[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Rules and Regulations]
[Pages 76291-76300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26022]



[[Page 76291]]

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FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1200, 1201, 1229, 1238, 1239, 1261, 1264, 1266, 1267, 
1269, 1270, 1273, 1274, 1278, 1281, 1282, 1290, and 1291

RIN 2590-AA80


Technical and Conforming Changes and Corrections to FHFA 
Regulations

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is amending its 
rules to make a number of conforming changes and corrections intended 
to fix citations, provide for consistent use of terminology, and remove 
duplicative definitions. FHFA is also removing provisions that are no 
longer applicable, clarifying other provisions by incorporating 
language to implement existing FHFA regulatory interpretations, and 
making other changes and corrections.

DATES: Effective December 2, 2016.

FOR FURTHER INFORMATION CONTACT: Thomas E. Joseph, Associate General 
Counsel, [email protected], 202-649-3076 (this is not a toll-free 
number), Office of General Counsel, Federal Housing Finance Agency, 400 
Seventh Street SW., Washington, DC 20219. The telephone number for the 
Telecommunications Device for the Hearing Impaired is 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Effective July 30, 2008, the Housing and Economic Recovery Act of 
2008 (HERA) \1\ created FHFA as a new independent agency of the federal 
government. HERA transferred to FHFA the supervisory and oversight 
responsibilities of the Office of Federal Housing Enterprise Oversight 
(OFHEO) over the Federal National Mortgage Association (Fannie Mae) and 
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, 
the Enterprises), and of the Federal Housing Finance Board (Finance 
Board) over the Federal Home Loan Banks (Banks) and the Bank System's 
Office of Finance. Under the legislation, the Enterprises, the Banks, 
and the Office of Finance continue to operate under regulations 
promulgated by OFHEO and the Finance Board until such regulations are 
superseded by regulations issued by FHFA.\2\
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    \1\ Public Law 110-289, 122 Stat. 2654.
    \2\ See 12 U.S.C. 4511, note.
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II. The Final Rule

A. The Proposed Amendments

    In May 2016, FHFA issued a Notice of Proposed Rulemaking (NPR) that 
would have amended its regulations to make a number of technical and 
conforming changes and corrections that corrected citations, provided 
for consistent use of terminology, and removed outdated or duplicative 
provisions and definitions.\3\ While most of the changes represented 
technical corrections, some of the proposed changes removed provisions 
that FHFA believed were no longer applicable, clarified provisions to 
incorporate FHFA regulatory interpretations of the particular rule, or 
changed provisions to better reflect statutory requirements. As a 
result, FHFA requested public comments on all of the proposed changes. 
The comment period for the NPR closed on July 25, 2016.
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    \3\ See, Proposed Rule: Technical and Conforming Changes and 
Corrections to FHFA Regulations, 81 FR 33424 (May 26, 2016) 
(hereinafter ``Proposed Rule'').
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    FHFA intended the NPR to address errors that had arisen in its 
regulations as it amended, readopted, and transferred a large number of 
the Finance Board or OFHEO regulations. Given that this process 
occurred over several years, not all cross-references in the FHFA 
current regulations are correct. In addition, in January 2013, FHFA 
adopted 12 CFR part 1201 (part 1201), which provides general 
definitions of terms used in all FHFA's regulations. Not all 
terminology in FHFA's regulations is consistent with the terms in part 
1201. FHFA also identified certain provisions in its regulations that 
require corrections to bring them more in line with statutory mandates. 
Finally, a number of provisions in the regulations address now-
completed transition periods or events or otherwise do not have future 
applicability to the Enterprises or the Banks.

B. Comments Received

    FHFA received two comments on the NPR. One comment letter was a 
joint letter from all eleven Banks. The other came from a smaller group 
of Banks. One comment letter objected to the proposed removal of the 
provision on out-of-district advances from the regulations and to 
statements FHFA made in the preamble of the proposed rule about the 
need for Banks to assure that members capitalize any participated 
advances. It also identified additional errors in current regulations 
that FHFA had not included in the proposed rule and suggested a change 
to one of the definitions proposed by FHFA. The other letter did not 
comment specifically on any amendments proposed by FHFA but objected to 
some aspects of what FHFA described in the preamble as the current 
policy for identifying which Bank directorships would be eliminated 
when a state is slated to lose a director's seat as a result of the 
annual designation of directorships.\4\
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    \4\ See Proposed Rule, 81 FR at 33427-28.
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    Proposal To Remove Sec.  1266.25. One comment letter objected to 
FHFA's proposal to remove from its regulations Sec.  1266.25, a 
provision that authorizes a Bank to become a creditor to a member of 
another Bank through the purchase of an outstanding advance (or a 
participation interest therein) from the other Bank, or ``through an 
arrangement with the other Bank that provides for the establishment of 
such a creditor/debtor relationship at the time the advance is made.'' 
The commenters believed that removal of the provision, coupled with 
FHFA's statement in the preamble that non-members of a purchasing Bank 
would need to capitalize any participation interest in their advances 
that are sold to that Bank, will result in eliminating long-standing 
authority that allowed Banks to purchase such advances.\5\ The 
commenters contended that when the Finance Board adopted the 
predecessor regulation to Sec.  1266.25 in 2000, it did not mention 
requiring non-member capitalization of such out-of-district 
participation interests, but instead stated that the purpose of the 
rule was to assure that the Bank performed the same level of due 
diligence as that applied to in-district advances.
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    \5\ In the NPR, FHFA noted that:
     Removal of this provision [Sec.  1266.25] would not prevent one 
Bank from selling an advance or participation to another Bank, based 
solely on the statutory authority, but FHFA would expect that before 
doing so a Bank would first obtain the concurrence of FHFA about how 
a non-member could capitalize those advances through some means 
other than buying stock. Proposed Rule, 81 FR at 33430.
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    While the comment letter contended that the Finance Board did not 
require the capitalization of participation interests in advances when 
it originally adopted what is currently Sec.  1266.25, the rule 
specifically states that any creditor/debtor relationships established 
under the rule ``shall be subject to all the provisions of [the 
advances regulation] that would apply to an advance made by a Bank to 
its own members or housing associates.'' \6\ One of the provisions in

[[Page 76292]]

