Federal Home Loan Bank Capital Stock and Capital Plans, 12753-12758 [2015-05268]
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12753
Rules and Regulations
Federal Register
Vol. 80, No. 47
Wednesday, March 11, 2015
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
I. Background
A. Creation of the Federal Housing
Finance Agency
FEDERAL HOUSING FINANCE BOARD
12 CFR Parts 931 and 933
FEDERAL HOUSING FINANCE
AGENCY
12 CFR Part 1277
RIN 2590–AA71
Federal Home Loan Bank Capital Stock
and Capital Plans
Federal Housing Finance
Board, Federal Housing Finance
Agency.
ACTION: Final rule.
AGENCY:
On October 8, 2014, the
Federal Housing Finance Agency
(FHFA) published a notice of proposed
rulemaking in the Federal Register to
transfer existing parts of the Federal
Housing Finance Board (Finance Board)
regulations to the FHFA regulations.
These rules address Federal Home Loan
Bank (Bank) capital stock and capital
plans. FHFA did not propose to make
any substantive changes to these
requirements, but proposed to delete
certain provisions that applied only to
the one-time conversion of Bank stock
to the new capital structure required by
the Gramm-Leach-Bliley Act (GLB Act)
and to make certain other clarifying
changes. FHFA is now adopting the
proposed rule as a final rule without
change.
SUMMARY:
This final rule will become
effective on April 10, 2015.
DATES:
Julie
Paller, Senior Financial Analyst,
Julie.Paller@FHFA.gov, 202–649–3201,
Division of Federal Home Loan Bank
Regulation; or Thomas E. Joseph,
Associate General Counsel,
Thomas.Joseph@FHFA.gov, 202–649–
3076 (these are not toll-free numbers),
Office of General Counsel (OGC),
Federal Housing Finance Agency,
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FOR FURTHER INFORMATION CONTACT:
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Constitution Center, 400 Seventh Street
SW., Washington, DC 20024. The
telephone number for the
Telecommunications Device for the
Hearing Impaired is 800–877–8339.
SUPPLEMENTARY INFORMATION:
Effective July 30, 2008, the Housing
and Economic Recovery Act of 2008
(HERA) 1 created FHFA as a new
independent agency of the Federal
Government, and transferred to FHFA
the supervisory and oversight
responsibilities of the Office of Federal
Housing Enterprise Oversight (OFHEO)
over the Federal National Mortgage
Association and the Federal Home Loan
Mortgage Corporation (collectively, the
Enterprises), the oversight
responsibilities of the Finance Board
over the Banks and the Office of Finance
(OF) (which acts as the Banks’ fiscal
agent) and certain functions of the
Department of Housing and Urban
Development.2 Under the legislation,
the Enterprises, the Banks, and the OF
continue to operate under regulations
promulgated by OFHEO and the
Finance Board until such regulations are
superseded by regulations issued by
FHFA.3 While FHFA has amended or readopted and transferred most of the
former Finance Board regulations,
certain Finance Board regulations,
including those which address Bank
capital, have not yet been transferred by
FHFA, although they continue to apply
to the Banks.
B. Bank Capital Stock and Capital Plans
The twelve Banks are
instrumentalities of the United States
organized under the Federal Home Loan
Bank Act (Bank Act).4 The Banks are
cooperatives; only members of a Bank
may purchase the capital stock of a
Bank, and only members or certain
eligible housing associates (such as state
housing finance agencies) may obtain
access to secured loans, known as
advances, or other products provided by
1 Public
Law 110–289, 122 Stat. 2654.
12 U.S.C. 4511.
3 See 12 U.S.C. 4511, note.
4 See 12 U.S.C. 1423 and 1432(a). The twelve
Banks are located in: Boston, New York, Pittsburgh,
Atlanta, Cincinnati, Indianapolis, Chicago, Des
Moines, Dallas, Topeka, San Francisco, and Seattle.
2 See
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a Bank.5 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.6
In 1999, the GLB Act 7 amended the
Bank Act to replace the capital structure
of the Bank System. Under the GLB Act,
the Banks became subject to risk-based
and leverage capital requirements
similar to those applicable to depository
institutions and other housing GSEs.
The GLB Act also directed the Finance
Board to adopt regulations prescribing
uniform capital standards applicable to
each Bank. It also required the Banks to
replace their existing capital stock with
new classes of capital stock that would
have different terms from the stock then
held by Bank System members.
Specifically, the GLB Act authorized the
Banks to issue new Class A stock, which
the GLB Act defined as redeemable six
months after filing of a notice by a
member, and Class B stock, defined as
redeemable five years after filing of a
notice by a member. The GLB Act
allowed Banks to issue Class A and
Class B stock in any combination and to
establish terms and preferences for each
class or subclass of stock issued,
consistent with Finance Board
regulations and the Bank Act.8
As part of the process for converting
the ‘‘old’’ capital stock to the new GLB
Act Class A and Class B stock, the GLB
Act required each Bank to adopt and
maintain a capital plan that established
the rights, terms and preferences of each
class or subclass of capital stock that it
would issue.9 The GLB Act also
required that each Bank’s capital plan
establish the minimum investment in
capital stock required for its members to
maintain membership and to conduct
business with the Bank. Such minimum
investment requirements needed to be
sufficient for the Bank to meet its new
minimum regulatory capital
requirements. The GLB Act provided
each Bank’s board of directors the
discretion to develop and implement a
capital plan that it determined was best
suited for the conditions and operations
5 See
12 U.S.C. 1426(a)(4), 1430(a), and 1430b.
12 U.S.C. 1427.
7 Public Law 106–102, 113 Stat. 1338 (Nov. 12,
1999).
8 See 12 U.S.C. 1426, and 12 CFR parts 931 and
933.
9 Id.
6 See
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of the Bank and the interests of the
Bank’s members.10 It also required
Finance Board approval of each Bank’s
capital plan prior to it taking effect.
Under the Finance Board regulations,
each Bank had discretion as to when it
would convert to the new capital
structure. The Finance Board
regulations also addressed in detail the
process for the one-time conversion to
the new capital structure, including
requirements for disclosure to be given
to members prior to the conversion.
Since the Finance Board originally
adopted these regulations in 2001, all
Banks have converted to the GLB Act
capital structure. The original Finance
Board regulations were never amended,
however, to remove provisions that
applied only to the initial conversion
process.11
C. Considerations of Differences
Between the Banks and the Enterprises
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When promulgating regulations
relating to the Banks, section 1313(f) of
the Federal Housing Enterprises
Financial Safety and Soundness Act of
1992 (Safety and Soundness Act)
requires the Director of FHFA (Director)
to consider the differences between the
Banks and the Enterprises with respect
to the Banks’ cooperative ownership
structure; mission of providing liquidity
to members; affordable housing and
community development mission;
capital structure; and joint and several
liability.12 This requirement does not
apply to regulations of the Finance
Board that the Director reissues.
The changes to the Bank capital stock
and capital plan regulations proposed
by FHFA in October 2014 were
clarifying and conforming in nature and
applied exclusively to the Banks. The
proposed amendments did not alter the
substance of the existing Finance Board
regulations. Accordingly, the proposed
rule did not trigger this statutory
requirement. Nonetheless, FHFA, in
preparing the proposed rule, considered
the differences between the Banks and
the Enterprises as they related to the
above factors and specifically requested
comments from the public about
whether these differences should have
resulted in any revisions to the
proposed rule. FHFA received no
comments in response to this request.
10 See
12 U.S.C. 1426(b)(1).
Final Rule: Capital Requirements for
Federal Home Loan Banks, 66 FR 8262 (Jan. 30,
2001); and Final Rule: Capital Requirements for
Federal Home Loan Banks, 66 FR 54097 (Oct. 26,
2001) (amending capital requirements).
12 See 12 U.S.C. 4513 (as amended by section
1201 Public Law 110–289, 122 Stat. 2782–83).
11 See
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II. Analysis of the Final Rule
The Proposed Rule
FHFA published a proposed rule on
Bank capital stock and capital plans in
the Federal Register on October 8, 2014,
with a 60-day comment period.13 The
proposed rule would have transferred
the Finance Board Bank capital stock
regulations from 12 CFR part 931 and
the Bank capital plan regulations from
12 CFR part 933 to subparts C and D of
new part 1277 of FHFA regulations,
respectively. Relevant definitions for
parts 931 and 933 also would have been
transferred to subpart A of new part
1277.14 FHFA also proposed to make
certain non-substantive, clarifying and
conforming changes to these provisions
and to remove requirements which
applied only to the Banks’ initial
conversion to the GLB Act capital
structure.
