[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2010 Edition]
[From the U.S. Government Printing Office]
[[Page 1]]
12
Part 900 to End
Revised as of January 1, 2010
Banks and Banking
________________________
Containing a codification of documents of general
applicability and future effect
As of January 1, 2010
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
[[Page ii]]
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Table of Contents
Page
Explanation................................................. v
Title 12:
Chapter IX--Federal Housing Finance Board 3
Chapter XI--Federal Financial Institutions
Examination Council 177
Chapter XII--Federal Housing Finance Agency 213
Chapter XIV--Farm Credit System Insurance
Corporation 317
Chapter XV--Department of the Treasury 355
Chapter XVII--Office of Federal Housing Enterprise
Oversight, Department of Housing and Urban
Development 377
Chapter XVIII--Community Development Financial
Institutions Fund, Department of the Treasury 587
Finding Aids:
Table of CFR Titles and Chapters........................ 625
Alphabetical List of Agencies Appearing in the CFR...... 645
List of CFR Sections Affected........................... 655
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 12 CFR 900.1 refers
to title 12, part 900,
section 1.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
The Code of Federal Regulations is kept up to date by the individual
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To determine whether a Code volume has been amended since its
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OMB CONTROL NUMBERS
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Federal agencies to display an OMB control number with their information
collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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[[Page vii]]
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Raymond A. Mosley,
Director,
Office of the Federal Register.
January 1, 2010.
[[Page ix]]
THIS TITLE
Title 12--Banks and Banking is composed of seven volumes. The parts
in these volumes are arranged in the following order: parts 1-199, 200-
219, 220-299, 300-499, 500-599, part 600-899, and 900-end. The first
volume containing parts 1-199 is comprised of chapter I--Comptroller of
the Currency, Department of the Treasury. The second and third volumes
containing parts 200-299 are comprised of chapter II--Federal Reserve
System. The fourth volume containing parts 300-499 is comprised of
chapter III--Federal Deposit Insurance Corporation and chapter IV--
Export-Import Bank of the United States. The fifth volume containing
parts 500-599 is comprised of chapter V--Office of Thrift Supervision,
Department of the Treasury. The sixth volume containing parts 600-899 is
comprised of chapter VI--Farm Credit Administration, chapter VII--
National Credit Union Administration, chapter VIII--Federal Financing
Bank. The seventh volume containing part 900-end is comprised of chapter
IX--Federal Housing Finance Board, chapter XI--Federal Financial
Institutions Examination Council, chapter XII--Federal Housing Finance
Agency, chapter XIV--Farm Credit System Insurance Corporation, chapter
XV--Department of the Treasury, chapter XVII--Office of Federal Housing
Enterprise Oversight, Department of Housing and Urban Development and
chapter XVIII--Community Development Financial Institutions Fund,
Department of the Treasury. The contents of these volumes represent all
of the current regulations codified under this title of the CFR as of
January 1, 2010.
For this volume, Jonn V. Lilyea was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Michael L. White, assisted by Ann Worley.
[[Page 1]]
TITLE 12--BANKS AND BANKING
(This book contains part 900 to end)
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Part
chapter ix--Federal Housing Finance Board................... 900
chapter xi--Federal Financial Institutions Examination
Council................................................... 1101
chapter xii--Federal Housing Finance Agency................. 1231
chapter xiv--Farm Credit System Insurance Corporation....... 1400
chapter xv--Department of the Treasury...................... 1510
chapter xvii--Office of Federal Housing Enterprise
Oversight, Department of Housing and Urban Development.... 1700
chapter xviii--Community Development Financial Institutions
Fund, Department of the Treasury.......................... 1805
[[Page 3]]
CHAPTER IX--FEDERAL HOUSING FINANCE BOARD
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SUBCHAPTER A--GENERAL DEFINITIONS
Part Page
900 General definitions applying to all finance
board regulations....................... 5
SUBCHAPTER B--FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
905 Description of organization and functions... 8
906 Operations.................................. 12
907 Procedures.................................. 14
908 Rules of practice and procedure in hearings
on the record........................... 23
911 Availability of unpublished information..... 52
912 Information regarding meetings of the Board
of Directors of the Federal Housing
Finance Board........................... 57
SUBCHAPTER C--GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS
914 Data availability and reporting............. 63
917 Powers and responsibilities of Bank boards
of directors and senior management...... 63
918 Bank director compensation and expenses..... 70
SUBCHAPTER D--FEDERAL HOME LOAN BANK MEMBERS AND HOUSING ASSOCIATES
925 Members of the Banks........................ 72
926 Federal Home Loan Bank housing associates... 90
SUBCHAPTER E--FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL
STANDARDS
930 Definitions applying to risk management and
capital regulations..................... 93
931 Federal Home Loan Bank capital stock........ 94
932 Federal Home Loan Bank capital requirements. 98
[[Page 4]]
933 Bank capital structure plans................ 110
SUBCHAPTER F--FEDERAL HOME LOAN BANK MISSION
940 Core mission activities..................... 116
944 Community support requirements.............. 117
SUBCHAPTER G--FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS
950 Advances.................................... 122
952 Community Investment Cash Advance Programs.. 132
955 Acquired member assets...................... 137
956 Federal Home Loan Bank Investments.......... 140
960 Standby letters of credit................... 142
SUBCHAPTER H--FEDERAL HOME LOAN BANK LIABILITIES
965 Source of funds............................. 145
966 Consolidated obligations.................... 145
969 Deposits.................................... 150
SUBCHAPTER I--MISCELLANEOUS FEDERAL HOME LOAN BANK OPERATIONS AND
AUTHORITIES
975 Collection, settlement, and processing of
payment instruments..................... 151
977 Miscellaneous bank authorities.............. 153
978 Bank requests for information............... 153
SUBCHAPTER J--NEW FEDERAL HOME LOAN BANK ACTIVITIES
980 New business activities..................... 156
SUBCHAPTER K--OFFICE OF FINANCE
985 The Office of Finance....................... 159
987 Book-entry procedure for consolidated
obligations............................. 163
989 Financial statements of the Banks........... 168
SUBCHAPTER L--NON-BANK SYSTEM ENTITIES
995 Financing Corporation operations............ 170
996 Authority for Bank assistance of the
Resolution Funding Corporation.......... 173
997 Resolution Funding Corporation obligations
of the Banks............................ 173
SUBCHAPTER M--FEDERAL HOME LOAN BANK DISCLOSURES
998 Registration of Federal Home Loan Bank
equity securities....................... 176
[[Page 5]]
SUBCHAPTER A_GENERAL DEFINITIONS
PART 900_GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD REGULATIONS--Table of Contents
Sec.
900.1 Basic terms relating to the Finance Board, the Bank System and
related entities.
900.2 Terms relating to Bank operations, mission and supervision.
900.3 Terms relating to other entities and concepts used throughout 12
CFR chapter IX.
Authority: 12 U.S.C. 1422b(a).
Source: 67 FR 12842, Mar. 20, 2002, unless otherwise noted.
Sec. 900.1 Basic terms relating to the Finance Board, the Bank System and related entities.
As used throughout this chapter, the following basic terms relating
to the Finance Board, the Bank System and related entities have the
meanings set forth below, unless otherwise indicated in a particular
subchapter, part, section, or paragraph:
Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 1421
through 1449).
Bank, written in title case, means a Federal Home Loan Bank
established under section 12 of the Act (12 U.S.C. 1432).
Bank System means the Federal Home Loan Bank System, consisting of
the 12 Banks and the Office of Finance.
Board of Directors, written in title case, means the Board of
Directors of the Federal Housing Finance Board; the term board of
directors, written in lower case, has the meaning indicated in context.
Chairperson means the Chairperson of the Board of Directors of the
Finance Board.
Executive Secretary means an employee within the Office of
Management of the Finance Board who is responsible for records
management.
Finance Board means the Federal Housing Finance Board established by
section 2A of the Act (12 U.S.C. 1422a).
Financing Corporation or FICO means the Financing Corporation
established and supervised by the Finance Board under section 21 of the
Act (12 U.S.C. 1441) and part 995 of this chapter.
Housing associate means an entity that has been approved as a
housing associate pursuant to part 926 of this chapter.
Member means an institution that has been approved for membership in
a Bank and has purchased capital stock in the Bank in accordance with
Sec. Sec. 925.20 or 925.24(b) of this chapter.
Office of Finance or OF means the Office of Finance, a joint office
of the Banks referred to in section 2B of the Act (12 U.S.C. 1422b) and
established under part 985 of this chapter.
Resolution Funding Corporation or REFCORP means the Resolution
Funding Corporation established by section 21B of the Act (12 U.S.C.
1441b) and addressed in parts 996 and 997 of this chapter.
Secretary to the Board means employees within the Office of General
Counsel of the Finance Board who are responsible for issues concerning
meetings of the Board of Directors.
[67 FR 12842, Mar. 20, 2002, as amended at 68 FR 38169, June 27, 2003]
Sec. 900.2 Terms relating to Bank operations, mission and supervision.
As used throughout this chapter, the following terms relating to
Bank operations, mission and supervision have the meanings set forth
below, unless otherwise indicated in a particular subchapter, part,
section or paragraph:
Acquired member assets or AMA means those assets that may be
acquired by a Bank under part 955 of this chapter.
Advance means a loan from a Bank that is:
(1) Provided pursuant to a written agreement;
(2) Supported by a note or other written evidence of the borrower's
obligation; and
(3) Fully secured by collateral in accordance with the Act and part
950 of this chapter.
Affordable Housing Program or AHP means the Affordable Housing
Program, the CICA program that each Bank is required to establish
pursuant
[[Page 6]]
to section 10(j) of the Act (12 U.S.C. 1430(j)) and part 951 of this
chapter.
Capital plan means the capital structure plan required for each Bank
by section 6(b) of the Act, as amended (12 U.S.C. 1426(b)), and part 933
of this chapter, as approved by the Finance Board, unless the context of
the regulation refers to the capital plan prior to its approval by the
Finance Board.
CIP means the Community Investment Program, an advance program under
CICA required to be offered pursuant to section 10(i) of the Act (12
U.S.C. 1430(i)).
Community Investment Cash Advance or CICA means any advance made
through a program offered by a Bank under section 10 of the Act (12
U.S.C. 1430) and parts 951 and 952 of this chapter to provide funding
for targeted community lending and affordable housing, including
advances made under a Bank's Rural Development Funding (RDF) program,
offered under section 10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a
Bank's Urban Development Funding (UDF) program, offered under section
10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a Bank's Affordable
Housing Program (AHP), offered under section 10(j) of the Act (12 U.S.C.
1430(j)); a Bank's Community Investment Program (CIP), offered under
section 10(i) of the Act (12 U.S.C. 1430(i)); or any other program
offered by a Bank that meets the requirements of part 952 of this
chapter.
Community lending means providing financing for economic development
projects for targeted beneficiaries, and, for community financial
institutions (as defined in Sec. 925.1 of this chapter), purchasing or
funding small business loans, small farm loans or small agri-business
loans (as defined in Sec. 950.1 of this chapter).
Consolidated obligation or CO means any bond, debenture, or note
authorized under part 966 of this chapter to be issued jointly by the
Banks pursuant to section 11(a) of the Act, as amended (12 U.S.C.
1431(a)), or any bond or note issued by the Finance Board on behalf of
all Banks pursuant to section 11(c) of the Act (12 U.S.C. 1431(c)), on
which the Banks are jointly and severally liable.
Data Reporting Manual or DRM means a manual issued by the Finance
Board and amended from time to time containing reporting requirements
for the Banks.
Excess stock means that amount of a Bank's capital stock owned by a
member or other institution in excess of that member's or other
institution's minimum investment in capital stock required under the
Bank's capital plan, the Act, or the Finance Board's regulations, as
applicable.
Financial Management Policy or FMP means the Financial Management
Policy For The Federal Home Loan Bank System approved by the Finance
Board pursuant to Finance Board Resolution No. 96-45 (July 3, 1996), as
amended by Finance Board Resolution No. 96-90 (Dec. 6, 1996), Finance
Board Resolution No. 97-05 (Jan. 14, 1997), and Finance Board Resolution
No. 97-86 (Dec. 17, 1997).
[67 FR 12842, Mar. 20, 2002, as amended at 71 FR 35499, June 21, 2006;
71 FR 78050, Dec. 28, 2006]
Sec. 900.3 Terms relating to other entities and concepts used throughout 12 CFR chapter IX.
As used throughout this chapter, the following terms relating to
other entities and concepts used throughout 12 CFR chapter IX have the
meanings set forth below, unless otherwise indicated in a particular
subchapter, part, section or paragraph:
Appropriate Federal banking agency has the meaning set forth in
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))
and, for federally-insured credit unions, means the NCUA.
Appropriate state regulator means any state officer, agency,
supervisor or other entity that has regulatory authority over, or is
empowered to institute enforcement action against, a particular
institution.
Fannie Mae means the Federal National Mortgage Association
established under authority of the Federal National Mortgage Association
Charter Act (12 U.S.C. 1716, et seq.).
FDIC means the Federal Deposit Insurance Corporation.
FRB means the Board of Governors of the Federal Reserve System.
[[Page 7]]
Freddie Mac means the Federal Home Loan Mortgage Corporation
established under authority of the Federal Home Loan Mortgage
Corporation Act (12 U.S.C. 1451, et seq.).
Generally Accepted Accounting Principles or GAAP means accounting
principles generally accepted in the United States.
Ginnie Mae means the Government National Mortgage Association
established under authority of the Federal National Mortgage Association
Charter Act (12 U.S.C. 1716, et seq.).
GLB Act means the Gramm-Leach-Bliley Act (Pub. L. 106-102 (1999)).
HUD means the United States Department of Housing and Urban
Development.
NCUA means the National Credit Union Administration.
NRSRO means a credit rating organization regarded as a Nationally
Recognized Statistical Rating Organization by the Securities and
Exchange Commission.
OCC means the Office of the Comptroller of the Currency.
OTS means the Office of Thrift Supervision.
SBIC means a small business investment company formed pursuant to
section 301 of the Small Business Investment Act (15 U.S.C. 681).
SEC means the United States Securities and Exchange Commission.
State means a state of the United States, American Samoa, the
Commonwealth of the Northern Mariana Islands, the District of Columbia,
Guam, Puerto Rico, or the United States Virgin Islands.
1934 Act means the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.).
[67 FR 12842, Mar. 20, 2002, as amended at 69 FR 38811, June 29, 2004]
[[Page 8]]
SUBCHAPTER B_FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
PART 905_DESCRIPTION OF ORGANIZATION AND FUNCTIONS--Table of Contents
Subpart A_Functions and Responsibilities of Finance Board
Sec.
905.1 [Reserved]
905.2 General statement and statutory authority.
905.3 Location and business hours.
905.4 Duties of the Finance Board.
Appendix A to Subpart A of Part 905--Federal Home Loan Banks
Subpart B_General Organization
905.10 Board of Directors.
905.11 Office of Inspector General.
905.12 Office of Management.
905.13 Office of Supervision.
905.14 Office of General Counsel.
Subpart C_Miscellaneous
905.25 Forms.
905.26 Official logo and seal.
905.27 OMB control numbers assigned under the Paperwork Reduction Act.
Authority: 5 U.S.C. 552; 12 U.S.C. 1422b(a) and 1423; 44 U.S.C.
3507; 5 CFR 1320.5 and 1320.8.
Source: 56 FR 67155, Dec. 30, 1991, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Subpart A_Functions and Responsibilities of Finance Board
Sec. 905.1 [Reserved]
Sec. 905.2 General statement and statutory authority.
(a) The Finance Board is an independent, executive agency in the
Federal Government, responsible for regulating the Bank System. It is
funded through assessments levied upon the Banks. These funds are not
considered Government Funds or appropriated monies. The Finance Board is
governed by a five-member Board of Directors and administered by a full-
time staff.
(b) The members of the Board of Directors individually are referred
to as Directors. Other than the Office of Inspector General and the
Office of General Counsel, the heads of the administrative units, called
offices, also are called Directors. The head of the Office of Inspector
General is called the Inspector General and the head of the Office of
General Counsel is called the General Counsel.
(c) The Finance Board administers the Act and is authorized to issue
rules, regulations and orders affecting the Bank System. The Finance
Board performs all such duties and responsibilities as may be required
by statute. As required by section 302(b)(2) of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1717(b)), it also conducts a
monthly survey of all major lenders to calculate a national average for
interest rates on mortgages for one-family homes, on behalf of the
Fannie Mae. As required by section 305(b) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1454(b)), it conducts a similar
survey for the Freddie Mac.
[56 FR 67155, Dec. 30, 1991, as amended at 65 FR 8256, Feb. 18, 2000; 67
FR 12843, Mar. 20, 2002; 68 FR 38169, June 27, 2003]
Sec. 905.3 Location and business hours.
(a) Location. All office units of the Finance Board are located at
1777 F Street, NW., Washington, DC 20006.
(b) Hours of operation. The regular hours of operation of the
Finance Board are from 8:30 a.m. to 5:30 p.m., Monday through Friday.
Sec. 905.4 Duties of the Finance Board.
(a) Bank System. The Finance Board supervises and regulates the
Banks and the Office of Finance. Specifically, its duties are:
(1) To ensure that the Banks operate in a safe and sound manner;
(2) To supervise all business operations of the Banks, which may
include:
(i) Prescribing conditions upon which Banks may advance funds to
their members and housing associates;
(ii) Prescribing rules and conditions under which a Bank may borrow
funds,
[[Page 9]]
pay interest on those funds, or issue obligations;
(iii) Requiring examinations of the Banks; and
(iv) Appointing the public interest members of the boards of
directors of the Banks;
(3) To ensure that the Banks fulfill their housing finance and
community lending mission;
(4) To ensure that the Banks remain adequately capitalized; and
(5) To ensure that the Banks are able to raise funds in the capital
markets.
(b) Financing Corporation. The Finance Board also oversees the
operations of the Financing Corporation, including its issuance of
obligations.
[67 FR 12843, Mar. 20, 2002]
Sec. Appendix A to Subpart A of Part 905--Federal Home Loan Banks
Federal Home Loan Bank District 1
(Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island,
Vermont)
Federal Home Loan Bank of Boston
111 Huntington Avenue, 24th Floor, Boston, MA 02199-7614
Federal Home Loan Bank District 2
(New Jersey, New York, Puerto Rico, Virgin Islands)
Federal Home Loan Bank of New York
101 Park Avenue, New York, NY 10178-0599
Federal Home Loan Bank District 3
(Delaware, Pennsylvania, West Virginia)
Federal Home Loan Bank of Pittsburgh
601 Grant Street, Pittsburgh, PA 15219-4455
Federal Home Loan Bank District 4
(Alabama, District of Columbia, Florida, Georgia, Maryland, North
Carolina, South Carolina, Virginia)
Federal Home Loan Bank of Atlanta
1475 Peachtree Street, NE., Atlanta, GA 30309
Federal Home Loan Bank District 5
(Kentucky, Ohio, Tennessee)
Federal Home Loan Bank of Cincinnati
221 East Fourth Street, Suite 1000, Cincinnati, OH 45202
Federal Home Loan Bank District 6
(Indiana, Michigan)
Federal Home Loan Bank of Indianapolis
8250 Woodfield Crossing Boulevard, Indianapolis, IN 46240
Federal Home Loan Bank District 7
(Illinois, Wisconsin)
Federal Home Loan Bank of Chicago
111 East Wacker Drive, Suite 700, Chicago, IL 60601
Federal Home Loan Bank District 8
(Iowa, Minnesota, Missouri, North Dakota, South Dakota)
Federal Home Loan Bank of Des Moines
907 Walnut Street, Des Moines, IA 50309
Federal Home Loan Bank District 9
(Arkansas, Louisiana, Mississippi, New Mexico, Texas)
Federal Home Loan Bank of Dallas
8500 Freeport Parkway South, Suite 100, Irving, TX 75063-2547
Federal Home Loan Bank District 10
(Colorado, Kansas, Nebraska, Oklahoma)
Federal Home Loan Bank of Topeka
One Security Benefit Place, Suite 100, Topeka, KS 66606-2444
Federal Home Loan Bank District 11
(Arizona, California, Nevada)
Federal Home Loan Bank of San Francisco
600 California Street, San Francisco, CA 94108
Federal Home Loan Bank District 12
(Alaska, American Samoa, the Commonwealth of the Northern Mariana
Islands, Guam, Hawaii, Idaho, Montana, Oregon, Utah, Washington,
Wyoming)
Federal Home Loan Bank of Seattle
1501 Fourth Avenue, 19th Floor, Seattle, WA 98101-1693
[56 FR 67155, Dec. 30, 1991, as amended at 63 FR 3455, Jan. 23, 1998; 67
FR 12843, Mar. 20, 2002; 68 FR 38170, June 27, 2003]
Subpart B_General Organization
Source: 68 FR 38170, June 27, 2003, unless otherwise noted.
[[Page 10]]
Sec. 905.10 Board of Directors.
(a) Board of Directors--(1) General. The Bank Act vests management
of the Finance Board in a five-member Board of Directors consisting of
four members appointed by the President with the advice and consent of
the Senate to serve staggered seven-year terms, and one ex-officio
member, the Secretary of the U.S. Department of Housing and Urban
Development. The four appointed directors must have backgrounds in
housing finance or a demonstrated commitment to providing specialized
housing credit and at least one appointed director must have a
background with an organization with a two-year record of representing
consumer or community interests on either banking services, credit
needs, housing or financial consumer protections. Not more than three of
the five directors may belong to the same political party.
(2) Responsibilities. The Board of Directors is responsible for
setting agency policy and issuing resolutions, rules, regulations,
orders and policies as necessary.
(b) Chairperson--(1) General. The President designates an appointed
director as chairperson of the Board of Directors.
(2) Responsibilities. The responsibilities of the chairperson
include:
(i) Presiding over the meetings of the Board of Directors;
(ii) Effecting the overall management, functioning and organization
of the Finance Board;
(iii) Ensuring effective coordination and communication with the
Congress and interest groups on legislative issues pertaining to the
Finance Board, the Bank System, and the Financing Corporation; and
(iv) Disseminating information about the Finance Board to other
government agencies, the public and the news media.
Sec. 905.11 Office of Inspector General.
(a) General. The Inspector General reports directly to the
chairperson of the Board of Directors and is subject to, and operates
under, the provisions of the Inspector General Act of 1978, as amended
(5 U.S.C. app. 3).
(b) Responsibilities. The responsibilities of the Office of
Inspector General under the Inspector General Act include:
(1) Conducting and supervising audits and investigations relating to
the programs and operations of the Finance Board;
(2) Providing leadership and coordination, and recommending policies
for Finance Board activities designed to promote the economy, efficiency
and effectiveness of programs and operations, and preventing and
detecting fraud and abuse in programs and operations; and
(3) Providing a means for keeping the Board of Directors, agency
managers and the Congress fully and currently informed regarding on-
going investigations and, if needed, the necessity for and progress of
corrective action.
Sec. 905.12 Office of Management.
(a) General. The Office of Management is the principal advisor to
the chairperson and the Board of Directors on management and
organizational policies and is responsible for the Finance Board's
administrative management programs.
(b) Responsibilities. The responsibilities of the Office of
Management include:
(1) Developing and managing agency policies and procedures governing
employment and personnel action requirements, compensation and agency
payroll requirements, travel, awards, insurance, retirement benefits and
other employee benefits;
(2) Facilities and property management and supply requirements;
(3) Procurement and contracting programs;
(4) Agency financial management, budgeting and accounting;
(5) Records management; and
(6) Coordinating the design, programming, operation and maintenance
of the Finance Board's technology and information systems.
Sec. 905.13 Office of Supervision.
(a) General. The Office of Supervision is responsible for conducting
on-site examinations of the twelve Federal
[[Page 11]]
Home Loan Banks and the Office of Finance and conducting off-site
monitoring and analysis. The Office of Supervision also is responsible
for providing expert policy advice and analyzing and reporting on
economic, housing finance, community investment and competitive
environments in which the Bank System and its members operate.
(b) Responsibilities. The responsibilities of the Office of
Supervision include:
(1) Conducting examinations, at least annually, of the Banks, the
Office of Finance and the Financing Corporation and resolving
outstanding examination issues;
(2) Monitoring Bank and Bank System market, credit and operational
risks;
(3) Analyzing the financial performance of the Banks;
(4) Preparing the Monthly Survey of Rates and Terms of Conventional
One-Family Nonfarm Mortgage Loans (MIRS) and determining the conforming
loan limit for Federal National Mortgage Association (Fannie Mae) and
Federal Home Loan Mortgage Corporation (Freddie Mac) purchases and
guarantees;
(5) Analyzing the Banks' performance and policy issues arising under
the Affordable Housing Program and the Community Investment Program; and
(6) Collecting and analyzing data on the housing and community and
economic development activities of the Banks.
Sec. 905.14 Office of General Counsel.
(a) General. The General Counsel is the chief legal officer of the
Finance Board and is responsible for advising the Board of Directors,
the chairperson and other Finance Board officials on interpretations of
law, regulation and policy.
(b) Responsibilities. The responsibilities of the Office of General
Counsel include:
(1) Preparing all legal documents on behalf of the Finance Board
such as opinions, regulations and memoranda of law;
(2) Representing the Finance Board in all administrative
adjudicatory proceedings before the Board of Directors and in all other
administrative matters involving the agency;
(3) Representing the Finance Board in judicial proceedings involving
the agency's supervisory or regulatory authority over the Federal Home
Loan Banks;
(4) Administering the Finance Board's Ethics, Freedom of Information
Act, Privacy Act, Paperwork Reduction Act, and Government in the
Sunshine Act programs; and
(5) Secretary to the Board functions.
Subpart C_Miscellaneous
Sec. 905.25 Forms.
The following forms are available at the Finance Board headquarters
facility and shall be used for the purpose indicated:
Form
10-91--Monthly Survey of Rates and Terms on Conventional 1 Family
Nonfarm Mortgage Loans.
9102--Certificate of Nomination, Election of Federal Home Loan Bank
Directors.
9103--Election Ballot, Election of Federal Home Loan Bank Directors.
A-1--Appointive Director Candidates--Personal Certification and
Disclosure Form.
E-1--Elective Director Nominees--Personal Certification and Disclosure
Form.
90-T04--Local Travel Claim.
[60 FR 49199, Sept. 22, 1995, as amended at 63 FR 65687, Nov. 30, 1998;
65 FR 8257, Feb. 18, 2000. Redesignated and amended at 67 FR 12843, Mar.
20, 2002]
Sec. 905.26 Official logo and seal.
This section describes and displays the logo adopted by the Board of
Directors as the official symbol representing the Finance Board. It is
displayed on correspondence and selected documents. This logo also
serves as the official seal used to certify and authenticate official
documents of the Board of Directors.
(a) Description. The logo is a disc with its center consisting of
three polygons arranged in an irregular line partially overlapping--each
polygon drawn in a manner resembling a silhouette of a pitched roof
house and with distinctive eaves under its roof--encircled by a
designation scroll having an outer and inner border of plain heavy lines
and containing the words ``FEDERAL
[[Page 12]]
HOUSING FINANCE BOARD'' in capital letters with serifs, with two mullets
on the extreme left and right of the scroll.
(b) Display. The Finance Board's official seal and logo appears
below:
[GRAPHIC] [TIFF OMITTED] TR20MR02.004
[67 FR 12843, Mar. 20, 2002]
Sec. 905.27 OMB control numbers assigned under the Paperwork Reduction Act.
(a) Purpose. This section collects and displays the control numbers
assigned to information collection requirements contained in Finance
Board regulations by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) and OMB
regulations (5 CFR 1320.5 and 1320.8). The Finance Board may not sponsor
or conduct, and a person is not required to respond to, an information
collection unless the agency displays a currently valid OMB control
number.
(b) Display.
------------------------------------------------------------------------
12 CFR part or section where OMB
identified and described control No. Expiration date
------------------------------------------------------------------------
906.5............................... 3069-0001 July 2007.
915.3............................... 3069-0002 Nov. 2007.
915.4............................... 3069-0002 Nov. 2007.
915.5............................... 3069-0002 Nov. 2007.
915.6............................... 3069-0002 Nov. 2007.
915.7............................... 3069-0002 Nov. 2007.
915.8............................... 3069-0002 Nov. 2007.
915.10.............................. 3069-0002 Nov. 2007.
915.12.............................. 3069-0002 Nov. 2007.
925.2............................... 3069-0004 May 2007.
925.3............................... 3069-0004 May 2007.
925.5............................... 3069-0004 May 2007.
925.6............................... 3069-0004 May 2007.
925.7............................... 3069-0004 May 2007.
925.8............................... 3069-0004 May 2007.
925.9............................... 3069-0004 May 2007.
925.11.............................. 3069-0004 May 2007.
925.12.............................. 3069-0004 May 2007.
925.13.............................. 3069-0004 May 2007.
925.15.............................. 3069-0004 May 2007.
925.16.............................. 3069-0004 May 2007.
925.17.............................. 3069-0004 May 2007.
925.18.............................. 3069-0004 May 2007.
925.22.............................. 3069-0004 May 2007.
925.24.............................. 3069-0004 May 2007.
925.26.............................. 3069-0004 May 2007.
925.31.............................. 3069-0004 May 2007.
926.1............................... 3069-0005 Nov. 2005.
926.2............................... 3069-0005 Nov. 2005.
926.3............................... 3069-0005 Nov. 2005.
926.4............................... 3069-0005 Nov. 2005.
926.5............................... 3069-0005 Nov. 2005.
926.6............................... 3069-0005 Nov. 2005.
931.3............................... 3069-0059 Feb. 2007.
931.7............................... 3069-0004 May 2007.
933.2............................... 3069-0059 Feb. 2007.
944.2............................... 3069-0003 Feb. 2006.
944.3............................... 3069-0003 Feb. 2006.
944.4............................... 3069-0003 Feb. 2006.
944.5............................... 3069-0003 Feb. 2006.
950.17.............................. 3069-0005 Nov. 2005.
951.1............................... 3069-0006 July 2007.
951.3............................... 3069-0006 July 2007.
951.4............................... 3069-0006 July 2007.
951.6............................... 3069-0006 July 2007.
951.7............................... 3069-0006 July 2007.
951.8............................... 3069-0006 July 2007.
951.10.............................. 3069-0006 July 2007.
951.11.............................. 3069-0006 July 2007.
951.13.............................. 3069-0006 July 2007.
951.15.............................. 3069-0006 July 2007.
955.4............................... 3069-0058 Mar. 2007.
------------------------------------------------------------------------
[70 FR 9508, Feb. 28, 2005]
PART 906_OPERATIONS--Table of Contents
Subpart A [Reserved]
Subpart B_Monthly Interest Rate Survey (MIRS)
Sec.
906.5 Monthly interest rate survey.
Subpart C_Contractor Outreach Program for Businesses Owned by
Minorities, Women, or Individuals With Disabilities
906.10 Why does the Finance Board have this outreach program?
906.11 Who may participate in the outreach program?
906.12 What outreach efforts are included in this program?
906.13 How does the Finance Board oversee and monitor the outreach
program?
Authority: 12 U.S.C. 4516.
Source: 70 FR 9509, Feb. 28, 2005, unless otherwise noted.
Subpart A [Reserved]
[[Page 13]]
Subpart B_Monthly Interest Rate Survey (MIRS)
Sec. 906.5 Monthly interest rate survey.
The Finance Board conducts its Monthly Survey of Rates and Terms on
Conventional One-Family Non-farm Mortgage Loans in the following manner:
(a) Initial survey. Each month, the Finance Board samples savings
institutions, commercial banks, and mortgage loan companies, and asks
them to report the terms and conditions on all conventional mortgages
(i.e., those not federally insured or guaranteed) used to purchase
single-family homes that each such lender closes during the last five
working days of the month. In most cases, the information is reported
electronically in a format similar to Finance Board Form FHFB 10-91. The
initial weights are based on lender type and lender size. The data also
is weighted so that the pattern of weighted responses matches the actual
pattern of mortgage originations by lender type and by region. The
Finance Board tabulates the data and publishes standard data tables late
in the following month.
(b) Adjustable-rate mortgage index. The weighted data, tabulated and
published pursuant to paragraph (a) of this section, is used to compile
the Finance Board's adjustable-rate mortgage index, entitled the
``National Average Contract Mortgage Rate for the Purchase of Previously
Occupied Homes by Combined Lenders.'' This index is the successor to the
index maintained by the former Federal Home Loan Bank Board and is used
for determining the movement of the interest rate on renegotiable-rate
mortgages and on some other adjustable-rate mortgages.
Subpart C_Contractor Outreach Program for Businesses Owned by
Minorities, Women, or Individuals With Disabilities
Sec. 906.10 Why does the Finance Board have this outreach program?
The Finance Board awards contracts consistent with the principles of
full and open competition and best value acquisition. The purpose of
this outreach program is to ensure that minorities, women, and
individuals with disabilities, and businesses unconditionally owned by
them, have the maximum practicable opportunity to participate fully in
all contracts awarded by the Finance Board.
Sec. 906.11 Who may participate in the outreach program?
Minorities, women, and individuals with disabilities, and businesses
unconditionally owned by them, may participate in the outreach program.
As used in this subpart:
(a) Disability with respect to an individual has the same meaning as
defined by the Equal Employment Opportunity Commission at 29 CFR
1630.2(g) and 1630.3.
(b) Minority means Black or African American, American Indian or
Alaska Native, Hispanic or Latino American, Asian American, and Native
Hawaiian or Other Pacific Islander.
(c) Unconditional ownership means ownership of at least 51 percent
of a business by one or more members of a minority group, women, or
individuals with disabilities. In the case of a corporation, it means
ownership of at least 51 percent of each class of voting stock. In the
case of a partnership, it means ownership of at least 51 percent of the
partnership interest.
Sec. 906.12 What outreach efforts are included in this program?
The Finance Board's outreach program includes the following:
(a) Identifying businesses unconditionally owned by minorities,
women, and individuals with disabilities by obtaining lists and
directories that may be maintained by government agencies, trade groups,
and other organizations;
(b) Contacting businesses unconditionally owned by minorities,
women, and individuals with disabilities to provide information about,
and technical assistance to participate in, the Finance Board
contracting process;
(c) Advertising contracting opportunities with the Finance Board
through media targeted to reach businesses unconditionally owned by
minorities, women, and individuals with disabilities;
[[Page 14]]
(d) Participating, to the extent practicable, in events such as
conventions, seminars, and professional meetings that are intended
primarily to promote business opportunities for minorities, women, and
individuals with disabilities, and businesses unconditionally owned by
them; and
(e) Ensuring that Finance Board contracting staff understand and
promote the outreach program.
Sec. 906.13 How does the Finance Board oversee and monitor the outreach program?
The Chairperson will appoint an Outreach Advocate who will be
responsible for program advocacy, oversight, and monitoring. In
addition, the Outreach Advocate will be responsible for providing the
Finance Board with technical assistance and guidance to facilitate
identifying and soliciting participation in the contracting process of
minorities, women, and individuals with disabilities, and businesses
unconditionally owned by them.
PART 907_PROCEDURES--Table of Contents
Subpart A_Definitions
Sec.
907.1 Definitions.
Subpart B_Waivers, Approvals, No-Action Letters, and Regulatory
Interpretations
907.2 Waivers.
907.3 Approvals.
907.4 No-Action Letters.
907.5 Regulatory Interpretations.
907.6 Submission requirements.
907.7 Issuance of Waivers, Approvals, No-Action Letters, and Regulatory
Interpretations.
Subpart C_Case-by-Case Determinations; Review of Disputed Supervisory
Determinations
907.8 Case-by-Case Determinations.
907.9 Review of Disputed Supervisory Determinations.
907.10 Petitions.
907.11 Requests to Intervene.
907.12 Finance Board procedures.
907.13 Consideration and Final Decisions.
907.14 Meetings of the Board of Directors to consider Petitions.
907.15 General provisions.
907.16 Rules of practice.
Authority: 12 U.S.C. 1422b(a)(1).
Source: 64 FR 30883, June 9, 1999, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Editorial Note: Nomenclature changes to part 907 appear at 67 FR
12844, Mar. 20, 2002.
Subpart A_Definitions
Sec. 907.1 Definitions.
As used in this part:
Approval means a written statement issued to a Bank or the Office of
Finance approving a transaction, activity, or item that requires Finance
Board approval under the Act or a Finance Board rule, regulation,
policy, or order.
Case-by-Case Determination means a Final Decision concerning any
matter that requires a determination, finding, or approval by the Board
of Directors under the Act or Finance Board regulations, for which no
controlling statutory, regulatory, or other Finance Board standard
previously has been established, and that, in the judgment of the Board
of Directors, is best resolved on a case-by-case basis by a ruling
applicable only to the Petitioner and any Intervenor, and not by
adoption of a rule of general applicability.
Final Decision means a decision rendered by the Board of Directors
on issues raised in a Petition or Request to Intervene that have been
accepted for consideration.
Intervenor means a Bank, Member, or other entity that has been
granted leave to intervene in the consideration of a Petition by the
Board of Directors.
Managing Director means the Managing Director of the Finance Board.
No-Action Letter means a written statement issued to a Bank or the
Office of Finance providing that Finance Board staff will not recommend
supervisory or other action to the Board of Directors for failure to
comply with a specific provision of the Act or a Finance Board rule,
regulation, policy, or order, if a requester undertakes a proposed
transaction or activity.
Party means a Petitioner, an Intervenor, or the Finance Board.
Petition means a Petition for Case-by-Case Determination or a
Petition for Review of a Disputed Supervisory Determination.
[[Page 15]]
Petitioner means the Office of Finance or a Bank that has filed a
Petition.
Regulatory Interpretation means written guidance issued by Finance
Board staff with respect to application of the Act or a Finance Board
rule, regulation, policy, or order to a proposed transaction or
activity.
Requester means an entity or person that has submitted an
application for a Waiver or Approval or a request for a No-Action Letter
or Regulatory Interpretation.
Supervisory determination means a Finance Board finding in a report
of examination, order, or directive, or a Finance Board order or
directive concerning safety and soundness or compliance matters that
requires mandatory action by a Bank or the Office of Finance.
Waiver means a written statement issued to a Bank, a Member, or the
Office of Finance that waives a provision, restriction, or requirement
of a Finance Board rule, regulation, policy, or order, or a required
submission of information, not otherwise required by law, in connection
with a particular transaction or activity.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Subpart B_Waivers, Approvals, No-Action Letters, and Regulatory
Interpretations
Sec. 907.2 Waivers.
(a) Authority. The Board of Directors reserves the right, in its
discretion and in connection with a particular transaction or activity,
to waive any provision, restriction, or requirement of this chapter, or
any required submission of information, not otherwise required by law,
if such waiver is not inconsistent with the law and does not adversely
affect any substantial existing rights, upon a determination that
application of the provision, restriction, or requirement would
adversely affect achievement of the purposes of the Act, or upon a
showing of good cause.
(b) Application. A Bank, a Member, or the Office of Finance may
apply for a Waiver in accordance with Sec. 907.6.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.3 Approvals.
(a) Application. A Bank or the Office of Finance may apply for an
Approval of any transaction, activity, or item that requires Finance
Board approval under the Act or a Finance Board rule, regulation,
policy, or order in accordance with Sec. 907.6, unless alternative
application procedures are prescribed by the Act or a Finance Board
rule, regulation, policy, or order for the transaction, activity, or
item at issue.
(b) Reservation. The Finance Board reserves the right, in its
discretion, to prescribe additional or alternative procedures for any
application for Approval of a transaction, activity, or item.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.4 No-Action Letters.
(a) Authority. Finance Board staff, in its discretion, may issue a
No-Action Letter to a Bank or the Office of Finance stating that staff
will not recommend supervisory or other action to the Board of Directors
for failure to comply with a specific provision of the Act or a Finance
Board rule, regulation, policy, or order, if a requester undertakes a
proposed transaction or activity. The Board of Directors may modify or
supersede a No-Action Letter.
(b) Requests. A Bank or the Office of Finance may request a No-
Action Letter in accordance with Sec. 907.6.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.5 Regulatory Interpretations.
(a) Authority. Finance Board staff, in its discretion, may issue a
Regulatory Interpretation to a Bank, a Member, an official of a Bank or
Member, the Office of Finance, or any other entity or person, providing
guidance with respect to application of the Act or a Finance Board rule,
regulation, policy, or order to a proposed transaction or activity. The
Board of Directors may
[[Page 16]]
modify or supersede a Regulatory Interpretation.
(b) Requests. A Bank, a Member, an official of a Bank or Member, the
Office of Finance, or any other entity or person may request a
Regulatory Interpretation in accordance with Sec. 907.6.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.6 Submission requirements.
Applications for a Waiver or Approval and requests for a No-Action
Letter or Regulatory Interpretation shall comply with the following
requirements:
(a) Filing. Each application or request shall be in writing. The
original and three copies shall be filed with the Secretary to the
Board, Federal Housing Finance Board, 1777 F Street NW., Washington, DC
20006.
(b) Authorization--(1) Waivers and Approvals. Applications for
Waivers and Approvals shall be signed by an official with authority to
sign such applications on behalf of the requester. Applications for
Waivers and Approvals from a Bank or the Office of Finance shall be
accompanied by a resolution of the board of directors of the Bank or the
Office of Finance concurring in the substance and authorizing the filing
of the application.
(2) Requests for No-Action Letters. The president of the Bank making
a Request for a No-Action Letter shall sign the Request. Requests for a
No-Action Letter from the Office of Finance shall be signed by the
chairperson of the board of directors of the Office of Finance.
(3) Requests for Regulatory Interpretations. The requester or an
authorized representative of the requester shall sign a request for a
Regulatory Interpretation.
(c) Information requirements. Each application or request shall
contain:
(1) The name of the requester, and the name, title, address,
telephone number, and electronic mail address, if any, of the official
filing the application or request on its behalf;
(2) The name, address, telephone number, and electronic mail
address, if any, of a contact person from whom Finance Board staff may
seek additional information if necessary;
(3) The section numbers of the particular provisions of the Act or
Finance Board rules, regulations, policies, or orders to which the
application or request relates;
(4) Identification of the determination or relief requested,
including any alternative relief requested if the primary relief is
denied, and a clear statement of why such relief is needed;
(5) A statement of the particular facts and circumstances giving
rise to the application or request and identifying all relevant legal
and factual issues;
(6) References to all relevant authorities, including the Act,
Finance Board rules, regulations, policies, and orders, judicial
decisions, administrative decisions, relevant statutory interpretations,
and policy statements;
(7) References to any Waivers, No-Action Letters, Approvals, or
Regulatory Interpretations issued to the requester in the past in
response to circumstances similar to those surrounding the request or
application;
(8) For any application or request involving interpretation of the
Act or Finance Board regulations, a reasoned opinion of counsel
supporting the relief or interpretation sought and distinguishing any
adverse authority;
(9) Any non-duplicative, relevant supporting documentation; and
(10) A certification by a person with knowledge of the facts that
the representations made in the application or request are accurate and
complete. The following form of certification is sufficient for this
purpose: ``I hereby certify that the statements contained in the
submission are true and complete to the best of my knowledge. [Name and
Title].''
