Advisory Bulletin on Collateralization of Advances and Other Credit Products Provided by Federal Home Loan Banks to Insurance Company Members, 60988-60996 [2012-24639]
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60988
Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices
to Mr. Robert E. Feldman, Executive
Secretary of the Corporation, at 202–
898–7043.
FEDERAL DEPOSIT INSURANCE
CORPORATION
Dated: October 2, 2012.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Update to Notice of Financial
Institutions for Which the Federal
Deposit Insurance Corporation has
been Appointed Either Receiver,
Liquidator, or Manager
[FR Doc. 2012–24683 Filed 10–3–12; 11:15 am]
AGENCY:
Federal Deposit Insurance
Corporation.
ACTION: Update listing of financial
institutions in liquidation.
BILLING CODE P
Notice is hereby given that
the Federal Deposit Insurance
Corporation (Corporation) has been
appointed the sole receiver for the
following financial institutions effective
as of the Date Closed as indicated in the
listing. This list (as updated from time
SUMMARY:
to time in the Federal Register) may be
relied upon as ‘‘of record’’ notice that
the Corporation has been appointed
receiver for purposes of the statement of
policy published in the July 2, 1992
issue of the Federal Register (57 FR
29491). For further information
concerning the identification of any
institutions which have been placed in
liquidation, please visit the Corporation
Web site at ww.fdic.gov/bank/
individual/failed/banklist.html or
contact the Manager of Receivership
Oversight in the appropriate service
center.
Dated: October 1, 2012.
Federal Deposit Insurance Corporation.
Pamela Johnson,
Regulatory Editing Specialist.
INSTITUTIONS IN LIQUIDATION
[In alphabetical order]
FDIC Ref. No.
Bank name
City
10459 ..............
First United Bank .......................................................................
Crete ........................................
[FR Doc. 2012–24548 Filed 10–4–12; 8:45 am]
BILLING CODE 6714–01–P
FEDERAL HOUSING FINANCE
AGENCY
[No. 2012–N–14]
Advisory Bulletin on Collateralization
of Advances and Other Credit
Products Provided by Federal Home
Loan Banks to Insurance Company
Members
Federal Housing Finance
Agency.
ACTION: Notice with request for
comments.
AGENCY:
The Federal Housing Finance
Agency (FHFA) is requesting comments
on a proposed Advisory Bulletin which
would set forth standards to guide
agency staff in its supervision of secured
lending to insurance company members
by the Federal Home Loan Banks
(Banks).
SUMMARY:
Written comments must be
received on or before December 4, 2012.
ADDRESSES: You may submit your
comments, identified by FHFA notice
number 2012–N–14, by any of the
following methods:
• Email: Comments to Alfred M.
Pollard, General Counsel may be sent by
email to RegComments@fhfa.gov. Please
include ‘‘2012–N–14’’ in the subject line
of the message.
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DATES:
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• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments. If
you submit your comment to the
Federal eRulemaking Portal, please also
send it by email to FHFA at
RegComments@fhfa.gov to ensure
timely receipt by FHFA. Please include
‘‘2012–N–14’’ in the subject line of the
message.
• U.S. Mail, United Parcel Service,
Federal Express, or Other Mail Service:
The mailing address for comments is:
Alfred M. Pollard, General Counsel,
Attention: Comments/2012–N–14,
Federal Housing Finance Agency,
Eighth Floor, 400 7th Street SW.,
Washington, DC 20024.
• Hand Delivered/Courier: The hand
delivery address is: Alfred M. Pollard,
General Counsel, Attention: Comments/
2012–N–14, Federal Housing Finance
Agency, Eighth Floor, 400 7th Street
SW., Washington, DC 20024. The
package should be logged at the FHFA
Guard Desk, First Floor, on business
days between 9 a.m. and 5 p.m.
FOR FURTHER INFORMATION CONTACT: Neil
Crowley, Deputy General Counsel,
Office of General Counsel, Neil.
