1.1.1: Conditions and Practices

FHLBanks improve their condition and practices and operate in compliance with supervisory requirements and agreements.

Other Information:

In 2007, the Finance Board plans to implement a risk rating system that assigns composite ratings to the FHLBanks. These ratings are based on an evaluation of an institution’s corporate governance, market, credit, and operational risk, and its overall financial condition and performance. An FHLBank’s performance in administering its affordable housing and community investment programs is taken into consideration in the assignment of component ratings for corporate governance and operational risk. The composite ratings range from “1” - FHLBank operates in a safe and sound manner to “4” - FHLBank operates in an unacceptable manner. An FHLBank that has a composite rating of “3” raises supervisory concerns due to deficiencies in its corporate governance, risk management, or its financial condition or performance. Taken alone or in combination, these deficiencies are moderate to severe. The FHLBank may be in substantial noncompliance with laws, regulations, or supervisory guidance. Its board of directors or management may lack the ability or willingness to address deficiencies. The Finance Board concludes that an FHLBank should be assigned a composite rating of “4” if it exhibits serious deficiencies in corporate governance, risk management, or financial condition and performance. It may be in substantial noncompliance with laws, regulations, or supervisory guidance. The institution requires close supervisory attention, and the Finance Board may initiate a formal enforcement action. Quarterly or more frequent on-site reviews, off-site monitoring, and subsequent annual examinations assess whether an FHLBank under a supervisory agreement is making sufficient progress in improving its condition and performance.

Indicator(s):

Indicator:1

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