(d) Waiver of requirements. The Managing Director may waive any
requirement of this section for good cause. The Managing Director shall
provide prompt notice of any such waiver to the Board of Directors. The
Board of Directors may overrule any waiver granted by the Managing
Director under this paragraph.
(e) Withdrawal. Once filed, an application or request may be
withdrawn only upon written request. The Finance Board will not consider
a request for withdrawal after transmission by the
[[Page 17]]
Secretary to the Board to the requester of a response in final form.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Sec. 907.7 Issuance of Waivers, Approvals, No-Action Letters, and Regulatory Interpretations.
(a) Board of Directors review. At least three business days prior to
issuance to the requester, the Secretary to the Board shall transmit
each Approval, No-Action Letter, or Regulatory Interpretation issued by
the Chairperson or Finance Board staff to the Board of Directors for
review.
(b) Issuance and effectiveness. A Waiver, Approval, No-Action
Letter, or Regulatory Interpretation is not effective until the
Secretary to the Board has transmitted it in final form to the
requester.
(c) Abbreviated form. The Finance Board may respond to an
application or request in an abbreviated form, consisting of a concise
statement of the nature of the response, without restatement of the
underlying facts.
Subpart C_Case-by-Case Determinations; Review of Disputed Supervisory
Determinations
Sec. 907.8 Case-by-Case Determinations.
(a) Petition for Case-by-Case Determination. A Bank or the Office of
Finance may seek a Case-by-Case Determination concerning any matter that
may require a determination, finding or approval under the Act or
Finance Board regulations by the Board of Directors, and for which no
controlling statutory, regulatory or other Finance Board standard
previously has been established. The Office of Finance or a Bank seeking
a Case-by-Case Determination shall file a Petition for Case-by-Case
Determination in accordance with Sec. 907.10.
(b) Intervention. A Member, a Bank, or the Office of Finance may
file a Request to Intervene in the consideration of the Petition in
accordance with Sec. 907.11 if it believes its rights may be affected.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.9 Review of Disputed Supervisory Determinations.
(a) Petition for Review of a Disputed Supervisory Determination. A
Bank or the Office of Finance may seek review by the Board of Directors
of a Finance Board finding in a report of examination, order, or
directive, or a Finance Board order or directive concerning safety and
soundness or compliance matters requiring mandatory action by the Bank
or Office of Finance. The Office of Finance or a Bank seeking review of
a disputed Supervisory Determination shall file a Petition for Review of
a Disputed Supervisory Determination within 60 calendar days from the
date of the disputed Supervisory Determination in accordance with Sec.
907.10.
(b) No stay while Petition is pending. All Supervisory
Determinations directed to a Bank or the Office of Finance shall remain
in full force and effect while a Petition is pending. That a Petition is
pending shall not operate or be deemed to operate as a suspension of the
obligation of a Bank or the Office of Finance to take corrective action
as required by a Supervisory Determination, except as the Bank or the
Office of Finance may be otherwise directed by order of the Board of
Directors.
(c) Notice to affected entities. With the approval of the Managing
Director, a Petitioner may, pursuant to 12 CFR 951.12(d) or otherwise,
provide notice of the issuance of a Supervisory Determination or the
filing of a Petition for Review of a Disputed Supervisory Determination,
to another Bank, the Office of Finance, or a Member or other entity
named in 12 CFR 951.12(d), if the Petitioner believes the entity's
rights may be affected by the Supervisory Determination or the Petition.
(d) Intervention. A Bank, the Office of Finance, a Member, or other
entity named in 12 CFR 951.12(d) may file a Request to Intervene in the
consideration of a Petition in accordance with Sec. 907.11 if it
believes its rights may be adversely affected by a Final Decision on the
Petition.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
[[Page 18]]
Sec. 907.10 Petitions.
Each Petition brought pursuant to this subpart shall comply with the
following requirements:
(a) Filing. The Petition shall be in writing. The original and three
copies shall be filed with the Secretary to the Board, Federal Housing
Finance Board, 1777 F Street NW., Washington, DC 20006.
(b) Information requirements. Each Petition shall contain:
(1) The name of the Petitioner, and the name, title, address,
telephone number, and electronic mail address, if any, of the official
filing the Petition on its behalf;
(2) The name, address, telephone number, and electronic mail
address, if any, of a contact person from whom Finance Board staff may
seek additional information if necessary;
(3) The section numbers of the particular provisions of the Act or
Finance Board rules, regulations, policies, or orders to which the
Petition relates, and, if the Petition is for Review of a Disputed
Supervisory Determination, identification of the disputed Supervisory
Determination;
(4) Identification of the determination or relief requested,
including any alternative relief requested if the primary relief is
denied, and a clear statement of why such relief is needed;
(5) A statement of the particular facts and circumstances giving
rise to the Petition and identifying all relevant legal and factual
issues;
(6) A summary of any steps taken to date by the Petitioner to
address or resolve the dispute or issue; or, in cases involving safety
and soundness or compliance issues, a summary of any actions taken by
the Petitioner in the interim to implement corrective action;
(7) The Petitioner's argument in support of its position, including
citation to any supporting legal opinions, policy statements, or other
relevant precedent and supporting documentation, if any;
(8) References to all relevant authorities, including the Act,
Finance Board rules, regulations, policies, and orders, judicial
decisions, administrative decisions, relevant statutory interpretations,
and policy statements;
(9) A reasoned opinion of counsel supporting the relief or
interpretation sought and distinguishing any adverse authority;
(10) Any non-duplicative, relevant supporting documentation; and
(11) A certification by a person with knowledge of the facts that
the representations made in the Petition are accurate and complete. The
following form of certification is sufficient for this purpose: ``I
hereby certify that the statements contained in the Petition are true
and complete to the best of my knowledge. [Name and Title].''
(c) Authorization. Each Petition shall be accompanied by a
resolution of the Petitioner's board of directors concurring in the
substance and authorizing the filing of the Petition.
(d) Request to Appear. The Petition may contain a request that staff
or an agent of the Petitioner be permitted to make a personal appearance
before the Board of Directors at any meeting convened to consider the
Petition pursuant to these procedures. A statement of the reasons a
written presentation would not suffice shall accompany a Request to
Appear. The statement shall specifically:
(1) Identify any questions of fact that are in dispute;
(2) Summarize the evidence that would be presented at the meeting;
and
(3) Identify any proposed witnesses, and state the substance of
their anticipated testimony.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.11 Requests to Intervene.
(a) Filing--(1) Date. Any Request to Intervene in consideration of a
Petition under this subpart shall be in writing and shall be filed with
the Secretary to the Board within 45 days from the date the Petition is
filed.
(2) Information requirements. A Request to Intervene shall include
the information required by Sec. 907.10(b), where applicable, and a
concise statement of the position and interest of the Intervenor and the
grounds for the proposed intervention.
(3) Authorization. If the entity requesting intervention is a Bank
or the
[[Page 19]]
Office of Finance, the Request to Intervene shall be accompanied by a
resolution of the Petitioner's board of directors concurring in the
substance and authorizing the filing of the Request. If the entity
requesting intervention is not a Bank or the Office of Finance, the
Request to Intervene shall be signed by an official of the entity with
authority to authorize the filing of the Request, and shall include a
statement describing such authority.
(4) Request to Appear. A Request to Intervene may include a Request
to Appear before the Board of Directors in any meeting conducted under
these procedures to consider a Petition. A Request to Appear shall be
accompanied by a statement containing the information required by Sec.
907.10(d), and, in addition, setting forth the likely impact that
intervention will have on the expeditious progress of the meeting. A
Request to Appear shall be filed with the Secretary to the Board either
with the Request to Intervene or at least 20 days prior to the meeting
scheduled to consider the Petition.
(5) Intervenor is bound. Any Request to Intervene shall include a
statement that, if such leave to intervene is granted, the Intervenor
shall be bound expressly by the Final Decision of the Board of
Directors, as described in Sec. 907.13(b), subject only to judicial
review or as otherwise provided by law.
(b) Grounds for approval. The Managing Director may grant leave to
intervene if the entity requesting intervention has complied with
paragraph (a) of this section and, in the judgment of Managing Director:
(1) The presence of the entity requesting intervention would not
unduly prolong or otherwise prejudice the adjudication of the rights of
the original parties; and
(2) The entity requesting intervention may be adversely affected by
a Final Decision on the Petition.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.12 Finance Board procedures.
(a) Notice of Receipt of Petition or Request to Intervene. No later
than three business days following receipt of a Petition or Request to
Intervene, the Secretary to the Board shall transmit a written Notice of
Receipt to the Petitioner or Intervenor. In the case of a Petition for
Case-by-Case Determination, the Finance Board shall promptly publish a
notice of receipt of Petition, including a brief summary of the issue(s)
involved, in the Federal Register.
(b) Transmittal of filings. The Secretary to the Board shall
promptly transmit copies of any Petition, Request to Intervene, or other
filing under this subpart to the Board of Directors and all other
parties to the filing.
(c) Opportunity to cure defects. The Managing Director shall afford
the Petitioner or Intervenor a reasonable opportunity to cure any
failure to comply with the requirements of Sec. 907.10.
(d) Information request. The Managing Director may request
additional information from the Petitioner or Intervenor. No later than
20 calendar days after the date of a request under this paragraph, the
Petitioner shall provide to the Secretary to the Board all information
requested.
(e) Supplemental information. Upon good cause shown, the Managing
Director may grant permission to a Petitioner or Intervenor to submit
supplemental written information pertaining to the Petition or Request
to Intervene.
(f) Consolidation and severance--(1) Consolidation. The Managing
Director may consolidate any or all matters at issue in two or more
meetings on Petitions where:
(i) There exist common parties or common questions of fact or law;
(ii) Consolidation would expedite and simplify consideration of the
issues; and
(iii) Consolidation would not adversely affect the rights of parties
engaged in otherwise separate proceedings.
(2) Severance. The Managing Director may order any meetings and
issues severed with respect to any or all parties or issues.
(g) Notice of Board Consideration. Within 30 calendar days of
receipt of a Petition deemed by the Managing Director to be in
compliance with the requirements of Sec. 907.10, or, if the Petition
has been the subject of a request
[[Page 20]]
under paragraph (d) of this section, within 30 calendar days of receipt
of a response from the Petitioner deemed by the Managing Director to
complete the information necessary for the Board of Directors to
consider the Petition, the Managing Director, after consultation with
the Board of Directors, through the Secretary to the Board, shall
provide all parties with a Notice of Board Consideration containing the
following information:
(1) Identification of the issues accepted for consideration;
(2) Any decision to consolidate or sever pursuant to paragraph (f)
of this section;
(3) Whether the Petition will be considered by the Board of
Directors on the written record pursuant to Sec. 907.13(a)(1), or at a
meeting pursuant to Sec. 907.13(a)(2); and
(4) If the Petition will be considered by the Board of Directors at
a meeting:
(i) The date, time and place of the meeting; and
(ii) A decision as to any Request to Appear filed pursuant to
Sec. Sec. 907.10(d) or 907.11(a)(4).
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.13 Consideration and Final Decisions.
(a) Consideration by Board of Directors. The Board of Directors may
consider a Petition and render a decision:
(1) Solely on the basis of the written record; or
(2) At a regularly scheduled meeting or a meeting convened
specifically for the purpose of considering the Petition. Consideration
of a Petition at a meeting shall be governed by the procedures described
in Sec. 907.14.
(b) Final Decision. The Board of Directors shall render a Final
Decision on the issue(s) presented in a Petition or Request to Intervene
that has been accepted for consideration, based upon consideration of
the entire record of the proceeding. The terms and conditions of the
Final Decision shall bind the parties as to any issue(s) presented in
the Petition or Request to Intervene and decided by the Board of
Directors. The decision of the Board of Directors is a final decision
for purposes of obtaining judicial review or as otherwise provided by
law.
(c) Time periods. Subject to extension by such additional time as
may reasonably be required, the Board of Directors shall render a Final
Decision within 120 calendar days of the date the Petition is received
in a form deemed by the Managing Director to be in compliance with the
requirements of Sec. 907.10 or, if the Petition has been the subject of
a request under Sec. 907.12(d), within 120 calendar days of receipt of
a response from the Petitioner deemed by the Managing Director to
complete the information necessary for the Board of Directors to
consider the Petition.
(d) Transmittal of Final Decision. The Secretary to the Board shall
transmit the Final Decision of the Board of Directors to all parties to
the submission.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.14 Meetings of the Board of Directors to consider Petitions.
(a) Full and fair opportunity to be heard. Any meeting of the Board
of Directors to consider a Petition shall be conducted in a manner that
provides the parties a full and fair opportunity to be heard on the
issues accepted for consideration. Any such meeting shall be conducted
so as to permit an expeditious presentation of such issues.
(b) Participation in meeting. (1) The presence of a quorum of the
Board if Directors is required to conduct a meeting under this section.
Members of the Board of Directors are deemed present if they appear in
person or by telephone.
(2) An act of the Board of Directors requires the vote of a majority
of the members of the Board of Directors voting at a meeting at which a
quorum of the Board of Directors is present.
(3) A Final Decision may be reached by a vote of the Board of
Directors after the meeting at which the Petition has been considered.
Only those members of the Board of Directors present at the meeting at
which the Petition was considered may vote on issues presented in the
Petition and accepted for consideration. A vote of the majority of the
members of the Board of Directors eligible to vote and voting shall be
an act of the Board of Directors.
[[Page 21]]
(c) Chairperson--(1) Presiding officer. The Chairperson, or a member
of the Board of Directors designated by the Chairperson, shall preside
over a meeting of the Board of Directors convened under this section.
(2) Authority of the Chairperson. The Chairperson shall have all
powers and discretion necessary to conduct the meeting in a fair and
impartial manner, to avoid unnecessary delay, to regulate the course of
the meeting and the conduct of the parties and their counsel, and to
discharge the duties of a presiding officer.
(3) Board of Directors may overrule the Chairperson. Any member of
the Board of Directors may, by motion, challenge any action, finding, or
determination made by the Chairperson in the course of the meeting, and
the Board of Directors, by majority vote, may overrule any action,
finding or determination of the Chairperson.
(d) Meeting may be closed. A party may request that the meeting, or
portion thereof, be closed to public observation. A request to close a
meeting shall be processed in accordance with the requirements of the
Government in the Sunshine Act (5 U.S.C. 552b) and the Finance Board's
implementing regulation (12 CFR part 912).
(e) Location of meeting. Unless otherwise specified, all meetings of
the Board of Directors will be held in the Board Room of the Finance
Board at 1777 F Street, NW., Washington, DC, at the time specified in
the notice of meeting issued pursuant to 12 CFR 912.6.
(f) Presentation of issues--(1) Stipulations. Subject to the
Chairperson's discretion, the parties may agree to stipulations of law
or fact, including stipulations as to the admissibility of exhibits, and
present such stipulations at the meeting. Stipulations shall be made a
part of the record of the proceeding.
(2) Order of presentation. The Chairperson shall determine the order
of presentation of the issues, testimony of any witnesses, presentation
of any other information or document, and all other procedural matters
at the meeting.
(g) Record. The meeting shall be recorded and transcribed.
Transcripts of the proceedings shall be governed by 12 CFR 912.5(c). The
Petition and all supporting documentation shall be made a part of the
record, unless otherwise determined by the Chairperson. The Chairperson
may order the record corrected, upon motion to correct, upon stipulation
of the parties, or at the Chairperson's discretion.
(h) Admissibility of documents and testimony. (1) The Chairperson
has discretion to admit and make a part of the record documents and
testimony that are relevant, material, and reliable, and may elect not
to admit documents and testimony that are privileged, unduly
repetitious, or of little probative value.
(2) The Board of Directors shall give such weight to documents and
testimony admitted and made part of the record as it may deem reasonable
and appropriate.
(3) The Chairperson may admit and make a part of the record, in lieu
of oral testimony, statements of fact or opinion prepared by a witness.
The admissibility of the information contained in the statement shall be
subject to the same rules as if the testimony were provided orally.
(i) Official notice. All matters officially noticed by the
Chairperson shall appear on the record.
(j) Exhibits and documents--(1) Copies. A legible duplicate copy of
a document shall be admissible to the same extent as the original.
(2) Exhibits. Witnesses may use existing or newly created charts,
exhibits, calendars, calculations, outlines, or other graphic materials
to summarize, illustrate, or simplify the presentation of testimony.
Subject to the Chairperson's discretion, such materials may be used with
or without being admitted into the record.
(3) Identification. All exhibits offered into the record shall be
numbered sequentially and marked with a designation identifying the
sponsor. The original of each exhibit offered into the record or marked
for identification shall be retained in the record of the meeting,
unless the Chairperson permits substitution of a copy for the original.
(4) Exchange of Exhibits. One copy of each exhibit offered into the
record
[[Page 22]]
shall be furnished to each of the parties and to each member of the
Board of Directors. If the Chairperson does not fix a time for the
exchange of exhibits, the parties shall exchange copies of proposed
exhibits at the earliest practicable time before the commencement of the
meeting to consider the Petition. Parties are not required to exchange
exhibits submitted as rebuttal information before the meeting commences
if submission of the exhibits is not reasonably certain at that time.
(5) Authenticity. The authenticity of all documents submitted or
exchanged as proposed exhibits prior to the meeting shall be admitted
unless written objection is filed before the commencement of the
meeting, or unless good cause is shown for failing to file such a
written objection.
(k) Sanction for obstruction of the proceedings. The Board of
Directors may impose sanctions it deems appropriate for violation of any
applicable provision of this subpart or any applicable law, rule,
regulation, or order, or any dilatory, frivolous, or obstructionist
conduct by any witness or counsel during the course of a meeting.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.15 General provisions.
(a) Waiver of requirements. The Managing Director may waive any
filing requirement or deadline in this subpart for good cause shown. The
Managing Director shall provide prompt notice of any such waiver to the
Board of Directors.
(b) Actions of the Managing Director subject to the authority of the
Board of Directors. The Board of Directors may overrule any action by
the Managing Director under this subpart.
(c) Withdrawal. At any time prior to the issuance by the Managing
Director of a Notice of Board Consideration pursuant to Sec. 907.12(g),
an authorized representative of a Petitioner may withdraw the Petition,
or an authorized representative of an Intervenor may withdraw the
Request to Intervene, by filing a written request to withdraw with the
Secretary to the Board. Only the Board of Directors may grant a request
to withdraw after issuance by the Managing Director of a Notice of Board
Consideration pursuant to Sec. 907.12(g). Unless otherwise agreed,
withdrawal of a Petition or Request to Intervene shall not foreclose a
Petitioner from resubmitting a Petition, or an Intervenor from
submitting a Request to Intervene, on the same or similar issues.
(d) Settlement agreement. (1) At any time during the course of
proceedings pursuant to this subpart, the Finance Board shall give
Petitioners and Intervenors the opportunity to submit offers of
settlement when the nature of the proceedings and the public interest
permit. With the approval of the Managing Director, an authorized
representative of a Petitioner or Intervenor may enter into a proposed
settlement agreement with the Finance Board disposing of some or all of
the issues presented in a Petition or Request to Intervene.
(2) No proposed settlement agreement shall be final until approved
by the Board of Directors. The Board of Directors shall consider any
proposed settlement agreement within 30 calendar days of receiving a
notice of the proposed settlement agreement. If the Board of Directors
disapproves or fails to approve a proposed settlement agreement within
30 days, the proposed settlement agreement shall be null and void and
the previously filed Petition or Request to Intervene shall be
considered in accordance with this subpart.
(3) A settlement agreement approved by the Board of Directors shall
be deemed final and binding on all parties to the agreement. At the time
a proposed settlement agreement becomes final, a Petition or Request to
Intervene previously filed by a party to the agreement shall be deemed
withdrawn as to all issues resolved in the agreement, and the parties to
the agreement shall be estopped from raising objection to those issues
or to the terms of the settlement agreement.
(e) No rights created; Finance Board not prohibited. Nothing in this
subpart shall be deemed to create any substantive or discovery right in
any party. Nothing in this subpart shall limit in any manner the right
of the Finance Board to conduct any examination or inspection of any
Bank or the Office of Finance, or to take any
[[Page 23]]
action with respect to a Bank or the Office of Finance, or its
directors, officers, employees or agents, otherwise authorized by law.
(f) Exhaustion requirement. When seeking a Case-by-Case
Determination of any matter or review by the Board of Directors of any
Supervisory Determination, a Bank or the Office of Finance shall follow
the procedures in this subpart as a prerequisite to seeking judicial
review. Failure to do so shall be deemed to be a failure to exhaust all
available administrative remedies.
(g) Improper conduct prohibited. No party shall, by act or omission,
unduly burden or frustrate the efforts of the Board of Directors to
carry out its duties under the laws and regulations of the Finance
Board. A Petitioner or Intervenor shall confine its communications with
the Board of Directors, or any individual member thereof, concerning
issues raised in a pending Petition, to written communications for
inclusion in the record of the proceeding, filed with the Secretary to
the Board.
(h) Costs. Petitioners are encouraged to contain costs associated
with the preparation and filing of Petitions and related personal
appearances, if any, at any meeting held by the Board of Directors under
this subpart. The Petitioner shall be solely responsible for all costs
associated with any such Petitions and appearances.
(i) Procedures are exclusive. All Case-by-Case Determinations by the
Board of Directors and all Reviews of Disputed Supervisory
Determinations shall be considered exclusively pursuant to the
procedures described in this subpart.
[64 FR 30883, June 9, 1999, as amended at 65 FR 8257, Feb. 18, 2000]
Sec. 907.16 Rules of practice.
In connection with any matter initiated or pending pursuant to this
part, petitioners, requestors or intervenors, or their representatives,
shall be subject to the provisions of subpart F of 12 CFR part 908. No
other provision of part 908 shall apply under this part
[67 FR 9903, Mar. 5, 2002]
PART 908_RULES OF PRACTICE AND PROCEDURE IN HEARINGS ON THE RECORD--Table of Contents
Subpart A_Introduction
Sec.
908.1 Scope.
908.2 Definitions.
908.3 Rules of construction.
Subpart B_Scope and Authority_Enforcement Proceedings
908.4 Cease and desist proceedings.
908.5 Temporary cease and desist orders.
908.6 Civil money penalties.
908.7 Service of notice.
908.8 Subpoenas.
908.9 Hearings on the record.
908.10 Judicial review.
908.11 Jurisdiction and enforcement.
908.12 Notice after separation.
908.13 Public disclosure of final orders.
908.14 No implied private right of action.
908.15-908.19 [Reserved]
Subpart C_General Rules
908.20 Authority of the Board of Directors.
908.21 Authority of the presiding officer.
908.22 Public hearings.
908.23 Good faith certification.
908.24 Ex parte communications.
908.25 Filing of papers.
908.26 Service of papers.
908.27 Computing time.
908.28 Change of time limits.
908.29 Witness fees and expenses.
908.30 Settlement or other dispute resolution.
908.31 Right to supervise the Banks.
908.32 Collateral attacks on proceedings under this part.
908.33-908.39 [Reserved]
Subpart D_Pre-Hearing Proceedings
908.40 Commencement of proceeding and contents of notices.
908.41 Answer.
908.42 Amended pleadings.
908.43 Failure to appear.
908.44 Consolidation and severance of actions.
908.45 Motions.
908.46 Discovery.
908.47 Request for document discovery from parties.
908.48 Document subpoenas to nonparties.
908.49 Deposition of witness unavailable for hearing.
908.50 Interlocutory review.
908.51 Summary disposition.
908.52 Partial summary disposition.
908.53 Scheduling and prehearing conferences.
[[Page 24]]
908.54 Pre-hearing submissions.
908.55 Hearing subpoenas.
908.56-908.59 [Reserved]
Subpart E_Hearing and Post-hearing Proceedings
908.60 Conduct of hearings.
908.61 Evidence.
908.62 Post-hearing filings.
908.63 Recommended decision and filing of record.
908.64 Exceptions to recommended decision.
908.65 Review by Board of Directors.
908.66 Exhaustion of administrative remedies.
908.67 Stay of final decision and order pending judicial review.
908.68-908.69 [Reserved]
Subpart F_Rules of Practice Before the Finance Board
908.70 Scope.
908.71 Practice before the Finance Board.
908.72 Appearances and practice in proceedings before the Finance Board.
908.73 Conflicts of interest.
908.74 Sanctions.
908.75 Censure, suspension, disbarment and reinstatement.
Authority: 12 U.S.C. 1422b(a)(5), 4631(c) and (f), and 4632-4641.
Section 908.4 is also authorized by 12 U.S.C. 1818(b)(6) and (7).
Source: 67 FR 9903, Mar. 5, 2002, unless otherwise noted.
Subpart A_Introduction
Sec. 908.1 Scope.
This part prescribes rules of practice and procedure applicable to
any hearing with regard to:
(a) Cease and desist proceedings under section 2B(a)(5) of the Act
(12 U.S.C. 1422b(a)(5)); or
(b) Civil money penalty assessment proceedings under section
2B(a)(5) of the Act (12 U.S.C. 1422b(a)(5)).
Sec. 908.2 Definitions.
For purposes of this part--
Decisional employee means any employee of the Finance Board, except
the Office of General Counsel, or any member of the presiding officer's
staff who has not engaged in an investigative or prosecutorial role in
connection with the subject cease and desist or civil money penalty
proceedings and who may assist the Board of Directors or the presiding
officer, respectively, in preparing orders, recommended decisions,
decisions and other documents under this part.
Hearing means an adjudicatory proceeding conducted pursuant to this
part;
Notice means a written notice of charges or notice of assessment of
a civil money penalty so titled that served by the Finance Board upon a
respondent, which conforms to Sec. 908.40 and describes the alleged
violations with sufficient specificity to put the respondent on notice
of the nature and scope of the charges being brought against him, except
in the context of the plain meaning of the word notice in a provision,
such as reasonable notice or actual notice.
Party means, for purposes of subparts C through F of this part only,
the Finance Board or respondent.
Person means an individual, sole proprietor, partnership,
corporation, unincorporated association, trust, joint venture, pool,
syndicate, agency, Bank, or other entity or organization with the
exception of the Finance Board.
Presiding officer means an administrative law judge or other
qualified, neutral individual who is appointed by the Finance Board
under applicable law, and, pursuant to Title 5 of the United States
Code, may conduct a hearing or adjudicatory proceeding under this part.
Representative of record means an individual who is authorized to
represent a respondent (and includes a respondent who represents
himself) at a hearing conducted under this part and who has filed a
notice of appearance in accordance with Sec. 908.72.
Respondent means any person named in a notice of charges or notice
of determination to impose civil money penalties issued by the Finance
Board.
Safety and Soundness Act means the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501-4641) (Title
XIII of the Housing and Community Development Act of 1992, Pub. L. No.
102-550).
Violation includes any act or omission by any person, undertaken
alone or with one or more others, that causes directly or indirectly,
counsels, participates in, or otherwise furthers, aids or abets a
violation of the Act, other
[[Page 25]]
applicable law, regulation, or order of the Finance Board.
Sec. 908.3 Rules of construction.
For purposes of this part--
(a) Any term in the singular includes the plural and the plural
includes the singular, if such use would be appropriate;
(b) Any use of a masculine, feminine, or neuter gender encompasses
all three, if such use would be appropriate; and
(c) Unless the context requires otherwise, a party's representative
of record, if any, may, on behalf of that party, take any action
required to be taken by the party.
Subpart B_Scope and Authority_Enforcement Proceedings
Sec. 908.4 Cease and desist proceedings.
(a) Notice of charges--(1) Grounds. The Finance Board may issue and
serve a notice of charges upon a Bank or any executive officer or
director of a Bank if the Finance Board determines that such party is
engaging or has engaged in, or, if the Finance Board has reasonable
cause to believe is about to engage in:
(i) An unsafe or unsound practice in conducting the business of the
Bank;
(ii) Any conduct that violates any provision of the Act or any
applicable law, order, rule or regulation; or
(iii) Any conduct that violates any condition imposed in writing by
the Finance Board in connection with the granting of any application or
other request by the Bank, or any written agreement between the Bank and
the Finance Board.
(2) Content of notice of charges. A notice of charges shall contain
a statement of the facts constituting the alleged conduct or violation
and otherwise shall conform to the requirements set forth in Sec.
908.40.
(b) Cease and desist order--(1) Issuance of order. An order to cease
and desist shall be issued in writing and only after the respondent has
been given the opportunity for a hearing on the record in accordance
with the requirements set forth in Sec. 908.9. If the Board of
Directors finds, based on the record of the hearing, that any conduct or
violation specified in the notice of charges has been established or if
a respondent consents (or is deemed to have consented pursuant to Sec.
908.43), the Board of Directors may issue and serve upon the respondent
an order requiring the respondent to cease and desist from any such
practice, violation or conduct, to take affirmative action to correct or
remedy the conditions resulting from any such practice, violation or
conduct, or to comply with such limitations on activities or functions
as may be prescribed therein.
(2) Affirmative action. The authority of the Board of Directors to
issue and serve a cease and desist order that requires a respondent to
take affirmative action to correct or remedy any conditions resulting
from any violation or practice with respect to which such order is
issued includes the authority to require a respondent to--
(i) Make restitution or provide reimbursement, indemnification, or
guarantee against loss if--
(A) The respondent was unjustly enriched in connection with the
violation, conduct or practice described in the order; or
(B) The violation, conduct or practice involved a reckless disregard
for the law or any applicable regulations or prior order of the Finance
Board;
(ii) Restrict the growth of the Bank;
(iii) Dispose of any loan or asset involved;
(iv) Rescind any agreement or contract;
(v) Employ qualified officers or employees (who may be subject to
approval by the Finance Board, as directed by the Finance Board); and
(vi) Take such other action as the Finance Board determines to be
appropriate.
(3) Authority to limit activities. The authority of the Board of
Directors to issue and serve a cease and desist order includes the
authority to place limitations on the activities or functions of a
respondent.
(c) Effective date of order. An order issued under paragraph (b) of
this section shall become effective upon the expiration of the 30-day
period beginning on the date of service of the order upon the
respondent, (except in the case of an order issued upon consent, which
shall become effective at the
[[Page 26]]
time specified therein), and shall remain effective and enforceable as
provided in the order, except to the extent that the order is stayed,
modified, terminated, or set aside by action of the Board of Directors
or otherwise as provided for in this part.
Sec. 908.5 Temporary cease and desist orders.
(a) Grounds. Whenever the Board of Directors determines that any
conduct or violation, or threatened conduct or violation, specified in a
notice of charges issued and served upon a respondent, or the
continuation of such conduct or violation, is likely to cause
insolvency, a significant depletion of total capital, or irreparable
harm to a Bank prior to the completion of the cease and desist
proceeding, the Board of Directors may issue a temporary order requiring
the respondent to cease and desist from any such conduct or violation,
or such threatened conduct or violation, and to take affirmative action
to prevent or remedy such insolvency, depletion, or harm pending
completion of such proceedings. Such order may include any requirement
authorized under Sec. 908.4(b)(2).
(b) Incomplete records. If a notice of charges specifies that the
books and records of a Bank are so incomplete or inaccurate that the
Finance Board is unable, through the normal supervisory process, to
determine the financial condition of the Bank or the details or purpose
of any transaction or transactions that may have a material effect on
the financial condition of a Bank, the Finance Board may issue a
temporary order requiring a respondent to:
(1) Cease and desist from any activity or practice that caused or
contributed to, whether in whole or in part, the incomplete or
inaccurate state of the books or records of a Bank; or
(2) Take affirmative action to restore the books or records to a
complete and accurate state.
(c) Effective date. Any temporary order issued pursuant to this
section shall become effective upon service upon the respondent.
(d) Effective period. (1) Any temporary order issued under paragraph
(a) of this section, unless set aside, limited, or suspended by a court
in a proceeding under paragraph (e) of this section, shall remain in
effect and enforceable pending the completion of the proceeding on the
notice of charges and shall remain effective until the Board of
Directors dismisses the charges specified in the notice of charges or it
is superceded by a cease and desist order.
(2) Any temporary order issued under paragraph (b) of this section,
unless set aside, limited, or suspended by a court in proceedings
pursuant to paragraph (e) of this section, shall remain in effect and
enforceable until the earlier of the completion of the proceeding on the
notice of charges, or the date that the Finance Board determines, by
examination or otherwise, that the books and records of the Bank are
accurate and reflect the financial condition of the Bank.
(e) Judicial relief. As authorized by section 2B(a)(5) of the Act
(12 U.S.C. 1422b(a)(5)) and sections 1372(d) and 1375(b) of the Safety
and Soundness Act (12 U.S.C. 4632(d) and 4635(b)), a respondent that has
been served with a temporary order may apply to the United States
District Court for the District of Columbia within ten days after such
service for an injunction setting aside, limiting, or suspending the
enforcement, operation, or effectiveness of the order pending the
completion of the hearing pursuant to the notice of charges.
(f) Enforcement of temporary order. If a respondent violates,
threatens to violate, or fails to obey, a temporary order issued
pursuant to this section, the Finance Board may bring an action in the
United States District Court for the District of Columbia for an
injunction to enforce such temporary order, as authorized by sections
2B(a)(5) and 2B(a)(7) of the Act (12 U.S.C. 1422b(a)(5) and (a)(7)) and
section 1372(e) of the Safety and Soundness Act (12 U.S.C. 4632(e)).
Sec. 908.6 Civil money penalties.
(a) Notice of assessment--(1) Grounds. The Finance Board may issue
and serve a notice of assessment of a civil money penalty on any Bank or
any executive officer or director of a Bank that:
[[Page 27]]
(i) Violates any provision of the Act, or any order, rule, or
regulation issued under the Act;
(ii) Violates any final or temporary cease and desist order issued
by the Finance Board pursuant to the Act;
(iii) Violates any written agreement between a Bank and the Finance
Board; or
(iv) Engages in any conduct that causes or is likely to cause a loss
to a Bank.
(2) Content of notice. A notice of assessment of a civil money
penalty shall contain a statement of the facts constituting the alleged
conduct or violation and otherwise conform to the requirements set forth
in Sec. 908.40.
(b) Order assessing penalty. An order assessing a civil money
penalty shall be issued in writing and only after the respondent has
been given the opportunity for a hearing on the record in accordance
with the procedures set forth in Sec. 908.9. If the Board of Directors
finds, based on the record of the hearing, that any conduct or violation
specified in the notice of assessment of a civil money penalty has been
established or if a respondent consents (or is deemed to have consented
pursuant to Sec. 908.43), the Board of Directors may issue and serve
upon the respondent an order assessing a civil money penalty.
(c) Amount of penalty. (1) The Finance Board may impose a civil
money penalty under paragraph (b) of this section against a Bank for a
violation described in paragraph (a)(i) through (iii) of this section in
an amount not to exceed $5,000.00 for each day that such violation
continues;
(2) The Finance Board may impose a civil money penalty on an
executive officer or director of a Bank in an amount not to exceed
$10,000.00, or on a Bank in an amount not to exceed $25,000.00, for each
day that a violation or conduct described in paragraph (a) of this
section continues, if the Finance Board finds that the violation or
conduct:
(i) Is part of a pattern of misconduct; or
(ii) Involved recklessness and caused or would be likely to cause a
material loss to a Bank; or
(3) The Finance Board may impose a civil money penalty on an
executive officer or director of a Bank in an amount not to exceed
$100,000.00, or on a Bank in an amount not to exceed $1,000,000.00, for
each day that a violation or conduct described in paragraph (a) of this
section continues, if the Finance Board finds that the violation or
conduct was knowing and caused or would be likely to cause a substantial
loss to a Bank.
(d) Factors in determining the amount of the penalty. In determining
the amount of the civil money penalty to be assessed under this section,
the Finance Board shall consider such factors as the gravity of the
violation, any history of prior violations, the good faith of the
officer or director of a Bank, the effect of the penalty on promoting or
protecting the safety and soundness of a Bank or the Bank System, any
injury to members of the subject Bank or to the public at large, any
benefits received, and the potential for the deterrence of future
violations.
(e) Judicial relief. Pursuant to section 2B(a)(5) of the Act (12
U.S.C. 1422b(a)(5)) and section 1376(c)(3) of the Safety and Soundness
Act (12 U.S.C. 4636(c)(3)), an order of the Board of Directors imposing
a civil money penalty under this subsection shall not be subject to
judicial review except as otherwise provided in Sec. 908.10, in
accordance with section 1374 of the Safety and Soundness Act (12 U.S.C.
4634).
(f) Judicial enforcement of an order imposing a penalty. Pursuant to
sections 2B(a)(5) and 2B(a)(7) of the Act (12 U.S.C. 1422b(a)(5) and
(a)(7)) and section 1376(d) of the Safety and Soundness Act (12 U.S.C.
4636(d)), if a Bank, or an executive officer or director of a Bank,
fails to comply with an order of the Board of Directors imposing a civil
money penalty, the Finance Board may seek to enforce the order as
follows:
(1) After the order is final and no longer subject to judicial
review under Sec. 908.10, the Finance Board may bring an action in the
United States District Court for the District of Columbia to obtain a
monetary judgment against a Bank or the executive officer or director of
a Bank;
(2) The Finance Board may, in addition, seek such other relief as
may be available from the District Court;
[[Page 28]]
(3) The monetary judgment may, in the discretion of the District
Court, include any attorneys fees and other expenses incurred by the
Finance Board in connection with the action; and
(4) The validity and appropriateness of the Board of Directors'
order assessing a civil money penalty shall not be subject to review of
the United States District Court for the District of Columbia.
(g) Board of Directors' authority to review. The Board of Directors
may:
(1) Review any order to assess a civil money penalty or any
interlocutory ruling arising from a hearing on the record, or
(2) Settle, modify, or remit in whole or in part, any civil money
penalty, which may be or may have been assessed under this section.
(h) Availability of other remedies. Any civil money penalty assessed
under this section shall be in addition to any other available civil
remedy and may be assessed whether or not the Finance Board imposes
other administrative sanctions pursuant to this part.
(i) Prohibition of reimbursement or indemnification. A Bank shall
not reimburse, indemnify, or otherwise compensate directly or indirectly
any executive officer or director for any penalty imposed against such
individual under paragraph (c)(3) of this section.
(j) Applicability. Any penalty under this part may be imposed only
for conduct or violations occurring after November 12, 1999.
(k) Adjustment of civil money penalties by the rate of inflation.
Pursuant to the Federal Civil Penalties Inflation Adjustment Act of
1990, as amended by the Debt Collection Improvement Act of 1996, Pub.
Law No. 104-134 (1996) (collectively, the Inflation Adjustment Act) (to
be codified at 28 U.S.C. 2461 note), the Finance Board is required to
adjust each civil money penalty set forth herein by a prescribed cost-
of-living adjustment at least once every four years. The adjustment is
based on the formula prescribed in section 5(b) of the Inflation
Adjustment Act (28 U.S.C. 2461 note).
Sec. 908.7 Service of notice.
In accordance with section 2B(a)(5) of the Act (12 U.S.C.
1422b(a)(5)) and section 1379A of the Safety and Soundness Act (12
U.S.C. 4640), any service required or authorized to be made by the
Finance Board under this part may be made by registered mail, or in such
other manner reasonably calculated to give actual notice as the Finance
Board may by regulation or otherwise provide.
Sec. 908.8 Subpoenas.
(a) Authority. Pursuant to section 2B(a)(5) of the Act (12 U.S.C.
1422b(a)(5)) and section 1379B of the Safety and Soundness Act (12
U.S.C. 4641), the Finance Board, in the course of or in connection with
a hearing under this part, shall have the authority:
(1) To administer oaths and affirmations;
(2) To take and preserve testimony under oath;
(3) To issue subpoenas and subpoenas duces tecum; and
(4) To revoke, quash, or modify subpoenas and subpoenas duces tecum
issued by the Finance Board pursuant to this part.
(b) Witnesses and documents. The attendance of witnesses and the
production of documents provided for in this subsection may be required
from any place in any State at any designated place where such
proceeding is being conducted.
(c) Enforcement. The Finance Board may file an action in the United
States district court for the judicial district where the proceeding is
being conducted or where the witness resides or conducts business, or in
the United States District Court for the District of Columbia, for
enforcement of any subpoena or subpoena duces tecum issued pursuant to
this section. Such courts shall have jurisdiction over such actions and
power to order and require compliance with such subpoenas and subpoenas
duces tecum.
(d) Fees and expenses. Witnesses subpoenaed under this section shall
be paid the same fees and mileage that are paid witnesses in the
district courts of the United States. Any court having jurisdiction of
any proceeding instituted under this section by a Bank may allow to any
such party such reasonable expenses and attorneys fees as the court
deems just and proper. Such
[[Page 29]]
expenses shall be paid by the Bank or from its assets.
Sec. 908.9 Hearings on the record.
(a) Requirements--(1) Venue and record. Pursuant to section 2B(a)(5)
of the Act (12 U.S.C. 1422b(a)(5)) and section 1373 of the Safety and
Soundness Act (12 U.S.C. 4633), any hearing conducted pursuant to
Sec. Sec. 908.4 or 908.6 shall be held on the record and in the
District of Columbia.
(2) Timing. Any hearing shall be set for a date not earlier than
thirty (30) days nor later than sixty (60) days after service of a
notice, unless an earlier or a later date is set by the presiding
officer at the request of the party served.
(3) Procedure. Any hearing held pursuant to Sec. Sec. 908.4 or
908.6 shall be conducted in accordance with chapter 5 of Title 5 of the
United States Code.
(4) Failure to appear. If a respondent fails to appear at a hearing
individually or through a duly authorized representative, the respondent
shall be deemed to have consented to the issuance of a cease and desist
order or an order assessing a civil money penalty for which the hearing
is held.
(5) Open to the public. All hearings on the record with respect to
any notice issued by the Finance Board shall be open to the public,
unless the Board of Directors, in its discretion, determines that
holding an open hearing would be contrary to the public interest.
(b) Issuance of final order. After a hearing on the record has been
concluded, and within 90 days after the parties have been notified that
the case has been submitted to the Board of Directors for final
decision, the Board of Directors shall render the final decision (which
shall include findings of fact upon which the decision is predicated)
and shall issue and serve upon each party to the proceeding a final
order or orders consistent with the provisions.
(c) Judicial review and modification of final orders. Judicial
review of any such final decision and order shall be exclusively as
provided for in Sec. 908.10, pursuant to section 2B(a)(5) of the Act
(12 U.S.C. 1422b(a)(5)) and sections 1373 and 1374 of the Safety and
Soundness Act (12 U.S.C. 4633 and 4634). Unless a petition for review is
timely filed as provided in Sec. 908.10, and thereafter until the
record in the proceeding has been filed as so provided, the Board of
Directors may at any time modify, terminate, or set aside any such final
decision and order, upon such notice and in such manner as the Board of
Directors, in its sole discretion, considers proper. Upon such filing of
the record, the Board of Directors may modify, terminate, or set aside
any such final decision and order with permission of the court.
Sec. 908.10 Judicial review.
(a) Authority. Pursuant to section 2B(a)(5) of the Act (12 U.S.C.
1422b(a)(5)) and section 1374 of the Safety and Soundness Act (12 U.S.C.