Among other changes, FHFA
proposed to replace definitions for
‘‘regulatory risk-based capital
requirement’’ and ‘‘regulatory total
capital requirement’’ with a new single
definition for ‘‘regulatory capital
requirements.’’ It also proposed to
define the term ‘‘former member’’ and to
add relevant references to ‘‘former
member’’ in the regulatory text to clarify
that under the Bank Act and existing
regulations, such institutions could be
required to hold Bank stock in certain
situations after termination of their
Bank membership.
With regard to existing capital stock
provisions, FHFA proposed to transfer
current 12 CFR part 931 to new subpart
C of part 1277. Most of these provisions
were to be transferred without change,
beyond necessary conforming changes.
FHFA, however, proposed to delete
current § 931.9 which addresses various
transition requirements related to the
Banks’ conversion to the GLB Act
capital structure. Given that all Banks
have successfully completed this
process, § 931.9 has no future
applicability.
FHFA also proposed to add clarifying
language to § 1277.24 that any provision
in a Bank’s capital plan related to
stockholder rights in a liquidation,
merger, or consolidation of the Bank
cannot limit FHFA’s authority under the
Bank Act or the Safety and Soundness
Act to issue a regulation or order or to
take any other action that may affect or
13 Proposed Rule: Federal Home Loan Bank
capital Stock and Capital Plans, 79 FR 60783 (Oct.
8, 2014).
14 As part of a separate and future rulemaking,
FHFA intends to amend and transfer the existing
Bank capital regulations from part 932 of the
Finance Board regulations to subpart B of new part
1277.
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otherwise alter the rights or privileges of
stock holders in these situations. FHFA
noted that it believed that the proposed
change was consistent with existing
provisions in each Bank’s approved
capital plan.
FHFA proposed to relocate relevant
provisions in current part 933 to subpart
D of new part 1277. As part of this
process, it proposed to remove those
provisions that related only to the
Banks’ initial conversion to the GLB Act
capital structure, given that the
provisions had no continuing
applicability.15
FHFA also proposed not to reissue
duplicative provisions related to the
calculation and application of a
member’s, or former member’s,
minimum investment requirements, and
instead, incorporated into proposed
§ 1277.28(a) the requirements governing
the calculation and maintenance of the
minimum investment set forth in
proposed § 1277.22 by reference. FHFA
noted that this change was not intended
to alter the current capital plan
requirements in any substantive
manner.
FHFA also proposed to add to subpart
D of new § 1277.29 to address the
process for amending a Bank’s approved
capital plan. The Finance Board rules
did not specifically address the process
for submitting capital plan amendments
for approval, although the Bank Act
allows Banks to amend their capital
plans with FHFA approval.16 The
amendments proposed in this new
section reflected long-standing guidance
first provided to the Banks in 2003
governing the submission of capital plan
amendments for approval. FHFA also
proposed to carry over in § 1277.29(c),
current language from § 933.1(c) stating
that the Director can approve an
amendment to a capital plan subject to
specific conditions.
Finally, as discussed more fully in the
SUPPLEMENTARY INFORMATION section of
the proposed rule, FHFA also proposed
other conforming or clarifying changes
to the existing Finance Board
regulations on Bank capital stock and
capital plans.
Final Rule
FHFA received one comment on the
proposed rule, but the comment did not
address issues relevant to this
rulemaking.17 As a result and for the
reasons discussed above and in the
notice of proposed rulemaking, FHFA is
15 Specifically, FHFA proposed not to reissue 12
CFR 933.2(d), (e), and (h), 933.3, 933.4, and 933.5.
16 See 12 U.S.C. 1426(b)(2).
17 Instead, the comment urged FHFA to
recapitalize the Enterprises.
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adopting the proposed rule as a final
rule without change.
III. Paperwork Reduction Act
The information collection, entitled
‘‘Capital Requirements for the Federal
Home Loan Banks,’’ contained in the 12
CFR parts 931 and 933 of the regulations
that are being relocated to 12 CFR part
1277 by this final rule, has been
assigned control number 2590–0002 by
the Office of Management and Budget
(OMB). The final rule does not
substantively or materially modify the
current, approved information
collection. OMB has approved the
relocation of this information collection
to part 1277 as a non-substantive change
under the Paperwork Reduction Act of
1995, 44 U.S.C. 3501, et seq.
IV. Regulatory Flexibility Act
The final rule applies only to the
Banks, which do not come within the
meaning of small entities as defined in
the Regulatory Flexibility Act (RFA).
See 5 U.S.C. 601(6). Therefore, in
accordance with section 605(b) of the
RFA, FHFA certifies that this final rule
does not have a significant economic
impact on a substantial number of small
entities.
List of Subjects
12 CFR Parts 931 and 933
Capital, Credit, Federal home loan
banks, Investments, Reporting and
recordkeeping requirements.
12 CFR Part 1277
Capital, Credit, Federal home loan
banks, Investments, Reporting and
recordkeeping requirements.
Accordingly, for reasons stated in the
SUPPLEMENTARY INFORMATION and under
the authority of 12 U.S.C. 1426, 1436,
1440, 1443, 1446, 4511, 4513, 4526,
FHFA hereby amends subchapter E of
chapter IX and subchapter D of chapter
XII of title 12 of the Code of Federal
Regulations as follows:
CHAPTER IX—FEDERAL HOUSING
FINANCE BOARD
Subchapter E—Federal Home Loan Bank
Risk Management and Capital Standards
PART 931—[REMOVED]
■
1. Remove part 931.
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PART 933—[REMOVED]
■
2. Remove part 933.
CHAPTER XII—FEDERAL HOUSING
FINANCE AGENCY
Subchapter D—Federal Home Loan Banks
3. Part 1277 is added to read as
follows:
■
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PART 1277—FEDERAL HOME LOAN
BANK CAPITAL REQUIREMENTS,
CAPITAL STOCK AND CAPITAL
PLANS
Subpart A—Definitions
Sec.
1277.1
Definitions.
Subpart B—[Reserved]
Subpart C—Bank Capital Stock
1277.20 Classes of capital stock.
1277.21 Issuance of capital stock.
1277.22 Minimum investment in capital
stock.
1277.23 Dividends.
1277.24 Liquidation, merger, or
consolidation.
1277.25 Transfer of capital stock.
1277.26 Redemption and repurchase of
capital stock.
1277.27 Other restrictions on the
repurchase or redemption of Bank stock.
Subpart D—Bank Capital Plans
1277.28 Bank capital plans.
1277.29 Amendments to a Bank’s capital
plan.
Authority: 12 U.S.C. 1426, 1436(a), 1440,
1443, 1446, 4511, 4513, 4514, 4526, 4612.
12755
Class A or Class B stock at par value
following the expiration of the sixmonth or five-year statutory redemption
period, respectively, for the stock.
Regulatory capital requirements
means the minimum amounts of
permanent and total capital that a Bank
is required to maintain under section
6(a) of the Bank Act (12 U.S.C. 1426(a))
and any related regulations, as such
requirements may be modified by the
Director, or any similar requirement
established for a Bank by regulation,
order, written agreement or other action.
Repurchase means the acquisition by
a Bank of excess stock prior to the
expiration of the six-month or five-year
statutory redemption period for the
stock.
Total capital of a Bank means the sum
of permanent capital, the amounts paidin for Class A stock, the amount of any
general allowance for losses, and the
amount of other instruments identified
in a Bank’s capital plan that the Director
has determined to be available to absorb
losses incurred by such Bank.
Subpart B—[Reserved]
Subpart A—Definitions
§ 1277.1
Subpart C—Bank Capital Stock
Definitions.
As used in this part:
Class A stock means capital stock
issued by a Bank, including subclasses,
that has the characteristics specified by
§ 1277.20(a).
Class B stock means capital stock
issued by a Bank, including subclasses,
that has the characteristics specified by
§ 1277.20(b).
Former member means an institution
for which the membership in a Bank has
been terminated but which continues to
hold stock in the Bank as required by
the Bank’s capital plan, and includes
any successor to such institution that
continues to hold the stock in the Bank
that had been issued to the acquired
institution.
General allowance for losses means an
allowance established by the Bank in
accordance with GAAP for losses, but
which does not include any amounts
held against specific assets of the Bank.
Minimum investment means the
minimum amount of stock that an
institution is required to own in order
to be a member of a Bank and in order
to obtain advances and to engage in
other business activities with the Bank
in accordance with § 1277.22.
Permanent capital means the retained
earnings of a Bank, determined in
accordance with GAAP, plus the
amount paid-in for the Bank’s Class B
stock.
