Federal Home Loan Bank Financial Management and Mission Achievement; Withdrawal of Proposed Rule; Notice of Cancellation of Public Hearing

FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 917, 925, 930, 940, 950, 954, 955, 958, 965, 966, and

980

[No. 99-57]

RIN 3069-AA84

Federal Home Loan Bank Financial Management and Mission

Achievement; Withdrawal of Proposed Rule; Notice of Cancellation of

Public Hearing

AGENCY: Federal Housing Finance Board.

ACTION: Withdrawal of proposed rule; Notice of cancellation of public

hearing.

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

withdrawing its recently-proposed Financial Management and Mission

Achievement (FMMA) regulation in light of the enactment of the Federal

Home Loan Bank System Modernization Act of 1999 (Bank System

Modernization Act). Although the Finance Board is withdrawing the

proposed FMMA regulation, it intends to re-propose certain sections of

the FMMA regulation in one or more separate rulemakings. However, the

Finance Board will take no action to promulgate proposed or final

regulations limiting Federal Home Loan Bank (Bank) assets or advances

beyond those currently in effect, except to the extent necessary to

protect the safety and soundness of the Banks, until the Finance Board

has promulgated final capital regulations pursuant to the requirements

of the Bank System Modernization Act and the statutory period for

submission of capital plans by the Banks to the Finance Board has

expired.

The Finance Board also hereby is canceling the public hearing on

the proposed FMMA regulation scheduled for November 29 and 30, 1999.

FOR FURTHER INFORMATION CONTACT: James L. Bothwell, Director and Chief

Economist, (202) 408-2821; or Scott L. Smith, Deputy Director, (202)

408-2991, Office of Policy, Research and Analysis, Federal Housing

Finance Board, 1777 F Street, NW, Washington, DC 20006.

SUPPLEMENTARY INFORMATION:

I. Background

The Finance Board proposed a regulation in the Federal Register of

September 27, 1999 to adopt new financial management and mission

achievement rules, and amend certain existing regulations, for the

Banks. See 64 FR 52163 (Sept. 27, 1999). The preamble to the proposed

FMMA regulation contains a detailed discussion of the background and

reasons for the proposed FMMA regulation. Generally, the proposed FMMA

regulation would have modernized policies governing the business

activities of the Banks and, for the first time, would have established

regulatory standards for mission achievement by the Banks and a

definition of mission assets. The proposal would have enabled the Banks

to help their members be more effective competitors in the housing

finance and community lending marketplace, which in turn would have

assured that benefits accrued to consumers.

The proposal would have imposed a risk-based capital requirement,

pursuant to which each Bank would have been required to maintain

capital based on the credit, market, and operations risks to which it

is exposed. The risk-based capital regime was designed to build upon

the regulatory framework used by other financial institution and

government-sponsored enterprise (GSE) regulators.

The mission achievement requirement in the proposal would have:

codified the authority of the Banks to hold mortgage assets, including

mortgage-backed securities; allowed mortgage assets

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meeting certain regulatory requirements to be counted as mission

assets; and eliminated the use of the Banks' GSE advantages in issuing

debt to fund arbitrage investments.

The proposal also would have specified the responsibilities of the

boards of directors and senior management of the Banks, as a means of

ensuring that they fulfill their duties in operating the Banks in a

safe and sound manner and in furtherance of their mission.

In a separate rulemaking, the Finance Board proposed to reorganize

its regulations to implement a more logical and efficient presentation

of the rules governing the Banks and the Bank System, as well as to

prepare for the anticipated incorporation of the revisions to be made

by the FMMA proposal. See 64 FR 52148 (Sept. 27, 1999). In view of the

technical, housekeeping nature of the proposed reorganization

provisions, the Finance Board is not withdrawing the proposed

reorganization regulation, which the Finance Board intends to finalize,

with any necessary amendments, at the earliest practicable date. The

comment period for the proposed reorganization regulation closes

December 27, 1999.

II. Reasons for Withdrawal of the Proposed FMMA Regulation

In light of the enactment of the Bank System Modernization Act, the

Finance Board is withdrawing the proposed FMMA regulation. The Finance

Board intends to re-propose certain sections of the proposed regulation

in one or more separate rulemakings, and to propose capital

requirements for the Banks in accordance with the Bank System

Modernization Act. However, the Finance Board will take no action to

promulgate proposed or final regulations limiting Bank assets or

advances beyond those currently in effect, except to the extent

necessary to protect the safety and soundness of the Banks, until the

Finance Board has promulgated final capital regulations pursuant to the

requirements of the Bank System Modernization Act and the statutory

period for submission of capital plans by the Banks to the Finance

Board has expired. The Finance Board will consult with the House and

Senate Banking Committees regarding the content of both the capital

regulations and any financial management or mission related regulations

prior to issuing them in proposed form.

III. Cancellation of Public Hearing

In the SUPPLEMENTARY INFORMATION to the proposed FMMA regulation,

the Finance Board announced that it would hold a public hearing on its

proposed FMMA regulation. See 64 FR 52165. The hearing was scheduled to

be held on November 29-30, 1999. As a result of the Finance Board's

action herein to withdraw the proposed FMMA regulation, the public

hearing is no longer necessary and is cancelled.

List of Subjects in 12 CFR Parts 917, 925, 930, 940, 950, 954, 955,

958, 965, 966 and 980

Community development, Credit, Housing and Federal home loan banks.

Dated: November 17, 1999.

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

Bruce A. Morrison,

Chairman.

[FR Doc. 99-30552 Filed 11-23-99; 8:45 am]

BILLING CODE 6725-01-P