[Federal Register Volume 59, Number 13 (Thursday, January 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1213]
[[Page Unknown]]
[Federal Register: January 20, 1994]
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FEDERAL HOUSING FINANCE BOARD
12 CFR Part 935
[No. 93-97]
Advances to Capital Deficient Members, and Other Matters
AGENCY: Federal Housing Finance Board.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending
its regulations to incorporate requirements governing secured loans
(called advances) made by the Federal Home Loan Banks (Banks) to
capital deficient members. The final rule prohibits Bank lending to
tangibly insolvent members, except at the request of the appropriate
federal regulator or insurer, and restricts the Banks from lending to
other capital deficient members whose use of Bank advances has been
prohibited by the appropriate federal regulator or insurer.
In addition, the final rule provides that a Bank may allow a member
to assume advances held by a nonmember, as long as the advances had
previously been extended by the Bank to another of its members. The
final rule also changes the definition of nursing homes from
nonresidential to residential real property, which means that mortgage
loans backed by nursing homes are eligible collateral for advances.
EFFECTIVE DATE: February 22, 1994.
FOR FURTHER INFORMATION CONTACT: Christine M. Freidel, Financial
Analyst, (202) 408-2976; Thomas D. Sheehan, Assistant Director, (202)
408-2870, District Banks Directorate; James H. Gray Jr., Associate
General Counsel, Office of Legal and External Affairs, (202) 408-2552;
Federal Housing Finance Board, 1777 F Street, NW., Washington, DC
20006.
SUPPLEMENTARY INFORMATION:
I. Background
On September 23, 1993, the Finance Board published for 30-day
public comment a proposed rule governing advances to capital deficient
members and other matters. See 58 FR 49446. The provisions in the
proposed rule addressing Bank lending to capital deficient members
closely paralleled the Finance Board's current policy on lending to
capital deficient members.
The Finance Board received six comment letters on the proposed
rule. Comment letters were submitted by three Banks, two trade
associations, and a federal savings bank member. In general, the
comment letters concurred with the overall intent of the provisions in
the proposed rule addressing lending to capital deficient members,
although there were conflicting views on the point at which access to
advances should be restricted. None of the comment letters addressed
the transfer of advances, and one comment letter addressed the
treatment of nursing home loans as eligible collateral.
Based on the comment letters received, the Finance Board is
publishing the final rule on lending to capital deficient members as
proposed, except that the definition of tangible capital has been
changed to permit members to include purchased mortgage servicing
rights to the extent a member has included such assets in core or Tier
1 capital.
II. Analysis of Final Rule
A. Lending to Capital Deficient Members
1. Background
In April 1992, the Finance Board adopted policy guidelines
governing the extension of advances to capital deficient members. See
Finance Board Resolution No. 92-277.1. The policy precludes the Banks
from making new advances available to members without positive tangible
capital, unless a member's regulator requests that the Bank provide
such funding and the Bank determines it can safely make the advance.
The Banks may extend new advances to undercapitalized but solvent
members without regulatory approval, but must refrain from doing so at
the request of the appropriate federal banking agency or insurer. The
policy permits the Banks to renew existing advances to tangibly
insolvent members for terms of up to 30 days without regulatory
approval.
Prior to the adoption of these policy guidelines, there were no
Finance Board-mandated restrictions on a Bank's ability to lend to an
insolvent member. The Federal Home Loan Bank Act (Bank Act) does not
address lending to capital deficient members. Although the secured
nature of advances generally protects the Banks from credit risk, the
Finance Board was concerned that, by making advances available to
certain capital deficient members, a Bank could inadvertently
contravene the wishes of a member's federal regulator.
2. New Advances to Members Without Positive Tangible Capital
Section 935.5(b) of the final rule restricts a Bank from making a
new advance to a member that does not have positive tangible capital,
unless the appropriate federal banking agency or insurer requests in
writing that funding be made available to such member. Section 935.5(b)
of the final rule also requires each Bank to promptly provide the
Finance Board with a copy of any such written request. A Bank shall use
the most recently available Report of Condition and Income (Call
Report), Thrift Financial Report (TFR), or other regulatory report of
financial condition to determine whether a member has positive tangible
capital.
