SBNY - FHFA said to weigh curbing big banks' ability to borrow from backstop lenders
2023-06-30 16:28:06 ET
The Federal Housing Finance Agency is weighing recommending limits on big banks to use Federal Home Loan Banks as last-resort support, a move that could require congressional action, Bloomberg reported Friday, citing people familiar with the matter.
Since the creation of FHLBs during the Great Depression to accelerate home lending, they have gradually become a financial backstop for their members, in that they are now seen as safety nets during times of turmoil. They took the spotlight when they lent billions of dollars to now-failed regional lenders Silicon Valley Bank ( OTCPK:SIVBQ ), Signature Bank ( OTCPK:SBNY ) and First Republic Bank ( OTCPK:FRCB ).
The proposed curbs, which could be adjusted before announcing them in the coming months, are part of its review launched last year of the $1.6T system, the article pointed out. A report of the review is slated to be released by the end of September.
In addition to reining in big banks' ability to borrow from the 11 FHLBs, the people told Bloomberg, U.S. officials have mulled over requiring a minimum percentage of banks' assets in mortgages that would need to maintained if banks want to borrow from the FHLBs.
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FHFA said to weigh curbing big banks' ability to borrow from backstop lenders