This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

80422 

Vol. 89, No. 192 

Thursday, October 3, 2024 

1See 12 U.S.C. 1423 and 1432(a). The eleven 

Banks are located in: Boston, New York, Pittsburgh, 

Atlanta, Cincinnati, Indianapolis, Chicago, Des 

Moines, Dallas, Topeka, and San Francisco. 

2See 12 U.S.C. 1427. 

3See 12 U.S.C. 1426(a)(4) and (c)(5), 1430(a), and 

1430b. 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1277 

RIN 2590–AB41 

Unsecured Credit Limits for Federal 

Home Loan Banks 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA or the Agency) proposes 

to amend its regulation on Federal 

Home Loan Bank (Bank) capital 

requirements to modify limits on Bank 

extensions of unsecured credit in their 

on- and off-balance sheet and derivative 

transactions. Currently, overnight 

federal funds are excluded from the 

more restrictive ‘‘general limit’’ on 

unsecured credit to a single 

counterparty and are limited only by the 

higher ‘‘overall limit.’’ The proposed 

rule would add interest bearing deposit 

accounts (IBDAs) and other authorized 

overnight investments to that exclusion, 

which may provide greater flexibility 

and improved cost to yield than 

overnight federal funds. 

DATES: Written comments must be 

received on or before December 2, 2024. 

ADDRESSES: You may submit your 

comments on the proposed rule, 

identified by regulatory information 

number (RIN) 2590–AB41, by any one of 

the following methods: 

• Agency website: https://

www.fhfa.gov/regulation/federalregister?comments=open. 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by email to FHFA at 

RegComments@fhfa.gov to ensure 

timely receipt by FHFA. Include the 

following information in the subject line 

of your submission: Comments/RIN 

2590–AB41. 

• Hand Delivered/Courier: The hand 

delivery address is: Clinton Jones, 

General Counsel, Attention: Comments/ 

RIN 2590–AB41, Federal Housing 

Finance Agency, 400 Seventh Street 

SW, Washington, DC 20219. Deliver the 

package at the Seventh Street entrance 

Guard Desk, First Floor, on business 

days between 9 a.m. and 5 p.m. 

• U.S. Mail, United Parcel Service, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Clinton Jones, General Counsel, 

Attention: Comments/RIN 2590–AB41, 

Federal Housing Finance Agency, 400 

Seventh Street SW, Washington, DC 

20219. Please note that all mail sent to 

FHFA via U.S. Mail is routed through a 

national irradiation facility, a process 

that may delay delivery by 

approximately two weeks. For any timesensitive correspondence, please plan 

accordingly. 

FOR FURTHER INFORMATION CONTACT: Jack 

Phelps, Associate Director, Division of 

Bank Regulation, Jack.Phelps@

FHFA.gov, 202–688–6348; Julie Paller, 

Principal Financial Analyst, Division of 

Bank Regulation, Julie.Paller@

FHFA.gov, 202–649–3201; or Winston 

Sale, Assistant General Counsel, Office 

of General Counsel, Winston.Sale@

fhfa.gov, 202–649–3081. These are not 

toll-free numbers. For TTY/TRS users 

with hearing and speech disabilities, 

dial 711 and ask to be connected to any 

of the contact numbers above. 

SUPPLEMENTARY INFORMATION: 

I. Comments 

FHFA invites comments on all aspects 

of the notice of proposed rulemaking 

and will take all comments into 

consideration before issuing a final rule. 

Comments will be posted to the 

electronic rulemaking docket on the 

FHFA public website at http://

www.fhfa.gov, except as described 

below. Commenters should submit only 

information that the commenter wishes 

to make available publicly. FHFA may 

post only a single representative 

example of identical or substantially 

identical comments, and in such cases 

will generally identify the number of 

identical or substantially identical 

comments represented by the posted 

example. FHFA may, in its discretion, 

redact or refrain from posting all or any 

portion of any comment that contains 

content that is obscene, vulgar, profane, 

or threatens harm. All comments, 

including those that are redacted or not 

posted, will be retained in their original 

form in FHFA’s internal rulemaking file 

and considered as required by all 

applicable laws. Commenters that 

would like FHFA to consider any 

portion of their comment exempt from 

disclosure on the basis that it contains 

trade secrets, or financial, confidential 

or proprietary data or information, 

should follow the procedures in section 

IV.D. of FHFA’s Policy on 

Communications with Outside Parties 

in Connection with FHFA Rulemakings, 

see https://www.fhfa.gov/sites/default/ 

files/documents/Ex-ParteCommunications-Public-Policy_3-5- 

19.pdf. FHFA cannot guarantee that 

such data or information, or the identity 

of the commenter, will remain 

confidential if disclosure is sought 

pursuant to an applicable statute or 

regulation. See 12 CFR 1202.8, 12 CFR 

1214.2. and https://www.fhfa.gov/about/ 

foia-reference-guide for additional 

information. 