The comment letters provided conflicting views on the appropriate
point to require regulatory approval for member access to advances. One
Bank commenter believes the regulators already have adequate authority
and power to limit advance borrowings by capital deficient and
insolvent members. The Bank commented that it is not necessary for the
Banks to become part of the regulatory process by subjecting themselves
to the direction of the shareholders' regulators.
A trade association for community bankers recommended that the
final rule preclude the Banks from making advances to critically
undercapitalized members (i.e., members with tangible capital equal to
two percent or less of assets) without regulatory approval.
A thrift trade association commented that the Banks should be
permitted to lend to members without positive tangible capital unless
the appropriate federal regulator objects. The comment letter notes
that the decision to fund an advance should be an independent credit
decision made by a Bank and that the Banks are protected from default
by full collateralization. The trade association also recommended that
the final rule allow the Banks to lend to tangibly insolvent members
with approved capital restoration plans without regulatory approval.
While the Finance Board agrees that the federal banking regulators
have considerable authority to supervise member activities, the purpose
of this final rule is to ensure that the Banks do not inadvertently
contravene the supervisory objectives of a member's primary federal
regulator. The provisions in this final rule prohibiting Bank lending
to tangibly insolvent members have been in effect since April 1992 as
part of the Finance Board's policy on limiting Bank lending to capital
deficient members. Since these provisions have been quite effective,
the Finance Board does not see any reason to eliminate them.
The final rule uses tangible insolvency, rather than the definition
of critically undercapitalized, as the threshold level for requiring
regulatory approval of new advances. The Finance Board considers the
insolvency criterion to be appropriate because it limits access by
insolvent members while providing a measure of flexibility for capital
deficient members unless the appropriate federal banking agency or
insurer objects. The Finance Board believes it is more appropriate for
the federal banking agencies and insurer to determine whether a
critically undercapitalized member should have access to Bank advances,
than for the Finance Board to take unilateral action and prohibit the
Banks from providing advances to such members.
Regarding the comment that the Banks be permitted to lend to a
tangibly insolvent member unless the member's appropriate regulator
objects, the Finance Board believes that requiring regulatory approval
for Bank lending to insolvent members provides greater assurance that
the objective of the final rule will be met. Regarding the suggestion
that tangibly insolvent members operating under approved capital
restoration plans be permitted to borrow new advances without
regulatory approval, the Finance Board believes that tangible solvency
rather than approval of a capital restoration plan should be the
criterion for determining access to advances without regulatory
approval. The regulator may request that funding for a tangibly
insolvent member be continued.
The federal savings bank member commenter generally agreed with the
proposed rule but expressed concern about Bank lending to members
without positive tangible capital, even with regulatory approval. The
commenter recommended that provisions be included in the final rule to
ensure that a Bank's collateral position is secured should a member
borrower be placed in receivership. However, this is unnecessary since
section 10(a) of the Bank Act (12 U.S.C. 1430(a)) requires that
advances be fully secured and that each Bank, at the time an advance is
originated or renewed, obtain and maintain a security interest in
certain specified types of eligible collateral.
Therefore, Sec. 935.5(b) is being adopted in the final rule as
proposed.
3. Renewal of Advances to Members Without Positive Tangible Capital
Section 935.5(c)(1) of the final rule permits a Bank to renew an
outstanding advance to a member without positive tangible capital for
successive terms of up to 30 days each. This provision is intended to
allow a Bank to accommodate a tangibly insolvent member's need to find
alternative funding sources, while also limiting the Bank's exposure to
a weak institution. This section of the final rule also prohibits a
Bank from renewing advances to tangibly insolvent members if the
appropriate federal banking agency or insurer objects. Section
935.5(c)(2) of the final rule provides that a Bank may renew an advance
to a member without positive tangible capital for a term greater than
30 days at the written request of the appropriate federal banking
agency or insurer.
The thrift trade association commenter recommended that the Banks
be permitted to renew advances to a tangibly insolvent member for
periods of any length, unless the member's regulator requests that the
Bank not do so. The Finance Board does not consider this change to be
necessary since the final rule provides the Banks with the flexibility
to renew an advance for successive 30-day terms. This allows the Bank
to reassess the advisability of such renewals at regular intervals.
