Revision of Financing Corporation Operations Regulation

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 950

[No. 96-80]

Revision of Financing Corporation Operations Regulation

AGENCY: Federal Housing Finance Board.

ACTION: Interim final rule with request for comments.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending

its regulation on Financing Corporation (FICO) operations to comply

with new statutory requirements and to eliminate provisions that have

been rendered obsolete by statutory changes. The interim final rule is

consistent with the goals of the Regulatory Reinvention Initiative of

the National Performance Review.

DATES: The interim final rule will become effective on November 22,

1996. The Finance Board will accept comments on the interim final rule

in writing on or before December 23, 1996.

ADDRESSES: Mail comments to Elaine L. Baker, Executive Secretary,

Federal Housing Finance Board, 1777 F Street, N.W., Washington, D.C.

20006. Comments will be available for public inspection at this

address.

FOR FURTHER INFORMATION CONTACT: Christine M. Freidel, Assistant

Director, Financial Management Division, Office of Policy, 202/408-

2976, or Janice A. Kaye, Attorney-Advisor, Office of General Counsel,

202/408-2505, Federal Housing Finance Board, 1777 F Street, N.W.,

Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

A. FICO Obligations

The Federal Savings and Loan Insurance Corporation (FSLIC)

Recapitalization Act of 1987 amended the Federal Home Loan Bank Act

(Bank Act) by adding a new section 21 directing the establishment of

FICO. See Public Law 100-86, Title III, section 302, 101 Stat. 585

(Aug. 10, 1987), codified at 12 U.S.C. 1441. On August 28, 1987, the

Finance Board's predecessor, the former Federal Home Loan Bank Board

(FHLBB), chartered FICO to recapitalize the former FSLIC. To raise

funds for that purpose, Congress authorized FICO to issue up to $10.825

billion in public debt. See 12 U.S.C. 1441(e)(1) (1987) (superseded).

From 1987 to 1989, FICO issued $8.17 billion in 30-year obligations,

the proceeds of which were used to resolve failed savings associations.

Congress terminated FICO's debt issuance authority in 1991, effectively

capping FICO's borrowings at the then outstanding $8.17 billion in

obligations.\1\

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\1\ See Pub. L. 102-233, Title I, section 104, 105 Stat. 1762

(Dec. 12, 1991), codified at 12 U.S.C. 1441(e)(2). Fifteen percent

of the outstanding FICO bond principal matures in the year 2017, 57

percent matures in 2018, and the remaining 28 percent matures in

2019. See General Accounting Office, Deposit Insurance Funds Report,

11 n.5 (Mar. 1995).

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To assure repayment of the $8.17 billion principal amount of the

FICO obligations, section 21(g)(2) of the Bank Act requires FICO to

invest in, and hold in a segregated account, certain enumerated

securities that will have a principal amount payable at maturity

approximately equal to the aggregate amount of principal on the FICO

obligations. See 12 U.S.C. 1441(g)(2). Accordingly, the principal on

FICO bonds was defeased by using Federal Home Loan Bank (FHLBank)

retained earnings to purchase 30-year zero coupon United States

Treasury securities that have a face value sufficient to retire the

FICO bonds at maturity. These securities currently are held in a

segregated account at the Federal Reserve Bank of New York.

B. FICO Expenses

Pursuant to section 21 of the Bank Act, FICO may incur two

categories of expenses: (1) administrative expenses, which include

general office and operating expenses, and (2) non-administrative

expenses, which include the almost $800 million in interest due each

year until maturity of the last FICO obligation, issuance costs, and

custodian fees. See id. 1441(b)(7), (f)(2), (g)(5). The FHLBanks pay

FICO's administrative expenses in accordance with a statutory formula

based on the percentage of FICO stock held by each FHLBank. See id.

1441(b)(7).

There are four statutory sources of funds to pay FICO's non-

administrative expenses. Under section 21(f)(1) of the Bank Act, FICO

has authority to use assessments previously assessed against insured

institutions (i.e., FSLIC-insured thrifts) under the special assessment

provisions that were in effect prior to enactment of the Financial

Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). See

id. 1441(f)(1), 1441(f) (1987 superseded); Public Law 101-73, Title V,

section 512(13), 103 Stat. 406 (Aug. 9, 1989). Funds from this source

have been exhausted and are no longer available.

