[Federal Register Volume 61, Number 227 (Friday, November 22, 1996)]
[Rules and Regulations]
[Pages 59311-59315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29748]


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FEDERAL HOUSING FINANCE BOARD

12 CFR Part 950

[No. 96-80]


Revision of Financing Corporation Operations Regulation

AGENCY: Federal Housing Finance Board.

ACTION: Interim final rule with request for comments.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending 
its regulation on Financing Corporation (FICO) operations to comply 
with new statutory requirements and to eliminate provisions that have 
been rendered obsolete by statutory changes. The interim final rule is 
consistent with the goals of the Regulatory Reinvention Initiative of 
the National Performance Review.

DATES: The interim final rule will become effective on November 22, 
1996. The Finance Board will accept comments on the interim final rule 
in writing on or before December 23, 1996.

ADDRESSES: Mail comments to Elaine L. Baker, Executive Secretary, 
Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C. 
20006. Comments will be available for public inspection at this 
address.

FOR FURTHER INFORMATION CONTACT: Christine M. Freidel, Assistant 
Director, Financial Management Division, Office of Policy, 202/408-
2976, or Janice A. Kaye, Attorney-Advisor, Office of General Counsel, 
202/408-2505, Federal Housing Finance Board, 1777 F Street, N.W., 
Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

A. FICO Obligations

    The Federal Savings and Loan Insurance Corporation (FSLIC) 
Recapitalization Act of 1987 amended the Federal Home Loan Bank Act 
(Bank Act) by adding a new section 21 directing the establishment of 
FICO. See Public Law 100-86, Title III, section 302, 101 Stat. 585 
(Aug. 10, 1987), codified at 12 U.S.C. 1441. On August 28, 1987, the 
Finance Board's predecessor, the former Federal Home Loan Bank Board 
(FHLBB), chartered FICO to recapitalize the former FSLIC. To raise 
funds for that purpose, Congress authorized FICO to issue up to $10.825 
billion in public debt. See 12 U.S.C. 1441(e)(1) (1987) (superseded). 
From 1987 to 1989, FICO issued $8.17 billion in 30-year obligations, 
the proceeds of which were used to resolve failed savings associations. 
Congress terminated FICO's debt issuance authority in 1991, effectively 
capping FICO's borrowings at the then outstanding $8.17 billion in 
obligations.\1\
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    \1\ See Pub. L. 102-233, Title I, section 104, 105 Stat. 1762 
(Dec. 12, 1991), codified at 12 U.S.C. 1441(e)(2). Fifteen percent 
of the outstanding FICO bond principal matures in the year 2017, 57 
percent matures in 2018, and the remaining 28 percent matures in 
2019. See General Accounting Office, Deposit Insurance Funds Report, 
11 n.5 (Mar. 1995).
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    To assure repayment of the $8.17 billion principal amount of the 
FICO obligations, section 21(g)(2) of the Bank Act requires FICO to 
invest in, and hold in a segregated account, certain enumerated 
securities that will have a principal amount payable at maturity 
approximately equal to the aggregate amount of principal on the FICO 
obligations. See 12 U.S.C. 1441(g)(2). Accordingly, the principal on 
FICO bonds was defeased by using Federal Home Loan Bank (FHLBank) 
retained earnings to purchase 30-year zero coupon United States 
Treasury securities that have a face value sufficient to retire the 
FICO bonds at maturity. These securities currently are held in a 
segregated account at the Federal Reserve Bank of New York.

