18366 Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Rules and Regulations 

(a) Obtaining identifying information 

about, and verifying the identity of, a person 

opening a covered account; for example, 

using the policies and procedures regarding 

identification and verification set forth in the 

Customer Identification Program rules 

implementing 31 U.S.C. 5318(l) (31 CFR 

1020.220); and 

* * * * * 

PART 748—SECURITY PROGRAM, 

REPORT OF SUSPECTED CRIMES, 

SUSPICIOUS TRANSACTIONS, 

CATASTROPHIC ACTS, AND BANK 

SECRECY ACT COMPLIANCE 

■ 4. The authority citation for part 748 

continues to read as follows: 

Authority: 12 U.S.C. 1766(a), 1786(Q), 

15 U.S.C. 6801 and 6805(b); 31 U.S.C. 5311 

and 5318. 

■ 5. Amend § 748.1 by revising 

paragraphs (c)(2)(ii) and (iii) to read as 

follows: 

§ 748.1 Filing of reports. 

* * * * * 

(c) * * * 

(2) * * * 

(ii) Content. A credit union must 

complete, fully and accurately, SAR 

form TDF 90–22.47, Suspicious Activity 

Report (also known as NCUA Form 

2362) in accordance with the form’s 

instructions and 31 CFR 1020.320. A 

copy of the SAR form may be obtained 

from the credit union resources section 

of NCUA’s Web site, http:// 

www.ncua.gov, or the regulatory section 

of FinCEN’s Web site, http:// 

www.fincen.gov. These sites include 

other useful guidance on SARs, for 

example, forms and filing instructions, 

Frequently Asked Questions, and the 

FFIEC Bank Secrecy Act/Anti-Money 

Laundering Examination Manual. 

(iii) Compliance. Failure to file a SAR 

as required by the form’s instructions 

and 31 CFR 1020.320 may subject the 

credit union, its officials, employees, 

and agents to the assessment of civil 

money penalties or other administrative 

actions. 

* * * * * 

■ 6. Amend § 748.2 by revising 

paragraphs (a) and (b) to read as follows: 

§ 748.2 Procedures for monitoring Bank 

Secrecy Act (BSA) compliance. 

(a) Purpose. This section is issued to 

ensure that all federally insured credit 

unions establish and maintain 

procedures reasonably designed to 

assure and monitor compliance with the 

requirements of subchapter II of chapter 

53 of title 31, United States Code, the 

Financial Recordkeeping and Reporting 

of Currency and Foreign Transactions 

Act, and the implementing regulations 

promulgated under it by the Department 

of Treasury, 31 CFR chapter X. 

(b) Establishment of a BSA 

compliance program—(1) Program 

requirement. Each federally insured 

credit union shall develop and provide 

for the continued administration of a 

program reasonably designed to assure 

and monitor compliance with the 

recordkeeping and recording 

requirements in subchapter II of chapter 

53 of title 31, United States Code and 

implementing regulations issued by the 

Department of Treasury at 31 CFR 

chapter X. The compliance program 

must be written, approved by the credit 

union’s board of directors, and reflected 

in the credit union’s minutes. 

(2) Customer identification program. 

Each federally insured credit union is 

subject to the requirements of 31 U.S.C. 

5318(l) and the implementing regulation 

jointly promulgated by the NCUA and 

Department of the Treasury at 31 CFR 

1020.220, which require a customer 

identification program to be 

implemented as part of the BSA 

compliance program required under this 

section. 

* * * * * 

By the National Credit Union 

Administration Board, this 3rd day of March, 

2011. 

Mary F. Rupp, 

Secretary of the Board. 

[FR Doc. 2011–7911 Filed 4–1–11; 8:45 am] 

BILLING CODE 7535–01–P 

FEDERAL HOUSING FINANCE BOARD 

12 CFR Parts 965, 966, 969, and 987 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1270 

RIN 2590–AA36 

Federal Home Loan Bank Liabilities 

AGENCY: Federal Housing Finance 

Board, Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is re-organizing and readopting existing Federal Housing 

Finance Board (Finance Board) 

regulations dealing with consolidated 

obligations (COs), as well as related 

regulations addressing other authorized 

Federal Home Loan Bank (Bank) 

liabilities and book-entry procedures for 

COs, as new part 1270 of the FHFA 

regulations. The final rule amends these 

regulations to reflect statutory 

amendments made to section 11(c) of 

the Federal Home Bank Act (Bank Act) 

with regard to the issuance of COs. 

Otherwise, FHFA is re-adopting most of 

the regulatory provisions addressed in 

this rulemaking without substantive 

change. 

DATES: This rule will become effective 

on May 4, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Joseph A. McKenzie, Chief Economist, 

Federal Home Loan Bank and System 

Analysis, 202–408–2845, Federal 

Housing Finance Agency, 1625 Eye 

Street, NW., Washington, DC 20006; or 

Thomas E. Joseph, Senior AttorneyAdvisor, 202–414–3095, Office of 

General Counsel, Federal Housing 

Finance Agency, Fourth Floor, 1700 G 

Street, NW., Washington, DC 20552. The 

telephone number for the 

Telecommunications Device for the Deaf 

is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Creation of the Federal Housing 

Finance Agency and Recent Legislation 

Effective July 30, 2008, the Housing 

and Economic Recovery Act of 2008 

(HERA), Public Law 110–289, 122 Stat. 

2654, created FHFA as a new 

independent agency of the Federal 

Government, and transferred to FHFA 

the supervisory and oversight 

responsibilities of the Office of Federal 

Housing Enterprise Oversight (OFHEO) 

over the Federal National Mortgage 

Association, and the Federal Home Loan 

Mortgage Corporation (collectively, the 

Enterprises), the oversight 

responsibilities of the Finance Board 

over the Banks and the Office of Finance 

(OF) (which acts as the Banks’ fiscal 

agent) and certain functions of the 

Department of Housing and Urban 

Development. See id. at section 1101, 

122 Stat. 2661–62. FHFA is responsible 

for ensuring that the Enterprises and the 

Banks operate in a safe and sound 

manner, including that they maintain 

adequate capital and internal controls, 

that their activities foster liquid, 

efficient, competitive and resilient 

national housing finance markets, and 

that they carry out their public policy 

missions through authorized activities. 

See id. at section 1102, 122 Stat. 2663– 

64. The Enterprises, the Banks, and the 

OF continue to operate under 

regulations promulgated by OFHEO and 

the Finance Board until such 

regulations are superseded by 

regulations issued by FHFA. See id. at 

sections 1301, 1302, 1311, 1312, 122 

Stat. 2794–95, 2797–98. 


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1The twelve Banks are located in: Boston, New 

York, Pittsburgh, Atlanta, Cincinnati, Indianapolis, 

Chicago, Des Moines, Dallas, Topeka, San 

Francisco, and Seattle. 

2As amended by HERA, section 11(c) of the Bank 

Act provides, in relevant part, that the Office of 

Finance, as agent for the Banks, may issue 

consolidated * * * Bank bonds which shall be the 

joint and several obligations of all the * * * Banks, 

and shall be secured and be issued upon such terms 

and conditions as such Office may prescribe. 12 

U.S.C. 1431(c). 

B. The Bank System Generally 

The twelve Banks are 

instrumentalities of the United States 

organized under the Federal Home Loan 

Bank Act (Bank Act).1 See 12 U.S.C. 

1423 and 1432(a). The Banks are 

cooperatives; only members of a Bank 

may purchase the capital stock of a 

Bank, and only members or certain 

eligible housing associates (such as state 

housing finance agencies) may obtain 

access to secured loans, known as 

advances, or other products provided by 

a Bank. See 12 U.S.C. 1426(a)(4), 

1430(a), and 1430b. Each Bank is 

managed by its own board of directors 

and serves the public interest by 

enhancing the availability of residential 

mortgage and community lending credit 

through its member institutions. See 12 

U.S.C. 1427. Any eligible institution 

(generally a federally insured depository 

institution or state-regulated insurance 

company) may become a member of a 

Bank if it satisfies certain criteria and 

purchases a specified amount of the 

Bank’s capital stock. See 12 U.S.C. 1424; 

12 CFR part 1263. 

C. Consolidated Obligations 

COs, consisting of bonds and discount 

notes, are the principal funding source 

for the Banks. Although each Bank is 

primarily liable for the portion of COs 

corresponding to the proceeds received 

by that Bank, each Bank is also jointly 

and severally liable with the other 

eleven Banks for the payment of 

principal and interest on all COs. See 12 

CFR 966.9. In addition to issuing COs, 

the Banks are authorized to raise funds 

and incur liabilities by accepting 

deposits from members, other Banks 

and instrumentalities of the United 

States, purchasing Federal funds and 

entering into repurchase agreements. 

