The FHLBanks have never incurred a loss on an advance in their more than eight decades of existence. This record is attributed to the collateralization of all advances, conservative underwriting standards and strong credit monitoring policies. All of the FHLBanks’ lending is fully collateralized. Additionally, if a loan in a pool of collateral is underperforming, it must be replaced. The credit profiles of members are actively monitored. FHLBank investments are also very safe. By regulation, they are prohibited from purchasing non-investment grade securities and nearly all of their investments are triple-A rated.

FHLBanks are jointly and severally liable for their combined obligations. If any individual Bank would not be able to pay a creditor, the other Banks are required to step in and cover that debt. This provides another level of safety and leads to prudent borrowing throughout the FHLBanks.

FHLBanks are uniquely self-capitalizing. To become a member of an FHLBank, financial institutions must purchase stock in the Bank. All shares have a statutory par value of $100. When a member needs to access advances, it must not only pledge high-quality collateral, but also purchase additional activity-based stock in proportion to their borrowing. During times of high advance activity, capital automatically increases. In 2011, the FHLBanks went further by instituting the Joint Capital Enhancement Agreement to boost their ability to protect members, investors and taxpayers against the potential of any future losses.

In order to access advances, a member must pledge high-quality collateral, in the form of mortgages, small business, and agriculture or community development loans. The member must also purchase additional, activity-based stock in proportion to their borrowings.

FHLBanks are well capitalized. FHLBank members must meet strict capital, credit and collateral standards that are continually monitored. No taxpayer funds are involved in the operation of the FHLBanks.


The Council of FHLBanks   |   2120 L Street NW, Suite 208, Washington, DC 20037   |   202-955-0002 or 1-888-941-4405   |   Fax: 202-835-1144

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