4634), any party to a hearing may obtain judicial review of a final
decision and order issued under Sec. Sec. 908.4 or 908.6 exclusively by
filing a written petition in the United States Court of Appeals for the
District of Columbia Circuit within thirty (30) days after the date of
service of the final decision and order, requesting the court to modify,
terminate or set aside the final decision and order.
(b) Filing of record. Upon receiving a copy of the petition from the
clerk of the court of appeals, the Finance Board shall file the hearing
record with the clerk, as provided in section 2112 of Title 28 of the
United States Code (28 U.S.C. 2112).
(c) Jurisdiction. Pursuant to section 2B(a)(5) of the Act (12 U.S.C.
1422b(a)(5)) and section 1374(c) of the Safety and Soundness Act (12
U.S.C. 4634(c)), upon the filing of a petition, the court of appeals
shall have jurisdiction, which upon the filing of the record by the
Finance Board (except as otherwise provided in Sec. 908.9) shall be
exclusive, to affirm, modify, terminate or set aside, in whole or in
part, a final decision and order of the Board of Directors.
(d) Review. Review by the court of appeals of a final decision and
order of the Board of Directors and the record of any hearing conducted
pursuant to this part shall be governed by chapter 7 of Title 5 of the
United States Code (5 U.S.C. 701 et seq.).
(e) Order to pay civil money penalty. In connection with its review
of a final order pursuant to this part, the court
[[Page 30]]
of appeals shall have authority in accordance with section 2B(a)(5) of
the Act (12 U.S.C. 1422b(a)(5)) and section 1374(e) of the Safety and
Soundness Act (12 U.S.C. 4634(e)), to order payment of any civil money
penalty imposed by the Finance Board.
(f) No automatic stay. In accordance with section 2B(a)(5) of the
Act (12 U.S.C. 1422b(a)(5)) and section 1374(f) of the Safety and
Soundness Act (12 U.S.C. 4634(f)), the commencement of an action for
judicial review of a final decision and order of the Board of Directors
under this section shall not operate as a stay of any such order, unless
the court of appeals specifically orders a stay of the order in whole or
in part.
Sec. 908.11 Jurisdiction and enforcement.
(a) Enforcement. In accordance with sections 2B(a)(5) and 2B(a)(7)
of the Act (12 U.S.C. 1422b(a)(5) and (a)(7)) and section 1375(a) of the
Safety and Soundness Act (12 U.S.C. 4635(a)), the Finance Board may
bring an action in the United States District Court for the District of
Columbia for the enforcement of any effective order issued by the Board
of Directors under this part. Such court shall have jurisdiction and
power to order and require compliance with such order.
(b) Limitation on jurisdiction. In accordance with sections 2B(a)(5)
and 2B(a)(7) of the Act (12 U.S.C. 1422b(a)(5) and (a)(7)) and section
1375(b) of the Safety and Soundness Act (12 U.S.C. 4635(b)), and except
as otherwise provided in the Act, no court shall have jurisdiction to
affect, by injunction or otherwise, the issuance or enforcement of any
order issued by the Board of Directors under this part, or to review,
modify, suspend, terminate, or set aside any such notice or order.
Sec. 908.12 Notice after separation.
The resignation, termination of employment or participation, or
separation of a director or executive officer of a Bank shall not affect
the jurisdiction and authority of the Finance Board to issue any notice
and proceed under this part against any such director or executive
officer, if such notice is served before the end of the two-year period
beginning on the date such director or executive officer ceases to be
associated with the Bank.
Sec. 908.13 Public disclosure of final orders.
(a) In general. The Finance Board shall make available to the
public--
(1) Any written agreement or other written statement for which a
violation may be redressed by the Finance Board or any modification to
or termination thereof, unless the Finance Board in its discretion,
determines that public disclosure would be contrary to the public
interest;
(2) Any order that is issued by the Board of Directors and that has
become final in accordance with this part; and
(3) Any modification to or termination of any final order made
public pursuant to this part.
(b) Delay of public disclosure under exceptional circumstances. If
the Finance Board determines in writing that the public disclosure,
pursuant to paragraph (a) of this section, of any final decision and
order of the Board of Directors would seriously threaten the financial
health or security of a Bank, the Finance Board may delay the public
disclosure of such decision and order for a reasonable time.
(c) Documents filed under seal. The Finance Board may file any
document or part thereof under seal in any hearing commenced by the
Finance Board under this part, if it determines in writing that
disclosure thereof would be contrary to the public interest.
(d) Retention of documents. The Finance Board shall keep and
maintain a record, for not less than six years, of all documents
described in paragraph (a) of this section and all enforcement
agreements and other supervisory actions and supporting documents issued
with respect to or in connection with any enforcement proceeding
initiated by the Finance Board under this part or any other law.
(e) Disclosure to Congress. This section may not be construed to
authorize the withholding, or to prohibit the disclosure, of any
information to the Congress or any committee or subcommittee thereof.
[[Page 31]]
Sec. 908.14 No implied private right of action.
This part shall not create any private right of action on behalf of
any person against a Bank or any director or executive officer of a Bank
or impair any existing private right of action under applicable law.
Sec. Sec. 908.15-908.19 [Reserved]
Subpart C_General Rules
Sec. 908.20 Authority of the Board of Directors.
The Board of Directors may, at any time during the pendency of a
proceeding under this part, perform, direct the performance of, or waive
the performance of any act that could be done or ordered by the
presiding officer.
Sec. 908.21 Authority of the presiding officer.
(a) General rule. All cease and desist or civil money penalty
proceedings governed by this subpart shall be conducted in a hearing on
the record in accordance with the provisions of the Administrative
Procedure Act, 5 U.S.C. 551-559. The presiding officer shall have
complete charge of the hearing, conduct a fair and impartial hearing,
avoid unnecessary delay, and assure that a record of the hearing is
made.
(b) Powers. The presiding officer shall have all powers necessary to
conduct the hearing in accordance with paragraph (a) of this section and
5 U.S.C. 556(c). The presiding officer is authorized to--
(1) Set and change the date, time and place of the hearing upon
reasonable notice to the parties;
(2) Continue or recess the hearing in whole or in part for a
reasonable period of time;
(3) Hold conferences to identify or simplify the issues, or to
consider other matters that may aid in the expeditious disposition of
the proceeding, including settlement conferences, mediation or other
consensual methods of dispute resolution;
(4) Administer oaths and affirmations;
(5) Issue subpoenas, subpoenas duces tecum, and protective orders,
as authorized by this part, and to revoke, quash, or modify such
subpoenas;
(6) Take and preserve testimony under oath;
(7) Rule on motions and other procedural matters appropriate in a
hearing, except that only the Board of Directors shall have the power to
grant any motion to dismiss a cease and desist or civil money penalty
proceeding or to make a final determination on the merits of such
proceedings;
(8) Regulate the scope and timing of discovery;
(9) Regulate the course of the hearing and the conduct of
representatives and parties;
(10) Examine witnesses;
(11) Receive, exclude, limit, or otherwise rule on evidence;
(12) Upon motion of a party, take official notice of facts;
(13) Recuse herself/himself upon motion made by a party or on her or
his own motion;
(14) Prepare and present to the Board of Directors a recommended
decision as provided in this part;
(15) Establish time, place and manner limitations on the attendance
of the public and the media for any public hearing; and
(16) Do all other things necessary and appropriate to discharge the
duties of a presiding officer.
Sec. 908.22 Public hearings.
(a) General rule. All hearings shall be open to the public, unless
the Finance Board, in its discretion, determines that holding an open
hearing would be contrary to the public interest. The Finance Board may
make such determination sua sponte at any time by written notice to all
parties.
(b) Motion for closed hearing. Within twenty (20) days of service of
a notice, any party or respondent may file with the presiding officer a
motion for a non-public hearing and any party may file a pleading in
reply to the motion. The presiding officer shall forward the motion and
any reply, together with a recommended decision on the motion, to the
Board of Directors, who shall make a final determination. Such motions
and replies shall be governed by Sec. 908.45.
[[Page 32]]
(c) Filing documents under seal. The Finance Board, in its
discretion, may file any document, or any part of any document, under
seal if the agency makes a written determination that disclosure of the
document would be contrary to the public interest. The presiding officer
shall take all appropriate steps to preserve the confidentiality of such
documents or parts thereof, including closing portions of the hearing to
the public.
Sec. 908.23 Good faith certification.
(a) General requirement. Every filing or submission of record
following the issuance of a notice by the Finance Board shall be signed
by at least one representative of record in her or his individual name
and shall state that representative's address and telephone number and
the names, addresses and telephone numbers of all other representatives
of record for the person making the filing or submission.
(b) Effect of signature. (1) By signing a document, the
representative of record or party certifies that--
(i) The representative of record or party has read the filing or
submission of record;
(ii) To the best of her or his knowledge, information and belief
formed after reasonable inquiry, the filing or submission of record is
well-grounded in fact and is warranted by existing law or a good faith,
non-frivolous argument for the extension, modification, or reversal of
existing law, regulation or Finance Board policy or order; and
(iii) The filing or submission of record is not made for any
improper purpose, such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
(2) If a filing or submission of record is not signed, the presiding
officer shall strike the filing or submission of record, unless it is
signed promptly after the omission is called to the attention of the
pleader or movant.
(c) Effect of making oral motion or argument. The act of making any
oral motion or oral argument by any representative or party shall
constitute a certification that to the best of her or his knowledge,
information, and belief, formed after reasonable inquiry, such
expressions or statements are well-grounded in fact and are warranted by
existing law or a good faith, non-frivolous argument for the extension,
modification, or reversal of existing law, regulation, or Finance Board
policy or order, and are not made for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the cost of
litigation.
Sec. 908.24 Ex parte communications.
(a) Definition.(1) Ex parte communication means any material oral or
written communication relevant to the merits of a cease and desist or
civil money penalty proceeding under this part that was neither on the
record nor on reasonable prior notice to all parties that takes place
between--
(i) An interested person outside the Finance Board (including the
person's representative); and
(ii) The presiding officer handling the proceeding, the Board of
Directors or any member thereof, a decisional employee of the Finance
Board assigned to that proceeding, or any other person who is or may
reasonably be expected to be involved in the decisional process.
(2) A communication that does not concern the merits of a proceeding
under this part, such as a request for status of the proceeding, does
not constitute an ex parte communication.
(b) Prohibition of ex parte communications. From the time that a
notice commencing a proceeding under this part is issued by the Finance
Board until the date that the Board of Directors issues its final
decision pursuant to Sec. 908.65, no person referred to in paragraph
(a)(1)(i) of this section shall knowingly make or cause to be made an ex
parte communication. The Board of Directors, any member thereof
individually, the presiding officer, or an employee of the Finance
Board, shall not knowingly make or cause to be made an ex parte
communication.
(c) Procedure upon occurrence of ex parte communication. If an ex
parte communication is received by any person identified in paragraph
(a) of this section, that person promptly shall cause all such written
communications (or, if the communication is oral, a memorandum stating
the substance of the communication) to be placed on the
[[Page 33]]
record of the proceeding and served on all parties. All parties to the
proceeding shall have an opportunity, within ten days of receipt of
service of the ex parte communication or the written record of an oral
communication, to file responses thereto and to recommend any sanctions,
in accordance with paragraph (d) of this section, that they believe to
be appropriate under the circumstances.
(d) Sanctions. Any party or representative for a party who makes an
ex parte communication, or who encourages or solicits another person or
entity to make any such communication, may be subject to any appropriate
sanction or sanctions imposed by the Board of Directors or the presiding
officer, including, but not limited to, exclusion from the proceedings
and an adverse ruling on the issue that is the subject of the prohibited
communication.
(e) Consultations by presiding officer. Except to the extent
required for the disposition of ex parte matters as authorized by law,
the presiding officer may not consult a person or party on any matter
relevant to the merits of a proceeding, unless on notice and opportunity
for all parties to participate.
(f) Separation of functions. An employee or agent engaged in the
performance of investigative or prosecuting functions for the Finance
Board in a case may not, in that or a factually related case,
participate or advise in the decision, recommended decision, or Board of
Directors' review of the recommended decision under Sec. 908.65, except
as a witness or counsel in a hearing.
Sec. 908.25 Filing of papers.
(a) Filing. Any papers required to be filed shall be addressed to
the presiding officer and filed with the Finance Board, 1777 F Street,
NW., Washington, DC 20006.
(b) Manner of filing. Unless otherwise specified by the Finance
Board or the presiding officer, filing shall be accomplished by:
(1) Personal service;
(2) Delivery to the U.S. Postal Service or to a reliable commercial
delivery service for same day or overnight delivery;
(3) Mailing by first class, registered, or certified mail; or
(4) Transmission by electronic media upon any conditions specified
by the Finance Board or the presiding officer. All papers filed by
electronic media shall also concurrently be filed in accordance with
paragraph (c) of this section.
(c) Formal requirements as to papers filed--(1) Form. All papers
must set forth the name, address and telephone number of the
representative or party making the filing and must be accompanied by a
certification setting forth when and how service has been made on all
other parties. All papers filed must be double-spaced and printed or
typewritten on 8\1/2\ x 11-inch paper and must be clear and legible.
(2) Signature. All papers must be dated and signed as provided in
Sec. 908.23.
(3) Caption. All papers filed must include at the head thereof, or
on a title page, the name of the Finance Board and of the filing party,
the title and docket number of the proceeding and the subject of the
particular paper.
(4) Number of copies. Unless otherwise specified by the Finance
Board or the presiding officer, an original and one copy of all
documents, papers, transcripts of testimony, and exhibits shall be
filed.
Sec. 908.26 Service of papers.
(a) By the parties. Except as otherwise provided, a party filing
papers or serving a subpoena shall serve a copy upon the representative
of record for each party to the proceeding so represented and upon any
party not so represented.
(b) Method of service. Except as provided in paragraphs (c)(2) and
(d) of this section, a serving party shall use one or more of the
following methods of service:
(1) Personal service;
(2) Delivery to the U.S. Postal Service or to a reliable commercial
delivery service for same day or overnight delivery;
(3) Mailing by first class, registered, or certified mail; or
(4) Transmission by electronic media, only if the parties mutually
agree. Any papers served by electronic media shall
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also concurrently be served in accordance with the requirements of Sec.
908.25(c).
(c) By the Finance Board or the presiding officer. (1) All papers
required to be served by the Finance Board or the presiding officer upon
a party who has appeared in the proceeding in accordance with Sec.
908.72 may be served by any means specified in paragraph (b) of this
section.
(2) If a notice of appearance has not been filed in the proceeding
for a party in accordance with Sec. 908.72, the Finance Board or the
presiding officer shall make service upon such party by any of the
following methods:
(i) By personal service;
(ii) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where the
individual resides or works;
(iii) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or to
any other agent authorized by appointment or by law to receive service
and, if the agent is one authorized by statute to receive service and
the statute so requires, by also mailing a copy to the party;
(iv) By registered or certified mail addressed to the person's last
known address; or
(v) By any other method reasonably calculated to give actual notice.
(d) Subpoenas. Subject to applicable provisions in this part,
service of a subpoena may be made:
(1) By personal service;
(2) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where the
individual resides or works;
(3) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or to
any other agent authorized by appointment or by law to receive service
and, if the agent is one authorized by statute to receive service and
the statute so requires, by also mailing a copy to the party;
(4) By registered or certified mail addressed to the person's last
known address; or
(5) By any other method reasonably calculated to give actual notice.
(e) Area of service. Service in any State, commonwealth, possession,
territory of the United States or the District of Columbia on any person
doing business in any State, commonwealth, possession, territory of the
United States or the District of Columbia, or on any person as otherwise
permitted by law, is effective without regard to the place where the
hearing is held.
(f) Proof of service. Proof of service of papers filed by a party
shall be filed before action is taken thereon. The proof of service,
which shall serve as prima facie evidence of the fact and date of
service, shall show the date and manner of service and may be by written
acknowledgment of service, by declaration of the person making service,
or by certificate of a representative of record. However, failure to
file proof of service contemporaneously with the papers shall not affect
the validity of actual service. The presiding officer may allow the
proof to be amended or supplied, unless to do so would result in
material prejudice to a party.
Sec. 908.27 Computing time.
(a) General rule. In computing any period of time prescribed or
allowed by this subpart, the date of the act or event that commences the
designated period of time is not included. The last day so computed is
included unless it is a Saturday, Sunday, or Federal holiday. When the
last day is a Saturday, Sunday or Federal holiday, the period shall run
until the end of the next day that is not a Saturday, Sunday, or Federal
holiday. Intermediate Saturdays, Sundays and Federal holidays are
included in the computation of time. However, when the time period
within which an act is to be performed is ten (10) days or less, not
including any additional time allowed for in paragraph (c) of this
section, intermediate Saturdays, Sundays and Federal holidays are not
included.
(b) When papers are deemed to be filed or served. (1) Filing and
service are deemed to be effective--
(i) In the case of personal service or same day reliable commercial
delivery service, upon actual service;
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(ii) In the case of U.S. Postal Service or reliable commercial
overnight delivery service, or first class, registered, or certified
mail, upon deposit in or delivery to an appropriate point of collection;
or
(iii) In the case of transmission by electronic media, as specified
by the authority receiving the filing in the case of filing, and as
agreed among the parties in the case of service.
(2) The effective filing and service dates specified in paragraph
(b)(1) of this section may be modified by the Finance Board or the
presiding officer in the case of filing or by agreement of the parties
in the case of service.
(c) Calculation of time for service and filing of responsive papers.
Whenever a time limit is measured by a prescribed period from the
service of any notice or paper, the applicable time limits shall be
calculated as follows:
(1) If service was made by first class, registered, or certified
mail, or by delivery to the U.S. Postal Service for longer than
overnight delivery service, add three (3) calendar days to the
prescribed period for the responsive filing.
(2) If service was made by U.S. Postal Service or reliable
commercial overnight delivery service, add one (1) calendar day to the
prescribed period for the responsive filing.
(3) If service was made by electronic media transmission, add one
(1) calendar day to the prescribed period for the responsive filing,
unless otherwise determined by the Board of Directors or the presiding
officer in the case of filing, or by agreement among the parties in the
case of service.
Sec. 908.28 Change of time limits.
Except as otherwise provided by law, the presiding officer may, for
good cause shown, extend the time limits prescribed above or prescribed
by any notice or non-dispositive order issued under this part. After the
referral of the case to the Board of Directors pursuant to Sec. 908.63,
the Board of Directors may grant extensions of the time limits for good
cause shown. Extensions may be granted on the motion of a party after
notice and opportunity to respond is afforded all nonmoving parties, or
on the Board of Directors' or the presiding officer's own motion.
Sec. 908.29 Witness fees and expenses.
Witnesses (other than parties) subpoenaed for testimony or
depositions shall be paid the same fees for attendance and mileage as
are paid to witnesses pursuant to the Federal Rules of Civil Procedure
(title 28 of the U.S. Code) governing proceedings in the United States
district courts, in which the United States is a party, provided that,
in the case of a discovery subpoena addressed to a party, no witness
fees or mileage shall be paid. Fees for witnesses shall be tendered in
advance by the party requesting the subpoena, except that fees and
mileage need not be tendered in advance where the Finance Board is the
issuer of the subpoena. The Finance Board shall not be responsible for
or required to pay any fees to or expenses of any witness not subpoenaed
by the Finance Board.
Sec. 908.30 Settlement or other dispute resolution.
Any respondent may, at any time in a cease and desist or civil money
penalty proceeding, unilaterally submit to the Finance Board's counsel
of record written offers or proposals for settlement of such proceeding
in whole or in part without prejudice to the rights of any of the
parties. Any such offer or proposal shall be made exclusively to the
Finance Board. Submission of a written settlement offer does not provide
a basis for adjourning or otherwise delaying all or any portion of a
proceeding under this part. Any party to a proceeding under this part
may request a neutral individual preside over settlement negotiations.
No settlement offer or proposal, or any subsequent negotiation or
resolution, is admissible as evidence in any proceeding under this part
or any court.
Sec. 908.31 Right to supervise the Banks.
Nothing contained in this part shall limit in any manner the right
of the Finance Board to conduct any examination, inspection, or
visitation of any Bank, or the right of the Finance Board to conduct or
continue any form of investigation authorized by law. Nothing set forth
in this part shall restrict or be deemed to restrict the authority of
the Finance Board to supervise the Banks or to issue or enforce
[[Page 36]]
orders or directives pursuant to section 2B(a)(1), or any other
provision, of the Act (12 U.S.C. 1422b(a)(1)).
Sec. 908.32 Collateral attacks on proceedings under this part.
If a respondent files in any court a collateral attack that purports
to challenge all or any portion of a proceeding under this part, the
hearing on the merits shall continue without regard to the pendency of
any such challenge action. No default or other failure to act as
directed in the hearing within the times prescribed in this subpart
shall be excused based on the pendency of any such challenge action.
Sec. Sec. 908.33-908.39 [Reserved]
Subpart D_Pre-Hearing Proceedings
Sec. 908.40 Commencement of proceeding and contents of notices.
Proceedings under this part are commenced by the issuance of a
notice of charges or a notice of assessment of a civil money penalty
(notice). A notice that is served by the Finance Board upon a respondent
in accordance with Sec. 908.7 shall state all of the following:
(a) The legal authority for the proceeding and for the Finance
Board's jurisdiction over the proceeding;
(b) A statement of the matters of fact or law showing that the
Finance Board is entitled to relief;
(c) A proposed order or prayer for an order granting the requested
relief;
(d) The time, place and nature of the hearing;
(e) The time within which to file an answer;
(f) The time within which to request a hearing; and
(g) The address for filing the answer and/or request for a hearing.
Sec. 908.41 Answer.
(a) Deadline for filing answer. Unless otherwise specified by the
Finance Board in the notice, respondent shall file an answer within
twenty (20) days of service of the notice.
(b) Content of answer. An answer shall respond specifically to each
paragraph or allegation of fact contained in the notice and must admit,
deny, or state that the party lacks sufficient information to admit or
deny each allegation of fact. A statement of lack of information has the
effect of a denial. Denials must fairly meet the substance of each
allegation of fact denied; general denials are not permitted. When a
respondent denies part of an allegation, that part must be denied and
the remainder specifically admitted. Any allegation of fact in the
notice that is not denied in the answer is deemed admitted for purposes
of the proceeding. A respondent is not required to respond to the
portion of a notice that constitutes the prayer for relief or proposed
order. The answer shall set forth affirmative defenses, if any, asserted
by the respondent.
(c) Default. Failure of a respondent to file an answer required by
this section within the time provided constitutes a waiver of such
respondent's right to appear and contest the allegations in the notice.
If no timely answer is filed, the Finance Board's counsel of record may
file a motion for entry of an order of default. Upon a finding that no
good cause has been shown for the failure to file a timely answer, the
presiding officer shall file with the Board of Directors a recommended
decision containing the findings and the relief sought in the notice.
Any final order issued by the Board of Directors based upon a
respondent's failure to answer shall be deemed to be an order issued
upon consent.
Sec. 908.42 Amended pleadings.
(a) Amendments. The notice or answer may be amended or supplemented
by the Finance Board prior to the scheduling conference held in
accordance with Sec. 908.53, or at any stage of the proceeding with the
permission of the presiding officer for good cause shown. The respondent
must answer an amended notice within the time remaining for the
respondent's answer to the original notice, or within ten (10) days
after service of the amended notice, whichever period is longer, unless
the Board of Directors or the presiding officer orders otherwise for
good cause shown.
(b) Amendments to conform to the evidence. When issues not raised in
the notice or answer are tried at the hearing
[[Page 37]]
by express or implied consent of the parties, they shall be treated in
all respects as if they had been raised in the notice or answer, and no
formal amendments shall be required. If evidence is objected to at the
hearing on the ground that it is not within the issues raised by the
notice or answer, the presiding officer may admit the evidence when
admission is likely to assist in adjudicating the merits of the action.
The presiding officer will do so freely when the determination of the
merits of the action is served thereby and the objecting party fails to
satisfy the presiding officer that the admission of such evidence would
unfairly prejudice that party's action or defense upon the merits. The
presiding officer may grant a continuance to enable the objecting party
to meet such evidence.
Sec. 908.43 Failure to appear.
Failure of a respondent to appear in person or by a duly authorized
representative at the hearing constitutes a waiver of respondent's right
to a hearing and is deemed an admission of the facts as alleged and
consent to the relief sought in the notice. Without further proceedings
or notice to the respondent, the presiding officer shall file with the
Board of Directors a recommended decision containing the findings and
the relief sought in the notice.
Sec. 908.44 Consolidation and severance of actions.
(a) Consolidation. On the motion of any party, or on the Finance
Board's or the presiding officer's own motion, the presiding officer may
consolidate, for some or all purposes, any two or more proceedings, if
each such proceeding involves or arises out of the same transaction,
occurrence or series of transactions or occurrences, or involves at
least one common respondent or a material common question of law or
fact, unless such consolidation would cause unreasonable delay or
injustice. In the event of consolidation under this section, appropriate
adjustment to the pre-hearing schedule must be made to avoid unnecessary
expense, inconvenience, or delay.
(b) Severance. The presiding officer may, upon the motion of the
Finance Board or any party, sever the proceeding for separate resolution
of the matter as to any respondent only if the presiding officer finds
that undue prejudice or injustice to the moving party would result from
not severing the proceeding and such undue prejudice or injustice would
outweigh the interests of judicial economy and expedition in the
complete and final resolution of the proceeding.
Sec. 908.45 Motions.
(a) Written motions. (1) Except as otherwise provided herein, an
application or request for an order or ruling must be made by written
motion.
(2) All written motions shall state with particularity the relief
sought and must be accompanied by a proposed order.
(3) No oral argument may be held on written motions except as
otherwise directed by the presiding officer. Written memoranda, briefs,
affidavits, or other relevant material or documents may be filed in
support of or in opposition to a motion.
(b) Oral motions. A motion may be made orally and on the record at a
hearing, unless the presiding officer directs that such motion be
reduced to writing and filed with the presiding officer. Oral motions
must be made a part of the record of the hearing, and accompanied by a
proposed order.
(c) Filing of motions. Motions shall be filed with the presiding
officer, except that following the filing of a recommended decision with
the Board of Directors, motions must be filed with the Board of
Directors in accordance with Sec. 908.64.
(d) Responses. (1) Except as otherwise provided herein, any party
may file a written response to a motion within ten days after service of
any written motion, or within such other period of time as may be
established by the presiding officer or the Board of Directors. The
presiding officer shall not rule on any oral or written motion before
each party has had an opportunity to file a response.
(2) The failure of a party to oppose a written motion or an oral
motion made on the record is deemed to be consent by that party to the
entry of an order
[[Page 38]]
substantially in the form of the order accompanying the motion.
(e) Dilatory motions. Frivolous, dilatory, or repetitive motions are
prohibited. The filing of such motions may form the basis for sanctions.
(f) Dispositive motions. Dispositive motions shall be governed by
Sec. Sec. 908.51 and 908.52.
Sec. 908.46 Discovery.
(a) Limits on discovery. Subject to the limitations set out in
paragraphs (b), (d), and (e) of this section, any party to a hearing
under this part may obtain document discovery by serving a written
request to produce documents. For purposes of a request to produce
documents, the term documents may be defined to include drawings,
graphs, charts, photographs, recordings, data stored in electronic form,
and other data compilations from which information can be obtained or
translated, if necessary, by the parties through detection devices into
reasonably usable form, as well as written material of all kinds.
(b) Relevance. A party may obtain document discovery regarding any
matter not privileged provided that the information sought has a logical
connection to consequential facts (i.e., material) or may tend to prove
or disprove a matter in issue (i.e., relevant) related to the merits of
the pending action. Any request to produce documents that calls for
irrelevant or immaterial information, or that is unreasonable,
oppressive, excessive in scope, unduly burdensome, or repetitive of
previous requests, or that seeks to obtain privileged documents, shall
be denied or modified. A request is unreasonable, oppressive, excessive
in scope, or unduly burdensome if, among other things, it fails to
include justifiable limitations on the time period covered and the
geographic locations to be searched, the time provided to respond in the
request is inadequate, or the request calls for copies of documents to
be delivered to the requesting party and fails to include the
requestor's written agreement to pay in advance for the copying, in
accordance with Sec. 908.47.
(c) Forms of discovery. Document discovery shall be limited to
requests for production of documents for inspection and copying. No
other form of discovery shall be allowed. Discovery by use of
interrogatories may be permitted. This paragraph shall not be
interpreted to require the creation of a document.
(d) Privileged matter. Privileged documents shall not be
discoverable. Privileges include the attorney-client privilege, work-
product privilege, any government's or government agency's deliberative
process privilege and any other privileges provided by the Constitution,
any applicable act of Congress, or the principles of common law.
(e) Time limits. All discovery, including all responses to discovery
requests, shall be completed within the time set by the presiding
officer, but in no case later than ten (10) days prior to the service
deadline for pre-hearing submissions in accordance with Sec. 908.54. No
exception to this time limit shall be permitted, unless the presiding
officer finds on the record that good cause exists for waiving the
requirements of this paragraph.
Sec. 908.47 Request for document discovery from parties.
(a) General rule. Any party may serve on any other party a request
to produce for inspection any discoverable documents that are in the
possession, custody, or control of the party upon whom the request is
served. Copies of the request shall be served on all other parties. The
request must identify the documents to be produced either by individual
item or by category and must describe each item and category with
reasonable particularity. Documents must be produced as they are kept in
the usual course of business or they shall be labeled and organized to
correspond with the categories in the request.
(b) Production or copying. The request shall specify a reasonable
time, place and manner for production and performing any related acts.
In lieu of inspecting the documents, the requesting party may specify
that all or some of the responsive documents be copied and the copies
delivered to the requesting party. If copying of fewer than 250 pages is
requested, the party to whom the request is addressed shall bear the
[[Page 39]]
cost of copying and shipping charges. If a party requests more than 250
pages of copying, the requesting party shall pay for copying and
shipping charges. Copying charges are at the current rate per page
imposed by the Finance Board at Sec. 910.9(g) of this chapter for
requests for documents filed under the Freedom of Information Act, 5
U.S.C. 552. The party to whom the request is addressed may require
payment in advance before producing the documents.
(c) Obligation to update responses. A party who has responded to a
discovery request is not required to supplement the response, unless:
(1) The responding party learns that in some material respect the
information disclosed is incomplete or incorrect, and
(2) The additional or corrective information has not otherwise been
made known to the other parties during the discovery process or in
writing.
(d) Motions to strike or limit discovery requests. (1) Any party
that objects to a discovery request may, within ten (10) days of being
served with such request, file a motion in accordance with the
provisions of Sec. 908.45 requesting the presiding officer order the
request be stricken or otherwise limited. If an objection is made to
only a portion of an item or category in a request, the objection shall
specify that portion. Any objections not made in accordance with this
paragraph and Sec. 908.45 are waived.
(2) The party who served the request that is the subject of a motion
to strike or limit may file a written response within five (5) days of
service of the motion. No other party may file a response.
(e) Privilege. At the time other documents are produced, all
documents withheld on the grounds of privilege must be reasonably
identified, together with a statement of the basis for the assertion of
privilege. When similar documents that are protected by deliberative
process, attorney work-product, or attorney-client privilege are
voluminous, these documents may be identified by category instead of by
individual document. The presiding officer has discretion to determine
when the identification by category is insufficient.
(f) Motions to compel production. (1) If a party withholds any
documents as privileged or fails to comply fully with a discovery
request, the requesting party may, within (10) ten days of the assertion
of privilege or of the time the failure to comply becomes known to the
requesting party, file a motion in accordance with the provisions of
Sec. 908.45 for the issuance of a subpoena compelling production.
(2) The party who asserted the privilege or failed to comply with
the request may, within five (5) days of service of a motion for the
issuance of a subpoena compelling production, file a written response to
the motion. No other party may file a response.
(g) Ruling on motions. After the time for filing responses to
motions pursuant to this section has expired, the presiding officer
shall rule promptly on all such motions. If the presiding officer
determines that a discovery request or any of its terms calls for
irrelevant material, is unreasonable, oppressive, excessive in scope,
unduly burdensome, or repetitive of previous requests, or seeks to
obtain privileged documents, he or she may deny or modify the request
and may issue appropriate protective orders, upon such conditions as
justice may require. The pendency of a motion to strike or limit
discovery or to compel production shall not be a basis for staying or
continuing the proceeding, unless otherwise ordered by the presiding
officer. Notwithstanding any other provision in this part, the presiding
officer may not release, or order a party to produce, documents withheld
on grounds of privilege if the party has stated to the presiding officer
its intention to file a timely motion for interlocutory review of the
presiding officer's order to produce the documents, until the motion for
interlocutory review has been decided.
(h) Enforcing discovery subpoenas. If the presiding officer issues a
subpoena compelling production of documents by a party, the subpoenaing
party may, in the event of noncompliance and to the extent authorized by
applicable law, apply to any appropriate United States district court
for an order requiring compliance with the subpoena. A party's right to
seek court enforcement of a subpoena shall not in any manner
[[Page 40]]
limit the sanctions that may be imposed by the presiding officer against
a party who fails to produce or induces another to fail to produce
subpoenaed documents.
Sec. 908.48 Document subpoenas to nonparties.
(a) General rules. (1) Any party may apply to the presiding officer
for the issuance of a document discovery subpoena addressed to any
person who is not a party to the proceeding. The application must
contain a proposed document subpoena and a brief statement showing the
general relevance and reasonableness of the scope of documents sought.
The subpoenaing party shall specify a reasonable time, place, and manner
for production in response to the subpoena.
(2) A party shall only apply for a document subpoena under this
section within the time period during which such party could serve a
discovery request under Sec. 908.46(e) and in accordance with Sec.
908.47. The party requesting the document subpoena is responsible for
serving it on the subpoenaed person and for serving copies on all
parties. Document subpoenas may be served in any State, territory, or
possession of the United States, the District of Columbia, or as
otherwise provided by law.
(3) The presiding officer shall promptly issue any document subpoena
applied for under this section; except that, if the presiding officer
determines that the application does not set forth a valid basis for the
issuance of the subpoena, or that any of its terms are unreasonable,
oppressive, excessive in scope, or unduly burdensome, he may refuse to
issue the subpoena or may issue it in a modified form upon such
conditions as may be determined by the presiding officer.
(b) Motion to quash or modify. (1) Any person to whom a document
subpoena is directed may file a motion to quash or modify such subpoena,
accompanied by a statement of the basis for quashing or modifying the
subpoena. The movant shall serve the motion on all parties and any party
may respond to such motion within ten days of service of the motion.
(2) Any motion to quash or modify a document subpoena shall be filed
on the same basis, including the assertion of privilege, upon which a
party could object to a discovery request under Sec. 908.47 and during
the same time limits during which such an objection could be filed.
(c) Enforcing document subpoenas. If a subpoenaed person fails to
comply with any subpoena issued pursuant to this section or any order of
the presiding officer that directs compliance with all or any portion of
a document subpoena, the subpoenaing party or any other aggrieved party
may, to the extent authorized by applicable law, apply to an appropriate
United States district court for an order requiring compliance with any
part of the subpoena that the presiding officer has not quashed or
modified. A party's right to seek court enforcement of a document
subpoena shall in no way limit the sanctions that may be imposed by the
presiding officer on a party who induces a failure to comply with
subpoenas issued under this section.
Sec. 908.49 Deposition of witness unavailable for hearing.
(a) General rules. (1) A party desiring to preserve that witness'
testimony for the record may apply in accordance with the procedures set
forth in paragraph (a)(2) of this section to the presiding officer for
the issuance of a subpoena, including a subpoena duces tecum, requiring
the attendance of the witness at a deposition. The presiding officer may
issue a deposition subpoena under this section upon a showing that--
(i) The testimony is reasonably expected to be material; and
(ii) Taking the deposition will not result in any undue burden to
any other party and will not cause undue delay of the proceeding.
(2) The application must contain a proposed deposition subpoena and
a brief statement of the reasons for the issuance of the subpoena. The
subpoena must name the witness whose deposition is to be taken and
specify the time and place for taking the deposition. A deposition
subpoena may require the witness to be deposed anywhere within the
United States and its possessions
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and territories in which that witness resides or has a regular place of
employment or such other convenient place as the presiding officer shall
fix.
(3) A subpoena shall be promptly issued upon request, unless the
presiding officer determines that the request fails to set forth a valid
basis under this section for its issuance. The presiding officer shall
make a determination that there is a valid basis for issuing the
subpoena. The presiding officer may require a written response from the
party requesting the subpoena or require attendance at a conference to
determine whether there is a valid basis upon which to issue the
requested subpoena.
(4) The party obtaining a deposition subpoena is responsible for
serving it on the witness and for serving copies on all parties. Unless
the presiding officer orders otherwise, no deposition under this section
shall be taken on fewer than ten (10) days' notice to the witness and
all parties. Deposition subpoenas may be served anywhere within the
United States or its possessions or territories on any person doing
business anywhere within the United States or its possessions or
territories, or as otherwise permitted by law.
(b) Objections to deposition subpoenas. (1) The witness and any
party who has not had an opportunity to oppose a deposition subpoena
issued under this section may file a motion under Sec. 908.45 with the
presiding officer to quash or modify the subpoena prior to the time for
compliance specified in the subpoena, but not more than ten (10) days
after service of the subpoena.
(2) A statement of the basis for the motion to quash or modify a
subpoena issued under this section shall accompany the motion. The
motion must be served on all parties.
(c) Procedure upon deposition. (1) Each witness testifying pursuant
to a deposition subpoena shall be duly sworn and each party shall have
the right to examine the witness. Objections to questions or documents
must be in short form, stating the grounds for the objection. Failure to
object to questions or documents is not deemed a waiver except where the
ground for objection might have been avoided if the objection had been
presented timely. All questions, answers and objections must be
recorded.
(2) Any party may move before the presiding officer for an order
compelling the witness to answer any questions the witness has refused
to answer or submit any evidence that, during the deposition, the
witness has refused to submit.
(3) The deposition shall be subscribed by the witness, unless the
parties and the witness, by stipulation, have waived the signing, or the
witness is ill, cannot be found, or has refused to sign. If the
deposition is not subscribed by the witness, the court reporter taking
the deposition shall certify that the transcript is a true and complete
transcript of the deposition.
(d) Enforcing subpoenas. If a subpoenaed person fails to comply with
any subpoena issued pursuant to this section or with any order of the
presiding officer made upon motion under paragraph (c)(2) of this
section, the subpoenaing party or other aggrieved party may, to the
extent authorized by applicable law, apply to an appropriate United
States district court for an order requiring compliance with the
portions of the subpoena that the presiding officer has ordered
enforced. A party's right to seek court enforcement of a deposition
subpoena in no way limits the sanctions that may be imposed by the
presiding officer on a party who fails to comply with or induces a
failure to comply with a subpoena issued under this section.
Sec. 908.50 Interlocutory review.
(a) General rule. The Board of Directors may review a ruling of the
presiding officer prior to the certification of the record to the Board
of Directors only in accordance with the procedures set forth in this
section.
(b) Procedure. Any motion for interlocutory review shall be filed by
a party with the presiding officer within ten (10) days of his ruling.
Upon the expiration of the time for filing all responses, the presiding
officer shall refer the matter to the Board of Directors for final
disposition. In referring the matter to the Board of Directors, the
presiding officer may indicate agreement or disagreement with the
[[Page 42]]
asserted grounds for interlocutory review of the ruling in question.
(c) Scope of review. The Board of Directors may exercise
interlocutory review of a ruling of the presiding officer if it finds
that--
(1) The ruling involves a controlling question of law or policy as
to which substantial grounds exist for a difference of opinion;
(2) Immediate review of the ruling may materially advance the
ultimate termination of the proceeding;
(3) Subsequent modification of the ruling at the conclusion of the
proceeding would be an inadequate remedy; or
(4) Subsequent modification of the ruling would cause unusual delay
or expense.
(d) Suspension of proceeding. Neither a request for interlocutory
review nor any disposition of such a request by the Board of Directors
under this section suspends or stays the proceeding unless otherwise
ordered by the presiding officer or the Board of Directors.
Sec. 908.51 Summary disposition.
(a) In general. The presiding officer shall recommend that the Board
of Directors issue a final order granting a motion for summary
disposition if the undisputed pleaded facts, admissions, affidavits,
stipulations, documentary evidence, matters as to which official notice
may be taken and any other evidentiary materials properly submitted in
connection with a motion for summary disposition show that--
(1) There is no genuine issue as to any material fact; and
(2) The movant is entitled to a decision in its favor as a matter of
law.
(b) Filing of motions and responses. (1) Any party who believes
there is no genuine issue of material fact to be determined and that
such party is entitled to a decision as a matter of law may move at any
time for summary disposition in its favor of all or any part of the
proceeding. Any party, within twenty (20) days after service of such
motion or within such time period as allowed by the presiding officer,
may file a response to such motion.
(2) A motion for summary disposition must be accompanied by a
statement of material facts as to which the movant contends there is no
genuine issue. Such motion must be supported by documentary evidence,
which may take the form of admissions in pleadings, stipulations,
written interrogatory responses, depositions, investigatory depositions,
transcripts, affidavits and any other evidentiary materials that the
movant contends support its position. The motion must also be
accompanied by a brief containing the points and authorities in support
of the contention of the movant. Any party opposing a motion for summary
disposition must file a statement setting forth those material facts as
to which such party contends a genuine dispute exists. Such opposition
must be supported by evidence of the same type as that submitted with
the motion for summary disposition and a brief containing the points and
authorities in support of the contention that summary disposition would
be inappropriate.
(c) Hearing on motion. At the request of any party or on his own
motion, the presiding officer may hear oral argument on the motion for
summary disposition.
(d) Decision on motion. Following receipt of a motion for summary
disposition and all responses thereto, the presiding officer shall
determine whether the movant is entitled to summary disposition. If the
presiding officer finds that the moving party is not entitled to summary
disposition, the presiding officer shall make a ruling denying the
motion. If the presiding officer determines that summary disposition is
warranted, the presiding officer shall submit a recommended decision to
that effect to the Board of Directors under Sec. 908.63.
Sec. 908.52 Partial summary disposition.
If the presiding officer determines that a party is entitled to
summary disposition as to certain claims only, he or she shall defer
submitting a recommended decision to the Board of Directors as to those
claims. A hearing on the remaining issues must be ordered. Those claims
for which the presiding officer has determined that summary disposition
is warranted will be addressed in the recommended decision filed at the
conclusion of the hearing.
[[Page 43]]
Sec. 908.53 Scheduling and prehearing conferences.
(a) Scheduling conference. Within thirty (30) days of service of the
notice or order commencing a proceeding or at such other time as the
parties may agree, the presiding officer shall direct representatives
for all parties to meet with him or her in person at a specified time
and place prior to the hearing or to confer by telephone for the purpose
of scheduling the course and conduct of the proceeding. This meeting or
telephone conference is called a ``scheduling conference.'' The
identification of potential witnesses, the time for and manner of
discovery and the exchange of any pre-hearing materials including
witness lists, statements of issues, stipulations, exhibits and any
other materials may also be determined at the scheduling conference.
