Proposed FHLB Mission & Incentive Program Could Restrict CUs

The Federal Housing Finance Agency (FHFA) should reconsider establishing a Federal Home Loan Bank (FHLB) dual mission statement and consider targeted policy initiatives as alternatives, America’s Credit Unions (ACU) and state credit union leagues/associations wrote to the agency Monday.

The FHFA proposed to establish core mission activities and mission achievement for the FHLBs. ACU and state credit union leagues/associations noted credit unions depend on the flexibility of the FHLBs to “adapt to changing economic conditions and community needs,” and shared several concerns with the proposals.

“The proposed changes to the mission statement could limit credit unions’ access to liquidity, impose restraints on their ability to offer innovative financial products, and increase compliance costs and administrative burdens,” the organizations wrote. “Furthermore, without additional clarification, the proposed incentive program would likely primarily benefit volume lenders and push small community lenders out of the market.”

The organizations also note:

• Congress has “adequately stated” the FHLBs’ mission in multiple pieces of legislation;
• Opposition to the member incentive program without further clarification and specificity, as the structure will be most burdensome on smaller lenders while benefitting high-volume lenders; and
• Support for a legislative amendment to the FHLB Act to redefine “community financial institution” to include credit unions, expanding membership opportunities for credit unions.