Federal Register, Volume 81 Issue 212 (Wednesday, November 2, 2016)
[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Rules and Regulations]
[Pages 76291-76300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26022]
[[Page 76291]]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Parts 1200, 1201, 1229, 1238, 1239, 1261, 1264, 1266, 1267,
1269, 1270, 1273, 1274, 1278, 1281, 1282, 1290, and 1291
RIN 2590-AA80
Technical and Conforming Changes and Corrections to FHFA
Regulations
AGENCY: Federal Housing Finance Agency.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is amending its
rules to make a number of conforming changes and corrections intended
to fix citations, provide for consistent use of terminology, and remove
duplicative definitions. FHFA is also removing provisions that are no
longer applicable, clarifying other provisions by incorporating
language to implement existing FHFA regulatory interpretations, and
making other changes and corrections.
DATES: Effective December 2, 2016.
FOR FURTHER INFORMATION CONTACT: Thomas E. Joseph, Associate General
Counsel, Thomas.Joseph@fhfa.gov, 202-649-3076 (this is not a toll-free
number), Office of General Counsel, Federal Housing Finance Agency, 400
Seventh Street SW., Washington, DC 20219. The telephone number for the
Telecommunications Device for the Hearing Impaired is 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
Effective July 30, 2008, the Housing and Economic Recovery Act of
2008 (HERA) \1\ created FHFA as a new independent agency of the federal
government. HERA transferred to FHFA the supervisory and oversight
responsibilities of the Office of Federal Housing Enterprise Oversight
(OFHEO) over the Federal National Mortgage Association (Fannie Mae) and
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively,
the Enterprises), and of the Federal Housing Finance Board (Finance
Board) over the Federal Home Loan Banks (Banks) and the Bank System's
Office of Finance. Under the legislation, the Enterprises, the Banks,
and the Office of Finance continue to operate under regulations
promulgated by OFHEO and the Finance Board until such regulations are
superseded by regulations issued by FHFA.\2\
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\1\ Public Law 110-289, 122 Stat. 2654.
\2\ See 12 U.S.C. 4511, note.
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II. The Final Rule
A. The Proposed Amendments
In May 2016, FHFA issued a Notice of Proposed Rulemaking (NPR) that
would have amended its regulations to make a number of technical and
conforming changes and corrections that corrected citations, provided
for consistent use of terminology, and removed outdated or duplicative
provisions and definitions.\3\ While most of the changes represented
technical corrections, some of the proposed changes removed provisions
that FHFA believed were no longer applicable, clarified provisions to
incorporate FHFA regulatory interpretations of the particular rule, or
changed provisions to better reflect statutory requirements. As a
result, FHFA requested public comments on all of the proposed changes.
The comment period for the NPR closed on July 25, 2016.
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\3\ See, Proposed Rule: Technical and Conforming Changes and
Corrections to FHFA Regulations, 81 FR 33424 (May 26, 2016)
(hereinafter ``Proposed Rule'').
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FHFA intended the NPR to address errors that had arisen in its
regulations as it amended, readopted, and transferred a large number of
the Finance Board or OFHEO regulations. Given that this process
occurred over several years, not all cross-references in the FHFA
current regulations are correct. In addition, in January 2013, FHFA
adopted 12 CFR part 1201 (part 1201), which provides general
definitions of terms used in all FHFA's regulations. Not all
terminology in FHFA's regulations is consistent with the terms in part
1201. FHFA also identified certain provisions in its regulations that
require corrections to bring them more in line with statutory mandates.
Finally, a number of provisions in the regulations address now-
completed transition periods or events or otherwise do not have future
applicability to the Enterprises or the Banks.
B. Comments Received
FHFA received two comments on the NPR. One comment letter was a
joint letter from all eleven Banks. The other came from a smaller group
of Banks. One comment letter objected to the proposed removal of the
provision on out-of-district advances from the regulations and to
statements FHFA made in the preamble of the proposed rule about the
need for Banks to assure that members capitalize any participated
advances. It also identified additional errors in current regulations
that FHFA had not included in the proposed rule and suggested a change
to one of the definitions proposed by FHFA. The other letter did not
comment specifically on any amendments proposed by FHFA but objected to
some aspects of what FHFA described in the preamble as the current
policy for identifying which Bank directorships would be eliminated
when a state is slated to lose a director's seat as a result of the
annual designation of directorships.\4\
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\4\ See Proposed Rule, 81 FR at 33427-28.