the Finance Board advances regulation, at the time current Sec.  
1266.25, was originally adopted in 2000, prohibited a Bank from making 
an advance to one of its members if the aggregate amount of the 
outstanding advances to that member would exceed 20 times the amount 
paid in by such member for the Bank's capital stock.\7\ Thus, as 
written, the out-of-district advances rule by its terms would appear to 
have required the capitalization of an out-of-district advance 
involving a member of another Bank, whether it was established through 
sale of a participation interest or through creation of a direct 
creditor/debtor relationship between a Bank and a member of another 
Bank.
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    \6\ The commenter noted that current Sec.  1266.25 is identical, 
except for some minor changes in word order, to the provision 
adopted at 12 CFR 950.18 in July 2000.
    \7\ See 12 CFR 935.15(a) (2000). Effective February 18, 2000, 
Sec.  935.15 of the Finance Board regulations was re-designated 
without substantive change as Sec.  950.15. See 65 FR 8253, 8254 
(Feb. 18, 2000). This provision was again later re-designated 
without further amendment as Sec.  950.11 in July 2000. See 65 FR. 
44414, 44430 (July 18, 2000). This provision is currently found at 
12 CFR 1266.11(a) but applied only to Banks that had not converted 
to the Gramm-Leach-Bliley capital structure. As a consequence, FHFA 
proposed to delete it in the NPR. See Proposed Rule, 81 FR at 33430.
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    In fact, part of FHFA's reason for proposing to delete Sec.  
1266.25 is the ambiguity and difficulty in applying the broad 
requirement that any participation interest in an advance or direct 
creditor/debtor relationship with an out-of-district member meet all 
requirements of the advances regulation, as if that out-of-district 
member were a member of the Bank ultimately holding the advance.\8\ 
Moreover, as FHFA also noted, the provision does not add meaningfully 
to the clear statutory authority that allows Banks to buy or sell 
advances or participation interests in advances to other Banks.\9\ As 
written, Sec.  1266.25 requires that in order to purchase an advance or 
participation interest in an advance made by another Bank, the 
purchasing Bank would have to assure the transaction is structured to 
meet all the same requirements that apply to an advance that the 
purchasing Bank makes to its own members. This requirement appears to 
add complexity to these sales and to create uncertainties for these 
transactions. As a result, the comments received in response to the 
proposal to delete Sec.  1266.25 do not alter FHFA's underlying reasons 
for proposing to remove the provision, and FHFA has determined to adopt 
the final rule as proposed.
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    \8\ See id.
    \9\ 12 U.S.C. 1430 (d) provides in relevant part that: ``Any 
Federal Home Loan Bank shall have power to sell to any other Federal 
Home Loan Bank, with or without recourse, any advance made under the 
provision of this chapter, or to allow such [B]ank a participation 
therein, and any other Federal Home Loan Bank shall have power to 
purchase such advance or accept a participation therein, together 
with an appropriate assignment of security therefor.''
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    The comment letter, however, correctly noted that prior to the 
adoption of the predecessor to Sec.  1266.25, the Finance Board had not 
required non-member capitalization of participated advances. The 
comment letter, therefore, raised a fair point that FHFA's statements 
in the preamble about capitalization of participation interests were 
likely to create uncertainties about the Banks' ability to exercise 
their statutory authority to buy and sell participation interests in 
advances. Notwithstanding the language of the preamble to the NPR, FHFA 
did not intend to alter the long-standing agency policy that allows a 
Bank to purchase a participation interest in an advance made by another 
Bank without requiring the borrowing member to capitalize the 
participation interest acquired by the purchasing Bank. The final rule 
does nothing to change that policy, and thus the Banks may continue to 
purchase and sell participation interests in advances as they have done 
previously. The only substantive effect of removing Sec.  1266.25 is to 
eliminate the language that addresses the establishment of debtor/
creditor relationships other than those created through the sale of a 
participation interest in an advance. Because that provision does not 
describe the type of relationships encompassed by its language, it has 
created some uncertainty as to its scope, which has prompted inquiries 
from the Banks about what types of transactions are permitted. FHFA has 
informally advised some Banks that the ``arrangement with the other 
Bank'' language of Sec.  1266.25(a) does not authorize a Bank to 
originate an advance to a member of another Bank, nor does it authorize 
a Bank to issue standby letters of credit on behalf of a member of 
another Bank. By removing that language FHFA will eliminate such 
uncertainties and should not adversely affect any Bank because none has 
established any such debtor/creditor relationships with members of 
other Banks in reliance on that provision.
    Proposed Changes to Part 1261. Another comment expressed concerns 
about FHFA statements in the SUPPLEMENTARY INFORMATION section of the 
NPR relating to how FHFA determines which member directorship to 
eliminate when, in the annual designation of directorships, FHFA 
allocates to a particular state fewer directorships for the coming year 
than it has in the current year. Specifically, commenters took issue 
with FHFA's statement that if a state were going to lose a member 
directorship at the start of the next year and such state had a member 
directorship slated to expire at the end of the current year, then the 
Bank would eliminate the directorship--and the director--with the 
expiring term.\10\ The commenters argued that this statement 
constituted a change in agency policy and as such should have been the 
subject of a substantive rulemaking. They also argued that in this 
situation, a Bank's board of directors should be able to designate 
which directorship for the particular state would be eliminated, as is 
the case when FHFA reduces the number of directorships for a state 
which has no director with a term expiring that year. Without 
discretion to make such determinations, commenters stated, Banks' 
boards of directors could suffer adverse consequences, including losing 
key members.
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    \10\ See Proposed Rule, 81 FR at 33427-28.
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    As an initial matter, these comments did not address any of the 
specific technical amendments that FHFA proposed to make to the part 
1261 regulation. Indeed, FHFA did not propose to revise any regulations 
pertaining to the reduction of directorships caused by the annual 
designation process, and the preamble statements that appear to have 
prompted the comments were simply background information that FHFA 
provided as context to the FHFA's proposed revisions to other 
provisions of part 1261. As background information, the preamble 
statements did not purport to make any changes to agency policy 
regarding Bank directorships, but simply described the existing 
practice for one particular situation. Therefore, FHFA is not making 
any changes in the final rule as a result of these comments.
    Moreover, FHFA disagrees with the comment letter's contention that 
a Bank's board of directors should be permitted in all cases to 
determine which particular directorship must be eliminated when the 
annual designation of directorships reduces the number of directorships 
allocated to a particular state. By statute, FHFA is required annually 
to establish the size of the board of directors for each Bank and to 
designate the number of member directorships to be allocated to each 
state within each Bank's district. Occasionally, FHFA's designation of 
directorships order reduces the number of directorships allocated to a 
particular state, which means that one of the incumbent directorships 
must be eliminated as of the end of that calendar year. If one of those 
directorships has a

[[Page 76293]]

