Illinois Administrative Code › Title 38 - FINANCIAL INSTITUTIONS › Part 1075 - SAVINGS BANK ACT › Subpart E - INVESTMENTS › Section 1075.565 - Financial Futures

Current through Register Vol. 48, No. 28, July 12, 2024
a) Definitions
				as used in this Section apply unless the context otherwise requires.
"Financial Futures Transaction" means the purchase or sale of
				  a financial futures contract.
"Forward Commitment" means a written commitment to make,
				  purchase or issue mortgage loans or mortgage-related securities at a price and
				  on or before a date specified in the commitment.
"Long Position" means the purchase of a financial futures
				  contract to take delivery of a financial instrument.
"Mortgage-Related Securities" means securities based on and
				  backed by mortgages, including mortgage-backed securities guaranteed by the
				  Government National Mortgage Association (GNMA's), Mortgage Participation
				  Certificates of the Federal Home Loan Mortgage Corporation, and similar
				  obligations issued by a private issuer or in which the savings bank shall
				  invest.
"Offset" means to cancel an obligation to make or take
				  delivery of securities under a financial instrument under a financial futures
				  contract. A futures contract to purchase a financial instrument is offset by a
				  futures contract to sell a financial instrument of the same type for the same
				  delivery month. A futures contract to sell a financial instrument is offset by
				  a futures contract to purchase a financial instrument of the same type for the
				  same delivery month.
"Short Position" means the holding of a financial futures
				  contract to make delivery of a financial instrument.
b) Permitted Transactions - to the extent
				that it has legal power to do so, a savings bank may engage in interest rate
				futures transactions to reduce its net interest rate risk exposure as provided
				in this subsection. For purposes of this Section, net interest rate risk
				exposure is the volatility in a savings bank's earnings that can arise from the
				mismatching of the maturities of assets and liabilities. A savings bank may
				enter into short positions that are appropriate for reducing its net
				interest-risk exposure. A savings bank may enter into long positions, other
				than those that offset short positions, only under the following conditions.
1) The futures position must be matched
				against a firm forward commitment to sell mortgages not yet originated or to
				issue mortgage-related securities to be based on mortgages not yet originated.
				For purposes of subsection (b), a firm forward commitment is a written
				commitment obligating the seller to make delivery, and the buyer to take
				delivery of mortgage loans not yet originated or mortgage-related securities to
				be based on mortgages not yet originated, at a price and on or before a date
				specified in the commitment.
2) The
				futures position may be entered into and maintained only to the extent that the
				savings bank's firm forward commitments exceed 10% of long-term assets with
				fixed interest rates. For purposes of this Section, long-term assets are those
				having remaining terms to maturity in excess of 5 years.