§ 935.13 - Restrictions on advances to members that are not qualified thrift lenders.

(a) Restrictions on advances to non-QTL members. (1) Except as provided in paragraphs (a)(4) and (a)(5) of this section, a Bank may make or renew an advance to a non-QTL member only under the following conditions:

(i) The advance is for the purpose of purchasing or funding new or existing residential housing finance assets, as determined pursuant to paragraph (a)(2) of this section;

(ii) The member holds Bank stock at the time it receives the advance in an amount equal to at least five percent of the outstanding principal amount of the member's total advances, divided by such member's ATIP, calculated pursuant to paragraph (a)(3) of this section; and

(iii) Making the advance will not cause the aggregate amount of advances issued by the twelve Banks to non-QTL members to exceed 30 percent of the aggregate amount of the twelve Banks’ total outstanding advances.

(2) Prior to approving an application for an advance by a non-QTL member, a Bank shall determine that the principal amount of all advances outstanding to the member at the time the advance is requested does not exceed the total book value of residential housing finance assets held by such member, which shall be determined using the most recent Report of Condition and Income or financial statement made available by the member.

(3)(i) A Bank shall calculate each non-savings association member's ATIP at least annually, between July 1 and October 31, based upon financial data as of June 30 of that calendar year. The Bank may, in its discretion, calculate a member's ATIP more frequently than annually.

(ii) In determining a non-savings association member's annual ATIP, a Bank shall use the financial information from the member's June 30 call report as the primary source of information. A Bank making ATIP determinations other than as part of the annual QTL determination (whether for existing members or new members) shall use the member's most recent call report, except that in determining the amount of a member's loan to small businesses a Bank may use the information for such loans on the member's most recent June 30 call report. If any information necessary for determining the member's ATIP is not separately identified on a member's call report, the Bank may rely on a written certification provided by the member that attests to the dollar amount and composition of those other assets that meet the definitions of “qualified thrift investments” or “portfolio assets” as of the date of the call report. Notwithstanding the preceding two sentences, a Bank may, at its option, accept from a non-savings association member preliminary information as to the dollar amount and composition of assets that meet the definitions of “qualified thrift investments” or “portfolio assets,” provided that the Bank thereafter verifies against the most recent call report the accuracy of any items that are also available from the call report. In any case in which a Bank relies on a certification from a non-savings association member as to its level of “qualified thrift investments” or “portfolio assets,” the certification must recite that the information is accurate as of the date specified, must be in writing and be signed and dated by the chief executive officer of the member. The chief executive officer may delegate authority to sign and date the certification to the chief financial officer, chief operating officer, or controller of the member.

(iii) For purposes of this section, the term“call report” shall include:

(A) With respect to a commercial bank, the annual or quarterly “Report of Condition and Income“ submitted to its appropriate Federal banking agency;

(B) With respect to a credit union, the quarterly or semi-annual call report submitted to the National Credit Union Administration; and

(C) With respect to an insurance company, its National Association of Insurance Commissioners annual regulatory filing.

(iv) For purposes of this section, the amount of a member's “loans to small businesses” shall include any commercial business loan (or series of loans to the same borrower) in the original amount of $1 million or less, any farm loan (or series of loans to the same borrower) in the original amount of $500,000 or less, and any loan to a “small business” as that term is defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a), and implemented by the Small Business Administration at 13 CFR part 121, or any successor provisions.

(4) The requirements of paragraphs (a) (1), (2), and (3) of this section shall not apply to:

(i) A savings bank, as defined in section 3(g) of the Federal Deposit Insurance Act, as amended (12 U.S.C. 1813(g)); or

(ii) A Federal savings association in existence as such on August 9, 1989 that:

(A) Was a state chartered savings bank or cooperative bank before October 15, 1982; or

(B) Acquired its principal assets from an institution that was a state chartered savings bank or cooperative bank before October 15, 1982.

(5) The requirements of paragraph (a)(2) of this section shall not apply to applications from non-savings association members for CICA advances.

(b) Priority for QTL members. (1) Except as provided in paragraph (b)(3) of this section, if a Bank is unable to meet the aggregate advance demand of all of its members, the Bank shall give priority to applications for advances from its QTL members, subject to the following considerations:

(i) The effect of making the advances on the financial integrity of the Bank;

(ii) The member's creditworthiness;

(iii) The availability of funding with maturities compatible with advances applications; and

(iv) Any other factors that the Bank determines to be relevant.

(2) The institutions identified in paragraph (a)(4) of this section shall be treated as QTLs for purposes of this paragraph (b).

(3) The requirement of paragraph (b)(1) of this section shall not apply to a Bank's special, or otherwise limited, advance offerings.

(c) Additional restrictions on advances to non-QTL savings associations. (1) Either the Bank's written advances agreement required by § 935.4(b)(2) of this part or the written advances application authorized in § 935.4(a) of this part shall require that each savings association member, which pursuant to the QTL requirements of the OTS becomes ineligible for Bank advances, immediately provide its Bank with written notification of its ineligibility.

(2) Except as requested in writing by the OTS, or as authorized in § 935.18(c) of this part, a Bank shall not make an advance to a savings association member after receiving written notification from such member or from the OTS that such member is ineligible for advances pursuant to the QTL requirements of the OTS.

(d) Repayment of advances by non-QTL savings association members. (1) Each Bank, if informed by a savings association member or the OTS that the member has failed to regain its QTL status and is required to repay said member's advances prior to maturity, shall, in conjunction with the non-QTL savings association member, develop a schedule for the prompt and prudent repayment of any outstanding advances held by that member, consistent with the member's and the Bank's safe and sound operations.

(2) The schedule agreed to under paragraph (d)(1) of this section shall be provided promptly by the Bank to the Board and the OTS.

(e) Advance commitments. Either the Bank's written advances agreement required by § 935.4(b)(2) of this part or the written advances application authorized in § 935.4(a) of this part shall stipulate that the Bank shall not honor advance commitments previously made to members whose access to advances is subsequently restricted pursuant to paragraphs (a) or (c) of this section.

(The Office of Management and Budget approved the information collection requirements contained in this section and assigned control number 3069-0057 with an expiration date of April 30, 2000)