Redeem or Redemption means the
acquisition by a Bank of its outstanding
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§ 1277.20
Classes of capital stock.
The authorized capital stock of a Bank
shall consist of the following
instruments:
(a) Class A stock, which shall:
(1) Have a par value as determined by
the board of directors of the Bank and
stated in the Bank’s capital plan;
(2) Be issued, redeemed, and
repurchased only at its stated par value;
and
(3) Be redeemable in cash only on sixmonths written notice to the Bank.
(b) Class B stock, which shall:
(1) Have a par value as determined by
the board of directors of the Bank and
stated in the Bank’s capital plan;
(2) Be issued, redeemed, and
repurchased only at its stated par value;
(3) Be redeemable in cash only on
five-years written notice to the Bank;
and
(4) Confer an ownership interest in
the retained earnings, surplus,
undivided profits, and equity reserves of
the Bank.
(c) Any one or more subclasses of
Class A or Class B stock, each of which
may have different rights, terms,
conditions, or preferences as may be
authorized in the Bank’s capital plan,
provided, however, that each subclass of
stock shall have all of the characteristics
of its respective class, as specified in
paragraph (a) or (b) of this section.
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§ 1277.21
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Issuance of capital stock.
A Bank may issue either one or both
classes of its capital stock (including
subclasses), as authorized by § 1277.20,
and shall not issue any other class of
capital stock. A Bank shall issue its
stock only to its members, or to former
members to the extent those institutions
are required to maintain a minimum
stock investment for existing activities
under the capital plan, and only in
book-entry form. The Bank shall act as
its own transfer agent. All capital stock
shall be issued in accordance with the
Bank’s capital plan.
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§ 1277.22
stock.
Minimum investment in capital
(a) A Bank shall require each member
to maintain a minimum investment in
the capital stock of the Bank, both as a
condition to becoming and remaining a
member of the Bank and as a condition
to transacting business with the Bank or
obtaining advances and other services
from the Bank. The amount of the
required minimum investment shall be
determined in accordance with the
Bank’s capital plan and shall be
sufficient to ensure that the Bank
remains in compliance with its
regulatory capital requirements. A Bank
shall require each member to maintain
its minimum investment for as long as
the institution remains a member of the
Bank and shall require each member
and former member to maintain its
minimum investment for as long as the
institution engages in any activity with
the Bank for which the capital plan
requires the institution to maintain
capital stock.
(b) A Bank may establish the
minimum investment as a percentage of
the total assets of an institution, as a
percentage of the advances outstanding
to that institution, as a percentage of any
other business activity conducted with
the institution, on any other basis that
is approved by the Director, or any
combination thereof.
(c) A Bank may require that the
minimum investment requirement be
satisfied through the purchase of either
Class A or Class B stock, or through the
purchase of one or more combinations
of Class A and Class B stock that have
been authorized by the board of
directors of the Bank in its capital plan.
A Bank, in its discretion, may establish
a lower minimum investment to the
extent the requirement is met through
investment in Class B stock than if the
requirement is met through investment
in Class A stock, provided that such
reduced investment provides sufficient
capital for the Bank to remain in
compliance with its regulatory capital
requirements.
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(d) Each member, or if applicable,
former member, of a Bank shall at all
times maintain an investment in the
capital stock of the Bank in an amount
that is sufficient to satisfy the minimum
investment required under the Bank’s
capital plan.
stock transfers shall be at par value and
shall be effective upon being recorded
on the appropriate books and records of
the Bank. The Bank may, in its capital
plan, require that the transfer be
approved by the Bank before such
transfer can occur.
§ 1277.23
§ 1277.26 Redemption and repurchase of
capital stock.
Dividends.
(a) In general. A Bank may pay
dividends on Class A or Class B stock,
including any subclasses of such stock,
only out of previously retained earnings
or current net earnings, and shall
declare and pay dividends only as
provided by its capital plan. The capital
plan may establish different dividend
rates or preferences for each class or
subclass of stock, which may include a
dividend that tracks the economic
performance of certain Bank assets, such
as Acquired Member Assets. A member,
including a member that has provided
the Bank with a notice of intent to
withdraw from membership, or a former
member shall be entitled to receive any
dividends that a Bank declares on its
capital stock while such institution
owns the stock.
(b) Limitation on payment of
dividends. In no event shall a Bank
declare or pay any dividend on its
capital stock if after doing so the Bank
would fail to meet any of its regulatory
capital requirements, nor shall a Bank
that is not in compliance with any of its
regulatory capital requirements declare
or pay any dividend on its capital stock.
§ 1277.24 Liquidation, merger, or
consolidation.
The respective rights of the Class A
and Class B stockholders, in the event
that the Bank is liquidated, merged, or
otherwise consolidated with another
Bank, shall be determined in accordance
with the capital plan of the Bank,
provided, however, that nothing in the
capital plan shall be construed to limit
any rights or authority granted FHFA
under the Bank Act or the Safety and
Soundness Act to issue any regulation
or order or to take any other action that
may affect or otherwise alter the rights
or privileges of stock holders in a
liquidation, merger, or consolidation of
a Bank.
§ 1277.25
Transfer of capital stock.
A Bank in its capital plan may allow
a member or former member to transfer
any excess stock to a member of that
Bank or to an institution that has been
approved for membership in that Bank
and that has satisfied all conditions for
becoming a member, other than the
purchase of the minimum amount of
Bank stock that it is required to hold as
a condition of membership. Any such
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(a) Redemption. (1) A member or
former member may have its stock in a
Bank redeemed by providing written
notice to the Bank in accordance with
this section. A member or former
member shall provide six-months
written notice for Class A stock and
five-years written notice for Class B
stock. The notice shall indicate the
number of shares of Bank stock that are
to be redeemed. No more than one
notice of redemption may be
outstanding at one time for the same
shares of Bank stock. At the expiration
of the applicable notice period, the Bank
shall pay to the member or other
institution holding the stock the stated
par value of that stock in cash.
(2) A member may cancel a notice of
redemption by so informing the Bank in
writing, and the Bank may impose a fee
(to be specified in its capital plan) with
respect to any cancellation of a pending
notice of redemption. A request by a
member (whose membership has not
been terminated) to redeem specific
shares of stock shall automatically be
cancelled if the Bank is prevented from
redeeming the member’s stock by
paragraph (c) of this section within five
business days from the end of the
expiration of the applicable redemption
notice period because the member
would fail to maintain its minimum
investment in the stock of the Bank after
such redemption. The automatic
cancellation of a member’s redemption
request shall have the same effect as if
the member had cancelled its notice to
redeem stock prior to the end of the
redemption notice period, and a Bank
may impose a fee (to be specified in its
capital plan) for automatic cancellation
of a redemption request.
(3) A Bank shall not be obligated to
redeem its capital stock other than in
accordance with this paragraph.
(b) Repurchase. A Bank, in its
discretion and without regard to the
applicable redemption periods, may
repurchase excess stock in accordance
with the capital plan of that Bank. A
Bank undertaking such a stock
repurchase at its own initiative shall
provide reasonable notice prior to
repurchasing any excess stock, with the
period of such notice to be specified in
the Bank’s capital plan, and shall pay
the stated par value of that stock in
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cash. A member’s submission of a notice
of intent to withdraw from membership,
or its termination of membership in any
other manner, shall not, in and of itself,
cause any Bank stock to be deemed
excess stock for purposes of this section.
(c) Limitation. In no event may a Bank
redeem or repurchase any stock if,
following the redemption or repurchase,
the Bank would fail to meet its
regulatory capital requirements, or if the
member or former member would fail to
maintain its minimum investment in the
stock of the Bank, as required by
§ 1277.22.
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§ 1277.27 Other restrictions on the
repurchase or redemption of Bank stock.
(a) Capital impairment. A Bank may
not redeem or repurchase any capital
stock without the prior written approval
of the Director if the Director or the
board of directors of the Bank has
determined that the Bank has incurred
or is likely to incur losses that result in
or are likely to result in charges against
the capital of the Bank. This prohibition
shall apply even if a Bank is currently
in compliance with its regulatory capital
requirements, and shall remain in effect
for however long the Bank continues to
incur such charges or until the Director
determines that such charges are not
expected to continue.
(b) Bank discretion to suspend
redemption. A Bank, upon the approval
of its board of directors, or of a
subcommittee thereof, may suspend
redemption of stock if the Bank
reasonably believes that continued
redemption of stock would cause the
Bank to fail to meet its regulatory capital
requirements, would prevent the Bank
from maintaining adequate capital
against a potential risk that may not be
adequately reflected in its regulatory
capital requirements, or would
otherwise prevent the Bank from
operating in a safe and sound manner.
