On September 27, the FHFA
released its
NPRM and request for comment to amend capital requirements for FHLBanks to modify limits on unsecured credit extensions. The proposal seeks to exclude interest-bearing deposit accounts (IBDAs) and other authorized overnight investments from the more restrictive “general limit” on unsecured credit to a single counterparty. This change is aimed at providing greater flexibility and enhancing FHLBanks’ liquidity management capabilities.
The FHFA’s proposed rule would add the term, “authorized overnight investments,” to include investments with a maturity of one day or less, such as deposits in banks or trust companies, but exclude demand accounts in Federal Reserve Banks. This change would allow FHLBanks to manage liquidity effectively by utilizing IBDAs, which offer higher yields and greater intraday liquidity flexibility compared to overnight federal funds. In addition, the proposed rule aims to clarify the measurement of unsecured credit exposure to include intraday exposure and calculation methods for total capital.
By expanding the types of investments subject only to the higher overall limit, the NPRM aims to enhance the FHLBanks’ abilities to meet short-term liquidity needs and reduce the overall cost of holding liquidity assets. Comments on the rule must be received within 60 days following publication in the Federal Register.
