§ 1277.1 - Definitions.

§ 1277.1 Definitions.

Cross Reference

Link to an amendment published at 84 FR 5325, Feb. 20, 2019.

As used in this part:

Affiliated counterparty means a counterparty of a Bank that controls, is controlled by, or is under common control with another counterparty of the Bank. For the purposes of this definition only, direct or indirect ownership (including beneficial ownership) of more than 50 percent of the voting securities or voting interests of an entity constitutes control.

Bankruptcy remote means, in the context of any asset that a Bank has posted as collateral to a counterparty, that the asset would be excluded from that counterparty's estate in receivership, insolvency, liquidation, or similar proceeding.

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).

Collateralized mortgage obligation, or CMO, means any instrument backed or collateralized by residential mortgages or residential mortgage securities, that includes two or more tranches or classes, or is otherwise structured in any manner other than as a pass-through security.

Commitment to make an advance or acquire a loan subject to certain drawdown means a legally binding agreement that commits the Bank to make an advance or acquire a loan, at or by a specified future date.

Credit derivative means a derivative contract that transfers credit risk.

Credit risk means the risk that the market value, or estimated fair value if market value is not available, of an obligation will decline as a result of deterioration in the creditworthiness of the obligor.

Derivatives clearing organization means an organization that clears derivative contracts and is registered with the Commodity Futures Trading Commission as a derivatives clearing organization pursuant to section 5b(a) of the Commodity Exchange Act (7 U.S.C. 7a-1), or that the Commodity Futures Trading Commission has exempted from registration by rule or order pursuant to section 5b(h) of the Commodity Exchange Act (7 U.S.C. 7a-1(h)), or is registered with the Securities and Exchange Commission as a clearing agency pursuant to section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1), or that the SEC has exempted from registration as a clearing agency under section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1(k)).

Derivative contract means generally a financial contract the value of which is derived from the values of one or more underlying assets, reference rates, or indices of asset values, or credit-related events. Derivative contracts include interest rate, foreign exchange rate, equity, precious metals, commodity, and credit derivative contracts, and any other instruments that pose similar counterparty credit risks.

Eligible master netting agreement has the same meaning as set forth in § 1221.2 of this chapter.

Exchange rate contracts include cross-currency interest-rate swaps, forward foreign exchange rate contracts, currency options purchased, and any similar instruments that give rise to similar risks.

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.

Government Sponsored Enterprise, or GSE, means a United States Government-sponsored agency or instrumentality established or chartered to serve public purposes specified by the United States Congress, but whose obligations are not obligations of the United States and are not guaranteed by the United States.

Internal cash-flow model means a model developed and used by a Bank to estimate the potential evolving changes in the cash flows and market values of a portfolio for each month, extending out for a period of years, subject to a variety of plausible time paths of changes in interest rates, volatilities, and option adjusted spreads, and that incorporates assumptions about new or revolving business, including the roll-off and possible replacement of assets and liabilities as required.

Internal market-risk model means a model developed and used by a Bank to estimate the potential change in the market value of a portfolio subject to an instantaneous change in interest rates, volatilities, and option-adjusted spreads.

Market risk means the risk that the market value, or estimated fair value if market value is not available, of a Bank's portfolio will decline as a result of changes in interest rates, foreign exchange rates, or equity or commodity prices.

Market value-at-risk is the loss in the market value of a Bank's portfolio measured from a base line case, where the loss is estimated in accordance with § 1277.5.

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.

Non-mortgage asset means an asset held by a Bank other than an advance, a non-rated asset, a residential mortgage asset, a collateralized mortgage obligation, or a derivative contract.

Non-rated asset means a Bank's cash, premises, plant and equipment, and investments authorized pursuant to § 1265.3(e) and (f) of this chapter.

Operational risk means the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.

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.

Residential mortgage means a loan secured by a residential structure that contains one-to-four dwelling units, regardless of whether the structure is attached to real property. The term encompasses, among other things, loans secured by individual condominium or cooperative units and manufactured housing, whether or not the manufactured housing is considered real property under state law, and participation interests in such loans.

Residential mortgage asset, or RMA, means any residential mortgage, residential mortgage pool, or residential mortgage security.

Residential mortgage security means any instrument representing an undivided interest in a pool of residential mortgages.

Sales of federal funds subject to a continuing contract means an overnight federal funds loan that is automatically renewed each day unless terminated by either the lender or the borrower.

Total assets mean the total assets of a Bank, as determined in accordance with generally accepted accounting principles (GAAP).

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.

[80 FR 12755, Mar. 11, 2015, as amended at 84 FR 5325, Feb. 20, 2019]