12 USC 1426 - Capital structure of Federal home loan banks

U.S Code last checked for updates: Apr 29, 2024

§ 1426.

Capital structure of Federal home loan banks

(a)

Regulations

(1)

Capital standards

Not later than 18 months after November 12, 1999, the Director shall issue regulations prescribing uniform capital standards applicable to each Federal home loan bank, which shall require each such bank to meet—

(A)

the leverage requirement specified in paragraph (2); and

(B)

the risk-based capital requirements, in accordance with paragraph (3).

(2)

Leverage requirement

(A)

In general

(B)

Treatment of stock and retained earnings

(3)

Risk-based capital standards

(A)

Risk-based capital standards

(B)

Consideration of other risk-based standards

(4)

Other regulatory requirements

The regulations issued by the Director under paragraph (1) shall—

(A)

permit each Federal home loan bank to issue, with such rights, terms, and preferences, not inconsistent with this chapter and the regulations issued hereunder, as the board of directors of that bank may approve, any 1 or more of—

(i)

Class A stock, which shall be redeemable in cash and at par 6 months following submission by a member of a written notice of its intent to redeem such shares; and

(ii)

Class B stock, which shall be redeemable in cash and at par 5 years following submission by a member of a written notice of its intent to redeem such shares;

(B)

provide that the stock of a Federal home loan bank may be issued to and held by only members of the bank, and that a bank may not issue any stock other than as provided in this section;

(C)

prescribe the manner in which stock of a Federal home loan bank may be sold, transferred, redeemed, or repurchased; and

(D)

provide the manner of disposition of outstanding stock held by, and the liquidation of any claims of the Federal home loan bank against, an institution that ceases to be a member of the bank, through merger or otherwise, or that provides notice of intention to withdraw from membership in the bank.

(5)

Definitions of capital

For purposes of determining compliance with the capital standards established under this subsection—

(A)

permanent capital of a Federal home loan bank shall include—

(i)

the amounts paid for the Class B stock; and

(ii)

the retained earnings of the bank (as determined in accordance with generally accepted accounting principles); and

(B)

total capital of a Federal home loan bank shall include—

(i)

permanent capital;

(ii)

the amounts paid for the Class A stock;

(iii)

consistent with generally accepted accounting principles, and subject to the regulation of the Director, a general allowance for losses, which may not include any reserves or allowances made or held against specific assets; and

(iv)

any other amounts from sources available to absorb losses incurred by the bank that the Director determines by regulation to be appropriate to include in determining total capital.

(6)

Transition period

(b)

Capital structure plan

(1)

Approval of plans

Not later than 270 days after the date of publication by the Director of final regulations in accordance with subsection (a), the board of directors of each Federal home loan bank shall submit for approval by the Director a plan establishing and implementing a capital structure for such bank that—

(A)

the board of directors determines is best suited for the condition and operation of the bank and the interests of the members of the bank;

(B)

meets the requirements of subsection (c); and

(C)

meets the minimum capital standards and requirements established under subsection (a) and other regulations prescribed by the Director.

(2)

Approval of modifications

(c)

Contents of plan

The capital structure plan of each Federal home loan bank shall contain provisions addressing each of the following:

(1)

Minimum investment

(A)

In general

(B)

Investment alternatives

(i)

In general

(ii)

Authorized requirements

A requirement is referred to in this clause if it is a requirement for—

(I)

a stock purchase based on a percentage of the total assets of a member; or

(II)

a stock purchase based on a percentage of the outstanding advances from the bank to the member.

(C)

Minimum amount

(D)

Adjustments to minimum required investment

(2)

Transition rule

(A)

In general

(B)

Interim purchase requirements

(3)

Disposition of shares

(4)

Classes of stock

(A)

In general

(B)

Rights requirement

(C)

Reduced minimum investment

(D)

Liquidation of claims

(5)

Limited transferability of stock

The capital structure plan of a Federal home loan bank shall—

(A)

provide that any stock issued by that bank shall be available only to and held only by members of that bank and tradable only between that bank and its members; and

(B)

establish standards, criteria, and requirements for the issuance, purchase, transfer, retirement, and redemption of stock issued by that bank.

(6)

Bank review of plan

Before filing a capital structure plan with the Director, each Federal home loan bank shall conduct a review of the plan by—

(A)

an independent certified public accountant, to ensure, to the extent possible, that implementation of the plan would not result in any write-down of the redeemable bank stock investment of its members; and

(B)

at least one major credit rating agency, to determine, to the extent possible, whether implementation of the plan would have any material effect on the credit ratings of the bank.

(d)

Termination of membership

(1)

Voluntary withdrawal

(2)

Involuntary withdrawal

(A)

In general

The board of directors of a Federal home loan bank may terminate the membership of any institution if, subject to regulations of the Director, it determines that—

(i)

the member has failed to comply with a provision of this chapter or any regulation prescribed under this chapter; or

(ii)

the member has been determined to be insolvent, or otherwise subject to the appointment of a conservator, receiver, or other legal custodian, by a Federal or State authority with regulatory and supervisory responsibility for the member.

(B)

Stock disposition

An institution, the membership of which is terminated in accordance with subparagraph (A)—

(i)

shall surrender redeemable stock to the Federal home loan bank, and shall receive in cash the par value of the stock, upon the expiration of the applicable notice period under subsection (a)(4)(A);

(ii)

shall receive any dividends declared on its redeemable stock, during the applicable notice period under subsection (a)(4)(A); and

(iii)

shall not be entitled to any other rights or privileges accorded to members after the date of the termination.

(C)

Commencement of notice period

With respect to an institution, the membership of which is terminated in accordance with subparagraph (A), the applicable notice period under subsection (a)(4) for each class of redeemable stock shall commence on the earlier of—

(i)

the date of such termination; or

(ii)

the date on which the member has provided notice of its intent to redeem such stock.

(3)

Liquidation of indebtedness

(e)

Redemption of excess stock

(1)

In general

(2)

Excess stock

(3)

Priority

(f)

Impairment of capital

(g)

Rejoining after divestiture of all shares

(1)

In general

(2)

Exception for withdrawals from membership before 1998

(h)

Treatment of retained earnings

(1)

In general

(2)

Exception

(3)

Limitation

(July 22, 1932, ch. 522, § 6, 47 Stat. 727; June 27, 1934, ch. 847, § 509, 48 Stat. 1264; May 28, 1935, ch. 150, § 2, 49 Stat. 293; June 27, 1950, ch. 369, § 2, 64 Stat. 257; Aug. 11, 1955, ch. 783, title I, § 109(a)(1), 69 Stat. 640; Pub. L. 87–210, §§ 1, 2, Sept. 8, 1961, 75 Stat. 482, 483; Pub. L. 96–153, title III, § 327, Dec. 21, 1979, 93 Stat. 1121; Pub. L. 97–320, title III, §§ 353, 355, Oct. 15, 1982, 96 Stat. 1507, 1508; Pub. L. 97–457, § 16, Jan. 12, 1983, 96 Stat. 2509; Pub. L. 101–73, title VII, §§ 701(b)(1), (3)(A), 706, 710(b)(2), (3), 715, Aug. 9, 1989, 103 Stat. 412, 416, 418, 421; Pub. L. 106–102, title VI, § 608, Nov. 12, 1999, 113 Stat. 1456; Pub. L. 106–569, title XII, § 1224, Dec. 27, 2000, 114 Stat. 3036; Pub. L. 110–289, div. A, title I, § 1110(b), title II, § 1204(4), (10), July 30, 2008, 122 Stat. 2676, 2786.)

cite as: 12 USC 1426

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