A Bank shall notify the Director in
writing within two business days of the
date of the decision to suspend the
redemption of stock, providing the
reasons for the suspension and the
Bank’s strategies and time frames for
addressing the conditions that led to the
suspension. The Director may require
the Bank to re-institute the redemption
of stock. A Bank shall not repurchase
any stock without the written
permission of the Director during any
period in which the Bank has
suspended redemption of stock under
this paragraph.
VerDate Sep<11>2014
14:23 Mar 10, 2015
Jkt 235001
Subpart D—Bank Capital Plans
§ 1277.28
Bank capital plans.
Each Bank shall have in place a
capital plan approved by the Bank’s
board of directors and the Director. The
capital plan shall include, at a
minimum, provisions addressing the
following matters:
(a) Minimum investment. (1) The
capital plan shall require each member,
and if applicable each former member,
to purchase and maintain a minimum
investment in the capital stock of the
Bank and prescribe the manner for
calculating the minimum investment, in
accordance with § 1277.22.
(2) The capital plan shall specify the
amount and class (or classes) of Bank
stock that an institution is required to
own in order to become and remain a
member of the Bank, and to obtain
advances from, or to engage in other
business transactions with, the Bank. If
a Bank requires that the minimum
investment be satisfied through the
purchase of one or more combinations
of Class A and Class B stock, the
authorized combinations of stock shall
be specified in the capital plan, which
shall afford the option of satisfying the
minimum investment through the
purchase of any such combination of
stock.
(3) The capital plan shall require the
board of directors of the Bank to
monitor and, as necessary, to adjust, the
minimum investment to ensure that
outstanding stock remains sufficient for
the Bank to comply with its regulatory
capital requirements. The plan shall
require each member or, where required
by the plan, former member, to comply
promptly with any adjusted minimum
investment established by the board of
directors of the Bank, but may allow a
reasonable time to do so and may allow
a reduction in outstanding business
with the Bank as an alternative to
purchasing additional stock.
(b) Classes of capital stock. The
capital plan shall specify the class or
classes of stock (including subclasses, if
any) that the Bank will issue, and shall
establish the par value, rights, terms,
and preferences associated with each
class (or subclass) of stock. A Bank may
establish preferences relating to, but not
limited to, the dividend, voting, or
liquidation rights for each class or
subclass of Bank stock. Any voting
preferences established by the Bank
pursuant to § 1261.6 of this chapter
shall expressly state the voting rights of
each class of stock with regard to the
election of Bank directors. The capital
plan shall provide that the owners of the
Class B stock own the retained earnings,
surplus, undivided profits, and equity
PO 00000
Frm 00005
Fmt 4700
Sfmt 4700
12757
reserves of the Bank, but shall have no
right to receive any portion of those
items, except through declaration of a
dividend or capital distribution
approved by the board of directors or
through the liquidation of the Bank.
(c) Dividends. The capital plan shall
establish the manner in which the Bank
will pay dividends, if any, on each class
or subclass of stock, and shall provide
that the Bank may not declare or pay
any dividends if it is not in compliance
with any regulatory capital requirement
or if after paying the dividend it would
not be in compliance with any
regulatory capital requirement.
(d) Stock transactions. The capital
plan shall establish the criteria for the
issuance, redemption, repurchase,
transfer, and retirement of stock issued
by the Bank. The capital plan also:
(1) Shall provide that the Bank may
not issue stock other than in accordance
with § 1277.21;
(2) Shall provide that the stock of the
Bank may be issued only to and held
only by the members of that Bank, and
by former members to the extent
necessary to meet requirements set forth
in a capital plan;
(3) Shall specify whether the stock of
the Bank may be transferred, as allowed
under § 1277.25, and, if such transfer is
allowed, shall specify the procedures to
effect such transfer, and provide that the
transfer shall be undertaken only in
accordance with § 1277.25;
(4) Shall specify that the stock of the
Bank may be traded only among the
Bank and its members, and former
members;
(5) May provide for a minimum
investment based on investment in
Class B stock that is lower than a
minimum investment based on
investment in Class A stock, provided
that the level of investment is sufficient
for the Bank to comply with its
regulatory capital requirements;
(6) Shall specify the fee, if any, to be
imposed upon cancellation of a request
to redeem Bank stock or upon
cancellation of a request to withdraw
from membership; and
(7) Shall specify the period of notice
that the Bank will provide before the
Bank, on its own initiative, determines
to repurchase any excess Bank stock.
(e) Termination of membership. The
capital plan shall address the manner in
which the Bank will provide for the
disposition of its capital stock that is
held by institutions that terminate their
membership, and the manner in which
the Bank will liquidate claims against
such institutions, including claims
resulting from prepayment of advances
prior to their stated maturity.
E:\FR\FM\11MRR1.SGM
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Rmajette on DSK2VPTVN1PROD with RULES
§ 1277.29
plan.
Federal Register / Vol. 80, No. 47 / Wednesday, March 11, 2015 / Rules and Regulations
Amendments to a Bank’s capital
(a) In general. A Bank’s board of
directors shall approve any amendments
to the Bank’s capital plan and submit
such amendment to the Director for
approval. No such amendment may take
effect until it has been approved by the
Director.
(b) Submission of amendments for
approval. Any request for approval of
capital plan amendments should be
submitted to the Deputy Director for the
Division of Federal Home Loan Bank
Regulation and should include the
following:
(1) The name of the Bank making the
request and the name, title, and contact
information of the official filing the
request;
(2) The name, title and contact
information of the staff member(s)
whom FHFA may contact for additional
information;
(3) A certification by an executive
officer of the Bank with knowledge of
the facts that the representations made
in the request are accurate and
complete. The following form of
certification may be used: ‘‘I hereby
certify that the statements contained in
the submission are true and complete to
the best of my knowledge. [Name and
Title]’’;
(4) A written, narrative description of
the proposed amendments to the Bank’s
capital plan and a discussion of the
Bank’s reasons for the proposed
changes;
(5) The amended capital plan as
approved by the Bank’s board of
directors;
(6) A version of the Bank’s capital
plan showing all proposed changes to
its previously approved capital plan;
(7) Resolutions of the Bank’s board of
directors:
(i) Approving the proposed capital
plan amendments; and
(ii) Authorizing the filing of the
application for approval of the
amendments and concurring in
substance with the supporting
documentation provided;
(8) An opinion of counsel
demonstrating that the proposed
amendments comply with the Bank Act,
FHFA regulations and any other
applicable law or regulation. If the
amendments would be identical in
substance to provisions approved for
other Banks’ capital plans, a Bank’s
legal analysis may reference the other
capital plans that contain the provisions
in question;
(9) An analysis of the effect of the
proposed amendments, if any, on the
Bank’s capital levels and the Bank’s
VerDate Sep<11>2014
14:23 Mar 10, 2015
Jkt 235001
ability to meet its regulatory capital
requirements;
(10) Pro forma financial statements
from the end of the quarter immediately
prior to the date of submission of the
request for approval through at least the
end of the next two years, showing the
impact of the proposed changes, if any,
on capital levels; and
(11) A discussion of and an
explanation for changes to the Bank’s
strategic plan, if any, which may be
related to the capital plan amendments.
(c) FHFA consideration of the
amendment. The Director may approve
any amendment to a Bank’s capital plan
as submitted or may condition approval
on the Bank’s compliance with certain
stated conditions.
Dated: March 2, 2015.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2015–05268 Filed 3–10–15; 8:45 am]
BILLING CODE 8070–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 389
[Docket No. RM15–10–000; Order No. 805]
Display of OMB Control Numbers
Federal Energy Regulatory
Commission, DOE.
ACTION: Final rule.
AGENCY:
The Commission is revising
and updating its regulations related to
the display of Office of Management and
Budget (OMB) control numbers under
the Paperwork Reduction Act. The Final
Rule updates the existing table and
revises the regulations to explain that an
updated table displaying OMB control
numbers is available on www.ferc.gov.
DATES: This rule will become effective
March 11, 2015.
FOR FURTHER INFORMATION CONTACT:
Ellen Brown (Technical Information),
Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC
20426, (202) 502–8663, DataClearance@
ferc.gov.
Christopher MacFarlane (Legal
Information), Federal Energy Regulatory
Commission, 888 First Street NE.,
Washington, DC 20426, (202) 502–6761,
christopher.macfarlane@ferc.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Discussion
1. The Commission is revising and
updating Part 389 of its regulations
related to the display of Office of
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
Management and Budget (OMB) control
numbers,1 by updating the existing table
and revising the regulations to explain
that an updated table displaying OMB
control numbers is available on
www.ferc.gov.