term that will expire as of the end of that calendar year, the 
reduction in board size required by FHFA's designation of directorships 
order is effectively self-executing, i.e., the expiration of the term 
of office for one director automatically brings the board size into 
compliance with the size authorized by the designation order. To allow 
the Banks to do what the commenter has suggested, i.e., retain the 
director with the expiring term, would necessarily require that the 
Bank take some action to remove from its board a director whose term of 
office has not expired, so that the number of directorships for that 
state does not exceed the number authorized by FHFA. A Bank, however, 
has no legal authority to remove a sitting director from the Bank's 
board of directors, and thus could not require an incumbent director 
whose term is not expiring to leave the board. This situation differs 
from that in which FHFA reduces the number of directorships allocated 
to a particular state, which has no directorships expiring at the end 
of the year. In that case, the designation of directorships order is 
what terminates one of the member directorships, and effectively 
delegates to the Bank's board of directors the authority to determine 
which particular directorship has been terminated. In those 
circumstances, there is no legal issue relating to the removal of an 
incumbent director prior to the expiration of his or her term because, 
as of the effective date of the designation of directorships order, the 
directorship would have ceased to exist and there would be no office 
from which the person was being removed.
    Proposed Definition of President. Commenters also suggested that 
FHFA alter the proposed definition of ``president'' to read ``the 
individual who serves as the highest ranking executive officer of a 
Bank.'' The NPR proposed to define president, when used to describe an 
officer of a Bank, as ``a Bank's principal executive officer.''
    The commenters did not provide a reason for the suggested change or 
why FHFA's proposed definition was problematic. FHFA notes that the 
Securities Exchange Commission (SEC) uses the term ``principal 
executive officer'' in the context of its disclosure rules on 
compensation, which the Banks already apply.\11\ FHFA also believes the 
reference to ``principal executive officer'' is clearer and more 
straightforward than trying to identify which Bank officer outranks 
another or to quantify the ranking among executive officers. Thus, FHFA 
is adopting the definition of ``president'' as proposed.
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    \11\ See 17 CFR 229.402.
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    Additional Technical Corrections. Finally, commenters identified 
additional corrections to FHFA's regulations that were not included as 
part of the NPR. FHFA agrees that commenters identified clear errors 
with FHFA's current regulations and is therefore adopting the 
corrections suggested by commenters as part of the final rule.
    First, commenters pointed out that cross references in 12 CFR 
1266.17(c)(2) to Sec.  1266.3(b) of FHFA's rules appear to be 
incorrect, and the reference instead should be to Sec.  1266.5(b). FHFA 
agrees and is adding to the final rule a provision to make this 
correction. The cross reference in Sec.  1266.17(c)(2) is intended to 
incorporate standards that Banks must apply when making advances to 
members to any advance that a Bank makes to a housing associate. The 
current cite in the rule to Sec.  1266.3(b), however, references 
requirements that apply to long-term advances made to members rather 
than the pricing criteria, which are set forth in Sec.  1266.5(b). The 
Finance Board appears to have added the erroneous cross reference to 
the rule when it first adopted it in 2002, and FHFA carried over the 
mistake to part 1266 when it re-adopted the rule in 2010.\12\
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    \12\ See Final Rule: Technical Amendments to Federal Housing 
Finance Board Regulations, 57 FR12841, 12851 (Mar. 20, 2002). See, 
also, Final Rule: Use of Community Development Loans by Community 
Financial Institutions to Secure Advances; Secured Lending by 
Federal Home Loan Banks to Members and Their Affiliates; Transfer of 
Advances and New Business Activity Regulation, 75 FR 76617, 76622 
(Dec. 9, 2010).
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    Second, commenters identified two corrections to appendix A of part 
1273 (appendix A), which sets forth exceptions to the general SEC 
disclosure standards that the Office of Finance (OF) otherwise must 
follow in preparing the Bank System's Combined Financial Report. The 
first error is a reference to ``Item 402(1) of SEC Regulation S-K'' in 
paragraph C of appendix A. SEC Regulation S-K, however does not contain 
an ``Item 402(1).'' The Finance Board erroneously cited to ``Item 
402(1), 17 CFR 229.402(1)'' when it first adopted appendix A in 
2000.\13\ FHFA, however, cannot determine what provision in Regulation 
S-K, the Finance Board intended to reference. Nor can FHFA identify any 
other SEC item that might be relevant to the matters addressed in 
paragraph C of appendix A. As a result, FHFA intends to delete the 
reference to ``Item 402(1) of SEC Regulation S-K,'' as suggested by 
commenters.
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    \13\ See Final Rule, Office of Finance; Authority of Federal 
Home Loan Banks to Issue Consolidated Obligations, 65 FR 36290, 
36303 (June 7, 2000).
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    Commenters also pointed out that a statement in paragraph D of 
appendix A is no longer accurate given recent regulatory changes. 
Specifically, paragraph D, which addresses matters submitted for 
shareholder vote, contains a statement that: ``The only item 
shareholders vote upon is the annual election of directors.'' Under the 
voluntary merger rules adopted by FHFA after HERA, however, a Bank's 
shareholders also may vote to ratify a voluntary merger agreement 
between their Bank and another Bank.\14\ Thus, given that the statement 
about member voting is no longer accurate and adds nothing substantive 
to the appendix item at issue, FHFA is deleting the sentence as 
suggested by commenters.
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    \14\ See 12 CFR 1278.6.
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C. The Final Rule

    As just discussed, FHFA is adopting as part of the final rule a 
number of additional technical corrections suggested by commenters but 
is otherwise not changing the proposed rule based on the comments 
received. In addition, FHFA is updating the table in Sec.  1200.4 
providing the Office of Management and Budget (OMB) control numbers and 
expiration dates for FHFA information collections under the Paperwork 
Reduction Act to reflect recent OMB actions and approvals.
    Further, after publication of the NPR, FHFA identified additional 
instances in which terms defined in part 1201 of its regulations, which 
provides general definitions applicable to all FHFA regulations, are 
also defined in other FHFA regulations. As a result, FHFA is adopting 
provisions as part of this final rule to remove duplicative definitions 
from part 1281 for the terms ``Bank System'' and ``data reporting 
manual (DRM)'' and from part 1282 for the term ``HUD.'' \15\ FHFA is 
also adopting in the final rule a correction to a cross-reference in 12 
CFR 1266.10 to the FHFA regulation addressing the Banks' member product 
policies. The member products policy regulation was located at 12 CFR 
917.4 but FHFA recently transferred it to 12 CFR 1239.30, although FHFA 
did not update the cross reference in 12 CFR 1266.10 at that time.\16\
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    \15\ 12 CFR parts 1281 and 1282.
    \16\ See Final Rule: Responsibilities of Boards of Directors, 
Corporate Practices and Corporate Governance Matters, 80 FR 72327 
(Nov. 19, 2015).
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    Other than incorporating the additional corrections highlighted 
above, FHFA is adopting the changes proposed by the NPR as final 
without further substantive changes.

[[Page 76294]]

D. Considerations of Differences Between the Banks and the Enterprises

    When promulgating regulations relating to the Banks, section 
1313(f) of the Safety and Soundness Act requires the Director to 
consider the differences between the Banks and the Enterprises with 
respect to the Banks' cooperative ownership structure; mission of 
providing liquidity to members; affordable housing and community 
development mission; capital structure; and joint and several 
liability.\17\ The changes made in this rulemaking correct existing 
FHFA regulations or are clarifying and conforming in nature. 
Nonetheless, FHFA, in preparing this rule, considered the differences 
between the Banks and the Enterprises as they related to the above 
factors. FHFA requested public comments about whether these differences 
should result in any revisions to the proposed rule, but received no 
comments responsive to this request.
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    \17\ See 12 U.S.C. 4513.
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III. Paperwork Reduction Act

    The final rule does not contain any collections of information 
pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). Therefore, FHFA has not submitted any information to the Office 
of Management and Budget for review.

IV. Regulatory Flexibility Act

    The final rule applies only to the Banks and the Enterprises, which 
do not come within the meaning of small entities as defined in the 
Regulatory Flexibility Act (RFA). See 5 U.S.C. 601(6). Therefore, in 
accordance with section 605(b) of the RFA, FHFA certifies that this 
final rule does not have significant economic impact on a substantial 
number of small entities.

List of Subjects

12 CFR Part 1200

    Organization and functions (Government agencies), Reporting and 
recordkeeping requirements, Seals and insignia.

12 CFR Part 1201

    Administrative practice and procedure, Federal home loan banks, 
Government-sponsored enterprises, Office of finance, Regulated 
entities.

12 CFR Part 1229

    Capital, Federal home loan banks, Government-sponsored enterprises, 
Reporting and recordkeeping requirements.

12 CFR Part 1238

    Administrative practice and procedure, Capital, Federal home loan 
banks, Government-sponsored enterprises, Reporting and recordkeeping 
requirements, Stress test.

12 CFR Part 1239

    Administrative practice and procedure, Federal home loan banks, 
Government-sponsored enterprises, Reporting and recordkeeping 
requirements.

12 CFR Part 1261

    Banking, Banks, Conflicts of interest, Elections, Ethical conduct, 
Federal home loan banks, Financial disclosure, Reporting and 
recordkeeping requirements.