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Proposal To Remove Sec. 1266.25. One comment letter objected to
FHFA's proposal to remove from its regulations Sec. 1266.25, a
provision that authorizes a Bank to become a creditor to a member of
another Bank through the purchase of an outstanding advance (or a
participation interest therein) from the other Bank, or ``through an
arrangement with the other Bank that provides for the establishment of
such a creditor/debtor relationship at the time the advance is made.''
The commenters believed that removal of the provision, coupled with
FHFA's statement in the preamble that non-members of a purchasing Bank
would need to capitalize any participation interest in their advances
that are sold to that Bank, will result in eliminating long-standing
authority that allowed Banks to purchase such advances.\5\ The
commenters contended that when the Finance Board adopted the
predecessor regulation to Sec. 1266.25 in 2000, it did not mention
requiring non-member capitalization of such out-of-district
participation interests, but instead stated that the purpose of the
rule was to assure that the Bank performed the same level of due
diligence as that applied to in-district advances.
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\5\ In the NPR, FHFA noted that:
Removal of this provision [Sec. 1266.25] would not prevent one
Bank from selling an advance or participation to another Bank, based
solely on the statutory authority, but FHFA would expect that before
doing so a Bank would first obtain the concurrence of FHFA about how
a non-member could capitalize those advances through some means
other than buying stock. Proposed Rule, 81 FR at 33430.
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While the comment letter contended that the Finance Board did not
require the capitalization of participation interests in advances when
it originally adopted what is currently Sec. 1266.25, the rule
specifically states that any creditor/debtor relationships established
under the rule ``shall be subject to all the provisions of [the
advances regulation] that would apply to an advance made by a Bank to
its own members or housing associates.'' \6\ One of the provisions in
[[Page 76292]]
the Finance Board advances regulation, at the time current Sec.
1266.25, was originally adopted in 2000, prohibited a Bank from making
an advance to one of its members if the aggregate amount of the
outstanding advances to that member would exceed 20 times the amount
paid in by such member for the Bank's capital stock.\7\ Thus, as
written, the out-of-district advances rule by its terms would appear to
have required the capitalization of an out-of-district advance
involving a member of another Bank, whether it was established through
sale of a participation interest or through creation of a direct
creditor/debtor relationship between a Bank and a member of another
Bank.
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\6\ The commenter noted that current Sec. 1266.25 is identical,
except for some minor changes in word order, to the provision
adopted at 12 CFR 950.18 in July 2000.
\7\ See 12 CFR 935.15(a) (2000). Effective February 18, 2000,
Sec. 935.15 of the Finance Board regulations was re-designated
without substantive change as Sec. 950.15. See 65 FR 8253, 8254
(Feb. 18, 2000). This provision was again later re-designated
without further amendment as Sec. 950.11 in July 2000. See 65 FR.
44414, 44430 (July 18, 2000). This provision is currently found at
12 CFR 1266.11(a) but applied only to Banks that had not converted
to the Gramm-Leach-Bliley capital structure. As a consequence, FHFA
proposed to delete it in the NPR. See Proposed Rule, 81 FR at 33430.
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In fact, part of FHFA's reason for proposing to delete Sec.
1266.25 is the ambiguity and difficulty in applying the broad
requirement that any participation interest in an advance or direct
creditor/debtor relationship with an out-of-district member meet all
requirements of the advances regulation, as if that out-of-district
member were a member of the Bank ultimately holding the advance.\8\
Moreover, as FHFA also noted, the provision does not add meaningfully
to the clear statutory authority that allows Banks to buy or sell
advances or participation interests in advances to other Banks.\9\ As
written, Sec. 1266.25 requires that in order to purchase an advance or
participation interest in an advance made by another Bank, the
purchasing Bank would have to assure the transaction is structured to
meet all the same requirements that apply to an advance that the
purchasing Bank makes to its own members. This requirement appears to
add complexity to these sales and to create uncertainties for these
transactions. As a result, the comments received in response to the
proposal to delete Sec. 1266.25 do not alter FHFA's underlying reasons
for proposing to remove the provision, and FHFA has determined to adopt
the final rule as proposed.