To the extent pre-FIRREA assessments are insufficient to cover

FICO's non-administrative expenses, under section 21(f)(2) of the Bank

Act, FICO has first priority to impose and collect assessments against

each Savings Association Insurance Fund (SAIF) member that is a savings

association. See 12 U.S.C. 1441(f)(2) (1996). FICO's assessment

authority is subject to the approval of the Board of Directors of the

Federal Deposit Insurance Corporation (FDIC), and must be made in the

same manner as assessments are made by the FDIC. Id. To date, FICO's

assessments on SAIF member savings associations have been the major or

sole source of revenue to pay FICO's non-administrative expenses, i.e.,

FICO's interest, issuance, and custodial costs.

Effective January 1, 1997, the Deposit Insurance Funds Act of 1996

(Funds Act) amends FICO's assessment authority under section 21(f)(2)

of the Bank Act. See Public Law 104-208, Title II, Subtitle G, 110

Stat. 3009 (Sept. 30, 1996). Section 2702 of the Funds Act eliminates

the provision granting FICO first priority to make assessments and

changes FICO's assessment base from all SAIF member savings

associations to all depository institutions insured by the FDIC. See 12

U.S.C. 1441(f)(2) (1997). Beginning with the first assessment in 1997,

FICO has authority, with the approval of the Board of Directors of the

FDIC, to assess all insured depository institutions to cover the

interest payments due on FICO obligations and FICO's issuance costs and

custodian fees. Id. However, until the earlier of

[[Page 59312]]

December 31, 1999 or the date on which the last savings association

ceases to exist, the assessment rate FICO imposes on an insured

depository institution with respect to any BIF-assessable deposits must

be 1/5 of the assessment rate FICO imposes on an insured depository

institution with respect to any SAIF-assessable deposits. Id.

1441(f)(2)(A). For purposes of the FICO assessment, the term ``BIF-

assessable deposit'' means a deposit that is subject to assessment for

purposes of the Bank Insurance Fund (BIF) under the Federal Deposit

Insurance Act (FDI Act), including a deposit that is treated as a BIF-

insured deposit under section 5(d)(3) of the FDI Act, and the term

``SAIF-assessable deposit'' means a deposit that is subject to

assessment for purposes of the SAIF under the FDI Act, including a

deposit that is treated as a SAIF-insured deposit under section 5(d)(3)

of the FDI Act.\2\ Absent statutory changes or unforeseen fluctuations

in the assessment base, FICO anticipates that assessments on insured

depository institutions will provide sufficient funds to pay its non-

administrative expenses.

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\2\ See id. 1441(f)(4); Funds Act section 2710. Section 5(d)(3)

of the FDI Act attributes to BIF or SAIF the deposits of an insured

depository institution that has undergone a conversion transaction

by which it switched deposit insurance funds. See 12 U.S.C.

1815(d)(3).

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However, if funds available from pre-FIRREA assessments and

assessments on all insured depository institutions are insufficient to

cover FICO's non-administrative expenses, section 21(f)(3) of the Bank

Act authorizes FICO to use FSLIC Resolution Fund (FRF) receivership

proceeds that are not required by the Resolution Funding Corporation to

fund its principal fund. Id. 1441(f)(3). If the funds available

pursuant to the three sources provided by section 21(f) of the Bank Act

are insufficient to pay FICO's interest expenses, section 5(d)(2) of

the FDI Act provides that the Secretary of the Treasury may order the

transfer to FICO of exit fees assessed against insured depository

institutions that participated in transactions by which they switched

deposit insurance funds. See id. 1815(d)(2)(E), (F).

C. FICO Regulations

The operating authority for FICO initially appeared in part 592 of

the FHLBB's regulations. When Congress abolished the FHLBB in 1989, it

transferred regulatory and supervisory authority over FICO to the

Finance Board. See FIRREA, section 401, 103 Stat. 183, codified at 12

U.S.C. 1437 note; FIRREA, Title V. The Finance Board derives its

authority over FICO from the provisions of section 21 of the Bank Act.