B. FICO Expenses

    Pursuant to section 21 of the Bank Act, FICO may incur two 
categories of expenses: (1) administrative expenses, which include 
general office and operating expenses, and (2) non-administrative 
expenses, which include the almost $800 million in interest due each 
year until maturity of the last FICO obligation, issuance costs, and 
custodian fees. See id. 1441(b)(7), (f)(2), (g)(5). The FHLBanks pay 
FICO's administrative expenses in accordance with a statutory formula 
based on the percentage of FICO stock held by each FHLBank. See id. 
1441(b)(7).
    There are four statutory sources of funds to pay FICO's non-
administrative expenses. Under section 21(f)(1) of the Bank Act, FICO 
has authority to use assessments previously assessed against insured 
institutions (i.e., FSLIC-insured thrifts) under the special assessment 
provisions that were in effect prior to enactment of the Financial 
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). See 
id. 1441(f)(1), 1441(f) (1987 superseded); Public Law 101-73, Title V, 
section 512(13), 103 Stat. 406 (Aug. 9, 1989). Funds from this source 
have been exhausted and are no longer available.
    To the extent pre-FIRREA assessments are insufficient to cover 
FICO's non-administrative expenses, under section 21(f)(2) of the Bank 
Act, FICO has first priority to impose and collect assessments against 
each Savings Association Insurance Fund (SAIF) member that is a savings 
association. See 12 U.S.C. 1441(f)(2) (1996). FICO's assessment 
authority is subject to the approval of the Board of Directors of the 
Federal Deposit Insurance Corporation (FDIC), and must be made in the 
same manner as assessments are made by the FDIC. Id. To date, FICO's 
assessments on SAIF member savings associations have been the major or 
sole source of revenue to pay FICO's non-administrative expenses, i.e., 
FICO's interest, issuance, and custodial costs.
    Effective January 1, 1997, the Deposit Insurance Funds Act of 1996 
(Funds Act) amends FICO's assessment authority under section 21(f)(2) 
of the Bank Act. See Public Law 104-208, Title II, Subtitle G, 110 
Stat. 3009 (Sept. 30, 1996). Section 2702 of the Funds Act eliminates 
the provision granting FICO first priority to make assessments and 
changes FICO's assessment base from all SAIF member savings 
associations to all depository institutions insured by the FDIC. See 12 
U.S.C. 1441(f)(2) (1997). Beginning with the first assessment in 1997, 
FICO has authority, with the approval of the Board of Directors of the 
FDIC, to assess all insured depository institutions to cover the 
interest payments due on FICO obligations and FICO's issuance costs and 
custodian fees. Id. However, until the earlier of

[[Page 59312]]

December 31, 1999 or the date on which the last savings association 
ceases to exist, the assessment rate FICO imposes on an insured 
depository institution with respect to any BIF-assessable deposits must 
be 1/5 of the assessment rate FICO imposes on an insured depository 
institution with respect to any SAIF-assessable deposits. Id. 
1441(f)(2)(A). For purposes of the FICO assessment, the term ``BIF-
assessable deposit'' means a deposit that is subject to assessment for 
purposes of the Bank Insurance Fund (BIF) under the Federal Deposit 
Insurance Act (FDI Act), including a deposit that is treated as a BIF-
insured deposit under section 5(d)(3) of the FDI Act, and the term 
``SAIF-assessable deposit'' means a deposit that is subject to 
assessment for purposes of the SAIF under the FDI Act, including a 
deposit that is treated as a SAIF-insured deposit under section 5(d)(3) 
of the FDI Act.\2\ Absent statutory changes or unforeseen fluctuations 
in the assessment base, FICO anticipates that assessments on insured 
depository institutions will provide sufficient funds to pay its non-
administrative expenses.
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    \2\ See id. 1441(f)(4); Funds Act section 2710. Section 5(d)(3) 
of the FDI Act attributes to BIF or SAIF the deposits of an insured 
depository institution that has undergone a conversion transaction 
by which it switched deposit insurance funds. See 12 U.S.C. 
1815(d)(3).
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    However, if funds available from pre-FIRREA assessments and 
assessments on all insured depository institutions are insufficient to 
cover FICO's non-administrative expenses, section 21(f)(3) of the Bank 
Act authorizes FICO to use FSLIC Resolution Fund (FRF) receivership 
proceeds that are not required by the Resolution Funding Corporation to 
fund its principal fund. Id. 1441(f)(3). If the funds available 
pursuant to the three sources provided by section 21(f) of the Bank Act 
are insufficient to pay FICO's interest expenses, section 5(d)(2) of 
the FDI Act provides that the Secretary of the Treasury may order the 
transfer to FICO of exit fees assessed against insured depository 
institutions that participated in transactions by which they switched 
deposit insurance funds. See id. 1815(d)(2)(E), (F).