See 12 CFR 965.2. 

Prior to June 2000, COs had for many 

years been issued on behalf of the Banks 

by the Finance Board, as the Banks’ 

regulator, under authority in section 

11(c) of the Bank Act. Until the passage 

of HERA, section 11(c) of the Bank Act 

authorized the Banks’ regulator to issue 

bonds which were the joint and several 

obligations of all the Banks. See 12 

U.S.C. 1431(c)(2007). 

In June 2000, the Finance Board 

published a final rule which altered 

how COs were issued and transferred 

authority for issuance of the Bank COs 

to the Banks pursuant to authority 

under section 11(a) of the Bank Act. See 

65 FR 36290 (June 7, 2000) (adopting 

among other parts 12 CFR parts 966 and 

985). Section 11(a) of the Bank Act 

allows each Bank to issue debt subject 

to any conditions and requirements 

established by the Banks’ regulator. See 

12 U.S.C. 1431(a). Under the rules 

published in June 2000, the Banks were 

allowed to issue debt subject to 

requirements that all such debt be the 

joint and several obligations of all 

twelve Banks and be issued through the 

OF as their agent. See 12 CFR 966.2(b). 

The Finance Board retained the option 

to issue COs itself under section 11(c) of 

the Bank Act at any point, although it 

did not do so. See 12 CFR 966.2(a). 

In 2008, HERA amended section 11 of 

the Bank Act to remove the authority of 

the regulator to issue COs and to allow 

the Banks to issue such debt through OF 

as the Banks’ agent. See section 1204(3), 

Public Law 110–289, 122 Stat. 2786. As 

a consequence, the Banks are now able 

to issue COs pursuant to section 11(c) of 

the Bank Act on which the Banks are 

jointly and severally liable by statute.2

On November 8, 2010, FHFA 

published a proposed rule that would 

amend its regulations to reflect the 

changes to the CO provisions and make 

other organizational and conforming 

changes to the rules dealing with COs 

and Bank liabilities. See Proposed Rule: 

Federal Home Loan Bank Liabilities, 75 

FR 68534 (Nov. 8, 2010). FHFA is now 

adopting these rule changes. These 

amendments to FHFA regulations, 

however, will affect neither current 

operations and processes for issuing 

COs nor the Banks’ joint and several 

liability for payment of principal and 

interest on outstanding COs. 

D. Considerations of Differences 

Between the Banks and the Enterprises 

Section 1201 of HERA requires the 

Director, when promulgating regulations 

relating to the Banks, to consider the 

following differences between the Banks 

and the Enterprises: cooperative 

ownership structure; mission of 

providing liquidity to members; 

affordable housing and community 

development mission; capital structure; 

and joint and several liability. See 

section 1201 Public Law 110–289, 122 

Stat. 2782–83 (amending 12 U.S.C. 

4513). Section 1201 specifically 

provides, however, that its requirements 

shall not apply if the Director is 

reissuing any regulation, advisory 

document or examination guidance 

previously issued by the Finance Board. 

This rule falls within that exception 

because FHFA is reissuing previous 

Finance Board regulations (including 

the related Finance Board interpretation 

of its rules with respect to the 

prohibition on the direct placement of 

COs), updated only as necessary to 

conform with statutory changes made by 

HERA. Nevertheless, as noted in the 

preamble to the proposed rule, FHFA 

considered the differences between the 

Banks and the Enterprises as they relate 

to the above factors in developing the 

proposal. 75 FR at 68535. FHFA also 

requested comments from the public 

about whether differences related to 

these factors should have resulted in 

any revisions to the proposal, but no 

specific comments were received in 

response to that request. 

II. Analysis of the Final Rule 

A. The Proposed Rule 

FHFA proposed amending existing 

regulations previously adopted by the 

Finance Board that address COs to 

reflect changes made by HERA to 

section 11 of the Bank Act. See 75 FR 

at 68536–537. At the same time, FHFA 

proposed combining the CO regulations 

with related regulations addressing 

Banks’ authorized sources of funds, 

deposits from Bank members and bookentry procedures for COs into a single 

new part 1270 of the FHFA regulations. 

As proposed, most of these existing 

Finance Board provisions would have 

been carried over to new part 1270 

without change, other than for certain 

necessary technical and conforming 

changes. Id. 

In the preamble to the proposed rule, 

FHFA also noted that section 939A of 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act) requires federal agencies to review 

regulations that require the use of an 

assessment of the credit-worthiness of a 

security or money market instrument, or 

any references to, or requirements in, 

such regulations regarding credit ratings 

issued by nationally recognized 

statistical rating organizations 

(NRSROs), and to remove such 

references or requirements. See id. 

(citing section 939A, Public Law 

111–203, 124 Stat. 1376, 1887 (July 21, 

2010)). FHFA further noted that the 

Dodd-Frank provision requires the 

agency to the extent feasible to adopt 

uniform standards of credit-worthiness 

in its regulations, taking into account 

the entities regulated by it and the 

purpose for which such regulated 

entities would rely on the creditworthiness standard. Id. Because the 


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3 Definitions contained in part 900 apply to all 

Finance Board regulations but would not apply to 

part 1270 of the FHFA regulations. See 12 CFR part 

900. No substantive changes are being made to most 

of these definitions. Included in the definitions 

being carried over from part 900 of the Finance 

Board regulations is one for ‘‘SBIC.’’ FHFA 

inadvertently failed to include a definition for 

‘‘SBIC’’ in proposed § 1270.1, but the definition 

being adopted here is exactly the same as the one 

that had been in part 900 of the Finance Board rules 

and that had long been applicable to the relevant 

provisions that are being adopted in the new part 

1270 rules. 

4As already noted, relevant definitions 

previously found in § 966.1 of the Finance Board 

proposed rule provisions carried over a 

number of references to or requirements 

based on credit ratings issued by 

NRSROs, FHFA requested comments on 

what credit-worthiness standards could 

be used in the Bank liability rule, and 

more generally across its regulations, to 

replace these references or 

requirements. 

B. Comments 

FHFA received five comments on the 

proposed rule. The comments mainly 

responded to FHFA’s request for 

information on potential standards to 

replace regulatory references or 

requirements that cite credit ratings. 

Overall, these comments did not 

address specific provisions in the 

proposed Bank liabilities rule, or 

suggest changes to those provisions in 

proposed part 1270 that referenced 

credit ratings. Instead, the comments 

identified and discussed broader 

principles that FHFA should apply in 

developing new credit-worthiness 

standards for its regulations more 

generally. 

FHFA has considered these 

comments. However, given the 

requirements in section 939A of DoddFrank that the agency adopt uniform 

standards of credit-worthiness across its 

regulations to the extent feasible, FHFA 

recently issued an advance notice of 

proposed rulemaking and request for 

comment (ANPR) that sought comments 

on a wider range of issues related to 

implementation of section 939A of the 

Dodd-Frank Act than had been raised as 

part of the Bank liabilities proposed 

rulemaking. See Advance Notice of 

Proposed Rulemaking: Alternatives to 

Use of Credit Ratings in Regulations 

Governing the Federal National 

Mortgage Association, the Federal Home 

Loan Mortgage Corporation and the 

Federal Home Loan Banks, 76 FR 5292 

(Jan. 31, 2011). Rather than make 

changes at this time to proposed 

provisions in part 1270 that continue to 

reference specific credit rating 

requirements, FHFA has determined to 

carry over these part 1270 provisions as 

proposed on a temporary basis, pending 

completion of the ANPR process. FHFA 

believes that this approach will best 

allow it to implement the Dodd-Frank 

requirements that it adopt uniform 

standards of credit-worthiness in its 

regulations while not further delaying 

amending the Bank liability regulations 

to conform to statutory changes made by 

HERA in 2008. 

FHFA, however, will propose changes 

to relevant part 1270 provisions as well 

as to other regulations as part of a future 

rulemaking or rulemakings designed to 

remove references to, or requirements 

based on, specific credit ratings, as 

required by the Dodd-Frank Act. FHFA 

will consider the relevant comments 

received on the Bank liabilities rules 

along with any additional comments 

received on the ANPR in developing 

any proposed amendments needed to 

define and implement new uniform 

credit-worthiness standards in its 

regulations. 