(b) Pre-hearing conference. The presiding officer may, in addition
to the scheduling conference, on his own motion or at the request of any
party, direct representatives for the parties to meet with him (in
person or by telephone) at a pre-hearing conference to address any or
all of the following:
(1) Simplification and clarification of the issues;
(2) Stipulations, admissions of fact and the contents, authenticity
and admissibility into evidence of documents;
(3) Matters of which official notice may be taken;
(4) Limitation of the number of witnesses;
(5) Summary disposition of any or all issues;
(6) Resolution of discovery issues or disputes;
(7) Amendments to pleadings; and
(8) Such other matters as may aid in the orderly disposition of the
proceeding.
(c) Transcript. The presiding officer, in his discretion, may
require that a scheduling or prehearing conference be recorded by a
court reporter. A transcript of the conference and any materials filed,
including orders, becomes part of the record of the proceeding. A party
may obtain a copy of the transcript at such party's expense.
(d) Scheduling or pre-hearing orders. Within a reasonable time
following the conclusion of the scheduling conference or any pre-hearing
conference, the presiding officer shall serve on each party an order
setting forth any agreements reached and any procedural determinations.
Sec. 908.54 Pre-hearing submissions.
(a) Service deadline. Within the time set by the presiding officer,
but in no case later than 10 (ten) days before the start of the hearing,
each party shall serve on every other party the serving party's:
(1) Pre-hearing statement;
(2) Final list of witnesses to be called to testify at the hearing,
including name and address of each witness and a short summary of the
expected testimony of each witness;
(3) List of the exhibits to be introduced at the hearing along with
a copy of each exhibit; and
(4) Stipulations of fact, if any.
(b) Effect of failure to comply. No witness may testify and no
exhibits may be introduced at the hearing if such witness or exhibit is
not listed in the pre-hearing submissions pursuant to paragraph (a) of
this section, except for good cause shown.
Sec. 908.55 Hearing subpoenas.
(a) Issuance. (1) Upon application of a party showing general
materiality or relevance and reasonableness of scope of the testimony or
other evidence sought, the presiding officer may issue a subpoena or a
subpoena duces tecum requiring the attendance of a witness at the
hearing or the production of documentary or physical evidence at such
hearing. The application for a hearing subpoena must also contain a
proposed subpoena specifying the attendance of a witness or the
production of evidence from any State, commonwealth, possession,
territory of the United States, or the District of Columbia, or as
otherwise provided by law at any designated place where the hearing is
being conducted. The party making the application shall serve a copy of
the application and the proposed subpoena on every other party.
(2) A party may apply for a hearing subpoena at any time before the
commencement of or during a hearing. During a hearing, a party may make
an
[[Page 44]]
application for a subpoena orally on the record before the presiding
officer.
(3) The presiding officer shall promptly issue any hearing subpoena
applied for under this section; except that, if the presiding officer
determines that the application does not set forth a valid basis for the
issuance of the subpoena, or that any of its terms are unreasonable,
oppressive, excessive in scope, or unduly burdensome, he may refuse to
issue the subpoena or may issue the subpoena in a modified form upon any
conditions consistent with this subpart. Upon issuance by the presiding
officer, the party making the application shall serve the subpoena on
the person named in the subpoena and on each party.
(b) Motion to quash or modify. (1) Any person to whom a hearing
subpoena is directed or any party may file a motion to quash or modify
such subpoena, accompanied by a statement of the basis for quashing or
modifying the subpoena. The movant must serve the motion on each party
and on the person named in the subpoena. Any party may respond to the
motion within ten days of service of the motion.
(2) Any motion to quash or modify a hearing subpoena must be filed
prior to the time specified in the subpoena for compliance, but no more
than ten days after the date of service of the subpoena upon the movant.
(c) Enforcing subpoenas. If a subpoenaed person fails to comply with
any subpoena issued pursuant to this section or any order of the
presiding officer that directs compliance with all or any portion of a
hearing subpoena, the subpoenaing party or any other aggrieved party may
seek enforcement of the subpoena pursuant to Sec. 908.8(c). A party's
right to seek court enforcement of a hearing subpoena shall in no way
limit the sanctions that may be imposed by the presiding officer on a
party who fails, or induces a failure, to comply with any subpoena
issued under this section.
Sec. Sec. 908.56-908.59 [Reserved]
Subpart E_Hearing and Post-hearing Proceedings
Sec. 908.60 Conduct of hearings.
(a) General rules--(1) Hearings. Hearings shall be conducted in
accordance with chapter 5 of Title 5 of the United States Code (5 U.S.C.
501-559) and other applicable law, so as to provide a fair and
expeditious presentation of the relevant disputed issues. Except as
limited by this subpart, each party has the right to present its case or
defense by oral and documentary evidence and to conduct such cross-
examination of witnesses as may be required for full disclosure of the
facts.
(2) Order of hearing. The Finance Board shall present its case-in-
chief first, unless otherwise ordered by the presiding officer or unless
otherwise expressly specified by law or regulation. The Finance Board
shall be the first party to present an opening statement and a closing
statement and may make a rebuttal statement after the respondent's
closing statement. If there are multiple respondents, respondents may
agree among themselves as to their order or presentation of their cases,
but if they do not agree, the presiding officer shall fix the order.
(3) Examination of witnesses. Only one representative for each party
may conduct an examination of a witness, except that in the case of
extensive direct examination, the presiding officer may permit more than
one representative for the party presenting the witness to conduct the
examination. A party may have one representative conduct the direct
examination and another representative conduct re-direct examination of
a witness, or may have one representative conduct the cross examination
of a witness and another representative conduct the re-cross examination
of a witness.
(4) Stipulations. Unless the presiding officer directs otherwise,
all documents that the parties have stipulated as admissible shall be
admitted into evidence upon commencement of the hearing.
(b) Transcript. The hearing shall be recorded and transcribed. The
transcript shall be made available to any
[[Page 45]]
party upon payment of the cost thereof. The presiding officer shall have
authority to order the record corrected, either upon motion to correct,
upon stipulation of the parties, or following notice to the parties upon
the presiding officer's own motion.
Sec. 908.61 Evidence.
(a) Admissibility. (1) Except as is otherwise set forth in this
section, relevant, material and reliable evidence that is not unduly
repetitive is admissible to the fullest extent authorized by the
Administrative Procedure Act (5 U.S.C. 551-559) and other applicable
law.
(2) Evidence that would be admissible under the Federal Rules of
Evidence (see generally, 28 U.S.C.) is admissible in a proceeding
conducted pursuant to this subpart.
(3) The presiding officer may admit evidence, which otherwise would
be inadmissible under the Federal Rules of Evidence (28 U.S.C.), upon a
finding made on the record that the evidence is relevant, material,
probative and reliable, and would not prejudice the rights of or cause
an undue burden to any party to the proceeding.
(b) Official notice. (1) Official notice may be taken of any
material fact that may be judicially noticed by a United States district
court and any material information in the official public records of any
Federal or State government agency.
(2) All matters officially noticed by the presiding officer or the
Finance Board shall appear on the record.
(3) If official notice is requested of any material fact, the
parties, upon timely request, shall be afforded an opportunity to
object.
(c) Documents. (1) A duplicate copy of a document is admissible to
the same extent as the original, unless a genuine issue is raised as to
whether the copy is in some material respect not a true and legible copy
of the original.
(2) Subject to the requirements of paragraph (a)(1) of this section,
any document, including a report of examination, oversight activity,
inspection, or visitation, prepared by the Finance Board or by another
Federal or State financial institutions regulatory agency is admissible
either with or without a sponsoring witness.
(3) Witnesses may use existing or newly created charts, exhibits,
calendars, calculations, outlines, or other graphic material to
summarize, illustrate, or simplify the presentation of testimony. Such
materials may, subject to the presiding officer's discretion, be used
with or without being admitted into evidence.
(d) Objections. (1) Objections to the admissibility of evidence must
be timely made and rulings on all objections must appear in the record.
(2) When an objection to a question or line of questioning is
sustained, the examining representative of record may make a specific
proffer on the record of what he expected to prove by the expected
testimony of the witness. The proffer may be by representation of the
representative or by direct interrogation of the witness.
(3) The presiding officer shall retain rejected exhibits, adequately
marked for identification, for the record and transmit such exhibits to
the Board of Directors.
(4) Failure to object to admission of evidence or to any evidentiary
ruling constitutes a waiver of the objection.
(e) Stipulations. The parties may stipulate as to any relevant
matters of fact or the authentication of any relevant documents. Such
stipulations must be received in evidence at a hearing and are binding
on the parties with respect to the matters therein stipulated.
(f) Depositions of unavailable witnesses. (1) If a witness is
unavailable to testify at a hearing and that witness has testified in a
deposition in accordance with Sec. 908.49, a party may offer as
evidence all or any part of the transcript of the deposition, including
deposition exhibits, if any.
(2) Such deposition transcript is admissible to the same extent that
testimony would have been admissible had that person testified at the
hearing, provided that if a witness refused to answer proper questions
during the depositions, the presiding officer may, on that basis, limit
the admissibility of the deposition in any manner that justice requires.
[[Page 46]]
(3) Only those portions of a deposition received in evidence at the
hearing constitute a part of the record.
[67 FR 9903, Mar. 5, 2002; 67 FR 34990, May 16, 2002]
Sec. 908.62 Post-hearing filings.
(a) Proposed findings and conclusions and supporting briefs. (1)
Using the same method of service for each party, the presiding officer
shall serve notice upon each party that the certified transcript,
together with all hearing exhibits and exhibits introduced but not
admitted into evidence at the hearing, has been filed. Any party may
file with the presiding officer proposed findings of fact, proposed
conclusions of law and a proposed order within thirty (30) days after
the parties have received notice that the transcript has been filed with
the presiding officer, unless otherwise ordered by the presiding
officer.
(2) Proposed findings and conclusions must be supported by citation
to any relevant authorities and by page references to any relevant
portions of the record. A post-hearing brief may be filed in support of
proposed findings and conclusions, either as part of the same document
or in a separate document.
(3) Any party is deemed to have waived any issue not raised in
proposed findings or conclusions timely filed by that party.
(b) Reply briefs. Reply briefs may be filed within fifteen (15) days
after the date on which the parties' proposed findings and conclusions
and proposed order are due. Reply briefs must be limited strictly to
responding to new matters, issues, or arguments raised in another
party's papers. A party who has not filed proposed findings of fact and
conclusions of law or a post-hearing brief shall not file a reply brief.
(c) Simultaneous filing required. The presiding officer shall not
order the filing by any party of any brief or reply brief supporting
proposed findings and conclusions in advance of the other party's filing
of its brief.
Sec. 908.63 Recommended decision and filing of record.
(a) Filing of recommended decision and record. Within forty-five
(45) days after expiration of the time allowed for filing reply briefs
under Sec. 908.62(b), the presiding officer shall file with and certify
to the Board of Directors, for decision, the record of the proceeding.
The record must include the presiding officer's recommended decision,
recommended findings of fact and conclusions of law, and proposed order;
all pre-hearing and hearing transcripts, exhibits and rulings; and the
motions, briefs, memoranda and other supporting papers filed in
connection with the hearing. The presiding officer shall serve upon each
party the recommended decision, recommended findings and conclusions,
and proposed order.
(b) Filing of index. At the same time the presiding officer files
with and certifies to the Board of Directors, for final determination,
the record of the proceeding, the presiding officer shall furnish to the
Board of Directors a certified index of the entire record of the
proceeding. The certified index shall include, at a minimum, an entry
for each paper, document or motion filed with the presiding officer in
the proceeding, the date of the filing, and the identity of the filer.
The certified index shall also include an exhibit index containing, at a
minimum, an entry consisting of exhibit number and title or description
for each exhibit introduced and admitted into evidence at the hearing;
each exhibit introduced but not admitted into evidence at the hearing;
each exhibit introduced and admitted into evidence after the completion
of the hearing; and each exhibit introduced but not admitted into
evidence after the completion of the hearing.
Sec. 908.64 Exceptions to recommended decision.
(a) Filing exceptions. Within thirty (30) days after service of the
recommended decision, recommended findings and conclusions, and proposed
order under Sec. 908.63, a party may file with the Finance Board
written exceptions to the presiding officer's recommended decision,
recommended findings and conclusions, or proposed order; to the
admission or exclusion of evidence; or to the failure of the presiding
officer to make a ruling proposed by a party. A supporting brief
[[Page 47]]
may be filed at the time the exceptions are filed, either as part of the
same document or in a separate document.
(b) Effect of failure to file or raise exceptions. (1) Failure of a
party to file exceptions to those matters specified in paragraph (a) of
this section within the time prescribed is deemed a waiver of objection
thereto.
(2) No exception need be considered by the Board of Directors if the
party taking exception had an opportunity to raise the same objection,
issue, or argument before the presiding officer and failed to do so.
(c) Contents. (1) All exceptions and briefs in support of such
exceptions must be confined to the particular matters in or omissions
from the presiding officer's recommendations to which that party takes
exception.
(2) All exceptions and briefs in support of exceptions must set
forth page or paragraph references to the specific parts of the
presiding officer's recommendations to which exception is taken, the
page or paragraph references to those portions of the record relied upon
to support each exception and the legal authority relied upon to support
each exception. Exceptions and briefs in support shall not exceed a
total of 30 pages, except by leave of the Finance Board on motion.
(3) Each party may submit one reply brief within ten (10) days of
service of exceptions and briefs in support of exceptions. Reply briefs
shall not exceed 15 pages, except by leave of the Finance Board on
motion.
Sec. 908.65 Review by Board of Directors.
(a) Notice of submission to the Board of Directors. When the Board
of Directors determines that the record in the proceeding is complete,
the Finance Board shall serve notice upon the parties that the
proceeding has been submitted to the Board of Directors for final
decision and order in accordance with this section.
(b) Oral argument before the Board of Directors. Upon the initiative
of the Board of Directors or on the written request of any party filed
with the Board of Directors within the time for filing exceptions under
Sec. 908.64, the Board of Directors may order and hear oral argument on
the recommended findings, conclusions, decision and order of the
presiding officer. A written request by a party must show good cause for
oral argument and state reasons why arguments cannot be presented
adequately in writing. A denial of a request for oral argument may be
set forth in the Board of Directors' final decision and order. Oral
argument before the Board of Directors must be transcribed.
(c) Board of Directors' final decision and order. (1) Decisional
employees may advise and assist the Board of Directors in the
consideration and disposition of the case, and in the preparation of the
final decision and order. The final decision and order of the Board of
Directors will be based upon review of the entire record of the
proceeding, except that the Board of Directors may limit the issues to
be reviewed to those findings and conclusions to which opposing
arguments or exceptions have been filed by the parties in accordance
with this part.
(2) The Board of Directors shall render and issue a final decision
and order within ninety (90) days after notification of the parties that
the case has been submitted to the Board of Directors, unless the Board
of Directors orders that the action or any aspect thereof be remanded to
the presiding officer for further proceedings in accordance with
instructions as may be specified by the Board of Directors. Copies of
the final decision and order of the Board of Directors shall be served
upon each party to the proceeding and otherwise, as may be required by
the Board of Directors in accordance with applicable law.
Sec. 908.66 Exhaustion of administrative remedies.
To exhaust administrative remedies as to any issue on which a party
disagrees with the presiding officer's recommendations, a party must
file exceptions with the Board of Directors under Sec. 908.64. A party
must exhaust administrative remedies as a precondition to seeking
judicial review of any final decision and order, in whole or in part,
issued by the Board of Directors under Sec. 908.65.
[[Page 48]]
Sec. 908.67 Stay of final decision and order pending judicial review.
The commencement of proceedings for judicial review of all or part
of a final order issued by the Board of Directors in accordance with
Sec. 908.65, as provided in Sec. 908.10 may not, unless specifically
ordered by the Board of Directors or a reviewing court, operate as a
stay of any order issued by the Board of Directors. The Board of
Directors may, in its discretion and on such terms as it finds just,
stay the effectiveness of all or any part of an order of the Board of
Directors pending a final decision on a petition for judicial review of
that order.
Sec. Sec. 908.68-908.69 [Reserved]
Subpart F_Rules of Practice Before the Finance Board
Sec. 908.70 Scope.
This subpart contains rules governing practice by parties or their
representatives in any proceeding before the Finance Board. In
particular, these rules of practice shall apply to any appearances
before the Board of Directors under this part or part 907 of this
chapter. This subpart also shall govern the imposition of sanctions by
the Finance Board or a presiding officer against parties or their
representatives in a hearing under this part or a proceeding under part
907 of this chapter. In the sole discretion of the Finance Board,
Sec. Sec. 908.74 and 908.75 may be applied to persons who appear in a
representational capacity in any hearing under this part or any
proceeding under part 907 of this chapter, or in any other matter that
involves contacting the Finance Board as a principal or agent with
respect to asserting the rights, privileges, or liabilities of an
individual or entity, including presentations to or communications with
the Board of Directors or any member of the Board of Directors. This
representation includes, but is not limited to, the practice of
attorneys and accountants. Employees of the Finance Board are not
subject to disciplinary proceedings under this subpart.
Sec. 908.71 Practice before the Finance Board.
Practice before the Finance Board for the purposes of this subpart,
includes, but is not limited to, transacting any business with the
Finance Board as counsel, representative or agent for any other person,
unless the Finance Board orders otherwise. Practice before the Finance
Board also includes the preparation of any statement, opinion, or other
paper by a counsel, representative or agent that is filed with the
Finance Board in any request, certification, notification, application,
report, or other document, with the consent of such counsel,
representative or agent. Practice before the Finance Board does not
include work prepared for a Bank solely at the request of the Bank for
use in the ordinary course of its business.
Sec. 908.72 Appearances and practice in proceedings before the Finance Board.
(a) Appearances in proceedings before the Finance Board--(1) By
attorneys. A party may be represented by an attorney who is a member in
good standing of the bar of the highest court of any State,
commonwealth, possession, territory of the United States, or the
District of Columbia and who is not currently suspended or disbarred
from practice before the Finance Board.
(2) By non-attorneys. An individual may appear on his own behalf. A
member of a partnership may represent the partnership and a duly
authorized officer, board of director member, employee, or other agent
of any corporation or other entity not specifically listed herein may
represent such corporation or other entity; provided that such officer,
board of director member, employee, or other agent is not currently
suspended or disbarred from practice before the Finance Board. A duly
authorized officer or employee of any Government unit, agency, or
authority may represent that unit, agency, or authority.
(b) Notice of appearance. Any person appearing in a representative
capacity on behalf of a party, including the Finance Board, shall
execute and file a notice of appearance with the presiding
[[Page 49]]
officer at or before the time such person submits papers or otherwise
appears on behalf of a party in a hearing under this part. Such notice
of appearance shall include a written declaration that the individual is
currently qualified as provided in paragraphs (a)(1) or (a)(2) of this
section and is authorized to represent the particular party. By filing a
notice of appearance on behalf of a party in a hearing under this part,
the representative thereby agrees and represents that he is authorized
to accept service on behalf of the represented party and that, in the
event of withdrawal from representation, he or she will, if required by
the presiding officer, continue to accept service until a new
representative has filed a notice of appearance or until the represented
party indicates that he or she will proceed on a pro se basis. Unless
the representative filing the notice is an attorney, the notice of
appearance shall also be executed by the person represented or, if the
person is not an individual, by the chief executive officer, or duly
authorized officer of that person.
Sec. 908.73 Conflicts of interest.
(a) Conflict of interest in representation. No representative shall
represent another person in an adjudicatory proceeding if it reasonably
appears that such representation may be limited materially by that
representative's responsibilities to a third person or by that
representative's own interests. The presiding officer may take
corrective measures at any stage of a proceeding to cure a conflict of
interest in representation, including the issuance of an order limiting
the scope of representation or disqualifying an individual from
appearing in a representative capacity for the duration of the
proceeding.
(b) Certification and waiver. If any person appearing as counsel or
other representative represents two or more parties in a proceeding
under this part or also represents a nonparty on a matter relevant to an
issue in the proceeding, that representative must certify in writing at
the time of filing the notice of appearance required by Sec. 908.72:
(1) That the representative has personally and fully discussed the
possibility of conflicts of interest with each such party and nonparty;
(2) That each such party and nonparty waives any right it might
otherwise have had to assert any known conflicts of interest or to
assert any non-material conflicts of interest during the course of the
proceeding.
Sec. 908.74 Sanctions.
(a) General rule. Appropriate sanctions may be imposed during the
course of any proceeding when any party or representative of record has
acted or failed to act in a manner required by applicable statute,
regulation, or order, and that act or failure to act--
(1) Constitutes contemptuous conduct. Contemptuous conduct includes
dilatory, obstructionist, egregious, contumacious, unethical, or other
improper conduct at any phase of any proceeding, hearing, or appearance
before the Board of Directors;
(2) Has caused some other party material and substantive injury,
including, but not limited to, incurring expenses including attorney's
fees or experiencing prejudicial delay;
(3) Is a clear and unexcused violation of an applicable statute,
regulation, or order; or
(4) Has delayed the proceeding unduly.
(b) Sanctions. Sanctions that may be imposed include, but are not
limited to, any one or more of the following:
(1) Issuing an order against a party;
(2) Rejecting or striking any testimony or documentary evidence
offered, or other papers filed, by the party;
(3) Precluding the party from contesting specific issues or
findings;
(4) Precluding the party from offering certain evidence or from
challenging or contesting certain evidence offered by another party;
(5) Precluding the party from making a late filing or conditioning a
late filing on any terms that may be just; or
(6) Assessing reasonable expenses, including attorney's fees,
incurred by any other party as a result of the improper action or
failure to act.
(c) Procedure for imposition of sanctions. (1) The presiding
officer, on the
[[Page 50]]
motion of any party, or on his own motion, and after such notice and
responses as may be directed by the presiding officer, may impose any
sanction authorized by this section. The presiding officer shall submit
to the Board of Directors for final ruling any sanction that would
result in a final order that terminates the case on the merits or is
otherwise dispositive of the case.
(2) Except as provided in paragraph (d) of this section, no sanction
authorized by this section, other than refusing to accept late papers,
shall be imposed without prior notice to all parties and an opportunity
for any representative or party against whom sanctions would be imposed
to be heard. The presiding officer shall determine and direct the
appropriate notice and form for such opportunity to be heard. The
opportunity to be heard may be limited to an opportunity to respond
verbally immediately after the act or inaction in question is noted by
the presiding officer.
(3) For purposes of interlocutory review, motions for the imposition
of sanctions by any party and the imposition of sanctions shall be
treated the same as motions for any other ruling by the presiding
officer.
(4) Nothing in this section shall be read to preclude the presiding
officer or the Finance Board from taking any other action or imposing
any other restriction or sanction authorized by any applicable statute
or regulation.
(d) Sanctions for contemptuous conduct. If, during the course of any
proceeding, a presiding officer finds any representative or any
individual representing himself to have engaged in contemptuous conduct,
the presiding officer may summarily suspend that individual from
participating in that or any related proceeding or impose any other
appropriate sanction.
Sec. 908.75 Censure, suspension, disbarment and reinstatement.
(a) Discretionary censure, suspension and disbarment. (1) The
Finance Board may censure any individual who practices or attempts to
practice before it or suspend or revoke the privilege to appear or
practice before the Finance Board of such individual if, after notice of
and opportunity for a hearing in the matter, that individual is found by
the Finance Board--
(i) Not to possess the requisite qualifications or competence to
represent others;
(ii) To be seriously lacking in character or integrity or to have
engaged in material unethical or improper professional conduct;
(iii) To have caused unfair and material injury or prejudice to
another party, such as prejudicial delay or unnecessary expenses
including attorney's fees;
(iv) To have engaged in, or aided and abetted, a material and
knowing violation of the Act or the rules or regulations issued under
the Act or any other law or regulation governing Bank operations;
(v) To have engaged in contemptuous conduct before the Finance
Board;
(vi) With intent to defraud in any manner, to have willfully and
knowingly deceived, misled, or threatened any client or prospective
client; or
(vii) Within the last ten years, to have been convicted of an
offense involving moral turpitude, dishonesty or breach of trust, if the
conviction has not been reversed on appeal. A conviction within the
meaning of this paragraph shall be deemed to have occurred when the
convicting court enters its judgment or order, regardless of whether an
appeal is pending or could be taken and includes a judgment or an order
on a plea of nolo contendere or on consent, regardless of whether a
violation is admitted in the consent.
(2) Suspension or revocation on the grounds set forth in paragraphs
(a)(1) (ii), (iii), (iv), (v), (vi) and (vii) of this section shall only
be ordered upon a further finding that the individual's conduct or
character was sufficiently egregious as to justify suspension or
revocation. Suspension or disbarment under this paragraph shall continue
until the applicant has been reinstated by the Finance Board for good
cause shown or until, in the case of a suspension, the suspension period
has expired.
(3) If the final order against the respondent is for censure, the
individual may be permitted to practice before the Finance Board, but
such individual's future representations may be
[[Page 51]]
subject to conditions designed to promote high standards of conduct. If
a written letter of censure is issued, a copy will be maintained in the
Finance Board's files.
(b) Mandatory suspension and disbarment. (1) Any counsel who has
been and remains suspended or disbarred by a court of the United States
or of any State, commonwealth, possession, territory of the United
States or the District of Columbia; any accountant or other licensed
expert whose license to practice has been revoked in any State,
commonwealth, possession, territory of the United States or the District
of Columbia; any person who has been and remains suspended or barred
from practice before the Department of Housing and Urban Development,
the Office of the Comptroller of the Currency, the Board of Governors of
the Federal Reserve System, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation, the National Credit Union
Administration, the Office of Federal Housing Enterprise Oversight, the
Farm Credit Administration, the Securities and Exchange Commission, or
the Commodity Futures Trading Commission is also suspended automatically
from appearing or practicing before the Finance Board. A disbarment or
suspension within the meaning of this paragraph shall be deemed to have
occurred when the disbarring or suspending agency or tribunal enters its
judgment or order, regardless of whether an appeal is pending or could
be taken and regardless of whether a violation is admitted in the
consent.
(2) A suspension or disbarment from practice before the Finance
Board under paragraph (b)(1) of this section shall continue until the
person suspended or disbarred is reinstated under paragraph (d)(2) of
this section.
(c) Notices to be filed. (1) Any individual appearing or practicing
before Finance Board who is the subject of an order, judgment, decree,
or finding of the types set forth in paragraph (b)(1) of this section
shall file promptly with the Finance Board a copy thereof, together with
any related opinion or statement of the agency or tribunal involved.
(2) Any individual appearing or practicing before the Finance Board
who is or within the last ten years has been convicted of a felony or of
a misdemeanor that resulted in a sentence of prison term or in a fine or
restitution order totaling more than $5,000 shall file a notice promptly
with the Finance Board. The notice shall include a copy of the order
imposing the sentence or fine, together with any related opinion or
statement of the court involved.
(d) Reinstatement. (1) Unless otherwise ordered by the Finance
Board, an application for reinstatement for good cause may be made in
writing by a person suspended or disbarred under paragraph (a)(1) of
this section at any time more than three years after the effective date
of the suspension or disbarment and, thereafter, at any time more than
one year after the person's most recent application for reinstatement.
An applicant for reinstatement under this paragraph (d)(1) may, in the
Finance Board's sole discretion, be afforded a hearing.
(2) An application for reinstatement for good cause by any person
suspended or disbarred under paragraph (b)(1) of this section may be
filed at any time, but not less than one (1) year after the applicant's
most recent application. An applicant for reinstatement for good cause
under this paragraph (d)(2) may, in the Finance Board's sole discretion,
be afforded a hearing. However, if all the grounds for suspension or
disbarment under paragraph (b)(1) of this section have been removed by a
reversal of the order of suspension or disbarment or by termination of
the underlying suspension or disbarment, any person suspended or
disbarred under paragraph (b)(1) of this section may apply immediately
for reinstatement and shall be reinstated upon written application
notifying the Finance Board that the grounds have been removed.
(e) Conferences. (1) The Finance Board may confer with a proposed
respondent concerning allegations of misconduct or other grounds for
censure, disbarment or suspension, regardless of whether a proceeding
for censure, disbarment or suspension has been commenced. If a
conference results in a stipulation in connection with a proceeding in
which the individual is the
[[Page 52]]
respondent, the stipulation may be entered in the record at the request
of either party to the proceeding.
(2) Resignation or voluntary suspension. In order to avoid the
institution of or a decision in a disbarment or suspension proceeding, a
person who practices before the Finance Board may consent to censure,
suspension or disbarment from practice. At the discretion of the Finance
Board, the individual may be censured, suspended or disbarred in
accordance with the consent offered.
(f) Hearings under this section. Hearings conducted under this
section shall be conducted in substantially the same manner as other
hearings under this part, provided that in proceedings to terminate an
existing suspension or disbarment order, the person seeking the
termination of the order shall bear the burden of going forward with an
application supported with proof that the suspension should be
terminated. The Finance Board may, in its sole discretion, direct that
any proceeding to terminate an existing suspension or disbarment be
limited to written submissions. All hearings held under this section
shall be closed to the public unless the Finance Board, on its own
motion or upon the request of a party, otherwise directs that the
hearing be open to the public.
PART 911_AVAILABILITY OF UNPUBLISHED INFORMATION--Table of Contents
Sec.
911.1 Definitions.
911.2 Purpose and scope.
911.3 Prohibition on unauthorized use and disclosure of unpublished
information.
911.4 Requests for unpublished information by document or testimony.
911.5 Consideration of requests.
911.6 Persons and entities with access to unpublished information.
911.7 Availability of unpublished information by testimony.
911.8 Availability of unpublished information by document.
911.9 Fees.
Authority: 5 U.S.C. 301; 12 U.S.C. 1422b(a)(1).
Source: 64 FR 44106, Aug. 13, 1999, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Sec. 911.1 Definitions.
As used in this part:
Legal proceeding means any administrative, civil, or criminal
proceeding, including a grand jury or discovery proceeding, in which
neither the Finance Board nor the United States is a party.
Supervised entity means a Bank, the Office of Finance, and the
Financing Corporation.
Unpublished information means information and documents created or
obtained by the Finance Board in connection with the performance of
official duties, whether the information or documents are in the
possession of the Finance Board, a current or former Finance Board
employee or agent, a supervised entity, a Bank member, government
agency, or some other person or entity; and information and documents
created or obtained by, or in the memory of, a current or former Finance
Board employee or agent, that was acquired in the person's official
capacity or in the course of performing official duties. It does not
include information or documents the Finance Board must disclose under
the Freedom of Information Act (5 U.S.C. 552), Privacy Act (5 U.S.C.
552a), or the Finance Board's implementing regulations (12 CFR parts 910
and 913, respectively). It also does not include information or
documents that were previously published or disclosed or are customarily
furnished to the public in the course of the performance of official
duties such as the annual report the Finance Board submits to Congress
pursuant to section 2B(d) of the Act (12 U.S.C. 1422b(d)), press
releases, Finance Board forms, and materials published in the Federal
Register.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Sec. 911.2 Purpose and scope.
(a) Purpose. The purposes of this part are to:
(1) Maintain the confidentiality and control the dissemination of
unpublished information;
[[Page 53]]
(2) Conserve the time of employees for official duties and ensure
that Finance Board resources are used in the most efficient manner;
(3) Maintain the Finance Board's impartiality among private
litigants; and
(4) Establish an orderly mechanism for the Finance Board to process
expeditiously and respond appropriately to requests for unpublished
information.
(b) Scope. (1) This part applies to a request for and use and
disclosure of unpublished information, including a request for
unpublished information by document or testimony arising out of a legal
proceeding in which neither the Finance Board nor the United States is a
party. It does not apply to a request for unpublished information in a
legal proceeding in which the Finance Board or the United States is a
party or a request for information or records the Finance Board must
disclose under the Freedom of Information Act, Privacy Act, or the
Finance Board's implementing regulations.
(2) This part does not, and may not be relied upon to create any
substantive or procedural right or benefit enforceable against the
Finance Board.
Sec. 911.3 Prohibition on unauthorized use and disclosure of unpublished information.
(a) In general. Possession or control by any person, supervised
entity, Bank member, government agency, or other entity of unpublished
information does not constitute a waiver by the Finance Board of any
privilege or its right to control, supervise, or impose limitations on,
the subsequent use and disclosure of the information.
(b) Current and former employees and agents. Except as authorized by
this part or otherwise by the Finance Board, no current or former
Finance Board employee or agent may disclose or permit the disclosure in
any manner of any unpublished information to anyone other than a Finance
Board employee or agent for use in the performance of official duties.
(c) Other persons or entities possessing unpublished information.
(1) Except as authorized in writing by the Finance Board, no person,
supervised entity, Bank member, government agency, or other entity in
possession or control of unpublished information may disclose or permit
the use or disclosure of such information in any manner or for any
purpose.
(2) All unpublished information made available under this part
remains the property of the Finance Board and may not be used or
disclosed for any purpose other than that authorized under this part
without the prior written permission of the Finance Board.
(3) Reports of examination, supervisory correspondence, and other
unpublished information lawfully in the possession of a supervised
entity, Bank member, or government agency remains the property of the
Finance Board and may not be used or disclosed for any purpose other
than that authorized under this part without the prior written
permission of the Finance Board.
(4) Any person or entity that discloses or uses unpublished
information except as expressly authorized under this part may be
subject to the penalties provided in 18 U.S.C. 641 and other applicable
laws. A current Finance Board, Bank, or Office of Finance employee also
may be subject to administrative or disciplinary proceedings.
(d) Exception for supervised entities and Bank members. When
necessary or appropriate for business purposes, a supervised entity,
Bank member, or any director, officer, employee, or agent thereof, may
disclose unpublished information, including information contained in, or
related to, supervisory correspondence or reports of examination, to a
person or entity officially connected with the supervised entity or Bank
member as officer, director, employee, attorney, agent, auditor, or
independent auditor. A supervised entity, Bank member, or a director,
officer, employee, or agent thereof, also may disclose unpublished
information to a consultant under this paragraph if the consultant is
under a written contract to provide services to the supervised entity or
Bank member and the consultant has agreed in writing:
(1) To abide by the prohibition on the disclosure of unpublished
information contained in this section; and
(2) That it will not to use the unpublished information for any
purposes
[[Page 54]]
other than those stated in its contract to provide services to the
supervised entity or Bank member.
(e) Government agencies. The Finance Board may make reports of
examination, supervisory correspondence, and other unpublished
information available to another federal agency or a state agency for
use where necessary in the performance of the agency's official duties.
As used in this paragraph, the term agency does not include a grand
jury.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000; 67
FR 12844, Mar. 20, 2002]
Sec. 911.4 Requests for unpublished information by document or testimony.
(a) Form of requests. A request for unpublished information must be
submitted to the Finance Board in writing and include a detailed
description of the basis for the request. At a minimum, the request must
demonstrate that:
(1) The requested information is highly relevant to the purpose for
which it is sought;
(2) The requested information is not available from any other
source;
(3) The need for the information clearly outweighs the need to
maintain its confidentiality; and
(4) The need for the information clearly outweighs the burden on the
Finance Board to produce it.
(b) Requests for documents. If the request is for unpublished
information by document, the request must include the elements in
paragraph (a) of this section and also must adequately describe the
record or records sought by type and date.
(c) Requests for testimony. (1) If the request is for unpublished
information by testimony, the request must include the elements in
paragraph (a) of this section and also must set forth the intended use
of the testimony, a summary of the scope of the testimony requested, and
a showing that no document or the testimony of other non-Finance Board
persons, including retained experts, could be provided and used in lieu
of the testimony.
(2) Upon submitting a request to the Finance Board for unpublished
information by testimony, the requester must notify all other parties to
the matter at issue of the request.
(3) After receipt of a request for unpublished information by
testimony but before the requested testimony occurs, a party to the
matter at issue who did not join in the request and who wishes to
question the witness beyond the scope of the testimony sought by the
request, must timely submit its own request for unpublished information
pursuant to this part.
(d) Requests in connection with legal proceedings. If the request
for unpublished information arises out of a legal proceeding, the
Finance Board generally will require that the legal proceeding already
be filed before it will consider the request. In addition to the
elements in paragraph (a) of this section, requests in connection with
legal proceedings must include the caption and docket number of the
case; the forum; the name, address, phone number, and electronic mail
address, if available, of counsel to all other parties to the legal
proceeding; the requester's interest in the case; a summary of the
issues in litigation; and the reasons for the request, including the
relevance of the unpublished information and how the requested
information will contribute substantially to the resolution of one or
more specifically identified issues in the legal proceeding.
(e) Expedited requests. If a requester seeks a response in less than
60 days, the request must explain why the request was not submitted
earlier and why the Finance Board should expedite the request.
(f) Where to submit requests. Send requests for unpublished
information to the Office of General Counsel, Federal Housing Finance
Board, 1777 F Street, NW., Washington, DC 20006.
(g) Additional information--(1) From the requester. The Office of
General Counsel may consult with the requester to refine and limit the
scope of the request to make compliance less burdensome or to obtain
information necessary to make an informed determination on the request.
A requester's failure to cooperate in good faith with the Office of
General Counsel may serve as the basis for a determination not to grant
the request.
[[Page 55]]
(2) From others. The Office of General Counsel may inquire into the
facts and circumstances underlying a request for unpublished information
and rely on sources of information other than the requester, including
other parties to the matter at issue.
Sec. 911.5 Consideration of requests.
(a) Discretion. Each decision concerning the availability of
unpublished information is at the sole discretion of the Finance Board
based on a weighing of all appropriate factors. The decision is a final
agency action that exhausts administrative remedies for disclosure of
the information.
(b) Time to respond. The Finance Board generally will respond in
writing to a request for unpublished information within 60 days of
receipt absent exigent or unusual circumstances and dependent upon the
scope and completeness of the request.
(c) Factors the Finance Board may consider. The factors the Finance
Board may consider in making a determination regarding the availability
of unpublished information include:
(1) Whether and how the requested information is relevant to the
purpose for which it is sought;
(2) Whether information reasonably suited to the requester's needs
other than the requested information is available from another source;
(3) Whether the requested information is privileged;
(4) If the request is in connection with a legal proceeding, whether
the proceeding has been filed;
(5) The burden placed on the Finance Board to respond to the
request;
(6) Whether production of the information would be contrary to the
public interest; and
(7) Whether the need for the information clearly outweighs the need
to maintain the confidentiality of the information.
(d) Disclosure of unpublished information by others. When a person
or entity other than the Finance Board has a claim of privilege
regarding unpublished information and the information is in the
possession or control of that person or entity, the Finance Board, at
its sole discretion, may respond to a request for the information by
authorizing the person or entity to disclose the information to the
requester pursuant to an appropriate confidentiality order. Finance
Board authorization to disclose information under this paragraph does
not preclude the person or entity in possession of the unpublished
information from asserting its own privilege, arguing that the
information is not relevant, or asserting any other argument to protect
the information from disclosure.
(e) Notice to supervised entities and Bank members. The Finance
Board generally will notify a supervised entity or Bank member that it
is the subject of a request, unless the Finance Board, in its sole
discretion, determines that to do so would advantage or prejudice any of
the parties to the matter at issue.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]
Sec. 911.6 Persons and entities with access to unpublished information.
(a) Notice to Finance Board. Any person, including a current or
former Finance Board employee or agent, or any entity, including a
supervised entity, Bank member, or government agency that receives a
request for, or is served with a subpoena, order, or other legal process
to disclose unpublished information by document or testimony, must
immediately notify the Office of General Counsel.
(b) Response of person or entity served with request. Unless the
Finance Board has authorized in writing disclosure of the requested
information:
(1) A current or former Finance Board employee or agent or a
supervised entity that must respond to a subpoena, order, or other legal
process, must decline to disclose the requested information, citing this
part as authority.
(2) A non-Finance Board person or entity may not disclose
unpublished information unless:
(i) The requester has sought the information from the Finance Board
under this part; and
(ii) After the Finance Board or the Department of Justice has had
the opportunity to appear and oppose disclosure, a Federal court has
ordered the person or entity to disclose the information.
[[Page 56]]
(c) Finance Board response. If the Finance Board does not authorize
in writing disclosure of the requested information, the Finance Board
will provide a copy of this part to the person or entity at whose
instance the process was issued and advise that person or entity or the
court or other body that the Finance Board has prohibited disclosure of
the information under this part. The Finance Board or the Department of
Justice may intervene in the matter at issue, attempt to have the
compulsory process withdrawn, or register other appropriate objections.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]
Sec. 911.7 Availability of unpublished information by testimony.
(a) Scope. (1) The scope of permissible testimony is limited to that
set forth in the written authorization granted by the Finance Board. The
Finance Board may act to ensure that the scope of testimony provided is
consistent with the written authorization.
(2) A party to the matter at issue that did not join in a request
for unpublished information who wishes to question a witness beyond the
authorized scope must request expanded authorization under this part.
The Finance Board will attempt to render decisions on such requests in
an expedited manner.
(3) The Finance Board generally will not authorize a current
employee or agent to provide expert or opinion testimony for a private
party.
(b) Manner in which testimony is given. (1) The Finance Board
ordinarily will make the authorized testimony of a former or current
employee or agent available only through written interrogatories or
deposition. The Finance Board will not authorize testimony at a trial or
hearing unless the requester shows that properly developed deposition
testimony could not be used or would be inadequate at the trial or
hearing.
(2) If the Finance Board has authorized testimony in connection with
a legal proceeding, the requester must cause a subpoena to be served on
the employee in accordance with applicable rules of procedure, with a
copy by registered or certified mail to the Office of General Counsel.
(3) If the authorized testimony is through deposition, the
deposition ordinarily will take place at the Finance Board's offices at
a time that will avoid substantial interference with the performance of
the employee's official duties.
(4) The requester is responsible for all costs associated with an
employee's appearance, including provision of a copy of a transcript of
the deposition at the request of the Office of General Counsel. The
person whose deposition was transcribed does not waive his or her right
to review the transcript and note errors.
(c) Restrictions on use and disclosure. The Finance Board may
condition its authorization of deposition testimony on an agreement of
the parties to appropriate limitations, such as an agreement to keep the
transcript of the testimony under seal or to make the transcript
available only to the parties, the court or other body, or the jury.
Upon request made pursuant to this part or on its own initiative, the
Finance Board may authorize use of a deposition transcript in another
legal proceeding or non-adversarial matter.
(d) Responsibility of litigants. If the testimony is disclosed in
connection with a legal proceeding, the requester is responsible for:
(1) Promptly notifying all other parties to the legal proceeding of
the disclosure, and, after entry of a protective order, providing copies
of the testimony to the other parties who are signatories and subject to
the protective order; and
(2) At the conclusion of the legal proceeding, retrieving the
testimony from the court or other body's file as soon as it is no longer
required and certifying to the Finance Board that every party covered by
the protective order has destroyed the unpublished information.
Sec. 911.8 Availability of unpublished information by document.
(a) Scope. The scope of permissible document disclosure is limited
to that set forth in the written authorization granted by the Finance
Board. The Finance Board may act to ensure that
[[Page 57]]
the scope of documents provided is consistent with the written
authorization.