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\8\ See id.
\9\ 12 U.S.C. 1430 (d) provides in relevant part that: ``Any
Federal Home Loan Bank shall have power to sell to any other Federal
Home Loan Bank, with or without recourse, any advance made under the
provision of this chapter, or to allow such [B]ank a participation
therein, and any other Federal Home Loan Bank shall have power to
purchase such advance or accept a participation therein, together
with an appropriate assignment of security therefor.''
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The comment letter, however, correctly noted that prior to the
adoption of the predecessor to Sec. 1266.25, the Finance Board had not
required non-member capitalization of participated advances. The
comment letter, therefore, raised a fair point that FHFA's statements
in the preamble about capitalization of participation interests were
likely to create uncertainties about the Banks' ability to exercise
their statutory authority to buy and sell participation interests in
advances. Notwithstanding the language of the preamble to the NPR, FHFA
did not intend to alter the long-standing agency policy that allows a
Bank to purchase a participation interest in an advance made by another
Bank without requiring the borrowing member to capitalize the
participation interest acquired by the purchasing Bank. The final rule
does nothing to change that policy, and thus the Banks may continue to
purchase and sell participation interests in advances as they have done
previously. The only substantive effect of removing Sec. 1266.25 is to
eliminate the language that addresses the establishment of debtor/
creditor relationships other than those created through the sale of a
participation interest in an advance. Because that provision does not
describe the type of relationships encompassed by its language, it has
created some uncertainty as to its scope, which has prompted inquiries
from the Banks about what types of transactions are permitted. FHFA has
informally advised some Banks that the ``arrangement with the other
Bank'' language of Sec. 1266.25(a) does not authorize a Bank to
originate an advance to a member of another Bank, nor does it authorize
a Bank to issue standby letters of credit on behalf of a member of
another Bank. By removing that language FHFA will eliminate such
uncertainties and should not adversely affect any Bank because none has
established any such debtor/creditor relationships with members of
other Banks in reliance on that provision.
Proposed Changes to Part 1261. Another comment expressed concerns
about FHFA statements in the SUPPLEMENTARY INFORMATION section of the
NPR relating to how FHFA determines which member directorship to
eliminate when, in the annual designation of directorships, FHFA
allocates to a particular state fewer directorships for the coming year
than it has in the current year. Specifically, commenters took issue
with FHFA's statement that if a state were going to lose a member
directorship at the start of the next year and such state had a member
directorship slated to expire at the end of the current year, then the
Bank would eliminate the directorship--and the director--with the
expiring term.\10\ The commenters argued that this statement
constituted a change in agency policy and as such should have been the
subject of a substantive rulemaking. They also argued that in this
situation, a Bank's board of directors should be able to designate
which directorship for the particular state would be eliminated, as is
the case when FHFA reduces the number of directorships for a state
which has no director with a term expiring that year. Without
discretion to make such determinations, commenters stated, Banks'
boards of directors could suffer adverse consequences, including losing
key members.
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\10\ See Proposed Rule, 81 FR at 33427-28.
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As an initial matter, these comments did not address any of the
specific technical amendments that FHFA proposed to make to the part
1261 regulation. Indeed, FHFA did not propose to revise any regulations
pertaining to the reduction of directorships caused by the annual
designation process, and the preamble statements that appear to have
prompted the comments were simply background information that FHFA
provided as context to the FHFA's proposed revisions to other
provisions of part 1261. As background information, the preamble
statements did not purport to make any changes to agency policy
regarding Bank directorships, but simply described the existing
practice for one particular situation. Therefore, FHFA is not making
any changes in the final rule as a result of these comments.
