On July 13, the FHFA issued a proposed rule in the Federal Register that would repeal its New Business Activities (NBA) regulation at 12 C.F.R. part 1272, which governs the submission and approval of notices for a Federal Home Loan Bank (FHLBank) to commence a new business activity. The agency stated that it reviewed the regulation pursuant to Executive Order 14219 and identified part 1272 as potentially disincentivizing innovation that could advance the FHLBanks’ mission without a “sufficiently offsetting” benefit to safety and soundness. According to the agency, part 1272 originates from a regulation the Federal Housing Finance Board adopted in 2000 to implement statutory amendments under the FHLBank System Modernization Act of 1999 that expanded the types of collateral the banks could accept, and the FHFA re-designated the rule at part 1272 in 2010 without modification before narrowing its scope in a 2016 final rule.

The FHFA stated that in the last five years, the FHLBanks have submitted only two new business activity notices, and that the FHFA has not rejected any such notice for unmanageable risk in the past decade, which it cited as evidence that the regulation has had minimal effect on the banks’ deployment of new products and services. The agency further contended that the regulation duplicates oversight already performed through its ongoing supervisory and examination process, stating that banks typically engage the FHFA early in developing a new business activity, and that the prescriptive, uniform review process required under part 1272 is time-consuming and purportedly adds little value once substantive development work has already occurred. The FHFA also stated that rescinding the rule would reduce costs for both the banks and the agency, and would align with administration priorities favoring reduced regulatory burden and fiscal efficiency. Comments on the proposal are due by August 12.