II. Background 

A. The Federal Home Loan Banks and 

Limits on Unsecured Extensions of 

Credit 

The eleven Banks are wholesale 

financial institutions organized under 

the Federal Home Loan Bank Act (Bank 

Act).1 Each Bank is a cooperative 

managed by its own board of directors.2

Only members of a Bank may purchase 

the capital stock of a Bank and only 

members or certain eligible non-member 

housing associates (such as state 

housing finance agencies) may obtain 

access to secured loans, known as 

advances, or other products provided by 

a Bank.3

The Banks are subject to FHFA’s Bank 

capital regulation, located at 12 CFR 

part 1277, which sets requirements 

regarding Bank minimum capital, Bank 

capital stock, and Bank capital plans. 

Subpart B of the regulation, which 

governs Bank capital requirements, 

includes at 12 CFR 1277.7 provisions 

establishing limits on extensions of 

unsecured credit in which the Banks 

engage when managing their liquidity 


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4See 12 CFR 1277.7(a)(1). 

5See 12 CFR 1277.7(a)(2). 

6 ‘‘The fed funds market is an unsecured, mostly 

overnight, over-the counter funding market among 

banks and government-sponsored enterprises.’’ See 

Board of Governors of the Federal Reserve System 

FEDS Notes (July 11, 2024). By regulation FHFA has 

defined ‘‘sales of federal funds subject to a 

continuing contract’’ as ‘‘an overnight federal funds 

loan that is automatically renewed each day unless 

terminated by either the lender or the borrower.’’ 

12 CFR 1277.1. 

7See 12 CFR 1277.7(a)(1). 

8See 12 CFR 1277.7(a)(1)(ii). 

9See 66 FR 66718 (Dec. 27, 2001). 

10 66 FR at 66720–21. 

11See 84 FR 5308 (Feb. 20, 2019). 

12Available at: https://www.fhfa.gov/sites/ 

default/files/2023-06/AB-2018-07-FHLB-LiquidityGuidance.pdf. 

13Reverse repos are overnight or term lending to 

other financial institutions secured by securities 

collateral. 

14The Federal Reserve System facilitates financial 

institutions’ exchange of funds between various 

accounts, including from a Bank’s IBDA account to 

its account at its local Federal Reserve Bank. These 

services are generally available each business day. 

portfolios. Existing § 1277.7(a) 

establishes for the Banks two limits on 

unsecured extensions of credit to a 

single counterparty, referred to in the 

regulation as the ‘‘general limit’’ 4 and 

the ‘‘overall limit.’’ 5 The functional 

difference between the two limits is that 

the more restrictive general limit 

excludes sales of federal funds with a 

maturity of one day or less and the sales 

of federal funds subject to a continuing 

contract 6 (collectively, overnight Fed 

Funds) from its measurement of 

extensions of unsecured credit, while 

the higher overall limit includes 

overnight Fed Funds. 

The general limit is calculated by 

multiplying a maximum capital 

exposure limit (expressed as a 

percentage) associated with the 

applicable FHFA Credit Rating category 

of the counterparty by the lesser of 

either the Bank’s total capital, or the 

counterparty’s Tier 1 capital or total 

capital (in either case as defined by the 

counterparty’s principal regulator).7 In 

cases where the counterparty does not 

have a regulatory Tier 1 capital or total 

capital measure, the Bank would 

determine a similar capital measure to 

use.8 The overall limit is set at not more 

than twice the general limit, which 

effectively establishes overnight Fed 

Funds as a special category of 

unsecured extensions of credit subject 

to a substantially higher limit than all 

other unsecured extensions of credit. 

The Federal Housing Finance Board 

(Finance Board), FHFA’s predecessor as 

regulator of the Banks, established the 

general and overall limits in a 2001 final 

rule addressing the Banks’ extensions of 

unsecured credit.9 The intent of the 

limits was to prevent undue 

concentration of credit in a single 

counterparty or group of affiliated 

counterparties. In the final rule, the 

Finance Board stated that it had 

considered excluding overnight Fed 

Funds transactions from the unsecured 

credit limits because other banking 

regulators excluded these transactions 

from their lending limits. However, it 

ultimately concluded that, given the 

Banks’ financial incentives to lend into 

the federal funds markets (i.e., the 

government-sponsored enterprise (GSE) 

funding advantage and fewer 

permissible investments than are 

available to commercial banks), 

permitting such lending without limits 

would be imprudent.10 FHFA retained 

that approach when adopting the 

Finance Board’s capital regulations 

along with certain amendments in 

2019.11 The special limit for overnight 

Fed Funds has not been substantively 

revised since 2001, while the Banks and 

the financial products in which they 

may invest have evolved considerably. 

B. Developments in Overnight Lending 

One of the primary functions of the 

Banks is to provide advances to their 

members. Thus, each Bank must have a 

large store of liquidity to meet its own 

needs and demands for advances from 

its members, even during periods of 

financial market disruption. Each Bank 

holds asset-side liquidity, or liquidity 

assets, on its balance sheet to 

supplement its liability-side liquidity, 

sourced from debt issued in the capital 

markets. These liquidity holdings 

include money market instruments, 

certain U.S. Treasury securities, and 

unencumbered cash. FHFA has 

provided guidance to the Banks on 

maintaining sufficient amounts of assetside liquidity to continue regular 

business during capital market 

disruptions in FHFA Advisory Bulletin 

(AB) 2018–07.12 This guidance states an 

expectation that asset-side liquidity 

holdings be readily convertible to cash 

with little or no loss in their par value. 

