA work closely with the FHLBs to ensure that any proposed changes do not have unintended consequences on the safety and soundness of the FHLB system."
The FHFA is taking steps to modernize the regulation governing FHLB risk-based capital requirements to align with Dodd-Frank Act requirements. The proposed rule carries over most of the current regulations without material change, but would substantively revise the credit risk component of the risk-based capital requirement and the limitations on extensions of unsecured credit, noted NAFCU.
As the agency works to meet this goal, NAFCU also urged the FHFA to:
- Treat all government-sponsored enterprises (GSEs) equally with respect to unsecured credit exposure limits
- Replace the agency's explicit authority to require changes to the FHLBs' change capital charges for specific assets with the authority to recommend revisions to the FHLB's methodology for credit risk ratings.
Kossachev detailed each of NAFCU's suggestions in the letter and why they are necessary to preserve the safety and soundness of the FHLB system.