Moreover, FHFA disagrees with the comment letter's contention that
a Bank's board of directors should be permitted in all cases to
determine which particular directorship must be eliminated when the
annual designation of directorships reduces the number of directorships
allocated to a particular state. By statute, FHFA is required annually
to establish the size of the board of directors for each Bank and to
designate the number of member directorships to be allocated to each
state within each Bank's district. Occasionally, FHFA's designation of
directorships order reduces the number of directorships allocated to a
particular state, which means that one of the incumbent directorships
must be eliminated as of the end of that calendar year. If one of those
directorships has a
[[Page 76293]]
term that will expire as of the end of that calendar year, the
reduction in board size required by FHFA's designation of directorships
order is effectively self-executing, i.e., the expiration of the term
of office for one director automatically brings the board size into
compliance with the size authorized by the designation order. To allow
the Banks to do what the commenter has suggested, i.e., retain the
director with the expiring term, would necessarily require that the
Bank take some action to remove from its board a director whose term of
office has not expired, so that the number of directorships for that
state does not exceed the number authorized by FHFA. A Bank, however,
has no legal authority to remove a sitting director from the Bank's
board of directors, and thus could not require an incumbent director
whose term is not expiring to leave the board. This situation differs
from that in which FHFA reduces the number of directorships allocated
to a particular state, which has no directorships expiring at the end
of the year. In that case, the designation of directorships order is
what terminates one of the member directorships, and effectively
delegates to the Bank's board of directors the authority to determine
which particular directorship has been terminated. In those
circumstances, there is no legal issue relating to the removal of an
incumbent director prior to the expiration of his or her term because,
as of the effective date of the designation of directorships order, the
directorship would have ceased to exist and there would be no office
from which the person was being removed.
Proposed Definition of President. Commenters also suggested that
FHFA alter the proposed definition of ``president'' to read ``the
individual who serves as the highest ranking executive officer of a
Bank.'' The NPR proposed to define president, when used to describe an
officer of a Bank, as ``a Bank's principal executive officer.''
The commenters did not provide a reason for the suggested change or
why FHFA's proposed definition was problematic. FHFA notes that the
Securities Exchange Commission (SEC) uses the term ``principal
executive officer'' in the context of its disclosure rules on
compensation, which the Banks already apply.\11\ FHFA also believes the
reference to ``principal executive officer'' is clearer and more
straightforward than trying to identify which Bank officer outranks
another or to quantify the ranking among executive officers. Thus, FHFA
is adopting the definition of ``president'' as proposed.
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\11\ See 17 CFR 229.402.
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Additional Technical Corrections. Finally, commenters identified
additional corrections to FHFA's regulations that were not included as
part of the NPR. FHFA agrees that commenters identified clear errors
with FHFA's current regulations and is therefore adopting the
corrections suggested by commenters as part of the final rule.
First, commenters pointed out that cross references in 12 CFR
1266.17(c)(2) to Sec. 1266.3(b) of FHFA's rules appear to be
incorrect, and the reference instead should be to Sec. 1266.5(b). FHFA
agrees and is adding to the final rule a provision to make this
correction. The cross reference in Sec. 1266.17(c)(2) is intended to
incorporate standards that Banks must apply when making advances to
members to any advance that a Bank makes to a housing associate. The
current cite in the rule to Sec. 1266.3(b), however, references
requirements that apply to long-term advances made to members rather
than the pricing criteria, which are set forth in Sec. 1266.5(b). The
Finance Board appears to have added the erroneous cross reference to
the rule when it first adopted it in 2002, and FHFA carried over the
mistake to part 1266 when it re-adopted the rule in 2010.\12\
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\12\ See Final Rule: Technical Amendments to Federal Housing
Finance Board Regulations, 57 FR12841, 12851 (Mar. 20, 2002). See,
also, Final Rule: Use of Community Development Loans by Community
Financial Institutions to Secure Advances; Secured Lending by
Federal Home Loan Banks to Members and Their Affiliates; Transfer of
Advances and New Business Activity Regulation, 75 FR 76617, 76622
(Dec. 9, 2010).
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Second, commenters identified two corrections to appendix A of part
1273 (appendix A), which sets forth exceptions to the general SEC
disclosure standards that the Office of Finance (OF) otherwise must
follow in preparing the Bank System's Combined Financial Report. The
first error is a reference to ``Item 402(1) of SEC Regulation S-K'' in
paragraph C of appendix A. SEC Regulation S-K, however does not contain
an ``Item 402(1).'' The Finance Board erroneously cited to ``Item
402(1), 17 CFR 229.402(1)'' when it first adopted appendix A in
2000.\13\ FHFA, however, cannot determine what provision in Regulation
S-K, the Finance Board intended to reference. Nor can FHFA identify any
other SEC item that might be relevant to the matters addressed in
paragraph C of appendix A. As a result, FHFA intends to delete the
reference to ``Item 402(1) of SEC Regulation S-K,'' as suggested by
commenters.