In addition to the comments 

addressing credit-worthiness standards, 

one comment stated that the meaning of 

the phrase ‘‘joint and several liability’’ 

was unclear. However, § 1270.10, as 

proposed, carried over a long-standing 

Finance Board provision that addressed 

joint and several liability and 

implemented the Banks’ collective 

responsibility for payment on all COs. 

As this provision makes clear, each 

Bank individually and collectively has 

an obligation to make full and timely 

payment on all COs and to give priority 

for the payment of COs over the 

redemption of the stock of, or of any 

payment to, shareholders. Thus, FHFA 

believes the concept of ‘‘joint and 

several liability’’ was adequately 

addressed by the proposed rule 

language, and no changes to the 

proposal are necessary with regard to 

this point. 

Thus, after considering the comments, 

FHFA has decided to adopt part 1270, 

as proposed, without making any 

substantive changes. 

C. Analysis of the Final Rule 

The main purpose for this rulemaking 

is to update Finance Board regulations 

to reflect amendments made by HERA to 

section 11 of the Bank Act with regard 

to Bank authority to issue COs and to 

combine certain parts of the former 

Finance Board regulations into new part 

1270. 75 FR at 68535. As already 

discussed, because the Finance Board 

had previously delegated responsibility 

to the Banks themselves to issue COs in 

2000, the changes made by HERA to 

section 11 of the Bank Act—or the 

related regulatory amendments now 

being adopted—do not alter the current 

processes or practices for issuing COs. 

Otherwise, as FHFA noted when it 

proposed new part 1270, most of the 

provisions in new part 1270 are being 

carried over from existing regulations, 

without substantive change. Id. 

Subpart A of Part 1270 

As adopted, the final rule will 

consolidate relevant definitions from 

parts 965, 966, 969 and 987 of the 

Finance Board regulations into subpart 

A of part 1270. To the extent necessary, 

relevant definitions from part 900 of the 

Finance Board regulations are also being 

incorporated into this subpart.3 FHFA is 

not altering the definitions from those 

proposed in November 2010. See 75 FR 

at 68535–536. 

Therefore, FHFA is adopting a 

definition in § 1270.1 for ‘‘consolidated 

obligations’’ that varies slightly from the 

one that had been set forth in part 900 

of the Finance Board regulations. The 

new definition reflects the amendments 

made by HERA to section 11 of the Bank 

Act while recognizing that some 

outstanding COs may have been issued 

by the Finance Board under the prior 

statutory provisions. Id. This definition 

is the same as one FHFA adopted in 

other regulations. See, e.g., 12 CFR 

1229.1. FHFA is also adopting the 

proposed definition for the ‘‘Office of 

Finance.’’ As explained in the preamble 

of the proposed rule, this definition is 

based on one that previously had been 

set forth in part 987 of the Finance 

Board regulations concerning bookentry procedures but has been 

somewhat modified because a reference 

to the OF in part 1270 could be made 

in circumstances, or to address OF 

duties, other than those related to bookentry procedures. See 75 FR at 68535– 

536. 

Subpart B of Part 1270 

Subpart B of part 1270 combines 

provisions now found in the Finance 

Board regulations part 965, Sources of 

Funds, and part 969, Deposits. In this 

respect, § 965.2 of the Finance Board 

regulations is being relocated to new 

§ 1270.2, and § 1270.3 combines in a 

single section the authorizations and 

requirements that previously had been 

found in § 965.3 and § 969.2 of the 

Finance Board regulations. No 

substantive changes are being made to 

any of the previous Finance Board 

regulations that will be carried over to 

subpart B of part 1270. 

Subpart C of Part 1270 

Subpart C of part 1270 incorporates 

§ 966.2 through § 966.10 of the Finance 

Board regulations, addressing COs, as 

new §§ 1270.4 through 1270.11.4 FHFA 


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regulations are incorporated in subpart A of part 

1270. 

5As FHFA noted when it proposed the new 

language for § 1270.9(c), the adoption of § 1270.9(c) 

will not affect the validity of the waiver of this 

restriction issued by the Finance Board in 

December 2005 to allow, subject to certain 

conditions, the direct placement of COs with a Bank 

when necessary to assure that the Federal Reserve 

Bank of New York has sufficient funds to pay all 

principal and interest that come due on a given day 

on COs or on a portion of COs. See Fed. Hsing, Fin. 

Brd. Res. 2005–22 (Dec. 14, 2005). See also 75 FR 

at 68536, n.4. 

6As already noted, relevant definitions 

previously found in § 987.1 of the Finance Board 

regulations are incorporated in subpart A of part 

1270. 

is not amending most of these 

provisions in any substantive fashion. 

As it proposed, however, FHFA is 

amending language now found in 

§ 1270.4, which addresses issuance of 

COs, to reflect the amendments made by 

HERA to section 11(c) of the Bank Act. 

As such, FHFA is removing provisions 

of the former § 966.2(a) that had 

reserved to the Banks’ regulator the right 

to issue COs. Similarly, § 1270.4(a), as 

adopted, provides that the Banks shall 

issue COs pursuant to authority in 

section 11(c) of the Bank Act, rather 

than under section 11(a) of the Bank 

Act, as had been stated in § 966.2(b) of 

the Finance Board rules. Certain other 

changes made to language that had been 

in the old Finance Board regulations are 

editorial or are technical and 

conforming in nature, given 

amendments made by HERA to the Bank 

Act. See 75 FR at 68536. 

Section 1270.4(a) as adopted 

continues to require the Banks to issue 

COs subject to the provisions of part 

1270 and any other relevant rules, 

regulations, terms, and conditions as the 

FHFA Director may prescribe. This 

provision also makes clear that the 

Banks remain jointly and severally 

liable on all COs. The negative pledge 

requirement previously found in 

§ 966.2(c) of the Finance Board 

regulations is being carried over without 

substantive change as new § 1270.4(b). 

The final rule also removes, as 

unnecessary, the provision previously 

found in § 966.4(b) that referred to 

consolidated notes. See 12 CFR 966.4(b). 

This change has no effect on the Banks’ 

authority to issue COs. Prior § 966.4(a), 

which provided that all COs be issued 

in pari passu, is being re-adopted as 

new § 1270.4(a)(3). 

Finally, FHFA is carrying over as 

§ 1270.9(c) the prohibition on the direct 

placement of COs previously found in 

§ 966.8(c). As it explained in proposing 

the part 1270 rules, FHFA is amending 

the language in § 1270.9(c) to 

incorporate the Finance Board’s 

Regulatory Interpretation 2005–RI–01, 

which clarified that the Banks could not 

purchase COs as part of an initial 

issuance regardless of whether the 

purchase was directly from the OF or 

indirectly from one of the firms that 

formed OF’s approved underwriter 

network.5 See 75 FR at 68536 (citing 

Regulatory Interpretation 2005–RI–01 

(Mar. 30, 2005)). As a result, the Finance 

Board’s previous regulatory 

interpretation on this issue is hereby 

rescinded as of the effective date of this 

rule. 

Subpart D of Part 1270 

FHFA is moving regulations 

governing book-entry procedures for 

COs previously found in § 987.2 through 

§ 987.10 of the Finance Board rules to 

new subpart D of part 1270 as 

§§ 1270.12 through 1270.20.6 Any 

changes being adopted to these 

provisions are technical and conforming 

in nature, such as amendments to 

remove and update references to the 

Finance Board and to make other 

changes made necessary by the transfer 

and combination of these regulations 

into new part 1270. FHFA is not making 

any substantive amendments to these 

provisions. 

III. Paperwork Reduction Act 

The final rule does not contain any 

collections of information pursuant to 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.). Therefore, 

FHFA has not submitted any 

information to the Office of 

Management and Budget for review. 

IV. Regulatory Flexibility Act 

The final rule applies only to the 

Banks, which do not come within the 

meaning of small entities as defined in 

the Regulatory Flexibility Act (RFA). 

See 5 U.S.C. 601(6). Therefore in 

accordance with section 605(b) of the 

RFA, FHFA certifies that this final rule 

will not have significant economic 

impact on a substantial number of small 

entities. 

List of Subjects 

12 CFR Parts 965, 969 

Federal home loan banks. 

12 CFR Part 966 

Federal home loan banks, 

Government securities. 

12 CFR Part 987 

Accounting, Government securities. 

12 CFR Part 1270 

Accounting, Federal home loan banks, 

Government securities. 

