Recently, the FHFA issued a final rule amending its regulations on FHLBanks’ (Banks) capital requirements, specifically modifying limits on certain types of extensions of unsecured credit by the FHLBanks. Specifically, interest-bearing deposit accounts (IBDAs) and other authorized overnight investments would be treated like overnight federal funds and will no longer count toward the more restrictive “general limit” on unsecured credit to a single counterparty. Rather, IBDAs would count toward the more flexible and higher “overall limit,” allowing for greater flexibility in liquidity management.

According to the FHFA, the rule addressed the need for the FHLBanks to maintain sufficient liquidity to meet demands, especially during “financial market disruptions.” It recognized IBDAs as a “preferred money market instrument” due to their flexibility and similar risk profile to overnight federal funds. The rule also clarified the measurement of unsecured credit exposure, allowing FHLBanks to choose between daily or monthly capital calculations.

The only feedback the FHFA received on the proposed rule during the comment period was a joint letter from the FHLBanks and the Office of Finance, which lead to adjustments in the final rule. The rule will go into effect 90 days after publication in the Federal Register.