2. Part 389 aids in fulfilling the
requirements of the Paperwork
Reduction Act 2 to display current OMB
control numbers for information
collections. The Commission also
displays OMB control numbers on its
Web site at www.ferc.gov under
‘‘Documents and Filings’’ and then
‘‘Information Collections’’ or directly at
https://www.ferc.gov/docs-filing/infocollections.asp. The Web site is updated
regularly. For the most up-to-date
information, interested persons are
urged to consult the Commission’s Web
site.
II. Information Collection Statement
3. OMB’s regulations require that it
approve certain information collection
requirements imposed by agency rule.3
This Final Rule does not contain new or
revised information collection
requirements and thus does not require
OMB approval.
III. Environmental Analysis
4. The Commission is required to
prepare an Environmental Assessment
or Environmental Impact Statement for
any action that may have a significant
adverse effect on the quality of the
human environment.4 Part 380 of the
Commission’s regulations provides
exemptions to the requirement to
prepare an Environmental Assessment
or Environmental Impact Statement.
Included is an exemption for
procedural, ministerial or internal
administrative actions and
management.5 This Final Rule falls
within that exemption; consequently, no
environmental analysis is required.
IV. Regulatory Flexibility Act
5. The Regulatory Flexibility Act of
1980 (RFA) 6 generally requires a
description and analysis of final rules
that will have significant economic
impact on a substantial number of small
entities. This Final Rule, which revises
and updates regulations on the display
of OMB control numbers, will not have
a significant economic impact on a
substantial number of small entities.
1 18
CFR 389.101 (2014).
U.S.C. 3501–3521 (1980).
3 5 CFR part 1320.
4 Regulations Implementing the National
Environmental Policy Act, Order No. 486, 52 FR
47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783
(1987).
5 18 CFR 380.4(1).
6 5 U.S.C. 601–12.
2 44
E:\FR\FM\11MRR1.SGM
11MRR1
]]>Agencies
[Federal Register Volume 80, Number 47 (Wednesday, March 11, 2015)]
[Rules and Regulations]
[Pages 12753-12758]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-05268]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 80, No. 47 / Wednesday, March 11, 2015 /
Rules and Regulations
[[Page 12753]]
FEDERAL HOUSING FINANCE BOARD
12 CFR Parts 931 and 933
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1277
RIN 2590-AA71
Federal Home Loan Bank Capital Stock and Capital Plans
AGENCY: Federal Housing Finance Board, Federal Housing Finance Agency.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: On October 8, 2014, the Federal Housing Finance Agency (FHFA)
published a notice of proposed rulemaking in the Federal Register to
transfer existing parts of the Federal Housing Finance Board (Finance
Board) regulations to the FHFA regulations. These rules address Federal
Home Loan Bank (Bank) capital stock and capital plans. FHFA did not
propose to make any substantive changes to these requirements, but
proposed to delete certain provisions that applied only to the one-time
conversion of Bank stock to the new capital structure required by the
Gramm-Leach-Bliley Act (GLB Act) and to make certain other clarifying
changes. FHFA is now adopting the proposed rule as a final rule without
change.
DATES: This final rule will become effective on April 10, 2015.
FOR FURTHER INFORMATION CONTACT: Julie Paller, Senior Financial
Analyst, Julie.Paller@FHFA.gov, 202-649-3201, Division of Federal Home
Loan Bank Regulation; or Thomas E. Joseph, Associate General Counsel,
Thomas.Joseph@FHFA.gov, 202-649-3076 (these are not toll-free numbers),
Office of General Counsel (OGC), Federal Housing Finance Agency,
Constitution Center, 400 Seventh Street SW., Washington, DC 20024. The
telephone number for the Telecommunications Device for the Hearing
Impaired is 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
A. Creation of the Federal Housing Finance Agency
Effective July 30, 2008, the Housing and Economic Recovery Act of
2008 (HERA) \1\ created FHFA as a new independent agency of the Federal
Government, and transferred to FHFA the supervisory and oversight
responsibilities of the Office of Federal Housing Enterprise Oversight
(OFHEO) over the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation (collectively, the Enterprises), the
oversight responsibilities of the Finance Board over the Banks and the
Office of Finance (OF) (which acts as the Banks' fiscal agent) and
certain functions of the Department of Housing and Urban
Development.\2\ Under the legislation, the Enterprises, the Banks, and
the OF continue to operate under regulations promulgated by OFHEO and
the Finance Board until such regulations are superseded by regulations
issued by FHFA.\3\ While FHFA has amended or re-adopted and transferred
most of the former Finance Board regulations, certain Finance Board
regulations, including those which address Bank capital, have not yet
been transferred by FHFA, although they continue to apply to the Banks.
---------------------------------------------------------------------------
\1\ Public Law 110-289, 122 Stat. 2654.
\2\ See 12 U.S.C. 4511.
\3\ See 12 U.S.C. 4511, note.
---------------------------------------------------------------------------
B. Bank Capital Stock and Capital Plans
The twelve Banks are instrumentalities of the United States
organized under the Federal Home Loan Bank Act (Bank Act).\4\ The Banks
are cooperatives; only members of a Bank may purchase the capital stock
of a Bank, and only members or certain eligible housing associates
(such as state housing finance agencies) may obtain access to secured
loans, known as advances, or other products provided by a Bank.\5\ 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.\6\
---------------------------------------------------------------------------
\4\ See 12 U.S.C. 1423 and 1432(a). The twelve Banks are located
in: Boston, New York, Pittsburgh, Atlanta, Cincinnati, Indianapolis,
Chicago, Des Moines, Dallas, Topeka, San Francisco, and Seattle.
\5\ See 12 U.S.C. 1426(a)(4), 1430(a), and 1430b.
\6\ See 12 U.S.C. 1427.
---------------------------------------------------------------------------
In 1999, the GLB Act \7\ amended the Bank Act to replace the
capital structure of the Bank System. Under the GLB Act, the Banks
became subject to risk-based and leverage capital requirements similar
to those applicable to depository institutions and other housing GSEs.
The GLB Act also directed the Finance Board to adopt regulations
prescribing uniform capital standards applicable to each Bank. It also
required the Banks to replace their existing capital stock with new
classes of capital stock that would have different terms from the stock
then held by Bank System members. Specifically, the GLB Act authorized
the Banks to issue new Class A stock, which the GLB Act defined as
redeemable six months after filing of a notice by a member, and Class B
stock, defined as redeemable five years after filing of a notice by a
member. The GLB Act allowed Banks to issue Class A and Class B stock in
any combination and to establish terms and preferences for each class
or subclass of stock issued, consistent with Finance Board regulations
and the Bank Act.\8\
---------------------------------------------------------------------------
\7\ Public Law 106-102, 113 Stat. 1338 (Nov. 12, 1999).
\8\ See 12 U.S.C. 1426, and 12 CFR parts 931 and 933.
---------------------------------------------------------------------------
As part of the process for converting the ``old'' capital stock to
the new GLB Act Class A and Class B stock, the GLB Act required each
Bank to adopt and maintain a capital plan that established the rights,
terms and preferences of each class or subclass of capital stock that
it would issue.\9\ The GLB Act also required that each Bank's capital
plan establish the minimum investment in capital stock required for its
members to maintain membership and to conduct business with the Bank.
Such minimum investment requirements needed to be sufficient for the
Bank to meet its new minimum regulatory capital requirements. The GLB
Act provided each Bank's board of directors the discretion to develop
and implement a capital plan that it determined was best suited for the
conditions and operations
[[Page 12754]]
of the Bank and the interests of the Bank's members.\10\ It also
required Finance Board approval of each Bank's capital plan prior to it
taking effect.
---------------------------------------------------------------------------
\9\ Id.
\10\ See 12 U.S.C. 1426(b)(1).
---------------------------------------------------------------------------
Under the Finance Board regulations, each Bank had discretion as to
when it would convert to the new capital structure. The Finance Board
regulations also addressed in detail the process for the one-time
conversion to the new capital structure, including requirements for
disclosure to be given to members prior to the conversion. Since the
Finance Board originally adopted these regulations in 2001, all Banks
have converted to the GLB Act capital structure. The original Finance
Board regulations were never amended, however, to remove provisions
that applied only to the initial conversion process.\11\
---------------------------------------------------------------------------
\11\ See Final Rule: Capital Requirements for Federal Home Loan
Banks, 66 FR 8262 (Jan. 30, 2001); and Final Rule: Capital
Requirements for Federal Home Loan Banks, 66 FR 54097 (Oct. 26,
2001) (amending capital requirements).