Authority and Issuance 

Accordingly, for reasons stated in the 

preamble and under the authority of 12 

U.S.C. 1431, 1432, 1435, 4511, 4512, 

4513, and 4526, FHFA is amending 

subchapters H and K of chapter IX and 

subchapter D of chapter XII of title 12 

of the Code of Federal Regulations as 

follows: 

CHAPTER IX—FEDERAL HOUSING 

FINANCE BOARD 

SUBCHAPTER H—FEDERAL HOME 

LOAN BANK LIABILITIES 

PART 965—[REMOVED] 

■ 1. Remove part 965. 

PART 966—[REMOVED] 

■ 2. Remove part 966. 

PART 969—[REMOVED] 

■ 3. Remove part 969. 

SUBCHAPTER K—OFFICE OF 

FINANCE 

PART 987—[REMOVED] 

■ 4. Remove part 987. 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

SUBCHAPTER D—FEDERAL HOME 

LOAN BANKS 

■ 5. Add part 1270 to subchapter D to 

read as follows: 

PART 1270—LIABILITIES 

Subpart A—Definitions 

Sec. 

1270.1 Definitions. 

Subpart B—Sources of Funds 

1270.2 Authorized liabilities. 

1270.3 Deposits from members. 

Subpart C—Consolidated Obligations 

1270.4 Issuance of consolidated obligations. 

1270.5 Leverage limit and credit rating 

requirements. 

1270.6 Transactions in consolidated 

obligations. 

1270.7 Lost, stolen, destroyed, mutilated or 

defaced consolidated obligations. 

1270.8 Administrative provision. 

1270.9 Conditions for issuance of 

consolidated obligations. 

1270.10 Joint and several liability. 

1270.11 Savings clause. 

Subpart D—Book-Entry Procedure for 

Consolidated Obligations 

1270.12 Law governing rights and 

obligations of Banks, FHFA, Office of 

Finance, United States and Federal 

Reserve Banks; rights of any Person 

against Banks, FHFA, Office of Finance, 

United States and Federal Reserve 

Banks. 


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1270.13 Law governing other interests. 

1270.14 Creation of Participant’s Security 

Entitlement; security interests. 

1270.15 Obligations of the Banks and the 

Office of Finance; no Adverse Claims. 

1270.16 Authority of Federal Reserve 

Banks. 

1270.17 Liability of Banks, FHFA, Office of 

Finance and Federal Reserve Banks. 

1270.18 Additional requirements; notice of 

attachment for Book-entry consolidated 

obligations. 

1270.19 Reference to certain Department of 

Treasury commentary and 

determinations. 

1270.20 Consolidated obligations are not 

obligations of the United States or 

guaranteed by the United States. 

Authority: 12 U.S.C. 1431, 1432, 1435, 

4511, 4512, 4513, and 4526. 

Subpart A—Definitions 

§ 1270.1 Definitions. 

As used in this part, unless the 

context otherwise requires or indicates: 

Adverse Claim means a claim that a 

claimant has a property interest in a 

Book-entry consolidated obligation and 

that it is a violation of the rights of the 

claimant for another Person to hold, 

transfer, or deal with the Security. 

Bank, written in title case, means a 

Federal Home Loan Bank established 

under section 12 of the Bank Act. 

Bank Act means the Federal Home 

Loan Bank Act, as amended (12 U.S.C. 

1421 through 1449). 

Book-entry consolidated obligation 

means a consolidated obligation 

maintained in the book-entry system of 

the Federal Reserve Banks. 

Consolidated obligation means any 

bond, debenture or note on which the 

Banks are jointly and severally liable 

and which was issued under section 11 

of the Bank Act (12 U.S.C. 1431) and in 

accordance with any implementing 

regulations, whether or not such 

instrument was originally issued jointly 

by the Banks or by the Federal Housing 

Finance Board on behalf of the Banks. 

Deposits in banks or trust companies 

means: 

(1) A deposit in another Bank; 

(2) A demand account in a Federal 

Reserve Bank; 

(3) A deposit in, or a sale of Federal 

funds to: 

(i) An insured depository institution, 

as defined in section 2(9)(A) of the Bank 

Act (12 U.S.C. 1422(9)(A)), that is 

designated by a Bank’s board of 

directors; 

(ii) A trust company that is a member 

of the Federal Reserve System or 

insured by the FDIC, and is designated 

by a Bank’s board of directors; or 

(iii) A U.S. branch or agency of a 

foreign bank, as defined in the 

International Banking Act of 1978, as 

amended (12 U.S.C. 3101 et seq.), that 

is subject to the supervision of the 

Federal Reserve Board, and is 

designated by a Bank’s board of 

directors. 

Director, written in title case, means 

the Director of FHFA or his or her 

designee. 

Entitlement Holder means a Person or 

a Bank to whose account an interest in 

a Book-entry consolidated obligation is 

credited on the records of a Securities 

Intermediary. 

Federal Reserve Bank means a Federal 

Reserve Bank or branch, acting as fiscal 

agent for the Office of Finance, unless 

otherwise indicated. 

Federal Reserve Bank Operating 

Circular means the publication issued 

by each Federal Reserve Bank that sets 

forth the terms and conditions under 

which the Federal Reserve Bank 

maintains Book-entry Securities 

accounts and transfers Book-entry 

Securities. 

Federal Reserve Board means the 

Board of Governors of the Federal 

Reserve System. 

FHFA means the Federal Housing 

Finance Agency. 

Funds account means a reserve and/ 

or clearing account at a Federal Reserve 

Bank to which debits or credits are 

posted for transfers against payment, 

Book-entry Securities transaction fees, 

or principal and interest payments. 

Non-complying Bank means a Bank 

that has failed to provide the liquidity 

certification as required under 

§ 1270.10(b)(1). 

NRSRO means a credit rating 

organization registered with the 

Securities and Exchange Commission as 

a nationally recognized statistical rating 

organization. 

Office of Finance means the Office of 

Finance, a joint office of the Banks 

established under part 1273 of this 

chapter and referenced in the Bank Act 

and the Safety and Soundness Act, 

including the Office of Finance acting as 

agent of the Banks in all matters relating 

to the issuance of Book-entry 

consolidated obligations and in the 

performance of all other necessary and 

proper functions relating to Book-entry 

consolidated obligations, including the 

payment of principal and interest due 

thereon. 

Participant means a Person or a Bank 

that maintains a Participant’s Securities 

Account with a Federal Reserve Bank. 

Participant’s Securities Account 

means an account in the name of a 

Participant at a Federal Reserve Bank to 

which Book-entry consolidated 

obligations held for a Participant are or 

may be credited. 

Person means and includes an 

individual, corporation, company, 

governmental entity, association, firm, 

partnership, trust, estate, representative, 

and any other similar organization, but 

does not mean or include a Bank, the 

Director, FHFA, the Office of Finance, 

the United States, or a Federal Reserve 

Bank. 

Repurchase agreement means an 

agreement in which a Bank sells 

securities and simultaneously agrees to 

repurchase those securities or similar 

securities at an agreed upon price, with 

or without a stated time for repurchase. 

Revised Article 8 means Uniform 

Commercial Code, Revised Article 8, 

Investment Securities (with Conforming 

and Miscellaneous Amendments to 

Articles 1, 3, 4, 5, 9, and 10) 1994 

Official Text. Copies of this publication 

are available from the Executive Office 

of the American Law Institute, 4025 

Chestnut Street, Philadelphia, PA 

19104, and the National Conference of 

Commissioners on Uniform State Laws, 

676 North St. Clair Street, Suite 1700, 

Chicago, IL 60611. 

Safety and Soundness Act means the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 

U.S.C. 4501 et seq.) as amended. 

SBIC means a small business 

investment company formed pursuant 

to section 301 of the Small Business 

Investment Act (15 U.S.C. 681). 

Securities Intermediary means: 

(1) A Person that is registered as a 

‘‘clearing agency’’ under the Federal 

securities laws; a Federal Reserve Bank; 

any other person that provides clearance 

or settlement services with respect to a 

Book-entry consolidated obligation that 

would require it to register as a clearing 

agency under the Federal securities laws 

but for an exclusion or exemption from 

the registration requirement, if its 

activities as a clearing corporation, 

including promulgation of rules, are 

subject to regulation by a Federal or 

State governmental authority; or (2) A 

Person (other than an individual, unless 

such individual is registered as a broker 

or dealer under the Federal securities 

laws), including a bank or broker, that 

in the ordinary course of its business 

maintains securities accounts for others 

and is acting in that capacity. 