Furthermore, the Finance Board believes that the renewal of outstanding
advances to tangibly insolvent members should be a temporary measure
until the member finds alternative funding sources. Therefore,
Sec. 935.5(c) is being adopted as proposed.
4. Lending to Capital Deficient But Solvent Members
Section 935.5(d) of the final rule authorizes the Banks to make new
advances and renew outstanding advances to capital deficient members
(defined as members that fail to meet their minimum capital
requirements) that have positive tangible capital. However, the final
rule also directs the Banks not to make new advances or renew
outstanding advances to such capital deficient members upon receipt of
written notification from the appropriate federal regulator that the
member's access to advances has been prohibited.
The Finance Board wants to ensure that the Banks do not lend to
members whose access to advances has been restricted by the appropriate
federal banking agency or insurer. However, the Finance Board also
wants to ensure that the federal regulators, and not the Banks, have
the responsibility for determining whether a member's access to funding
should be restricted and for enforcing any directives that limit the
member's access to advances. The Finance Board therefore believes that
it is appropriate for a Bank to refrain from lending to a capital
deficient but tangibly solvent member after the appropriate federal
banking agency or insurer has established restrictions on the member's
access to Bank advances.
Accordingly, the final rule directs the Banks to refrain from
lending to a capital deficient but solvent member once the Bank
receives written notice from the appropriate federal regulator that the
member's use of Bank advances has been prohibited. The Bank may resume
lending to such a member once it receives a written statement from the
appropriate federal banking agency or insurer that re-establishes the
member's access to advances.
The community banker trade association recommended that members
that have been precluded from borrowing by their regulators be
permitted to petition the regulators for the resumption of funding. The
commenter believes that the proposed rule is unclear as to when the
regulator would be prompted to request the resumption of Bank funding
to an undercapitalized member.
The proposed rule provided that a Bank may resume funding to a
capital deficient but solvent member if it receives a written statement
from the appropriate federal banking agency or insurer which re-
establishes the member's ability to use advances. A member is always
entitled to petition its federal regulator or insurer. Therefore,
adding a provision to allow a member to petition its regulator is
unnecessary. In addition, since the Finance Board has no jurisdiction
in this area, such a provision would not be enforceable. Accordingly,
Sec. 935.5(d) is being adopted in the final rule as proposed.
5. Bank Determination That It Can Safely Make an Advance
Section 935.5(a)(3) reiterates the provision in the Bank Act that
all advances, including advances to tangibly insolvent members made at
the request of the appropriate federal banking agency or insurer, can
only be made if the Bank determines that it can safely make the advance
to the member. See 12 U.S.C. 1430(a).
6. Report of Outstanding Bank Advances
Section 935.5(e) of the final rule requires each Bank to provide
the Finance Board with a monthly report of outstanding Bank advances
and commitments to all members. Section 935.5(e) also directs the
Banks, upon written request from a member's appropriate federal banking
agency or insurer, to provide to such entity information on advances
and commitments outstanding to the member.
7. Capital Deficient Members That Are Not Federally Insured
Depositories
Section 935.5(f) of the final rule requires that, in the case of
members that are not federally insured depository institutions, the
relevant provisions in Sec. 935.5(b), (c), (d) and (e) apply to a
member's state regulator acting in a capacity similar to an appropriate
federal banking agency or insurer.
8. Advance Commitments
Section 935.5(g) of the final rule provides that the written
advances agreement required by Sec. 935.4(b)(2) of the Finance Board's
regulations, or the written advances application required by
Sec. 935.4(a) of the Finance Board's regulations, stipulate that a Bank
shall not fund commitments for advances, including Community Investment
Program and Affordable Housing Program advance commitments, previously
made to members whose access to advances was subsequently restricted
pursuant to Sec. 935.5. Consistent with Sec. 935.8 of the Finance
Board's advances regulation, a Bank may charge the member a fee for a
commitment cancellation resulting from the restrictions in Sec. 935.5.