---------------------------------------------------------------------------
C. Considerations of Differences Between the Banks and the Enterprises
When promulgating regulations relating to the Banks, section
1313(f) of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (Safety and Soundness Act) requires the Director
of FHFA (Director) to consider the differences between the Banks and
the Enterprises with respect to the Banks' cooperative ownership
structure; mission of providing liquidity to members; affordable
housing and community development mission; capital structure; and joint
and several liability.\12\ This requirement does not apply to
regulations of the Finance Board that the Director reissues.
---------------------------------------------------------------------------
\12\ See 12 U.S.C. 4513 (as amended by section 1201 Public Law
110-289, 122 Stat. 2782-83).
---------------------------------------------------------------------------
The changes to the Bank capital stock and capital plan regulations
proposed by FHFA in October 2014 were clarifying and conforming in
nature and applied exclusively to the Banks. The proposed amendments
did not alter the substance of the existing Finance Board regulations.
Accordingly, the proposed rule did not trigger this statutory
requirement. Nonetheless, FHFA, in preparing the proposed rule,
considered the differences between the Banks and the Enterprises as
they related to the above factors and specifically requested comments
from the public about whether these differences should have resulted in
any revisions to the proposed rule. FHFA received no comments in
response to this request.
II. Analysis of the Final Rule
The Proposed Rule
FHFA published a proposed rule on Bank capital stock and capital
plans in the Federal Register on October 8, 2014, with a 60-day comment
period.\13\ The proposed rule would have transferred the Finance Board
Bank capital stock regulations from 12 CFR part 931 and the Bank
capital plan regulations from 12 CFR part 933 to subparts C and D of
new part 1277 of FHFA regulations, respectively. Relevant definitions
for parts 931 and 933 also would have been transferred to subpart A of
new part 1277.\14\ FHFA also proposed to make certain non-substantive,
clarifying and conforming changes to these provisions and to remove
requirements which applied only to the Banks' initial conversion to the
GLB Act capital structure.
---------------------------------------------------------------------------
\13\ Proposed Rule: Federal Home Loan Bank capital Stock and
Capital Plans, 79 FR 60783 (Oct. 8, 2014).
\14\ As part of a separate and future rulemaking, FHFA intends
to amend and transfer the existing Bank capital regulations from
part 932 of the Finance Board regulations to subpart B of new part
1277.
---------------------------------------------------------------------------
Among other changes, FHFA proposed to replace definitions for
``regulatory risk-based capital requirement'' and ``regulatory total
capital requirement'' with a new single definition for ``regulatory
capital requirements.'' It also proposed to define the term ``former
member'' and to add relevant references to ``former member'' in the
regulatory text to clarify that under the Bank Act and existing
regulations, such institutions could be required to hold Bank stock in
certain situations after termination of their Bank membership.
With regard to existing capital stock provisions, FHFA proposed to
transfer current 12 CFR part 931 to new subpart C of part 1277. Most of
these provisions were to be transferred without change, beyond
necessary conforming changes. FHFA, however, proposed to delete current
Sec. 931.9 which addresses various transition requirements related to
the Banks' conversion to the GLB Act capital structure. Given that all
Banks have successfully completed this process, Sec. 931.9 has no
future applicability.
FHFA also proposed to add clarifying language to Sec. 1277.24 that
any provision in a Bank's capital plan related to stockholder rights in
a liquidation, merger, or consolidation of the Bank cannot limit FHFA's
authority under the Bank Act or the Safety and Soundness Act to issue a
regulation or order or to take any other action that may affect or
otherwise alter the rights or privileges of stock holders in these
situations. FHFA noted that it believed that the proposed change was
consistent with existing provisions in each Bank's approved capital
plan.
FHFA proposed to relocate relevant provisions in current part 933
to subpart D of new part 1277. As part of this process, it proposed to
remove those provisions that related only to the Banks' initial
conversion to the GLB Act capital structure, given that the provisions
had no continuing applicability.\15\
---------------------------------------------------------------------------
\15\ Specifically, FHFA proposed not to reissue 12 CFR 933.2(d),
(e), and (h), 933.3, 933.4, and 933.5.
---------------------------------------------------------------------------
FHFA also proposed not to reissue duplicative provisions related to
the calculation and application of a member's, or former member's,
minimum investment requirements, and instead, incorporated into
proposed Sec. 1277.28(a) the requirements governing the calculation
and maintenance of the minimum investment set forth in proposed Sec.
1277.22 by reference. FHFA noted that this change was not intended to
alter the current capital plan requirements in any substantive manner.
FHFA also proposed to add to subpart D of new Sec. 1277.29 to
address the process for amending a Bank's approved capital plan. The
Finance Board rules did not specifically address the process for
submitting capital plan amendments for approval, although the Bank Act
allows Banks to amend their capital plans with FHFA approval.\16\ The
amendments proposed in this new section reflected long-standing
guidance first provided to the Banks in 2003 governing the submission
of capital plan amendments for approval. FHFA also proposed to carry
over in Sec. 1277.29(c), current language from Sec. 933.1(c) stating
that the Director can approve an amendment to a capital plan subject to
specific conditions.
---------------------------------------------------------------------------
\16\ See 12 U.S.C. 1426(b)(2).
---------------------------------------------------------------------------
Finally, as discussed more fully in the SUPPLEMENTARY INFORMATION
section of the proposed rule, FHFA also proposed other conforming or
clarifying changes to the existing Finance Board regulations on Bank
capital stock and capital plans.
Final Rule
FHFA received one comment on the proposed rule, but the comment did
not address issues relevant to this rulemaking.\17\ As a result and for
the reasons discussed above and in the notice of proposed rulemaking,
FHFA is
[[Page 12755]]
adopting the proposed rule as a final rule without change.
---------------------------------------------------------------------------
\17\ Instead, the comment urged FHFA to recapitalize the
Enterprises.
---------------------------------------------------------------------------
III. Paperwork Reduction Act
The information collection, entitled ``Capital Requirements for the
Federal Home Loan Banks,'' contained in the 12 CFR parts 931 and 933 of
the regulations that are being relocated to 12 CFR part 1277 by this
final rule, has been assigned control number 2590-0002 by the Office of
Management and Budget (OMB). The final rule does not substantively or
materially modify the current, approved information collection. OMB has
approved the relocation of this information collection to part 1277 as
a non-substantive change under the Paperwork Reduction Act of 1995, 44
U.S.C. 3501, et seq.
IV. Regulatory Flexibility Act
The final rule applies only to the Banks, which do not come within
the meaning of small entities as defined in the Regulatory Flexibility
Act (RFA). See 5 U.S.C. 601(6). Therefore, in accordance with section
605(b) of the RFA, FHFA certifies that this final rule does not have a
significant economic impact on a substantial number of small entities.
List of Subjects
12 CFR Parts 931 and 933
Capital, Credit, Federal home loan banks, Investments, Reporting
and recordkeeping requirements.
12 CFR Part 1277
Capital, Credit, Federal home loan banks, Investments, Reporting
and recordkeeping requirements.
Accordingly, for reasons stated in the SUPPLEMENTARY INFORMATION
and under the authority of 12 U.S.C. 1426, 1436, 1440, 1443, 1446,
4511, 4513, 4526, FHFA hereby amends subchapter E of chapter IX and
subchapter D of chapter XII of title 12 of the Code of Federal
Regulations as follows:
CHAPTER IX--FEDERAL HOUSING FINANCE BOARD
Subchapter E--Federal Home Loan Bank Risk Management and Capital
Standards
PART 931--[REMOVED]
0
1. Remove part 931.
PART 933--[REMOVED]
0
2. Remove part 933.
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
Subchapter D--Federal Home Loan Banks
0
3. Part 1277 is added to read as follows:
PART 1277--FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS, CAPITAL
STOCK AND CAPITAL PLANS
Subpart A--Definitions
Sec.
1277.1 Definitions.
Subpart B--[Reserved]
Subpart C--Bank Capital Stock
1277.20 Classes of capital stock.
1277.21 Issuance of capital stock.
1277.22 Minimum investment in capital stock.
1277.23 Dividends.
1277.24 Liquidation, merger, or consolidation.
1277.25 Transfer of capital stock.
1277.26 Redemption and repurchase of capital stock.
1277.27 Other restrictions on the repurchase or redemption of Bank
stock.
Subpart D--Bank Capital Plans
1277.28 Bank capital plans.
1277.29 Amendments to a Bank's capital plan.
Authority: 12 U.S.C. 1426, 1436(a), 1440, 1443, 1446, 4511,
4513, 4514, 4526, 4612.