12 CFR Parts 1264, 1266, and 1267

    Community development, Credit, Federal home loan banks, Housing, 
Reporting and recordkeeping requirements.

12 CFR Part 1269

    Community development, Credit, Federal home loan banks, Housing, 
Letters of credit.

12 CFR Part 1270

    Accounting, Federal home loan banks, Government securities.

12 CFR Part 1273

    Federal home loan banks, Securities.

12 CFR Part 1274

    Accounting, Federal home loan banks, Financial disclosure.

12 CFR Part 1278

    Banks, Banking, Federal home loan banks, Mergers.

12 CFR Parts 1281 and 1290

    Credit, Federal home loan banks, Housing, Reporting and 
recordkeeping requirements.

12 CFR Part 1282

    Mortgages, Reporting and recordkeeping requirements.

12 CFR Part 1291

    Community development, Credit, Federal home loan banks, Housing, 
Reporting and recordkeeping requirements.

    Accordingly, for reasons stated in the SUPPLEMENTARY INFORMATION 
and under authority of 12 U.S.C. 4511, 4513, and 4526, FHFA is amending 
chapter XII of title 12 of the Code of Federal Regulations as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

Subchapter A--Organization and Operations

PART 1200--ORGANIZATION AND FUNCTIONS

0
1. The authority citation for part 1200 is revised to read as follows:

    Authority:  5 U.S.C. 552, 12 U.S.C. 4512, 12 U.S.C. 4526, 44 
U.S.C. 3506.


0
2. Add Sec.  1200.4 to read as follows:


Sec.  1200.4  OMB control numbers assigned under the Paperwork 
Reduction Act.

    (a) Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3531) 
and the implementing regulations of the Office of Management and Budget 
(OMB) (5 CFR part 1320), an agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number.
    (b) OMB has approved the collections of information contained in 
FHFA's regulations and has assigned each collection a control number. 
The following table displays the sections of FHFA's regulations (both 
those located in this chapter and those promulgated by the former 
Federal Housing Finance Board that appear in chapter IX of this title) 
containing collections of information, along with the applicable OMB 
control numbers and the expirations dates for those control numbers:

------------------------------------------------------------------------
  12 CFR part or section where identified and   OMB control   Expiration
                   described                        No.          date
------------------------------------------------------------------------
906.5.........................................    2590-0004   07/31/2017
955.4.........................................    2590-0008   02/29/2016
1207.23.......................................    2590-0014   07/31/2018
1222.22.......................................    2590-0013   07/31/2018
1222.23.......................................    2590-0013   07/31/2018
1222.24.......................................    2590-0013   07/31/2018
1222.25.......................................    2590-0013   07/31/2018
1222.26.......................................    2590-0013   07/31/2018
1261.7........................................    2590-0006   12/31/2017
1261.12.......................................    2590-0006   12/31/2017
1261.14.......................................    2590-0006   12/31/2017
1263.2........................................    2590-0003   12/31/2016
1263.4........................................    2590-0003   12/31/2016
1263.5........................................    2590-0003   12/31/2016
1263.6........................................    2590-0003   12/31/2016
1263.7........................................    2590-0003   12/31/2016
1263.8........................................    2590-0003   12/31/2016
1263.9........................................    2590-0003   12/31/2016
1263.11.......................................    2590-0003   12/31/2016
1263.12.......................................    2590-0003   12/31/2016
1263.13.......................................    2590-0003   12/31/2016
1263.14.......................................    2590-0003   12/31/2016
1263.15.......................................    2590-0003   12/31/2016
1263.16.......................................    2590-0003   12/31/2016
1263.17.......................................    2590-0003   12/31/2016
1263.18.......................................    2590-0003   12/31/2016

[[Page 76295]]

 
1263.24.......................................    2590-0003   12/31/2016
1263.26.......................................    2590-0003   12/31/2016
1263.31.......................................    2590-0003   12/31/2016
1264.4........................................    2590-0001   12/31/2018
1264.5........................................    2590-0001   12/31/2018
1264.6........................................    2590-0001   12/31/2018
1266.17.......................................    2590-0001   12/31/2018
1277.28.......................................    2590-0002   12/31/2016
1290.2........................................    2590-0005   02/29/2016
1290.3........................................    2590-0005   02/29/2016
1290.4........................................    2590-0005   02/29/2016
1290.5........................................    2590-0005   02/29/2016
1291.5........................................    2590-0007   11/30/2016
1291.6........................................    2590-0007   11/30/2016
1291.7........................................    2590-0007   11/30/2016
1291.8........................................    2590-0007   11/30/2016
1291.9........................................    2590-0007   11/30/2016
------------------------------------------------------------------------

PART 1201--GENERAL DEFINITIONS APPLYING TO ALL FEDERAL HOUSING 
FINANCE AGENCY REGULATIONS

0
3. The authority citation for part 1201 continues to read as follows:

    Authority:  12 U.S.C. 4511(b), 4513(a), 4513(b).


0
4. Amend Sec.  1201.1 by revising the definition of ``Bank System'' and 
adding, in alphabetical order, a definition for ``President'' to read 
as follows:


Sec.  1201.1  Definitions.

* * * * *
    Bank System means the Federal Home Loan Bank System, consisting of 
all of the Banks and the Office of Finance.
* * * * *
    President, when referring to an officer of a Bank only, means a 
Bank's principal executive officer.
* * * * *

Subchapter B--Entity Regulations

PART 1229--CAPITAL CLASSIFICATIONS AND PROMPT CORRECTIVE ACTION

0
5. The authority citation for part 1229 continues to read as follows:

    Authority:  12 U.S.C. 1426, 4513, 4526, 4613, 4614, 4615, 4616, 
4617, 4618, 4622, 4623.


0
6. Amend Sec.  1229.1 by revising the definitions of ``new business 
activity'' and ``total capital'' to read as follows:


Sec.  1229.1  Definitions.

* * * * *
    New business activity when used in this subpart has the same 
meaning set forth in Sec.  1272.1 of this chapter.
* * * * *
    Total capital means the sum of the Bank's permanent capital, the 
amount paid-in for its Class A stock, the amount of any general 
allowances for losses, and the amount of any other instruments 
identified in a Bank's capital plan that the Director has determined to 
be available to absorb losses incurred by such Bank.

0
7. Amend Sec.  1229.6 by revising paragraph (a)(3) to read as follows:


Sec.  1229.6  Mandatory actions applicable to undercapitalized Banks.

    (a) * * *
    (3) Not make any capital distribution unless:
    (i) The distribution meets the requirements of Sec.  1229.5(b) and 
paragraphs (a)(3)(ii) and (iii) of this section and the Director has 
provided permission for such distribution as set forth in Sec.  
1229.5(b);
    (ii) The capital distribution will not result in the Bank being 
reclassified as significantly undercapitalized or critically 
undercapitalized; and
    (iii) The capital distribution does not violate any restriction on 
the redemption or repurchase of capital stock or the declaration or 
payment of a dividend set forth in section 6 of the Bank Act (12 U.S.C. 
1426) or in any other applicable regulation;
* * * * *


Sec.  1229.7  [Amended]

0
8. Amend Sec.  1229.7(a) by removing the reference to ``Sec.  1229.7 or 
Sec.  1229.8 of this subpart'' and adding in its place a reference to 
``Sec.  1229.8 or Sec.  1229.9''.

PART 1238--STRESS TESTING OF REGULATED ENTITIES

0
9. The authority citation for part 1238 continues to read as follows:

    Authority:  12 U.S.C. 1426; 4513; 4526; 4612; 5365(i).