C. FICO Regulations

    The operating authority for FICO initially appeared in part 592 of 
the FHLBB's regulations. When Congress abolished the FHLBB in 1989, it 
transferred regulatory and supervisory authority over FICO to the 
Finance Board. See FIRREA, section 401, 103 Stat. 183, codified at 12 
U.S.C. 1437 note; FIRREA, Title V. The Finance Board derives its 
authority over FICO from the provisions of section 21 of the Bank Act. 
See 12 U.S.C. 1441. Under sections 21 (b)(8) and (c), the FICO 
Directorate \3\ and FICO's exercise of its statutory powers are subject 
to such regulations, orders, and directions as the Finance Board may 
prescribe. Id. 1441(b)(8), (c). In addition, under section 21(j), the 
Finance Board has authority to prescribe any regulations necessary to 
carry out the provisions of section 21, including regulations defining 
terms used in section 21. Id. 1441(j). In September 1989, pursuant to 
the authority granted by section 21 of the Bank Act, the Finance Board 
deleted part 592 of the FHLBB's regulations and promulgated the current 
rules regarding FICO's operating authority at part 950 of its 
regulations. See 54 FR 38589, 38592-38598 (Sept. 19, 1989), codified at 
12 CFR part 950.
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    \3\ The FICO Directorate is the managing body of FICO. See id. 
1441(b)(1).
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    The statutory changes made by the Funds Act require that 
corresponding amendments be made to the provisions of the FICO 
operations regulation that concern FICO's assessment authority. In 
addition, the changes made by the Funds Act, as well as prior statutory 
changes that terminated FICO's debt issuance authority, see supra, have 
rendered obsolete many of the existing provisions of part 950. 
Accordingly, the Finance Board is amending part 950 to comply with new 
statutory requirements, eliminate provisions that have been rendered 
obsolete, and clarify the practices and procedures of the Finance Board 
and FICO.

II. Analysis of the Interim Final Rule

A. Elimination of Obsolete Provisions

    The Finance Board has determined that the following provisions of 
part 950, which relate to or concern issuance of FICO debt obligations, 
are no longer required and therefore should be eliminated in their 
entirety: Sec. 950.4 Authority to issue obligations; Sec. 950.6 
Minority participation in public offerings; Sec. 950.10 Capital 
assessments of Federal loan banks [sic]; Sec. 950.11 Establishment, 
maintenance and funding of reserve account; and in Sec. 950.1, 
definitions of the terms ``deficient bank,'' ``excess amount,'' ``FSLIC 
Resolution Fund,'' ``Funding Corporation,'' ``net earnings,'' and 
``remaining bank.'' Streamlining part 950 by repealing these provisions 
is consistent with the goals of the Regulatory Reinvention Initiative 
of the National Performance Review.

B. Implementation of New Statutory Requirements

    Section 950.8(a) of the interim final rule continues the current 
requirement that FICO determine the anticipated interest expenses on 
its obligations at least semiannually.
    In Sec. 950.8(b), the Finance Board has implemented the provisions 
of the Funds Act that authorize FICO to assess all insured depository 
institutions, rather than just SAIF members, to cover FICO's non-
administrative expenses. See supra part I(B). The term ``insured 
depository institution,'' which replaces the definition of ``SAIF 
member'' in Sec. 950.1, has the same meaning as in section 3 of the FDI 
Act, namely, ``any bank or savings association the deposits of which 
are insured by the [FDIC]  * * *'' See 12 U.S.C. 1813(c)(2). For 
purposes of part 950, the term ``non-administrative expenses'' means 
custodian fees, issuance costs, and interest on Financing Corporation 
obligations. Custodian fees include any fees or expenses FICO incurs in 
connection with the establishment or maintenance of, or the transfer of 
any security to, or maintenance of any security in, the segregated 
account established to safeguard the securities that defease the 
principal amount of the FICO obligations. See supra part I(A). This is 
the same meaning given to the term ``custodian fees'' in section 
21(g)(5)(B) of the Bank Act. See 12 U.S.C. 1441(g)(5)(B). Issuance 
costs include fees and commissions FICO incurs in connection with the 
issuance or servicing of its obligations. The regulation provides an 
illustrative list that includes costs the Finance Board has to date 
determined to be issuance costs.
    Section 950.8(b)(1) authorizes FICO, with the approval of the Board 
of Directors of the FDIC, to impose against and collect from each 
insured depository institution an assessment sufficient to pay its non-
administrative expenses. FICO must make the assessment in the same 
manner as the FDIC makes assessments under section 7 of the FDI Act. 
See 12 U.S.C. 1817.
    Subject to the statutory limits on assessment rates with respect to 
BIF- and SAIF-assessable deposits, see supra part I(B), 
Sec. 950.8(b)(2) requires FICO to determine at least semiannually and 
to advise the FDIC and any collection agent of the rate(s) of the 
assessment it will assess against insured depository institutions in 
order to pay its non-administrative expenses. In determining the 
assessment rate(s), FICO must consider historical data regarding 
assessment collections and current