Section 935.5(g) of the proposed rule provided that all commitments
entered into after August 25, 1993 were subject to the restrictions in
Sec. 935.5 to ensure that commitments entered into by the Banks from
the time the proposed rule was approved did not result in the Banks
inadvertently circumventing the wishes of the federal banking agencies
or insurer. The Finance Board reasoned that immediate application of
the restrictions on advance commitments was justifiable, given that the
Banks and their members have been aware of the Finance Board's views on
lending to capital deficient members since the adoption of the Finance
Board's capital deficient lending policy on April 22, 1992. The Finance
Board specifically requested comment on this issue.
Two comment letters addressed this issue. The community banker
trade association expressed support for this provision. The second
commenter, a Bank, opposed the provision. The Bank wrote that the final
rule should not affect commitments made before the Banks had received
notice of the proposed limitation and had an opportunity to assimilate
the requirement into their operations and applicable credit
documentation.
However, as stated earlier, the Banks have been subject to
limitations on lending to capital deficient members since April 1992.
The Finance Board believes this is adequate notice. Further, there is
good cause to make the limitation on commitments effective August 25,
1993, because using this date allowed the Banks to adjust their lending
policies to avoid making commitments to lend that would contravene the
requirements of the final rule. Therefore, Sec. 935.5(g) is being
adopted in the final rule as proposed.
Another Bank commented more generally on the commitment provisions
in Sec. 935.5(g). It opposes the provision precluding a Bank from
funding an outstanding commitment to a capital deficient member if the
appropriate federal regulator has restricted the member's access to
advances. The Bank believes this requirement could result in potential
asset/liability management complications and funding costs for the
Bank, and could have serious negative implications for the Bank's
membership and marketing efforts.
The Finance Board believes it is doubtful that a member would ask a
Bank to fund an outstanding commitment once the member has been
prohibited by its regulator from access to Bank advances, and does not
believe that a Bank should provide a member with funding that has been
explicitly prohibited by the member's regulator. A Bank's asset/
liability management costs should be minimized since a Bank may charge
a fee if it is required to cancel an outstanding commitment due to
regulatory action. Therefore, Sec. 935.5(g) is being adopted in the
final rule as proposed.
9. Definition of ``Tangible Capital''
The restrictions on access to Bank advances are triggered by a
member's level of tangible capital. Section 935.1 of the proposed rule
defined ``tangible capital'' as: (1) Capital, calculated according to
Generally Accepted Accounting Principles (GAAP), less ``intangible
assets'' as reported in the member's TFR for members whose primary
federal regulator is the Office of Thrift Supervision (OTS), or as
reported in the Call Report for members whose primary federal regulator
is the Federal Deposit Insurance Corporation (FDIC), the Office of the
Comptroller of the Currency (OCC) or the Board of Governors of the
Federal Reserve System (Federal Reserve Board); or (2) capital
calculated according to GAAP, less intangible assets, as defined by a
Bank for members which are not regulated by the OTS, the FDIC, the OCC,
or the Federal Reserve Board.
This definition of tangible capital is consistent with the
definition established by the FDIC in its final rulemaking on prompt
corrective action. See 57 FR 44886 (Sept. 29, 1992), 12 CFR part 325.
The prompt corrective action procedures provide a framework for
determining supervisory action for financial institutions. The FDIC has
implemented prompt corrective action procedures based on an
institution's level of core or Tier 1 capital. GAAP capital less
intangible assets results in a definition of tangible capital that is
similar to core or Tier 1 capital, as defined by the federal banking
agencies. See e.g., 12 CFR part 3, Appendix A, section 2(a) (OCC); 12
CFR part 208, Appendix A, II.A.1 (Federal Reserve Board); 12 CFR
325.2(m) (FDIC); 12 CFR 567.5(a) (OTS).
The comment letter from the thrift trade association recommended
that the final rule use the definition of ``tangible equity'' as
adopted by the OTS and the FDIC to determine whether a member is
tangibly solvent. The commenter noted that this definition permits
banks and savings associations to include qualifying purchased mortgage
servicing rights in the calculation of tangible capital and permits
savings associations to include qualifying supervisory goodwill.
The community banker trade association requested that the capital
definitions in the final rule be the same as those used in the prompt
corrective action regulations, and that the definition of tangible
capital include certain qualifying intangible assets such as purchased
mortgage servicing rights.
The proposed rule sought to incorporate definitions that the Banks
could easily verify using currently available regulatory reports.