Crowley@fhfa.gov, (202) 649–3055;
Joseph A. McKenzie, Associate Director,
Division of Bank Regulation, Bank
Analysis Branch, Joseph.McKenzie@
fhfa.gov, (202) 649–3270; or Thomas
Doolittle, Senior Financial Analyst,
Division of Bank Regulation, Bank
Analysis Branch, Thomas.Doolittle@
fhfa.gov, (202) 649–3273 (these are not
PO 00000
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State
IL
Date closed
9/28/2012
toll-free numbers), Federal Housing
Finance Agency, 400 7th Street SW.,
Washington, DC 20024. The telephone
number for the Telecommunications
Device for the Hearing Impaired is (800)
877–8339.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects
of this Notice and the attached Advisory
Bulletin. Copies of all comments will be
posted without change, including any
personal information you provide, such
as your name, and address (mailing or
email), and telephone numbers, on
FHFA’s Internet Web site at https://www.
fhfa.gov. In addition, copies of all
comments received will be available for
examination by the public on business
days between the hours of 10 a.m. and
3 p.m. at the Federal Housing Finance
Agency, Eighth Floor, 400 7th Street
SW., Washington, DC 20024. To make
an appointment to inspect comments,
please call the Office of General Counsel
at (202) 649–3084.
II. Background
The Federal Home Loan Bank System
consists of twelve regional Banks and
the Office of Finance (OF). The Banks
are instrumentalities of the United
States organized under the Federal
Home Loan Bank Act (Bank Act).1 The
Banks are cooperatives; only an
institution that is a member of a Bank
1 See
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12 U.S.C. 1423, 1432(a).
05OCN1
Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices
may purchase its capital stock, and only
members or certain eligible non-member
housing associates (such as state
housing finance agencies) may obtain
access to secured loans, known as
advances, or other products provided by
a Bank.2 Each Bank is managed by its
own board of directors and serves the
public interest by enhancing the
availability of residential mortgage and
community lending credit through its
member institutions.3 Generally, any
federally insured depository institution
(i.e., a commercial bank, thrift, or credit
union) or state-regulated insurance
company, or any entity certified as a
Community Development Financial
Institution (CDFI) by the United States
Department of Treasury, may become a
member of a Bank if it satisfies certain
criteria and purchases a specified
amount of the Bank’s capital stock.4
Section 10(a) of the Bank Act
authorizes each Bank to make secured
advances to its members, each of which
must be fully secured by certain types
of eligible collateral enumerated in the
statute.5 Part 1266 of FHFA’s
regulations implements and expands
upon the statutory requirements
pertaining to Bank advances by
addressing, among other things: the
types and amounts of collateral that a
Bank may or must accept when making
advances; the priority of Bank claims to
such collateral in relation to other
creditors; and requirements regarding
the valuation and verification of the
existence of pledged collateral.6
FHFA is an independent agency of the
Federal government that is responsible
for the supervision and oversight of the
Banks, as well as Fannie Mae and
Freddie Mac. The Federal Housing
Enterprises Financial Safety and
Soundness Act of 1992 (Safety and
Soundness Act) invests the Director of
FHFA with general regulatory authority
2 See
12 U.S.C. 1426(a)(4), 1430(a), 1430b.
12 U.S.C. 1427.
4 See 12 U.S.C. 1424; 12 CFR part 1263.
5 Section 10(a)(3) of the Bank Act enumerates five
categories of collateral that are eligible to secure
Bank advances: (1) Current whole first mortgage
loans on improved residential property and
securities representing a whole interest in such
mortgages; (2) securities that are issued, guaranteed,
or insured by the United States Government, or any
agency thereof; (3) deposits of a Bank; (4) other realestate related collateral acceptable to the Bank if it
has a readily ascertainable value and the Bank can
perfect its security interest in the collateral; and (5)
(for certain smaller insured depository institutions)
secured loans for small business, agriculture, or
community development activities or securities
representing a whole interest in such secured loans.
See 12 U.S.C. 1430(a)(3).
6 See 12 CFR part 1266.
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over those regulated entities and charges
him with ensuring that they operate in
a safe and sound manner, comply with
applicable laws, and carry out their
respective policy missions.7 The
Director is authorized to exercise
whatever incidental powers are
necessary or appropriate to fulfill his
duties and responsibilities in overseeing
the regulated entities, and to issue any
regulations, guidelines or orders as are
necessary to carry out his duties.8
Advisory Bulletins are documents
through which the agency provides
guidance to its regulated entities
regarding particular supervisory issues.
Although Advisory Bulletins do not
have the force of a regulation or an
order, they reflect the position of FHFA
staff on the particular issues addressed
and are followed by FHFA staff in
carrying out the agency’s supervisory
responsibilities.