Money market instruments, including 

overnight Fed Funds, reverse 

repurchase agreements (reverse repos),13

and IBDA deposits, typically comprise 

the largest segment of Bank liquidity 

holdings to optimize adherence to the 

guidance set forth in AB 2018–07. These 

overnight money market instruments 

have no price risk (they are par 

instruments that do not fluctuate in 

value due to interest rate changes), but 

they do have small, varying amounts of 

credit and operational risk. 

Historically, Bank money market 

holdings consisted of overnight Fed 

Funds and reverse repos. Starting in 

2014, new liquidity risk management 

requirements imposed by members’ 

prudential regulators made it 

advantageous for certain insured 

depositories to offer IBDAs to the Banks. 

IBDA deposits are non-maturity 

deposits (that is, deposits that the 

depositor is free to withdraw at any time 

since there is no defined contractual 

maturity date) that a Bank may access 

whenever Fedwire fund transfer 

capabilities are open.14 In contrast, 

overnight Fed Funds and reverse repos 

are returned to a Bank from the 

counterparty the next trading or banking 

day and often require a trade 

commitment early in the day. Among 

eligible money market instrument 

alternatives, IBDAs provide the most 

intraday liquidity flexibility for a Bank, 

as protocols can be established for the 

counterparty to return IBDA deposits to 

the Bank early each business day and a 

Bank can wait until the close of 

business to commit to redepositing the 

funds. This provides the Bank flexibility 

to meet unexpected, late-day member 

advance demand. For these reasons, 

IBDAs have become a preferred money 

market instrument to manage Bank 

liquidity. 

Under the existing Bank capital 

regulation, IBDA deposits are subject to 

the general limit on unsecured 

extensions of credit to a single 

counterparty, in addition to the larger 

overall limit that includes overnight Fed 

Funds. This restricts the amount of 

liquidity the Banks can manage using 

IBDAs. From a risk-management 

perspective, IBDAs are a wellestablished money market instrument 

among the Banks and have a similar risk 

profile to overnight Fed Funds. IBDAs 

and overnight Fed Funds are both 

overnight unsecured investments 

returned daily and the amount of 

exposure a Bank can have to any one 

counterparty in either investment type 

depends on the same Bank-developed 

internal credit rating methodology for 

unsecured counterparties. For these 

reasons and considering the importance 

of IBDAs to Bank liquidity management, 

subjecting IBDA deposits to the general 

limit rather than restricting them only 

through the higher overall limit does not 

provide offsetting safety and soundness 

benefits. Revising the regulation to 

exclude IBDA deposits from the more 

restrictive general limit would provide 

the Banks with greater flexibility in 

managing liquidity. 

The Federal Home Loan Bank System 

(Bank System) IBDA deposits have 

slowly increased over time relative to 

total liquidity holdings, averaging 7.6 

percent since January 2019 and peaking 


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15The System at 100 Report is available at: 

https://www.fhfa.gov/sites/default/files/2024-01/ 

FHLBank-System-at-100-Report.pdf. 

16System at 100 Report at 32–33. 

17This regulatory provision characterizes these 

accounts as ‘‘amortized cost’’ or ‘‘fair value’’ items 

as described in that calculation, which is generally 

irrelevant in regard to whether they should be 

considered unsecured extensions of credit. 

at 13.6 percent in October 2023. 

Overnight Fed Funds holdings averaged 

43.7 percent over that same time. 

Despite growth in the Banks’ use of 

IBDAs, the overnight Fed Funds daily 

average across the Bank System for the 

first six months of 2024 ($91 billion) 

remains over three times the volume of 

IBDA deposits ($27 billion). Under the 

current general limit, the maximum 

permissible IBDA deposit to any one 

counterparty is only half of the limit 

applicable to overnight Fed Funds 

exposure. 

In November 2023, FHFA released its 

FHLBank System at 100: Focusing on 

the Future report (System at 100 

Report), culminating FHFA’s 

comprehensive review of the Bank 

System.15 In the report, FHFA identified 

the Banks’ ability to meet short-term 

liquidity needs as an area that would 

benefit from modernization.16 This 

proposed rule is part of FHFA’s efforts 

toward this end. 

III. The Proposed Rule 

A. Expanding Investments Restricted 

Only by the Higher Overall Limit— 

§§ 1277.1 and 1277.7(a)(1) 

FHFA is proposing to revise part 1277 

of its regulations to exclude from the 

general limit on extensions of unsecured 

credit to a single counterparty set forth 

in § 1277.7(a)(1) investments with a 

maturity of one day or less where the 

principal is returned to the Bank each 

day. These would include overnight Fed 

Funds and deposits in banks or trust 

companies (such as IBDAs) as defined 

in § 1267.1, but would exclude demand 

accounts in Federal Reserve Banks, as 

well as other similar investments that 

may be approved by FHFA in 

accordance with § 1211.3 of its 

procedures regulation. As discussed 

further below, the proposed rule would 

add to § 1277.1 a new defined term, 

‘‘authorized overnight investments,’’ to 

describe these investment options. 

