The Federal Housing Finance Agency (FHFA) has issued a notice of proposed rulemaking addressing the boards of directors and executive management of the Federal Home Loan Banks (FHLBanks) and the FHLBank System’s Office of Finance. The proposed rule will update and clarify regulatory requirements on a variety of corporate governance topics.
“The Federal Home Loan Bank System’s ability to provide liquidity to support its mission in a safe and reliable manner is dependent on the quality of its governance,” said FHFA Director Sandra L. Thompson. “These proposed revisions will not only help ensure boards of directors demonstrate the knowledge, expertise, and experience to act in the public interest, but will also strengthen the System’s capacity to respond to developments and emerging risks in housing finance.”
Highlights of the proposed revisions include:
- Expanding and modernizing the areas of knowledge and experience for independent directors to include artificial intelligence, Community Development Financial Institution (CDFI) business models, climate risk, information technology (IT) and security, and modeling.
- Clarifying qualifying requirements for public interest independent directors, to emphasize a requirement for direct and substantial experience on behalf, or for direct benefit, of consumers or communities.
- Requiring the FHLBanks to adopt conflicts of interest policies that: (1) address outside positions and financial interests of FHLBank employees, close family members, and associates; and (2) prohibit FHLBank executive officers and senior management from holding paid positions at potential and existing members, housing associates, or their affiliates.
These revisions are intended to ensure the effective governance of the FHLBank System and its continued safety and soundness and mission achievement.
This proposed rulemaking is a result of extensive outreach and engagement with the FHLBanks and other stakeholders since the release of FHFA’s FHLBank System at 100: Focusing on the Future Report in November 2023. FHFA will accept public comments on the proposed rule for 90 days following its publication in the Federal Register.
The FHFA has announced a webinar to address key elements of the proposed rule, set for Wednesday, October 30 at 1:00 p.m. Central. Click here to register for the webinar and click here to read the FHFA’s proposed rule.