(b) Restrictions on use and disclosure. The Finance Board may
condition a decision to disclose unpublished information by document on
entry of a protective order satisfactory to the Finance Board by the
court or other body presiding in a legal proceeding or, in non-
adversarial matters, on a written agreement of confidentiality that
limits access of third parties to the unpublished information. In a
legal proceeding in which a protective order already has been entered,
the Finance Board may condition a decision to disclose unpublished
information upon inclusion of additional or amended provisions in the
protective order. Upon request made pursuant to this part or on its own
initiative, the Finance Board may authorize use of the documents in
another legal proceeding or non-adversarial matter.
(c) Responsibility of litigants. If the documents are disclosed in
connection with a legal proceeding, the requester is responsible for:
(1) Promptly notifying all other parties to the legal proceeding of
the disclosure, and, after entry of a protective order, providing copies
of the documents to the other parties that are signatories and subject
to the protective order; and
(2) At the conclusion of the legal proceeding, retrieving the
documents from the court or other body's file as soon as they are no
longer required and certifying to the Finance Board that every party
covered by the protective order has destroyed the unpublished
information.
(d) Certification or authentication. If the Finance Board has
authorized disclosure of unpublished information by document, it will
provide certified or authenticated copies of the document upon request.
Sec. 911.9 Fees.
(a) Fees for records search, copying, and certification. Unless
waived or reduced, a requester must pay a fee to the Finance Board for
the costs of searching, copying, authenticating, or certifying
unpublished information in accordance with 12 CFR 910.9. The Office of
Resource Management generally will bill a requester upon completion of
the production, but, in certain instances, may require a requester to
remit payment prior to providing the requested information. To pay fees
assessed under this section, a requester must deliver to the Office of
Resource Management, located at the Federal Housing Finance Board, 1777
F Street, NW., Washington, DC 20006, a check or money order made payable
to the ``Federal Housing Finance Board.''
(b) Witness fees and mileage--(1) Current Finance Board or federal
employees. If the Finance Board authorizes disclosure of unpublished
information by testimony of a current Finance Board employee or agent or
a former Finance Board employee or agent who is still in the employ of
the United States, upon completion of the testimonial appearance the
requester must remit promptly to the Office of Resource Management
payment for witness fees and mileage computed in accordance with 28
U.S.C. 1821.
(2) Former employees or agents. If the Finance Board authorizes
disclosure of unpublished information by testimony of a former Finance
Board employee or agent who is not currently employed by the United
States, upon completion of the testimonial appearance the requester must
remit promptly to the witness any witness fees or mileage due in
accordance with 28 U.S.C. 1821.
[64 FR 44106, Aug. 13, 1999, as amended at 65 FR 8258, Feb. 18, 2000]
PART 912_INFORMATION REGARDING MEETINGS OF THE BOARD OF DIRECTORS OF THE FEDERAL HOUSING FINANCE BOARD--Table of Contents
Sec.
912.1 Definitions.
912.2 Purpose and scope.
912.3 Open meetings.
912.4 Closed meetings.
912.5 Procedures for closing meetings.
912.6 Notice of meetings.
Authority: 5 U.S.C. 552b.
Source: 58 FR 19202, Apr. 13, 1993, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
[[Page 58]]
Sec. 912.1 Definitions.
As used in this part:
Board Director or Director means a member of the Board of Directors.
Chairperson includes the Acting Chairperson.
Meeting means any deliberations of three or more Directors of the
Board of Directors, that determines or results in the joint conduct or
disposition of official Finance Board business, but does not include:
(1) Discussions to determine whether meetings will be open or closed
or whether information pertaining to closed meetings will be disclosed;
(2) Discussions to determine whether to schedule a meeting with less
than seven days notice, or to change the time, place or subject matter
of a scheduled meeting; and
(3) Disposition of Finance Board business by circulation of written
materials on proposed actions to individual Directors for proposed
actions, and notational voting by the individual Directors on such
proposed actions.
Public observation means the right of the general public to attend
open meetings of the Board of Directors, but does not include the right
to participate therein unless invited to do so by the Chairperson.
Secretary to the Board includes the Acting Secretary if the position
of Secretary is vacant.
Sunshine Act means the Government in the Sunshine Act (5 U.S.C.
552b).
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000.
Redesignated and amended at 67 FR 12844, Mar. 20, 2002]
Sec. 912.2 Purpose and scope.
(a) This part is issued by the Finance Board pursuant to the
Sunshine Act, which requires Federal agencies, headed by collegial
bodies, to promulgate regulations to implement its provisions. The
purpose of these regulations is to provide the public with access to
information regarding the decisionmaking processes of the Board of
Directors of the Finance Board, while protecting the privacy rights of
individuals and the ability of the Board of Directors to carry out its
responsibilities.
(b) The Board of Directors shall not jointly conduct or dispose of
official Finance Board business other than in accordance with this part.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000.
Redesignated and amended at 67 FR 12844, Mar. 20, 2002]
Sec. 912.3 Open meetings.
(a) Except as provided in Sec. 912.4, every portion of every
meeting of the Board of Directors shall be open to public observation.
(b) Unless otherwise specified in the public notice, open meetings
of the Board of Directors shall be held in the Board Room of the Finance
Board at 1777 F Street, NW., Washington, DC, at the time specified in
the public notice.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000]
Sec. 912.4 Closed meetings.
(a) The Board of Directors may close a meeting, or portion thereof,
to public observation, or withhold information from the public
pertaining to a meeting, when it determines that opening the meeting, or
a portion thereof, or the public disclosure of information pertaining to
such meeting, or portion thereof, is likely to:
(1) Disclose matters that are:
(i) Specifically authorized under criteria established by an
Executive Order to be kept secret in the interests of national defense
or foreign policy; and
(ii) Are, in fact, properly classified pursuant to such Executive
Order;
(2) Relate solely to the internal personnel rules and practices of
the Finance Board;
(3) Disclose matters specifically exempt from disclosure by statute
(other than the Freedom of Information Act (5 U.S.C. 552)), provided
that such statute:
(i) Requires that the matters be withheld from the public in such a
manner as to leave no discretion on the issue; or
(ii) Establishes particular criteria for withholding matters from
the public or refers to particular types of matters to be withheld;
(4) Disclose trade secrets or commercial or financial information
that is obtained from a person and is privileged or confidential;
[[Page 59]]
(5) Involve accusing any person of a crime, or formally censuring
any person;
(6) Disclose information of a personal nature where disclosure would
constitute a clearly unwarranted invasion of personal privacy;
(7) Disclose investigatory records compiled for law enforcement
purposes, or information which if written would be contained in such
records, but only to the extent that the production of such records or
information would:
(i) Interfere with enforcement proceedings;
(ii) Deprive a person of a right to a fair trial or an impartial
adjudication;
(iii) Constitute an unwarranted invasion of personal privacy;
(iv) Disclose the identity of a confidential source and, in the case
of a record compiled by a criminal law enforcement authority in the
course of a criminal investigation or by an agency conducting a lawful
national security intelligence investigation, confidential information
furnished only by the confidential source;
(v) Disclose investigative techniques and procedures; or
(vi) Endanger the life or physical safety of law enforcement
personnel;
(8) Disclose information contained in or related to examination,
operating, or condition reports prepared by, on behalf of, or for the
use of the Finance Board or another agency responsible for the
regulation or supervision of Banks or other financial institutions;
(9) Disclose information the premature disclosure of which would be
likely to:
(i) (A) Lead to significant financial speculation in currencies,
securities, or commodities;
(B) Significantly endanger the stability of any of the Banks or any
other financial institution; or
(ii) Significantly frustrate implementation of a proposed Finance
Board action, except that this paragraph shall not apply in any instance
where the Finance Board has already disclosed to the public the content
or nature of its proposed action, or where the Finance Board is required
by law to make such disclosure on its own initiative prior to taking
final action on such proposal; or
(10) Specifically concern the issuance of a subpoena by the Board of
Directors, or the Finance Board's participation in a civil action or
proceeding, an action in a foreign court or international tribunal, or
an arbitration, or the initiation, conduct or disposition of a
particular case of formal adjudication pursuant to the procedures in 5
U.S.C. 554 or otherwise involving a determination on the record after
opportunity for a hearing.
(b) A meeting or portions of a meeting shall not be closed nor
information withheld pursuant to paragraph (a) of this section if the
Board of Directors finds that the public interest requires otherwise.
[58 FR 19202, Apr. 13, 1993. Redesignated at 65 FR 8256, Feb. 18, 2000,
as amended at 67 FR 12844, Mar. 20, 2002]
Sec. 912.5 Procedures for closing meetings.
(a) Regular procedures. (1) Except as provided in paragraph (b) of
this section, a meeting of the Board of Directors, or portion thereof,
will be closed to public observation, and information pertaining to such
meeting, or portion thereof, will be withheld from the public, when a
majority of the Board of Directors determines by recorded vote that such
meeting, or portion thereof, or the withholding of information qualifies
for exemption under Sec. 912.4, and the Board of Directors does not
find that the public interest requires otherwise.
(2) Except as provided in paragraph (a)(3) of this section, a
separate vote of the Board Directors will be taken with respect to the
closing or the withholding of information as to each meeting or portion
thereof that is proposed to be closed to public observation, or with
respect to information that is proposed to be withheld pursuant to
paragraph (a) of this section.
(3) A single vote may be taken with respect to a series of meetings,
a portion or portions of which are proposed to be closed to public
observation, or with respect to any information concerning such series
of meetings proposed to be withheld, so long as each meeting in such
series involves the same particular matters and is scheduled to be held
no more than thirty
[[Page 60]]
days after the initial meeting in such series.
(4) The vote of each Board Director taken pursuant to paragraph (a)
of this section shall be recorded, and no proxies shall be allowed.
(5) Whenever any person's interests may be directly affected by any
portion of a meeting for any of the reasons referred to in Sec.
912.4(a)(5), (6), or (7), such person may send a written request to the
Secretary to the Board asking that such portion of the meeting be closed
to public observation. The Secretary to the Board will transmit the
request to each Board Director, and upon the request of a Director, a
recorded vote will be taken of the Board of Directors whether to close
the meeting to public observation.
(6)(i) Within one day of any vote taken pursuant to paragraph (a) of
this section, the Finance Board will make publicly available through the
Secretary to the Board a written copy of such vote reflecting the vote
of each Board Director.
(ii) If a meeting or portion thereof is to be closed to public
observation, the Finance Board within one day of the vote taken pursuant
to paragraph (a) of this section will make publicly available through
the Secretary to the Board a full, written explanation of its action
closing the meeting, or portion thereof, together with a list of all
persons expected to attend the meeting and their affiliation, except to
the extent such information is determined by the Board of Directors to
be exempt from disclosure under Sec. 912.4(a).
(7) Any person may request in writing to the Secretary to the Board
that an announced closed meeting, or portion thereof, be open to public
observation. The Secretary to the Board will transmit the request to
each Board Director, and upon the request of a Director, a recorded vote
will be taken of the Board of Directors on whether to open the meeting
to public observation.
(b) Expedited procedures. (1) Since a majority of the meetings, of
the Board of Directors may be closed pursuant to Sec. 912.4(a)(4), (8),
(9)(i) or (10), 5 U.S.C. 552b(d)(4) allows the Finance Board to use
expedited procedures in closing such meetings. The following are
examples of meetings of the Board of Directors, or portions thereof,
that may be closed to the public under these expedited procedures: sale
of consolidated obligations, and review of examination, operating or
condition reports of Banks.
(2) A decision to close a meeting, or portion thereof, under
paragraph (b) of this section shall be made at the beginning of the
meeting, or portion thereof, by majority vote of the Directors.
(3)(i) The Finance Board shall maintain a record of each of the
votes taken by its Board of Directors to close a meeting, or portion
thereof, or to withhold public access to information thereof, under
paragraph (b) of this section.
(ii) A copy of such record, reflecting the vote of each Board
Director on the question of closing a meeting, or portion thereof, or
withhholding public access to information thereof, under this paragraph
(b) of this section, shall be made available to any member of the public
upon request to the Secretary to the Board.
(4) Public announcement of the time, place and subject matter of
meetings, or portions thereof, closed under this paragraph (b) of this
section shall be made at the earliest practical time.
(c) Records of closed proceedings--(1) Transcripts or electronic
recording. Except as provided in paragraph (c)(2) of this section, the
Finance Board shall make and maintain a complete transcript or verbatim
electronic recording of the proceedings at each meeting, or portion
thereof, closed to public observation under paragraph (a) or (b) of this
section.
(2) Minutes. The Finance Board may make and maintain a set of
complete minutes, in lieu of such transcript or electronic recording,
with respect to meetings, or portions thereof, closed or information
withheld under Sec. 912.4(a)(8), (9)(i) or (10). Such set of minutes
shall fully and clearly describe all matters discussed and provide a
full and accurate summary of any action taken, and the reasons therefor,
including a description of each of the views expressed on any item and
the record of any roll call vote (reflecting the vote of each Board
Director on the question). All documents considered in connection
[[Page 61]]
with any action shall be identified in such set of minutes.
(3) Availability of Records. (i) The transcript, electronic
recording or set of minutes of an item discussed, or of testimony
received, at a meeting, shall be made available promptly to the public
through the Secretary to the Board except in cases where the Board of
Directors determines that the item or testimony contains information
which may be withheld under Sec. 912.4(a).
(ii) Copies of such transcript, electronic recording or set of
minutes, disclosing the identity of each speaker, shall be furnished to
any person at the actual cost of duplication or transcription.
(iii) The Finance Board shall maintain a complete copy of the
transcript, verbatim electronic recording or complete set of minutes of
each meeting, or portion thereof closed to the public, for at least two
years after such meeting, or until one year after the conclusion of any
proceeding of the Board of Directors with respect to which the meeting
or portion thereof was held, whichever occurs later.
(d) Legal certification for closing meeting. (1) For every meeting,
or portion thereof, of the Board of Directors closed pursuant to
paragraphs (a) or (b) of this section, the General Counsel (or in the
General Counsel's absence or incapacity the senior legal officer
available) shall publicly certify that the meeting or portion thereof
may be closed to the public pursuant to the Sunshine Act and this part,
and specifically state the relevant exemption in support thereof.
(2) A copy of the certification, together with a statement from the
Chairperson or, when appropriate, the Acting Chairperson or designee,
setting forth the time and place of the meeting and the persons present,
shall be retained in the permanent files of the Finance Board.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000; 65
FR 12844, Mar. 20, 2002]
Sec. 912.6 Notice of meetings.
(a) Scope of notice. (1) Except as provided in Sec. 912.4(a) that
such information is determined to be exempt from disclosure, each open
meeting of the Board of Directors, or each meeting closed under the
regular procedures in Sec. 912.5(a), will be preceded by public notice
as described in this section.
(2) The notices for meetings of the Board of Directors closed under
the expedited procedures pursuant to Sec. 912.5(b) will be made in
accordance with Sec. 912.5(b)(4).
(b) Content of notice. A notice of an open meeting or a meeting
closed under the regular procedures in Sec. 912.5(a) will state the
time, place, and subject matter of the meeting, whether it is to be open
or closed to the public, and the name and telephone number of the
Secretary to the Board for information about the meeting. Each such
notice shall be posted in the lobby of the Finance Board offices, and
may be made available in addition by other means or at other locations
as deemed desirable. Immediately following the posting of each such
notice, the Finance Board will publish the notice in the Federal
Register.
(c) Time--(1) Seven days notice. Except as provided in paragraph
(c)(2) of this section, a public notice of open meetings or meetings
closed under Sec. 912.5(a) will be made at least seven days in advance
of each meeting.
(2) Less than seven days notice. When a majority of the Board of
Directors determine by recorded vote that Finance Board business
requires a meeting to be called at any earlier date, the seven-day prior
notice rule may be suspended and notice shall be made at the earliest
practicable time.
(d) Amendment of notice--(1) Time and place. A change in the time or
place of a meeting following public notice may be made only if announced
at the earliest practicable time.
(2) Subject matter. A change in the subject matter of a meeting or a
re-determination to open or close a meeting, or portions thereof, may be
made, after public notice, only if:
(i) At least a majority of the Board Directors determines by
recorded vote that Finance Board business so requires and that no
earlier notice of the change was possible; and
(ii) The Finance Board publicly announces the change and the vote of
each Board Director by posting a notice thereof in the lobby of the
Finance
[[Page 62]]
Board offices at the earliest practicable time.
(3) Timing of amendment. A public announcement of a change in either
the time, place or subject matter of a meeting may be made after the
commencement of the meeting affected.
(4) Publication of amendment. Each change to a notice of a meeting
will be published in the Federal Register, following the Finance Board's
public announcement of the change.
[58 FR 19202, Apr. 13, 1993, as amended at 65 FR 8258, Feb. 18, 2000; 67
FR 12845, Mar. 20, 2002]
[[Page 63]]
SUBCHAPTER C_GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS
PART 914_DATA AVAILABILITY AND REPORTING--Table of Contents
Sec.
914.1 Regulatory Report defined.
914.2 Filing Regulatory Reports.
914.3 Access to books and records.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), and 1440.
Source: 71 FR 35499, June 21, 2006, unless otherwise noted.
Sec. 914.1 Regulatory Report defined.
(a) Definition. Regulatory Report means any report of raw or summary
data needed to evaluate the safe and sound condition and operations of a
Bank or to determine compliance with any:
(1) Provision in the Act or other law, order, rule, or regulation;
(2) Condition imposed in writing by the Finance Board in connection
with the granting of any application or other request by a Bank; or
(3) Written agreement entered into between the Finance Board and a
Bank.
(b) Examples. Regulatory Report includes:
(1) Call reports and reports of instrument-level risk modeling data;
(2) Reports related to a Bank's housing mission achievement, such as
reports related to AMA, AHP, CIP, and other CICA programs; and
(3) Reports submitted in response to requests to one or more Banks
for information on a nonrecurring basis.
Sec. 914.2 Filing Regulatory Reports.
Each Bank shall file Regulatory Reports with the Finance Board in
accordance with the forms, instructions, and schedules issued by the
Finance Board from time to time. If no regularly scheduled reporting
dates are established, Regulatory Reports shall be filed as requested by
the Finance Board.
Sec. 914.3 Access to books and records.
Each Bank shall make its books and records readily available for
inspection and other supervisory purposes within a reasonable period
upon request by the Finance Board, at a location acceptable to the
Finance Board. For requests for documents made during the course of an
onsite examination and pursuant to the examination's scope, a reasonable
period is presumed to be no longer than 1 business day. For requests for
documents made outside of an onsite examination, a reasonable period is
presumed to be 3 business days.
PART 917_POWERS AND RESPONSIBILITIES OF BANK BOARDS OF DIRECTORS AND SENIOR MANAGEMENT--Table of Contents
Sec.
917.1 Definitions.
917.2 General authorities and duties of Bank boards of directors.
917.3 Risk management.
917.4 Bank Member Products Policy.
917.5 Strategic business plan.
917.6 Internal control system.
917.7 Audit committees.
917.8 Budget preparation.
917.9 Dividends.
917.10 Bank bylaws.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1427, 1432(a),
1436(a), 1440.
Source: 65 FR 25274, May 1, 2000, unless otherwise noted.
Sec. 917.1 Definitions.
As used in this part:
Business risk means the risk of an adverse impact on a Bank's
profitability resulting from external factors as may occur in both the
short and long run.
Community financial institution has the meaning set forth in Sec.
925.1 of this chapter.
Contingency liquidity means the sources of cash a Bank may use to
meet its operational requirements when its access to the capital markets
is impeded, and includes:
(1) Marketable assets with a maturity of one year or less;
(2) Self-liquidating assets with a maturity of seven days or less;
[[Page 64]]
(3) Assets that are generally accepted as collateral in the
repurchase agreement market; and
(4) Irrevocable lines of credit from financial institutions rated
not lower than the second highest credit rating category by an NRSRO.
Credit risk means the risk that the market value, or estimated fair
value if market value is not available, of an obligation will decline as
a result of deterioration in creditworthiness.
Immediate family member means a parent, sibling, spouse, child,
dependent, or any relative sharing the same residence.
Internal auditor means the individual responsible for the internal
audit function at the Bank.
Liquidity risk means the risk that a Bank will be unable to meet its
obligations as they come due or meet the credit needs of its members and
associates in a timely and cost-efficient manner.
Market risk means the risk that the market value, or estimated fair
value if market value is not available, of a Bank's portfolio will
decline as a result of changes in interest rates, foreign exchange
rates, equity and commodity prices.
Operational liquidity means sources of cash from both a Bank's
ongoing access to the capital markets and its holding of liquid assets
to meet operational requirements in a Bank's normal course of business.
Operations risk means the risk of an unexpected loss to a Bank
resulting from human error, fraud, unenforceability of legal contracts,
or deficiencies in internal controls or information systems.
Reportable conditions means matters that represent significant
deficiencies in the design or operation of the internal control system
that could adversely affect a Bank's ability to record, process,
summarize and report financial data consistent with the assertions of
management.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.2 General authorities and duties of Bank boards of directors.
(a) Management of a Bank. The management of each Bank shall be
vested in its board of directors. While Bank boards of directors may
delegate the execution of operational functions to Bank personnel, the
ultimate responsibility of each Bank's board of directors for that
Bank's management is non-delegable.
(b) Duties of Bank directors. Each Bank director shall have the duty
to:
(1) Carry out his or her duties as director in good faith, in a
manner such director believes to be in the best interests of the Bank,
and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances;
(2) Administer the affairs of the Bank fairly and impartially and
without discrimination in favor of or against any member;
(3) At the time of appointment or election, or within a reasonable
time thereafter, have a working familiarity with basic finance and
accounting practices, including the ability to read and understand the
Bank's balance sheet and income statement and to ask substantive
questions of management and the internal and external auditors; and
(4) Direct the operations of the Bank in conformity with the
requirements set forth in the Act and this chapter.
(c) Authority regarding staff and outside consultants. (1) In
carrying out its duties and responsibilities under the Act and this
chapter, each Bank's board of directors and all committees thereof shall
have authority to retain staff and outside counsel, independent
accountants, or other outside consultants at the expense of the Bank.
(2) Bank staff providing services to the board of directors or any
committee of the board under paragraph (c)(1) of this section may be
required by the board of directors or such committee to report directly
to the board or such committee, as appropriate.
Sec. 917.3 Risk management.
(a) Risk management policy--(1) Adoption. Beginning August 29, 2000,
each Bank's board of directors shall have in effect at all times a risk
management policy that addresses the Bank's exposure to credit risk,
market risk, liquidity risk, business risk and operations
[[Page 65]]
risk and that conforms to the requirements of paragraph (b) of this
section and to all applicable Finance Board regulations and policies.
(2) Review and compliance. Each Bank's board of directors shall:
(i) Review the Bank's risk management policy at least annually;
(ii) Amend the risk management policy as appropriate;
(iii) Re-adopt the Bank's risk management policy, including interim
amendments, not less often than every three years; and
(iv) Ensure that policies and procedures are in place that are
reasonably designed to achieve continuing Bank compliance with the risk
management policy.
(b) Risk management policy requirements. In addition to meeting any
other requirements set forth in this chapter, each Bank's risk
management policy shall:
(1) After the Finance Board has approved a Bank's capital plan, but
before the plan takes effect, the Bank shall amend its risk management
policy to describe the specific steps the Bank will take to comply with
its capital plan and to include specific target ratios of total capital
and permanent capital to total assets at which the Bank intends to
operate. The target operating capital-to-assets ratios to be specified
in the risk management policy shall be in excess of the minimum leverage
and risk-based capital ratios and may be expressed as a range of ratios
or as a single ratio;
(2) Set forth the Bank's tolerance levels for the market and credit
risk components; and
(3) Set forth standards for the Bank's management of each risk
component, including but not limited to:
(i) Regarding credit risk arising from all secured and unsecured
transactions, standards and criteria for, and timing of, periodic
assessment of the creditworthiness of issuers, obligors, or other
counterparties including identifying the criteria for selecting dealers,
brokers and other securities firms with which the Bank may execute
transactions;
(ii) Regarding market risk, standards for the methods and models
used to measure and monitor such risk;
(iii) Regarding day-to-day operational liquidity needs and
contingency liquidity needs:
(A) An enumeration of specific types of investments to be held for
such liquidity purposes; and
(B) The methodology to be used for determining the Bank's
operational and contingency liquidity needs;
(iv) Regarding operations risk, standards for an effective internal
control system, including periodic testing and reporting; and
(v) Regarding business risk, strategies for mitigating such risk,
including contingency plans where appropriate.
(c) Risk assessment. The senior management of each Bank shall
perform, at least annually, a risk assessment that is reasonably
designed to identify and evaluate all material risks, including both
quantitative and qualitative aspects, that could adversely affect the
achievement of the Bank's performance objectives and compliance
requirements. The risk assessment shall be in written form and shall be
reviewed by the Bank's board of directors promptly upon its completion.
[65 FR 25274, May 1, 2000, as amended at 66 FR 8308, Jan. 30, 2001; 67
FR 12846, Mar. 20, 2002]
Sec. 917.4 Bank Member Products Policy.
(a) Adoption and review of member products policy--(1) Adoption.
Beginning November 15, 2000, each Bank's board of directors shall have
in effect at all times a policy that addresses the Bank's management of
products offered by the Bank to members and housing associates,
including but not limited to advances, standby letters of credit and
acquired member assets, consistent with the requirements of the Act,
paragraph (b) of this section, and all applicable Finance Board
regulations and policies.
(2) Review and compliance. Each Bank's board of directors shall:
(i) Review the Bank's member products policy annually;
(ii) Amend the member products policy as appropriate; and
(iii) Re-adopt the member products policy, including interim
amendments, not less often than every three years.
(b) Member products policy requirements. In addition to meeting any
other
[[Page 66]]
requirements set forth in this chapter, each Bank's member products
policy shall:
(1) Address credit underwriting criteria to be applied in evaluating
applications for advances, standby letters of credit, and renewals;
(2) Address appropriate levels of collateralization, valuation of
collateral and discounts applied to collateral values for advances and
standby letters of credit;
(3) Address advances-related fees to be charged by each Bank,
including any schedules or formulas pertaining to such fees;
(4) Address standards and criteria for pricing member products,
including differential pricing of advances pursuant to Sec. 950.5(b)(2)
of this chapter, and criteria regarding the pricing of standby letters
of credit, including any special pricing provisions for standby letters
of credit that facilitate the financing of projects that are eligible
for any of the Banks' CICA programs under part 952 of this chapter;
(5) Provide that, for any draw made by a beneficiary under a standby
letter of credit, the member will be charged a processing fee calculated
in accordance with the requirements of Sec. 975.6(b) of this chapter;
(6) Address the maintenance of appropriate systems, procedures and
internal controls; and
(7) Address the maintenance of appropriate operational and personnel
capacity.
[65 FR 44426, July 18, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.5 Strategic business plan.
(a) Adoption of strategic business plan. Beginning on July 30, 2000,
each Bank's board of directors shall have in effect at all times a
strategic business plan that describes how the business activities of
the Bank will achieve the mission of the Bank consistent with part 940
of this chapter. Specifically, each Bank's strategic business plan
shall:
(1) Enumerate operating goals and objectives for each major business
activity and for all new business activities, which must include plans
for maximizing activities that enhance the carrying out of the mission
of the Bank, consistent with part 940 of this chapter;
(2) Discuss how the Bank will:
(i) Address credit needs and market opportunities identified through
ongoing market research and consultations with members, associates and
public and private organizations; and
(ii) Notify members and associates of relevant programs and
initiatives;
(3) Establish quantitative performance goals for Bank products
related to multi-family housing, small business, small farm and small
agri-business lending;
(4) Describe any proposed new business activities or enhancements of
existing activities; and
(5) Be supported by appropriate and timely research and analysis of
relevant market developments and member and associate demand for Bank
products and services.
(b) Review and monitoring. Each Bank's board of directors shall:
(1) Review the Bank's strategic business plan at least annually;
(2) Amend the strategic business plan as appropriate;
(3) Re-adopt the Bank's strategic business plan, including interim
amendments, not less often than every three years; and
(4) Establish management reporting requirements and monitor
implementation of the strategic business plan and the operating goals
and objectives contained therein.
(c) Report to Finance Board. Each Bank shall submit to the Finance
Board annually a report analyzing and describing the Bank's performance
in achieving the goals described in paragraph (a)(3) of this section.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.6 Internal control system.
(a) Establishment and maintenance. (1) Each Bank shall establish and
maintain an effective internal control system that addresses:
(i) The efficiency and effectiveness of Bank activities;
(ii) The safeguarding of Bank assets;
(iii) The reliability, completeness and timely reporting of
financial and management information and transparency of such
information to the
[[Page 67]]
Bank's board of directors and to the Finance Board; and
(iv) Compliance with applicable laws, regulations, policies,
supervisory determinations and directives of the Bank's board of
directors and senior management.
(2) Ongoing internal control activities necessary to maintain the
internal control system required under paragraph (a)(1) of this section
shall include, but are not limited to:
(i) Top level reviews by the Bank's board of directors and senior
management, including review of financial presentations and performance
reports;
(ii) Activity controls, including review of standard performance and
exception reports by department-level management on an appropriate
periodic basis;
(iii) Physical and procedural controls to safeguard, and prevent the
unauthorized use of, assets;
(iv) Monitoring for compliance with the risk tolerance limits set
forth in the Bank's risk management policy;
(v) Any required approvals and authorizations for specific
activities; and
(vi) Any required verifications and reconciliations for specific
activities.
(b) Internal control responsibilities of Banks' boards of directors.
Each Bank's board of directors shall ensure that the internal control
system required under paragraph (a)(1) of this section is established
and maintained, and shall oversee senior management's implementation of
such a system on an ongoing basis, by:
(1) Conducting periodic discussions with senior management regarding
the effectiveness of the internal control system;
(2) Ensuring that an internal audit of the internal control system
is performed annually and that such annual audit is reasonably designed
to be effective and comprehensive;
(3) Requiring that internal control deficiencies be reported to the
Bank's board of directors in a timely manner and that such deficiencies
are addressed promptly;
(4) Conducting a timely review of evaluations of the effectiveness
of the internal control system made by internal auditors, external
auditors and Finance Board examiners;
(5) Directing senior management to address promptly and effectively
recommendations and concerns expressed by internal auditors, external
auditors and Finance Board examiners regarding weaknesses in the
internal control system;
(6) Reporting any internal control deficiencies found, and the
corrective action taken, to the Finance Board in a timely manner;
(7) Establishing, documenting and communicating an organizational
structure that clearly shows lines of authority within the Bank,
provides for effective communication throughout the Bank, and ensures
that there are no gaps in the lines of authority;
(8) Reviewing all delegations of authority to specific personnel or
committees and requiring that such delegations state the extent of the
authority and responsibilities delegated; and
(9) Establishing reporting requirements, including specifying the
nature and frequency of reports it receives.
(c) Internal control responsibilities of Banks' senior management.
Each Bank's senior management shall be responsible for carrying out the
directives of the Bank's board of directors, including the
establishment, implementation and maintenance of the internal control
system required under paragraph (a)(1) of this section, by:
(1) Establishing, implementing and effectively communicating to Bank
personnel policies and procedures that are adequate to ensure that
internal control activities necessary to maintain an effective internal
control system, including the activities enumerated in paragraph (a)(2)
of this section, are an integral part of the daily functions of all Bank
personnel;
(2) Ensuring that all Bank personnel fully understand and comply
with all policies, procedures and legal requirements applicable to their
positions and responsibilities;
(3) Ensuring that there is appropriate segregation of duties among
Bank personnel and that personnel are not assigned conflicting
responsibilities;
(4) Establishing effective paths of communication upward, downward
and
[[Page 68]]
across the organization in order to ensure that Bank personnel receive
necessary and appropriate information, including:
(i) Information relating to the operational policies and procedures
of the Bank;
(ii) Information relating to the actual operational performance of
the Bank;
(iii) Adequate and comprehensive internal financial, operational and
compliance data; and
(iv) External market information about events and conditions that
are relevant to decision making;
(5) Developing and implementing procedures that translate the major
business strategies and policies established by the Bank's board of
directors into operating standards;
(6) Ensuring adherence to the lines of authority and responsibility
established by the Bank's board of directors;
(7) Overseeing the implementation and maintenance of management
information and other systems;
(8) Establishing and implementing an effective system to track
internal control weaknesses and the actions taken to correct them; and
(9) Monitoring and reporting to the Bank's board of directors the
effectiveness of the internal control system on an ongoing basis.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.7 Audit committees.
(a) Establishment. The board of directors of each Bank shall
establish an audit committee, consistent with the requirements set forth
in this section.
(b) Composition. (1) The audit committee shall comprise five or more
persons drawn from the Bank's board of directors, each of whom shall
meet the criteria of independence set forth in paragraph (c) of this
section.
(2) The audit committee shall include a balance of representatives
of:
(i) Community financial institutions and other members; and
(ii) Appointive and elective directors of the Bank.
(3) The terms of audit committee members shall be appropriately
staggered so as to provide for continuity of service.
(4) At least one member of the audit committee shall have extensive
accounting or related financial management experience.
(c) Independence. Any member of the Bank's board of directors shall
be considered to be sufficiently independent to serve as a member of the
audit committee if that director does not have a disqualifying
relationship with the Bank or its management that would interfere with
the exercise of that director's independent judgment. Such disqualifying
relationships include, but are not limited to:
(1) Being employed by the Bank in the current year or any of the
past five years;
(2) Accepting any compensation from the Bank other than compensation
for service as a board director;
(3) Serving or having served in any of the past five years as a
consultant, advisor, promoter, underwriter, or legal counsel of or to
the Bank; or
(4) Being an immediate family member of an individual who is, or has
been in any of the past five years, employed by the Bank as an executive
officer.
(d) Charter. (1) The audit committee of each Bank shall adopt, and
the Bank's board of directors shall approve, a formal written charter
that specifies the scope of the audit committee's powers and
responsibilities, as well as the audit committee's structure, processes
and membership requirements.
(2) The audit committee and the board of directors of each Bank
shall:
(i) Review, assess the adequacy of and, where appropriate, amend the
Bank's audit committee charter on an annual basis;
(ii) Amend the audit committee charter as appropriate; and
(iii) Re-adopt and re-approve, respectively, the Bank's audit
committee charter not less often than every three years.
(3) Each Bank's audit committee charter shall:
(i) Provide that the audit committee has the responsibility to
select, evaluate and, where appropriate, replace the internal auditor
and that the internal auditor may be removed only with the approval of
the audit committee;
[[Page 69]]
(ii) Provide that the internal auditor shall report directly to the
audit committee on substantive matters and that the internal auditor is
ultimately accountable to the audit committee and board of directors;
and
(iii) Provide that both the internal auditor and the external
auditor shall have unrestricted access to the audit committee without
the need for any prior management knowledge or approval.
(e) Duties. Each Bank's audit committee shall have the duty to:
(1) Direct senior management to maintain the reliability and
integrity of the accounting policies and financial reporting and
disclosure practices of the Bank;
(2) Review the basis for the Bank's financial statements and the
external auditor's opinion rendered with respect to such financial
statements (including the nature and extent of any significant changes
in accounting principles or the application therein) and ensure that
policies are in place that are reasonably designed to achieve disclosure
and transparency regarding the Bank's true financial performance and
governance practices;
(3) Oversee the internal audit function by:
(i) Reviewing the scope of audit services required, significant
accounting policies, significant risks and exposures, audit activities
and audit findings;
(ii) Assessing the performance and determining the compensation of
the internal auditor; and
(iii) Reviewing and approving the internal auditor's work plan;
(4) Oversee the external audit function by:
(i) Approving the external auditor's annual engagement letter;
(ii) Reviewing the performance of the external auditor; and
(iii) Making recommendations to the Bank's board of directors
regarding the appointment, renewal, or termination of the external
auditor;
(5) Provide an independent, direct channel of communication between
the Bank's board of directors and the internal and external auditors;
(6) Conduct or authorize investigations into any matters within the
audit committee's scope of responsibilities;
(7) Ensure that senior management has established and is maintaining
an adequate internal control system within the Bank by:
(i) Reviewing the Bank's internal control system and the resolution
of identified material weaknesses and reportable conditions in the
internal control system, including the prevention or detection of
management override or compromise of the internal control system; and
(ii) Reviewing the programs and policies of the Bank designed to
ensure compliance with applicable laws, regulations and policies and
monitoring the results of these compliance efforts;
(8) Review the policies and procedures established by senior
management to assess and monitor implementation of the Bank's strategic
business plan and the operating goals and objectives contained therein;
and
(9) Report periodically its findings to the Bank's board of
directors.
(f) Meetings. The audit committee shall prepare written minutes of
each audit committee meeting.
[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 917.8 Budget preparation.
(a) Adoption of budgets. Each Bank's board of directors shall be
responsible for the adoption of an annual operating expense budget and a
capital expenditures budget for the Bank, and any subsequent amendments
thereto, consistent with the requirements of the Act, this section,
other regulations and policies of the Finance Board, and with the Bank's
responsibility to protect both its members and the public interest by
keeping its costs to an efficient and effective minimum.
(b) No delegation of budget authority. A Bank's board of directors
may not delegate the authority to approve the Bank's annual budgets, or
any subsequent amendments thereto, to Bank officers or other Bank
employees.
(c) Interest rate scenario. A Bank's annual budgets shall be
prepared based upon an interest rate scenario as determined by the Bank.
[[Page 70]]
(d) Board approval for deviations. A Bank may not exceed its total
annual operating expense budget or its total annual capital expenditures
budget without prior approval by the Bank's board of directors of an
amendment to such budget.
Sec. 917.9 Dividends.
(a) A Bank's board of directors may declare and pay a dividend only
from previously retained earnings or current net earnings and only in
accordance with any other applicable limitations on dividends set forth
in the Act or this chapter. Dividends on such capital stock shall be
computed without preference.
(b) A Bank's board of directors may not declare or pay a dividend
based on projected or anticipated earnings and may not declare or pay a
dividend if the par value of the Bank's stock is impaired or is
projected to become impaired after paying such dividend.
(c) The requirement in paragraph (a) of this section that dividends
be computed without preference shall cease to apply to any Bank that has
established any dividend preferences for 1 or more classes or subclasses
of its capital stock as part of its approved capital plan, as of the
date on which the capital plan takes effect.
[71 FR 78051, Dec. 28, 2006]
Sec. 917.10 Bank bylaws.
A Bank's board of directors shall have in effect at all times bylaws
governing the manner in which the Bank administers its affairs and such
bylaws shall be consistent with applicable laws and regulations as
administered by the Finance Board.
PART 918_BANK DIRECTOR COMPENSATION AND EXPENSES--Table of Contents
Sec.
918.1 Definitions.
918.2 Annual directors' compensation policy.
918.3 Directors' compensation policy requirements.
918.4 Directors' expenses.
918.5 Approval by Finance Board.
918.6 Disclosure.
918.7 Maintenance of effort.
918.8 Site of board of directors and committee meetings.
918.9 Date of applicability of removal of requirements regarding
compensation of bank officers and employees.
Authority: 12 U.S.C. 1422b(a), 1427.
Source: 65 FR 8260, Feb. 18, 2000, unless otherwise noted.
Sec. 918.1 Definitions.
As used in this part:
Compensation means any payment of money or provision of any other
thing of value (or the accrual of a right to receive money or a thing of
value in a subsequent year) in consideration of a director's performance
of official duties for the Bank, including, without limitation, daily
meeting fees, incentive payments and fringe benefits.
Sec. 918.2 Annual directors' compensation policy.
Beginning in 2000 and annually thereafter, each Bank's board of
directors shall adopt by resolution a written policy to provide for the
payment to Bank directors of reasonable compensation for the performance
of their duties as members of the Bank's board of directors, subject to
the requirements set forth in Sec. 918.3. At a minimum, such policy
shall address the activities or functions for which attendance is
necessary and appropriate and may be compensated, and shall explain and
justify the methodology for determining the amount of compensation to be
paid to directors.
[65 FR 8260, Feb. 18, 2000]
Sec. 918.3 Compensation policy requirements.
Payment to directors under each Bank's policy on director
compensation may be based upon factors that the Bank determines to be
appropriate, but each Bank's policy shall conform to the following
requirements:
(a)(1) Statutory limits on annual compensation. Pursuant to section
7(i) of the Act (12 U.S.C. 1427(i)), for 2000, the following limits on
compensation shall apply: for a Chairperson--$25,000; for a Vice
Chairperson--$20,000; for any other member of the Bank's board of
directors--$15,000. Beginning in 2001 and for subsequent years, these
limits on annual compensation shall be adjusted annually by the Finance
Board
[[Page 71]]
to reflect any percentage increase in the preceding year's Consumer
Price Index (CPI) for all urban consumers, as published by the
Department of Labor. Each year, as soon as practicable after the
publication of the previous year's CPI, the Finance Board shall publish
notice by Federal Register, distribution of a memorandum, or otherwise,
of the CPI-adjusted limits on annual compensation.
(2) Starting in 2000, the annual compensation limits set forth in
paragraph (a)(1) of this section shall apply to the year in which any
deferred compensation was accrued or earned by a director, and not to
the year in which it is paid to the director.
(b) Compensation permitted only for performance of official Bank
business. The total compensation received by each director in a year
shall reflect the amount of time spent on official Bank business, and
greater or lesser attendance at board and committee meetings during a
given year shall be reflected in the compensation received by the
director for that year. A Bank shall not pay a director who regularly
fails to attend board or committee meetings. A Bank shall not pay fees
to a director, such as retainer fees, that do not reflect the director's
performance of official Bank business conducted prior to the payment of
such fees.
[65 FR 8260, Feb. 18, 2000, as amended at 65 FR 13666, Mar. 14, 2000; 67
FR 12846, Mar. 20, 2002]
Sec. 918.4 Directors' expenses.
Each Bank may pay its directors for such necessary and reasonable
travel, subsistence and other related expenses incurred in connection
with the performance of their official duties as are payable to senior
officers of the Bank under the Bank's travel policy, except that
directors may not be paid for gift or entertainment expenses.
[65 FR 8260, Feb. 18, 2000]
Sec. 918.5 Approval by Finance Board.
Payments made to directors in compliance with the limits on annual
directors' compensation and the standards set forth in this section are
deemed to be approved by the Finance Board for purposes of section 7(i)
of the Act (12 U.S.C. 1427(i)).
[65 FR 8260, Feb. 18, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 918.6 Disclosure.
Each Bank shall, in its annual report:
(a) State the sum of the total actual compensation paid to its
directors in that year;
(b) State the sum of the total actual expenses paid to its directors
in that year; and
(c) Summarize its policy on director compensation.
Sec. 918.7 Maintenance of effort.
Notwithstanding the limits on annual directors' compensation
established by section 7(i) of the Act (12 U.S.C. 1427(i)), the board of
directors of each Bank shall continue to maintain its level of oversight
of the management of the Bank. In maintaining its level of oversight,
the board of directors of a Bank shall hold at least six in-person
meetings in any year.
[66 FR 24264, May 14, 2001, as amended at 67 FR 12846, Mar. 20, 2002]
Sec. 918.8 Site of board of directors and committee meetings.
