Liquidity Funding

The FHLBank System is funded entirely by private capital. Members purchase stock as a condition of membership and those funds help provide capital for each FHLBank and support lending to FHLBank members. Additionally, the FHLBank System funds itself by issuing bonds in the capital markets. The Office of Finance serves as the capital market agent, issuing and servicing all debt securities for the FHLBanks. The debt instruments issued by the FHLBank System are known as consolidated obligations and include consolidated bonds and consolidated discount notes.

Buyers of debt securities issued by the FHLBanks represent the entire spectrum of domestic and international fixed-income investors, including commercial banks, central banks, money market funds, investment managers, major corporations, pension funds, government agencies and individuals.

As provided by the FHLBank Act, and applicable regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. Consolidated obligations are the primary source of funds for the FHLBanks in addition to deposits, other borrowings, and capital stock issued to members. The FHLBanks primarily use these funds to provide advances to members.

The 11 FHLBanks are jointly and severally liable for every bond issued by the Office of Finance, meaning each FHLBank bears responsibility for paying the debts of the entire FHLBank System. If a single FHLBank is unable to contribute to a debt payment, the other 10 FHLBanks would be responsible for paying the debt in full. Joint and several liability enhances the safety and soundness of the FHLBank System and gives investors confidence that FHLBank System debt will be repaid.