Security Entitlement means the rights 

and property interest of an Entitlement 

Holder with respect to a Book-entry 

consolidated obligation. 

Transfer Message means an 

instruction of a Participant to a Federal 

Reserve Bank to effect a transfer of a 

Book-entry consolidated obligation, as 

set forth in Federal Reserve Bank 

Operating Circulars. 


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Subpart B—Sources of Funds 

§ 1270.2 Authorized liabilities. 

As a source of funds for business 

operations, each Bank is authorized to 

incur liabilities by: 

(a) Accepting proceeds from the 

issuance of consolidated obligations 

issued in accordance with this part; 

(b) Accepting time or demand 

deposits from members, other Banks or 

instrumentalities of the United States, 

and cash accounts from associates or 

members pursuant to 

§§ 1266.17(b)(2)(i)(B), 1266.17(d) and 

1269.4(a)(1) of this chapter, or § 1270.3 

of this part, or from other institutions 

for which the Bank is providing 

correspondent services pursuant to 

section 11(e) of the Bank Act (12 U.S.C. 

1431(e)); 

(c) Purchasing Federal funds; and 

(d) Entering into repurchase 

agreements. 

§ 1270.3 Deposits from members. 

(a) Banks may accept demand and 

time deposits from members, reserving 

the right to require notice of intention 

to withdraw any part of time deposits. 

Rates of interest paid on all deposits 

shall be set by the Bank’s board of 

directors (or, between regular meetings 

thereof, by a committee of directors 

selected by the board) or by the Bank 

President, if so authorized by the board. 

Unless otherwise specified by the board, 

a Bank President may delegate to any 

officer or employee of the Bank any 

authority he possesses under this 

section. 

(b) Each Bank shall at all times have 

at least an amount equal to the current 

deposits received from its members 

invested in: 

(1) Obligations of the United States; 

(2) Deposits in banks or trust 

companies; or 

(3) Advances with a remaining 

maturity not to exceed five years that 

are made to members in conformity 

with part 1266 of this chapter. 

Subpart C—Consolidated Obligations 

§ 1270.4 Issuance of consolidated 

obligations. 

(a) Consolidated obligations issued by 

the Banks—(1) Subject to the provisions 

of this part and such other rules, 

regulations, terms, and conditions as the 

Director may prescribe, the Banks may 

issue joint debt under section 11(c) of 

the Bank Act (12 U.S.C. 1431(c)), which 

shall be consolidated obligations, on 

which the Banks shall be jointly and 

severally liable in accordance with 

§ 1270.10 of this part. 

(2) Consolidated obligations shall be 

issued only through the Office of 

Finance, as agent of the Banks pursuant 

to this part and part 1273 of this 

chapter. 

(3) All consolidated obligations shall 

be issued in pari passu. 

(b) Negative pledge requirement. Each 

Bank shall at all times maintain assets 

described in paragraphs (b)(1) through 

(b)(6) of this section free from any lien 

or pledge, in an amount at least equal 

to a pro rata share of the total amount 

of currently outstanding consolidated 

obligations and equal to such Bank’s 

participation in all such consolidated 

obligations outstanding, provided that 

any assets that are subject to a lien or 

pledge for the benefit of the holders of 

any issue of consolidated obligations 

shall be treated as if they were assets 

free from any lien or pledge for 

purposes of compliance with this 

paragraph (b). Eligible assets are: 

(1) Cash; 

(2) Obligations of or fully guaranteed 

by the United States; 

(3) Secured advances; 

(4) Mortgages as to which one or more 

Banks have any guaranty or insurance, 

or commitment therefor, by the United 

States or any agency thereof; 

(5) Investments described in section 

16(a) of the Bank Act (12 U.S.C. 

1436(a)); and 

(6) Other securities that have been 

assigned a rating or assessment by an 

NRSRO that is equivalent to or higher 

than the rating or assessment assigned 

by that NRSRO to consolidated 

obligations outstanding. 

§ 1270.5 Leverage limit and credit rating 

requirements. 

(a) Bank leverage—(1) Except as 

provided in paragraph (a)(2) of this 

section, the total assets of any Bank that 

is not subject to the capital requirements 

set forth in part 932 of this title shall not 

exceed 21 times the total of paid-in 

capital stock, retained earnings, and 

reserves (excluding loss reserves and 

liquidity reserves for deposits pursuant 

to section 11(g) of the Bank Act (12 

U.S.C. 1431(g)) of that Bank. 

(2) The aggregate amount of assets of 

any Bank that is not subject to the 

capital requirements set forth in part 

932 of this title may be up to 25 times 

the total paid-in capital stock, retained 

earnings, and reserves of that Bank, 

provided that non-mortgage assets, after 

deducting the amount of deposits and 

capital, do not exceed 11 percent of 

such total assets. For the purposes of 

this section, the amount of nonmortgage assets equals total assets after 

deduction of: 

(i) Advances; 

(ii) Acquired member assets, 

including all United States governmentinsured or guaranteed whole singlefamily or multi-family residential 

mortgage loans; 

(iii) Standby letters of credit; 

(iv) Intermediary derivative contracts; 

(v) Debt or equity investments: 

(A) That primarily benefit households 

having a targeted income level, a 

significant proportion of which must 

benefit households with incomes at or 

below 80 percent of area median 

income, or areas targeted for 

redevelopment by local, state, tribal or 

Federal government (including Federal 

Empowerment Zones and Enterprise 

and Champion Communities), by 

providing or supporting one or more of 

the following activities: 

(1) Housing; 

(2) Economic development; 

(3) Community services; 

(4) Permanent jobs; or 

(5) Area revitalization or stabilization; 

(B) In the case of mortgage- or assetbacked securities, the acquisition of 

which would expand liquidity for loans 

that are not otherwise adequately 

provided by the private sector and do 

not have a readily available or well 

established secondary market; and 

(C) That involve one or more members 

or housing associates in a manner, 

financial or otherwise, and to a degree 

to be determined by the Bank; 

(vi) Investments in SBICs, where one 

or more members or housing associates 

of the Bank also make a material 

investment in the same activity; 

(vii) SBIC debentures, the short term 

tranche of SBIC securities, or other 

debentures that are guaranteed by the 

Small Business Administration under 

title III of the Small Business Investment 

Act of 1958, as amended (15 U.S.C. 681 

et seq.); 

(viii) Section 108 Interim Notes and 

Participation Certificates guaranteed by 

the Department of Housing and Urban 

Development under section 108 of the 

Housing and Community Development 

Act of 1974, as amended (42 U.S.C. 

5308); 

(ix) Investments and obligations 

issued or guaranteed under the Native 

American Housing Assistance and SelfDetermination Act of 1996 (25 U.S.C. 

4101 et seq.). 

(x) Securities representing an interest 

in pools of mortgages (MBS) issued, 

guaranteed, or fully insured by the 

Government National Mortgage 

Association (Ginnie Mae), the Federal 

Home Loan Mortgage Corporation 

(Freddie Mac), or the Federal National 

Mortgage Association (Fannie Mae), or 

Collateralized Mortgage Obligations 

(CMOs), including Real Estate Mortgage 

Investment Conduits (REMICs), backed 

by such securities; 


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(xi) Other MBS, CMOs, and REMICs 

rated in the highest rating category by 

an NRSRO; 

(xii) Asset-backed securities 

collateralized by manufactured housing 

loans or home equity loans and rated in 

the highest rating category by an 

NRSRO; and 

(xiii) Marketable direct obligations of 

state or local government units or 

agencies, rated in one of the two highest 

rating categories by an NRSRO, where 

the purchase of such obligations by a 

Bank provides to the issuer the 

customized terms, necessary liquidity, 

or favorable pricing required to generate 

needed funding for housing or 

community development. 

(b) Credit ratings—(1) The Banks, 

collectively, shall obtain from an 

NRSRO and, at all times, maintain a 

current credit rating on the Banks’ 

consolidated obligations. 

(2) Each Bank shall operate in such a 

manner and take any actions necessary, 

including without limitation reducing 

Bank leverage, to ensure that the Banks’ 

consolidated obligations receive and 

continue to receive the highest credit 

rating from any NRSRO by which the 

consolidated obligations have then been 

rated. 

(c) Individual Bank credit rating. Each 

Bank shall operate in such a manner 

and take any actions necessary to ensure 

that the Bank has and maintains an 

individual issuer credit rating of at least 

the second highest credit rating from 

any NRSRO providing a rating, where 

such rating is a meaningful measure of 

the individual Bank’s financial strength 

and stability, and is updated at least 

annually by an NRSRO, or more 

frequently as required by FHFA, to 

reflect any material changes in the 

condition of the Bank. 