III. The Advisory Bulletin on Insurance
Company Collateral
Lending to insurance companies
exposes the Banks to a number of risks
that are not associated with advances to
their insured depository institution
members. In large part, these risks arise
from the fact that, unlike the Banks’
commercial bank, thrift and credit
union members, insurance companies
are regulated at the state level. In
dealing with its insurance company
members, each Bank must understand
multiple statutory and regulatory
regimes and must assess how its
interests may be affected by the
variations between those regimes. This
is made more difficult by the fact that
there is little precedent to indicate how
the insurance commissioner in any
given state would deal with repayment
of the member’s outstanding advances
or with the Bank’s security interest in
advances collateral in the event of a
failure of an insurance company
member. In some states a Bank might be
required to liquidate collateral in order
to obtain repayment of its advances to
a failed insurance company, which
introduces additional uncertainties
about its ability to be made whole.
In addition, the financial statements
of insurance companies are based upon
statutory accounting principles that are
specific to insurance companies, as
opposed to the generally accepted
accounting principles in the United
States on which the financials of most
other domestic companies and all
7 See
8 See
PO 00000
12 U.S.C. 4511(b); 12 U.S.C. 4513(a).
12 U.S.C. 4513(a)(2), 4526(a).
Frm 00025
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60989
federally insured depository institutions
are based. While the statutory
accounting principles adopted by each
state are similar, required reporting
practices and reporting frequencies, as
well as data definitions and data formats
may be quite different from state to
state.
Over the last several years, lending to
insurance company members has come
to represent an increasingly larger
portion of the Banks’ overall business,
and several Banks are actively targeting
this member segment. Although
insurance companies comprise only
about 3.3 percent of total Bank system
membership, 12.6 percent of total
outstanding advances were to insurance
companies as of December 31, 2011—up
from 8.7 percent of total advances as of
December 31, 2009. This growth,
combined with the unique risks to
which the Banks are exposed in lending
to insurance companies, has led FHFA
to focus more intently upon the effective
supervision of Banks’ credit transactions
with their insurance company members.
The attached Advisory Bulletin sets
forth a series of considerations that
FHFA proposes to use in monitoring
these transactions. It focuses upon
principles that would be used by agency
supervisory staff to assess each Bank’s
ability to evaluate the financial health of
its insurance company members and the
quality of their eligible collateral, as
well as the extent to which the Bank has
a first-priority security interest in that
collateral. The risks inherent in lending
to insurance companies, which are
summarized above, are addressed more
thoroughly in the Advisory Bulletin.
FHFA seeks comments on all aspects of
the Advisory Bulletin, but is especially
interested in receiving comments about
the most appropriate method for Banks
to obtain ‘‘control’’ of securities
collateral and to otherwise obtain a firstpriority perfected security interest
under the Uniform Commercial Code in
any types of collateral pledged by its
insurance company members. FHFA is
also interested in receiving comments
on the use of funding agreements as a
means of documenting advances and
whether the Banks have confirmed
under state law that a Bank would be
recognized as a secured creditor with a
property interest in the collateral that is
pledged to the Bank under a funding
agreement. In addition, FHFA welcomes
comments on whether it should
consider establishing specific and
uniform standards for making advances
to insurance companies.
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Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices
IV. Consideration of Differences
Between the Banks and the Enterprises
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Section 1201 of the Housing and
Economic Recovery Act of 2008
amended the Safety and Soundness Act
to add a new section 1313(f), which
requires the Director of FHFA, when
promulgating regulations or taking any
other formal or informal action of
general applicability and future effect
relating to the Banks, to consider the
differences between the Banks and the
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Enterprises (Fannie Mae and Freddie
Mac) as they relate to: The Banks’
cooperative ownership structure; the
mission of providing liquidity to
members; the affordable housing and
community development mission; their
capital structure; and their joint and
several liability on consolidated
obligations.9 The Director also may
consider any other differences that are
9 See
PO 00000
12 U.S.C. 4513(f).
Frm 00026
Fmt 4703
deemed appropriate. In preparing the
appended Advisory Bulletin, FHFA
considered the differences between the
Banks and the Enterprises as they relate
to the above factors, and determined
that the guidance set forth therein is
appropriate.