Meetings of a Bank's board of directors and committees thereof
usually should be held within the district served by the Bank. No
meetings of a Bank's board of directors and committees thereof may be
held in any location that is not within the United States, including its
possessions and territories.
Sec. 918.9 Date of applicability of removal of requirements regarding compensation of bank officers and employees.
The removal of the requirements relating to compensation of Bank
officers and employees in former 12 CFR 932.19 (in the Code of Federal
Regulations revised as of January 1, 1999), is applicable for all Bank
officer and employee compensation years starting after December 21,
1999.
[65 FR 13666, Mar. 14, 2000, as amended at 67 FR 12846, Mar. 20, 2002]
[[Page 72]]
SUBCHAPTER D_FEDERAL HOME LOAN BANK MEMBERS AND HOUSING ASSOCIATES
PART 925_MEMBERS OF THE BANKS--Table of Contents
Subpart A_Definitions
Sec.
925.1 Definitions.
Subpart B_Membership Application Process
925.2 Membership application requirements.
925.3 Decision on application.
925.4 Automatic membership.
925.5 Appeals.
Subpart C_Eligibility Requirements
925.6 General eligibility requirements.
925.7 Duly organized requirement.
925.8 Subject to inspection and regulation requirement.
925.9 Makes long-term home mortgage loans requirement.
925.10 10 percent requirement for certain insured depository institution
applicants.
925.11 Financial condition requirement for applicants other than
insurance companies.
925.12 Character of management requirement.
925.13 Home financing policy requirement.
925.14 De novo insured depository institution applicants.
925.15 Recent merger or acquisition applicants.
925.16 Financial condition requirement for insurance company applicants.
925.17 Rebuttable presumptions.
925.18 Determination of appropriate Bank district for membership.
Subpart D_Stock Requirements
925.19 Par value and price of stock.
925.20 Stock purchase.
925.21 Issuance and form of stock.
925.22 Adjustments in stock holdings.
925.23 Excess stock.
Subpart E_Consolidations Involving Members
925.24 Consolidations involving members.
Subpart F_Withdrawal and Removal From Membership
925.26 Voluntary withdrawal from membership.
925.27 Involuntary termination of membership.
Subpart G_Orderly Liquidation of Advances and Redemption of Stock
925.29 Disposition of claims.
Subpart H_Reacquisition of Membership
925.30 Readmission to membership.
Subpart I_Bank Access to Information
925.31 Reports and examinations.
Subpart J_Membership Insignia
925.32 Official membership insignia.
Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430,
1442.
Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted.
Redesignated at 65 FR 8256, Feb. 18, 2000.
Subpart A_Definitions
Sec. 925.1 Definitions.
For purposes of this part:
Adjusted net income means net income, excluding extraordinary items
such as income received from, or expense incurred in, sales of
securities or fixed assets, reported on a regulatory financial report.
Aggregate unpaid loan principal means the aggregate unpaid principal
of a subscriber's or member's home mortgage loans, home-purchase
contracts and similar obligations.
Allowance for loan and lease losses means a specified balance-sheet
account held to fund potential losses on loans or leases, that is
reported on a regulatory financial report.
Appropriate regulator means a regulatory entity listed in Sec.
925.8, as applicable.
Combination business or farm property means real property for which
the total appraised value is attributable to residential, and business
or farm uses.
Community financial institution or CFI means an institution:
(1) The deposits of which are insured under the Federal Deposit
Insurance Act (12 U.S.C. 1811, et seq.); and
[[Page 73]]
(2) That has, as of the date of the transaction at issue, less than
the community financial institution asset cap in total assets, based on
an average of total assets over three years, which shall be calculated
by the Bank based on the average of total assets drawn from the
institution's regulatory financial reports filed with its appropriate
regulator for the most recent calendar quarter and the immediately
preceding 11 calendar quarters.
Community financial institution asset cap means, for 2000, $500
million. Beginning in 2001 and for subsequent years, the cap shall be
adjusted annually by the Finance Board to reflect any percentage
increase in the preceding year's Consumer Price Index (CPI) for all
urban consumers, as published by the U.S. Department of Labor. Each
year, as soon as practicable after the publication of the previous
year's CPI, the Finance Board shall publish notice by the Federal
Register of the CPI-adjusted cap.
Composite regulatory examination rating means a composite rating
assigned to an institution following the guidelines of the Uniform
Financial Institutions Rating System (Issued by the Federal Financial
Institutions Examination Council; for availability contact the Federal
Housing Finance Board, FOIA Office, 1777 F Street, NW., Washington, DC
20006), including a CAMEL rating, a MACRO rating, or other similar
rating, contained in a written regulatory examination report.
Consolidation includes a consolidation, a merger, or a purchase of
all of the assets and assumption of all of the liabilities of an entity
by another entity.
Dwelling unit means a single room or a unified combination of rooms
designed for residential use.
Enforcement action means any written notice, directive, order or
agreement initiated by an applicant for Bank membership or by its
appropriate regulator to address any operational, financial, managerial
or other deficiencies of the applicant identified by such regulator, but
does not include a board of directors resolution adopted by the
applicant in response to examination weaknesses identified by such
regulator.
Funded residential construction loan means the portion of a loan
secured by real property made to finance the on-site construction of
dwelling units on one-to-four family property or multifamily property
disbursed to the borrower.
Home mortgage loan means:
(1) A loan, whether or not fully amortizing, or an interest in such
a loan, which is secured by a mortgage, deed of trust, or other security
agreement that creates a first lien on one of the following interests in
property:
(i) One-to-four family property or multifamily property, in fee
simple;
(ii) A leasehold on one-to-four family property or multifamily
property under a lease of not less than 99 years that is renewable, or
under a lease having a period of not less than 50 years to run from the
date the mortgage was executed; or
(iii) Combination business or farm property where at least 50
percent of the total appraised value of the combined property is
attributable to the residential portion of the property or, in the case
of any community financial institution, combination business or farm
property, on which is located a permanent structure actually used as a
residence (other than for temporary or seasonal housing), where the
residence constitutes an integral part of the property; or
(2) A mortgage pass-through security that represents an undivided
ownership interest in:
(i) Long-term loans, provided that, at the time of issuance of the
security, all of the loans meet the requirements of paragraph (1) of
this definition; or
(ii) A security that represents an undivided ownership interest in
long-term loans, provided that, at the time of issuance of the security,
all of the loans meet the requirements of paragraph (1) of this
definition.
Insured depository institution means an insured depository
institution as defined in section 2(12) of the Act (12 U.S.C. 1422(12)).
Long-term means a term to maturity of five years or greater.
Manufactured housing means a manufactured home as defined in section
[[Page 74]]
603(6) of the Manufactured Home Construction and Safety Standards Act of
1974, as amended (42 U.S.C. 5402(6)).
Multifamily property means:
(1) Real property that is solely residential and includes five or
more dwelling units;
(2) Real property that includes five or more dwelling units combined
with commercial units, provided that the property is primarily
residential; or
(3) Nursing homes, dormitories, or homes for the elderly.
Nonperforming loans and leases means the sum of the following,
reported on a regulatory financial report:
(1) Loans and leases that have been past due for 90 days (60 days in
the case of credit union applicants) or longer but are still accruing;
(2) Loans and leases on a nonaccrual basis; and
(3) Restructured loans and leases (not already reported as
nonperforming).
Nonresidential real property means real property that is not used
for residential purposes, including business or industrial property,
hotels, motels, churches, hospitals, educational and charitable
institution buildings or facilities, clubs, lodges, association
buildings, golf courses, recreational facilities, farm property not
containing a dwelling unit, or similar types of property.
One-to-four family property means:
(1) Real property that is solely residential, including one-to-four
family dwelling units or more than four family dwelling units if each
dwelling unit is separated from the other dwelling units by dividing
walls that extend from ground to roof, such as row houses, townhouses or
similar types of property;
(2) Manufactured housing if applicable state law defines the
purchase or holding of manufactured housing as the purchase or holding
of real property;
(3) Individual condominium dwelling units or interests in individual
cooperative housing dwelling units that are part of a condominium or
cooperative building without regard to the number of total dwelling
units therein; or
(4) Real property which includes one-to-four family dwelling units
combined with commercial units, provided the property is primarily
residential.
Other real estate owned means all other real estate owned (i.e.,
foreclosed and repossessed real estate), reported on a regulatory
financial report, and does not include direct and indirect investments
in real estate ventures.
Regulatory examination report means a written report of examination
prepared by the applicant's appropriate regulator, containing, in the
case of insured depository institution applicants, a composite rating
assigned to the institution following the guidelines of the Uniform
Financial Institutions Rating System, including a CAMEL rating, a MACRO
rating, or other similar rating.
Regulatory financial report means a financial report that an
applicant is required to file with its appropriate regulator on a
specific periodic basis, including the quarterly call report for
commercial banks, thrift financial report for savings associations,
quarterly or semi-annual call report for credit unions, the National
Association of Insurance Commissioners' annual or quarterly report for
insurance companies, or other similar report, including such report
maintained by the appropriate regulator on a computer on-line database.
Residential mortgage loan means any one of the following types of
loans, whether or not fully amortizing:
(1) Home mortgage loans;
(2) Funded residential construction loans;
(3) Loans secured by manufactured housing whether or not defined by
state law as secured by an interest in real property;
(4) Loans secured by junior liens on one-to-four family property or
multifamily property;
(5) Mortgage pass-through securities representing an undivided
ownership interest in:
(i) Loans that meet the requirements of paragraphs (1) through (4)
of this definition at the time of issuance of the security;
(ii) Securities representing an undivided ownership interest in
loans, provided that, at the time of issuance of the security, all of
the loans meet the requirements of paragraphs (1) through (4) of this
definition; or
(iii) Mortgage debt securities as defined in paragraph (6) of this
definition;
[[Page 75]]
(6) Mortgage debt securities secured by:
(i) Loans, provided that, at the time of issuance of the security,
substantially all of the loans meet the requirements of paragraphs (1)
through (4) of this definition;
(ii) Securities that meet the requirements of paragraph (5) of this
definition; or
(iii) Securities secured by assets, provided that, at the time of
issuance of the security, all of the assets meet the requirements of
paragraphs (1) through (5) of this definition;
(7) Home mortgage loans secured by a leasehold interest, as defined
in paragraph (1)(ii) of the definition of ``home mortgage loan,'' except
that the period of the lease term may be for any duration; or
(8) Loans that finance properties or activities that, if made by a
member, would satisfy the statutory requirements for the CIP established
under section 10(i) of the Act (12 U.S.C. 1430(i)), or the regulatory
requirements established for any CICA program.
Total assets means the total assets reported on a regulatory
financial report.
[67 FR 12846, Mar. 20, 2002]
Subpart B_Membership Application Process
Source: 61 FR 42543 Aug. 16, 1996, unless otherwise noted.
Sec. 925.2 Membership application requirements.
(a) Application. An applicant for membership in a Bank shall submit
to that Bank an application that satisfies the requirements of this
part. The application shall include a written resolution or
certification duly adopted by the applicant's board of directors, or by
an individual with authority to act on behalf of the applicant's board
of directors, of the following:
(1) Applicant review. Applicant has reviewed the requirements of
this part and, as required by this part, has provided to the best of
applicant's knowledge the most recent, accurate and complete information
available; and
(2) Duty to supplement. Applicant will promptly supplement the
application with any relevant information that comes to applicant's
attention prior to the Bank's decision on whether to approve or deny the
application, and if the Bank's decision is appealed pursuant to Sec.
925.5 of this part, prior to resolution of any appeal by the Finance
Board.
(b) Digest. The Bank shall prepare a written digest for each
applicant stating whether or not the applicant meets each of the
requirements in Sec. Sec. 925.6 to 925.18 of this part, the Bank's
findings and the reasons therefor.
(c) File. The Bank shall maintain a membership file for each
applicant for at least three years after the Bank decides whether to
approve or deny membership and the resolution of any appeal to the
Finance Board. The membership file shall contain at a minimum:
(1) Digest. The digest required by paragraph (b) of this section.
(2) Required documents. All documents required by Sec. Sec. 925.6
to 925.18 of this part, including those documents required to establish
or rebut a presumption under this part, shall be described in and
attached to the digest. The Bank may retain in the file only the
relevant portions of the regulatory financial reports required by this
part. If an applicant's appropriate regulator requires return or
destruction of a regulatory examination report, the date that the report
is returned or destroyed shall be noted in the file.
(3) Additional documents. Any additional document submitted by the
applicant, or otherwise obtained or generated by the Bank, concerning
the applicant.
(4) Decision resolution. The decision resolution described in Sec.
925.3(b) of this part.
[61 FR 42543, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 70 FR 9510, Feb. 28, 2005]
Sec. 925.3 Decision on application.
(a) Authority. The Finance Board authorizes the Banks to approve or
deny all applications for membership, subject to the requirements of
this part. The Bank may delegate the authority to approve membership
applications only to a committee of the Bank's board of directors, the
Bank president,
[[Page 76]]
or a senior officer who reports directly to the Bank president other
than an officer with responsibility for business development.
(b) Decision resolution. For each applicant, the Bank shall prepare
a written resolution duly adopted by the Bank's board of directors, by a
committee of the board of directors, or by an officer with delegated
authority to approve membership applications. The decision resolution
shall state:
(1) That the statements in the digest are accurate to the best of
the Bank's knowledge, and are based on a diligent and comprehensive
review of all available information identified in the digest; and
(2) The Bank's decision and the reasons therefor. Decisions to
approve an application should state specifically that: the applicant is
authorized under the laws of the United States and the laws of the
appropriate state to become a member of, purchase stock in, do business
with, and maintain deposits in, the Bank to which the applicant has
applied; and the applicant meets all of the membership eligibility
criteria of the Act and this part.
(c) Action on applications. The Bank shall act on an application
within 60 calendar days of the date the Bank deems the application to be
complete. An application is ``complete'' when a Bank has obtained all
the information required by this part, and any other information the
Bank deems necessary, to process the application. If an application that
was deemed complete subsequently is deemed incomplete because the Bank
determines during the review process that additional information is
necessary to process the application, the Bank may stop the 60-day clock
until the application again is deemed complete, and then resume the
clock where it left off. The Bank shall notify an applicant in writing
when its application is deemed by the Bank to be complete, and shall
maintain a copy of such letter in the applicant's membership file. The
Bank shall notify an applicant if the 60-day clock is stopped, and when
the clock is resumed, and shall maintain a written record of such
notifications in the applicant's membership file. Within 3 business days
of a Bank's decision on an application, the Bank shall provide the
applicant and the Finance Board's Secretary to the Board with a copy of
the Bank's decision resolution.
[61 FR 42543, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 67 FR 12848, Mar. 20, 2002; 70 FR 9510, Feb.
28, 2005]
Sec. 925.4 Automatic membership.
(a) Automatic membership for certain charter conversions. An insured
depository institution member that converts from one charter type to
another automatically shall become a member of the Bank of which the
converting institution was a member on the effective date of such
conversion, provided that the converting institution continues to be an
insured depository institution and the assets of the institution
immediately before and immediately after the conversion are not
materially different. In such case, all relationships existing between
the member and the Bank at the time of such conversion may continue.
(b) Automatic membership for transfers. Any member whose membership
is transferred pursuant to Sec. 925.18(d) of this part automatically
shall become a member of the Bank to which it transfers.
(c) Automatic membership, in the Bank's discretion, for certain
consolidations. (1) If a member institution (or institutions) and a
nonmember institution are consolidated and the consolidated institution
has its principal place of business in a state in the same Bank district
as the disappearing institution (or institutions), and the consolidated
institution will operate under the charter of the nonmember institution,
on the effective date of the consolidation, the consolidated institution
may, in the discretion of the Bank of which the disappearing institution
(or institutions) was a member immediately prior to the effective date
of the consolidation, automatically become a member of such Bank upon
the purchase of stock in that Bank pursuant to Sec. 925.20, provided
that:
(i) 90 percent or more of the total assets of the consolidated
institution are derived from the total assets of the disappearing member
institution (or institutions); and
[[Page 77]]
(ii) The consolidated institution provides written notice to such
Bank, within 60 calendar days after the effective date of the
consolidation, that it desires to be a member of the Bank.
(2) The provisions of Sec. 925.24(b)(4)(i) shall apply, and upon
approval of automatic membership by the Bank, the provisions of
Sec. Sec. 925.24(c) and (d) shall apply.
[61 FR 42543, Aug. 16, 1996, as amended at 63 FR 40024, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 65 FR 13870, Mar. 15, 2000; 67 FR 12848, Mar.
20, 2002]
Sec. 925.5 Appeals.
(a) Appeals by applicants--(1) Filing procedure. Within 90 calendar
days of the date of a Bank's decision to deny an application for
membership, the applicant may file a written appeal of the decision with
the Finance Board.
(2) Documents. The applicant's appeal shall be addressed to the
Secretary to the Board, Federal Housing Finance Board, 1777 F Street,
NW., Washington, DC 20006, with a copy to the Bank, and shall include
the following documents:
(i) Bank's decision resolution. A copy of the Bank's decision
resolution; and
(ii) Basis for appeal. A statement of the basis for the appeal by
the applicant with sufficient facts, information, analysis and
explanation to rebut any applicable presumptions and otherwise support
the applicant's position.
(b) Record for appeal--(1) Copy of membership file. Upon receiving a
copy of an appeal, the Bank whose action has been appealed (appellee
Bank) shall provide the Finance Board with a copy of the applicant's
complete membership file. Until the Finance Board resolves the appeal,
the appellee Bank shall supplement the materials provided to the Finance
Board as any new materials are received.
(2) Additional information. The Finance Board may request additional
information or further supporting arguments from the appellant, the
appellee Bank or any other party that the Finance Board deems
appropriate.
(c) Deciding appeals. The Finance Board shall consider the record
for appeal described in paragraph (b) of this section and shall resolve
the appeal based on the requirements of the Act and this part within 90
calendar days of the date the appeal is filed with the Finance Board. In
deciding the appeal, the Finance Board shall apply the presumptions in
this part, unless the appellant or appellee Bank presents evidence to
rebut a presumption as provided in Sec. 925.17 of this part.
[61 FR 42543, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000; 67
FR 12848, Mar. 20, 2002; 70 FR 9510, Feb. 28, 2005]
Subpart C_Eligibility Requirements
Source: 61 FR 42545, Aug. 16, 1996, unless otherwise noted.
Sec. 925.6 General eligibility requirements.
(a) Requirements. Any building and loan association, savings and
loan association, cooperative bank, homestead association, insurance
company, savings bank, or insured depository institution, upon
application satisfying all of the requirements of the Act and this part,
shall be eligible to become a member of a Bank if:
(1) It is duly organized under the laws of any State or of the
United States;
(2) It is subject to inspection and regulation under the banking
laws, or under similar laws, of any State or of the United States;
(3) It makes long-term home mortgage loans;
(4) Its financial condition is such that advances may be safely made
to it;
(5) The character of its management is consistent with sound and
economical home financing; and
(6) Its home financing policy is consistent with sound and
economical home financing.
(b) Additional eligibility requirement for insured depository
institutions other than community financial institutions. In order to be
eligible to become a member of a Bank, an insured depository institution
applicant other than a community financial institution also must have at
least 10 percent of its total assets in residential mortgage loans.
(c) Additional eligibility requirement for applicants that are not
insured depository institutions. In order to be eligible to become a
member of a Bank, an applicant that is not an insured depository
[[Page 78]]
institution also must have mortgage-related assets that reflect a
commitment to housing finance, as determined by the Bank in its
discretion.
(d) Ineligibility. Except as otherwise provided in this part, if an
applicant does not satisfy the requirements of this part, the applicant
is ineligible for membership.
[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 13870, Mar. 15, 2000;
70 FR 9510, Feb. 28, 2005]
Sec. 925.7 Duly organized requirement.
An applicant shall be deemed to be duly organized as required by
section 4(a)(1)(A) of the Act (12 U.S.C. 1424(a)(1)(A)) and Sec.
925.6(a)(1) of this part, if it is chartered by a state or federal
agency as a building and loan association, savings and loan association,
cooperative bank, homestead association, insurance company, savings bank
or insured depository institution.
[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000; 67
FR 12848, Mar. 20, 2002; 70 FR 9510, Feb. 28, 2005]
Sec. 925.8 Subject to inspection and regulation requirement.
An applicant shall be deemed to be subject to inspection and
regulation as required by section 4(a)(1)(B) of the Act (12 U.S.C.
1424(a)(1)(B)) and Sec. 925.6(a)(2) of this part, if, in the case of a
depository institution applicant, it is subject to inspection and
regulation by the FDIC, FRB, NCUA, OCC, OTS, or other appropriate state
regulator, and, in the case of an insurance company applicant, it is
subject to inspection and regulation by an appropriate state regulator
accredited by the National Association of Insurance Commissioners.
[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000; 67
FR 12848, Mar. 20, 2002; 70 FR 9510, Feb. 28, 2005]
Sec. 925.9 Makes long-term home mortgage loans requirement.
An applicant shall be deemed to make long-term home mortgage loans
as required by section 4(a)(1)(C) of the Act (12 U.S.C. 1424(a)(1)(C))
and Sec. 925.6(a)(3) of this part, if, based on the applicant's most
recent regulatory financial report filed with its appropriate regulator,
the applicant originates or purchases long-term home mortgage loans.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 67 FR 12848, Mar. 20, 2002; 70 FR 9510, Feb.
28, 2005]
Sec. 925.10 10 percent requirement for certain insured depository institution applicants.
An insured depository institution applicant that is subject to the
10 percent requirement of section 4(a)(2)(A) of the Act (12 U.S.C.
1424(a)(2)(A))and section 925.6(b) of this part, shall be deemed to be
in compliance with such requirement if, based on the applicant's most
recent regulatory financial report filed with its appropriate regulator,
the applicant has at least 10 percent of its total assets in residential
mortgage loans, except that any assets used to secure mortgage debt
securities as described in paragraph (6) of the definition of
``residential mortgage loan'' set forth in Sec. 925.1 of this part
shall not be used to meet this requirement.
[65 FR 13870, Mar. 15, 2000, as amended at 67 FR 12848, Mar. 20, 2002]
Sec. 925.11 Financial condition requirement for applicants other than insurance companies.
(a) Review requirement. In determining whether an applicant other
than an insurance company has complied with the financial condition
requirement of section 4(a)(2)(B) of the Act (12 U.S.C. 1424(a)(2)(B))
and Sec. 925.6(a)(4) of this part, the Bank shall obtain as a part of
the membership application and review each of the following documents:
(1) Regulatory financial reports. The regulatory financial reports
filed by the applicant with its appropriate regulator for the last six
calendar quarters and three year-ends preceding the date the Bank
receives the application;
(2) Financial statement. In order of preference: the most recent
independent audit of the applicant conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm which submits a report on the applicant; the most recent
independent audit of the applicant's parent holding company
[[Page 79]]
conducted in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the
consolidated holding company but not on the applicant separately; the
most recent Directors' examination of the applicant conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm; the most recent Directors' examination of the
applicant performed by other external auditors; the most recent review
of the applicant's financial statements by external auditors; the most
recent Compilation of the applicant's financial statements by external
auditors; or the most recent audit of other procedures of the applicant;
(3) Regulatory examination report. The applicant's most recent
available regulatory examination report prepared by its appropriate
regulator, a summary prepared by the Bank of the applicant's strengths
and weaknesses as cited in the regulatory examination report, and a
summary prepared by the Bank or applicant of actions taken by the
applicant to respond to examination weaknesses;
(4) Enforcement actions. A description prepared by the Bank or
applicant of any outstanding enforcement actions against the applicant,
responses by the applicant, reports as required by the enforcement
action, and verbal or written indications, if available, from the
appropriate regulator of how the applicant is complying with the terms
of the enforcement action; and
(5) Additional information. Any other relevant document or
information concerning the applicant that comes to the Bank's attention
in reviewing the applicant's financial condition.
(b) Standards. An applicant other than an insurance company shall be
deemed to be in compliance with the financial condition requirement of
section 4(a)(2)(B) of the Act (12 U.S.C. 1424(a)(2)(B)) and Sec.
925.6(a)(4) of this part, if:
(1) Recent composite regulatory examination rating. The applicant
has received a composite regulatory examination rating from its
appropriate regulator within two years preceding the date the Bank
receives the application;
(2) Capital requirement. The applicant meets all of its minimum
statutory and regulatory capital requirements as reported in its most
recent quarter-end regulatory financial report filed with its
appropriate regulator; and
(3) Minimum performance standard. (i) The applicant's most recent
composite regulatory examination rating from its appropriate regulator
within the past two years was ``1;'' or was ``2'' or ``3'' and, based on
the applicant's most recent regulatory financial report filed with its
appropriate regulator, the applicant satisfied all of the following
performance trend criteria:
(A) Earnings. The applicant's adjusted net income was positive in
four of the six most recent calendar quarters;
(B) Nonperforming assets. The applicant's nonperforming loans and
leases plus other real estate owned, did not exceed 10 percent of its
total loans and leases plus other real estate owned, in the most recent
calendar quarter; and
(C) Allowance for loan and lease losses. The applicant's ratio of
its allowance for loan and lease losses plus the allocated transfer risk
reserve to nonperforming loans and leases was 60 percent or greater
during 4 of the 6 most recent calendar quarters.
(ii) For applicants that are not required to report financial data
to their appropriate regulator on a quarterly basis, the information
required in paragraph (b)(3)(i) of this section may be reported on a
semiannual basis.
(c) Eligible collateral not considered. The availability of
sufficient eligible collateral to secure advances to the applicant is
presumed and shall not be considered in determining whether an applicant
is in the financial condition required by section 4(a)(2)(B) of the Act
(12 U.S.C. 1424(a)(2)(B)) and Sec. 925.6(a)(4) of this part.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, 40024, July 27,
1998; 65 FR 8261, Feb. 18, 2000; 67 FR 12848, Mar. 20, 2002; 70 FR 9510,
Feb. 28, 2005]
Sec. 925.12 Character of management requirement.
An applicant shall be deemed to be in compliance with the character
of management requirement of section 4(a)(2)(C) of the Act (12 U.S.C.
[[Page 80]]
1424(a)(2)(C)) and Sec. 925.6(a)(5) of this part, if the applicant
provides to the Bank an unqualified written certification duly adopted
by the applicant's board of directors, or by an individual with
authority to act on behalf of the applicant's board of directors, that:
(a) Enforcement actions. Neither the applicant nor any of its
directors or senior officers is subject to, or operating under, any
enforcement action instituted by its appropriate regulator;
(b) Criminal, civil or administrative proceedings. Neither the
applicant nor any of its directors or senior officers has been the
subject of any criminal, civil or administrative proceedings reflecting
upon creditworthiness, business judgment, or moral turpitude since the
most recent regulatory examination report; and
(c) Criminal, civil or administrative monetary liabilities, lawsuits
or judgments. There are no known potential criminal, civil or
administrative monetary liabilities, material pending lawsuits, or
unsatisfied judgments against the applicant or any of its directors or
senior officers since the most recent regulatory examination report,
that are significant to the applicant's operations.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 67 FR 12848, Mar. 20, 2002; 70 FR 9510, Feb.
28, 2005]
Sec. 925.13 Home financing policy requirement.
(a) Standard. An applicant shall be deemed to be in compliance with
the home financing policy requirement of section 4(a)(2)(C) of the Act
(12 U.S.C. 1424(a)(2)(C)) and Sec. 925.6(a)(6) of this part, if the
applicant has received a Community Reinvestment Act (CRA) rating of
``Satisfactory'' or better on its most recent formal, or if unavailable,
informal or preliminary, CRA performance evaluation.
(b) Written justification required. An applicant that is not subject
to the CRA shall file as part of its application for membership a
written justification acceptable to the Bank of how and why the
applicant's home financing policy is consistent with the Bank System's
housing finance mission.
[61 FR 42545, Aug. 16, 1996, as amended at 65 FR 8261, Feb. 18, 2000; 67
FR 12848, Mar. 20, 2002; 70 FR 9510, Feb. 28, 2005]
Sec. 925.14 De novo insured depository institution applicants.
(a) Duly organized, subject to inspection and regulation, financial
condition and character of management requirements. An insured
depository institution applicant whose date of charter approval is
within three years prior to the date the Bank receives the applicant's
application for membership in the Bank (de novo applicant) is deemed to
meet the requirements of Sec. Sec. 925.7, 925.8, 925.11 and 925.12.
(b) Makes long-term home mortgage loans requirement. A de novo
applicant shall be deemed to make long-term home mortgage loans as
required by Sec. 925.9 if it has filed as part of its application for
membership a written justification acceptable to the Bank of how its
home financing credit policy and lending practices will include
originating or purchasing long-term home mortgage loans.
(c) 10 percent requirement--(1) One-year requirement. A de novo
applicant that is subject to the 10 percent requirement of section
4(a)(2)(A) of the Act (12 U.S.C. 1424(a)(2)(A)) and Sec. 925.6(b) shall
have until one year after commencing its initial business operations to
meet the 10 percent requirement of Sec. 925.10.
(2) Conditional approval. A de novo applicant shall be conditionally
deemed to be in compliance with the 10 percent requirement of section
4(a)(2)(A) of the Act (12 U.S.C. 1424(a)(2)(A)) and Sec. 925.6(b). A de
novo applicant that receives such conditional membership approval is
subject to the stock purchase requirements of Sec. 925.20 and the
advances provisions of part 950 of this chapter.
(3) Approval. A de novo applicant shall be deemed to be in
compliance with the 10 percent requirement of section 4(a)(2)(A) of the
Bank Act (12 U.S.C. 1424(a)(2)(A)) and Sec. 925.6(b) upon receipt by
the Bank from the applicant, within one year after commencement of the
applicant's initial business operations, of evidence acceptable to
[[Page 81]]
the Bank that the applicant satisfies the 10 percent requirement.
(4) Conditional approval deemed null and void. If the requirements
of paragraph (c)(3) of this section are not satisfied, a de novo
applicant shall be deemed to be in noncompliance with the 10 percent
requirement of section 4(a)(2)(A) of the Act (12 U.S.C. 1424(a)(2)(A))
and Sec. 925.6(b), and its conditional membership approval is deemed
null and void.
(5) Treatment of outstanding advances and Bank stock. If a de novo
applicant's conditional membership approval is deemed null and void
pursuant to paragraph (c)(4) of this section, the liquidation of any
outstanding indebtedness owed by the applicant to the Bank and
redemption of stock of such Bank shall be carried out in accordance with
Sec. 925.29.
(d) Home financing policy requirement--(1) Conditional approval. A
de novo applicant that has not received its first formal, or, if
unavailable, informal or preliminary, Community Reinvestment Act (CRA)
performance evaluation, shall be conditionally deemed to be in
compliance with the home financing policy requirement of section
4(a)(2)(C) of the Act (12 U.S.C. 1424(a)(2)(C)) and Sec. 925.6(a)(6),
if the applicant has filed as part of its application for membership a
written justification acceptable to the Bank of how and why its home
financing credit policy and lending practices will meet the credit needs
of its community. An applicant that receives such conditional membership
approval is subject to the stock purchase requirements of Sec. 925.20
and the advances provisions of part 950 of this chapter.
(2) Approval. A de novo applicant that has been granted conditional
approval under paragraph (d)(1) of this section shall be deemed to be in
compliance with the home financing policy requirement of section
4(a)(2)(C) of the Act (12 U.S.C. 1424(a)(2)(C)) and Sec. 925.6(a)(6)
upon receipt by the Bank of evidence from the applicant that it received
a CRA rating of ``Satisfactory'' or better on its first formal, or if
unavailable, informal or preliminary, CRA performance evaluation.
(3) Conditional approval deemed null and void. If the de novo
applicant's first such CRA rating is ``Needs to Improve'' or
``Substantial Non-Compliance,'' the applicant shall be deemed to be in
noncompliance with the home financing policy requirement of section
4(a)(2)(C) of the Act (12 U.S.C. 1424(a)(2)(C)) and Sec. 925.6(a)(6),
subject to rebuttal by the applicant under Sec. 925.17(f), and its
conditional membership approval is deemed null and void.
(4) Treatment of outstanding advances and Bank stock. If the
applicant's conditional membership approval is deemed null and void
pursuant to paragraph (d)(3) of this section, the liquidation of any
outstanding indebtedness owed by the applicant to the Bank and
redemption of stock of such Bank shall be carried out in accordance with
Sec. 925.29.
[67 FR 12848, Mar. 20, 2002]
Sec. 925.15 Recent merger or acquisition applicants.
An applicant that merged with or acquired another institution prior
to the date the Bank receives its application for membership is subject
to the requirements of Sec. Sec. 925.7 to 925.13 of this part except as
provided in this section.
(a) Financial condition requirement--(1) Regulatory financial
reports. For purposes of Sec. 925.11(a)(1) of this part, an applicant
that, as a result of a merger or acquisition preceding the date the Bank
receives its application for membership, has not yet filed regulatory
financial reports with its appropriate regulator for the last six
calendar quarters and three year-ends preceding such date, shall provide
any regulatory financial reports that the applicant has filed with its
appropriate regulator.
(2) Performance trend criteria. For purposes of Sec.
925.11(b)(3)(i) (A) to (C) of this part, an applicant that, as a result
of a merger or acquisition preceding the date the Bank receives its
application for membership, has not yet filed combined regulatory
financial reports with its appropriate regulator for the last six
calendar quarters preceding such date, shall provide pro forma combined
financial statements for those calendar quarters in which actual
combined regulatory financial reports are unavailable.
(b) Home financing policy requirement. For purposes of Sec. 925.13
of this part, an
[[Page 82]]
applicant that, as a result of a merger or acquisition preceding the
date the Bank receives its application for membership, has not received
its first formal, or if unavailable, informal or preliminary, Community
Reinvestment Act performance evaluation, shall file as part of its
application a written justification acceptable to the Bank of how and
why the applicant's home financing credit policy and lending practices
will meet the credit needs of its community.
(c) Makes long-term home mortgage loans requirement; 10 percent
requirement. For purposes of determining compliance with Sec. Sec.
925.9 and 925.10, a Bank may, in its discretion, permit an applicant
that, as a result of a merger or acquisition preceding the date the Bank
receives its application for membership, has not yet filed a
consolidated regulatory financial report as a combined entity with its
appropriate regulator, to provide the combined pro forma financial
statement for the combined entity filed with the regulator that approved
the merger or acquisition.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, 40024, July 27,
1998; 65 FR 8261, Feb. 18, 2000; 70 FR 9510, Feb. 28, 2005]
Sec. 925.16 Financial condition requirement for insurance company applicants.
An insurance company applicant shall be deemed to meet the financial
condition requirement of section 4(a)(2)(B) of the Act (12 U.S.C.
1424(a)(2)(B)) and Sec. 925.6(a)(4) of this part, if, based on the
information contained in the applicant's most recent regulatory
financial report filed with its appropriate regulator, the applicant
meets all of its minimum statutory and regulatory capital requirements
and the capital standards established by the National Association of
Insurance Commissioners.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 67 FR 12849, Mar. 20, 2002; 70 FR 9510, Feb.
28, 2005]
Sec. 925.17 Rebuttable presumptions.
(a) Rebutting presumptive compliance. The presumption that an
applicant meeting the requirements of Sec. Sec. 925.7 to 925.16 of this
part is in compliance with section 4(a) of the Act (12 U.S.C. 1424(a))
and Sec. 925.6 (a) and (b) of this part, may be rebutted, and the Bank
may deny membership to the applicant, if the Bank obtains substantial
evidence to overcome the presumption of compliance.
(b) Rebutting presumptive noncompliance. The presumption that an
applicant not meeting a particular requirement of Sec. Sec. 925.8,
925.11, 925.12, 925.13, or 925.16 of this part is in noncompliance with
section 4(a) of the Act (12 U.S.C. 1424(a)) and Sec. 925.6(a)(2), (4),
(5), or (6) of this part, may be rebutted, and the applicant shall be
deemed to meet such requirement, if the applicable requirements in this
section are satisfied.
(c) Presumptive noncompliance by insurance company applicant with
``subject to inspection and regulation'' requirement of Sec. 925.8. If
an insurance company applicant is not subject to inspection and
regulation by an appropriate state regulator accredited by the National
Association of Insurance Commissioners (NAIC), as required by Sec.
925.8 of this part, the applicant or the Bank shall prepare a written
justification that provides substantial evidence acceptable to the Bank
that the applicant is subject to inspection and regulation as required
by Sec. 925.6(a)(2) of this part, notwithstanding the lack of NAIC
accreditation.
(d) Presumptive noncompliance with financial condition requirements
of Sec. Sec. 925.11 and 925.16--(1) Applicants other than insurance
companies. For applicants other than insurance companies, in the case of
an applicant's lack of a composite regulatory examination rating within
the two-year period required by Sec. 925.11(b)(1) of this part, a
variance from the rating required by Sec. 925.11(b)(3)(i) of this part,
or a variance from a performance trend criterion required by Sec.
925.11(b)(3)(i) of this part, the applicant or the Bank shall prepare a
written justification pertaining to such requirement that provides
substantial evidence acceptable to the Bank that the applicant is in the
financial condition required by Sec. 925.6(a)(4) of this part,
notwithstanding the lack of rating or variance.
[[Page 83]]
(2) Insurance company applicants. In the case of an insurance
company applicant's variance from a capital requirement or standard of
Sec. 925.16 of this part, the applicant or the Bank shall prepare a
written justification pertaining to such requirement or standard that
provides substantial evidence acceptable to the Bank that the applicant
is in the financial condition required by Sec. 925.6(a)(4) of this
part, notwithstanding the variance.
(e) Presumptive noncompliance with character of management
requirement of Sec. 925.12--(1) Enforcement actions. If an applicant or
any of its directors or senior officers is subject to, or operating
under, any enforcement action instituted by its appropriate regulator,
the applicant shall provide or the Bank shall obtain:
(i) Regulator confirmation. Written or verbal confirmation from the
applicant's appropriate regulator that the applicant or its directors or
senior officers are in substantial compliance with all aspects of the
enforcement action; or
(ii) Written analysis. A written analysis acceptable to the Bank
indicating that the applicant or its directors or senior officers are in
substantial compliance with all aspects of the enforcement action. The
written analysis shall state each action the applicant or its directors
or senior officers are required to take by the enforcement action, the
actions actually taken by the applicant or its directors or senior
officers, and whether the applicant regards this as substantial
compliance with all aspects of the enforcement action.
(2) Criminal, civil or administrative proceedings. If an applicant
or any of its directors or senior officers has been the subject of any
criminal, civil or administrative proceedings reflecting upon
creditworthiness, business judgment, or moral turpitude since the most
recent regulatory examination report, the applicant shall provide or the
Bank shall obtain:
(i) Regulator confirmation. Written or verbal confirmation from the
applicant's appropriate regulator that the proceedings will not likely
result in enforcement action; or
(ii) Written analysis. A written analysis acceptable to the Bank
indicating that the proceedings will not likely result in enforcement
action. The written analysis shall state the severity of the charges,
and any mitigating action taken by the applicant or its directors or
senior officers.
(3) Criminal, civil or administrative monetary liabilities, lawsuits
or judgments. If there are any known potential criminal, civil or
administrative monetary liabilities, material pending lawsuits, or
unsatisfied judgments against the applicant or any of its directors or
senior officers since the most recent regulatory examination report,
that are significant to the applicant's operations, the applicant shall
provide or the Bank shall obtain:
(i) Regulator confirmation. Written or verbal confirmation from the
applicant's appropriate regulator that the liabilities, lawsuits or
judgments will not likely cause the applicant to fall below its
applicable capital requirements set forth in Sec. Sec. 925.11(b)(2) and
925.16 of this part; or
(ii) Written analysis. A written analysis acceptable to the Bank
indicating that the liabilities, lawsuits or judgments will not likely
cause the applicant to fall below its applicable capital requirements
set forth in Sec. Sec. 925.11(b)(2) and 925.16 of this part. The
written analysis shall state the likelihood of the applicant or its
directors or senior officers prevailing, and the financial consequences
if the applicant or its directors or senior officers do not prevail.
(f) Presumptive noncompliance with home financing policy
requirements of Sec. Sec. 925.13 and 925.14(d). If an applicant
received a ``Substantial Non-Compliance'' rating on its most recent
formal, or if unavailable, informal or preliminary, Community
Reinvestment Act (CRA) performance evaluation, or a ``Needs to Improve''
CRA rating on its most recent formal, or if unavailable, informal or
preliminary, CRA performance evaluation and a CRA rating of ``Needs to
Improve'' or better on any immediately preceding CRA performance
evaluation, the applicant shall provide or the Bank shall obtain:
[[Page 84]]
(1) Regulator confirmation. Written or verbal confirmation from the
applicant's appropriate regulator of the applicant's recent satisfactory
CRA performance, including any corrective action that substantially
improved upon the deficiencies cited in the most recent CRA performance
evaluation(s); or
(2) Written analysis. A written analysis acceptable to the Bank
demonstrating that the CRA rating is unrelated to home financing, and
providing substantial evidence of how and why the applicant's home
financing credit policy and lending practices meet the credit needs of
its community.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 40023, July 27, 1998;
65 FR 8261, Feb. 18, 2000; 67 FR 12849, Mar. 20, 2002; 70 FR 9510, Feb.
28, 2005]
Sec. 925.18 Determination of appropriate Bank district for membership.
(a) Eligibility. (1) An institution eligible to become a member of a
Bank under the Act and this part may become a member only of the Bank of
the district in which the institution's principal place of business is
located, except as provided in paragraph (a)(2) of this section. A
member shall promptly notify its Bank in writing whenever it relocates
its principal place of business to another state and the Bank shall
inform the Finance Board in writing of any such relocation.
(2) An institution eligible to become a member of a Bank under the
Act and this part may become a member of the Bank of a district
adjoining the district in which the institution's principal place of
business is located, if demanded by convenience and then only with the
approval of the Finance Board.
(b) Principal place of business. Except as otherwise designated in
accordance with this section, the principal place of business of an
institution is the state in which the institution maintains its home
office established as such in conformity with the laws under which the
institution is organized.
(c) Designation of principal place of business. (1) A member or an
applicant for membership may request in writing to the Bank in the
district where the institution maintains its home office that a state
other than the state in which it maintains its home office be designated
as its principal place of business. Within 90 calendar days of receipt
of such written request, the board of directors of the Bank in the
district where the institution maintains its home office shall designate
a state other than the state where the institution maintains its home
office as the institution's principal place of business, provided all of
the following criteria are satisfied:
(i) At least 80 percent of the institution's accounting books,
records and ledgers are maintained, located or held in such designated
state;
(ii) A majority of meetings of the institution's board of directors
and constituent committees are conducted in such designated state; and
(iii) A majority of the institution's five highest paid officers
have their place of employment located in such designated state.
(2) Written notice of a designation made pursuant to paragraph
(c)(1) of this section shall be sent to the Bank in the district
containing the designated state, the Finance Board and the institution.
(3) The notice of designation made pursuant to paragraph (c)(1) of
this section shall include the state designated as the principal place
of business and the resulting Bank to which membership will be
transferred.