See 12 U.S.C. 1441. Under sections 21 (b)(8) and (c), the FICO

Directorate \3\ and FICO's exercise of its statutory powers are subject

to such regulations, orders, and directions as the Finance Board may

prescribe. Id. 1441(b)(8), (c). In addition, under section 21(j), the

Finance Board has authority to prescribe any regulations necessary to

carry out the provisions of section 21, including regulations defining

terms used in section 21. Id. 1441(j). In September 1989, pursuant to

the authority granted by section 21 of the Bank Act, the Finance Board

deleted part 592 of the FHLBB's regulations and promulgated the current

rules regarding FICO's operating authority at part 950 of its

regulations. See 54 FR 38589, 38592-38598 (Sept. 19, 1989), codified at

12 CFR part 950.

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\3\ The FICO Directorate is the managing body of FICO. See id.

1441(b)(1).

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The statutory changes made by the Funds Act require that

corresponding amendments be made to the provisions of the FICO

operations regulation that concern FICO's assessment authority. In

addition, the changes made by the Funds Act, as well as prior statutory

changes that terminated FICO's debt issuance authority, see supra, have

rendered obsolete many of the existing provisions of part 950.

Accordingly, the Finance Board is amending part 950 to comply with new

statutory requirements, eliminate provisions that have been rendered

obsolete, and clarify the practices and procedures of the Finance Board

and FICO.

II. Analysis of the Interim Final Rule

A. Elimination of Obsolete Provisions

The Finance Board has determined that the following provisions of

part 950, which relate to or concern issuance of FICO debt obligations,

are no longer required and therefore should be eliminated in their

entirety: Sec. 950.4 Authority to issue obligations; Sec. 950.6

Minority participation in public offerings; Sec. 950.10 Capital

assessments of Federal loan banks [sic]; Sec. 950.11 Establishment,

maintenance and funding of reserve account; and in Sec. 950.1,

definitions of the terms ``deficient bank,'' ``excess amount,'' ``FSLIC

Resolution Fund,'' ``Funding Corporation,'' ``net earnings,'' and

``remaining bank.'' Streamlining part 950 by repealing these provisions

is consistent with the goals of the Regulatory Reinvention Initiative

of the National Performance Review.

B. Implementation of New Statutory Requirements

Section 950.8(a) of the interim final rule continues the current

requirement that FICO determine the anticipated interest expenses on

its obligations at least semiannually.

In Sec. 950.8(b), the Finance Board has implemented the provisions

of the Funds Act that authorize FICO to assess all insured depository

institutions, rather than just SAIF members, to cover FICO's non-

administrative expenses. See supra part I(B). The term ``insured

depository institution,'' which replaces the definition of ``SAIF

member'' in Sec. 950.1, has the same meaning as in section 3 of the FDI

Act, namely, ``any bank or savings association the deposits of which

are insured by the [FDIC] * * *'' See 12 U.S.C. 1813(c)(2). For

purposes of part 950, the term ``non-administrative expenses'' means

custodian fees, issuance costs, and interest on Financing Corporation

obligations. Custodian fees include any fees or expenses FICO incurs in

connection with the establishment or maintenance of, or the transfer of

any security to, or maintenance of any security in, the segregated

account established to safeguard the securities that defease the

principal amount of the FICO obligations. See supra part I(A). This is

the same meaning given to the term ``custodian fees'' in section

21(g)(5)(B) of the Bank Act. See 12 U.S.C. 1441(g)(5)(B). Issuance

costs include fees and commissions FICO incurs in connection with the

issuance or servicing of its obligations. The regulation provides an

illustrative list that includes costs the Finance Board has to date

determined to be issuance costs.

Section 950.8(b)(1) authorizes FICO, with the approval of the Board

of Directors of the FDIC, to impose against and collect from each

insured depository institution an assessment sufficient to pay its non-

administrative expenses. FICO must make the assessment in the same

manner as the FDIC makes assessments under section 7 of the FDI Act.

See 12 U.S.C. 1817.

Subject to the statutory limits on assessment rates with respect to

BIF- and SAIF-assessable deposits, see supra part I(B),

Sec. 950.8(b)(2) requires FICO to determine at least semiannually and

to advise the FDIC and any collection agent of the rate(s) of the

assessment it will assess against insured depository institutions in

order to pay its non-administrative expenses. In determining the

assessment rate(s), FICO must consider historical data regarding

assessment collections and current

[[Page 59313]]

information concerning the SAIF and BIF deposit base and the location

of insured depository institutions that is available only to the FDIC.