§ 1270.6 Transactions in consolidated 

obligations. 

The general regulations of the 

Department of the Treasury now or 

hereafter in force governing transactions 

in United States securities, except 31 

CFR part 357 regarding book-entry 

procedure, are hereby incorporated into 

this subpart C of this part, so far as 

applicable and as necessarily modified 

to relate to consolidated obligations, as 

the regulations of FHFA for similar 

transactions on consolidated 

obligations. The book-entry procedure 

for consolidated obligations is contained 

in subpart D of this part. 

§ 1270.7 Lost, stolen, destroyed, mutilated 

or defaced consolidated obligations. 

United States statutes and regulations 

of the Department of the Treasury now 

or hereafter in force governing relief on 

account of the loss, theft, destruction, 

mutilation or defacement of United 

States securities, so far as applicable 

and as necessarily modified to relate to 

consolidated obligations, are hereby 

adopted as the regulations of FHFA for 

the issuance of substitute consolidated 

obligations or the payment of lost, 

stolen, destroyed, mutilated or defaced 

consolidated obligations. 

§ 1270.8 Administrative provision. 

The Secretary of the Treasury or the 

Acting Secretary of the Treasury is 

hereby authorized and empowered, as 

the agent of FHFA and the Banks, to 

administer §§ 1270.6 and 1270.7, and to 

delegate such authority at their 

discretion to other officers, employees, 

and agents of the Department of the 

Treasury. Any such regulations may be 

waived on behalf of FHFA and the 

Banks by the Secretary of the Treasury, 

the Acting Secretary of the Treasury, or 

by an officer of the Department of the 

Treasury authorized to waive similar 

regulations with respect to United States 

securities, but only in any particular 

case in which a similar regulation with 

respect to United States securities 

would be waived. The terms ‘‘securities’’ 

and ‘‘bonds’’ as used in this section 

shall, unless the context otherwise 

requires, include and apply to coupons 

and interim certificates. 

§ 1270.9 Conditions for issuance of 

consolidated obligations. 

(a) The Office of Finance board of 

directors shall authorize the offering for 

current and forward settlement (up to 12 

months) or the reopening of 

consolidated obligations, as necessary, 

and authorize the maturities, rates of 

interest, terms and conditions thereof, 

subject to the provisions of 31 U.S.C. 

9108. 

(b) Consolidated obligations may be 

offered for sale only to the extent that 

Banks are committed to take the 

proceeds. 

(c) Consolidated obligations shall not 

be purchased by any Bank as part of an 

initial issuance whether such 

consolidated obligation is purchased 

directly from the Office of Finance or 

indirectly from an underwriter. 

(d) If the Banks issue consolidated 

obligations denominated in a currency 

other than U.S. Dollars or linked to 

equity or commodity prices, then any 

Bank accepting proceeds from those 

consolidated obligations shall meet the 

following requirements with regard to 

such consolidated obligations: 

(1) The relevant foreign exchange, 

equity price or commodity price risks 

associated with the consolidated 

obligation must be hedged in 

accordance with § 956.6 of this title; 

(2) If there is a default on the part of 

a counterparty to a contract hedging the 

foreign exchange, equity or commodity 

price risk associated with a consolidated 

obligation, the Bank shall enter into a 

replacement contract in a timely manner 

and as soon as market conditions 

permit. 

§ 1270.10 Joint and several liability. 

(a) In general—(1) Each and every 

Bank, individually and collectively, has 

an obligation to make full and timely 

payment of all principal and interest on 

consolidated obligations when due. 

(2) Each and every Bank, individually 

and collectively, shall ensure that the 

timely payment of principal and interest 

on all consolidated obligations is given 

priority over, and is paid in full in 

advance of, any payment to or 

redemption of shares from any 

shareholder. 

(3) The provisions of this part shall 

not limit, restrict or otherwise diminish, 

in any manner, the joint and several 

liability of all of the Banks on any 

consolidated obligation. 

(b) Certification and reporting—(1) 

Before the end of each calendar quarter, 

and before declaring or paying any 

dividend for that quarter, the President 

of each Bank shall certify in writing to 

FHFA that, based on known current 

facts and financial information, the 

Bank will remain in compliance with 

the liquidity requirements set forth in 

section 11(g) of the Act (12 U.S.C. 

1431(g)), and any regulations (as the 

same may be amended, modified or 

replaced), and will remain capable of 

making full and timely payment of all 

of its current obligations, including 

direct obligations, coming due during 

the next quarter. 

(2) A Bank shall immediately provide 

written notice to FHFA if at any time 

the Bank: 

(i) Is unable to provide the 

certification required by paragraph 

(b)(1) of this section; 

(ii) Projects at any time that it will fail 

to comply with statutory or regulatory 

liquidity requirements, or will be unable 

to timely and fully meet all of its current 

obligations, including direct obligations, 

due during the quarter; 

(iii) Actually fails to comply with 

statutory or regulatory liquidity 

requirements or to timely and fully meet 

all of its current obligations, including 

direct obligations, due during the 

quarter; or 

(iv) Negotiates to enter or enters into 

an agreement with one or more other 

Banks to obtain financial assistance to 

meet its current obligations, including 


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direct obligations, due during the 

quarter; the notice of which shall be 

accompanied by a copy of the 

agreement, which shall be subject to the 

approval of FHFA. 

(c) Consolidated obligation payment 

plans—(1) A Bank promptly shall file a 

consolidated obligation payment plan 

for FHFA approval: 

(i) If the Bank becomes a noncomplying Bank as a result of failing to 

provide the certification required in 

paragraph (b)(1) of this section; 

(ii) If the Bank becomes a noncomplying Bank as a result of being 

required to provide the notice required 

pursuant to paragraph (b)(2) of this 

section, except in the event that a failure 

to make a principal or interest payment 

on a consolidated obligation when due 

was caused solely by a temporary 

interruption in the Bank’s debt servicing 

operations resulting from an external 

event such as a natural disaster or a 

power failure; or 

(iii) If FHFA determines that the Bank 

will cease to be in compliance with the 

statutory or regulatory liquidity 

requirements, or will lack the capacity 

to timely and fully meet all of its current 

obligations, including direct obligations, 

due during the quarter. 

(2) A consolidated obligation payment 

plan shall specify the measures the noncomplying Bank will undertake to make 

full and timely payments of all of its 

current obligations, including direct 

obligations, due during the applicable 

quarter. 

(3) A non-complying Bank may 

continue to incur and pay normal 

operating expenses incurred in the 

regular course of business (including 

salaries, benefits, or costs of office 

space, equipment and related expenses), 

but shall not incur or pay any 

extraordinary expenses, or declare, or 

pay dividends, or redeem any capital 

stock, until such time as FHFA has 

approved the Bank’s consolidated 

obligation payment plan or inter-Bank 

assistance agreement, or ordered 

another remedy, and all of the noncomplying Bank’s direct obligations 

have been paid. 

(d) FHFA payment orders; Obligation 

to reimburse—(1) FHFA, in its 

discretion and notwithstanding any 

other provision in this section, may at 

any time order any Bank to make any 

principal or interest payment due on 

any consolidated obligation. 

(2) To the extent that a Bank makes 

any payment on any consolidated 

obligation on behalf of another Bank, 

the paying Bank shall be entitled to 

reimbursement from the non-complying 

Bank, which shall have a corresponding 

obligation to reimburse the Bank 

providing assistance, to the extent of 

such payment and other associated costs 

(including interest to be determined by 

FHFA). 

(e) Adjustment of equities—(1) Any 

non-complying Bank shall apply its 

assets to fulfill its direct obligations. 

(2) If a Bank is required to meet, or 

otherwise meets, the direct obligations 

of another Bank due to a temporary 

interruption in the latter Bank’s debt 

servicing operations (e.g., in the event of 

a natural disaster or power failure), the 

assisting Bank shall have the same right 

to reimbursement set forth in paragraph 

(d)(2) of this section. 

(3) If FHFA determines that the assets 

of a non-complying Bank are 

insufficient to satisfy all of its direct 

obligations as set forth in paragraph 

(e)(1) of this section, then FHFA may 

allocate the outstanding liability among 

the remaining Banks on a pro rata basis 

in proportion to each Bank’s 

participation in all consolidated 

obligations outstanding as of the end of 

the most recent month for which FHFA 

has data, or otherwise as FHFA may 

prescribe. 

