Election of Federal Home Loan Bank Directors

FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 900, 922, 931, 932, 933, 934, and 941

[No. 98-47]

RIN 3069-AA55

Election of Federal Home Loan Bank Directors

AGENCY: Federal Housing Finance Board.

ACTION: Final rule.

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

its regulations on the election of Federal Home Loan Bank (Bank)

directors. The final rule devolves responsibility for determining the

eligibility of elective directors and administering the election

process from the Finance Board to the Banks. The final rule is part of

the Finance Board's continuing effort to transfer management and

governance responsibilities to the Banks and is consistent with the

goals of the Regulatory Reinvention Initiative of the National

Performance Review.

EFECTIVE DATE: The Final Rule will become effective on December 30,

1998.

FOR FURTHER INFORMATION CONTACT: Patricia L. Sweeney, Program Analyst,

Compliance Assistance Division, Office of Policy, 202/408-2872, or Roy

S. Turner, Jr., Attorney-Advisor, Office of General Counsel, 202/408-

2512, Federal Housing Finance Board, 1777 F Street, NW, Washington, DC

20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

Pursuant to section 7 of the Federal Home Loan Bank Act (Act),

which sets forth the eligibility requirements and the procedures for

electing and appointing Bank directors, and regulations promulgated

thereunder, the Finance Board's predecessor, the former Federal Home

Loan Bank Board (FHLBB), determined the eligibility of all Bank

directors, administered the Bank director elections, and appointed

public interest directors. See 12 U.S.C. 1427 (1989); 12 CFR part 522

(1989). After Congress abolished the FHLBB in 1989, see Financial

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

Pub.L. 101-73, sec. 401, 103 Stat. 183 (Aug. 9, 1989), the Finance

Board adopted the FHLBB regulations on Bank directors, without change.

See 54 FR 36757 (Sept. 5, 1989), codified at 12 CFR part 932. The

Finance Board subsequently amended its regulations to implement the

changes FIRREA made to the eligibility requirements for, and to apply

the conflicts of interest limitations FIRREA imposed on, Bank

directors. 55 FR 1393 (Jan. 16, 1990); 56 FR 55205 (Oct. 25, 1991); see

FIRREA, secs. 707, 710(b)(4), 103 Stat. 417, 418, codified at 12 U.S.C.

1427.

Since the enactment of FIRREA the Finance Board has determined the

eligibility of all Bank directors, has administered the election of

Bank directors, and has appointed public interest directors. As part of

its policy of removing itself from the management and governance

functions of the Banks and devolving those responsibilities to the

Banks, the Finance Board is transferring the administration of the

elections, including the responsibility to determine the eligibility of

elective directors, to the Banks. This action does not affect the

appointment of public interest directors for the Banks, who will

continue to be appointed in the sole discretion of the Finance Board.

The final rule amends, redesignates, or eliminates various

provisions of part 932, and includes conforming amendments to parts

900, 931, 933, 934, and 941. The Finance Board also is repealing the

current conflict of interest and financial disclosure requirements

established by part 922 of its regulations for the appointed members of

the Board of Directors of the Finance Board. All of the changes are

consistent with the goals of the Regulatory Reinvention Initiative of

the National Performance Review. See E.O. 12861, 58 FR 48255 (Sept. 11,

1993).

[[Page 65684]]

II. Analysis of the Public Comments and Final Rule

The Finance Board received seven comment letters in response to its

proposal to devolve the management and administration of the election

process to the Banks. The proposed rule was published in the Federal

Register, with a 45-day period for public comment. 63 FR 26532 (May 13,

1998). Commenters included six Banks and one member. Most commenters

supported the devolution of the election process to the Banks, though

they also offered suggested revisions to the rule. Two commenters

opposed the proposal, citing the potential administrative burden that

could be placed on the Banks. One of these commenters also

characterized the regulation as too detailed and restrictive and

failing to devolve to the Banks any meaningful control over the

election process.

Notwithstanding those concerns, the Board believes that the

election of directors to serve on the board of a corporate entity is a

responsibility more appropriately assigned to the entity than to its

safety and soundness regulator. Accordingly, the Board is adopting the

regulation largely as proposed, with revisions made to take into

account a number of revisions proposed by the commenters. Those

revisions are discussed below.

A. Definitions--Sec. 932.1

1. ``Bona Fide Resident''-- Sec. 932.1

The proposed definition of ``bona fide resident'' that appeared in

the Federal Register included a typographical error, which prompted two

commenters to question whether appointive directors need always have

some residence within the district. The final rule corrects the error,

making clear that an appointive director who does not maintain a

principal residence within the district may, nonetheless, be a ``bona

fide resident'' if he or she owns or leases in his or her own name a

residence within the district and is employed within a voting state in

the district. The same test applies to elective directors.

2. ``Voting State''--Sec. 932.1

Under the proposal, a member's ``voting state'' is the state in

which the member's principal place of business, ``as determined in

accordance with part 933,'' is located on the record date. One

commenter contended that the definition might bar a member from voting

if its principal place of business were located outside the district of

the Bank in which the institution is a member. Because that scenario

could occur only in rare circumstances, which would require Finance

Board approval, and the existing regulations and statutes would address

the matter, the final rule adopts the definition as proposed.

By statute, an institution must become a member of the Bank whose

district includes the state in which the institution maintains its

principal place of business, unless the institution requests membership

in an adjoining district, which is permissible only if it is ``demanded

by convenience'' and only if it is approved by the Finance Board. 12

U.S.C. 1424(b). Thus, a member could have its principal place of

business outside of its normal Bank district only pursuant to the

``demanded by convenience'' provision. If such a transfer were to

occur, it would be governed by the regulations of the Finance Board,

principally Section 933.18(a) and (b). Those provisions authorize

membership in another Bank under the ``demanded by convenience''

provision and provide that ``[e]xcept as otherwise designated in

accordance with this section'' a member's principal place of business

is the state in which it maintains its home office. The latter

provision contemplates that the Finance Board may ``otherwise

designate'' a state other than the one in which a member maintains its

home office as its principal place of business, which the Finance Board

would have to do if the home office were outside the district. As the

regulations address the concern of the commenter, especially when read

in conjunction with section 1427(c), which requires the Finance Board

to designate the state in which each member is deemed to be located for

voting purposes, the Finance Board does not believe it is necessary to

revise this definition.

B. Director Elections--Sec. 932.3

1. Responsibilities of the Banks

Consistent with the proposed rule, the final rule transfers the

responsibility for the conduct and administration of the director

elections from the Finance Board to the Banks. Two commenters believed

that the regulatory language should expressly permit the Banks to use

staff and contractors to run the elections process, even though the

preamble to the proposal indicated that Bank staff could be used. As it

was never the Finance Board's intent to have the board of directors

personally perform those tasks, the final rule clarifies that the

disinterested members of the board of directors, or a committee of

disinterested directors, may use staff or an outside contractor to

perform the ministerial and administrative tasks associated with the

elections process. The final rule retains the language that the

disinterested members, or committee of disinterested members, are

responsible for overseeing the election process, which means that they

must ensure that the persons administering the election are competent

and act in accordance with these regulations.