Sec.  1238.1  [Amended]

0
10. Amend Sec.  1238.1(a) by:
0
a. Removing the reference to ``Federal Housing Finance Agency (FHFA)'' 
and adding in its place ``FHFA'';
0
b. Removing the reference to ``Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992, as amended'' and adding in its place 
``Safety and Soundness Act''; and
0
c. Removing the reference to ``Federal Home Loan Bank Act, as amended'' 
and adding in its place ``Bank Act''.


Sec.  1238.2  [Amended]

0
11. Amend Sec.  1238.2 by removing the definitions for ``Federal Home 
Loan Banks,'' ``Federal Housing Finance Agency or FHFA,'' and 
``regulated entities''.

PART 1239--RESPONSIBLITIES OF BOARDS OF DIRECTORS, CORPORATE 
PRACTICES, AND CORPORATE GOVERNANCE

0
12. The authority citation for part 1239 is revised to read as follows:

    Authority:  12 U.S.C. 1426, 1427, 1432(a), 1436(a), 1440, 
4511(b), 4513(a), 4513(b), 4526, and 15 U.S.C. 78oo(b).


0
13. Amend Sec.  1239.32 by:
0
a. Revising paragraphs (d)(3) and (e)(4);
0
b. Removing the word ``and'' at the end of paragraph (e)(8);
0
c. Removing the period at the end of paragraph (e)(9) and adding ``; 
and'' in its place; and
0
d. Adding paragraph (e)(10).
    The revisions and addition read as follows:


Sec.  1239.32  Audit committee.

* * * * *
    (d) * * *
    (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;
    (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;
    (iii) Provide that the audit committee shall be directly 
responsible for the appointment, compensation, retention, and oversight 
of the work of the external auditor;
    (iv) Provide that the external auditor shall report directly to the 
audit committee;
    (v) 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; and
    (vi) Provide that the Bank shall make available appropriate 
funding, as determined by the audit committee, for payment of 
compensation to the external auditor, to any independent advisors or 
counsel engaged by the audit committee, and ordinary administrative 
expenses that are necessary or appropriate for the audit committee to 
carry out its duties.
    (e) * * *
    (4) Oversee the external audit function by:

[[Page 76296]]

    (i) Approving the external auditor's annual engagement letter; and
    (ii) Reviewing the performance of the external auditor.
* * * * *
    (10) Establish procedures for the receipt, retention, and treatment 
of complaints received by the Bank regarding accounting, internal 
accounting controls, or auditing matters, and for the confidential, 
anonymous submission by employees of the Bank of concerns regarding 
questionable accounting or auditing matters.
* * * * *

Subchapter D--Federal Home Loan Banks

PART 1261--FEDERAL HOME LOAN BANK DIRECTORS

0
14. The authority citation for part 1261 continues to read as follows:

    Authority:  12 U.S.C. 1426, 1427, 1432, 4511 and 4526.


Sec.  1261.2  [Amended]

0
15. Amend Sec.  1261.2:
0
a. By adding, in alphabetical order, a definition for ``Advisory 
Council'';
0
b. In the definition of ``Member directorship'', by removing the words 
``, and includes guaranteed directorships and stock directorships'';
0
c. In the definition of ``Public interest directorship'', by removing 
the words ``four years experience'' and, in their place, adding the 
words ``four years of experience''; and
0
d. By removing the definition of ``Stock directorship''.
    The revision reads as follows:


Sec.  1261.2  Definitions.

* * * * *
    Advisory Council means the Advisory Council each Bank is required 
to establish pursuant to section 10(j)(11) of the Bank Act (12 U.S.C. 
1430(j)(11)), and part 1291 of this chapter.
* * * * *


Sec.  1261.3  [Amended]

0
16. Amend Sec.  1261.3:
0
a. In paragraph (b), by removing the words ``commencing on or after 
January 1, 2009''; and
0
b. In paragraph (e), by removing the word ``part'', wherever it 
appears, and, in its place, adding the word ``subpart''.

0
17. Amend Sec.  1261.4 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  1261.4  Designation of member directorships.

    (a) Capital stock reports. (1) On or before April 10 of each year, 
each Bank shall deliver to FHFA a capital stock report that indicates, 
as of the record date, the number of members located in each voting 
State in the Bank's district, the number of shares of Bank stock that 
each member (identified by its FHFA ID number) was required to hold, 
and the number of shares of Bank stock that all members located in each 
voting State were required to hold. If a Bank has issued more than one 
class of stock, it shall report the total shares of stock of all 
classes required to be held by the members. The Bank shall certify to 
FHFA that, to the best of its knowledge, the information provided in 
the capital stock report is accurate and complete, and that it has 
notified each member of its minimum capital stock holding requirement 
as of the record date.
    (2) The number of shares of Bank stock that any member was required 
to hold as of the record date shall be determined in accordance with 
the minimum investment established by the capital plan for that Bank.
    (b) Designation of member directorships. Using the method of equal 
proportions, the Director annually will conduct a designation of member 
directorships for each Bank based on the number of shares of Bank stock 
required to be held by the members in each State as of the record date. 
If a Bank has issued more than one class of stock, the Director will 
designate the directorships for each State in that Bank district based 
on the combined number of shares required to be held by the members in 
that State. For purposes of conducting the designation, the number of 
shares of Bank stock required to be held by members as of that date 
shall be determined in accordance with the minimum investment 
established by the capital plan for that Bank. In all cases, the 
Director will designate the directorships by using the information 
provided by each Bank in its capital stock report required by paragraph 
(a)(1) of this section.
* * * * *


Sec.  1261.5  [Amended]

0
18. Amend Sec.  1261.5:
0
a. In paragraph (b), by removing the extra period following the words 
``under Sec.  1261.4(c).''; and
0
b. By removing paragraph (e)(2).

0
19. Amend Sec.  1261.6 by revising paragraph (b) to read as follows:


Sec.  1261.6  Determination of member votes.

* * * * *
    (b) Number of votes. For each member directorship and each 
independent directorship that is to be filled in an election, each 
member shall be entitled to cast one vote for each share of Bank stock 
that the member was required to hold as of the record date. 
Notwithstanding the preceding sentence, the number of votes that any 
member may cast for any one directorship shall not exceed the average 
number of shares of Bank stock required to be held as of the record 
date by all members located in the same State as of the record date. If 
a Bank has issued more than one class of stock, it shall calculate the 
average number of shares separately for each class of stock, using the 
total number of members in a State as the denominator, and shall apply 
those limits separately in determining the maximum number of votes that 
any member owning that class of stock may cast in the election. The 
number of shares of Bank stock that a member was required to hold as of 
the record date shall be determined in accordance with the minimum 
investment requirement established by the Bank's capital plan.
* * * * *


Sec.  1261.7  [Amended]

0
20. Amend Sec.  1261.7:
0
a. In paragraph (a), by redesignating the first paragraph (a)(1) as the 
introductory text to paragraph (a);
0
b. In paragraph (d)(1)(i), by removing the words ``four years 
experience'' and, in their place, adding the words ``four years of 
experience''; and
0
c. In paragraph (e)(2), by removing the words ``four years experience'' 
and, in their place, adding the words ``four years of experience''.

0
21. Amend Sec.  1261.8 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  1261.8  Election process.