[[Page 59313]]

information concerning the SAIF and BIF deposit base and the location 
of insured depository institutions that is available only to the FDIC. 
Accordingly, the FDIC will provide such accurate, complete, and timely 
information as FICO may require to carry out its statutory 
responsibilities to pay its non-administrative expenses by setting the 
assessment rate(s) and imposing an assessment against all insured 
depository institutions.
    To facilitate collection of the FICO assessment, 
Sec. 950.8(b)(3)(i) requires FICO to collect assessments in accordance 
with section 21(f)(2) of the Act and the provisions of this regulation, 
and permits assessment collection through a collection agent. 
Currently, the FDIC collects and processes FICO's assessment pursuant 
to a memorandum of understanding between FICO and the FDIC. The FDIC 
handles administrative tasks, such as computing each institution's 
assessment, issuing invoices notifying institutions of the amount to be 
paid and the date of payment, and arranging for the collection of the 
assessment through the payments system. The Finance Board expects the 
assessment process to continue to operate in a similar fashion. 
Further, Sec. 950.8(a)(3)(ii) authorizes each FHLBank to establish and 
maintain a demand deposit account for any insured depository 
institution located in the FHLBank's district regardless of whether the 
institution is a FHLBank member.
    Sections 950.8 (c) and (d) of the interim final rule, which concern 
FICO's authority to receive FRF receivership proceeds and exit fees, 
see supra part I(B), restate without substantive change the provisions 
found currently in Secs. 950.12 (b)(2) and (b)(3), respectively.

C. Clarifying Current Regulatory Requirements

    The remainder of the interim final rule clarifies and reorganizes 
provisions that appear in the current FICO operations regulation. The 
following provisions of the interim final rule restate provisions of 
the current rule without substantive change: In Sec. 950.1, definitions 
of the terms ``Act,'' ``Bank or Banks,'' ``Directorate,'' ``FDIC,'' and 
``Office of Finance;'' Sec. 950.2 FICO's general operating authority; 
Sec. 950.3 FICO Directorate's authority to establish investment 
policies and procedures; Sec. 950.4 book-entry procedure for FICO 
obligations; and Sec. 950.5 FICO's authority to use the services of 
FHLBank or Office of Finance officers, employees, or agents to carry 
out its functions.
    Section 950.6 of the interim final rule, which concerns FICO's 
budget and expenses, is a revision of Sec. 950.8 of the current rule. 
To provide increased flexibility, paragraphs (a) and (b) require FICO 
to submit to the FICO Directorate, and the FICO Directorate to submit 
in turn to the Finance Board, FICO's budget of proposed expenditures 
for approval annually rather than by a date certain each year. Since 
the Finance Board disseminates FICO's approved annual budget to the 
FHLBanks, the requirement that FICO transmit a copy of its budget to 
the FHLBanks is deleted. Paragraphs (c) and (d) make clear that FICO 
may not incur expenditures unless they have been approved by either the 
Finance Board or the FICO Directorate within limits set by the Finance 
Board.
    Consistent with current practice, Sec. 950.7 of the interim final 
rule requires the FHLBanks to pay FICO's administrative expenses. FICO 
determines the amount of administrative expenses each FHLBank must pay 
in the manner provided by section 21(b)(7)(B) of the Bank Act. See 12 
U.S.C. 1441(b)(7)(B). The definition of the term ``administrative 
expenses'' in Sec. 950.1 is revised to reflect more closely the format 
of the financial documents provided by FICO to the Finance Board and to 
make clear that issuance costs are not administrative expenses. See 12 
U.S.C. 1441(b)(7)(C). Consistent with current practice, the interim 
final rule replaces the requirement that FICO bill each FHLBank at 
least semiannually with a requirement that FICO bill the FHLBanks 
periodically. Paragraph (c) makes clear that FICO must adjust the 
amount of administrative expenses the FHLBanks must pay in any calendar 
year, if, in the prior year, administrative expenses have been approved 
by the Finance Board, paid by the FHLBanks, but not actually incurred 
by FICO.
    Section 950.9 concerns reports FICO must make to the Finance Board. 
To reduce the regulatory reporting burden on FICO and to provide 
increased flexibility, the requirement that FICO submit reports on a 
quarterly basis, which appears in Sec. 950.14 of the current rule, is 
deleted. To ensure the current relevance and utility of the information 
provided in the reports FICO submits to the Finance Board, the laundry 
list of required information in the current rule is replaced with a 
requirement that FICO file reports containing such information as the 
Finance Board may direct.
    To ensure compliance with the Bank Act and Finance Board 
regulations, Sec. 950.10 of the interim final rule requires the Finance 
Board to examine FICO's operations at least annually.