Subpart A--Definitions
Sec. 1277.1 Definitions.
As used in this part:
Class A stock means capital stock issued by a Bank, including
subclasses, that has the characteristics specified by Sec. 1277.20(a).
Class B stock means capital stock issued by a Bank, including
subclasses, that has the characteristics specified by Sec. 1277.20(b).
Former member means an institution for which the membership in a
Bank has been terminated but which continues to hold stock in the Bank
as required by the Bank's capital plan, and includes any successor to
such institution that continues to hold the stock in the Bank that had
been issued to the acquired institution.
General allowance for losses means an allowance established by the
Bank in accordance with GAAP for losses, but which does not include any
amounts held against specific assets of the Bank.
Minimum investment means the minimum amount of stock that an
institution is required to own in order to be a member of a Bank and in
order to obtain advances and to engage in other business activities
with the Bank in accordance with Sec. 1277.22.
Permanent capital means the retained earnings of a Bank, determined
in accordance with GAAP, plus the amount paid-in for the Bank's Class B
stock.
Redeem or Redemption means the acquisition by a Bank of its
outstanding Class A or Class B stock at par value following the
expiration of the six-month or five-year statutory redemption period,
respectively, for the stock.
Regulatory capital requirements means the minimum amounts of
permanent and total capital that a Bank is required to maintain under
section 6(a) of the Bank Act (12 U.S.C. 1426(a)) and any related
regulations, as such requirements may be modified by the Director, or
any similar requirement established for a Bank by regulation, order,
written agreement or other action.
Repurchase means the acquisition by a Bank of excess stock prior to
the expiration of the six-month or five-year statutory redemption
period for the stock.
Total capital of a Bank means the sum of permanent capital, the
amounts paid-in for Class A stock, the amount of any general allowance
for losses, and the amount of other instruments identified in a Bank's
capital plan that the Director has determined to be available to absorb
losses incurred by such Bank.
Subpart B--[Reserved]
Subpart C--Bank Capital Stock
Sec. 1277.20 Classes of capital stock.
The authorized capital stock of a Bank shall consist of the
following instruments:
(a) Class A stock, which shall:
(1) Have a par value as determined by the board of directors of the
Bank and stated in the Bank's capital plan;
(2) Be issued, redeemed, and repurchased only at its stated par
value; and
(3) Be redeemable in cash only on six-months written notice to the
Bank.
(b) Class B stock, which shall:
(1) Have a par value as determined by the board of directors of the
Bank and stated in the Bank's capital plan;
(2) Be issued, redeemed, and repurchased only at its stated par
value;
(3) Be redeemable in cash only on five-years written notice to the
Bank; and
(4) Confer an ownership interest in the retained earnings, surplus,
undivided profits, and equity reserves of the Bank.
(c) Any one or more subclasses of Class A or Class B stock, each of
which may have different rights, terms, conditions, or preferences as
may be authorized in the Bank's capital plan, provided, however, that
each subclass of stock shall have all of the characteristics of its
respective class, as specified in paragraph (a) or (b) of this section.
[[Page 12756]]
Sec. 1277.21 Issuance of capital stock.
A Bank may issue either one or both classes of its capital stock
(including subclasses), as authorized by Sec. 1277.20, and shall not
issue any other class of capital stock. A Bank shall issue its stock
only to its members, or to former members to the extent those
institutions are required to maintain a minimum stock investment for
existing activities under the capital plan, and only in book-entry
form. The Bank shall act as its own transfer agent. All capital stock
shall be issued in accordance with the Bank's capital plan.
Sec. 1277.22 Minimum investment in capital stock.
(a) A Bank shall require each member to maintain a minimum
investment in the capital stock of the Bank, both as a condition to
becoming and remaining a member of the Bank and as a condition to
transacting business with the Bank or obtaining advances and other
services from the Bank. The amount of the required minimum investment
shall be determined in accordance with the Bank's capital plan and
shall be sufficient to ensure that the Bank remains in compliance with
its regulatory capital requirements. A Bank shall require each member
to maintain its minimum investment for as long as the institution
remains a member of the Bank and shall require each member and former
member to maintain its minimum investment for as long as the
institution engages in any activity with the Bank for which the capital
plan requires the institution to maintain capital stock.
(b) A Bank may establish the minimum investment as a percentage of
the total assets of an institution, as a percentage of the advances
outstanding to that institution, as a percentage of any other business
activity conducted with the institution, on any other basis that is
approved by the Director, or any combination thereof.
(c) A Bank may require that the minimum investment requirement be
satisfied through the purchase of either Class A or Class B stock, or
through the purchase of one or more combinations of Class A and Class B
stock that have been authorized by the board of directors of the Bank
in its capital plan. A Bank, in its discretion, may establish a lower
minimum investment to the extent the requirement is met through
investment in Class B stock than if the requirement is met through
investment in Class A stock, provided that such reduced investment
provides sufficient capital for the Bank to remain in compliance with
its regulatory capital requirements.
(d) Each member, or if applicable, former member, of a Bank shall
at all times maintain an investment in the capital stock of the Bank in
an amount that is sufficient to satisfy the minimum investment required
under the Bank's capital plan.
Sec. 1277.23 Dividends.
(a) In general. A Bank may pay dividends on Class A or Class B
stock, including any subclasses of such stock, only out of previously
retained earnings or current net earnings, and shall declare and pay
dividends only as provided by its capital plan. The capital plan may
establish different dividend rates or preferences for each class or
subclass of stock, which may include a dividend that tracks the
economic performance of certain Bank assets, such as Acquired Member
Assets. A member, including a member that has provided the Bank with a
notice of intent to withdraw from membership, or a former member shall
be entitled to receive any dividends that a Bank declares on its
capital stock while such institution owns the stock.
(b) Limitation on payment of dividends. In no event shall a Bank
declare or pay any dividend on its capital stock if after doing so the
Bank would fail to meet any of its regulatory capital requirements, nor
shall a Bank that is not in compliance with any of its regulatory
capital requirements declare or pay any dividend on its capital stock.
Sec. 1277.24 Liquidation, merger, or consolidation.
The respective rights of the Class A and Class B stockholders, in
the event that the Bank is liquidated, merged, or otherwise
consolidated with another Bank, shall be determined in accordance with
the capital plan of the Bank, provided, however, that nothing in the
capital plan shall be construed to limit any rights or authority
granted FHFA under the Bank Act or the Safety and Soundness Act to
issue any regulation or order or to take any other action that may
affect or otherwise alter the rights or privileges of stock holders in
a liquidation, merger, or consolidation of a Bank.
Sec. 1277.25 Transfer of capital stock.
A Bank in its capital plan may allow a member or former member to
transfer any excess stock to a member of that Bank or to an institution
that has been approved for membership in that Bank and that has
satisfied all conditions for becoming a member, other than the purchase
of the minimum amount of Bank stock that it is required to hold as a
condition of membership. Any such stock transfers shall be at par value
and shall be effective upon being recorded on the appropriate books and
records of the Bank. The Bank may, in its capital plan, require that
the transfer be approved by the Bank before such transfer can occur.
Sec. 1277.26 Redemption and repurchase of capital stock.
(a) Redemption. (1) A member or former member may have its stock in
a Bank redeemed by providing written notice to the Bank in accordance
with this section. A member or former member shall provide six-months
written notice for Class A stock and five-years written notice for
Class B stock. The notice shall indicate the number of shares of Bank
stock that are to be redeemed. No more than one notice of redemption
may be outstanding at one time for the same shares of Bank stock. At
the expiration of the applicable notice period, the Bank shall pay to
the member or other institution holding the stock the stated par value
of that stock in cash.
(2) A member may cancel a notice of redemption by so informing the
Bank in writing, and the Bank may impose a fee (to be specified in its
capital plan) with respect to any cancellation of a pending notice of
redemption. A request by a member (whose membership has not been
terminated) to redeem specific shares of stock shall automatically be
cancelled if the Bank is prevented from redeeming the member's stock by
paragraph (c) of this section within five business days from the end of
the expiration of the applicable redemption notice period because the
member would fail to maintain its minimum investment in the stock of
the Bank after such redemption. The automatic cancellation of a
member's redemption request shall have the same effect as if the member
had cancelled its notice to redeem stock prior to the end of the
redemption notice period, and a Bank may impose a fee (to be specified
in its capital plan) for automatic cancellation of a redemption
request.
(3) A Bank shall not be obligated to redeem its capital stock other
than in accordance with this paragraph.