These changes would have the effect 

of expanding the types of permissible 

investments that are subject only to the 

overall limit on unsecured credit 

extensions set forth in § 1277.7(a)(2), a 

status that currently applies only to 

overnight Fed Funds. Overnight Fed 

Funds are overnight unsecured 

investments in approved counterparties, 

while IBDA deposits are non-maturity 

deposits in approved counterparties, 

using the same credit standards as, and 

generally paying a premium compared 

to, overnight Fed Funds. For a Bank’s 

IBDA deposit to be considered an 

authorized overnight investment under 

the proposed rule, the Bank would be 

required to establish a process by which 

the counterparty would return its IBDA 

deposit daily, which is analogous to 

movement of overnight Fed Funds 

trades. 

While IBDA deposits have a similar 

risk profile to overnight Fed Funds, 

FHFA expects that expanding IBDA 

deposit capacity would benefit the 

Banks by increasing the flexibility of 

their liquidity asset management. For 

example, while most reverse repo and 

overnight Fed Funds transactions 

require an early morning trade 

commitment, IBDA deposits can move 

between a Bank and counterparty 

whenever funds transfer systems are 

open, including the end of the business 

day. By employing IBDA deposits to 

manage liquidity, a Bank need not 

attempt to accurately anticipate member 

advance demand before gaining a full 

understanding of member liquidity 

needs and debt issuance conditions 

throughout the business day. In a 

stressed market environment, 

developments during the business day 

can create sudden, unanticipated lateday advance demand. The proposed 

exclusion of ‘‘authorized overnight 

investments’’ from the general limit 

would allow the Banks to increase IBDA 

deposit exposure and therefore retain 

more cash on hand to satisfy 

unexpected late-day member advance 

needs before committing excess funds to 

their IBDA counterparties at the end of 

the business day, thereby improving 

their overall liquidity flexibility. 

FHFA expects that expanding the 

Banks’ ability to use IBDA deposits for 

liquidity management would further 

benefit the Banks by reducing the 

overall cost of holding liquidity assets 

due to higher yields available through 

IBDAs. Since 2018, the Bank System has 

achieved a spread on IBDA deposits 

above reverse repo and overnight Fed 

Funds sold transactions of 

approximately 7.5 and 6.7 basis points, 

respectively, indicating a lower cost to 

yield against instruments of comparable 

risk. 

FHFA proposes including in the new 

definition of ‘‘authorized overnight 

investments’’ set forth in § 1277.1 the 

ability to expand without a rulemaking 

the types of overnight investments 

excluded from the general limit, and 

therefore subject only to the higher 

overall limit, to respond to changes in 

financial products and market 

conditions. The Banks would seek 

approval for such investments through 

the approval process set forth in FHFA’s 

procedures regulation at 12 CFR part 

1211. This would allow FHFA to update 

the instruments qualifying as authorized 

overnight investments without 

amending the regulation through 

rulemaking, significantly increasing the 

speed with which the Agency could 

respond to the evolving financial 

marketplace. FHFA requests comment 

on whether, as proposed, unsecured 

extensions of credit excluded from the 

general limit and subject only to the 

overall limit should be authorized by 

FHFA through the regulatory approval 

process, or whether any such changes 

should be subject to notice and 

comment rulemaking. 

FHFA has considered whether 

unsecured deposits in non-interestbearing deposit accounts such as 

settlement, payroll, or other 

transactional accounts should be 

considered unsecured extensions of 

credit and included in a Bank’s 

calculation of its unsecured credit 

limits. Such deposits are considered onbalance sheet transactions under 

existing § 1277.7(f)(1)(i) 17 and therefore 

must be considered unsecured 

extensions of credit and subject to the 

unsecured credit limits. Further, 

nothing in the existing regulation 

excludes such deposits from the 

unsecured credit limits. 

For purposes of this proposed rule, 

whether unsecured deposits in noninterest-bearing accounts such as 

settlement or payroll accounts would 

count toward the general limit or the 

overall limit would be determined by 

whether they meet the daily repayment 

requirement of the proposed definition 

of ‘‘authorized overnight investments,’’ 

as they would potentially qualify as 

‘‘deposits in banks or trust companies’’ 

under that definition. FHFA is 

proposing that deposits that are not 

returned to the Bank or custodian each 

day would be subject to the lesser 

general limit, while funds that are 

returned to the Bank or custodian each 

day, as set forth in the proposed 

definition of ‘‘authorized overnight 

investments,’’ would be subject to the 

greater overall limit. FHFA requests 

comment on whether this interpretation 

of which accounts would be included in 

the definition of ‘‘authorized overnight 

investments’’ would create operational 

or other safety and soundness concerns 

for the Banks or their counterparties. 

B. Other Revisions to § 1277.7(a)(1) 

The proposed rule would also make 

several other revisions to § 1277.7(a)(1). 