(f) Reservation of authority. Nothing 

in this section shall affect the Director’s 

authority to adjust equities between the 

Banks in a manner different than the 

manner described in paragraph (e) of 

this section, or to take enforcement or 

other action against any Bank pursuant 

to the Director’s authority under the 

Safety and Soundness Act or the Bank 

Act, or otherwise to supervise the Banks 

and ensure that they are operated in a 

safe and sound manner. 

(g) No rights created—(1) Nothing in 

this part shall create or be deemed to 

create any rights in any third party. 

(2) Payments made by a Bank toward 

the direct obligations of another Bank 

are made for the sole purpose of 

discharging the joint and several 

liability of the Banks on consolidated 

obligations. 

(3) Compliance, or the failure to 

comply, with any provision in this 

section shall not be deemed a default 

under the terms and conditions of the 

consolidated obligations. 

§ 1270.11 Savings clause. 

Any agreements or other instruments 

entered into in connection with the 

issuance of consolidated obligations 

prior to the amendments made to this 

part shall continue in effect with respect 

to all consolidated obligations issued 

under the authority of section 11 of the 

Bank Act (12 U.S.C. 1431) and pursuant 

to this part. References to consolidated 

obligations in such agreements and 

instruments shall be deemed to refer to 

all joint and several obligations of the 

Banks. 

Subpart D—Book-Entry Procedure for 

Consolidated Obligations 

§ 1270.12 Law governing rights and 

obligations of Banks, FHFA, Office of 

Finance, United States and Federal Reserve 

Banks; rights of any Person against Banks, 

FHFA, Office of Finance, United States and 

Federal Reserve Banks. 

(a) Except as provided in paragraph 

(b) of this section, the rights and 

obligations of the Banks, FHFA, the 

Director, the Office of Finance, the 

United States and the Federal Reserve 

Banks with respect to: A Book-entry 

consolidated obligation or Security 

Entitlement and the operation of the 

Book-entry system, as it applies to 

consolidated obligations; and the rights 

of any Person, including a Participant, 

against the Banks, FHFA, the Director, 

the Office of Finance, the United States 

and the Federal Reserve Banks with 

respect to: A Book-entry consolidated 

obligation or Security Entitlement and 

the operation of the Book-entry system, 

as it applies to consolidated obligations; 

are governed solely by regulations of 

FHFA, including the regulations of this 

part 1270, the applicable offering notice, 

applicable procedures established by 

the Office of Finance, and Federal 

Reserve Bank Operating Circulars. 

(b) A security interest in a Security 

Entitlement that is in favor of a Federal 

Reserve Bank from a Participant and 

that is not recorded on the books of a 

Federal Reserve Bank pursuant to 

§ 1270.14(c)(1), is governed by the law 

(not including the conflict-of-law rules) 

of the jurisdiction where the head office 

of the Federal Reserve Bank maintaining 

the Participant’s Securities Account is 

located. A security interest in a Security 

Entitlement that is in favor of a Federal 

Reserve Bank from a Person that is not 

a Participant, and that is not recorded 

on the books of a Federal Reserve Bank 

pursuant to § 1270.14(c)(1), is governed 

by the law determined in the manner 

specified in § 1270.13. 

(c) If the jurisdiction specified in the 

first sentence of paragraph (b) of this 

section is a State that has not adopted 

Revised Article 8, then the law specified 

in the first sentence of paragraph (b) of 

this section shall be the law of that State 

as though Revised Article 8 had been 

adopted by that State. 

§ 1270.13 Law governing other interests. 

(a) To the extent not inconsistent with 

this part 1270, the law (not including 

the conflict-of-law rules) of a Securities 

Intermediary’s jurisdiction governs: 


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(1) The acquisition of a Security 

Entitlement from the Securities 

Intermediary; 

(2) The rights and duties of the 

Securities Intermediary and Entitlement 

Holder arising out of a Security 

Entitlement; 

(3) Whether the Securities 

Intermediary owes any duties to an 

adverse claimant to a Security 

Entitlement; 

(4) Whether an Adverse Claim can be 

asserted against a Person who acquires 

a Security Entitlement from the 

Securities Intermediary or a Person who 

purchases a Security Entitlement or 

interest therein from an Entitlement 

Holder; and 

(5) Except as otherwise provided in 

paragraph (c) of this section, the 

perfection, effect of perfection or nonperfection, and priority of a security 

interest in a Security Entitlement. 

(b) The following rules determine a 

‘‘Securities Intermediary’s jurisdiction’’ 

for purposes of this section: 

(1) If an agreement between the 

Securities Intermediary and its 

Entitlement Holder specifies that it is 

governed by the law of a particular 

jurisdiction, that jurisdiction is the 

Securities Intermediary’s jurisdiction. 

(2) If an agreement between the 

Securities Intermediary and its 

Entitlement Holder does not specify the 

governing law as provided in paragraph 

(b)(1) of this section, but expressly 

specifies that the securities account is 

maintained at an office in a particular 

jurisdiction, that jurisdiction is the 

Securities Intermediary’s jurisdiction. 

(3) If an agreement between the 

Securities Intermediary and its 

Entitlement Holder does not specify a 

jurisdiction as provided in paragraphs 

(b)(1) or (b)(2) of this section, the 

Securities Intermediary’s jurisdiction is 

the jurisdiction in which is located the 

office identified in an account statement 

as the office serving the Entitlement 

Holder’s account. 

(4) If an agreement between the 

Securities Intermediary and its 

Entitlement Holder does not specify a 

jurisdiction as provided in paragraphs 

(b)(1) or (b)(2) of this section and an 

account statement does not identify an 

office serving the Entitlement Holder’s 

account as provided in paragraph (b)(3) 

of this section, the Securities 

Intermediary’s jurisdiction is the 

jurisdiction in which is located the chief 

executive office of the Securities 

Intermediary. 

(c) Notwithstanding the general rule 

in paragraph (a)(5) of this section, the 

law (but not the conflict-of-law rules) of 

the jurisdiction in which the Person 

creating a security interest is located 

governs whether and how the security 

interest may be perfected automatically 

or by filing a financing statement. 

(d) If the jurisdiction specified in 

paragraph (b) of this section is a State 

that has not adopted Revised Article 8, 

then the law for the matters specified in 

paragraph (a) of this section shall be the 

law of that State as though Revised 

Article 8 had been adopted by that 

State. For purposes of the application of 

the matters specified in paragraph (a) of 

this section, the Federal Reserve Bank 

maintaining the Securities Account is a 

clearing corporation, and the 

Participant’s interest in a Bank Bookentry Security is a Security Entitlement. 

§ 1270.14 Creation of Participant’s 

Security Entitlement; security interests. 

(a) A Participant’s Security 

Entitlement is created when a Federal 

Reserve Bank indicates by book entry 

that a Book-entry consolidated 

obligation has been credited to a 

Participant’s Securities Account. 

(b) A security interest in a Security 

Entitlement of a Participant in favor of 

the United States to secure deposits of 

public money, including, without 

limitation, deposits to the Treasury tax 

and loan accounts, or other security 

interest in favor of the United States that 

is required by Federal statute, 

regulation, or agreement, and that is 

marked on the books of a Federal 

Reserve Bank is thereby effected and 

perfected, and has priority over any 

other interest in the Securities. Where a 

security interest in favor of the United 

States in a Security Entitlement of a 

Participant is marked on the books of a 

Federal Reserve Bank, such Federal 

Reserve Bank may rely, and is protected 

in relying, exclusively on the order of an 

authorized representative of the United 

States directing the transfer of the 

Security. For purposes of this paragraph 

(b), an ‘‘authorized representative of the 

United States’’ is the official designated 

in the applicable regulations or 

agreement to which a Federal Reserve 

Bank is a party, governing the security 

interest. 

(c)(1) The Banks, FHFA, the Director, 

the Office of Finance, the United States 

and the Federal Reserve Banks have no 

obligation to agree to act on behalf of 

any Person or to recognize the interest 

of any transferee of a security interest or 

other limited interest in a Security 

Entitlement in favor of any Person 

except to the extent of any specific 

requirement of Federal law or regulation 

or to the extent set forth in any specific 

agreement with the Federal Reserve 

Bank on whose books the interest of the 

Participant is recorded. To the extent 

required by such law or regulation or set 

forth in an agreement with a Federal 

Reserve Bank, or the Federal Reserve 

Bank Operating Circular, a security 

interest in a Security Entitlement that is 

in favor of a Federal Reserve Bank or a 

Person may be created and perfected by 

a Federal Reserve Bank marking its 

books to record the security interest. 