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\13\ See Final Rule, Office of Finance; Authority of Federal
Home Loan Banks to Issue Consolidated Obligations, 65 FR 36290,
36303 (June 7, 2000).
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Commenters also pointed out that a statement in paragraph D of
appendix A is no longer accurate given recent regulatory changes.
Specifically, paragraph D, which addresses matters submitted for
shareholder vote, contains a statement that: ``The only item
shareholders vote upon is the annual election of directors.'' Under the
voluntary merger rules adopted by FHFA after HERA, however, a Bank's
shareholders also may vote to ratify a voluntary merger agreement
between their Bank and another Bank.\14\ Thus, given that the statement
about member voting is no longer accurate and adds nothing substantive
to the appendix item at issue, FHFA is deleting the sentence as
suggested by commenters.
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\14\ See 12 CFR 1278.6.
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C. The Final Rule
As just discussed, FHFA is adopting as part of the final rule a
number of additional technical corrections suggested by commenters but
is otherwise not changing the proposed rule based on the comments
received. In addition, FHFA is updating the table in Sec. 1200.4
providing the Office of Management and Budget (OMB) control numbers and
expiration dates for FHFA information collections under the Paperwork
Reduction Act to reflect recent OMB actions and approvals.
Further, after publication of the NPR, FHFA identified additional
instances in which terms defined in part 1201 of its regulations, which
provides general definitions applicable to all FHFA regulations, are
also defined in other FHFA regulations. As a result, FHFA is adopting
provisions as part of this final rule to remove duplicative definitions
from part 1281 for the terms ``Bank System'' and ``data reporting
manual (DRM)'' and from part 1282 for the term ``HUD.'' \15\ FHFA is
also adopting in the final rule a correction to a cross-reference in 12
CFR 1266.10 to the FHFA regulation addressing the Banks' member product
policies. The member products policy regulation was located at 12 CFR
917.4 but FHFA recently transferred it to 12 CFR 1239.30, although FHFA
did not update the cross reference in 12 CFR 1266.10 at that time.\16\
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\15\ 12 CFR parts 1281 and 1282.
\16\ See Final Rule: Responsibilities of Boards of Directors,
Corporate Practices and Corporate Governance Matters, 80 FR 72327
(Nov. 19, 2015).
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Other than incorporating the additional corrections highlighted
above, FHFA is adopting the changes proposed by the NPR as final
without further substantive changes.
[[Page 76294]]
D. Considerations of Differences Between the Banks and the Enterprises
When promulgating regulations relating to the Banks, section
1313(f) of the Safety and Soundness Act requires the Director to
consider the differences between the Banks and the Enterprises with
respect to the Banks' cooperative ownership structure; mission of
providing liquidity to members; affordable housing and community
development mission; capital structure; and joint and several
liability.\17\ The changes made in this rulemaking correct existing
FHFA regulations or are clarifying and conforming in nature.
Nonetheless, FHFA, in preparing this rule, considered the differences
between the Banks and the Enterprises as they related to the above
factors. FHFA requested public comments about whether these differences
should result in any revisions to the proposed rule, but received no
comments responsive to this request.
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\17\ See 12 U.S.C. 4513.
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III. Paperwork Reduction Act
The final rule does not contain any collections of information
pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.). Therefore, FHFA has not submitted any information to the Office
of Management and Budget for review.
IV. Regulatory Flexibility Act
The final rule applies only to the Banks and the Enterprises, which
do not come within the meaning of small entities as defined in the
Regulatory Flexibility Act (RFA). See 5 U.S.C. 601(6). Therefore, in
accordance with section 605(b) of the RFA, FHFA certifies that this
final rule does not have significant economic impact on a substantial
number of small entities.
List of Subjects
12 CFR Part 1200
Organization and functions (Government agencies), Reporting and
recordkeeping requirements, Seals and insignia.
12 CFR Part 1201
Administrative practice and procedure, Federal home loan banks,
Government-sponsored enterprises, Office of finance, Regulated
entities.
12 CFR Part 1229
Capital, Federal home loan banks, Government-sponsored enterprises,
Reporting and recordkeeping requirements.
12 CFR Part 1238
Administrative practice and procedure, Capital, Federal home loan
banks, Government-sponsored enterprises, Reporting and recordkeeping
requirements, Stress test.