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Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Proposed Rules 80425 

18As defined in 12 CFR 1201.1 the ‘‘Data 

Reporting Manual or DRM’’ means a manual issued 

by FHFA and amended from time to time 

containing reporting requirements for the Regulated 

Entities. The DRM is one method through which 

FHFA implements its statutory authority under 12 

U.S.C. 4514 to require regular and special reports 

from its regulated entities and communicates those 

requirements. 

FHFA proposes adding language to the 

introductory paragraph clarifying that 

measurement of unsecured credit 

exposure to a single counterparty also 

includes intra-day exposure and is not 

limited to overnight exposure. This 

language is intended to clarify FHFA’s 

expectations and ensure consistency 

among the Banks in how they manage 

intra-day unsecured credit extension 

exposure. 

As discussed above, existing 

§ 1277.7(a)(1) provides that the general 

limit is to be calculated by multiplying 

the maximum capital exposure limit 

percentage associated with the 

applicable FHFA Credit Rating category 

of the counterparty by the lesser of 

either (i) the Bank’s total capital, or (ii) 

the counterparty’s Tier 1 capital, or (if 

Tier 1 capital is unavailable) total 

capital. To provide clarity on what 

measure of total capital a Bank should 

use for purposes of determining 

compliance with the general and overall 

limits and avoid discrepancies between 

FHFA’s unsecured limit calculations 

and the Bank’s calculations, the 

proposed rule would revise 

§ 1277.7(a)(1)(i) to specify that, for 

purposes of this calculation, a Bank’s 

total capital is to be calculated as the 

lesser of the daily total or the most 

recent month-end total capital. FHFA 

does not expect that the proposed 

clarification would require the Banks to 

make any changes to their current 

methods of calculating month-end 

capital or daily capital. Similarly, 

§ 1277.7(a)(1)(ii) would be revised to 

provide that the counterparty’s total 

capital would be measured based on its 

most recent regulatory financial report 

filed with its appropriate regulator, as 

defined in 12 CFR 1263.1. FHFA 

expects that this proposed revision 

would provide greater certainty to the 

Banks about the measure of capital to 

use when calculating the regulatory 

limits, facilitating compliance review 

during examinations. 

C. Limits on Extensions of Credit to 

Affiliated Counterparties and GSEs— 

§§ 1277.7(b) & 1277.7(c) 

Existing § 1277.7(b) provides that the 

total amount of unsecured extensions of 

credit by a Bank to a group of affiliated 

counterparties, including sales of Fed 

Funds, shall not exceed 30 percent of 

the Bank’s capital—a limit that applies 

in addition to the limits on extensions 

of unsecured credit to a single 

counterparty under § 1277.7(a). As a 

conforming change, FHFA proposes to 

revise § 1277.7(b) to replace the 

references to Fed Funds with references 

to the newly-defined ‘‘authorized 

overnight investments.’’ The proposed 

rule would also clarify that, for 

purposes of the affiliated counterparty 

limits, a Bank’s total capital must be 

calculated in the same manner as 

provided for the single counterparty 

limits under proposed § 1277.7(a)(1)(i). 

Similar revisions would also be made to 

§ 1277.7(c), which provides that 

unsecured extensions of credit to a GSE 

that is operating with capital support or 

another form of direct financial 

assistance from the United States 

government that enables the GSE to 

repay those obligations shall not exceed 

a Bank’s total capital. 

D. Removing References to Sales of 

Federal Funds Subject to a Continuing 

Contract—§§ 1277.1 and 1277.7(d) 

Existing § 1277.7(d) provides that if a 

Bank revises its internal credit rating for 

any counterparty or obligation, it must 

assign the counterparty or obligation to 

the appropriate FHFA Credit Rating 

category based on the revised rating. If 

the revised internal rating results in a 

lower FHFA Credit Rating category, a 

Bank need not unwind or liquidate any 

existing transaction or position, but any 

subsequent extensions of unsecured 

credit must comply with the maximum 

capital exposure limit applicable to that 

lower rating category. The provision 

stipulates that the renewal of an existing 

unsecured extension of credit, 

‘‘including any decision not to 

terminate any sales of federal funds 

subject to a continuing contract,’’ shall 

be considered a subsequent extension of 

unsecured credit that can be undertaken 

only in accordance with the lower limit. 

The proposed rule would remove 

from this provision the reference to 

‘‘sales of federal funds subject to a 

continuing contract’’ and replace it with 

a reference to ‘‘any automatic renewal of 

an authorized overnight investment.’’ 

FHFA is not aware of any Bank that 

participates in overnight Fed Funds 

sales that are subject to a continuing 

contract and considers the term 

obsolete. The purpose of the change 

would be to ensure that the regulation 

would address a similar concept to the 

extent it would be applicable now or in 

the future. As described above, funds in 

any automatically renewing overnight 

investment would need to be transferred 

to and from the Bank daily to be eligible 

for treatment under the overall limit or 

would otherwise be subject to the lesser 

general limit. 