Further, three commenters suggested that the Finance Board share

information with, and offer the appropriate training to, the Banks as a

part of its devolution of the election process. The Finance Board

intends to provide the information and training necessary to ensure a

smooth transition of the management of the election process from the

Finance Board to the Banks and anticipates that it will do so in

consultation with the Banks in advance of the 1999 election cycle. No

regulatory changes are necessary to provide such assistance.

2. Designation of elective directorships.

For any Bank district with five or more states, the Act authorizes

the Finance Board to increase the number of elective directorships up

to thirteen, and the number of appointive directorships up to three-

fourths of the number of elective directorships. 12 U.S.C. 1427(a). The

proposed rule had provided that in creating any additional appointive

directorships under this authority the Finance Board may round up to

the nearest whole number. Two Banks objected to the rounding provision,

contending that it could result in a Bank having a number of appointive

directors in excess of the three-fourths statutory limit.

The principal difficulty in applying the statutory limit is that it

results in a whole number of appointive directors only when the number

of elective directors is eight or twelve. If a Bank has nine, ten, or

eleven elective directors, the formula results in a fractional cap on

the number of appointive directors, i.e., 6.75, 7.5, and 8.25,

respectively. It is not clear from the statute how Congress intended

the cap to be applied when it includes a fraction. The Finance Board

could disregard all fractions altogether, meaning that it would have to

``round down'' to the nearest whole number in all cases. Alternatively,

the Finance Board could follow standard rounding conventions and round

to the nearest whole number in all cases. The Finance Board has

determined that the most reasonable means of applying the limitation is

to use standard rounding conventions whenever the ``three-fourths''

formula results in something other than a whole number. Thus, for any

fraction of one-half or more the Finance Board will round up to the

[[Page 65685]]

nearest whole number, and for any fraction of less than one-half the

Finance Board will round down to the nearest whole number.

The Finance Board believes that this interpretation is permissible

and is in accord with the standards of statutory interpretation.

Chevron, U.S.A., Inc. v. Natural Resources Defense Council Inc., 467

U.S. 837, 844 (1984). The final rule amends the proposed language by

deleting the term ``up,'' to make clear that fractions less than one-

half will be rounded down, and adds a provision requiring the Finance

Board to consult with the affected Banks prior to increasing the number

of elective or appointive directorships.

One commenter suggested that the Finance Board establish separate

seats on the board of directors of a Bank for co-operative banks and

federal savings and loan associations, as those institutions are too

small to have sufficient votes to elect their own representatives. The

Finance Board cannot make such a change because it is not permitted by

the statute. The Finance Board has no authority to set up separate

classes of directors to represent different segments of the membership

base.

C. Capital Stock Report--Sec. 932.4

The proposed rule would have required each Bank, by April 10 of

each year, to submit to the Finance Board and to each member a capital

stock report, which would indicate the minimum number of shares of Bank

stock each member was required to hold at the end of the preceding

calendar year. The proposal also would have allowed each member to

obtain Finance Board review of the Bank's determination of its minimum

stock holdings. Two commenters objected to this provision, contending

that providing the capital stock report to the members would be

confusing because the report would not indicate the number of votes

each member would be entitled to cast in the election, and that the

appeals process would delay the elections.

The Finance Board believes that there is some merit in the

suggestion about member confusion, but also believes that it is

important for each member to have the opportunity to review for itself

and, if necessary, to obtain Finance Board review of the Bank's

calculation of the member's minimum stock purchase requirement (which

is used to determine the member's voting rights) and to confirm that

the Bank has included the member in the appropriate voting state. To

balance those concerns, the final rule relocates the reporting and

review provisions from the election regulation to the membership

regulation, at section 933.22(b)(1).

Section 933.22(b)(1) currently directs the Banks annually to

calculate each member's minimum stock purchase requirement and to

notify the member of any required adjustment. The final rule amends

section 933.22(b)(1) to require the Banks to include as part of the

notice a statement informing the member that the Bank's minimum stock

calculation will be used to determine the number of votes the member

may cast in that year's election, and identifying the state in which

the member will vote. If a member does not agree with the Bank's

calculation of the minimum stock holdings or the Bank's identification

of the voting state, the member may request the Finance Board to

resolve either matter. The Finance Board must do so promptly and its

determination is final.

By requiring the Bank to notify the member of its voting state the

final rule affords each member the opportunity to confirm that the

records of the Bank correctly indicate the location of its principal

place of business. This should minimize the possibility that a member

may be assigned to vote in the wrong state, which might occasionally

occur as members merge, consolidate, or relocate across state lines.

Although the Banks do not designate the state in which a member is

deemed to be located for voting purposes (that is done by the Finance

Board), they do need to know promptly whenever a member relocates its

principal place of business (i.e., its home office) to another state.

Toward that end, the final rule also amends Sec. 933.18(a)(1) to

require that a member promptly notify its Bank whenever it relocates

its principal place of business to another state. The Bank, in turn,

must inform the Finance Board of any such relocation.

Section 7(c) of the Act requires the Finance Board to designate the

state in which each member is deemed to be located for voting purposes

and, if the member has its principal place of business in a state

within the district, the Finance Board must designate that state as its

voting state for purposes of the election. 12 U.S.C. 1427(c). The

Finance Board has made such a designation in its current regulations,

12 CFR 932.11(a) (1998), and the final rule retains a comparable

provision, amending Section 932.3(d) to provide that for purposes of

director elections a member is deemed to be located in its voting

state.

D. Determination of Member Votes--Sec. 932.5

Section 7(b) of the Act provides that in electing directors, each

member may cast a number of votes equal to the number of shares of

capital stock in the Bank the member was required to hold as of the

record date (December 31 of the prior year), but the number of votes

may not exceed the average number of shares required to be held by all

of the members in that state as of the record date. 12 U.S.C. 1427(b).

Because the statute establishes voting rights as of the record

date, the proposal would not have terminated those rights based on

events occurring subsequent to the record date, such as a merger or

consolidation into a nonmember, transfer to another Bank, or withdrawal

from the Bank. Consequently, in the event of such a transaction the

proposed rule would have allowed the legal successor to the member to

exercise whatever voting rights the member possessed as of the record

date, but only for the election occurring in the year of the merger or

other transaction. In subsequent years the successor's right to vote,

if any, would be determined by its own membership status.

Three commenters objected to any provision that might allow

institutions that were not members at the time of the election to vote

in the election for Bank directors. One commenter questioned whether a

member that was subject to the maximum cap on the number of votes it

may cast (i.e., not to exceed the average stock purchase requirement

for all members) would be permitted to cast the votes belonging to

another member that had merged into the first member subsequent to the

record date.