Dated: October 1, 2012.
Edward J. DeMarco,
Acting Director, Federal Housing Finance
Agency.
BILLING CODE 8070–01–P
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EN05OC12.068
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60996
Federal Register / Vol. 77, No. 194 / Friday, October 5, 2012 / Notices
[FR Doc. 2012–24639 Filed 10–4–12; 8:45 am]
BILLING CODE 8070–01–C
FEDERAL RESERVE SYSTEM
Change in Bank Control Notices;
Acquisitions of Shares of a Bank or
Bank Holding Company
The notificants listed below have
applied under the Change in Bank
Control Act (12 U.S.C. 1817(j)) and
§ 225.41 of the Board’s Regulation Y (12
CFR 225.41) to acquire shares of a bank
or bank holding company. The factors
that are considered in acting on the
notices are set forth in paragraph 7 of
the Act (12 U.S.C. 1817(j)(7)).
The notices are available for
immediate inspection at the Federal
Reserve Bank indicated. The notices
also will be available for inspection at
the offices of the Board of Governors.
Interested persons may express their
views in writing to the Reserve Bank
indicated for that notice or to the offices
of the Board of Governors. Comments
must be received not later than October
22, 2012.
A. Federal Reserve Bank of Atlanta
(Chapelle Davis, Assistant Vice
President) 1000 Peachtree Street, NE.,
Atlanta, Georgia 30309:
1. Guido Edwin Hinojosa Cardoso, La
Paz, Bolivia; to voting shares of Anchor
Commercial Bank, Juno Beach, Florida.
Board of Governors of the Federal Reserve
System, October 2, 2012.
Margaret McCloskey Shanks,
Associate Secretary of the Board.
available for inspection at the offices of
the Board of Governors. Interested
persons may express their views in
writing on the standards enumerated in
the BHC Act (12 U.S.C. 1842(c)). If the
proposal also involves the acquisition of
a nonbanking company, the review also
includes whether the acquisition of the
nonbanking company complies with the
standards in section 4 of the BHC Act
(12 U.S.C. 1843). Unless otherwise
noted, nonbanking activities will be
conducted throughout the United States.
Unless otherwise noted, comments
regarding each of these applications
must be received at the Reserve Bank
indicated or the offices of the Board of
Governors not later than November 2,
2012.
A. Federal Reserve Bank of Kansas
City (Dennis Denney, Assistant Vice
President) 1 Memorial Drive, Kansas
City, Missouri 64198–0001:
1. BBJ Incorporated, Ord, Nebraska; to
merge with City National Bancshares,
Inc., and thereby indirectly acquire CNB
Community Bank, both in Greeley,
Nebraska.
B. Federal Reserve Bank of San
Francisco (Kenneth Binning, Vice
President, Applications and
Enforcement) 101 Market Street, San
Francisco, California 94105–1579:
1. Grandpoint Capital, Inc., Los
Angeles, California; to acquire 100
percent of the voting shares of California
Community Bank, Escondido,
California.
[FR Doc. 2012–24619 Filed 10–4–12; 8:45 am]
Board of Governors of the Federal Reserve
System, October 2, 2012.
Margaret McCloskey Shanks,
Associate Secretary of the Board.
BILLING CODE 6210–01–P
[FR Doc. 2012–24620 Filed 10–4–12; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL RESERVE SYSTEM
pmangrum on DSK3VPTVN1PROD with NOTICES
Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR part
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
The applications listed below, as well
as other related filings required by the
Board, are available for immediate
inspection at the Federal Reserve Bank
indicated. The applications will also be
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FEDERAL RESERVE SYSTEM
Notice of Proposals To Engage in or
To Acquire Companies Engaged in
Permissible Nonbanking Activities
The companies listed in this notice
have given notice under section 4 of the
Bank Holding Company Act (12 U.S.C.
1843) (BHC Act) and Regulation Y, (12
CFR part 225) to engage de novo, or to
acquire or control voting securities or
assets of a company, including the
companies listed below, that engages
either directly or through a subsidiary or
other company, in a nonbanking activity
that is listed in § 225.28 of Regulation Y
(12 CFR 225.28) or that the Board has
determined by Order to be closely
related to banking and permissible for
bank holding companies. Unless
otherwise noted, these activities will be
conducted throughout the United States.