Existing § 1277.1 includes a definition 

of sales of federal funds subject to a 

continuing contract, which the 

proposed rule would delete, given that 

the term is obsolete and would no 

longer be referenced in the regulation. 

E. Clarifying Reporting Requirements 

Existing § 1277.7(e)(1) requires each 

Bank to report to FHFA monthly on 

secured and unsecured extensions of 

credit arising from on- and off-balance 

sheet and derivative transactions to any 

counterparty and group of affiliated 

counterparties exceeding five percent of 

its total capital or the counterparty’s or 

affiliated counterparties’ Tier 1 capital 

or total capital. Existing § 1277.7(e)(2) 

also requires each Bank to report to 

FHFA monthly on total secured and 

unsecured extensions of credit arising 

from on- and off-balance sheet and 

derivative transactions to any single 

counterparty or group of affiliated 

counterparties exceeding five percent of 

the Bank’s total assets. FHFA is 

proposing to revise § 1277.7(e)(1) and 

(2) to replace the descriptions of the 

specific reporting requirements with 

new language referencing FHFA’s Data 

Reporting Manual (DRM),18 which sets 

forth detailed data reporting 

requirements for the Banks and in 

accordance with which the Banks are 

required to report under § 1277.8. 

The DRM sets forth specific 

requirements for the reporting of 

unsecured credit data by each Bank, 

including data required to be reported 

under § 1277.7(e)(1) and (2). Since 

FHFA collects comprehensive 

information on secured and unsecured 

credit exposure through its DRM 

requirements, the detailed requirements 

in § 1277.7(e)(1) and (2) are redundant. 

FHFA proposes deleting them to avoid 

confusion and the possibility that the 

regulatory text may conflict with the 

DRM reporting requirements as FHFA’s 

supervisory reporting needs evolve. 

FHFA proposes to retain the violation 

self-reporting requirement of 

§ 1277.7(e)(3), which is not currently 

covered in the DRM, and redesignate it 

as § 1277.7(e)(2). 

Existing § 1277.7(e)(3) requires that a 

Bank ‘‘report promptly to FHFA’’ any 

extension of unsecured credit that 

exceeds any limit set forth in 

§ 1277.7(a), (b), or (c). FHFA requests 

comment on whether the use of the term 

‘‘promptly’’ in 1277.7(e)(3) is too 

ambiguous and open to different 

interpretations given the seriousness of 

the context and, if so, whether it should 

be revised to reference a more specific 

timeframe such as ‘‘two business days.’’ 


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19See 12 U.S.C. 4513. 

20 44 U.S.C. 3501 et seq. 

21 5 U.S.C. 601 et seq. 

22 5 U.S.C. 605(b). 

23 5 U.S.C. 553(b)(4). 

24 44 U.S.C. 3501 note. 

FHFA also requests comment on 

whether the provision should explicitly 

address how to notify FHFA in 

situations where the Bank may not 

identify a violation until well after the 

event occurred. 

In coordination with the proposed 

revisions to the reporting requirements 

in 1277.7(e), FHFA proposes to add 

language clarifying FHFA’s expectations 

regarding credit exposure reporting to 

§ 1277.8. To avoid any ambiguity, FHFA 

proposes to add language highlighting 

that the Banks’ reporting on matters 

addressed by part 1277 under the DRM 

includes information related to secured 

and unsecured credit exposures and 

extensions of credit in excess of limits, 

in addition to capital information. 

Banks would be required to report this 

information in accordance with the 

instructions provided in the DRM. 

IV. Considerations of Differences 

Between the Banks and the Enterprises 

Section 1313(f) of the Safety and 

Soundness Act requires the Director of 

FHFA, when promulgating regulations 

relating to the Banks, to consider the 

differences between the Banks and the 

Enterprises (Fannie Mae and Freddie 

Mac) as they relate to: the Banks’ 

cooperative ownership structure; the 

mission of providing liquidity to 

members; the affordable housing and 

community development mission; their 

capital structure; and their joint and 

several liability.19 The Director also may 

consider any other differences that are 

deemed appropriate. In preparing this 

proposed rule, the Director considered 

the differences between the Banks and 

the Enterprises as they relate to the 

above factors and determined that the 

rule is appropriate. FHFA requests 

comments regarding whether 

differences related to those factors 

should result in any revisions to the 

proposed rule. 

V. Paperwork Reduction Act 

The proposed rule would not contain 

any changes to information collection 

requirements that would require the 

approval of the Office of Management 

and Budget (OMB) under the Paperwork 

Reduction Act.20 Therefore, FHFA has 

not submitted any information to OMB 

for review. 

VI. Regulatory Flexibility Act 

The Regulatory Flexibility Act 21

(RFA) requires that a regulation that has 

a significant economic impact on a 

substantial number of small entities, 

small businesses, or small organizations 

must include an initial regulatory 

flexibility analysis describing the 

regulation’s impact on small entities. 

Such an analysis need not be 

undertaken if the agency has certified 

that the regulation will not have a 

significant economic impact on a 

substantial number of small entities.22

FHFA has considered the impact of the 

proposed rule under the RFA. FHFA 

certifies that the proposed rule, if 

adopted as a final rule, would not have 

a significant economic impact on a 

substantial number of small entities 

because the proposed rule applies only 

to the Banks, which are not small 

entities for purposes of the RFA. 