The final rule retains the provisions under which voting rights are

to be determined as of the record date. The Finance Board has decided

not to introduce a number of exceptions to this rule that would

terminate a member's voting rights based on corporate transactions

occurring after the record date. The Finance Board is mindful of the

concerns expressed about entities that are not members being allowed to

vote in the election of directors for the Banks, but is persuaded that

the Banks should conduct their elections in the same manner as other

corporate entities, which use a record date to determine which

shareholders may vote for directors. If the concept of the record date

is to be applied in a meaningful fashion, events occurring subsequently

should not alter the voting rights that existed as of the record date.

Thus, if a member merges into a nonmember subsequent to the record date

but prior

[[Page 65686]]

to the election, or if a member relocates its home office to another

Bank district or withdraws from the Bank System, the successor or the

former member may vote those shares if it wishes to do so. Similarly,

if a member that has reached the maximum number of votes that a single

member may cast in an election acquires by merger or consolidation

another member that was entitled to vote in the election, and in the

same state, as of the record date, the resulting member would be

entitled to cast its own votes, as well as those of the acquired

member, but only in the election occurring in the year of the merger.

Thereafter, the voting rights of the member would be determined by the

number of shares it was required to hold as of the next following

record date.

Moreover, as a practical matter the Finance Board is not persuaded

that terminating the voting rights of members that merge, relocate, or

withdraw from the System after the record date can be done in a manner

that would treat each such member the same. At some point prior to the

distribution of the ballots the Banks must finalize their lists of

institutions that are entitled to vote in the election, even though

there may be a period of several weeks `` during which time other

mergers could occur `` before the balloting closes. Thus, there always

could be some institutions receiving ballots that no longer would be

members at the time of the election. In addition, terminating the

voting rights of even a single member that has participated in such a

transaction will affect the voting rights of every other member that is

subject to the cap on the maximum number of votes that it may cast in

the election, because the cap--the average stock holdings of all

members--will increase or decrease depending on the size of the former

member.

At some point, the voting membership and the number of votes per

member must be fixed. To select any date other than the record date may

result in disparate treatment of similarly situated members, hamper the

ability of the Banks to administer the election process, and subject

the election to challenge by some members. Given those difficulties,

the Finance Board believes that reliance solely on the record date is

consistent with general corporate practice and best ensures that all

members having voting rights on the record date will be treated

equitably in the election for the subsequent year.

One commenter suggested that the Finance Board be made the sole

authority to resolve ``voting determination disputes,'' such as vote

tabulation, principal residence requirement, and record date stock

requirement. Aside from the determination of the number of shares of

stock each member is required to maintain as of the record date and the

state in which the member may vote, for which Finance Board review is

available as noted previously, the Finance Board believes that these

matters are best left to the Banks as a part of the devolution of the

election process. The Banks may adopt dispute resolution procedures and

make elective director eligibility and voting determinations, as they

deem appropriate, consistent with the Act and these regulations.

E. Eligibility Requirements for Elective Directors--Sec. 932.7

The proposed rule, at Sec. 932.7, would have required the Banks to

verify that a director nominee meets the statutory and regulatory

eligibility requirements before placing the name of the nominee on the

ballot. One commenter suggested that the regulation be revised to

require the Banks to rely on the director eligibility certification

form (``Form E-1'') and to refer as well to any successor forms, so

that the Banks have clear guidance as to the source of information from

which they are required to assess a potential nominee's eligibility.

The final rule modifies the proposal to indicate that the Banks are

required to determine eligibility based on the forms provided by the

directors. It also amends the rule to refer to an executed ``director

eligibility certification'' as prescribed by the Finance Board rather

than to refer to the form by its current designation.

F. Conflicts of Interest Policy for Bank Directors--Sec. 932.11

To prevent conflicts of interest that may affect a Bank director in

the performance of his or her official duties, the final rule includes

a conflicts of interest provision that would replace the financial

disclosure requirements and the prohibitions on service, financial

interests, financial relationships, and gifts in the current

regulation. See 12 CFR 932.18(b)-(d), 932.21(b)-(c)(1998). Like the

proposal, the final rule requires each Bank to adopt a written

conflicts of interest policy and specifies the minimum contents for the

policy. The final rule also requires directors to disclose conflicts of

interest to the board of directors and to refrain from voting on

matters in which they have a financial interest.

One commenter suggested that Sec. 932.11(a) (requiring the adoption

of the policy and specifying its minimum contents) be deleted as being

duplicative of the Act and common law duties and lacking any practical

enforcement mechanism. The commenter believed that the disclosure and

recusal provisions in proposed Sec. 932.11(b) to be sufficient. The

Finance Board believes that the Banks, like other business

corporations, are well served by having clear corporate policies on

matters such as conflict of interests of their directors. The final

rule includes only two provisions, Sec. 932.11(a)(1) and (2), that

parallel provisions of the Act, but does not otherwise duplicate the

Act or common law. The Finance Board believes the inclusion of these

provisions is appropriate to remind directors of the obligations

imposed by the Act. Indeed, the provision relating to appointive

directors was added to the final rule on the basis of comments received

on the proposal. The remaining provisions in Sec. 932.11(a) describe

what the Finance Board believes to be minimal requirements for an

effective conflict of interests policy, which the individual Banks are

free to supplement as they believe appropriate.

Some commenters criticized various aspects of Sec. 932.11(b), the

disclosure and recusal provisions, which prompted the Finance Board to

revise that paragraph in its entirety. The final rule requires full

disclosure of any conflicts to the board of directors, applies to the

personal financial interests of the director and those of certain

family members and business associates, and requires recusal from

consideration or voting on matters in which a director has such an

interest. The interests of family members and business associates

require disclosure only if they are known to the director and arise in

connection with any matter to be considered by the board of directors

or any matter in which the other party does, or proposes to do,

business with the Bank. A director is required to disclose the full

nature of his or her interest, and should provide whatever information

that he or she has about the matter to the board. The definition of

``financial interest'' has been revised in the final rule to make clear

that it does not include deposits or savings accounts maintained with a

member or loans obtained in the ordinary course of business. This

exception was added in order that the provision barring appointed

directors from having any financial interest in a member not be read as

prohibiting ordinary business transactions with the member in which

there would be no real risk of conflict or abuse.

One commenter suggested that the disclosure requirements apply only

to

[[Page 65687]]

financial interests that would materially affect board decisions. The

definition of ``financial interest'' has been modified as noted above,

to exclude certain ordinary business transactions.

One commenter suggested that the rule incorporate the conflict of

interests provisions applicable to the Federal Reserve Banks. The

Finance Board reviewed those provisions, as well as those of other

corporate entities, in considering the proposed and final rules, but

does not believe it necessary to adopt the same policies that apply to

the Reserve Banks. If any Bank wishes to include provisions comparable

to those applicable to the Reserve Banks in their own conflict policies

they are free to do so.

