FHFA Finalizes Rule on Federal Home Loan Bank Capital Requirements

The final rule carries over most of the existing Finance Board regulations without material change, but substantively revises the credit risk component of the risk-based capital requirement as well as the limitations on extensions of unsecured credit. The principal revisions to those provisions remove requirements that the banks calculate credit risk capital charges and unsecured credit limits based on ratings issued by a Nationally Recognized Statistical Rating Organization (NRSRO), and instead require that the banks use their own internal rating methodology. The final rule also revises the percentages used in the tables to calculate the credit risk capital charges for advances and non-mortgage assets. FHFA retains the percentages used in the existing table to calculate the capital charges for mortgage-related assets, but revises the approach to identify the appropriate percentage within the table. FHFA also has revised the table numbers in the final rule to align with the Federal Register's new formatting standards, which were revised after publication of the proposed rule.

Related Link: Final Rule in Federal Register

Effective Date: January 01, 2020

Keywords: Americas, US, Banking, Capital Requirements, Credit Risk, Mortgage Lending, FHFA