    (a) Ballots. Promptly after fulfilling the requirements of Sec.  
1261.7(f), each Bank shall prepare and deliver a ballot to each member 
that was a member as of the record date. The Bank shall include with 
each ballot a closing date for the Bank's receipt of voted ballots, 
which date shall be no earlier than 30 calendar days after the date 
such ballot is delivered to the member.
    (1) A ballot shall include at least the following provisions:
    (i) For states in which one or more member directorships are to be 
filled in the election, an alphabetical listing of the names of each 
nominee for such directorship, the name, location, and FHFA ID number 
of the member each nominee serves, the nominee's title or position with 
the member, and the number of member directorships to be filled by the 
members in that voting state in the election;
    (ii) An alphabetical listing of the names of each nominee for a 
public

[[Page 76297]]

interest independent directorship and a brief description of each 
nominee's experience representing consumer and community interests;
    (iii) An alphabetical listing of the names of each nominee for the 
other independent directorships and a brief description of each 
nominee's qualifications, including his or her knowledge or experience 
in the areas of financial management, auditing and accounting, risk 
management practices, derivatives, project development, organizational 
management, and any other area of knowledge or experience set forth in 
Sec.  1261.7(e);
    (iv) A statement that write-in candidates are not permitted; and
    (v) A confidentiality statement prohibiting the Bank from 
disclosing how any member voted.
    (2) At the election of the Bank, a ballot also may include, in the 
body or as an attachment, a brief description of the skills and 
experience of each nominee for a member directorship.
* * * * *
    (c) Lack of member directorship nominees. If, for any voting State, 
the number of nominees for the member directorships for that State is 
equal to or fewer than the number of such directorships to be filled in 
that year's election, the Bank shall deliver a notice to the members in 
the affected voting State (in lieu of including any member directorship 
nominees on the ballot for that State) that such nominees shall be 
deemed elected without further action, due to an insufficient number of 
nominees to warrant balloting. Thereafter, the Bank shall declare 
elected all such eligible nominees. The nominees declared elected shall 
be included as directors-elect in the report of election required under 
paragraph (g) of this section. Any member directorship that is not 
filled due to a lack of nominees shall be deemed vacant as of January 1 
of the following year and shall be filled by the Bank's board of 
directors in accordance with Sec.  1261.14(a).
* * * * *

0
22. Amend Sec.  1261.9 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  1261.9  Actions affecting director elections.

    (a) Banks. Each Bank, acting through its board of directors, may 
conduct an annual assessment of the skills and experience possessed by 
the members of its board of directors as a whole and may determine 
whether the capabilities of the board would be enhanced through the 
addition of individuals with particular skills and experience. If the 
board of directors determines that the Bank could benefit by the 
addition to the board of directors of individuals with particular 
qualifications, such as auditing and accounting, derivatives, financial 
management, organizational management, project development, risk 
management practices, or the law, it may identify those qualifications 
and so inform the members as part of its announcement of elections 
pursuant to Sec.  1261.7(a).
* * * * *
    (c) Prohibition. Except as provided in paragraphs (a) and (b) of 
this section, or Sec.  1207.21(b)(5) of this chapter, no director, 
officer, attorney, employee, or agent of a Bank shall:
    (1) Communicate in any manner that a director, officer, attorney, 
employee, or agent of a Bank, directly or indirectly, supports or 
opposes the nomination or election of a particular individual for a 
directorship; or
    (2) Take any other action to influence the voting with respect to 
any particular individual.


Sec.  1261.13  [Amended]

0
23. Amend Sec.  1261.13 by removing the words ``this part'' in the 
first sentence, and, in their place, adding the words ``this subpart''.

0
24. Revise Sec.  1261.15 to read as follows:


Sec.  1261.15  Minimum number of member directorships.

    Except with respect to member directorships of a Bank resulting 
from the merger of any two or more Banks, the number of member 
directorships allocated to each state shall not be less than the number 
of directorships allocated to that state on December 31, 1960. The 
following table sets forth the states within Bank districts not created 
from the merger of two or more Banks whose members held more than one 
directorship on December 31, 1960:

------------------------------------------------------------------------
                                                     Number of  elective
                       State                           directorships on
                                                      December 31, 1960
------------------------------------------------------------------------
California.........................................                   3
Colorado...........................................                   2
Illinois...........................................                   4
Indiana............................................                   5
Kansas.............................................                   3
Kentucky...........................................                   2
Louisiana..........................................                   2
Massachusetts......................................                   3
Michigan...........................................                   3
New Jersey.........................................                   4
New York...........................................                   4
Ohio...............................................                   4
Oklahoma...........................................                   2
Pennsylvania.......................................                   6
Tennessee..........................................                   2
Texas..............................................                   3
Wisconsin..........................................                   4
------------------------------------------------------------------------

PART 1264--FEDERAL HOME LOAN BANK HOUSING ASSOCIATES

0
25. The authority citation for part 1264 continues to read as follows:

    Authority:  12 U.S.C. 1430b, 4511, 4513 and 4526.


Sec.  1264.2  [Amended]

0
26. Amend Sec.  1264.2 by removing the reference ``part 950 of this 
title'' and adding in its place the reference ``part 1266 of this 
chapter''.

PART 1266--ADVANCES

0
27. The authority citation for part 1266 continues to read as follows:

    Authority:  12 U.S.C. 1426, 1429, 1430, 1430b, 1431, 4511(b), 
4513, 4526(a).

Subpart A--Advances to Members

0
28. Amend Sec.  1266.1 by revising the definition of ``Tangible 
capital'' to read as follows:


Sec.  1266.1  Definitions.

* * * * *
    Tangible capital means:
    (1) Capital, calculated according to GAAP, less ``intangible 
assets'' except for purchased mortgage servicing rights to the extent 
such assets are included in a member's core or Tier 1 capital, as 
reported in a member's Report of Condition and Income for members whose 
primary federal regulator is the FDIC, the OCC, or the FRB.
    (2) Capital calculated according to GAAP, less intangible assets, 
as defined by a Bank for members that are not regulated by the FDIC, 
the OCC, or the FRB; provided that a Bank shall include a member's 
purchased mortgage servicing rights to the extent such assets are 
included for the purpose of meeting regulatory capital requirements. In 
addition, for those members that are insurance companies and that do 
not file or otherwise prepare financial statements based on GAAP, Banks 
may base this calculation on the member's financial statements prepared 
using Statutory Accounting Principles as implemented by the insurance 
company member's appropriate state regulator.
* * * * *


Sec.  1266.10  [Amended]

0
29. Amend Sec.  1266.10(a) by removing the reference to ``Sec.  917.4 
of this title''

[[Page 76298]]

and adding in its place a reference to ``Sec.  1239.30 of this 
chapter''.


Sec.  1266.11  [Removed and Reserved]

0
30. Remove and reserve Sec.  1266.11.

0
31. Amend Sec.  1266.13 by revising paragraph (a) to read as follows:


Sec.  1266.13  Special advances to savings associations.

    (a) Eligible institutions. (1) A Bank, upon receipt of a written 
request from the OCC, with respect to a federal savings association, or 
from the FDIC, with respect to a state chartered savings association, 
may make short-term advances to a savings association member pursuant 
to section 10(h) of the Bank Act (12 U.S.C. 1430(h)).
    (2) Such request must certify that the savings association member:
    (i) Is solvent but presents a supervisory concern to the OCC or 
FDIC, as appropriate, because of the member's financial condition; and
    (ii) Has reasonable and demonstrable prospects of returning to a 
satisfactory financial condition.
* * * * *

Subpart B--Advances to Housing Associates


Sec.  1266.17  [Amended]

0
32. Amend Sec.  1266.17(c)(2)(i) by removing the reference to ``Sec.  
1266.3(b)'' each time it appears and adding in its place a reference to 
``Sec.  1266.5(b)''.