III. Regulatory Flexibility Act

The final rule implements statutory requirements binding on all

Banks, all Bank members, and all prospective and incumbent Bank

directors. The Finance Board is not at liberty to make adjustments in

those requirements to accommodate small entities. The Finance Board has

not imposed any additional regulatory requirements that will have a

disproportionate impact on small entities. In addition, in an effort to

reduce the reporting burden on prospective and incumbent Bank

directors, the Finance Board has streamlined Form E-1, the Elective

Director Eligibility Certification Form, and Form A-1, the Appointive

Director Eligibility Certification Form, eliminated Forms E-2 and A-2,

and will allow individuals to certify that no changes have occurred

since they last submitted required information rather than completing

anew the entire form. Thus, in accordance with the provisions of the

Regulatory Flexibility Act, the Finance Board hereby certifies that

this final rule will not have a significant economic impact on a

substantial number of small entities. See 5 U.S.C. 605(b).

IV. Paperwork Reduction Act

As part of the proposed rulemaking, the Finance Board published a

request for comments concerning the collection of information contained

in proposed rule. See 63 FR 26532 (May 13, 1998). The Finance Board

received one comment in support of the Finance Board's efforts to

reduce the burden of regulatory reporting requirements. The Finance

Board submitted an analysis of the information collection to the Office

of Management and Budget (OMB) for review in accordance with section

2507 of the Paperwork Reduction Act of 1995. See 44 U.S.C. 3507. OMB

assigned a control number, 3069-0002, and approved the information

collection without conditions with an expiration date of June 30, 2001.

Potential respondents are not required to respond to the collection of

information unless the regulation collecting the information displays a

currently valid control number assigned by OMB. See id. 3512(a).

Although the final rule does not modify the approved information

collection, the revised collection reduces the reporting and

recordkeeping burden imposed on many respondents by streamlining Forms

E-1 and A-1 and eliminating Forms E-2 and A-2 and permitting

individuals to certify that no changes have occurred since they last

submitted required information rather than completing anew the entire

form.

The following table discloses the estimated annual reporting and

recordkeeping burden:

a. Number of respondents....................................... 3442

b. Total annual responses...................................... 3442

Percentage of these responses collected electronically....... 0

c. Total annual hours requested................................ 1,172

d. Current OMB inventory....................................... 376

e. Difference................................................ 796

The estimated annual reporting and recordkeeping cost burden is:

a. Total annualized capital/startup costs............... $180,000.00

b. Total annual costs (O&M)............................. 24,000.00

c. Total annualized cost requested...................... 0

d. Current OMB inventory................................ 0

e. Difference........................................... $204,000.00

Any comments concerning the information collection should be

submitted to Elaine L. Baker, Executive Secretary, Federal Housing

Finance Board, 1777 F. Street, NW, Washington, DC 20006, and the Office

of Information and Regulatory Affairs of the Office of Management and

Budget, Attention: Desk Officer for Federal Housing Finance Board,

Washington, DC 20503.

List of Subjects

12 CFR Part 900

Organization and functions (Government agencies).

12 CFR Part 922

Conflict of interests.

12 CFR Part 931

Banks, Banking, Federal home loan banks.

12 CFR Part 932

Banks, Banking, Conflict of interests, Elections, Ethical conduct,

Federal home loan banks, Financial disclosure, Reporting and

recordkeeping requirements.

12 CFR Part 933

Credit, Federal home loan banks, Reporting and recordkeeping

requirements.

12 CFR Part 934

Federal home loan banks, Securities, Surety bonds.

12 CFR Part 941

Federal home loan banks, Organization and functions (government

agencies).

Accordingly, the Federal Housing Finance Board hereby amends

chapter IX, title 12, parts 900, 922, 931, 932, 933, 934, and 941 of

the Code of Federal Regulations as follows:

PART 900--[Amended]

1. The authority citation for part 900 continues to read as

follows:

Authority: 5 U.S.C. 552;(12 U.S.C. 1422b(a).

Sec. 900.51 [Amended]

2. Amend Sec. 900.51 by removing ``A-2--Appointive Directors--

Personal Certification and Disclosure Form'' and ``E-2--Elective

Directors--Personal Certification and Disclosure Form.''

PART 922--[Removed]

1. Under the authority in 12 U.S.C. 1422a and 1422b, remove part

922.

PART 931--DEFINITIONS

1. The authority citation for part 931 continues to read as

follows:

Authority: 12 U.S.C. 1422a and 1422b.

Secs. 931.13 through 931.40 [Removed]

2. Remove Secs. 931.13 through 931.40.

Secs. 931.11 and 931.12 [Redesignated as Secs. 931.5 and 931.6]

3. Redesignate Secs. 931.11 and 931.12 as Secs. 931.5 and 931.6,

respectively.

PART 934--OPERATIONS OF THE BANKS

1. The authority citation for part 934 continues to read as

follows:

Authority: 12 U.S.C. 1422a, 1422b, 1431(g), 1432(a), and 1442.

Sec. 932.3 [Redesignated as Sec. 934.17]

2. Redesignate Sec. 932.3 as Sec. 934.17.

PART 932--DIRECTORS, OFFICERS, AND EMPLOYEES OF THE BANKS

1. Revise the heading of part 932 to read as set forth above.

2. Revise the authority citation for part 932 to read as follows:

[[Page 65688]]

Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1427, and

1432; 42 U.S.C. 8101 et seq.

3. Revise the table of contents of part 932 to read as follows:

Subpart A--Definitions

Sec.

932.1 Definitions.

932.2 Dates.

Subpart B--Bank Directors

Sec.

932.3 Director elections.

932.4 Capital stock report.

932.5 Determination of member votes.

932.6 Elective director nominations.

932.7 Eligibility requirements for elective directors.

932.8 Election process.

932.9 Prohibition on actions to influence director elections.

932.10 Selection of appointive directors.

932.11 Conflict of interests policy for Bank directors.

932.12 Reporting requirements for Bank directors

932.13 Ineligible Bank directors.

932.14 Vacant Bank directorships.

932.15 Minimum number of elective directorships.

932.16 Site of board of directors and committee meetings.

932.17 Compensation and expenses of Bank directors.

Subpart C--Selection of Bank Officers and Employees

Sec.

932.18 Selection of Bank officer and employees

932.19 Compensation of Bank officers and employees

4. Designate Secs. 932.1 and 932.2 as subpart A and add a subpart

heading to read as follows:

Subpart A--Definitions

5. Revise Sec. 932.1 to read as follows:

Sec. 932.1 Definitions.

For purposes of this part:

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

1421 et seq.).

Bank or Banks means a Federal Home Loan Bank or the Federal Home

Loan Banks.

Bona fide resident of a Bank district means an individual who:

(1) Maintains a principal residence within the Bank district; or

(2) If serving as an elective director, owns or leases in his or

her own name a residence within the Bank district and is an officer or

director of a member located in a voting state within the Bank

district; or

(3) If serving as an appointive director, owns or leases in his or

her own name a residence within the Bank district and is employed

within a voting state within the Bank district.