VII. Providing Accountability Through 

Transparency Act of 2023 

The Providing Accountability 

Through Transparency Act of 2023 23

requires that a notice of proposed 

rulemaking include the internet address 

of a summary of not more than 100 

words in length of a proposed rule, in 

plain language, that shall be posted on 

the internet website under section 

206(d) of the E-Government Act of 

2002 24 (commonly known as 

Regulations.gov). FHFA’s proposal and 

the required summary can be found at 

https://www.regulations.gov. 

List of Subjects for 12 CFR Part 1277 

Capital, Credit, Federal home loan 

banks, Investments, Reporting and 

recordkeeping requirements. 

Accordingly, for reasons stated in the 

Preamble, and under the authority of 12 

U.S.C. 1426, 1436(a), 1440, 1443, 1446, 

4511, 4513, 4514, 4526, 4612, FHFA 

proposes to amend subchapter D of 

chapter XII of title 12 of the Code of 

Federal Regulations as follows: 

PART 1277—FEDERAL HOME LOAN 

BANK CAPITAL REQUIREMENTS, 

CAPITAL STOCK AND CAPITAL 

PLANS 

■ 1. The authority citation for part 1277 

continues to read as follows: 

Authority: 12 U.S.C. 1426, 1436(a), 1440, 

1443, 1446, 4511, 4513, 4514, 4526, and 

4612. 

■ 2. Amend § 1277.1 by removing the 

definition of ‘‘Sales of federal funds 

subject to a continuing contract’’ and 

adding the definition of ‘‘Authorized 

overnight investments’’ in alphabetical 

order to read as follows: 

§ 1277.1 Definitions. 

* * * * * 

Authorized overnight investments 

means an investment with a maturity of 

one day or less where the principal is 

returned to the Bank or custodian each 

day, including sales of federal funds 

(known as Federal funds sold), deposits 

in banks or trust companies as defined 

in § 1267.1 of this chapter, but 

excluding demand accounts in Federal 

Reserve Banks, and other similar 

investments approved by FHFA in 

accordance with § 1211.3 of this 

chapter. 

* * * * * 

■ 3. Amend § 1277.7 by revising 

paragraphs (a)(1) and (2), and (b), (c), 

(d), and (e) to read as follows: 

§ 1277.7 Limits on unsecured extensions 

of credit; reporting requirements. 

(a) * * * 

(1) General limits. All unsecured 

extensions of credit by a Bank to a 

single counterparty that arise from the 

Bank’s on- and off-balance sheet and 

derivative transactions, including intraday exposure (but excluding authorized 

overnight investments) shall not exceed 

the product of the maximum capital 

exposure limit applicable to such 

counterparty, as determined in 

accordance with the following Table 1 

to this section, multiplied by the lesser 

of: 

(i) The Bank’s total capital calculated 

as the lesser of the daily total or the 

most recent month end; or 

(ii) The counterparty’s Tier 1 capital, 

or if Tier 1 capital is not available, total 

capital (in each case as defined by the 

counterparty’s appropriate regulator, as 

defined in § 1263.1 of this chapter) or 

some similar comparable measure 

identified by the Bank based on the 

counterparty’s most recent regulatory 

financial report filed with its 

appropriate regulator. 

(2) Overall limits including authorized 

overnight investments. All unsecured 

extensions of credit by a Bank to a 

single counterparty that arise from the 

Bank’s on- and off-balance sheet and 

derivative transactions, including 

authorized overnight investments, shall 

not exceed twice the limit calculated 

pursuant to paragraph (a)(1) of this 

section. 

* * * * * 

(b) Unsecured extensions of credit to 

affiliated counterparties—(1) In general. 

The total amount of unsecured 

extensions of credit by a Bank to a group 

of affiliated counterparties that arise 

from the Bank’s on- and off-balance 

sheet and derivative transactions, 

including authorized overnight 


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Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Proposed Rules 80427 

investments, shall not exceed 30 percent 

of the Bank’s total capital as calculated 

in accordance with paragraph (a)(1)(i) of 

this section. 

(2) Relation to individual limits. The 

aggregate limits calculated under 

paragraph (b)(1) of this section shall 

apply in addition to the limits on 

extensions of unsecured credit to a 

single counterparty imposed by 

paragraph (a) of this section. 

(c) Special limits for certain GSEs. 

Unsecured extensions of credit by a 

Bank that arise from the Bank’s on- and 

off-balance sheet and derivative 

transactions, including from the 

purchase of any authorized overnight 

investments, with a GSE that is 

operating with capital support or 

another form of direct financial 

assistance from the United States 

government that enables the GSE to 

repay those obligations, shall not exceed 

the Bank’s total capital as calculated in 

accordance with paragraph (a)(1)(i) of 

this section. 