(4) If the board of directors of the Bank in the district where the
institution maintains its home office fails to make the designation
requested by the member or applicant pursuant to paragraph (c)(1) of
this section, then the member or applicant may request in writing that
the Finance Board make the designation.
(d) Transfer of membership. (1) No transfer of membership from one
Bank to another Bank shall take effect until the Banks involved reach
agreement on a method of orderly transfer.
(2) In the event that the Banks involved fail to agree on a method
of orderly transfer, the Finance Board shall determine the conditions
under which the transfer shall take place.
(e) Effect of transfer. A transfer of membership pursuant to this
section shall be effective for all purposes, but shall not affect voting
rights in the
[[Page 85]]
year of the transfer and shall not be subject to the provisions on
termination of membership set forth in section 6 of the Act (12 U.S.C.
1426) or Sec. Sec. 925.26 and 925.27, nor the restriction on
reacquiring Bank membership set forth in Sec. 925.30.
[61 FR 42545, Aug. 16, 1996, as amended at 63 FR 65692, Nov. 30, 1998;
65 FR 8261, Feb. 18, 2000; 65 FR 13870, Mar. 15, 2000; 67 FR 12849, Mar.
20, 2002; 70 FR 9510, Feb. 28, 2005]
Subpart D_Stock Requirements
Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted.
Redesignated at 61 FR 42542, Aug. 16, 1996.
Sec. 925.19 Par value and price of stock.
The capital stock of each Bank shall be sold at par, unless the
Board has fixed a higher price.
Sec. 925.20 Stock purchase.
(a) Minimum stock purchase. Each member shall purchase stock in the
Bank in which it is a member in an amount equal to the greater of:
(1) $500;
(2) 1 percent of the member's aggregate unpaid loan principal; or
(3) 5 percent of the member's aggregate amount of outstanding
advances.
(b) Timing of minimum stock purchase. (1) Within 60 calendar days
after an institution is approved for membership in a Bank pursuant to
Sec. 925.3 of this part, or an institution is automatically approved
for membership pursuant to Sec. 925.4(c) of this part, the institution
shall purchase its minimum stock requirement as set forth in paragraph
(a) of this section.
(2) At the election of an institution approved for membership,
including those automatically approved under Sec. 925.4(c) of this
part, the institution may purchase its minimum stock requirement in
installments, provided that not less than one-fourth of the total amount
shall be purchased within 60 calendar days of the date of approval of
membership, and that a further sum of not less than one-fourth of such
total shall be purchased at the end of each succeeding period of four
months from the date of approval of membership.
(c) Commencement of membership. An institution that has been
approved for membership shall become a member at the time it purchases
its minimum stock requirement or the first installment thereof pursuant
to this section.
(d) Failure to purchase minimum stock requirement. If an institution
that has submitted an application and been approved for membership fails
to purchase its minimum stock requirement or its first installment
within 60 calendar days of the date of its approval for membership, such
approval shall be null and void and the institution, if it wants to be a
member, shall be required to submit a new application for membership.
(e) Reports. The Bank shall make reports to the Finance Board
setting forth purchases by institutions approved for membership of their
minimum stock requirement pursuant to this section in accordance with
the instructions provided in the Data Reporting Manual issued by the
Finance Board, as amended from time to time.
[58 FR 43542, Aug. 17, 1993; 58 FR 47181, Sept. 7, 1993. Redesignated
and amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 40024, July 27,
1998; 63 FR 65692, Nov. 30, 1998; 65 FR 8261, Feb. 18, 2000; 65 FR
13870, Mar. 15, 2000; 71 FR 35500, June 21, 2006]
Sec. 925.21 Issuance and form of stock.
(a) A Bank shall issue to each new member, as of the effective date
of membership, stock in the member's name for the amount of stock
purchased and paid for in full.
(b) If the member purchases stock in installments, the stock shall
be issued in installments with the appropriate number of shares issued
after each payment is made.
(c) Stock may be issued in certificated or uncertificated form at
the discretion of the Bank.
(d) A Bank may convert all outstanding certificated stock to
uncertificated form at its discretion.
Sec. 925.22 Adjustments in stock holdings.
(a) Adjustment in general. A Bank may from time to time increase or
decrease the amount of stock any member is required to hold.
(b)(1) Annual adjustment. A Bank shall calculate annually, in the
manner
[[Page 86]]
set forth in Sec. 925.20(a) of this part, each member's required
minimum holdings of stock in the Bank in which it is a member using
calendar year-end financial data provided by the member to the Bank,
pursuant to Sec. 925.31(d) of this part, and shall notify each member
of the adjustment. The notice shall clearly state that the Bank's
calculation of each member's minimum stock holdings is to be used to
determine the number of votes that the member may cast in that year's
election of directors and shall identify the state within the district
in which the member will vote. A member that does not agree with the
Bank's calculation of the minimum stock requirement or with the
identification of its voting state may request the Finance Board to
review the Bank's determination. The Finance Board shall promptly
determine the member's minimum required holdings and its proper voting
state, which determination shall be final.
(2) Redemption of excess shares. If, after the annual adjustment
required by paragraph (b)(1) of this section is made, the amount of
stock that a member is required to hold is decreased, the Bank may, in
its discretion and upon proper application of the member, retire such
excess stock, and the Bank shall pay for each share upon surrender of
the stock an amount equal to the par value thereof (except that if at
any time the Finance Board finds that the paid-in capital of a Bank is
or is likely to be impaired as a result of losses in or depreciation of
the assets held, the Bank shall on the order of the Finance Board
withhold from the amount to be paid in retirement of the stock a pro
rata share of the amount of such impairment as determined by the Finance
Board) or, at its election, the Bank may credit any part of such payment
against the member's debt to the Bank.
(c) A member's stock holdings shall not be reduced under this
section to an amount less than required by sections 6(b), 10(c) and
10(e) of the Act (12 U.S.C. 1426(b), 1430(c), 1430(e)).
[58 FR 43542, Aug. 17, 1993, as amended at 58 FR 50837, Sept. 29, 1993;
58 FR 53023, Oct. 13, 1993; 58 FR 58231, Oct. 29, 1993. Redesignated and
amended at 61 FR 42542, 42549, Aug. 16, 1996; 63 FR 65692, Nov. 30,
1998; 65 FR 8261, Feb. 18, 2000; 67 FR 12849, Mar. 20, 2002; 70 FR 9510,
Feb. 28, 2005]
Sec. 925.23 Excess stock.
(a) Sale of excess stock. Subject to the restriction in paragraph
(b) of this section, a member may purchase excess stock as long as the
purchase is approved by the member's Bank and is permitted by the laws
under which the member operates.
(b) Restriction. Any Bank with excess stock greater than 1 percent
of its total assets shall not declare or pay any dividends in the form
of additional shares of Bank stock or otherwise issue any excess stock.
A Bank shall not issue excess stock, as a dividend or otherwise, if
after the issuance, the outstanding excess stock at the Bank would be
greater than 1 percent of its total assets.
[71 FR 78051, Dec. 28, 2006]
Subpart E_Consolidations Involving Members
Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted.
Redesignated at 61 FR 42542, Aug. 16, 1996.
Sec. 925.24 Consolidations involving members.
(a) Consolidation of members. Upon the consolidation of two or more
institutions that are members of the same Bank into one institution
operating under the charter of one of the consolidating institutions,
the membership of the surviving institution shall continue and the
membership of each disappearing institution shall terminate on the
cancellation of its charter. Upon the consolidation of two or more
institutions, at least two of which are members of different Banks, into
one institution operating under the charter of one of the consolidating
institutions, the membership of the surviving institution shall continue
and the membership of each disappearing institution shall terminate upon
cancellation of
[[Page 87]]
its charter, provided, however, that if more than 80 percent of the
assets of the consolidated institution are derived from the assets of a
disappearing institution, then the consolidated institution shall
continue to be a member of the Bank of which that disappearing
institution was a member prior to the consolidation, and the membership
of the other institutions shall terminate upon the effective date of the
consolidation.
(b) Consolidation into nonmember--(1) In general. Upon the
consolidation of a member into an institution that is not a member of a
Bank, where the consolidated institution operates under the charter of
the nonmember institution, the membership of the disappearing
institution shall terminate upon the cancellation of its charter.
(2) Notification. If a member has consolidated into a nonmember that
has its principal place of business in a state in the same Bank district
as the former member, the consolidated institution shall have 60
calendar days after the cancellation of the charter of the former member
within which to notify the Bank of the former member that the
consolidated institution intends to apply for membership in such Bank.
If the consolidated institution does not so notify the Bank by the end
of the period, the Bank shall require the liquidation of any outstanding
indebtedness owed by the former member, shall settle all outstanding
business transactions with the former member, and shall redeem or
repurchase the Bank stock owned by the former member in accordance with
Sec. 925.29.
(3) Application. If such a consolidated institution has notified the
appropriate Bank of its intent to apply for membership, the consolidated
institution shall submit an application for membership within 60
calendar days of so notifying the Bank. If the consolidated institution
does not submit an application for membership by the end of the period,
the Bank shall require the liquidation of any outstanding indebtedness
owed by the former member, shall settle all outstanding business
transactions with the former member, and shall redeem or repurchase the
Bank stock owned by the former member in accordance with Sec. 925.29.
(4) Outstanding indebtedness. If a member has consolidated into a
nonmember institution, the Bank need not require the former member or
its successor to liquidate any outstanding indebtedness owed to the Bank
or to redeem its Bank stock, as otherwise may be required under Sec.
925.29, during:
(i) The initial 60 calendar-day notification period;
(ii) The 60 calendar-day period following receipt of a notification
that the consolidated institution intends to apply for membership; and
(iii) The period of time during which the Bank processes the
application for membership.
(5) Approval of membership. If the application of such a
consolidated institution is approved, the consolidated institution shall
become a member of that Bank upon the purchase of the amount of Bank
stock required by section 6 of the Act (12 U.S.C. 1426). If a Bank's
capital plan has not taken effect, the amount of stock that the
consolidated institution is required to own shall be as provided in
Sec. 925.20 and Sec. 925.22. If the capital plan for the Bank has
taken effect, the amount of stock that the consolidated institution is
required to own shall be equal to the minimum investment established by
the capital plan for that Bank.
(6) Disapproval of membership. If the Bank disapproves the
application for membership of the consolidated institution, the Bank
shall require the liquidation of any outstanding indebtedness owed by,
and the settlement of all other outstanding business transactions with,
the former member, and shall redeem or repurchase the Bank stock owned
by the former member in accordance with Sec. 925.29.
(c) Dividends on acquired Bank stock. A consolidated institution
shall be entitled to receive dividends on the Bank stock that it
acquires as a result of a consolidation with a member in accordance with
Sec. 931.4(a) of this chapter.
(d) Stock transfers. With regard to any transfer of Bank stock from
a disappearing member to the surviving or consolidated member, as
appropriate, for which the approval of the Finance Board is required
pursuant to section 6(f) of the Act (12 U.S.C. 1426(f)), as in effect
prior to November 12, 1999, such
[[Page 88]]
transfer shall be deemed to be approved by the Finance Board by
compliance in all applicable respects with the requirements of this
section.
[66 FR 8308, Jan. 30, 2001, as amended at 67 FR 12849, Mar. 20, 2002; 70
FR 9510, Feb. 28, 2005]
Subpart F_Withdrawal and Removal From Membership
Source: 58 FR 43542, Aug. 17, 1993, unless otherwise noted.
Redesignated at 61 FR 42542, Aug. 16, 1996.
Sec. 925.26 Voluntary withdrawal from membership.
(a) In general. (1) Any institution may withdraw from membership by
providing to the Bank written notice of its intent to withdraw from
membership. A member that has so notified its Bank shall be entitled to
have continued access to the benefits of membership until the effective
date of its withdrawal, but the Bank need not commit to providing any
further services, including advances, to a withdrawing member that would
mature or otherwise terminate subsequent to the effective date of the
withdrawal. A member may cancel its notice of withdrawal at any time
prior to its effective date by providing a written cancellation notice
to the Bank. A Bank may impose a fee on a member that cancels a notice
of withdrawal, provided that the fee or the manner of its calculation is
specified in the Bank's capital plan.
(2) A Bank shall notify the Finance Board within 10 calendar days of
receipt of any notice of withdrawal or notice of cancellation of
withdrawal from membership.
(b) Effective date of withdrawal. The membership of an institution
that has submitted a notice of withdrawal shall terminate as of the date
on which the last of the applicable stock redemption periods ends for
the stock that the member is required to hold, as of the date that the
notice of withdrawal is submitted, under the terms of a Bank's capital
plan as a condition of membership, unless the institution has cancelled
its notice of withdrawal prior to the effective date of the termination
of its membership.
(c) Stock redemption periods. The receipt by a Bank of a notice of
withdrawal shall commence the applicable 6-month and 5-year stock
redemption periods, respectively, for all of the Class A and Class B
stock held by that member that is not already subject to a pending
request for redemption. In the case of an institution the membership of
which has been terminated as a result of a merger or other consolidation
into a nonmember or into a member of another Bank, the applicable stock
redemption periods for any stock that is not subject to a pending notice
of redemption shall be deemed to commence on the date on which the
charter of the former member is cancelled.
(d) Certification. No institution may withdraw from membership
unless, on the date that the membership is to terminate, there is in
effect a certification from the Finance Board that the withdrawal of a
member will not cause the Bank System to fail to satisfy its
requirements under section 21B(f)(2)(C) of the Act (12 U.S.C.
1441b(f)(2)(C)) to contribute toward the interest payments owed on
obligations issued by the Resolution Funding Corporation.
[66 FR 8309, Jan. 30, 2001, as amended at 66 FR 54107, Oct. 26, 2001; 67
FR 12849, Mar. 20, 2002; 70 FR 9510, Feb. 28, 2005]
Sec. 925.27 Involuntary termination of membership.
(a) Grounds. The board of directors of a Bank may terminate the
membership of any institution that:
(1) Fails to comply with any requirement of the Act, any regulation
adopted by the Finance Board, or any requirement of the Bank's capital
plan;
(2) Becomes insolvent or otherwise subject to the appointment of a
conservator, receiver, or other legal custodian under federal or state
law; or
(3) Would jeopardize the safety or soundness of the Bank if it were
to remain a member.
(b) Stock redemption periods. The applicable 6-month and 5-year
stock redemption periods, respectively, for all of the Class A and Class
B stock owned by a member and not already subject to a pending request
for redemption, shall commence on the date that the Bank terminates the
institution's membership.
[[Page 89]]
(c) Membership rights. An institution whose membership is terminated
involuntarily under this section shall cease being a member as of the
date on which the board of directors of the Bank acts to terminate the
membership, and the institution shall have no right to obtain any of the
benefits of membership after that date, but shall be entitled to receive
any dividends declared on its stock until the stock is redeemed or
repurchased by the Bank.
[66 FR 8309, Jan. 30, 2001, as amended at 66 FR 54107, Oct. 26, 2001]
Subpart G_Orderly Liquidation of Advances and Redemption of Stock
Sec. 925.29 Disposition of claims.
(a) In general. If an institution withdraws from membership or its
membership is otherwise terminated, the Bank shall determine an orderly
manner for liquidating all outstanding indebtedness owed by that member
to the Bank and for settling all other claims against the member. After
all such obligations and claims have been extinguished or settled, the
Bank shall return to the member all collateral pledged by the member to
the Bank to secure its obligations to the Bank.
(b) Bank stock. If an institution that has withdrawn from membership
or that otherwise has had its membership terminated remains indebted to
the Bank or has outstanding any business transactions with the Bank
after the effective date of its termination of membership, the Bank
shall not redeem or repurchase any Bank stock that is required to
support the indebtedness or the business transactions until after all
such indebtedness and business transactions have been extinguished or
settled.
[66 FR 8310, Jan. 30, 2001]
Subpart H_Reacquisition of Membership
Sec. 925.30 Readmission to membership.
(a) In general. An institution that has withdrawn from membership or
otherwise has had its membership terminated and which has divested all
of its shares of Bank stock, may not be readmitted to membership in any
Bank, or acquire any capital stock of any Bank, for a period of 5 years
from the date on which its membership terminated and it divested all of
its shares of Bank stock.
(b) Exceptions. An institution that transfers membership between two
Banks without interruption shall not be deemed to have withdrawn from
Bank membership or had its membership terminated. Any institution that
withdrew from Bank membership prior to December 31, 1997, and for which
the 5-year period has not expired, may apply for membership in a Bank at
any time, subject to the approval of the Finance Board and the
requirements of this part 925.
[66 FR 8310, Jan. 30, 2001]
Subpart I_Bank Access to Information
Sec. 925.31 Reports and examinations.
As a condition precedent to Bank membership, each member:
(a) Consents to such examinations as the Bank or the Finance Board
may require for purposes of the Act;
(b) Agrees that reports of examinations by local, state or federal
agencies or institutions may be furnished by such authorities to the
Bank or the Finance Board upon request;
(c) Agrees to give the Bank or the appropriate Federal banking
agency, upon request, such information as the Bank or the appropriate
Federal banking agency may need to compile and publish cost of funds
indices and to publish other reports or statistical summaries pertaining
to the activities of Bank members;
(d) Agrees to provide the Bank with calendar year-end financial data
each year, for purposes of making the calculation described in Sec.
925.22(b)(1) of this part; and
(e) Agrees to provide the Bank with copies of reports of condition
and operations required to be filed with the member's appropriate
Federal banking agency, if applicable, within 20 calendar days of
filing, as well as copies of
[[Page 90]]
any annual report of condition and operations required to be filed.
[58 FR 43542, Aug. 17, 1993; 58 FR 50837, Sept. 29, 1993; 58 FR 53023,
Oct. 13, 1993. Redesignated and amended at 61 FR 42542, 42549, Aug. 16,
1996; 65 FR 8262, Feb. 18, 2000; 67 FR 12849, Mar. 20, 2002; 70 FR 9510,
Feb. 28, 2005]
Subpart J_Membership Insignia
Sec. 925.32 Official membership insignia.
Members may display the approved insignia of membership on their
documents, advertising and quarters, and likewise use the words ``Member
Federal Home Loan Bank System.''
[58 FR 43542, Aug. 17, 1993. Redesignated at 61 FR 42542, Aug. 16, 1996]
PART 926_FEDERAL HOME LOAN BANK HOUSING ASSOCIATES--Table of Contents
Sec.
926.1 Definitions.
926.2 Bank authority to make advances to housing associates.
926.3 Housing associate eligibility requirements.
926.4 Satisfaction of eligibility requirements.
926.5 Housing associate application process.
926.6 Appeals.
Authority: 12 U.S.C. 1422b(a), 1430b.
Source: 65 FR 44426, July 18, 2000, unless otherwise noted.
Sec. 926.1 Definitions.
As used in this part:
Governmental agency means the governor, legislature, and any other
component of a federal, state, local, tribal, or Alaskan native village
government with authority to act for or on behalf of that government.
State housing finance agency or SHFA means:
(1) A public agency, authority, or publicly sponsored corporation
that serves as an instrumentality of any state or political subdivision
of any state, and functions as a source of residential mortgage loan
financing in that state; or
(2) A legally established agency, authority, corporation, or
organization that serves as an instrumentality of any Indian tribe,
band, group, nation, community, or Alaskan Native village recognized by
the United States or any state, and functions as a source of residential
mortgage loan financing for the Indian or Alaskan Native community.
[65 FR 44426, July 18, 2000, as amended at 67 FR 12849, Mar. 20, 2002]
Sec. 926.2 Bank authority to make advances to housing associates.
Subject to the provisions of the Act and part 950 of this chapter, a
Bank may make advances to an entity that is not a member of the Bank if
the Bank has certified the entity as a housing associate under the
provisions of this part.
Sec. 926.3 Housing associate eligibility requirements.
(a) General. A Bank may certify as a housing associate any applicant
that meets the following requirements, as determined using the criteria
set forth in Sec. 926.4:
(1) The applicant is approved under title II of the National Housing
Act (12 U.S.C. 1707, et seq.);
(2) The applicant is a chartered institution having succession;
(3) The applicant is subject to the inspection and supervision of
some governmental agency;
(4) The principal activity of the applicant in the mortgage field
consists of lending its own funds; and
(5) The financial condition of the applicant is such that advances
may be safely made to it.
(b) State housing finance agencies. In addition to meeting the
requirements in paragraph (a) of this section, any applicant seeking
access to advances as a SHFA pursuant to Sec. 950.17(b)(2) of this
chapter shall provide evidence satisfactory to the Bank, such as a copy
of, or a citation to, the statutes and/or regulations describing the
applicant's structure and responsibilities, that the applicant is a
state housing finance agency as defined in Sec. 926.1.
Sec. 926.4 Satisfaction of eligibility requirements.
(a) HUD approval requirement. An applicant shall be deemed to meet
the requirement in section 10b(a) of the Act (12 U.S.C. 1430b(a)) and
Sec. 926.3(a)(1) that it be approved under title II of the National
Housing Act if it submits a current HUD Yearly Verification Report
[[Page 91]]
or other documentation issued by HUD stating that the Federal Housing
Administration of HUD has approved the applicant as a mortgagee.
(b) Charter requirement. An applicant shall be deemed to meet the
requirement in section 10b(a) of the Act and Sec. 926.3(a)(2) that it
be a chartered institution having succession if it provides evidence
satisfactory to the Bank, such as a copy of, or a citation to, the
statutes and/or regulations under which the applicant was created, that:
(1) The applicant is a government agency; or
(2) The applicant is chartered under state, federal, local, tribal,
or Alaskan Native village law as a corporation or other entity that has
rights, characteristics, and powers under applicable law similar to
those granted a corporation.
(c) Inspection and supervision requirement. (1) An applicant shall
be deemed to meet the inspection and supervision requirement in section
10b(a) of the Act (12 U.S.C. 1430b(a)) and Sec. 926.3(a)(3) if it
provides evidence satisfactory to the Bank, such as a copy of, or a
citation to, relevant statutes and/or regulations, that, pursuant to
statute or regulation, the applicant is subject to the inspection and
supervision of a federal, state, local, tribal, or Alaskan native
village governmental agency.
(2) An applicant shall be deemed to meet the inspection requirement
if there is a statutory or regulatory requirement that the applicant be
audited or examined periodically by a governmental agency or by an
external auditor.
(3) An applicant shall be deemed to meet the supervision requirement
if the governmental agency has statutory or regulatory authority to
remove an applicant's officers or directors for cause or otherwise
exercise enforcement or administrative control over actions of the
applicant.
(d) Mortgage activity requirement. An applicant shall be deemed to
meet the mortgage activity requirement in section 10b(a) of the Act (12
U.S.C. 1430b(a)) and Sec. 926.3(a)(4) if it provides documentary
evidence satisfactory to the Bank, such as a financial statement or
other financial documents that include the applicant's mortgage loan
assets and their funding liabilities, that it lends its own funds as its
principal activity in the mortgage field. For purposes of this
paragraph, lending funds includes, but is not limited to, the purchase
of whole mortgage loans. In the case of a federal, state, local, tribal,
or Alaskan Native village government agency, appropriated funds shall be
considered an applicant's own funds. An applicant shall be deemed to
satisfy this requirement notwithstanding that the majority of its
operations are unrelated to mortgage lending if its mortgage activity
conforms to this requirement. An applicant that acts principally as a
broker for others making mortgage loans, or whose principal activity is
to make mortgage loans for the account of others, does not meet this
requirement.
(e) Financial condition requirement. An applicant shall be deemed to
meet the financial condition requirement in Sec. 926.3(a)(5) if the
Bank determines that advances may be safely made to the applicant. The
applicant shall submit to the Bank copies of its most recent regulatory
audit or examination report, or external audit report, and any other
documentary evidence, such as financial or other information, that the
Bank may require to make the determination.
[65 FR 44426, July 18, 2000, as amended at 67 FR 12849, Mar. 20, 2002;
70 FR 9510, Feb. 28, 2005]
Sec. 926.5 Housing associate application process.
(a) Authority. The Banks are authorized to approve or deny all
applications for certification as a housing associate, subject to the
requirements of the Act and this part. A Bank may delegate the authority
to approve applications for certification as a housing associate only to
a committee of the Bank's board of directors, the Bank president, or a
senior officer who reports directly to the Bank president other than an
officer with responsibility for business development.
(b) Application requirements. An applicant for certification as a
housing associate shall submit an application that satisfies the
requirements of the Act and this part to the Bank of the district in
which the applicant's principal
[[Page 92]]
place of business, as determined in accordance with part 925 of this
chapter, is located.
(c) Bank decision process--(1) Action on applications. A Bank shall
approve or deny an application for certification as a housing associate
within 60 calendar days of the date the Bank deems the application to be
complete. A Bank shall deem an application complete, and so notify the
applicant in writing, when it has obtained all of the information
required by this part and any other information it deems necessary to
process the application. If a Bank determines during the review process
that additional information is necessary to process the application, the
Bank may deem the application incomplete and stop the 60-day time period
by providing written notice to the applicant. When the Bank receives the
additional information, it shall again deem the application complete, so
notify the applicant in writing, and resume the 60-day time period where
it stopped.
(2) Decision on applications. The Bank or a duly delegated committee
of the Bank's board of directors, the Bank president, or a senior
officer who reports directly to the Bank president other than an officer
with responsibility for business development shall approve, or the board
of directors of a Bank shall deny, each application for certification as
a housing associate by a written decision resolution stating the grounds
for the decision. Within three business days of a Bank's decision on an
application, the Bank shall provide the applicant and the Finance Board
with a copy of the Bank's decision resolution.
(3) File. The Bank shall maintain a certification file for each
applicant for at least three years after the date the Bank decides
whether to approve or deny certification or the date the Finance Board
resolves any appeal, whichever is later. At a minimum, the certification
file shall include all documents submitted by the applicant or otherwise
obtained or generated by the Bank concerning the applicant, all
documents the Bank relied upon in making its determination regarding
certification, including copies of statutes and regulations, and the
decision resolution.
[65 FR 44426, July 18, 2000, as amended at 70 FR 9510, Feb. 28, 2005]
Sec. 926.6 Appeals.
(a) General. Within 90 calendar days of the date of a Bank's
decision to deny an application for certification as a housing
associate, the applicant may submit a written appeal to the Finance
Board that includes the Bank's decision resolution and a statement of
the basis for the appeal with sufficient facts, information, analysis,
and explanation to support the applicant's position. Appeals shall be
sent to the Federal Housing Finance Board, 1777 F Street, NW,
Washington, DC 20006, with a copy to the Bank.
(b) Record for appeal. Upon receiving a copy of an appeal, the Bank
whose action has been appealed shall provide to the Finance Board a
complete copy of the applicant's certification file maintained by the
Bank under Sec. 926.5(c)(3). Until the Finance Board resolves the
appeal, the Bank shall promptly provide to the Finance Board any
relevant new materials it receives. The Finance Board may request
additional information or further supporting arguments from the
applicant, the Bank, or any other party that the Finance Board deems
appropriate.
(c) Deciding appeals. Within 90 calendar days of the date an
applicant files an appeal with the Finance Board, the Finance Board
shall consider the record for appeal described in paragraph (b) of this
section and resolve the appeal based on the requirements of the Act and
this part.
[65 FR 44426, July 18, 2000, as amended at 70 FR 9510, Feb. 28, 2005]
[[Page 93]]
SUBCHAPTER E_FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL
STANDARDS
PART 930_DEFINITIONS APPLYING TO RISK MANAGEMENT AND CAPITAL REGULATIONS--Table of Contents
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1436(a), 1440,
1443, and 1446.
Sec. 930.1 Definitions.
As used in this subchapter:
Affiliated counterparty means a counterparty of a Bank that
controls, is controlled by or is under common control with another
counterparty of the Bank. For the purposes of this definition only,
direct or indirect ownership (including beneficial ownership) of more
than 50 percent of the voting securities or voting interests of an
entity constitutes control.
Certain drawdown means a legally binding agreement that commits the
Bank to make an advance or acquire a loan, at or by a specified future
date.
Charges against the capital of the Bank means an other than
temporary decline in the Bank's total equity that causes the value of
total equity to fall below the Bank's aggregate capital stock amount.
Class A stock means capital stock issued by a Bank, including
subclasses, that has the characteristics specified by Sec. 931.1(a) of
this subchapter.
Class B stock means capital stock issued by a Bank, including
subclasses, that has the characteristics specified by Sec. 931.1(b) of
this subchapter.
Contingency liquidity means the sources of cash a Bank may use to
meet its operational requirements when its access to the capital markets
is impeded, and includes:
(1) Marketable assets with a maturity of one year or less;
(2) Self-liquidating assets with a maturity of seven days or less;
(3) Assets that are generally accepted as collateral in the
repurchase agreement market; and
(4) Irrevocable lines of credit from financial institutions rated
not lower than the second highest credit rating category by an NRSRO.
Credit derivative contract means a derivative contract that
transfers credit risk.
Credit risk means the risk that the market value, or estimated fair
value if market value is not available, of an obligation will decline as
a result of deterioration in creditworthiness.
Derivative contract means generally a financial contract the value
of which is derived from the values of one or more underlying assets,
reference rates, or indices of asset values, or credit-related events.
Derivative contracts include interest rate, foreign exchange rate,
equity, precious metals, commodity, and credit contracts, and any other
instruments that pose similar risks.
Exchange rate contracts include cross-currency interest-rate swaps,
forward foreign exchange rate contracts, currency options purchased, and
any similar instruments that give rise to similar risks.
General allowance for losses means an allowance established by a
Bank in accordance with GAAP for losses, but which does not include any
amounts held against specific assets of the Bank.
Government Sponsored Enterprise, or GSE, means a United States
Government-sponsored agency or instrumentality originally established or
chartered to serve public purposes specified by the United States
Congress, but whose obligations are not obligations of the United States
and are not guaranteed by the United States.
Interest rate contracts include, single currency interest-rate
swaps, basis swaps, forward rate agreements, interest-rate options, and
any similar instrument that gives rise to similar risks, including when-
issued securities.
Investment grade means:
(1) A credit quality rating in one of the four highest credit rating
categories by an NRSRO and not below the fourth highest rating category
by any NRSRO; or
(2) If there is no credit quality rating by an NRSRO, a
determination by a
[[Page 94]]
Bank that the issuer, asset or instrument is the credit equivalent of
investment grade using credit rating standards available from an NRSRO
or other similar standards.
Market risk means the risk that the market value, or estimated fair
value if market value is not available, of a Bank's portfolio will
decline as a result of changes in interest rates, foreign exchange
rates, equity and commodity prices.
Marketable means, with respect to an asset, that the asset can be
sold with reasonable promptness at a price that corresponds reasonably
to its fair value.
Market value at risk is the loss in the market value of a Bank's
portfolio measured from a base line case, where the loss is estimated in
accordance with Sec. 932.5 of this chapter.
Minimum investment means the minimum amount of Class A and/or Class
B stock that a member is required to own in order to be a member of a
Bank and in order to obtain advances and to engage in other business
activities with the Bank in accordance with Sec. 931.3 of this chapter.
Operations risk means the risk of an unexpected loss to a Bank
resulting from human error, fraud, unenforceability of legal contracts,
or deficiencies in internal controls or information systems.
Permanent capital means the retained earnings of a Bank, determined
in accordance with GAAP, plus the amount paid-in for the Bank's Class B
stock.
Redeem or Redemption means the acquisition by a Bank of its
outstanding Class A or Class B stock at par value following the
expiration of the six-month or five-year statutory redemption period,
respectively, for the stock.
Regulatory risk-based capital requirement means the amount of
permanent capital that a Bank is required to maintain in accordance with
Sec. 932.3 of this chapter.
Regulatory total capital requirement means the amount of total
capital that a Bank is required to maintain in accordance with Sec.
932.2 of this chapter.
Repurchase means the acquisition by a Bank of excess stock prior to
the expiration of the six-month or five-year statutory redemption period
for the stock.
Repurchase agreement means an agreement between a seller and a buyer
whereby the seller agrees to repurchase a security or similar securities
at an agreed upon price, with or without a stated time for repurchase.
Sales of federal funds subject to a continuing contract means an
overnight federal funds loan that is automatically renewed each day
unless terminated by either the lender or the borrower.
Total assets means the total assets of a Bank, as determined in
accordance with GAAP.
Total capital of a Bank means the sum of permanent capital, the
amounts paid-in for Class A stock, the amount of any general allowance
for losses, and the amount of other instruments identified in a Bank's
capital plan that the Finance Board has determined to be available to
absorb losses incurred by such Bank.
Walkaway clause means a provision in a bilateral netting contract
that permits a nondefaulting counterparty to make a lower payment than
it would make otherwise under the bilateral netting contract, or no
payment at all, to a defaulter or the estate of a defaulter, even if the
defaulter or the estate of the defaulter is a net creditor under the
bilateral netting contract.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54107, Oct. 26, 2001; 66
FR 66728, Dec. 27, 2001; 67 FR 12849, Mar. 20, 2002; 71 FR 78051, Dec.
28, 2006]
PART 931_FEDERAL HOME LOAN BANK CAPITAL STOCK--Table of Contents
Sec.
931.1 Classes of capital stock.
931.2 Issuance of capital stock.
931.3 Minimum investment in capital stock.
931.4 Dividends.
931.5 Liquidation, merger, or consolidation.
931.6 Transfer of capital stock.
931.7 Redemption and repurchase of capital stock.
931.8 Other restrictions on the repurchase or redemption of Bank stock.
931.9 Transition provision.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443, 1446.
Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.
[[Page 95]]
Sec. 931.1 Classes of capital stock.
The authorized capital stock of a Bank shall consist of the
following instruments:
(a) Class A stock, which shall:
(1) Have a par value as determined by the board of directors of the
Bank and stated in the Bank's capital plan;
(2) Be issued, redeemed, and repurchased only at its stated par
value; and
(3) Be redeemable in cash only on six-months written notice to the
Bank.
(b) Class B stock, which shall:
(1) Have a par value as determined by the board of directors of the
Bank and stated in the Bank's capital plan;
(2) Be issued, redeemed, and repurchased only at its stated par
value;
(3) Be redeemable in cash only on five-years written notice to the
Bank; and
(4) Confer an ownership interest in the retained earnings, surplus,
undivided profits, and equity reserves of the Bank; and
(c) Any one or more subclasses of Class A or Class B stock, each of
which may have different rights, terms, conditions, or preferences as
may be authorized in the Bank's capital plan, provided, however, that
each subclass of stock shall have all of the characteristics of its
respective class, as specified in paragraph (a) or (b) of this section.
Sec. 931.2 Issuance of capital stock.
(a) In general. A Bank may issue either one or both classes of its
capital stock (including subclasses), as authorized by Sec. 931.1, and
shall not issue any other class of capital stock. A Bank shall issue its
stock only to its members and only in book-entry form, and the Bank
shall act as its own transfer agent. All capital stock shall be issued
in accordance with the Bank's capital plan.
(b) Initial issuance. In connection with the initial issuance of its
Class A and/or Class B stock (or any subclass of either), a Bank may
issue such stock in exchange for its existing stock, through a
conversion of its existing stock, or through any other fair and
equitable transaction or method of distribution. As part of its initial
stock issuance transaction, a Bank may distribute any portion of its
then-existing unrestricted retained earnings as shares of Class B stock.
Sec. 931.3 Minimum investment in capital stock.
(a) A Bank shall require each member to maintain a minimum
investment in the capital stock of the Bank, both as a condition to
becoming and remaining a member of the Bank and as a condition to
transacting business with the Bank or obtaining advances and other
services from the Bank. The amount of the required minimum investment
shall be determined in accordance with the Bank's capital plan and shall
be sufficient to ensure that the Bank remains in compliance with its
minimum capital requirements. A Bank shall require each member to
maintain its minimum investment for as long as the institution remains a
member of the Bank and for as long as the member engages in any activity
with the Bank against which the Bank is required to maintain capital.
(b) A Bank may establish the minimum investment required of each
member as a percentage of the total assets of the member, as a
percentage of the advances outstanding to the member, as a percentage of
any other business activity conducted with the member, on any other
basis that is approved by the Finance Board, or any combination thereof.
(c) A Bank may require each member to satisfy the minimum investment
requirement through the purchase of either Class A or Class B stock, or
through the purchase of one or more combinations of Class A and Class B
stock that have been authorized by the board of directors of the Bank in
its capital plan. A Bank, in its discretion, may establish a lower
minimum investment for members that invest in Class B stock than is
required for members that invest in Class A stock, provided that such
reduced investment provides sufficient capital for the Bank to remain in
compliance with its minimum capital requirements.
(d) Each member of a Bank shall at all times maintain an investment
in the capital stock of the Bank in an amount that is sufficient to
satisfy the minimum investment required for that
[[Page 96]]
member in accordance with the Bank's capital plan.
[66 FR 8310, Jan. 30, 2001, as amended at 70 FR 9510, Feb. 28, 2005]
Sec. 931.4 Dividends.
(a) In general. A Bank may pay dividends on Class A or Class B
stock, including any subclasses of such stock, only out of previously
retained earnings or current net earnings, and shall declare and pay
dividends only as provided by its capital plan. The capital plan may
establish different dividend rates or preferences for each class or
subclass of stock, which may include a dividend that tracks the economic
performance of certain Bank assets, such as Acquired Member Assets. A
member, including a member that has provided the Bank with a notice of
intent to withdraw from membership or one whose membership is otherwise
terminated, shall be entitled to receive any dividends that a Bank
declares on its capital stock while the member owns the stock.
(b) Limitation on payment of dividends. In no event shall a Bank
declare or pay any dividend on its capital stock if after doing so the
Bank would fail to meet any of its minimum capital requirements, nor
shall a Bank that is not in compliance with any of its minimum capital
requirements declare or pay any dividend on its capital stock.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 931.5 Liquidation, merger, or consolidation.
The respective rights of the Class A and Class B stockholders, in
the event that the Bank is liquidated, or is merged or otherwise
consolidated with another Bank, shall be determined in accordance with
the capital plan of the Bank.
Sec. 931.6 Transfer of capital stock.
A Bank in its capital plan may allow a member to transfer any excess
capital stock of the Bank to another member of that Bank or to an
institution that has been approved for membership in that Bank and that
has satisfied all conditions for becoming a member, other than the
purchase of the minimum amount of Bank stock that it is required to hold
as a condition of membership. Any such stock transfers shall be at par
value and shall be effective upon being recorded on the appropriate
books and records of the Bank. The Bank may, in its capital plan,
require a member to receive the approval of the Bank before a transfer
of the Bank's stock, as allowed under this section, is completed.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 931.7 Redemption and repurchase of capital stock.
(a) Redemption. A member may have its capital stock in a Bank
redeemed by providing written notice to the Bank in accordance with this
section. For Class A stock, a member shall provide six-months written
notice, and for Class B stock a member shall provide five-years written
notice. The notice shall indicate the number of shares of Bank stock
that are to be redeemed, and a member shall not have more than one
notice of redemption outstanding at one time for the same shares of Bank
stock. A member may cancel a notice of redemption by so informing the
Bank in writing, and the Bank may impose a fee (to be specified in its
capital plan) on any member that cancels a pending notice of redemption.
At the expiration of the applicable notice period, the Bank shall pay
the stated par value of that stock to the member in cash. A request by a
member (whose membership has not been terminated) to redeem specific
shares of stock shall automatically be cancelled if the Bank is
prevented from redeeming the member's stock by paragraph (c) of this
section within five business days from the end of the expiration of the
applicable redemption notice period because the member would fail to
maintain its minimum investment in the stock of the Bank after such
redemption. The automatic cancellation of a member's redemption request
shall have the same effect as if the member had cancelled its notice to
redeem stock prior to the end of the redemption notice period, and a
Bank may impose a fee (to be specified in its capital plan) for
automatic cancellation of a redemption request. A Bank
[[Page 97]]
shall not be obligated to redeem its capital stock other than in
accordance with this paragraph.
(b) Repurchase. A Bank, in its discretion and without regard to the
applicable redemption periods, may repurchase from a member any
outstanding Class A or Class B capital stock that is in excess of the
amount of that class of Bank stock that the member is required to hold
as a minimum investment, in accordance with the capital plan of that
Bank. A Bank undertaking such a stock repurchase at its own initiative
shall provide the member with reasonable notice prior to repurchasing
any excess stock, with the period of such notice to be specified in the
Bank's capital plan, and shall pay the stated par value of that stock to
the member in cash. For purposes of this section, any Bank stock owned
by a member shall be considered to be excess stock if the member is not
required to hold such stock either as a condition of remaining a member
of the Bank or as a condition of obtaining advances or transacting other
business with the Bank. A member's submission of a notice of intent to
withdraw from membership, or its termination of membership in any other
manner, shall not, in and of itself, cause any Bank stock to be deemed
excess stock for purposes of this section.
(c) Limitation. In no event may a Bank redeem or repurchase any
stock if, following the redemption or repurchase, the Bank would fail to
meet any minimum capital requirement, or if the member would fail to
maintain its minimum investment in the stock of the Bank, as required by
Sec. 931.3.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001; 70
FR 9510, Feb. 28, 2005]
Sec. 931.8 Other restrictions on the repurchase or redemption of Bank stock.
(a) Capital impairment. A Bank may not redeem or repurchase any
capital stock without the prior written approval of the Finance Board if
the Finance Board or the board of directors of the Bank has determined
that the Bank has incurred or is likely to incur losses that result in
or are likely to result in charges against the capital of the Bank. This
prohibition shall apply even if a Bank is in compliance with its minimum
capital requirements, and shall remain in effect for however long the
Bank continues to incur such charges or until the Finance Board
determines that such charges are not expected to continue.
(b) Bank discretion to suspend redemption. A Bank, upon the approval
of its board of directors, or of a subcommittee thereof, may suspend
redemption of stock if the Bank reasonably believes that continued
redemption of stock would cause the Bank to fail to meet its minimum
capital requirements as set forth in Sec. Sec. 932.2 or 932.3 of this
chapter, would prevent the Bank from maintaining adequate capital
against a potential risk that may not be adequately reflected in its
minimum capital requirements, or would otherwise prevent the Bank from
operating in a safe and sound manner. A Bank shall notify the Finance
Board in writing within two business days of the date of the decision to
suspend the redemption of stock, informing the Finance Board of the
reasons for the suspension and of the Bank's strategies and time frames
for addressing the conditions that led to the suspension. The Finance
Board may require the Bank to re-institute the redemption of member
stock. A Bank shall not repurchase any stock without the written
permission of the Finance Board during any period in which the Bank has
suspended redemption of stock under this paragraph.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 931.9 Transition provision.
(a) In general. Each Bank shall comply with the minimum leverage and
risk-based capital requirements specified in Sec. 932.2 and Sec. 932.3
of this chapter, respectively, and each member shall comply with the
minimum investment established in the capital plan, as of the effective
date of that Bank's capital plan. The effective date of a Bank's capital
plan shall be the date on which the Bank first issues any Class A or
Class B stock. Prior to the effective date, the issuance and retention
of Bank stock shall be as provided in Sec. 925.20 and Sec. 925.22 of
this chapter.