Docket number means the number assigned to each member by the

Finance Board and used by the Finance Board and the Banks to identify a

particular member.

Finance Board means the agency established as the Federal Housing

Finance Board.

Member means an institution admitted to membership and owning

capital stock in a Bank.

Record date means December 31 of the calendar year immediately

preceding the election year.

Voting state means the District of Columbia, Puerto Rico, or the

state of the United States in which a member's principal place of

business, as determined in accordance with part 933 of this chapter, is

located as of the record date. The voting state of a member with a

principal place of business located in the U.S. Virgin Islands as of

the record date shall be Puerto Rico, and the voting state of a member

with a principal place of business located in American Samoa, Guam, or

the Commonwealth of the Northern Mariana Islands as of the record date

shall be Hawaii.

6. Add Sec. 932.2 to subpart A to read as follows:

Sec. 932.2 Dates.

If any date specified in this part, or specified by a Bank pursuant

to this part, falls on a Saturday, Sunday, or federal holiday, the

relevant time period shall be deemed to include the next business day.

7. Designate Secs. 932.3 through 932.17 as subpart B and add a

subpart heading to read as follows:

Subpart B--Bank Directors

8. Add Sec. 932.3 to subpart B to read as follows:

Sec. 932.3 Director elections.

(a) Responsibilities of the Banks. Each Bank annually shall conduct

an election the purpose of which is to fill all elective directorships

designated by the Finance Board as commencing on January 1 of the

calendar year immediately following the year of the election. Subject

to the provisions of the Act and in accordance with the requirements of

this part, the disinterested members of the board of directors of each

Bank, or a committee of disinterested directors, shall administer and

conduct the annual election of directors. In so doing, the

disinterested directors may use Bank staff or independent contractors

to perform ministerial and administrative functions concerning the

elections process. The term of office of each elective directorship

shall be two years and shall commence on January 1 of the calendar year

immediately following the year in which the election is held. Each Bank

shall complete the election in sufficient time to allow newly elected

directors to assume their seats on January 1 of the year immediately

following the election.

(b) Designation of elective directorships. The Finance Board

annually shall establish the number of elective directorships for each

Bank, which are to be allocated as follows:

(1) One elective directorship shall be allocated to each state

within the Bank district;

(2) If the total number of elective directorships allocated

pursuant to paragraph (b)(1) of this section is less than eight, the

Finance Board shall allocate additional elective directorships among

the states, using the method of equal proportions, until the total

allocated for the Bank equals eight;

(3) If the number of elective directorships allocated to any state

pursuant to paragraphs (b)(1) and (2) of this section is less than the

number allocated to that state on December 31, 1960, as specified in

Sec. 932.15, the Finance Board shall allocate such additional elective

directorships to that state until the total allocated equals the number

allocated to the Bank on December 31, 1960;

(4) Pursuant to section 7(e) of the Act, the Federal Home Loan Bank

of New York is hereby allocated one additional elective directorship,

which is designated as representing the members in the Commonwealth of

Puerto Rico;

(5) Pursuant to section 7(a) of the Act, in any Bank district that

includes five or more states, the Finance Board, after consultation

with the affected Banks, may increase the number of elective

directorships up to thirteen, and the number of appointive

directorships up to three-fourths of the number of elective

directorships. In determining the number of appointive directorships,

the Finance Board may round to the nearest whole number.

(c) Notification. On or before June 1 of each year, the Finance

Board shall notify each Bank in writing of the total number of elective

directorships established for the Bank and the number of elective

directorships designated as representing the members in each voting

state in the Bank district. The annual designation of elective

directorships shall not cause any incumbent director to surrender his

or her directorship prior to the expiration of the full term of office.

[[Page 65689]]

(d) In accordance with section 7(c) of the Act, unless otherwise

designated by the Finance Board, for purposes of election of directors

a member shall be deemed to be located in its voting state.

(e) Transition. The term of office of each elective directorship

existing on the effective date of this section shall continue to its

scheduled expiration date, and the Banks may not thereafter alter the

commencement or expiration date for any elective directorship in

conducting the annual election of directors.

9. Add Sec. 932.4 to Subpart B to read as follows:

Sec. 932.4 Capital stock report.

(a) On or before April 10 of each year, each Bank shall submit to

the Finance Board, for its use in designating the elective

directorships a capital stock report that indicates, as of the record

date, the number of members in each voting state in the Bank's

district, and the number of shares of capital stock required to be held

by each member (identified by docket number), and the aggregate total

number of shares of capital stock required to be held by all members in

each voting state in the Bank's district. The Bank shall certify to the

Finance Board that to the best of its knowledge the information

provided in the capital stock report is accurate and complete, and that

it has notified each member of its minimum capital stock holdings

pursuant to Sec. 933.22(b)(1) of this chapter.

(b) A Bank shall determine the number of shares of capital stock

each member is required to hold as of the record date in the following

manner:

(1) The number of shares of capital stock shall be equal to the

greater of the advances-to-capital stock requirement under

Sec. 935.15(a) of this chapter, or the minimum capital stock

requirement under Sec. 933.20(a) of this chapter.

(2) If a member has elected to purchase its minimum required

capital stock in installments under Sec. 933.20(b)(2) of this chapter,

the number of shares of capital stock required to be held as of the

record date shall be the cumulative total of shares of capital stock

actually purchased as of the record date.

10. Add Sec. 932.5 to subpart B to read as follows:

Sec. 932.5 Determination of member votes.

(a) Authority. The Bank shall determine, in accordance with this

section, the number of votes each member of the Bank may cast in the

election of directors.

(b) Determination. The number of votes a member may cast for any

elective director nominee shall be the lesser of the number of shares

of capital stock the member was required to hold as of the record date,

as determined in accordance with Sec. 932.4(b), or the average number

of shares of capital stock required to be held by all of the members in

its voting state as of the record date.

11. Add Sec. 932.6 to subpart B to read as follows:

Sec. 932.6 Elective director nominations.

(a) Election announcement. Within a reasonable time in advance of

an election, a Bank shall provide to each member in its district a

written notice of the election that includes:

(1) The number of elective directorships designated as representing

the members in each voting state in the Bank district;

(2) The name of each incumbent Bank director, the name and location

of the member at which each elective director serves, and the name and

location of the organization with which each appointive director is

affiliated, if any, and the expiration date of each Bank director's

term of office;

(3) An attachment indicating the name, location, and docket number

of every member in the member's voting state, and the number of votes

each such member may cast in the election, as determined in accordance

with Sec. 932.5(b); and (4) A nominating certificate.

(b) Nominations. (1) Any member that is entitled to vote in the

election may nominate an eligible individual to fill each available

elective directorship for its voting state by submitting to its Bank,

prior to a deadline to be established by the Bank, a nominating

certificate duly adopted by the member's governing body or by an

individual authorized to act on behalf of the member's governing body.

(2) The nominating certificate shall include the name of the

nominee and the name, location, and docket number of the member at

which the nominee serves as an officer or director.

