To the extent that the FHFB has issued contrary advice or opinions, ABA urges the FHFB to rescind those positions. Redemption Clarification . In our letter of October 12, ABA urged the FHFB to address in the final rule a FHLBank s right to force redemption of stock. After further discussions with our members, ABA could accept redemption of activity-based stock in a manner that does not disadvantage FHLBank members. Redemption of activity-based stock in excess of the amount required to participate in the activity can improve dividend performance.
Dividends are an important source of investment income for many members.
Thus, permitting stock redemption can enhance the attractiveness of a FHLBank s stock and thereby increase its capital base. Several of the FHLBanks do this quarterly, and we understand that some are considering a more frequent and automatic process. Most do not redeem if the member institution anticipates further activity that would require maintaining the level of stock investment. We recommend that each FHLBank should work with its member institutions to develop a policy on stock redemption. Operational Risk .