(b) Repurchase. A Bank, in its discretion and without regard to the
applicable redemption periods, may repurchase excess stock in
accordance with the capital plan of that Bank. A Bank undertaking such
a stock repurchase at its own initiative shall provide reasonable
notice prior to repurchasing any excess stock, with the period of such
notice to be specified in the Bank's capital plan, and shall pay the
stated par value of that stock in
[[Page 12757]]
cash. A member's submission of a notice of intent to withdraw from
membership, or its termination of membership in any other manner, shall
not, in and of itself, cause any Bank stock to be deemed excess stock
for purposes of this section.
(c) Limitation. In no event may a Bank redeem or repurchase any
stock if, following the redemption or repurchase, the Bank would fail
to meet its regulatory capital requirements, or if the member or former
member would fail to maintain its minimum investment in the stock of
the Bank, as required by Sec. 1277.22.
Sec. 1277.27 Other restrictions on the repurchase or redemption of
Bank stock.
(a) Capital impairment. A Bank may not redeem or repurchase any
capital stock without the prior written approval of the Director if the
Director or the board of directors of the Bank has determined that the
Bank has incurred or is likely to incur losses that result in or are
likely to result in charges against the capital of the Bank. This
prohibition shall apply even if a Bank is currently in compliance with
its regulatory capital requirements, and shall remain in effect for
however long the Bank continues to incur such charges or until the
Director determines that such charges are not expected to continue.
(b) Bank discretion to suspend redemption. A Bank, upon the
approval of its board of directors, or of a subcommittee thereof, may
suspend redemption of stock if the Bank reasonably believes that
continued redemption of stock would cause the Bank to fail to meet its
regulatory capital requirements, would prevent the Bank from
maintaining adequate capital against a potential risk that may not be
adequately reflected in its regulatory capital requirements, or would
otherwise prevent the Bank from operating in a safe and sound manner. A
Bank shall notify the Director in writing within two business days of
the date of the decision to suspend the redemption of stock, providing
the reasons for the suspension and the Bank's strategies and time
frames for addressing the conditions that led to the suspension. The
Director may require the Bank to re-institute the redemption of stock.
A Bank shall not repurchase any stock without the written permission of
the Director during any period in which the Bank has suspended
redemption of stock under this paragraph.
Subpart D--Bank Capital Plans
Sec. 1277.28 Bank capital plans.
Each Bank shall have in place a capital plan approved by the Bank's
board of directors and the Director. The capital plan shall include, at
a minimum, provisions addressing the following matters:
(a) Minimum investment. (1) The capital plan shall require each
member, and if applicable each former member, to purchase and maintain
a minimum investment in the capital stock of the Bank and prescribe the
manner for calculating the minimum investment, in accordance with Sec.
1277.22.
(2) The capital plan shall specify the amount and class (or
classes) of Bank stock that an institution is required to own in order
to become and remain a member of the Bank, and to obtain advances from,
or to engage in other business transactions with, the Bank. If a Bank
requires that the minimum investment be satisfied through the purchase
of one or more combinations of Class A and Class B stock, the
authorized combinations of stock shall be specified in the capital
plan, which shall afford the option of satisfying the minimum
investment through the purchase of any such combination of stock.
(3) The capital plan shall require the board of directors of the
Bank to monitor and, as necessary, to adjust, the minimum investment to
ensure that outstanding stock remains sufficient for the Bank to comply
with its regulatory capital requirements. The plan shall require each
member or, where required by the plan, former member, to comply
promptly with any adjusted minimum investment established by the board
of directors of the Bank, but may allow a reasonable time to do so and
may allow a reduction in outstanding business with the Bank as an
alternative to purchasing additional stock.
(b) Classes of capital stock. The capital plan shall specify the
class or classes of stock (including subclasses, if any) that the Bank
will issue, and shall establish the par value, rights, terms, and
preferences associated with each class (or subclass) of stock. A Bank
may establish preferences relating to, but not limited to, the
dividend, voting, or liquidation rights for each class or subclass of
Bank stock. Any voting preferences established by the Bank pursuant to
Sec. 1261.6 of this chapter shall expressly state the voting rights of
each class of stock with regard to the election of Bank directors. The
capital plan shall provide that the owners of the Class B stock own the
retained earnings, surplus, undivided profits, and equity reserves of
the Bank, but shall have no right to receive any portion of those
items, except through declaration of a dividend or capital distribution
approved by the board of directors or through the liquidation of the
Bank.
(c) Dividends. The capital plan shall establish the manner in which
the Bank will pay dividends, if any, on each class or subclass of
stock, and shall provide that the Bank may not declare or pay any
dividends if it is not in compliance with any regulatory capital
requirement or if after paying the dividend it would not be in
compliance with any regulatory capital requirement.
(d) Stock transactions. The capital plan shall establish the
criteria for the issuance, redemption, repurchase, transfer, and
retirement of stock issued by the Bank. The capital plan also:
(1) Shall provide that the Bank may not issue stock other than in
accordance with Sec. 1277.21;
(2) Shall provide that the stock of the Bank may be issued only to
and held only by the members of that Bank, and by former members to the
extent necessary to meet requirements set forth in a capital plan;
(3) Shall specify whether the stock of the Bank may be transferred,
as allowed under Sec. 1277.25, and, if such transfer is allowed, shall
specify the procedures to effect such transfer, and provide that the
transfer shall be undertaken only in accordance with Sec. 1277.25;
(4) Shall specify that the stock of the Bank may be traded only
among the Bank and its members, and former members;
(5) May provide for a minimum investment based on investment in
Class B stock that is lower than a minimum investment based on
investment in Class A stock, provided that the level of investment is
sufficient for the Bank to comply with its regulatory capital
requirements;
(6) Shall specify the fee, if any, to be imposed upon cancellation
of a request to redeem Bank stock or upon cancellation of a request to
withdraw from membership; and
(7) Shall specify the period of notice that the Bank will provide
before the Bank, on its own initiative, determines to repurchase any
excess Bank stock.
(e) Termination of membership. The capital plan shall address the
manner in which the Bank will provide for the disposition of its
capital stock that is held by institutions that terminate their
membership, and the manner in which the Bank will liquidate claims
against such institutions, including claims resulting from prepayment
of advances prior to their stated maturity.
[[Page 12758]]
Sec. 1277.29 Amendments to a Bank's capital plan.
(a) In general. A Bank's board of directors shall approve any
amendments to the Bank's capital plan and submit such amendment to the
Director for approval. No such amendment may take effect until it has
been approved by the Director.
(b) Submission of amendments for approval. Any request for approval
of capital plan amendments should be submitted to the Deputy Director
for the Division of Federal Home Loan Bank Regulation and should
include the following:
(1) The name of the Bank making the request and the name, title,
and contact information of the official filing the request;
(2) The name, title and contact information of the staff member(s)
whom FHFA may contact for additional information;
(3) A certification by an executive officer of the Bank with
knowledge of the facts that the representations made in the request are
accurate and complete. The following form of certification may be used:
``I hereby certify that the statements contained in the submission are
true and complete to the best of my knowledge. [Name and Title]'';
(4) A written, narrative description of the proposed amendments to
the Bank's capital plan and a discussion of the Bank's reasons for the
proposed changes;
(5) The amended capital plan as approved by the Bank's board of
directors;
(6) A version of the Bank's capital plan showing all proposed
changes to its previously approved capital plan;
(7) Resolutions of the Bank's board of directors:
(i) Approving the proposed capital plan amendments; and
(ii) Authorizing the filing of the application for approval of the
amendments and concurring in substance with the supporting
documentation provided;
(8) An opinion of counsel demonstrating that the proposed
amendments comply with the Bank Act, FHFA regulations and any other
applicable law or regulation. If the amendments would be identical in
substance to provisions approved for other Banks' capital plans, a
Bank's legal analysis may reference the other capital plans that
contain the provisions in question;
(9) An analysis of the effect of the proposed amendments, if any,
on the Bank's capital levels and the Bank's ability to meet its
regulatory capital requirements;
(10) Pro forma financial statements from the end of the quarter
immediately prior to the date of submission of the request for approval
through at least the end of the next two years, showing the impact of
the proposed changes, if any, on capital levels; and
(11) A discussion of and an explanation for changes to the Bank's
strategic plan, if any, which may be related to the capital plan
amendments.
(c) FHFA consideration of the amendment. The Director may approve
any amendment to a Bank's capital plan as submitted or may condition
approval on the Bank's compliance with certain stated conditions.
Dated: March 2, 2015.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2015-05268 Filed 3-10-15; 8:45 am]
BILLING CODE 8070-01-P