PO 00000
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Each notice is available for inspection
at the Federal Reserve Bank indicated.
The notice also will be available for
inspection at the offices of the Board of
Governors. Interested persons may
express their views in writing on the
question whether the proposal complies
with the standards of section 4 of the
BHC Act.
Unless otherwise noted, comments
regarding the applications must be
received at the Reserve Bank indicated
or the offices of the Board of Governors
not later than November 2, 2012.
A. Federal Reserve Bank of Richmond
(Adam M. Drimer, Assistant Vice
President) 701 East Byrd Street,
Richmond, Virginia 23261–4528:
1. City Holding Company, Cross
Lanes, West Virginia; to acquire 100
percent of the voting securities of
Community Financial Corporation, and
thereby indirectly acquire voting shares
of Community Bank, both in Staunton,
Virginia, and thereby engage in
operating a savings association,
pursuant to section 225.28(b)(4)(ii).
Board of Governors of the Federal Reserve
System, October 2, 2012.
Margaret McCloskey Shanks,
Associate Secretary of the Board.
[FR Doc. 2012–24621 Filed 10–4–12; 8:45 am]
BILLING CODE 6210–01–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of the Secretary
Office of the Assistant Secretary for
Health, Statement of Organization,
Functions, and Delegations of
Authority
Part A, Office of the Secretary,
Statement of Organization, Function,
and Delegation of Authority for the U.S.
Department of Health and Human
Services is being amended at Chapter
AC, Office of the Assistant Secretary for
Health (OASH), as last amended at 77
FR 2012–12173, dated May 18, 2012; 75
FR 53304–05, dated August 31, 2010; 72
FR 58095–96, dated October 12, 2007;
69 FR 660–661, dated January 6, 2004;
68 FR 70507–10, dated December 18,
2003; and 67 FR 71568–70, dated
December 2, 2002. The amendment
reflects the realignment of personnel
oversight, administration and
management functions for the U.S.
Public Health Service (PHS)
Commissioned Corps in the OASH.
Specifically, it transfers functions
performed by the Office of the Assistant
Secretary for Administration, Program
Support Center, Administrative
Operations Service, Office of
E:\FR\FM\05OCN1.SGM
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Agencies
[Federal Register Volume 77, Number 194 (Friday, October 5, 2012)]
[Notices]
[Pages 60988-60996]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-24639]
=======================================================================
-----------------------------------------------------------------------
FEDERAL HOUSING FINANCE AGENCY
[No. 2012-N-14]
Advisory Bulletin on Collateralization of Advances and Other
Credit Products Provided by Federal Home Loan Banks to Insurance
Company Members
AGENCY: Federal Housing Finance Agency.
ACTION: Notice with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Federal Housing Finance Agency (FHFA) is requesting
comments on a proposed Advisory Bulletin which would set forth
standards to guide agency staff in its supervision of secured lending
to insurance company members by the Federal Home Loan Banks (Banks).
DATES: Written comments must be received on or before December 4, 2012.
ADDRESSES: You may submit your comments, identified by FHFA notice
number 2012-N-14, by any of the following methods:
Email: Comments to Alfred M. Pollard, General Counsel may
be sent by email to RegComments@fhfa.gov. Please include ``2012-N-14''
in the subject line of the message.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by email
to FHFA at RegComments@fhfa.gov to ensure timely receipt by FHFA.
Please include ``2012-N-14'' in the subject line of the message.
U.S. Mail, United Parcel Service, Federal Express, or
Other Mail Service: The mailing address for comments is: Alfred M.
Pollard, General Counsel, Attention: Comments/2012-N-14, Federal
Housing Finance Agency, Eighth Floor, 400 7th Street SW., Washington,
DC 20024.
Hand Delivered/Courier: The hand delivery address is:
Alfred M. Pollard, General Counsel, Attention: Comments/2012-N-14,
Federal Housing Finance Agency, Eighth Floor, 400 7th Street SW.,
Washington, DC 20024. The package should be logged at the FHFA Guard
Desk, First Floor, on business days between 9 a.m. and 5 p.m.