Accordingly, the FDIC will provide such accurate, complete, and timely

information as FICO may require to carry out its statutory

responsibilities to pay its non-administrative expenses by setting the

assessment rate(s) and imposing an assessment against all insured

depository institutions.

To facilitate collection of the FICO assessment,

Sec. 950.8(b)(3)(i) requires FICO to collect assessments in accordance

with section 21(f)(2) of the Act and the provisions of this regulation,

and permits assessment collection through a collection agent.

Currently, the FDIC collects and processes FICO's assessment pursuant

to a memorandum of understanding between FICO and the FDIC. The FDIC

handles administrative tasks, such as computing each institution's

assessment, issuing invoices notifying institutions of the amount to be

paid and the date of payment, and arranging for the collection of the

assessment through the payments system. The Finance Board expects the

assessment process to continue to operate in a similar fashion.

Further, Sec. 950.8(a)(3)(ii) authorizes each FHLBank to establish and

maintain a demand deposit account for any insured depository

institution located in the FHLBank's district regardless of whether the

institution is a FHLBank member.

Sections 950.8 (c) and (d) of the interim final rule, which concern

FICO's authority to receive FRF receivership proceeds and exit fees,

see supra part I(B), restate without substantive change the provisions

found currently in Secs. 950.12 (b)(2) and (b)(3), respectively.

C. Clarifying Current Regulatory Requirements

The remainder of the interim final rule clarifies and reorganizes

provisions that appear in the current FICO operations regulation. The

following provisions of the interim final rule restate provisions of

the current rule without substantive change: In Sec. 950.1, definitions

of the terms ``Act,'' ``Bank or Banks,'' ``Directorate,'' ``FDIC,'' and

``Office of Finance;'' Sec. 950.2 FICO's general operating authority;

Sec. 950.3 FICO Directorate's authority to establish investment

policies and procedures; Sec. 950.4 book-entry procedure for FICO

obligations; and Sec. 950.5 FICO's authority to use the services of

FHLBank or Office of Finance officers, employees, or agents to carry

out its functions.

Section 950.6 of the interim final rule, which concerns FICO's

budget and expenses, is a revision of Sec. 950.8 of the current rule.

To provide increased flexibility, paragraphs (a) and (b) require FICO

to submit to the FICO Directorate, and the FICO Directorate to submit

in turn to the Finance Board, FICO's budget of proposed expenditures

for approval annually rather than by a date certain each year. Since

the Finance Board disseminates FICO's approved annual budget to the

FHLBanks, the requirement that FICO transmit a copy of its budget to

the FHLBanks is deleted. Paragraphs (c) and (d) make clear that FICO

may not incur expenditures unless they have been approved by either the

Finance Board or the FICO Directorate within limits set by the Finance

Board.

Consistent with current practice, Sec. 950.7 of the interim final

rule requires the FHLBanks to pay FICO's administrative expenses. FICO

determines the amount of administrative expenses each FHLBank must pay

in the manner provided by section 21(b)(7)(B) of the Bank Act. See 12

U.S.C. 1441(b)(7)(B). The definition of the term ``administrative

expenses'' in Sec. 950.1 is revised to reflect more closely the format

of the financial documents provided by FICO to the Finance Board and to

make clear that issuance costs are not administrative expenses. See 12

U.S.C. 1441(b)(7)(C). Consistent with current practice, the interim

final rule replaces the requirement that FICO bill each FHLBank at

least semiannually with a requirement that FICO bill the FHLBanks

periodically. Paragraph (c) makes clear that FICO must adjust the

amount of administrative expenses the FHLBanks must pay in any calendar

year, if, in the prior year, administrative expenses have been approved

by the Finance Board, paid by the FHLBanks, but not actually incurred

by FICO.

Section 950.9 concerns reports FICO must make to the Finance Board.

To reduce the regulatory reporting burden on FICO and to provide

increased flexibility, the requirement that FICO submit reports on a

quarterly basis, which appears in Sec. 950.14 of the current rule, is

deleted. To ensure the current relevance and utility of the information

provided in the reports FICO submits to the Finance Board, the laundry

list of required information in the current rule is replaced with a

requirement that FICO file reports containing such information as the

Finance Board may direct.