III. Notice and Public Participation

    The Finance Board finds that the notice and comment procedure 
required by the Administrative Procedure Act is unnecessary, 
impracticable, and contrary to the public interest in this instance. 
See 5 U.S.C. 553(b)(3)(B). The Funds Act directs FICO to impose an 
assessment on all insured depository institutions on January 1, 1997. 
See Funds Act section 2702. In order to timely impose this assessment, 
the FDIC, acting as FICO's collection agent, must promptly undertake a 
number of administrative tasks, such as computing each institution's 
assessment, issuing invoices that notify the institution of the amount 
to be paid and the date of payment, and arranging for the collection of 
the assessment through the payments system. This rule provides the 
authority for FICO to proceed with the assessment process. It would not 
be possible for FICO to carry out its statutory responsibilities if the 
rule is subject to the notice and comment process. Nevertheless, 
because the Finance Board believes public comments aid in effective 
rulemaking, it will accept written comments on the interim final rule 
on or before December 23, 1996.

IV. Effective Date

    For the reasons stated in part III above, the Finance Board for 
good cause finds that the interim final rule should become effective on 
November 22, 1996. See 5 U.S.C. 553(d)(3).

V. Paperwork Reduction Act

    No collections of information pursuant to the Paperwork Reduction 
Act of 1995 are contained in this interim final rule. See 44 U.S.C. 
3501, et seq. Consequently, the Finance Board has not submitted any 
information to the Office of Management and Budget for review.

VI. Regulatory Flexibility Act

    The Finance Board is adopting the changes to part 950 in the form 
of an interim final rule and not as a proposed rule. Therefore, the 
provisions of the Regulatory Flexibility Act do not apply. See 5 U.S.C. 
601(2), 603(a).

List of Subjects in 12 CFR Part 950

    Federal home loan banks, Securities.

    Accordingly, the Federal Housing Finance Board hereby revises title 
12, chapter IX, subchapter C, part 950 of the Code of Federal 
Regulations, to read as follows:

[[Page 59314]]

PART 950--OPERATIONS

Sec.
950.1  Definitions.
950.2  General authority.
950.3  Authority to establish investment policies and procedures.
950.4  Book-entry procedure for Financing Corporation obligations.
950.5  Bank and Office of Finance employees.
950.6  Budget and expenses.
950.7  Administrative expenses.
950.8  Non-administrative expenses; assessments.
950.9  Reports to the Finance Board.
950.10  Review of books and records.

    Authority: 12 U.S.C. 1441(b)(8), (c), and (j).


Sec. 950.1  Definitions.