(3) The Bank shall establish a deadline for submitting nominating

certificates, which shall be no earlier than 30 calendar days after the

date on which the Bank mails the notice required by paragraph (a) of

this section, and the Bank shall not accept certificates received after

that deadline. The Bank shall retain all nominating certificates for at

least two years after the date of the election.

(c) Accepting nominations. A Bank shall notify in writing any

person nominated for an elective directorship promptly upon receipt of

the nominating certificate. A person may accept the nomination only by

submitting an executed director eligibility certification, as

prescribed by the Finance Board, to the Bank prior to the deadline

established by the Bank. A Bank shall allow each nominee at least 30

calendar days after the date of the notice of nomination within which

to submit the executed form. A nominee may decline the nomination by so

advising the Bank in writing, or by failing to submit a properly

executed director eligibility certification prior to the deadline. Each

Bank shall retain all information received under this paragraph for at

least two years after the date of the election.

12. Add Sec. 932.7 to subpart B read as follows:

Sec. 932.7 Eligibility requirements for elective directors.

(a) Eligibility verification. Based on the information provided on

the director eligibility certification form prescribed by the Finance

Board, a Bank shall verify that each nominee meets all of the

eligibility requirements for elective directors set forth in the Act

and this part before placing that nominee on the ballot prepared by the

Bank under Sec. 932.8(a).

(b) Eligibility requirements. Each elective director, and each

nominee, shall be:

(1) A citizen of the United States;

(2) A bona fide resident of the Bank district; and

(3) An officer or director of a member that is located in the

voting state to be represented by the elective directorship, that was a

member of the Bank as of the record date, and that meets all minimum

capital requirements established by its appropriate federal regulator

or appropriate state regulator. For purposes of this paragraph (b)(3),

the term appropriate federal regulator has the same meaning as the term

``appropriate Federal banking agency'' in section 3(q) of the Federal

Deposit Insurance Act (12 U.S.C. 1813(q)), and, for federally insured

credit unions, shall mean the National Credit Union Administration, and

the term appropriate state regulator means any state officer, agency,

supervisor, or other entity that has regulatory authority over, or is

empowered to institute enforcement action against, a member.

(c) Restrictions. A nominee is not eligible if he or she:

(1) Is an incumbent elective director, unless:

(i) The incumbent director's term of office would expire before the

new term of office would begin; and

[[Page 65690]]

(ii) The new term of office would not be barred by the term limit

provision of section 7(d) of the Act.

(2) Is a former elective director whose service would be barred by

the term limit provision of section 7(d) of the Act.

(3) Is an incumbent appointive director.

13. Revise Sec. 932.8 to read as follows:

Sec. 932.8 Election process.

(a) Ballots. Promptly after verifying the eligibility of all

nominees in accordance with Sec. 932.7(a), a Bank shall prepare a

ballot for each voting state for which an elective directorship is to

be filled and shall mail the ballot to all members within that state

that were members as of the record date. A ballot shall include at

least the following provisions:

(1) An alphabetical listing of the names of each nominee for the

member's voting state, the name, location, and docket number of the

member at which each nominee serves, the nominee's title or position

with the member, and the number of elective directorships to be filled

by members in that voting state in the election;

(2) A statement that write-in candidates are not permitted; and

(3) A confidentiality statement prohibiting the Bank from

disclosing how a member voted.

(b) Lack of nominees. If, for any voting state, the number of

nominees is equal to or less than the number of elective directorships

to be filled in the election, the Bank shall notify the members in the

affected voting state in writing (in lieu of providing a ballot) that

the directorships are to be filled without an election due to a lack of

nominees. The Bank shall declare elected any eligible nominee, who

shall be included as a director-elect in the report of election

required under paragraph (e). If necessary, the board of directors

shall fill, any elective directorship that has become vacant due to a

lack of a nominee in accordance with Sec. 932.14(a).

(c) Voting. For each directorship to be filled, a member may cast

the number of votes determined by the Bank pursuant to Sec. 932.5. A

member may not split its votes among multiple nominees for a single

directorship, nor, where there are multiple directorships to be filled

for a voting state, may it cumulatively vote for a single nominee. Any

ballots cast in violation of this subsection shall be void. To vote, a

member shall:

(1) Mark on the ballot the name of not more than one of the

nominees for each elective directorship to be filled in the member's

voting state. Each nominee so selected shall receive all of the votes

that the member is entitled to cast.

(2) Execute the ballot by resolution of the member's governing

body, or by an appropriate writing signed by an individual authorized

to act on behalf of the governing body.

(3) Deliver the executed ballot to the Bank on or before the

closing date that has been established by the Bank, which shall be no

earlier than 30 calendar days after the date the ballots are mailed in

accordance with paragraph (a) of this section. A member may not change

a ballot after it has been delivered to the Bank.

(d) Counting ballots. A Bank shall not open any ballot until after

the closing date, and may not include in the election results any

ballot received after the closing date. Promptly after the closing

date, each Bank shall tabulate, by each voting state, the votes cast in

accordance with paragraph (c) of this section, and shall declare

elected the nominee receiving the highest number of votes.

(1) If more than one elective directorship is to be filled in a

voting state, the Bank shall declare elected each successive nominee

receiving the next highest number of votes until all open elective

directorships for that voting state are filled.

(2) In the event of a tie for the last available seat, the

incumbent board of directors of the Bank shall, by a majority vote,

declare elected one of the nominees for whom the number of votes cast

was tied.

(3) The Bank shall retain all ballots it receives for at least two

years after the date of the election, and shall not disclose how any

member voted.

(e) Report of election. Promptly following the election, each Bank

shall provide written notice to its members, to each nominee, and to

the Finance Board of the following:

(1) The name of each director-elect, the name and location of the

member at which he or she serves, and his or her title or position at

the member;

(2) The voting state represented by each director-elect;

(3) The expiration date of the term of office of each director-

elect;

(4) The number of members voting in the election and the total

number of votes cast, both reported by state; and (5) The number of

votes cast for each nominee.

14. Revise Sec. 932.9 to read as follows:

Sec. 932.9 Prohibition on actions to influence director elections.

(a) Prohibition. Except as provided in paragraph (b) of this

section:

(1) No director, officer, attorney, employee, or agent of the

Finance Board or of a Bank may:

(i) Communicate in any manner that a director, officer, attorney,

employee, or agent of the Finance Board or of a Bank, directly or

indirectly, supports the nomination or election of a particular

individual for an elective directorship; or

(ii) Take any other action to influence votes for a directorship.

(2) No member may take any action prohibited by paragraph (a)(1)(i)

of this section.

(b) Exception for incumbent Bank directors. A Bank director acting

in his or her personal capacity may support the nomination or election

of any individual for an elective directorship, provided that no Bank

director shall purport to represent the views of the Bank, the Finance

Board, any other director, or any officer, attorney, employee, or agent

of the Bank or of the Finance Board concerning the nomination or

election of a particular individual for an elective directorship.