Tangible equity is not reported on the Call Report filed by commercial
bank members, and capital measured according to the prompt corrective
action definitions is not reported on the Call Report or the TFR.
Therefore, if these definitions were used, the Banks or their members
would be required to perform a separate calculation to determine a
member's capital level. The Finance Board believes that this
requirement would place an unnecessary regulatory burden on the Banks
and their members.
However, the Finance Board agrees with the commenters that since
both commercial bank and thrift members may include a certain amount of
purchased mortgage servicing rights (PMSRs) in their calculation of
core or Tier 1 capital, it is appropriate that such assets also be
included in tangible capital for the purpose of determining access to
advances. Since PMSRs are a line item on the Call Report and TFR, this
should not place an undue reporting burden on the members. Therefore,
the Finance Board has decided to change the definition of tangible
capital in Sec. 935.1 of the final rule to include PMSRs, to the extent
such assets are included in the member's calculation of core or Tier 1
capital as reported in the member's TFR, Call Report, or other
regulatory report of financial condition. At the present time, thrifts
and commercial banks may include PMSRs in core or Tier 1 capital in an
amount up to 50 percent of core or Tier 1 capital. See e.g., 12 CFR
325.6(e)(3) (1993).
For members that are not federally insured depository institutions,
the Bank shall define intangible assets; provided that a Bank shall
include a member's PMSRs to the extent such assets are included for the
purpose of meeting regulatory capital requirements.
The community banker trade association also recommended that the
definition ``capital deficient member'' in the proposed rule be
replaced by the definition of undercapitalized in the banking agencies'
prompt corrective action regulations. However, the term ``capital
deficient member,'' which is defined as an institution that fails to
meet its minimum regulatory capital requirements, has been used since
the Finance Board adopted its policy in 1992. Given that the Banks and
their membership are familiar with this term, the Finance Board does
not see any reason to change it. Therefore, the definition of ``capital
deficient member'' is being adopted as proposed.
B. Transfer of Advances
The final rule amends Sec. 935.17 of the Finance Board's advances
regulation, which governs the transfer of advances. Section 935.17
provides that a Bank may allow one of its members to assume advances
previously extended by the Bank to another of its members. The final
rule amends this section to provide that a Bank may allow a member to
assume advances held by a nonmember, provided the advances were
originated by the Bank.
The Banks generally may not make advances to nonmembers, except in
the limited circumstances provided for in section 10b of the Bank Act,
12 U.S.C. 1430b. However, a nonmember, through acquisition of a member
institution, may assume outstanding Bank advances held by the acquired
member. Section 935.17, as amended, authorizes a Bank to allow the
transfer of advances from a nonmember to a member, provided the advance
was originated by the Bank, and provided the assumption complies with
the requirements governing the issuance of new advances. A Bank may
charge an appropriate fee for processing the transfer. No comments were
received on this provision and Sec. 935.17 of the final rule is being
adopted as proposed.
C. Treatment of Nursing Homes as Residential Property
In the Finance Board's final advances rule published on May 20,
1993, see 58 FR 29456, nursing homes were treated as nonresidential
property, thus making mortgages on nursing homes ineligible as
collateral for advances. The Finance Board has subsequently
reconsidered this issue and determined that mortgages on nursing homes
have a sufficiently residential character to be treated as residential
real property, thus making them eligible to be accepted as collateral
for advances. One comment letter addressed this provision. The
commenter, a Bank, believes this treatment of nursing homes will assist
the Banks in fulfilling their housing mission, without exposing them to
unnecessary risk. Therefore, as proposed, the final rule deletes
nursing homes from the definition of ``nonresidential real property''
and includes nursing homes in the definition of ``multifamily
property.'' Thus, mortgage loans backed by nursing homes are eligible
collateral for an advance.
III. Paperwork Reduction Act
Section 935.5(e) of the final rule will require the Banks to report
certain information to the Finance Board. However, Sec. 935.5(e) does
not involve a ``collection of information'' for purposes of the
Paperwork Reduction Act because Sec. 935.5(e) does not require the
Banks to collect any additional information from the public. The
Paperwork Reduction Act defines ``collection of information'' to
include the obtaining of facts or opinions from ten or more persons
``other than * * * instrumentalities * * * of the United States.'' 44
U.S.C. 3502(4)(A).