    For purposes of this part:
    (a) Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 
1421, et seq.).
    (b) Administrative expenses:
    (1) Include general office and operating expenses such as telephone 
and photocopy charges, printing, legal, and professional fees, postage, 
courier services, and office supplies; and
    (2) Do not include any form of employee compensation, custodian 
fees, issuance costs, or any interest on (and any redemption premium 
with respect to) any Financing Corporation obligations.
    (c) Bank or Banks means a Federal Home Loan Bank or the Federal 
Home Loan Banks.
    (d) BIF-assessable deposit means a deposit that is subject to 
assessment for purposes of the Bank Insurance Fund under the Federal 
Deposit Insurance Act (12 U.S.C. 1811, et seq.), including a deposit 
that is treated as a deposit insured by the Bank Insurance Fund under 
section 5(d)(3) of the Federal Deposit Insurance Act.
    (e) Custodian fees means any fee incurred by the Financing 
Corporation in connection with the transfer of any security to, or 
maintenance of any security in, the segregated account established 
under section 21(g)(2) of the Act, and any other expense incurred by 
the Financing Corporation in connection with the establishment or 
maintenance of such account.
    (f) Directorate means the board established under section 21(b) of 
the Act to manage the Financing Corporation.
    (g) Exit fees means the amounts paid under sections 5(d)(2) (E) and 
(F) of the Federal Deposit Insurance Act, and regulations promulgated 
thereunder (12 CFR part 312).
    (h) FDIC means the agency established as the Federal Deposit 
Insurance Corporation.
    (i) Finance Board means the agency established as the Federal 
Housing Finance Board.
    (j) Insured depository institution has the same meaning as in 
section 3 of the Federal Deposit Insurance Act.
    (k) Issuance costs means issuance fees and commissions incurred by 
the Financing Corporation in connection with the issuance or servicing 
of Financing Corporation obligations, including legal and accounting 
expenses, trustee, fiscal, and paying agent charges, securities 
processing charges, joint collection agent charges, advertising 
expenses, and costs incurred in connection with preparing and printing 
offering materials to the extent the Financing Corporation incurs such 
costs in connection with issuing any obligations.
    (l) Non-administrative expenses means custodian fees, issuance 
costs, and interest on Financing Corporation obligations.
    (m) Obligations means debentures, bonds, and similar debt 
securities issued by the Financing Corporation under sections 21 (c)(3) 
and (e) of the Act.
    (n) Office of Finance means the joint office of the Banks 
established under part 941 of this chapter.
    (o) Receivership proceeds means the liquidating dividends and 
payments made on claims received by the Federal Savings and Loan 
Insurance Corporation Resolution Fund established under section 11A of 
the Federal Deposit Insurance Act from receiverships, that are not 
required by the Resolution Funding Corporation to provide funds for the 
Funding Corporation Principal Fund established under section 21B of the 
Act.
    (p) SAIF-assessable deposit means a deposit that is subject to 
assessment for purposes of the Savings Association Insurance Fund under 
the Federal Deposit Insurance Act, including a deposit that is treated 
as a deposit insured by the Savings Association Insurance Fund under 
section 5(d)(3) of the Federal Deposit Insurance Act.


Sec. 950.2  General authority.

    Subject to the limitations and interpretations in this part and 
such orders and directions as the Finance Board may prescribe, the 
Financing Corporation shall have authority to exercise all powers and 
authorities granted to it by the Act and by its charter and bylaws 
regardless of whether the powers and authorities are specifically 
implemented in regulation.


Sec. 950.3  Authority to establish investment policies and procedures.

    The Directorate shall have authority to establish investment 
policies and procedures with respect to Financing Corporation funds 
provided that the investment policies and procedures are consistent 
with the requirements of section 21(g) of the Act. The Directorate 
shall promptly notify the Finance Board in writing of any changes to 
the investment policies and procedures.


Sec. 950.4  Book-entry procedure for Financing Corporation obligations.

    (a) Authority. Any Federal Reserve Bank shall have authority to 
apply book-entry procedure to Financing Corporation obligations.
    (b) Procedure. The book-entry procedure for Financing Corporation 
obligations shall be governed by the book-entry procedure established 
for Bank securities, codified at part 912 of this chapter. Wherever the 
term ``Federal Home Loan Bank security(ies)'' appears in part 912, the 
term shall be construed also to mean ``Financing Corporation 
obligation(s),'' if appropriate to accomplish the purposes of this 
section.


Sec. 950.5  Bank and Office of Finance employees.

    The Financing Corporation shall have authority to utilize the 
officers, employees, or agents of any Bank or the Office of Finance in 
such manner as may be necessary to carry out its functions.


Sec. 950.6   Budget and expenses.

    (a) Directorate approval. The Financing Corporation shall submit 
annually to the Directorate for approval, a budget of proposed 
expenditures for the next calendar year that includes administrative 
and non-administrative expenses.
    (b) Finance Board approval. The Directorate shall submit annually 
to the Finance Board for approval, the budget of the Financing 
Corporation's proposed expenditures it approved pursuant to paragraph 
(a) of this section.
    (c) Spending limitation. The Financing Corporation shall not exceed 
the amount provided for in the annual budget approved by the Finance 
Board pursuant to paragraph (b) of this section, or as it may be 
amended by the Directorate within limits set by the Finance Board.
    (d) Amended budgets. Whenever the Financing Corporation projects or 
anticipates that it will incur expenditures, other than interest on 
Financing Corporation obligations, that exceed the amount provided for 
in the

[[Page 59315]]

annual budget approved by the Finance Board or the Directorate pursuant 
to paragraph (b) or (c) of this section, the Financing Corporation 
shall submit an amended annual budget to the Directorate for approval, 
and the Directorate shall submit such amended budget to the Finance 
Board for approval.