To ensure compliance with the Bank Act and Finance Board

regulations, Sec. 950.10 of the interim final rule requires the Finance

Board to examine FICO's operations at least annually.

III. Notice and Public Participation

The Finance Board finds that the notice and comment procedure

required by the Administrative Procedure Act is unnecessary,

impracticable, and contrary to the public interest in this instance.

See 5 U.S.C. 553(b)(3)(B). The Funds Act directs FICO to impose an

assessment on all insured depository institutions on January 1, 1997.

See Funds Act section 2702. In order to timely impose this assessment,

the FDIC, acting as FICO's collection agent, must promptly undertake a

number of administrative tasks, such as computing each institution's

assessment, issuing invoices that notify the institution of the amount

to be paid and the date of payment, and arranging for the collection of

the assessment through the payments system. This rule provides the

authority for FICO to proceed with the assessment process. It would not

be possible for FICO to carry out its statutory responsibilities if the

rule is subject to the notice and comment process. Nevertheless,

because the Finance Board believes public comments aid in effective

rulemaking, it will accept written comments on the interim final rule

on or before December 23, 1996.

IV. Effective Date

For the reasons stated in part III above, the Finance Board for

good cause finds that the interim final rule should become effective on

November 22, 1996. See 5 U.S.C. 553(d)(3).

V. Paperwork Reduction Act

No collections of information pursuant to the Paperwork Reduction

Act of 1995 are contained in this interim final rule. See 44 U.S.C.

3501, et seq. Consequently, the Finance Board has not submitted any

information to the Office of Management and Budget for review.

VI. Regulatory Flexibility Act

The Finance Board is adopting the changes to part 950 in the form

of an interim final rule and not as a proposed rule. Therefore, the

provisions of the Regulatory Flexibility Act do not apply. See 5 U.S.C.

601(2), 603(a).

List of Subjects in 12 CFR Part 950

Federal home loan banks, Securities.

Accordingly, the Federal Housing Finance Board hereby revises title

12, chapter IX, subchapter C, part 950 of the Code of Federal

Regulations, to read as follows:

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PART 950--OPERATIONS

Sec.

950.1 Definitions.

950.2 General authority.

950.3 Authority to establish investment policies and procedures.

950.4 Book-entry procedure for Financing Corporation obligations.

950.5 Bank and Office of Finance employees.

950.6 Budget and expenses.

950.7 Administrative expenses.

950.8 Non-administrative expenses; assessments.

950.9 Reports to the Finance Board.

950.10 Review of books and records.

Authority: 12 U.S.C. 1441(b)(8), (c), and (j).

Sec. 950.1 Definitions.

For purposes of this part:

(a) Act means the Federal Home Loan Bank Act, as amended (12 U.S.C.

1421, et seq.).

(b) Administrative expenses:

(1) Include general office and operating expenses such as telephone

and photocopy charges, printing, legal, and professional fees, postage,

courier services, and office supplies; and

(2) Do not include any form of employee compensation, custodian

fees, issuance costs, or any interest on (and any redemption premium

with respect to) any Financing Corporation obligations.

(c) Bank or Banks means a Federal Home Loan Bank or the Federal

Home Loan Banks.

(d) BIF-assessable deposit means a deposit that is subject to

assessment for purposes of the Bank Insurance Fund under the Federal

Deposit Insurance Act (12 U.S.C. 1811, et seq.), including a deposit

that is treated as a deposit insured by the Bank Insurance Fund under

section 5(d)(3) of the Federal Deposit Insurance Act.

(e) Custodian fees means any fee incurred by the Financing

Corporation in connection with the transfer of any security to, or

maintenance of any security in, the segregated account established

under section 21(g)(2) of the Act, and any other expense incurred by

the Financing Corporation in connection with the establishment or

maintenance of such account.

(f) Directorate means the board established under section 21(b) of

the Act to manage the Financing Corporation.

(g) Exit fees means the amounts paid under sections 5(d)(2) (E) and

(F) of the Federal Deposit Insurance Act, and regulations promulgated

thereunder (12 CFR part 312).