15. Revise Sec. 932.10 to read as follows:

Sec. 932.10 Selection of appointive directors.

(a) Selection. In accordance with the Act, the Finance Board, in

its sole discretion, shall select all appointive directors.

(b) Term of office. The term of office of each appointive

directorship shall commence on January 1.

16. Revise Sec. 932.11 to read as follows:

Sec. 932.11 Conflict of interests policy for Bank directors.

(a) Adoption of conflict of interests policy. Each Bank shall adopt

a written conflict of interests policy that shall apply to all Bank

directors. At a minimum, the conflict of interests policy of each Bank

shall:

(1) Require the directors to administer the affairs of the Bank

fairly and impartially and without discrimination in favor of or

against any member or nonmember borrower;

(2) Prohibit appointed directors from serving as an officer of any

Bank or as an officer or director of any member, and from owning any

equity or debt security issued by a member or from having any other

financial interest in a member;

(3) Prohibit the use of a director's official position for personal

gain;

(4) Require directors to disclose actual or apparent conflict of

interests and establish procedures for addressing such conflicts;

(5) Provide internal controls to ensure that reports are filed and

that conflicts are disclosed and resolved in accordance with this

section; and

[[Page 65691]]

(6) Establish procedures to monitor compliance with the conflict of

interests policy.

(b) Disclosure and recusal. A director shall disclose to the board

of directors any personal financial interests he or she has, as well as

any financial interests known to the director of any immediate family

member or business associate of the director, in any matter to be

considered by the board of directors and in any other matter in which

another person or entity does, or proposes to do, business with the

Bank. A director shall fully disclose the nature of his or her interest

in the matter and shall provide to the board of directors any

information requested to aid in its consideration of the director's

interest. A director shall refrain from considering or voting on any

issue in which the director, any immediate family member, or any

business associate has a financial interest.

(c) Confidential Information. Directors shall not disclose or use

confidential information received by them solely by reason of their

position with the Bank to obtain a financial interest for themselves or

for any other person.

(d) Gifts. Directors shall not accept, and shall discourage their

immediate family members from accepting, any substantial gift where the

director has reason to believe that the gift is given in order to

influence the director's actions as a member of the Bank's board of

directors, or where acceptance of such gift gives the appearance of

influencing the director's actions as a member of the board.

(e) Compensation. Directors shall not accept compensation for

services performed for the Bank from any source other than the Bank for

which the services are performed.

(f) Definitions. For purposes of this section:

(1) Immediate family member means parent, sibling, spouse, child,

or dependent, or any other relative sharing the same residence as the

director.

(2) Financial interest means a direct or indirect financial

interest in any activity, transaction, property, or relationship that

involves receiving or providing something of monetary value, and

includes, but is not limited to any right, contractual or otherwise, to

the payment of money, whether contingent or fixed. It does not include

a deposit or savings account maintained with a member, nor does it

include a loan or extension of credit obtained from a member in the

normal course of business on terms that are generally available to the

public.

(3) Business associate means any individual or entity with whom a

director has a business relationship, including, but not limited to:

(i) Any corporation or organization of which the director is an

officer or partner, or in which the director beneficially owns ten

percent or more of any class of equity security, including subordinated

debt;

(ii) Any other partner, officer, or beneficial owner of ten percent

or more of any class of equity security, including subordinated debt,

of any such corporation or organization; and

(iii) Any trust or other estate in which a director has a

substantial beneficial interest or as to which the director serves as

trustee or in a similar fiduciary capacity.

(4) Substantial Gifts includes:

(i) Gifts of more than token value;

(ii) Entertainment or hospitality, the cost of which is in excess

of what is considered reasonable, customary, and accepted business

practices; or

(iii) Any other items or services for which a director pays less

than market value.

17. Revise Sec. 932.12 to read as follows:

Sec. 932.12 Reporting requirements for Bank directors.

(a) Annual reporting. On or before March 1 of each year, each

director shall submit to his or her Bank the appropriate executed

director eligibility certification, as prescribed by the Finance Board.

(The forms are available pursuant to 12 CFR 900.51). The Bank shall

promptly forward to the Finance Board a copy of the certification filed

by each appointive director.

(b) Report of noncompliance. If an elective or appointive director

knows or has reason to believe that he or she no longer meets the

eligibility requirements set forth in the Act or this part, the

director shall so inform the Bank in writing within 30 calendar days of

first learning of the facts causing the loss of eligibility. An

appointive director also shall inform the Finance Board in writing at

the same time that he or she informs the Bank.

18. Revise Sec. 932.13 to read as follows:

Sec. 932.13 Ineligible Bank directors.

(a) Elective directors. Upon a determination by the Finance Board

or a Bank that an elective director no longer satisfies the eligibility

requirements set forth in the Act or this part, or has failed to comply

with the reporting requirements of Sec. 932.12, the elective

directorship shall immediately become vacant. Any elective director

that is determined to have failed to comply with the eligibility or

reporting requirements shall not continue to act as a Bank director.

(b) Appointive directors. Except as provided herein, upon a

determination by the Finance Board that an appointive director no

longer satisfies the eligibility requirements set forth in the Act, or

has failed to comply with the reporting requirements of Sec. 932.12,

the appointive directorship shall immediately become vacant.

Notwithstanding the vacancy, an appointive director may continue to

serve until a successor assumes the directorship or the term of office

expires, whichever occurs first, and the Finance Board, in its sole

discretion, may allow an appointive director up to 90 calendar days to

comply with the eligibility or reporting requirements.

19. Revise Sec. 932.14 to read as follows:

Sec. 932.14 Vacant Bank directorships.

(a) Vacant elective directorships. (1) As soon as practicable after

a vacancy occurs, a Bank shall fill the unexpired term of office of a

vacant elective directorship by a majority vote of the remaining Bank

directors regardless of whether the remaining Bank directors constitute

a quorum of the Bank's board of directors.

(2) An individual so selected to fill a vacant elective

directorship shall satisfy all of the eligibility requirements for

elective directors set forth in the Act and this part, and shall

provide to the Bank an executed director eligibility certification. The

Bank shall verify the individual's eligibility in accordance with

Sec. 932.7(a) before allowing the individual to assume the

directorship, and shall retain the information it receives in

accordance with Sec. 932.6(c).

(3) Promptly after verifying the individual's eligibility under

paragraph (a)(2) of this section, a Bank shall notify the Finance Board

and each member located in the Bank's district in writing of the

following:

(i) The name of the new elective director, the name, location and

docket number of the member at which the new director serves, and the

new director's title or position with the member;

(ii) The voting state that the new elective director represents;

and

(iii) The expiration date of the new elective director's term of

office.

(b) Vacant appointive directorships. (1) As soon as practicable

after a vacancy occurs, the Finance Board shall fill the unexpired term

of office of a vacant appointive directorship.