Except as provided in paragraph (b) of 

this section, a security interest in a 

Security Entitlement marked on the 

books of a Federal Reserve Bank shall 

have priority over any other interest in 

the Securities. 

(2) In addition to the method 

provided in paragraph (c)(1) of this 

section, a security interest in a Security 

Entitlement, including a security 

interest in favor of a Federal Reserve 

Bank, may be perfected by any method 

by which a security interest may be 

perfected under applicable law as 

described in § 1270.12(b) or § 1270.13. 

The perfection, effect of perfection or 

non-perfection, and priority of a 

security interest are governed by that 

applicable law. A security interest in 

favor of a Federal Reserve Bank shall be 

treated as a security interest in favor of 

a clearing corporation in all respects 

under that law, including with respect 

to the effect of perfection and priority of 

the security interest. A Federal Reserve 

Bank Operating Circular shall be treated 

as a rule adopted by a clearing 

corporation for such purposes. 

§ 1270.15 Obligations of the Banks and the 

Office of Finance; no Adverse Claims. 

(a) Except in the case of a security 

interest in favor of the United States or 

a Federal Reserve Bank or otherwise as 

provided in § 1270.14(c)(1), for the 

purposes of this part 1270, the Banks, 

the Office of Finance and the Federal 

Reserve Banks shall treat the Participant 

to whose Securities Account an interest 

in a Book-entry consolidated obligations 

has been credited as the person 

exclusively entitled to issue a Transfer 

Message, to receive interest and other 

payments with respect thereof and 

otherwise to exercise all the rights and 

powers with respect to the Security, 

notwithstanding any information or 

notice to the contrary. Neither the 

Banks, FHFA, the Director, the Office of 

Finance, the United States, nor the 

Federal Reserve Banks are liable to a 

Person asserting or having an Adverse 

Claim to a Security Entitlement or to 

Book-entry consolidated obligations in a 

Participant’s Securities Account, 

including any such claim arising as a 

result of the transfer or disposition of a 

Book-entry consolidated obligation by a 

Federal Reserve Bank pursuant to a 

Transfer Message that the Federal 


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Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Rules and Regulations 18375 

Reserve Bank reasonably believes to be 

genuine. 

(b) The obligation of the Banks and 

the Office of Finance to make payments 

of interest and principal with respect to 

Book-entry consolidated obligations is 

discharged at the time payment in the 

appropriate amount is made as follows: 

(1) Interest on Book-entry 

consolidated obligations is either 

credited by a Federal Reserve Bank to a 

Funds Account maintained at the 

Federal Reserve Bank or otherwise paid 

as directed by the Participant. 

(2) Book-entry consolidated 

obligations are paid, either at maturity 

or upon redemption, in accordance with 

their terms by a Federal Reserve Bank 

withdrawing the securities from the 

Participant’s Securities Account in 

which they are maintained and by either 

crediting the amount of the proceeds, 

including both principal and interest, 

where applicable, to a Funds Account at 

the Federal Reserve Bank or otherwise 

paying such principal and interest as 

directed by the Participant. No action by 

the Participant is required in connection 

with the payment of a Book-entry 

consolidated obligation, unless 

otherwise expressly required. 

§ 1270.16 Authority of Federal Reserve 

Banks. 

(a) Each Federal Reserve Bank is 

hereby authorized as fiscal agent of the 

Office of Finance: To perform functions 

with respect to the issuance of Bookentry consolidated obligations, in 

accordance with the terms of the 

applicable offering notice and with 

procedures established by the Office of 

Finance; to service and maintain Bookentry consolidated obligations in 

accounts established for such purposes; 

to make payments of principal, interest 

and redemption premium (if any), as 

directed by the Office of Finance; to 

effect transfer of Book-entry 

consolidated obligations between 

Participants’ Securities Accounts as 

directed by the Participants; and to 

perform such other duties as fiscal agent 

as may be requested by the Office of 

Finance. 

(b) Each Federal Reserve Bank may 

issue Operating Circulars not 

inconsistent with this part 1270, 

governing the details of its handling of 

Book-entry consolidated obligations, 

Security Entitlements, and the operation 

of the Book-entry system under this part 

1270. 

§ 1270.17 Liability of Banks, FHFA, Office 

of Finance and Federal Reserve Banks. 

The Banks, FHFA, the Director, the 

Office of Finance and the Federal 

Reserve Banks may rely on the 

information provided in a tender, 

transaction request form, other 

transaction documentation, or Transfer 

Message, and are not required to verify 

the information. Neither the Banks, 

FHFA, the Director, the Office of 

Finance, the United States, nor the 

Federal Reserve Banks shall be liable for 

any action taken in accordance with the 

information set out in a tender, 

transaction request form, other 

transaction documentation, or Transfer 

Message, or evidence submitted in 

support thereof. 

§ 1270.18 Additional requirements; notice 

of attachment for Book-entry consolidated 

obligations. 

(a) Additional requirements. In any 

case or any class of cases arising under 

the regulations in this part 1270, the 

Office of Finance may require such 

additional evidence and a bond of 

indemnity, with or without surety, as 

may in its judgment, or in the judgment 

of the Banks or FHFA, be necessary for 

the protection of the interests of the 

Banks, FHFA, the Office of Finance or 

the United States. 

(b) Notice of attachment. The interest 

of a debtor in a Security Entitlement 

may be reached by a creditor only by 

legal process upon the Securities 

Intermediary with whom the debtor’s 

securities account is maintained, except 

where a Security Entitlement is 

maintained in the name of a secured 

party, in which case the debtor’s interest 

may be reached by legal process upon 

the secured party. The regulations in 

this part 1270 do not purport to 

establish whether a Federal Reserve 

Bank is required to honor an order or 

other notice of attachment in any 

particular case or class of cases. 

§ 1270.19 Reference to certain Department 

of Treasury commentary and 

determinations. 

Notwithstanding provisions in 

§ 1270.6 regarding Department of 

Treasury regulations set forth in 31 CFR 

part 357: 

(a) The Department of Treasury 

TRADES Commentary (31 CFR part 357, 

appendix B) addressing the Department 

of Treasury regulations governing bookentry procedure for Treasury Securities 

is hereby referenced, so far as applicable 

and as necessarily modified to relate to 

Book-entry consolidated obligations, as 

an interpretive aid to this subpart D of 

this part. 

(b) Determinations of the Department 

of Treasury regarding whether a State 

shall be considered to have adopted 

Revised Article 8 for purposes of 31 CFR 

part 357, as published in the Federal 

Register or otherwise, shall also apply 

to this subpart D of this part. 

§ 1270.20 Consolidated obligations are not 

obligations of the United States or 

guaranteed by the United States. 

Consolidated obligations are not 

obligations of the United States and are 

not guaranteed by the United States. 

Dated: March 28, 2011. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2011–7832 Filed 4–1–11; 8:45 am] 

BILLING CODE 8070–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

Small Business Jobs Act: Eligible 

Loans for 504 Loan Program Debt 

Refinancing 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Announcement of loan 

eligibility. 

SUMMARY: The SBA is issuing this 

document to allow loans with any 

maturity date to be eligible for debt 

refinancing under the Small Business 

Jobs Act. 

DATES: Effective Date: This document is 

effective April 4, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Andrew B. McConnell, Jr., Office of 

Financial Assistance, U.S. Small 

Business Administration, 409 Third 

Street, SW., Washington, DC 20416; 

Telephone (202) 205–7238; e-mail: 

Andrew.McConnell@sba.gov. 

SUPPLEMENTARY INFORMATION: Under the 

temporary 504 debt refinancing program 

authorized by the Small Business Jobs 

Act (Jobs Act), Public Law 111–240, 124 

Stat. 2504, only loans that will mature 

on or before December 31, 2012, are 

eligible for this temporary program, 

unless SBA publishes a Notice in the 

Federal Register extending such date 

based on its assessment of available 

resources and market conditions. See 13 

CFR 120.882(g)(3). SBA established this 

initial maturity date in order to ensure 

that those small businesses most in need 

would have access to the limited 

resources available in this temporary 

program. Based on a review of program 

demand, SBA has determined that it 

currently has the resources available to 

accept applications for the refinancing 

of loans with any maturity date. 

Effective immediately, such loans will 

now be eligible for this temporary debt 

refinancing program if they also meet 

the other statutory and regulatory 

requirements. 


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