ICBA: FHFA guidance on FHLBank liquidity won’t work

ICBA and state community banking associations told the Federal Housing Finance Agency that its recent Advisory Bulletin to the FHLBanks regarding credit risk management expectations for member institutions lacked both clarity and statutory authority.

Details: In a joint letter to FHFA, ICBA and the other groups expressed concerns that the Advisory Bulletin lacks clarity, creates uncertainty, and could disrupt community bank access to the FHLB System. The groups also emphasized that community banks rely on FHLBank advances for liquidity and oppose any regulatory action that undermines community bank access to the system.

Background: The FHFA last month sent an Advisory Bulletin to the FHLBanks that detailed expectations for providing members access to advances in a safe and sound manner.

ICBA View: ICBA is deeply concerned about the impact of the FHFA’s ongoing review of the FHLBank mission and its impact on the ability of the system to provide liquidity to community banks.

• In a recent article in American Banker (subscription required), ICBA’s Tim Roy said the FHFA does not have the authority to redefine the FHLBank mission and any change must be approved by Congress.

• ICBA issued a national news release following an FHLBank of New York message noting it would impose additional reporting requirements to align with the FHFA’s more restrictive approach to lending.

• ICBA recently set up a FHLB Task Force, composed of community bankers from each FHLB district, to focus exclusively on FHLB reform and advocacy.

Previous Comments: Following last fall’s comprehensive FHFA report on the FHLBanks, ICBA urged the agency to ensure any new policies affecting the system do not disrupt it as a source of liquidity for community banks. ICBA also offers a high-level summary of the report outlining its views on the agency’s policy recommendations.