(2) Promptly after filling a vacant appointive directorship, the

Finance Board shall notify the affected Bank in writing of the

following:

(i) The name of the new appointive director, the name and location

of the organization with which the new director is affiliated, if any,

and the new

[[Page 65692]]

director's title or position with such organization; and

(ii) The expiration date of the new appointive director's term of

office.

(3) Promptly after receiving the notice required by paragraph

(b)(2) of this section, a Bank shall provide each of its members with

the information described in paragraphs (b)(2)(i) and (ii) of this

section.

Secs. 932.15 through 932.19 [Removed]

20. Remove Secs. 932.15 through 932.19.

Secs. 932.20 [Redesignated as Sec. 932.15]

21. Redesignate Sec. 932.20 as Sec. 932.15 and revise the second

sentence and table to read as follows:

Sec. 932.15 Minimum number of elective directorships

* * * The following list sets forth the states whose members held

more than one (1) seat on December 31, 1960:

------------------------------------------------------------------------

No. of

elective

State directorships

on December

31, 1960

------------------------------------------------------------------------

California.............................................. 3

Colorado................................................ 2

Illinois................................................ 4

Indiana................................................. 5

Iowa.................................................... 2

Kansas.................................................. 3

Kentucky................................................ 2

Louisiana............................................... 2

Massachusetts........................................... 3

Michigan................................................ 3

Minnesota............................................... 2

Missouri................................................ 2

New Jersey.............................................. 4

New York................................................ 4

Ohio.................................................... 4

Oklahoma................................................ 2

Pennsylvania............................................ 6

Tennessee............................................... 2

Texas................................................... 3

Wisconsin............................................... 4

------------------------------------------------------------------------

Secs. 932.21 through 932.25 [Removed]

22. Remove Secs. 932.21 through 932.23.

Sec. 932.26 [Redesignated as Sec. 932.16]

23. Redesignate Sec. 932.26 as Sec. 932.16 of subpart B.

Sec. 932.27 [Redesignated as Sec. 932.17]

24. Redesignate Sec. 932.27 as Sec. 932.17 of subpart B.

Secs. 932.28 through 932.39 [Removed]

25. Remove Secs. 932.28 through and 932.39.

26. Designate Secs. 932.18 and 932.19 as subpart C and add a

subpart heading to read as follows:

Subpart C--Selection of Bank Officers and Employees

Sec. 932.40 [Redesignated as Sec. 932.18]

27. Redesignate Sec. 932.40 as Sec. 932.18 of subpart C, remove

paragraph (d), and revise the section heading and paragraph (a)

introductory text to read as follows:

Sec. 932.18 Selection of Bank officers and employees.

(a) Bank presidents. The board of directors of each Bank may

appoint a president, who shall be the chief executive officer of the

Bank, subject to the following limitations:

* * * * *

Sec. 932.41 [Redesignated as Sec. 932.19]

28. Redesignate Sec. 932.41 as Sec. 932.19 of subpart C and revise

the section heading to read as follows:

Sec. 932.19 Compensation of Bank officers and employees.

* * * * *

Secs. 932.42 through 932.62 [Removed]

29. Remove Secs. 932.42 through 932.62.

PART 933--MEMBERS OF THE BANKS

1. The authority citation for part 933 continues to read as

follows:

Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430,

1442.

2. Part 933 is amended by removing ``Sec. 932.3'' wherever it

appears and adding ``Sec. 934.17'' in its place in the following

locations:

a. 933.24(b)(3)

b. 933.25(e)

c. 933.26(d)

d. 933.27(f)

e. 933.28(c)

Sec. 933.18 [Amended]

3. Amend Sec. 933.18 by adding a sentence to paragraph (a)(1) and

revising paragraph (e) as follows:

Sec. 933.18 Determination of appropriate Bank district for membership.

(a) Eligibility. (1) * * * A member shall promptly notify its Bank

in writing whenever it relocates its principal place of business to

another state and the Bank shall inform the Finance Board in writing of

any such relocation.

* * * * *

(e) Effect of transfer. A transfer of membership pursuant to this

section shall be effective for all purposes, but shall not affect

voting rights in the year of the transfer and shall not be subject to

the provisions on termination of membership set forth in section 6 of

the Act or Secs. 933.26, 933.27, and 933.28, nor the restriction on

reacquiring Bank membership within 10 years set forth in Sec. 933.30.

* * * * *

4. Amend Sec. 933.20 by revising paragraph (e) to read as follows:

Sec. 933.20 Stock purchase.

* * * * *

(e) Reports. The Bank shall make quarterly reports to the Board

setting forth purchases by institutions approved for membership of

their minimum stock requirement pursuant to this section.

5. Amend Sec. 933.22 by adding three sentences to paragraph (b)(1)

as follows:

Sec. 933.22 Adjustments in stock holdings.

* * * * *

(b)(1) Annual Adjustment. * * * The notice shall clearly state that

the Bank's calculation of each member's minimum stock holdings is to be

used to determine the number of votes that the member may cast in that

year's election of directors and shall identify the state within the

district in which the member will vote. A member that does not agree

with the Bank's calculation of the minimum stock requirement or with

the identification of its voting state may request the Finance Board to

review the Bank's determination. The Finance Board shall promptly

determine the member's minimum required holdings and its proper voting

state, which determination shall be final.

* * * * *

Sec. 933.24 [Amended]

6. Amend Sec. 933.24 by removing paragraph (b)(4).

Sec. 933.25 [Amended]

7. Amend Sec. 933.25 by removing paragraph (f).

Sec. 933.26 [Amended]

8. Amend Sec. 933.26 by removing paragraph (e).

Sec. 933.27 [Amended]

9. Amend Sec. 933.27 by removing paragraph (g).

Sec. 933.28 [Amended]

10. Amend Sec. 933.28 by removing paragraph (d).

PART 941--OPERATIONS OF THE OFFICE OF FINANCE

1. The authority citation for part 941 continues to read as

follows:

Authority: 12 U.S.C. 1422b, 1431.

2. Amend Sec. 941.7 by revising paragraph (f)(2) to read as

follows:

Sec. 941.7 Office of Finance Board of Directors.

* * * * *

[[Page 65693]]

(f) * * *

(2) Private Citizen member. The Office of Finance shall pay

compensation and expenses to the Private Citizen member of the OF board

of directors in accordance with the requirements for payment of

compensation and expenses to Bank directors set forth in Sec. 932.17 of

this chapter, except that, for these purposes:

(i) The Office of Finance policy on director compensation must be

approved by the board of directors of the Finance Board;

(ii) Section 932.17(a)(3) and (c)(1)(ii) of this chapter shall not

apply; and

(iii) The terms ``average compensation per director'' and ``ACPD,''

as used in Sec. 932.17 of this chapter, shall be deemed to mean

``maximum compensation of the Private Citizen member''.

Dated: October 28, 1998.

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

Bruce A. Morrison,

Chairperson.

[FR Doc. 98-31786 Filed 11-27-98; 8:45 am]

BILLING CODE 6725-01-P