12 CFR Part 1239
Administrative practice and procedure, Federal home loan banks,
Government-sponsored enterprises, Reporting and recordkeeping
requirements.
12 CFR Part 1261
Banking, Banks, Conflicts of interest, Elections, Ethical conduct,
Federal home loan banks, Financial disclosure, Reporting and
recordkeeping requirements.
12 CFR Parts 1264, 1266, and 1267
Community development, Credit, Federal home loan banks, Housing,
Reporting and recordkeeping requirements.
12 CFR Part 1269
Community development, Credit, Federal home loan banks, Housing,
Letters of credit.
12 CFR Part 1270
Accounting, Federal home loan banks, Government securities.
12 CFR Part 1273
Federal home loan banks, Securities.
12 CFR Part 1274
Accounting, Federal home loan banks, Financial disclosure.
12 CFR Part 1278
Banks, Banking, Federal home loan banks, Mergers.
12 CFR Parts 1281 and 1290
Credit, Federal home loan banks, Housing, Reporting and
recordkeeping requirements.
12 CFR Part 1282
Mortgages, Reporting and recordkeeping requirements.
12 CFR Part 1291
Community development, Credit, Federal home loan banks, Housing,
Reporting and recordkeeping requirements.
Accordingly, for reasons stated in the SUPPLEMENTARY INFORMATION
and under authority of 12 U.S.C. 4511, 4513, and 4526, FHFA is amending
chapter XII of title 12 of the Code of Federal Regulations as follows:
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
Subchapter A--Organization and Operations
PART 1200--ORGANIZATION AND FUNCTIONS
0
1. The authority citation for part 1200 is revised to read as follows:
Authority: 5 U.S.C. 552, 12 U.S.C. 4512, 12 U.S.C. 4526, 44
U.S.C. 3506.
0
2. Add Sec. 1200.4 to read as follows:
Sec. 1200.4 OMB control numbers assigned under the Paperwork
Reduction Act.
(a) Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3531)
and the implementing regulations of the Office of Management and Budget
(OMB) (5 CFR part 1320), an agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number.
(b) OMB has approved the collections of information contained in
FHFA's regulations and has assigned each collection a control number.
The following table displays the sections of FHFA's regulations (both
those located in this chapter and those promulgated by the former
Federal Housing Finance Board that appear in chapter IX of this title)
containing collections of information, along with the applicable OMB
control numbers and the expirations dates for those control numbers:
------------------------------------------------------------------------
12 CFR part or section where identified and OMB control Expiration
described No. date
------------------------------------------------------------------------
906.5......................................... 2590-0004 07/31/2017
955.4......................................... 2590-0008 02/29/2016
1207.23....................................... 2590-0014 07/31/2018
1222.22....................................... 2590-0013 07/31/2018
1222.23....................................... 2590-0013 07/31/2018
1222.24....................................... 2590-0013 07/31/2018
1222.25....................................... 2590-0013 07/31/2018
1222.26....................................... 2590-0013 07/31/2018
1261.7........................................ 2590-0006 12/31/2017
1261.12....................................... 2590-0006 12/31/2017
1261.14....................................... 2590-0006 12/31/2017
1263.2........................................ 2590-0003 12/31/2016
1263.4........................................ 2590-0003 12/31/2016
1263.5........................................ 2590-0003 12/31/2016
1263.6........................................ 2590-0003 12/31/2016
1263.7........................................ 2590-0003 12/31/2016
1263.8........................................ 2590-0003 12/31/2016
1263.9........................................ 2590-0003 12/31/2016
1263.11....................................... 2590-0003 12/31/2016
1263.12....................................... 2590-0003 12/31/2016
1263.13....................................... 2590-0003 12/31/2016
1263.14....................................... 2590-0003 12/31/2016
1263.15....................................... 2590-0003 12/31/2016
1263.16....................................... 2590-0003 12/31/2016
1263.17....................................... 2590-0003 12/31/2016
1263.18....................................... 2590-0003 12/31/2016
[[Page 76295]]
1263.24....................................... 2590-0003 12/31/2016
1263.26....................................... 2590-0003 12/31/2016
1263.31....................................... 2590-0003 12/31/2016
1264.4........................................ 2590-0001 12/31/2018
1264.5........................................ 2590-0001 12/31/2018
1264.6........................................ 2590-0001 12/31/2018
1266.17....................................... 2590-0001 12/31/2018
1277.28....................................... 2590-0002 12/31/2016
1290.2........................................ 2590-0005 02/29/2016
1290.3........................................ 2590-0005 02/29/2016
1290.4........................................ 2590-0005 02/29/2016
1290.5........................................ 2590-0005 02/29/2016
1291.5........................................ 2590-0007 11/30/2016
1291.6........................................ 2590-0007 11/30/2016
1291.7........................................ 2590-0007 11/30/2016
1291.8........................................ 2590-0007 11/30/2016
1291.9........................................ 2590-0007 11/30/2016
------------------------------------------------------------------------
PART 1201--GENERAL DEFINITIONS APPLYING TO ALL FEDERAL HOUSING
FINANCE AGENCY REGULATIONS
0
3. The authority citation for part 1201 continues to read as follows:
Authority: 12 U.S.C. 4511(b), 4513(a), 4513(b).