Sec. 950.7   Administrative expenses.

    (a) Payment by Banks. The Banks shall pay all administrative 
expenses of the Financing Corporation approved pursuant to Sec. 950.6.
    (b) Amount. The Financing Corporation shall determine the amount of 
administrative expenses each Bank shall pay in the manner provided by 
section 21(b)(7)(B) of the Act. The Financing Corporation shall bill 
each Bank for such amount periodically.
    (c) Adjustments. The Financing Corporation shall adjust the amount 
of administrative expenses the Banks are required to pay in any 
calendar year pursuant to paragraphs (a) and (b) of this section, by 
deducting any funds that remain from the amount paid by the Banks for 
administrative expenses in the prior calendar year.


Sec. 950.8   Non-administrative expenses; assessments.

    (a) Interest expenses. The Financing Corporation shall determine 
anticipated interest expenses on its obligations at least semiannually.
    (b) Assessments on insured depository institutions. (1) Authority. 
To provide sufficient funds to pay the non-administrative expenses of 
the Financing Corporation approved under Sec. 950.6, the Financing 
Corporation shall, with the approval of the Board of Directors of the 
FDIC, assess against each insured depository institution an assessment 
in the same manner as assessments are made by the FDIC under section 7 
of the Federal Deposit Insurance Act.
    (2) Assessment rate--(i) Determination. The Financing Corporation 
at least semiannually shall determine the rate or rates of the 
assessment it will assess against insured depository institutions 
pursuant to section 21(f)(2) of the Act and paragraph (b)(1) of this 
section.
    (ii) Limitation. Until the earlier of December 31, 1999, or the 
date as of which the last savings association ceases to exist, the rate 
of the assessment imposed on an insured depository institution with 
respect to any BIF-assessable deposit shall be a rate equal to \1/5\ of 
the rate of the assessment imposed on an insured depository institution 
with respect to any SAIF-assessable deposit.
    (iii) Notice. The Financing Corporation shall notify the FDIC and 
the collection agent, if any, of its determination under paragraph 
(b)(2)(i) of this section.
    (3) Collecting assessments--(i) Collection agent. The Financing 
Corporation shall have authority to collect assessments made under 
section 21(f)(2) of the Act and paragraph (b)(1) of this section 
through a collection agent of its choosing.
    (ii) Accounts. Each Bank shall permit any insured depository 
institution whose principal place of business is in its district to 
establish and maintain at least one demand deposit account to 
facilitate collection of the assessments made under section 21(f)(2) of 
the Act and paragraph (b)(1) of this section.
    (c) Receivership proceeds--(1) Authority. To the extent the amounts 
collected under paragraph (b) of this section are insufficient to pay 
the non-administrative expenses of the Financing Corporation approved 
under Sec. 950.6, the Financing Corporation shall have authority to 
require the FDIC to transfer receivership proceeds to the Financing 
Corporation in accordance with section 21(f)(3) of the Act.
    (2) Procedure. The Directorate shall request in writing that the 
FDIC transfer the receivership proceeds to the Financing Corporation. 
Such request shall specify the estimated amount of funds required to 
pay the non-administrative expenses of the Financing Corporation 
approved under Sec. 950.6.
    (d) Exit fees--(1) Authority. To the extent the amounts provided 
under paragraphs (b) and (c) of this section are insufficient to pay 
the interest due on Financing Corporation obligations, the Financing 
Corporation shall have authority to request that the Secretary of the 
Treasury order the transfer of exit fees to the Financing Corporation 
in accordance with section 5(d)(2)(E) of the Federal Deposit Insurance 
Act.
    (2) Procedure. The Directorate shall request in writing that the 
Secretary of the Treasury order that exit fees be transferred to the 
Financing Corporation. Such request shall specify the estimated amount 
of funds required to pay the interest due on Financing Corporation 
obligations.


Sec. 950.9   Reports to the Finance Board.

    The Financing Corporation shall file such reports as the Finance 
Board shall direct.


Sec. 950.10   Review of books and records.

    The Finance Board shall examine the Financing Corporation at least 
annually to determine whether the Financing Corporation is performing 
its functions in accordance with the requirements of section 21 of the 
Act and this part.

    By the Board of Directors of the Federal Housing Finance Board.
Bruce A. Morrison,
Chairperson.
[FR Doc. 96-29748 Filed 11-21-96; 8:45 am]
BILLING CODE 6725-01-U