FOR FURTHER INFORMATION CONTACT: Neil Crowley, Deputy General Counsel,
Office of General Counsel, Neil.Crowley@fhfa.gov, (202) 649-3055;
Joseph A. McKenzie, Associate Director, Division of Bank Regulation,
Bank Analysis Branch, Joseph.McKenzie@fhfa.gov, (202) 649-3270; or
Thomas Doolittle, Senior Financial Analyst, Division of Bank
Regulation, Bank Analysis Branch, Thomas.Doolittle@fhfa.gov, (202) 649-
3273 (these are not toll-free numbers), Federal Housing Finance Agency,
400 7th Street SW., Washington, DC 20024. The telephone number for the
Telecommunications Device for the Hearing Impaired is (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects of this Notice and the
attached Advisory Bulletin. Copies of all comments will be posted
without change, including any personal information you provide, such as
your name, and address (mailing or email), and telephone numbers, on
FHFA's Internet Web site at https://www.fhfa.gov. In addition, copies of
all comments received will be available for examination by the public
on business days between the hours of 10 a.m. and 3 p.m. at the Federal
Housing Finance Agency, Eighth Floor, 400 7th Street SW., Washington,
DC 20024. To make an appointment to inspect comments, please call the
Office of General Counsel at (202) 649-3084.
II. Background
The Federal Home Loan Bank System consists of twelve regional Banks
and the Office of Finance (OF). The Banks are instrumentalities of the
United States organized under the Federal Home Loan Bank Act (Bank
Act).\1\ The Banks are cooperatives; only an institution that is a
member of a Bank
[[Page 60989]]
may purchase its capital stock, and only members or certain eligible
non-member housing associates (such as state housing finance agencies)
may obtain access to secured loans, known as advances, or other
products provided by a Bank.\2\ Each Bank is managed by its own board
of directors and serves the public interest by enhancing the
availability of residential mortgage and community lending credit
through its member institutions.\3\ Generally, any federally insured
depository institution (i.e., a commercial bank, thrift, or credit
union) or state-regulated insurance company, or any entity certified as
a Community Development Financial Institution (CDFI) by the United
States Department of Treasury, may become a member of a Bank if it
satisfies certain criteria and purchases a specified amount of the
Bank's capital stock.\4\
---------------------------------------------------------------------------
\1\ See 12 U.S.C. 1423, 1432(a).
\2\ See 12 U.S.C. 1426(a)(4), 1430(a), 1430b.
\3\ See 12 U.S.C. 1427.
\4\ See 12 U.S.C. 1424; 12 CFR part 1263.
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Section 10(a) of the Bank Act authorizes each Bank to make secured
advances to its members, each of which must be fully secured by certain
types of eligible collateral enumerated in the statute.\5\ Part 1266 of
FHFA's regulations implements and expands upon the statutory
requirements pertaining to Bank advances by addressing, among other
things: the types and amounts of collateral that a Bank may or must
accept when making advances; the priority of Bank claims to such
collateral in relation to other creditors; and requirements regarding
the valuation and verification of the existence of pledged
collateral.\6\
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\5\ Section 10(a)(3) of the Bank Act enumerates five categories
of collateral that are eligible to secure Bank advances: (1) Current
whole first mortgage loans on improved residential property and
securities representing a whole interest in such mortgages; (2)
securities that are issued, guaranteed, or insured by the United
States Government, or any agency thereof; (3) deposits of a Bank;
(4) other real-estate related collateral acceptable to the Bank if
it has a readily ascertainable value and the Bank can perfect its
security interest in the collateral; and (5) (for certain smaller
insured depository institutions) secured loans for small business,
agriculture, or community development activities or securities
representing a whole interest in such secured loans. See 12 U.S.C.
1430(a)(3).
\6\ See 12 CFR part 1266.
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FHFA is an independent agency of the Federal government that is
responsible for the supervision and oversight of the Banks, as well as
Fannie Mae and Freddie Mac. The Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (Safety and Soundness Act) invests the
Director of FHFA with general regulatory authority over those regulated
entities and charges him with ensuring that they operate in a safe and
sound manner, comply with applicable laws, and carry out their
respective policy missions.\7\ The Director is authorized to exercise
whatever incidental powers are necessary or appropriate to fulfill his
duties and responsibilities in overseeing the regulated entities, and
to issue any regulations, guidelines or orders as are necessary to
carry out his duties.\8\ Advisory Bulletins are documents through which
the agency provides guidance to its regulated entities regarding
particular supervisory issues. Although Advisory Bulletins do not have
the force of a regulation or an order, they reflect the position of
FHFA staff on the particular issues addressed and are followed by FHFA
staff in carrying out the agency's supervisory responsibilities.