[[Page 98]]
(b) Transition period--(1) Bank transition. A Bank that will not be
in compliance with the minimum leverage and risk-based capital
requirements specified in Sec. 932.2 and Sec. 932.3 of this chapter as
of the effective date of its capital plan shall maintain compliance with
the leverage limit requirements in Sec. 966.3(a) of this chapter and
shall include in its capital plan a description of the steps that the
Bank will take to achieve compliance with the minimum capital
requirements specified in Sec. 932.2 and Sec. 932.3 of this chapter.
The period of time for compliance with the minimum capital requirements
shall be stated in the plan and shall not exceed three years from the
effective date of the capital plan. When the Bank has achieved
compliance with the leverage requirement of Sec. 932.2 of this chapter,
the leverage limit requirements of Sec. 966.3(a) of this chapter shall
cease to apply to that Bank.
(2) Member transition. (i) Existing members. A Bank's capital plan
shall require any institution that was a member on November 12, 1999,
and whose investment in Bank stock as of the effective date of the
capital plan will be less than the minimum investment required by the
plan, to comply with the minimum investment by a date specified in the
Bank's capital plan. The length of the transition period shall be
specified in the capital plan and shall not exceed three years. The
capital plan shall describe the actions that the existing members are
required to take to achieve compliance with the minimum investment, and
may require such members to purchase additional Bank stock periodically
over the course of the transition period.
(ii) New members. A Bank's capital plan shall require any
institution that became a member after November 12, 1999, but prior to
the effective date of the capital plan, to comply with the minimum
investment specified in the Bank's capital plan as of the effective date
of the plan. A Bank's capital plan shall require any institution that
becomes a member after the effective date of the capital plan, to comply
with the minimum investment upon becoming a member.
(3) New business. A Bank's capital plan shall require any member
that obtains an advance or other services from the Bank, or that
initiates any other business activity with the Bank against which the
Bank is required to hold capital, after the effective date of the
capital plan to comply with the minimum investment specified in the
Bank's capital plan for such advance, services, or activity at the time
the transaction occurs.
PART 932_FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS--Table of Contents
Sec.
932.1 Risk management.
932.2 Total capital requirement.
932.3 Risk-based capital requirement.
932.4 Credit risk capital requirement.
932.5 Market risk capital requirement.
932.6 Operations risk capital requirement.
932.7 Reporting requirements.
932.8 Minimum liquidity requirements.
932.9 Limits on unsecured extensions of credit to one counterparty or
affiliated counterparties; reporting requirements for total
extensions of credit to one counterparty or affiliated
counterparties.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443, 1446.
Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.
Sec. 932.1 Risk management.
Before its new capital plan may take effect, each Bank shall obtain
the approval of the Finance Board for the internal market risk model or
the internal cash flow model used to calculate the market risk component
of its risk-based capital requirement, and for the risk assessment
procedures and controls (whether established as part of its risk
management policy or otherwise) to be used to manage its credit, market,
and operations risks.
Sec. 932.2 Total capital requirement.
(a) Each Bank shall maintain at all times:
(1) Total capital in an amount at least equal to 4.0 percent of the
Bank's total assets; and
(2) A leverage ratio of total capital to total assets of at least
5.0 percent of the Bank's total assets. For purposes of determining the
leverage ratio, total capital shall be computed by multiplying the
Bank's permanent capital
[[Page 99]]
by 1.5 and adding to this product all other components of total capital.
(b) For reasons of safety and soundness, the Finance Board may
require an individual Bank to have and maintain a greater amount of
total capital than mandated by paragraph (a)(1) of this section.
Sec. 932.3 Risk-based capital requirement.
(a) Each Bank shall maintain at all times permanent capital in an
amount at least equal to the sum of its credit risk capital requirement,
its market risk capital requirement, and its operations risk capital
requirement, calculated in accordance with Sec. Sec. 932.4, 932.5 and
932.6, respectively.
(b) For reasons of safety and soundness, the Finance Board may
require an individual Bank to have and maintain a greater amount of
permanent capital than required by paragraph (a) of this section.
Sec. 932.4 Credit risk capital requirement.
(a) General requirement. Each Bank's credit risk capital requirement
shall be equal to the sum of the Bank's credit risk capital charges for
all assets, off-balance sheet items and derivative contracts.
(b) Credit risk capital charge for assets. Except as provided in
paragraph (i) of this section, each Bank's credit risk capital charge
for an asset shall be equal to the book value of the asset multiplied by
the credit risk percentage requirement assigned to that asset pursuant
to paragraph (e)(2) of this section.
(c) Credit risk capital charge for off-balance sheet items. Each
Bank's credit risk capital charge for an off-balance sheet item shall be
equal to the credit equivalent amount of such item, as determined
pursuant to paragraph (f) of this section multiplied by the credit risk
percentage requirement assigned to that item pursuant to paragraph
(e)(2) of this section, except that the credit risk percentage
requirement applied to the credit equivalent amount for a stand-by
letter of credit shall be that for an advance with the same remaining
maturity as that stand-by letter of credit.
(d) Credit risk capital charge for derivative contracts--(1)
Derivative contracts with non-member counterparties. Except as provided
in paragraph (j) of this section, each Bank's credit risk capital charge
for a specific derivative contract entered into between a Bank and a
non-member institution shall equal the sum of :
(i) The current credit exposure for the derivative contract,
calculated in accordance with paragraph (g) or (h) of this section, as
applicable, multiplied by the credit risk percentage requirement
assigned to that derivative contract pursuant to paragraph (e)(2) of
this section, provided that:
(A) The remaining maturity of the derivative contract shall be
deemed to be less than one year for the purpose of applying Table 1.1 or
1.3 of this part; and
(B) Any collateral held against an exposure from the derivative
contract shall be applied to reduce the portion of the credit risk
capital charge corresponding to the current credit exposure in
accordance with the requirements of paragraph (e)(2)(ii)(B) of this
section; plus
(ii) The potential future credit exposure for the derivative
contract calculated in accordance with paragraph (g) or (h) of this
section, as applicable, multiplied by the credit risk percentage
requirement assigned to that derivative contract pursuant to paragraph
(e)(2) of this section, where the actual remaining maturity of the
derivative contract is used to apply Table 1.1 or Table 1.3 of this
part.
(2) Derivative contracts with a member. Except as provided in
paragraph (j) of this section, the credit risk capital charge for any
derivative contract entered into between a Bank and one of its member
institutions shall be calculated in accordance with paragraph (d)(1) of
this section. However, the credit risk percentage requirements used in
the calculations shall be found in Table 1.1 of this part, which sets
forth the credit risk percentage requirements for advances.
(e) Determination of credit risk percentage requirements--(1)
Finance Board determination of credit risk percentage requirements. The
Finance Board shall determine, and update periodically, the
[[Page 100]]
credit risk percentage requirements set forth in Tables 1.1 through 1.4
of this part applicable to a Bank's assets, off-balance sheet items, and
derivative contracts.
(2) Bank determination of credit risk percentage requirements. (i)
Each Bank shall determine the credit risk percentage requirement
applicable to each asset, each off-balance sheet item and each
derivative contract by identifying the category set forth in Table 1.1,
Table 1.2, Table 1.3 or Table 1.4 of this part to which the asset, item
or derivative belongs, given, if applicable, its demonstrated credit
rating and remaining maturity (as determined in accordance with
paragraphs (e)(2)(ii) and (e)(2)(iii) of this section). The applicable
credit risk percentage requirement for an asset, off-balance sheet item
or derivative contract shall be used to calculate the credit risk
capital charge for such asset, item, or derivative contract in
accordance with paragraphs (b), (c) or (d) of this section respectively.
The relevant categories and credit risk percentage requirements are
provided in the following Tables 1.1 through 1.4 of this part:
Table 1.1--Requirement for Advances
------------------------------------------------------------------------
Percentage
Type of advances applicable
to advances
------------------------------------------------------------------------
Advances with:
Remaining maturity <= 4 years............................ 0.07
Remaining maturity 4 years to 7 years........ 0.20
Remaining maturity 7 years to 10 years....... 0.30
Remaining maturity 10 years.................. 0.35
------------------------------------------------------------------------
Table 1.2--Requirement for Rated Residential Mortgage Assets
------------------------------------------------------------------------
Percentage
applicable
to
Type of residential mortgage asset residential
mortgage
assets
------------------------------------------------------------------------
Highest Investment Grade................................... 0.37
Second Highest Investment Grade............................ 0.60
Third Highest Investment Grade............................. 0.86
Fourth Highest Investment Grade............................ 1.20
If Downgraded to Below Investment Grade After Acquisition
By Bank:
Highest Below Investment Grade........................... 2.40
Second Highest Below Investment Grade.................... 4.80
All Other Below Investment Grade......................... 34.00
Subordinated Classes of Mortgage Assets:
Highest Investment Grade................................. 0.37
Second Highest Investment Grade.......................... 0.60
Third Highest Investment Grade........................... 1.60
Fourth Highest Investment Grade.......................... 4.45
If Downgraded to Below Investment Grade After Acquisition
By Bank:
Highest Below Investment Grade........................... 13.00
Second Highest Below Investment Grade.................... 34.00
All Other Below Investment Grade......................... 100.00
------------------------------------------------------------------------
Table 1.3--Requirement for rated Assets or Rated Items Other Than Advances or Residential Mortgage Assets
[Based on remaining maturity]
----------------------------------------------------------------------------------------------------------------
Applicable percentage
---------------------------------------------------------------------
7
<= 1 year 1 3 yrs to 10 10
yr to 3 yrs yrs to 7yrs yrs yrs
----------------------------------------------------------------------------------------------------------------
U.S. Government Securities................ 0.00 0.00 0.00 0.00 0.00
Highest Investment Grade.................. 0.15 0.40 0.90 1.40 2.20
Second Highest Investment Grade........... 0.20 0.45 1.00 1.45 2.30
Third Highest Investment Grade............ 0.70 1.10 1.60 2.05 2.95
Fourth Highest Investment Grade........... 2.50 3.70 4.45 5.50 7.05
If Downgraded Below Investment Grade After
Acquisition by Bank:
Highest Below Investment Grade........ 10.00 13.00 13.00 13.00 13.00
Second Highest Below Investment Grade. 26.00 34.00 34.00 34.00 34.00
All Other............................. 100.00 100.00 100.00 100.00 100.00
----------------------------------------------------------------------------------------------------------------
Table 1.4--Requirement for Unrated Assets
------------------------------------------------------------------------
Applicable
Type of unrated asset percentage
------------------------------------------------------------------------
Cash....................................................... 0.00
Premises, Plant, and Equipment............................. 8.00
Investments Under Sec. 940.3(e) & (f).................... 8.00
------------------------------------------------------------------------
(ii) When determining the applicable credit risk percentage
requirement from Tables 1.2 or 1.3 of this part, each Bank shall apply
the following criteria:
(A) For assets or items that are rated directly by an NRSRO, the
credit rating shall be the NRSRO's credit rating for the asset or item
as determined in accordance with paragraph (e)(2)(iii) of this section.
(B) When using Table 1.3 of this part, for an asset, off-balance
sheet item, or
[[Page 101]]
derivative contract that is not rated directly by an NRSRO, but for
which an NRSRO rating has been assigned to any corresponding obligor
counterparty, third party guarantor, or collateral backing the asset,
item, or derivative, the credit rating that shall apply to the asset,
item, or derivative, or portion of the asset, item, or derivative so
guaranteed or collateralized, shall be the credit rating corresponding
to such obligor counterparty, third party guarantor, or underlying
collateral, as determined in accordance with paragraph (e)(2)(iii) of
this section. If there are multiple obligor counterparties, third party
guarantors, or collateral instruments backing an asset, item, or
derivative not rated directly by an NRSRO, or any specific portion
thereof, then the credit rating that shall apply to that asset, item, or
derivative or specific portion thereof, shall be the highest credit
rating among such obligor counterparties, third party guarantors, or
collateral instruments, as determined in accordance with paragraph
(e)(2)(iii) of this section. Assets, items or derivatives shall be
deemed to be backed by collateral for purposes of this paragraph if the
collateral is:
(1) Actually held by the Bank or an independent, third-party
custodian, or, if permitted under the Bank's collateral agreement with
such party, by the Bank's member or an affiliate of that member where
the term ``affiliate'' has the same meaning as in Sec. 950.1 of this
chapter;
(2) Legally available to absorb losses;
(3) Of a readily determinable value at which it can be liquidated by
the Bank;
(4) Held in accordance with the provisions of the Bank's member
products policy established pursuant to Sec. 917.4 of this chapter; and
(5) Subject to an appropriate discount to protect against price
decline during the holding period, as well as the costs likely to be
incurred in the liquidation of the collateral.
(C) When using Table 1.3 of this part, for an asset with a short-
term credit rating from a given NRSRO, the credit risk percentage
requirement shall be based on the remaining maturity of the asset and
the long-term credit rating provided for the issuer of the asset by the
same NRSRO. Should the issuer of the short-term asset not have a long-
term credit rating, the long-term equivalent rating shall be determined
as follows:
(1) The highest short-term credit rating shall be equivalent to the
third highest long-term rating;
(2) The second highest short-term rating shall be equivalent to the
fourth highest long-term rating;
(3) The third highest short-term rating shall be equivalent to the
fourth highest long-term rating; and
(4) If the short-term rating is downgraded to below investment grade
after acquisition by the Bank, the short-term rating shall be equivalent
to the second highest below investment grade long-term rating.
(D) For residential mortgage assets and other assets or items, or
relevant portion of an asset or item, that do not meet the requirements
of paragraphs (e)(2)(ii)(A), (e)(2)(ii)(B) or (e)(2)(ii)(C) of this
section, and are not identified in Tables 1.1 or Table 1.4 of this part,
each Bank shall determine its own credit rating for such assets or
items, or relevant portion thereof, using credit rating standards
available from an NRSRO or other similar standards. This credit rating,
as determined by the Bank, shall be used to identify the applicable
credit risk percentage requirement under Table 1.2 of this part for
residential mortgage assets, or under Table 1.3 of this part for all
other assets or items.
(E) The credit risk percentage requirement for mortgage assets that
are acquired member assets described in Sec. 955.2 of this chapter
shall be assigned from Table 1.2 of this part based on the rating of
those assets after taking into account any credit enhancement required
by Sec. 955.3 of this chapter. Should a Bank further enhance a pool of
loans through the purchase of insurance or by some other means, the
credit risk percentage requirement shall be based on the rating of such
pool after the supplemental credit enhancement, except that the Finance
Board retains the right to adjust the credit capital charge to account
for any deficiencies with the supplemental enhancement on a case-by-case
basis.
[[Page 102]]
(iii) In determining the credit ratings under paragraph
(e)(2)(ii)(A), (e)(2)(ii)(B) and (e)(2)(ii)(C) of this section, each
Bank shall apply the following criteria:
(A) The most recent credit rating from a given NRSRO shall be
considered. If only one NRSRO has rated an asset or item, that NRSRO's
rating shall be used. If an asset or item has received credit ratings
from more than one NRSRO, the lowest credit rating from among those
NRSROs shall be used.
(B) Where a credit rating has a modifier (e.g., A-1+ for short-term
ratings and A+ or A- for long-term ratings) the credit rating is deemed
to be the credit rating without the modifier (e.g., A-1+ = A-1 and A+ or
A-= A);
(f) Calculation of credit equivalent amount for off-balance sheet
items--(1) General requirement. The credit equivalent amount for an off-
balance sheet item shall be determined by a Finance Board approved model
or shall be equal to the face amount of the instrument multiplied by the
credit conversion factor assigned to such risk category of instruments,
subject to the exceptions in paragraph (f)(2) of this section, provided
in the following Table 2 of this part:
Table 2--Credit Conversion Factors for Off-Balance Sheet Items
------------------------------------------------------------------------
Credit
conversion
Instrument factor (In
percent)
------------------------------------------------------------------------
Asset sales with recourse where the credit risk remains 100
with the Bank..........................................
Commitments to make advances subject to certain drawdown
Commitments to acquire loans subject to certain drawdown
Standby letters of credit............................... 50
Other commitments with original maturity of over one
year...................................................
Other commitments with original maturity of one year or 20
less...................................................
------------------------------------------------------------------------
(2) Exceptions. The credit conversion factor shall be zero for Other
Commitments With Original Maturity of Over One Year and Other
Commitments With Original Maturity of One Year or Less, for which credit
conversion factors of 50 percent or 20 percent would otherwise apply,
that are unconditionally cancelable, or that effectively provide for
automatic cancellation, due to the deterioration in a borrower's
creditworthiness, at any time by the Bank without prior notice.
(g) Calculation of current and potential future credit exposures for
single derivative contracts--(1) Current credit exposure. The current
credit exposure for a derivative contract that is not subject to a
qualifying bilateral netting contract described in paragraph (h)(3) of
this section shall be:
(i) If the mark-to-market value of the contract is positive, the
mark-to-market value of the contract; or
(ii) If the mark-to-market value of the contract is zero or
negative, zero.
(2) Potential future credit exposure. (i) The potential future
credit exposure for a single derivative contract, including a derivative
contract with a negative mark-to-market value, shall be calculated using
an internal model approved by the Finance Board or, in the alternative,
by multiplying the effective notional amount of the derivative contract
by one of the assigned credit conversion factors, modified as may be
required by paragraph (g)(2)(ii) of this section, for the appropriate
category as provided in the following Table 3 of this part:
Table 3--Credit Conversion Factors for Potential Future Credit Exposure Derivative Contracts
[In percent]
----------------------------------------------------------------------------------------------------------------
Foreign Precious
Residual maturity Interest exchange and Equity metals Other
rate gold except gold commodities
----------------------------------------------------------------------------------------------------------------
One year or less............................. 0 1 6 7 10
Over 1 year to five years.................... .5 5 8 7 12
Over five years.............................. 1.5 7.5 10 8 15
----------------------------------------------------------------------------------------------------------------
[[Page 103]]
(ii) In applying the credit conversion factors in Table 3 of this
part the following modifications shall be made:
(A) For derivative contracts with multiple exchanges of principal,
the conversion factors are multiplied by the number of remaining
payments in the derivative contract; and
(B) For derivative contracts that automatically reset to zero value
following a payment, the residual maturity equals the time until the
next payment; however, interest rate contracts with remaining maturities
of greater than one year shall be subject to a minimum conversion factor
of 0.5 percent.
(iii) If a Bank uses an internal model to determine the potential
future credit exposure for a particular type of derivative contract, the
Bank shall use the same model for all other similar types of contracts.
However, the Bank may use an internal model for one type of derivative
contract and Table 3 of this part for another type of derivative
contract.
(iv) Forwards, swaps, purchased options and similar derivative
contracts not included in the Interest Rate, Foreign Exchange and Gold,
Equity, or Precious Metals Except Gold categories shall be treated as
other commodities contracts when determining potential future credit
exposures using Table 3 of this part.
(v) If a Bank uses Table 3 of this part to determine the potential
future credit exposures for credit derivative contracts, the credit
conversion factors provided in Table 3 for equity contracts shall also
apply to the credit derivative contracts entered into with investment
grade counterparties. If the counterparty is downgraded to below
investment grade, the credit conversion factor provided in Table 3 of
this part for other commodity contracts shall apply.
(h) Calculation of current and potential future credit exposures for
multiple derivative contracts subject to a qualifying bilateral netting
contract--(1) Current credit exposure. The current credit exposure for
multiple derivative contracts executed with a single counterparty and
subject to a qualifying bilateral netting contract described in
paragraph (h)(3) of this section, shall be calculated on a net basis and
shall equal:
(i) The net sum of all positive and negative mark-to-market values
of the individual derivative contracts subject to a qualifying bilateral
netting contract, if the net sum of the mark-to-market values is
positive; or
(ii) Zero, if the net sum of the mark-to-market values is zero or
negative.
(2) Potential future credit exposure. The potential future credit
exposure for each individual derivative contract from among a group of
derivative contracts that are executed with a single counterparty and
subject to a qualifying bilateral netting contract described in
paragraph (h)(3) of this section shall be calculated as follows:
Anet = 0.4 x Agross + (0.6 x NGR x
Agross),
where:
(i) Anet is the potential future credit exposure for an
individual derivative contract subject to the qualifying bilateral
netting contract;
(ii) Agross is the gross potential future credit
exposure, i.e., the potential future credit exposure for the individual
derivative contract, calculated in accordance with paragraph (g)(2) of
this section but without regard to the fact that the contract is subject
to the qualifying bilateral netting contract;
(iii) NGR is the net to gross ratio, i.e., the ratio of the net
current credit exposure of all the derivative contracts subject to the
qualifying bilateral netting contract, calculated in accordance with
paragraph (h)(1) of this section, to the gross current credit exposure;
and
(iv) The gross current credit exposure is the sum of the positive
current credit exposures of all the individual derivative contracts
subject to the qualifying bilateral netting contract, calculated in
accordance with paragraph (g)(1) of this section but without regard to
the fact that the contract is subject to the qualifying bilateral
netting contract.
(3) Qualifying bilateral netting contract. A bilateral netting
contract shall be considered a qualifying bilateral netting contract if
the following conditions are met:
(i) The netting contract is in writing;
(ii) The netting contract is not subject to a walkaway clause;
[[Page 104]]
(iii) The netting contract provides that the Bank would have a
single legal claim or obligation either to receive or to pay only the
net amount of the sum of the positive and negative mark-to-market values
on the individual derivative contracts covered by the netting contract
in the event that a counterparty, or a counterparty to whom the netting
contract has been assigned, fails to perform due to default, insolvency,
bankruptcy, or other similar circumstance;
(iv) The Bank obtains a written and reasoned legal opinion that
represents, with a high degree of certainty, that in the event of a
legal challenge, including one resulting from default, insolvency,
bankruptcy, or similar circumstances, the relevant court and
administrative authorities would find the Bank's exposure to be the net
amount under:
(A) The law of the jurisdiction by which the counterparty is
chartered or the equivalent location in the case of non-corporate
entities, and if a branch of the counterparty is involved, then also
under the law of the jurisdiction in which the branch is located;
(B) The law of the jurisdiction that governs the individual
derivative contracts covered by the netting contract; and
(C) The law of the jurisdiction that governs the netting contract;
(v) The Bank establishes and maintains procedures to monitor
possible changes in relevant law and to ensure that the netting contract
continues to satisfy the requirements of this section; and
(vi) The Bank maintains in its files documentation adequate to
support the netting of a derivative contract.
(i) Credit risk capital charge for assets hedged with credit
derivatives--(1) Credit derivatives with a remaining maturity of one
year or more. The credit risk capital charge for an asset that is hedged
with a credit derivative that has a remaining maturity of one year or
more may be reduced only in accordance with paragraph (i)(3) or (i)(4)
of this section and only if the credit derivative provides substantial
protection against credit losses.
(2) Credit derivatives with a remaining maturity of less than one
year. The credit risk capital charge for an asset that is hedged with a
credit derivative that has a remaining maturity of less than one year
may be reduced only in accordance with paragraph (i)(3) of this section
and only if the remaining maturity on the credit derivative is identical
to or exceeds the remaining maturity of the hedged asset and the credit
derivative provides substantial protection against credit losses.
(3) Capital charge reduced to zero. The credit risk capital charge
for an asset shall be zero if a credit derivative is used to hedge the
credit risk on that asset in accordance with paragraph (i)(1) or (i)(2)
of this section, provided that:
(i) The remaining maturity for the credit derivative used for the
hedge is identical to or exceeds the remaining maturity for the hedged
asset, and either:
(A) The asset referenced in the credit derivative is identical to
the hedged asset; or
(B) The asset referenced in the credit derivative is different from
the hedged asset, but only if the asset referenced in the credit
derivative and the hedged asset have been issued by the same obligor,
the asset referenced in the credit derivative ranks pari passu to or
more junior than the hedged asset and has the same maturity as the
hedged asset, and cross-default clauses apply; and
(ii) The credit risk capital charge for the credit derivative
contract calculated pursuant to paragraph (d) of this section is still
applied.
(4) Capital charge reduction in certain other cases. The credit risk
capital charge for an asset hedged with a credit derivative in
accordance with paragraph (i)(1) of this section shall equal the sum of
the credit risk capital charges for the hedged and unhedged portion of
the asset provided that:
(i) The remaining maturity for the credit derivative is less than
the remaining maturity for the hedged asset and either:
(A) The asset referenced in the credit derivative is identical to
the hedged asset; or
(B) The asset referenced in the credit derivative is different from
the hedged asset, but only if the asset referenced in the credit
derivative and the hedged
[[Page 105]]
asset have been issued by the same obligor, the asset referenced in the
credit derivative ranks pari passu to or more junior than the hedged
asset and has the same maturity as the hedged asset, and cross-default
clauses apply; and
(ii) The credit risk capital charge for the unhedged portion of the
asset equals:
(A) The credit risk capital charge for the hedged asset, calculated
as the book value of the hedged asset multiplied by the hedged asset's
credit risk percentage requirement assigned pursuant to paragraph (e)(2)
of this section where the appropriate credit rating is that for the
hedged asset and the appropriate maturity is the remaining maturity of
the hedged asset; minus
(B) The credit risk capital charge for the hedged asset, calculated
as the book value of the hedged asset multiplied by the hedged asset's
credit risk percentage requirement assigned pursuant to paragraph (e)(2)
of this section where the appropriate credit rating is that for the
hedged asset but the appropriate maturity is deemed to be the remaining
maturity of the credit derivative; and
(iii) The credit risk capital charge for the hedged portion of the
asset is equal to the credit risk capital charge for the credit
derivative, calculated in accordance with paragraph (d) of this section.
(j) Zero Credit risk capital charge for certain derivative
contracts. The credit risk capital charge for the following derivative
contracts shall be zero:
(1) A foreign exchange rate contract with an original maturity of 14
calendar days or less (gold contracts do not qualify for this
exception); and
(2) A derivative contract that is traded on an organized exchange
requiring the daily payment of any variations in the market value of the
contract.
(k) Date of calculations. Unless otherwise directed by the Finance
Board, each Bank shall perform all calculations required by this section
using the assets, off-balance sheet items, and derivative contracts held
by the Bank, and, if applicable, the values or credit ratings of such
assets, items, or derivatives as of the close of business of the last
business day of the month for which the credit risk capital charge is
being calculated.
[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]
Sec. 932.5 Market risk capital requirement.
(a) General requirement. (1) Each Bank's market risk capital
requirement shall equal the sum of:
(i) The market value of the Bank's portfolio at risk from movements
in interest rates, foreign exchange rates, commodity prices, and equity
prices that could occur during periods of market stress, where the
market value of the Bank's portfolio at risk is determined using an
internal market risk model that fulfills the requirements of paragraph
(b) of this section and that has been approved by the Finance Board; and
(ii) The amount, if any, by which the Bank's current market value of
total capital is less than 85 percent of the Bank's book value of total
capital, where:
(A) The current market value of the total capital is calculated by
the Bank using the internal market risk model approved by the Finance
Board under paragraph (d) of this section; and
(B) The book value of total capital is the same as the amount of
total capital reported by the Bank to the Finance Board under Sec.
932.7 of this part.
(2) A Bank may substitute an internal cash flow model to derive a
market risk capital requirement in place of that calculated using an
internal market risk model under paragraph (a)(1) of this section,
provided that:
(i) The Bank obtains Finance Board approval of the internal cash
flow model and of the assumptions to be applied to the model; and
(ii) The Bank demonstrates to the Finance Board that the internal
cash flow model subjects the Bank's assets and liabilities, off-balance
sheet items and derivative contracts, including related options, to a
comparable degree of stress for such factors as will be required for an
internal market risk model.
(b) Measurement of market value at risk under a Bank's internal
market risk model. (1) Except as provided under paragraph (a)(2) of this
section, each
[[Page 106]]
Bank shall use an internal market risk model that estimates the market
value of the Bank's assets and liabilities, off-balance sheet items, and
derivative contracts, including any related options, and measures the
market value of the Bank's portfolio at risk of its assets and
liabilities, off-balance sheet items, and derivative contracts,
including related options, from all sources of the Bank's market risks,
except that the Bank's model need only incorporate those risks that are
material.
(2) The Bank's internal market risk model may use any generally
accepted measurement technique, such as variance-covariance models,
historical simulations, or Monte Carlo simulations, for estimating the
market value of the Bank's portfolio at risk, provided that any
measurement technique used must cover the Bank's material risks.
(3) The measures of the market value of the Bank's portfolio at risk
shall include the risks arising from the non-linear price
characteristics of options and the sensitivity of the market value of
options to changes in the volatility of the options' underlying rates or
prices.
(4) The Bank's internal market risk model shall use interest rate
and market price scenarios for estimating the market value of the Bank's
portfolio at risk, but at a minimum:
(i) The Bank's internal market risk model shall provide an estimate
of the market value of the Bank's portfolio at risk such that the
probability of a loss greater than that estimated shall be no more than
one percent;
(ii) The Bank's internal market risk model shall incorporate
scenarios that reflect changes in interest rates, interest rate
volatility, and shape of the yield curve, and changes in market prices,
equivalent to those that have been observed over 120-business day
periods of market stress. For interest rates, the relevant historical
observations should be drawn from the period that starts at the end of
the previous month and goes back to the beginning of 1978;
(iii) The total number of, and specific historical observations
identified by the Bank as, stress scenarios shall be:
(A) Satisfactory to the Finance Board;
(B) Representative of the periods of the greatest potential market
stress given the Bank's portfolio, and
(C) Comprehensive given the modeling capabilities available to the
Bank; and
(iv) The measure of the market value of the Bank's portfolio at risk
may incorporate empirical correlations among interest rates.
(5) For any consolidated obligations denominated in a currency other
than U.S. Dollars or linked to equity or commodity prices, each Bank
shall, in addition to fulfilling the criteria of paragraph (b)(4) of
this section, calculate an estimate of the market value of its portfolio
at risk due to the material foreign exchange, equity price or commodity
price risk, such that, at a minimum:
(i) The probability of a loss greater than that estimated shall not
exceed one percent;
(ii) The scenarios reflect changes in foreign exchange, equity, or
commodity market prices that have been observed over 120-business day
periods of market stress, as determined using historical data that is
from an appropriate period; and
(iii) The total number of, and specific historical observations
identified by the Bank as, stress scenarios shall be:
(A) Satisfactory to the Finance Board;
(B) Representative of the periods of greatest potential stress given
the Bank's portfolio; and
(C) Comprehensive given the modeling capabilities available to the
Bank; and
(iv) The measure of the market value of the Bank's portfolio at risk
may incorporate empirical correlations within or among foreign exchange
rates, equity prices, or commodity prices.
(c) Independent validation of Bank internal market risk model or
internal cash flow model. (1) Each Bank shall conduct an independent
validation of its internal market risk model or internal cash flow model
within the Bank that is carried out by personnel not reporting to the
business line responsible for conducting business transactions for the
[[Page 107]]
Bank. Alternatively, the Bank may obtain independent validation by an
outside party qualified to make such determinations. Validations shall
be done on an annual basis, or more frequently as required by the
Finance Board.
(2) The results of such independent validations shall be reviewed by
the Bank's board of directors and provided promptly to the Finance
Board.
(d) Finance Board approval of Bank internal market risk model or
internal cash flow model. Each Bank shall obtain Finance Board approval
of an internal market risk model or an internal cash flow model,
including subsequent material adjustments to the model made by the Bank,
prior to the use of any model. Each Bank shall make such adjustments to
its model as may be directed by the Finance Board.
(e) Date of calculations. Unless otherwise directed by the Finance
Board, each Bank shall perform any calculations or estimates required
under this section using the assets and liabilities, off-balance sheet
items, and derivative contracts held by the Bank, and if applicable, the
values of any such holdings, as of the close of business of the last
business day of the month for which the market risk capital requirement
is being calculated.
Sec. 932.6 Operations risk capital requirement.
(a) General requirement. Except as authorized under paragraph (b) of
this section, each Bank's operations risk capital requirement shall at
all times equal 30 percent of the sum of the Bank's credit risk capital
requirement and market risk capital requirement.
(b) Alternative requirements. With the approval of the Finance
Board, each Bank may have an operations risk capital requirement equal
to less than 30 percent but no less than 10 percent of the sum of the
Bank's credit risk capital requirement and market risk capital
requirement if:
(1) The Bank provides an alternative methodology for assessing and
quantifying an operations risk capital requirement; or
(2) The Bank obtains insurance to cover operations risk from an
insurer rated at least the second highest investment grade credit rating
by an NRSRO.
Sec. 932.7 Reporting requirements.
Each Bank shall report to the Finance Board by the 15th business day
of each month its risk-based capital requirement by component amounts,
and its actual total capital amount and permanent capital amount,
calculated as of the close of business of the last business day of the
preceding month, or more frequently, as may be required by the Finance
Board.
Sec. 932.8 Minimum liquidity requirements.
In addition to meeting the deposit liquidity requirements contained
in Sec. 965.3 of this chapter, each Bank shall hold contingency
liquidity in an amount sufficient to enable the Bank to meet its
liquidity needs, which shall, at a minimum, cover five business days of
inability to access the consolidated obligation debt markets. An asset
that has been pledged under a repurchase agreement cannot be used to
satisfy minimum liquidity requirements.
Sec. 932.9 Limits on unsecured extensions of credit to one counterparty
or affiliated counterparties; reporting requirements for total extensions of credit to
one counterparty or affiliated counterparties.
(a) Unsecured extensions of credit to a single counterparty. A Bank
shall not extend unsecured credit to any single counterparty (other than
a GSE) in an amount that would exceed the limits of this paragraph. A
Bank shall not extend unsecured credit to a GSE in an amount that would
exceed the limits set forth in paragraph (c) of this section. If a
third-party provides an irrevocable, unconditional guarantee of
repayment of a credit (or any part thereof), the third-party guarantor
shall be considered the counterparty for purposes of calculating and
applying the unsecured credit limits of this section with respect the to
guaranteed portion of the transaction.
(1) Term 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 (but excluding
[[Page 108]]
the amount of sales of federal funds with a maturity of one day or less
and sales of federal funds subject to a continuing contract) shall not
exceed the product of the maximum capital exposure limit applicable to
such counterparty, as determined in accordance with paragraph (a)(4) of
this section and Table 4 of this part, multiplied by the lesser of:
(i) The Bank's total capital; or
(ii) The counterparty's Tier 1 capital, or if Tier 1 capital is not
available, total capital (as defined by the counterparty's principal
regulator) or some similar comparable measure identified by the Bank.
(2) Overall limits including sales of overnight federal funds. 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 the amounts of sales of federal funds with a
maturity of one day or less and sales of federal funds subject to a
continuing contract, shall not exceed twice the limit calculated
pursuant to paragraph (a)(1) of this section.
(3) Limits for certain obligations issued by state, local or tribal
governmental agencies. The term limit set forth in paragraph (a)(1) of
this section when applied to the marketable direct obligations of state,
local or tribal government unit or agencies that are acquired member
assets identified in Sec. 955.2(a)(3) of this chapter or are otherwise
excluded from the prohibition against investments in whole mortgages or
whole loan or interests in such mortgages or loans by Sec.
956.3(a)(4)(iii) of this chapter shall be calculated based on the Bank's
total capital and the credit rating assigned to the particular
obligation as determined in accordance with paragraph (a)(5) of this
section. If a Bank owns series or classes of obligations issued by a
particular state, local or tribal government unit or agency or has
extended other forms of unsecured credit to such entity falling into
different rating categories, the total amount of unsecured credit
extended by the Bank to that government unit or agency shall not exceed
the term limit associated with the highest-rated obligation issued by
the entity and actually purchased by the Bank.
(4) Bank determination of applicable maximum capital exposure
limits. (i) Except as set forth in paragraph (a)(4)(ii) or (a)(4)(iii)
of this section, the applicable maximum capital exposure limits are
assigned to each counterparty based upon the long-term credit rating of
the counterparty, as determined in accordance with paragraph (a)(5) of
this section, and are provided in the following Table 4 of this part:
Table 4--Maximum Limits on Unsecured Extensions of Credit to a Single
Counterparty by Counterparty Long-Term Credit Rating Category
------------------------------------------------------------------------
Maximum
capital
Long-term credit rating of counterparty category exposure limit
(in percent)
------------------------------------------------------------------------
Highest Investment Grade................................ 15
Second Highest Investment Grade......................... 14
Third Highest Investment Grade.......................... 9
Fourth Highest Investment Grade......................... 3
Below Investment Grade or Other......................... 1
------------------------------------------------------------------------
(ii) If a counterparty does not have a long-term credit rating but
has received a short-term credit rating from an NRSRO, the maximum
capital exposure limit applicable to that counterparty shall be based
upon the short-term credit rating, as determined in accordance with
paragraph (a)(5) of this section, as follows:
(A) The highest short-term investment grade credit rating shall
correspond to the maximum capital exposure limit provided in Table 4 of
this part for the third highest long-term investment grade rating;
(B) The second highest short-term investment grade rating shall
correspond to the maximum capital exposure limit provided in Table 4 of
this part for the fourth highest long-term investment grade rating; and
(C) The third highest short-term investment grade rating shall
correspond to the maximum capital exposure limit provided in Table 4 of
this part for the fourth highest long-term investment grade rating.
(iii) If a specific debt obligation issued by a counterparty
receives a credit rating from an NRSRO that is lower than the
counterparty's long-term credit rating, the total amount of
[[Page 109]]
the lower-rated obligation held by the Bank may not exceed a sub-limit
calculated in accordance with paragraph (a)(1) of this section, except
that the Bank shall use the credit rating associated with the specific
obligation to determine the applicable maximum capital exposure limit.
For purposes of this paragraph, the credit rating of the debt obligation
shall be determined in accordance with paragraph (a)(5) of this section.
(5) Bank determination of applicable credit ratings. The following
criteria shall be applied to determine a counterparty's credit rating:
(i) The counterparty's most recent credit rating from a given NRSRO
shall be considered;
(ii) If only one NRSRO has rated the counterparty, that NRSRO's
rating shall be used. If a counterparty has received credit ratings from
more than one NRSRO, the lowest credit rating from among those NRSROs
shall be used;
(iii) Where a credit rating has a modifier, the credit rating is
deemed to be the credit rating without the modifier;
(iv) If a counterparty is placed on a credit watch for a potential
downgrade by an NRSRO, the credit rating from that NRSRO at the next
lower grade shall be used; and
(v) If a counterparty is not rated by an NRSRO, the Bank shall
determine the applicable credit rating by using credit rating standards
available from an NRSRO or other similar standards.
(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 sales of
federal funds with a maturity of one day or less and sales of federal
funds subject to a continuing contract, shall not exceed thirty percent
of the Bank's total capital.
(2) Relation to individual limits. The aggregate limits calculated
under this paragraph 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 GSEs--(1) In general. Unsecured extensions of
credit by a Bank to a GSE that arise from the Bank's on- and off-balance
sheet and derivative transactions, including from the purchase of any
subordinated debt subject to the sub-limit set forth in paragraph (c)(2)
of this section, from any sales of federal funds with a maturity of one
day or less and from sales of federal funds subject to a continuing
contract, shall not exceed the lesser of:
(i) The Bank's total capital; or
(ii) The GSE's total capital (as defined by the GSE's principal
regulator) or some similar comparable measure identified by the Bank.
(2) Sub-limit for subordinated debt. The maximum amount of
subordinated debt issued by a GSE and held by a Bank shall not exceed
the term limit calculated under paragraph (a)(1) of this section, except
that a Bank shall use the credit rating of the GSE's subordinated debt
to determine the applicable maximum capital exposure limit. The credit
rating of the subordinated debt shall be determined in accordance with
paragraph (a)(5) of this section.
(3) Limits applying to a GSE after a downgrade. If any NRSRO assigns
a credit rating to any senior debt obligation issued (or to be issued)
by a GSE that is below the highest investment grade or downgrades, or
places on a credit watch for a potential downgrade of the credit rating
on any senior unsecured obligation issued by a GSE to below the highest
investment grade, the special limits on unsecured extensions of credit
under paragraph (c)(1) of this section shall cease to apply, and
instead, the Bank shall calculate the maximum amount of its unsecured
extensions of credit to that GSE in accordance with paragraphs (a)(1)
and (a)(2) of this section.
(4) Extensions of unsecured credit to other Banks. The limits of
this section do not apply to unsecured credit extended by one Bank to
another Bank.
(d) Extensions of unsecured credit after downgrade or placement on
credit watch. If an NRSRO downgrades the credit rating applicable to any
counterparty or places any counterparty on a credit watch for a
potential downgrade, a Bank need not unwind or liquidate any existing
transaction or position with
[[Page 110]]
that counterparty that complied with the limits of this section at the
time it was entered. In such a case, however, a Bank may extend any
additional unsecured credit to such a counterparty only in compliance
with the limitations that are calculated using the lower maximum
exposure limits. For the purposes of this section, 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 an additional extension of unsecured credit that can
be undertaken only in accordance with the lower limit.
(e) Reporting requirements--(1) Total unsecured extensions of
credit. Each Bank shall report monthly to the Finance Board the amount
of the Bank's total unsecured extensions of credit arising from on- and
off-balance sheet and derivative transactions to any single counterparty
or group of affiliated counterparties that exceeds 5 percent of:
(i) The Bank's total capital; or
(ii) The counterparty's, or affiliated counterparties' combined,
Tier 1 capital, or if Tier 1 capital is not available, total capital (as
defined by each counterparty's principal regulator) or some similar
comparable measure identified by the Bank.
(2) Total secured and unsecured extensions of credit. Each Bank
shall report monthly to the Finance Board the amount of the Bank's 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 that exceeds 5 percent of the Bank's
total assets.
(3) Extensions of credit in excess of limits. A Bank shall report
promptly to the Finance Board any extensions of unsecured credit that
exceeds any limit set forth in paragraphs (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, if applicable, a
brief explanation of any extenuating circumstances which caused the
limit to be exceeded.
(f) Measurement of unsecured extensions of credit--(1) In general.
For purposes of this section, unsecured extensions of credit will be
measured as follows:
(i) For on-balance sheet transactions, an amount equal to the sum of
the book value of the item plus net payments due the Bank;
(ii) For off-balance sheet transactions, an amount equal to the
credit equivalent amount of such item, calculated in accordance with
Sec. 932.4(f) of this part; and
(iii) For derivative transactions, an amount equal to the sum of the
current and potential future credit exposures for the derivative
contract, where those values are calculated in accordance with
Sec. Sec. 932.4(g) or 932.4(h) of this part, as applicable, less the
amount of any collateral that is held in accordance with the
requirements of Sec. 932.4(e)(2)(ii)(B) of this part against the credit
exposure from the derivative contract.
(2) Status of debt obligations purchased by the Bank. Any debt
obligation or debt security (other than mortgage-backed securities or
acquired member assets that are identified in Sec. Sec. 955.2(a)(1) and
(2) of this chapter) purchased by a Bank shall be considered an
unsecured extension of credit for the purposes of this section, except:
(i) Any amount owed the Bank against which the Bank holds collateral
in accordance with Sec. 932.4(e)(2)(ii)(B) of this part; or
(ii) Any amount which the Finance Board has determined on a case-by-
case basis shall not be considered an unsecured extension of credit.
(g) Obligations of the United States. Obligations of, or guaranteed
by, the United States are not subject to the requirements of this
section.
[66728, Dec. 27, 2002]