(h) FDIC means the agency established as the Federal Deposit

Insurance Corporation.

(i) Finance Board means the agency established as the Federal

Housing Finance Board.

(j) Insured depository institution has the same meaning as in

section 3 of the Federal Deposit Insurance Act.

(k) Issuance costs means issuance fees and commissions incurred by

the Financing Corporation in connection with the issuance or servicing

of Financing Corporation obligations, including legal and accounting

expenses, trustee, fiscal, and paying agent charges, securities

processing charges, joint collection agent charges, advertising

expenses, and costs incurred in connection with preparing and printing

offering materials to the extent the Financing Corporation incurs such

costs in connection with issuing any obligations.

(l) Non-administrative expenses means custodian fees, issuance

costs, and interest on Financing Corporation obligations.

(m) Obligations means debentures, bonds, and similar debt

securities issued by the Financing Corporation under sections 21 (c)(3)

and (e) of the Act.

(n) Office of Finance means the joint office of the Banks

established under part 941 of this chapter.

(o) Receivership proceeds means the liquidating dividends and

payments made on claims received by the Federal Savings and Loan

Insurance Corporation Resolution Fund established under section 11A of

the Federal Deposit Insurance Act from receiverships, that are not

required by the Resolution Funding Corporation to provide funds for the

Funding Corporation Principal Fund established under section 21B of the

Act.

(p) SAIF-assessable deposit means a deposit that is subject to

assessment for purposes of the Savings Association Insurance Fund under

the Federal Deposit Insurance Act, including a deposit that is treated

as a deposit insured by the Savings Association Insurance Fund under

section 5(d)(3) of the Federal Deposit Insurance Act.

Sec. 950.2 General authority.

Subject to the limitations and interpretations in this part and

such orders and directions as the Finance Board may prescribe, the

Financing Corporation shall have authority to exercise all powers and

authorities granted to it by the Act and by its charter and bylaws

regardless of whether the powers and authorities are specifically

implemented in regulation.

Sec. 950.3 Authority to establish investment policies and procedures.

The Directorate shall have authority to establish investment

policies and procedures with respect to Financing Corporation funds

provided that the investment policies and procedures are consistent

with the requirements of section 21(g) of the Act. The Directorate

shall promptly notify the Finance Board in writing of any changes to

the investment policies and procedures.

Sec. 950.4 Book-entry procedure for Financing Corporation obligations.

(a) Authority. Any Federal Reserve Bank shall have authority to

apply book-entry procedure to Financing Corporation obligations.

(b) Procedure. The book-entry procedure for Financing Corporation

obligations shall be governed by the book-entry procedure established

for Bank securities, codified at part 912 of this chapter. Wherever the

term ``Federal Home Loan Bank security(ies)'' appears in part 912, the

term shall be construed also to mean ``Financing Corporation

obligation(s),'' if appropriate to accomplish the purposes of this

section.

Sec. 950.5 Bank and Office of Finance employees.

The Financing Corporation shall have authority to utilize the

officers, employees, or agents of any Bank or the Office of Finance in

such manner as may be necessary to carry out its functions.

Sec. 950.6 Budget and expenses.

(a) Directorate approval. The Financing Corporation shall submit

annually to the Directorate for approval, a budget of proposed

expenditures for the next calendar year that includes administrative

and non-administrative expenses.

(b) Finance Board approval. The Directorate shall submit annually

to the Finance Board for approval, the budget of the Financing

Corporation's proposed expenditures it approved pursuant to paragraph

(a) of this section.

(c) Spending limitation. The Financing Corporation shall not exceed

the amount provided for in the annual budget approved by the Finance

Board pursuant to paragraph (b) of this section, or as it may be

amended by the Directorate within limits set by the Finance Board.

(d) Amended budgets. Whenever the Financing Corporation projects or

anticipates that it will incur expenditures, other than interest on

Financing Corporation obligations, that exceed the amount provided for

in the

[[Page 59315]]

annual budget approved by the Finance Board or the Directorate pursuant

to paragraph (b) or (c) of this section, the Financing Corporation

shall submit an amended annual budget to the Directorate for approval,

and the Directorate shall submit such amended budget to the Finance

Board for approval.