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\7\ See 12 U.S.C. 4511(b); 12 U.S.C. 4513(a).
\8\ See 12 U.S.C. 4513(a)(2), 4526(a).
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III. The Advisory Bulletin on Insurance Company Collateral
Lending to insurance companies exposes the Banks to a number of
risks that are not associated with advances to their insured depository
institution members. In large part, these risks arise from the fact
that, unlike the Banks' commercial bank, thrift and credit union
members, insurance companies are regulated at the state level. In
dealing with its insurance company members, each Bank must understand
multiple statutory and regulatory regimes and must assess how its
interests may be affected by the variations between those regimes. This
is made more difficult by the fact that there is little precedent to
indicate how the insurance commissioner in any given state would deal
with repayment of the member's outstanding advances or with the Bank's
security interest in advances collateral in the event of a failure of
an insurance company member. In some states a Bank might be required to
liquidate collateral in order to obtain repayment of its advances to a
failed insurance company, which introduces additional uncertainties
about its ability to be made whole.
In addition, the financial statements of insurance companies are
based upon statutory accounting principles that are specific to
insurance companies, as opposed to the generally accepted accounting
principles in the United States on which the financials of most other
domestic companies and all federally insured depository institutions
are based. While the statutory accounting principles adopted by each
state are similar, required reporting practices and reporting
frequencies, as well as data definitions and data formats may be quite
different from state to state.
Over the last several years, lending to insurance company members
has come to represent an increasingly larger portion of the Banks'
overall business, and several Banks are actively targeting this member
segment. Although insurance companies comprise only about 3.3 percent
of total Bank system membership, 12.6 percent of total outstanding
advances were to insurance companies as of December 31, 2011--up from
8.7 percent of total advances as of December 31, 2009. This growth,
combined with the unique risks to which the Banks are exposed in
lending to insurance companies, has led FHFA to focus more intently
upon the effective supervision of Banks' credit transactions with their
insurance company members.
The attached Advisory Bulletin sets forth a series of
considerations that FHFA proposes to use in monitoring these
transactions. It focuses upon principles that would be used by agency
supervisory staff to assess each Bank's ability to evaluate the
financial health of its insurance company members and the quality of
their eligible collateral, as well as the extent to which the Bank has
a first-priority security interest in that collateral. The risks
inherent in lending to insurance companies, which are summarized above,
are addressed more thoroughly in the Advisory Bulletin. FHFA seeks
comments on all aspects of the Advisory Bulletin, but is especially
interested in receiving comments about the most appropriate method for
Banks to obtain ``control'' of securities collateral and to otherwise
obtain a first-priority perfected security interest under the Uniform
Commercial Code in any types of collateral pledged by its insurance
company members. FHFA is also interested in receiving comments on the
use of funding agreements as a means of documenting advances and
whether the Banks have confirmed under state law that a Bank would be
recognized as a secured creditor with a property interest in the
collateral that is pledged to the Bank under a funding agreement. In
addition, FHFA welcomes comments on whether it should consider
establishing specific and uniform standards for making advances to
insurance companies.
[[Page 60990]]
IV. Consideration of Differences Between the Banks and the Enterprises
Section 1201 of the Housing and Economic Recovery Act of 2008
amended the Safety and Soundness Act to add a new section 1313(f),
which requires the Director of FHFA, when promulgating regulations or
taking any other formal or informal action of general applicability and
future effect relating to the Banks, to consider the differences
between the Banks and the Enterprises (Fannie Mae and Freddie Mac) as
they relate to: The Banks' cooperative ownership structure; the mission
of providing liquidity to members; the affordable housing and community
development mission; their capital structure; and their joint and
several liability on consolidated obligations.\9\ The Director also may
consider any other differences that are deemed appropriate. In
preparing the appended Advisory Bulletin, FHFA considered the
differences between the Banks and the Enterprises as they relate to the
above factors, and determined that the guidance set forth therein is
appropriate.
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\9\ See 12 U.S.C. 4513(f).
Dated: October 1, 2012.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
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[FR Doc. 2012-24639 Filed 10-4-12; 8:45 am]
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