The Banks are considered to be instrumentalities of the United
States under statute and case law. See 12 U.S.C. 1431(e)(1); Fahey v.
O'Melveny & Myers, 200 F.2d 420, 446 (9th Cir. 1952) (``a Federal Home
Loan Bank is a federal instrumentality organized to carry out public
policy * * *'' Id.); Association of Data Processing Service
Organizations v. Fed. Home Loan Bank Board, 568 F.2d 478 (6th Cir.
1977) (court found Banks to be federal instrumentalities in action
preventing a Bank from providing on-line data processing services);
Osei-Bonsu v. Fed. Home Loan Bank of New York, 726 F. Supp. 95, 97-98
(S.D.N.Y. 1989) (Banks held to be federal instrumentalities in an
employment context).
Reporting requirements imposed upon the Banks are not
``collection[s] of information'' unless the collection is for general
statistical purposes. See 12 U.S.C. 3502(4)(B). The information that
the Banks are required to provide the Finance Board in Sec. 935.5(e) is
not for general statistical purposes and, therefore, is not an
information collection under the Paperwork Reduction Act. Accordingly,
this final rule does not require any reporting under the Paperwork
Reduction Act.
IV. Regulatory Flexibility Act
The final rule applies to all Bank members, regardless of their
size. The final rule does not contain any requirements that the Finance
Board believes will have a disproportionate impact on small entities.
Therefore, it is certified, pursuant to section 605(b) of the
Regulatory Flexibility Act, 5 U.S.C. 605(b), that this final rule, as
promulgated, will not have a significant economic impact on a
substantial number of small entities.
List of Subjects in 12 CFR Part 935
Advances, Credit, Federal home loan banks.
The Finance Board hereby amends chapter IX, title 12, Code of
Federal Regulations, as follows:
PART 935--ADVANCES
1. The authority citation for part 935 is revised to read as
follows:
Authority: 12 U.S.C. 1422b(a)(1), 1426, 1429, 1430, 1430b, 1431.
Subpart A--Advances to Members
2. Section 935.1 is amended by revising the definitions of
``Insurer,'' ``Multifamily property,'' and ``Nonresidential real
property'' and by adding the following definitions in appropriate
alphabetical order to read as follows:
Sec. 935.1 Definitions.
* * * * *
Capital deficient member means a member that fails to meet its
minimum regulatory capital requirements as defined or otherwise
required by the member's appropriate federal banking agency, insurer
or, in the case of members that are not federally insured depository
institutions, state regulator.
* * * * *
Insurer means the Federal Deposit Insurance Corporation for
``insured depository institutions'' as defined in 12 U.S.C. 1813(c)(2)
and the National Credit Union Administration for federally insured
credit unions.
* * * * *
Multifamily property means, for purposes of this part:
(1)(i) Real property that is solely residential and which includes
five or more dwelling units; or
(ii) Real property which includes five or more dwelling units with
commercial units combined, provided the property is primarily
residential.
(2) Multifamily property as defined in this section includes
nursing homes, dormitories and homes for the elderly.
* * * * *
Nonresidential real property means, for purposes of this part, real
property not used for residential purposes, including business or
industrial property, hotels, motels, churches, hospitals, educational
and charitable institutions, clubs, lodges, association buildings, golf
courses, recreational facilities, farm property not containing a
dwelling unit, or similar types of property, except as otherwise
determined by the Board in its discretion.
* * * * *
State regulator means a state insurance commissioner or state
regulatory entity with primary responsibility for supervising a member
borrower that is not a federally insured depository institution.
Tangible capital means:
(1) Capital, calculated according to GAAP, less ``intangible
assets'' except for purchased mortgage servicing rights to the extent
such assets are included in a member's core or Tier 1 capital, as
reported in the member's Thrift Financial Report for members whose
primary federal regulator is the OTS, or as reported in the Report of
Condition and Income for members whose primary federal regulator is the
FDIC, the OCC, or the Board of Governors of the Federal Reserve System.