Subpart C [Removed]

0
33. Remove subpart C to part 1266, consisting of Sec.  1266.25.

PART 1267--FEDERAL HOME LOAN BANK INVESTMENTS

0
34. The authority citation for part 1267 continues to read as follows:

    Authority:  12 U.S.C. 1429, 1430, 1430b, 1431, 1436, 4511, 4513, 
4526.


Sec.  1267.1  [Amended]

0
35. Amend Sec.  1267.1 by removing the definitions for ``consolidated 
obligation'' and ``GAAP''.

PART 1269--STANDBY LETTERS OF CREDIT

0
36. The authority citation for part 1269 continues to read as follows:

    Authority:  12 U.S.C. 1429, 1430, 1430b, 1431, 4511, 4513 and 
4526.


Sec.  1269.4  [Amended]

0
37. Amend Sec.  1269.4(a)(1) by removing the reference to ``969.2 of 
this title'' and adding in its place a reference to ``1270.3 of this 
chapter''.

PART 1270--LIABILITIES

0
38. The authority citation for part 1270 continues to read as follows:

    Authority:  12 U.S.C. 1431, 1432, 1435, 4511, 4512, 4513, and 
4526.


Sec.  1270.9  [Amended]

0
39. Amend Sec.  1270.9(d)(1) by removing the reference to ``Sec.  956.6 
of this title'' and adding in its place a reference to ``Sec.  1267.4 
of this chapter''.

PART 1273--OFFICE OF FINANCE

0
40. The authority citation for part 1273 continues to read as follows:

    Authority:  12 U.S.C. 1431, 1440, 4511(b), 4513, 4514(a), 
4526(a).


Sec.  1273.1  [Amended]

0
41. Amend Sec.  1273.1 by removing the definitions for ``Bank System,'' 
``Consolidated obligations,'' ``Financing Corporation or FICO,'' 
``Generally accepted accounting principles or GAAP,'' ``NRSRO,'' 
``Office of Finance or OF,'' and ``Resolution Funding Corporation or 
REFCORP''.

0
42. Amend Sec.  1273.3 by revising paragraphs (a) and (d) to read as 
follows:


Sec.  1273.3  Functions of the OF.

    (a) Joint debt issuance. Subject to part 1270, subparts B and C, of 
this chapter, and this part, the OF, as agent for the Banks, shall 
offer, issue, and service (including making timely payments on 
principal and interest due) consolidated obligations.
* * * * *
    (d) Financing Corporation and Resolution Funding Corporation. The 
OF shall perform such duties and responsibilities for FICO as may be 
required under part 1271, subpart D, of this chapter, or for REFCORP as 
may be required under part 1271, subpart E, of this chapter or 
authorized by FHFA pursuant to section 21B(c)(6)(B) of the Bank Act (12 
U.S.C. 1441b(c)(6)(B)).


Sec.  1273.6  [Amended]

0
43. Amend Sec.  1273.6(a) by removing the reference to ``Sec. Sec.  
966.8 and 966.9 of this title'' and adding in its place a reference to 
``Sec. Sec.  1270.9 and 1270.10 of this chapter''.

0
44. Revise Sec.  1273.7 to read as follows:


Sec.  1273.7  Structure of the OF board of directors.

    (a) Membership. The OF board of directors shall consist of part-
time members as follows:
    (1) Each of the Bank presidents, ex officio, provided that if the 
presidency of any Bank becomes vacant, the person designated by the 
Bank's board of directors to temporarily fulfill the duties of 
president of that Bank shall serve on the OF board of directors until 
the presidency is filled permanently; and
    (2) Five Independent Directors who--
    (i) Each shall be a citizen of the United States;
    (ii) As a group, shall have substantial experience in financial and 
accounting matters; and
    (iii) Shall not have any material relationship with a Bank, or the 
OF (directly or as a partner, shareholder, or officer of an 
organization), as determined under criteria set forth in a policy 
adopted by the OF board of directors. At a minimum, such policy shall 
provide that an Independent Director may not:
    (A) Be an officer, director, or employee of any Bank or member of a 
Bank, or have been an officer, director, or employee of a Bank or 
member of a Bank during the previous three years;
    (B) Be an officer or employee of the OF, or have been an officer or 
employee of the OF during the previous three years; or
    (C) Be affiliated with any consolidated obligations selling or 
dealer group under contract with OF, or hold shares or any other 
financial interest in any entity that is part of a consolidated 
obligations seller or dealer group in an amount greater than the lesser 
of $250,000 or 0.01% of the market capitalization of the seller or 
dealer group, or in an amount that exceeds $1,000,000 for all entities 
that are part of any consolidated obligations seller dealer group, 
combined. For purposes of this paragraph (a)(2)(iii)(C), a holding 
company of an entity that is part of a consolidated obligations seller 
or dealer group shall be deemed to be part of the consolidated 
obligations selling or dealer group if the assets of the holding 
company's subsidiaries that are part of a consolidated obligation 
seller or dealer group constitute 35% or more of the consolidated 
assets of the holding company.
    (b) Terms. (1) Except as provided in paragraph (b)(2) of this 
section, each Independent Director shall serve for five-year terms 
(which shall be staggered so that no more than one Independent Director 
seat would be scheduled to become vacant in any one year), and shall be 
subject to removal or suspension in accordance with Sec.  1273.4(a). An 
Independent Director may not serve more than two full, consecutive 
terms, provided that any partial term served by an Independent Director 
pursuant to paragraph (b)(2) of this section shall not count as a term 
for purposes of this restriction.

[[Page 76299]]