Sec. 950.7 Administrative expenses.

(a) Payment by Banks. The Banks shall pay all administrative

expenses of the Financing Corporation approved pursuant to Sec. 950.6.

(b) Amount. The Financing Corporation shall determine the amount of

administrative expenses each Bank shall pay in the manner provided by

section 21(b)(7)(B) of the Act. The Financing Corporation shall bill

each Bank for such amount periodically.

(c) Adjustments. The Financing Corporation shall adjust the amount

of administrative expenses the Banks are required to pay in any

calendar year pursuant to paragraphs (a) and (b) of this section, by

deducting any funds that remain from the amount paid by the Banks for

administrative expenses in the prior calendar year.

Sec. 950.8 Non-administrative expenses; assessments.

(a) Interest expenses. The Financing Corporation shall determine

anticipated interest expenses on its obligations at least semiannually.

(b) Assessments on insured depository institutions. (1) Authority.

To provide sufficient funds to pay the non-administrative expenses of

the Financing Corporation approved under Sec. 950.6, the Financing

Corporation shall, with the approval of the Board of Directors of the

FDIC, assess against each insured depository institution an assessment

in the same manner as assessments are made by the FDIC under section 7

of the Federal Deposit Insurance Act.

(2) Assessment rate--(i) Determination. The Financing Corporation

at least semiannually shall determine the rate or rates of the

assessment it will assess against insured depository institutions

pursuant to section 21(f)(2) of the Act and paragraph (b)(1) of this

section.

(ii) Limitation. Until the earlier of December 31, 1999, or the

date as of which the last savings association ceases to exist, the rate

of the assessment imposed on an insured depository institution with

respect to any BIF-assessable deposit shall be a rate equal to \1/5\ of

the rate of the assessment imposed on an insured depository institution

with respect to any SAIF-assessable deposit.

(iii) Notice. The Financing Corporation shall notify the FDIC and

the collection agent, if any, of its determination under paragraph

(b)(2)(i) of this section.

(3) Collecting assessments--(i) Collection agent. The Financing

Corporation shall have authority to collect assessments made under

section 21(f)(2) of the Act and paragraph (b)(1) of this section

through a collection agent of its choosing.

(ii) Accounts. Each Bank shall permit any insured depository

institution whose principal place of business is in its district to

establish and maintain at least one demand deposit account to

facilitate collection of the assessments made under section 21(f)(2) of

the Act and paragraph (b)(1) of this section.

(c) Receivership proceeds--(1) Authority. To the extent the amounts

collected under paragraph (b) of this section are insufficient to pay

the non-administrative expenses of the Financing Corporation approved

under Sec. 950.6, the Financing Corporation shall have authority to

require the FDIC to transfer receivership proceeds to the Financing

Corporation in accordance with section 21(f)(3) of the Act.

(2) Procedure. The Directorate shall request in writing that the

FDIC transfer the receivership proceeds to the Financing Corporation.

Such request shall specify the estimated amount of funds required to

pay the non-administrative expenses of the Financing Corporation

approved under Sec. 950.6.

(d) Exit fees--(1) Authority. To the extent the amounts provided

under paragraphs (b) and (c) of this section are insufficient to pay

the interest due on Financing Corporation obligations, the Financing

Corporation shall have authority to request that the Secretary of the

Treasury order the transfer of exit fees to the Financing Corporation

in accordance with section 5(d)(2)(E) of the Federal Deposit Insurance

Act.

(2) Procedure. The Directorate shall request in writing that the

Secretary of the Treasury order that exit fees be transferred to the

Financing Corporation. Such request shall specify the estimated amount

of funds required to pay the interest due on Financing Corporation

obligations.

Sec. 950.9 Reports to the Finance Board.

The Financing Corporation shall file such reports as the Finance

Board shall direct.

Sec. 950.10 Review of books and records.

The Finance Board shall examine the Financing Corporation at least

annually to determine whether the Financing Corporation is performing

its functions in accordance with the requirements of section 21 of the

Act and this part.

By the Board of Directors of the Federal Housing Finance Board.

Bruce A. Morrison,

Chairperson.

[FR Doc. 96-29748 Filed 11-21-96; 8:45 am]

BILLING CODE 6725-01-U