(2) Capital calculated according to GAAP, less intangible assets,
as defined by a Bank for members which are not regulated by the OTS,
the FDIC, the OCC, or the Board of Governors of the Federal Reserve
System; provided that a Bank shall include a member's purchased
mortgage servicing rights to the extent such assets are included for
the purpose of meeting regulatory capital requirements.
3. Section 935.5 is amended by removing the period at the end of
paragraph (a)(2) and adding in its place ``; and'' and adding
paragraphs (a)(3) and (b) through (g) to read as follows:
Sec. 935.5 Limitations on access to advances.
(a) * * *
(3) Make advances and renewals only if the Bank determines that it
may safely make such advance or renewal to the member, including
advances and renewals made pursuant to this section.
(b) New advances to members without positive tangible capital. (1)
A Bank shall not make a new advance to a member without positive
tangible capital unless the member's appropriate federal banking agency
or insurer requests in writing that the Bank make such advance. The
Bank shall promptly provide the Finance Board with a copy of any such
request.
(2) A Bank shall use the most recently available Thrift Financial
Report, Report of Condition, and Income or other regulatory report of
financial condition to determine whether a member has positive tangible
capital.
(c) Renewals of advances to members without positive tangible
capital. (1) Renewal for 30-day terms. A Bank may renew outstanding
advances, for successive terms of up to 30 days each, to a member
without positive tangible capital; provided, however, that a Bank shall
honor any written request of the appropriate federal banking agency or
insurer that the Bank not renew such advances.
(2) Renewal for longer than 30-day terms. A Bank may renew
outstanding advances to a member without positive tangible capital for
a term greater than 30 days at the written request of the appropriate
federal banking agency or insurer.
(d) Advances to capital deficient but solvent members. (1) Except
as provided in paragraph (d)(2)(i) of this section, a Bank may make a
new advance or renew an outstanding advance to a capital deficient
member that has positive tangible capital.
(2)(i) A Bank shall not lend to a capital deficient member that has
positive tangible capital if it receives written notice from the
appropriate federal banking agency or insurer that the member's use of
Bank advances has been prohibited. The Bank shall promptly provide the
Finance Board with a copy of any such notice.
(ii) A Bank may resume lending to such a capital deficient member
if the Bank receives a written statement from the appropriate federal
banking agency or insurer which re-establishes the member's ability to
use advances.
(e) Reporting. (1) Each Bank shall provide the Finance Board with a
monthly report of the advances and commitments outstanding to each of
its members.
(2) Such monthly report shall be in a format or on a form
prescribed by the Finance Board.
(3) Each Bank shall, upon written request from a member's
appropriate federal banking agency or insurer, provide to such entity
information on advances and commitments outstanding to the member.
(f) Members without federal regulators. In the case of members that
are not federally insured depository institutions, the references in
paragraphs (b), (c), (d) and (e) of this section to ``appropriate
federal banking agency or insurer'' shall mean the member's state
regulator acting in a capacity similar to an appropriate federal
banking agency or insurer.
(g) Advance commitments. (1) In the event that a member's access to
advances from a Bank is restricted pursuant to this section, the Bank
shall not fund outstanding commitments for advances not exercised prior
to the imposition of the restriction. This requirement shall apply to
all advance commitments made by a Bank after August 25, 1993.
(2) Each Bank shall include the stipulation contained in paragraph
(g)(1) of this section as a clause in either:
(i) The written advances agreement required by Sec. 935.4(b)(2) of
this part; or
(ii) The written advances application required by Sec. 935.4(a) of
this part.
4. Section 935.17 is revised to read as follows:
Sec. 935.17 Intradistrict transfer of advances.
(a) Advances held by members. A Bank may allow one of its members
to assume an advance extended by the Bank to another of its members,
provided the assumption complies with the requirements of this part
governing the issuance of new advances. A Bank may charge an
appropriate fee for processing the transfer.
(b) Advances held by nonmembers. A Bank may allow one of its
members to assume an advance held by a nonmember, provided the advance
was originated by the Bank and provided the assumption complies with
the requirements of this part governing the issuance of new advances. A
Bank may charge an appropriate fee for processing the transfer.
By the Federal Housing Finance Board.
December 15, 1993.
Philip L. Conover,
Managing Director.
[FR Doc. 94-1213 Filed 1-19-94; 8:45 am]
BILLING CODE 6725-01-P