    (2) The OF board of directors shall fill any vacancy among the 
Independent Directors occurring prior to the scheduled end of a term by 
majority vote, subject to FHFA's review of, and non-objection to, the 
new Independent Director. The OF board of directors shall provide FHFA 
with the same biographic and background information about the new 
Independent Director required under paragraph (c) of this section, and 
FHFA shall have the same rights of non-objection to the Independent 
Director (and to appoint a different Independent Director) as set forth 
in paragraph (c) of this section. A person shall be elected (or 
otherwise appointed by FHFA) under this paragraph (b)(2) to serve only 
for the remainder of the term associated with the vacant directorship.
    (c) Election of Independent Directors. The Independent Directors 
shall be elected by majority vote of the OF board of directors, subject 
to FHFA's review of, and non-objection to, each Independent Director. 
The OF board of directors shall provide FHFA with relevant biographic 
and background information, including information demonstrating that 
the new Independent Director meets the requirements of paragraph (a)(2) 
of this section, at least 20 business days before the person assumes 
any duties as a member of the OF board of directors. If the OF board of 
directors, in FHFA's judgment, fails to elect a suitably qualified 
person, FHFA may appoint some other person who meets the requirements 
of paragraph (a)(2) of this section. FHFA will provide notice of its 
objection to a particular Independent Director prior to the date that 
such Director is to assume duties as a member of the OF board of 
directors. Such notice shall indicate whether, given FHFA's objection, 
FHFA intends to fill the seat through appointment or a new election 
should be held by the OF board of directors.
    (d) Election of Chair and Vice-Chair. (1) The Chair shall be 
elected by majority vote of the OF board of directors from among the 
Independent Directors then serving on the OF board of directors, and 
the Vice Chair shall be elected by majority vote of the OF board of 
directors from among all directors.
    (2) The OF board of directors shall promptly inform FHFA of the 
election of a Chair or Vice Chair. If FHFA objects to any Chair or Vice 
Chair elected by the OF board of directors, FHFA shall provide written 
notice of its objection within 20 business days of the date that FHFA 
first receives the notice of the election of the Chair and or Vice 
Chair, and the OF board of directors must then promptly elect a new 
Chair or Vice Chair, as appropriate.
    (e) By-laws and Committees. (1) The OF board of directors shall 
adopt by-laws governing the manner in which the board conducts its 
affairs, which shall be consistent with the requirements of this part 
and other applicable laws and regulations as administered by FHFA. The 
by-laws of the board of directors shall be subject to review and 
approval by FHFA.
    (2) In addition to the Audit Committee required under Sec.  1273.9, 
the OF board of directors may establish other committees, including an 
Executive Committee. The duties and powers of such committee, including 
any powers delegated by the OF board of directors, shall be specified 
in the by-laws of the board of directors or the charter of the 
committee.
    (f) Compensation. (1) The Bank presidents shall not receive any 
additional compensation or reimbursement as a result of their service 
as a director of the OF board.
    (2) The OF shall pay reasonable compensation and expenses to the 
Independent Directors in accordance with the requirements for payment 
of compensation and expenses to Bank directors as set forth in part 
1261 of this chapter.
    (g) Corporate Governance and Indemnification--(1) General. The 
corporate governance practices and procedures of the OF, and practices 
and procedures related to indemnification (including advancement of 
expenses) shall comply with applicable Federal law, rules, and 
regulations.
    (2) Election and designation of body of law. (i) To the extent not 
inconsistent with paragraph (g)(1) of this section, the OF shall elect 
to follow the corporate governance and indemnification practices and 
procedures set forth in one of the following:
    (A) The law of the jurisdiction in which the principal office of 
the OF is located;
    (B) The Delaware General Corporation Law (Del. Code Ann. Title 8); 
or
    (C) The Revised Model Business Corporation Act.
    (ii) The OF board of directors shall designate in its by-laws the 
body of law elected pursuant to this paragraph (g)(2).
    (3) Indemnification. Subject to paragraphs (g)(1) and (2) of this 
section, to the extent applicable, the OF shall indemnify (and advance 
the expenses of) its directors, officers, and employees under such 
terms and conditions as are determined by the OF board of directors. 
The OF shall be authorized to maintain insurance for its directors, the 
CEO, and any other officer or employee of the OF. Nothing in this 
paragraph (g)(3) shall affect any rights to indemnification (including 
the advancement of expenses) that a director, the CEO, or any other 
officer or employee of the OF had with respect to any actions, 
omissions, transactions, or facts occurring prior to December 2, 2016.
    (h) Delegation. In addition to any delegation to a committee 
allowed under paragraph (e) of this section, the OF board of directors 
may delegate any of its authority or duties to any employee of the OF 
in order to enable OF to carry out its functions.
    (i) Outside staff and consultants. In carrying out its duties and 
responsibilities, the OF board of directors, or any committee thereof, 
shall have authority to retain staff and outside counsel, independent 
accountants, or other outside consultants at the expense of the OF.


Sec.  1273.8  [Amended]

0
45. Amend Sec.  1273.8 by:
0
a. Removing from paragraph (d)(2) the reference to ``Sec.  917.5 of 
this title'' and adding in its place a reference to ``Sec.  1239.31 of 
this chapter'';
0
b. Removing paragraph (d)(3); and
0
c. Redesignating paragraphs (d)(4), (5), and (6) as paragraphs (d)(3), 
(4), and (5), respectively.

0
46. Amend Sec.  1273.9 by revising paragraph (b)(5) to read as follows:


Sec.  1273.9  Audit Committee.

* * * * *
    (b) * * *
    (5) The Audit Committee shall oversee internal audit activities, 
including the selection, evaluation, compensation, and, where 
appropriate, replacement of the internal auditor. The internal auditor 
shall report directly to the Audit Committee on substantive matters, 
and is ultimately accountable to the Audit Committee and the board of 
directors.
* * * * *


Sec.  1273.10  [Removed]

0
47. Remove Sec.  1273.10.

0
48. Amend appendix A to part 1273 by revising paragraphs C and D to 
read as follows:

Appendix A to Part 1273--Exceptions to the General Disclosure Standards

* * * * *
    C. Compensation. The information on compensation required by 
Item 402 of Regulation S-K, 17 CFR 229.402, will be provided only 
for Bank presidents and the CEO of the OF.
    D. Submission of matters to a vote of stockholders. No 
information will be presented on matters submitted to

[[Page 76300]]

shareholders for a vote, as otherwise required by Item 4 of the 
SEC's form 10-K, 17 CFR 249.310.
* * * * *

PART 1274--FINANCIAL STATEMENT OF THE BANKS

0
49. The authority citation for part 1274 continues to read as follows:

    Authority:  12 U.S.C. 1426, 1431, 4511(b), 4513, 4526(a).


Sec.  1274.1  [Amended]

0
50. Amend Sec.  1274.1 by removing the definitions for ``Bank System'' 
and ``Financing Corporation or FICO''.

PART 1278--VOLUNTARY MERGERS OF FEDERAL HOME LOAN BANKS

0
51. The authority citation for part 1278 continues to read as follows:

    Authority:  12 U.S.C. 1432(a), 1446, 4511.


Sec.  1278.1  [Amended]

0
52. Amend Sec.  1278.1 by removing the definition for ``GAAP''.

Subchapter E--Housing Goals and Mission

PART 1281--FEDERAL HOME LOAN BANK HOUSING GOALS

0
53. The authority citation for part 1281 continues to read as follows:

    Authority:  12 U.S.C. 1430c.

Subpart A--General


Sec.  1281.1  [Amended]

0
54. Amend Sec.  1281.1 by removing the definitions for ``Bank System'', 
``Data Reporting Manual (DRM)'', and ``Member''.

PART 1282--ENTERPIRSE HOUSING GOALS AND MISSION

0
55. The authority citation for part 1282 continues to read as follows:

    Authority:  12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.

Subpart A--General


Sec.  1282.1  [Amended]

0
56. Amend Sec.  1282.1 by removing the definition for the term ``HUD''.

PART 1290--COMMUNITY SUPPORT REQUIREMENTS

0
57. The authority citation for part 1290 continues to read as follows:

    Authority:  12 U.S.C. 1430(g), 4511, 4513.

0
58. Amend Sec.  1290.1 by revising the definition of ``Advisory 
Council'' to read as follows:


Sec.  1290.1  Definitions.

* * * * *
    Advisory Council means the Advisory Council each Bank is required 
to establish pursuant to section 10(j)(11) of the Bank Act (12 U.S.C. 
1430(j)(11)) and part 1291 of this chapter.
* * * * *

PART 1291--FEDERAL HOME LOAN BANKS' AFFORDABLE HOUSING PROGRAM

0
59. The authority citation for part 1291 continues to read as follows:

    Authority:  12 U.S.C. 1430(j).


Sec.  1291.4  [Amended]

0
60. Amend Sec.  1291.4(f) by removing the reference to ``the Act'' and 
adding a reference to ``the Bank Act'' in its place.

    Dated: October 21, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-26022 Filed 11-1-16; 8:45 am]
 BILLING CODE 8070-01-P