(d) Extensions of unsecured credit 

after reduced rating. If a Bank revises its 

internal credit rating for any 

counterparty or obligation, it shall 

assign the counterparty or obligation to 

the appropriate FHFA Credit Rating 

category based on the revised rating. If 

the revised internal rating results in a 

lower FHFA Credit Rating category, 

then any subsequent extensions of 

unsecured credit shall comply with the 

maximum capital exposure limit 

applicable to that lower rating category, 

but a Bank need not unwind or liquidate 

any existing transaction or position that 

complied with the limits of this section 

at the time it was entered. For purposes 

of this paragraph (d), the renewal of an 

existing unsecured extension of credit, 

including any decision not to terminate 

any automatic renewal of an authorized 

overnight investment, shall be 

considered a subsequent extension of 

unsecured credit that can be undertaken 

only in accordance with the lower limit. 

(e) Reporting requirements—(1) 

Secured and unsecured extensions of 

credit. Each Bank shall report to FHFA 

information concerning the Bank’s 

secured and unsecured extensions of 

credit arising from on- and off-balance 

sheet and derivative transactions to any 

counterparty and group of affiliated 

counterparties, including information 

related to the Bank’s total capital, the 

counterparty’s total capital, and 

assigned FHFA Credit Rating category 

per Table 1 to § 1277.7 of this part, in 

accordance with instructions provided 

in the FHFA Data Reporting Manual as 

required in § 1277.8. 

(2) Extensions of credit in excess of 

limits. A Bank shall report promptly to 

FHFA any extension of unsecured credit 

that exceeds any limit set forth in 

paragraph (a), (b), or (c) of this section. 

In making this report, a Bank shall 

provide the name of the counterparty or 

group of affiliated counterparties to 

which the excess unsecured credit has 

been extended, the dollar amount of the 

applicable limit which has been 

exceeded, the dollar amount by which 

the Bank’s extension of unsecured credit 

exceeds such limit, the dates for which 

the Bank was not in compliance with 

the limit, and a brief explanation of the 

circumstances that caused the limit to 

be exceeded. 

* * * * * 

■ 4. Revise § 1277.8 to read as follows: 

§ 1277.8 Reporting requirements. 

Each Bank shall report information 

related to capital, secured and 

unsecured credit exposures, extensions 

of credit in excess of limits, and other 

matters addressed by this part in 

accordance with instructions provided 

in the Data Reporting Manual issued by 

FHFA, as amended from time to time. 

Sandra L. Thompson, 

Director, Federal Housing Finance Agency. 

[FR Doc. 2024–22865 Filed 10–2–24; 8:45 am] 

BILLING CODE 8070–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2024–2326; Project 

Identifier MCAI–2023–01048–T] 

RIN 2120–AA64 

Airworthiness Directives; Airbus 

Canada Limited Partnership (Type 

Certificate Previously Held by C Series 

Aircraft Limited Partnership (CSALP); 

Bombardier, Inc.) Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to 

supersede Airworthiness Directive (AD) 

2022–19–09, which applies to all Airbus 

Canada Limited Partnership Model BD– 

500–1A10 and BD–500–1A11 airplanes. 

AD 2022–19–09 requires repetitive 

inspections of the left and right main 

landing gear (MLG) lower spindle pins 

to detect corrosion, and applicable 

repair or replacement. Since the FAA 

issued AD 2022–19–09, the tracking of 

flight cycles for inspections was 

changed from the usage of the MLG to 

the usage of MLG lower spindle 

assemblies and a replacement was 

developed, which would terminate the 

inspections. This proposed AD 

continues to require certain actions in 

AD 2022–19–09, would change the 

tracking of flight cycles for inspections 

from the usage of the MLG to the usage 

of MLG lower spindle assemblies, and 

would require replacement of affected 

MLG lower spindle assemblies, as 

specified in a Transport Canada AD, 

which is proposed for incorporation by 

reference (IBR). This proposed AD also 

would remove airplanes from the 

applicability. This proposed AD would 

also prohibit the installation of affected 

parts under certain conditions. The FAA 

is proposing this AD to address the 

unsafe condition on these products. 

DATES: The FAA must receive comments 

on this proposed AD by November 18, 

2024. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

regulations.gov. Follow the instructions 

for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

AD Docket: You may examine the AD 

docket at regulations.gov under Docket 

No. FAA–2024–2326; or in person at 

Docket Operations between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. The AD docket 

contains this NPRM, the mandatory 

continuing airworthiness information 

(MCAI), any comments received, and 

other information. The street address for 

Docket Operations is listed above. 

Material Incorporated by Reference: 

• For Transport Canada material 

identified in this proposed AD, contact 

Transport Canada, Transport Canada 

National Aircraft Certification, 159 

Cleopatra Drive, Nepean, Ontario K1A 

0N5, Canada; telephone 888–663–3639; 

email TC.AirworthinessDirectivesConsignesdenavigabilite.TC@tc.gc.ca. 

You may find this material on the 

Transport Canada website at 

tc.canada.ca/en/aviation. It is also 

available at regulations.gov under 

Docket No. FAA–2024–2326. 

• You may view this material at the 

FAA, Airworthiness Products Section, 

Operational Safety Branch, 2200 South 


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