0
4. Amend Sec. 1201.1 by revising the definition of ``Bank System'' and
adding, in alphabetical order, a definition for ``President'' to read
as follows:
Sec. 1201.1 Definitions.
* * * * *
Bank System means the Federal Home Loan Bank System, consisting of
all of the Banks and the Office of Finance.
* * * * *
President, when referring to an officer of a Bank only, means a
Bank's principal executive officer.
* * * * *
Subchapter B--Entity Regulations
PART 1229--CAPITAL CLASSIFICATIONS AND PROMPT CORRECTIVE ACTION
0
5. The authority citation for part 1229 continues to read as follows:
Authority: 12 U.S.C. 1426, 4513, 4526, 4613, 4614, 4615, 4616,
4617, 4618, 4622, 4623.
0
6. Amend Sec. 1229.1 by revising the definitions of ``new business
activity'' and ``total capital'' to read as follows:
Sec. 1229.1 Definitions.
* * * * *
New business activity when used in this subpart has the same
meaning set forth in Sec. 1272.1 of this chapter.
* * * * *
Total capital means the sum of the Bank's permanent capital, the
amount paid-in for its Class A stock, the amount of any general
allowances for losses, and the amount of any other instruments
identified in a Bank's capital plan that the Director has determined to
be available to absorb losses incurred by such Bank.
0
7. Amend Sec. 1229.6 by revising paragraph (a)(3) to read as follows:
Sec. 1229.6 Mandatory actions applicable to undercapitalized Banks.
(a) * * *
(3) Not make any capital distribution unless:
(i) The distribution meets the requirements of Sec. 1229.5(b) and
paragraphs (a)(3)(ii) and (iii) of this section and the Director has
provided permission for such distribution as set forth in Sec.
1229.5(b);
(ii) The capital distribution will not result in the Bank being
reclassified as significantly undercapitalized or critically
undercapitalized; and
(iii) The capital distribution does not violate any restriction on
the redemption or repurchase of capital stock or the declaration or
payment of a dividend set forth in section 6 of the Bank Act (12 U.S.C.
1426) or in any other applicable regulation;
* * * * *
Sec. 1229.7 [Amended]
0
8. Amend Sec. 1229.7(a) by removing the reference to ``Sec. 1229.7 or
Sec. 1229.8 of this subpart'' and adding in its place a reference to
``Sec. 1229.8 or Sec. 1229.9''.
PART 1238--STRESS TESTING OF REGULATED ENTITIES
0
9. The authority citation for part 1238 continues to read as follows:
Authority: 12 U.S.C. 1426; 4513; 4526; 4612; 5365(i).
Sec. 1238.1 [Amended]
0
10. Amend Sec. 1238.1(a) by:
0
a. Removing the reference to ``Federal Housing Finance Agency (FHFA)''
and adding in its place ``FHFA'';
0
b. Removing the reference to ``Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, as amended'' and adding in its place
``Safety and Soundness Act''; and
0
c. Removing the reference to ``Federal Home Loan Bank Act, as amended''
and adding in its place ``Bank Act''.
Sec. 1238.2 [Amended]
0
11. Amend Sec. 1238.2 by removing the definitions for ``Federal Home
Loan Banks,'' ``Federal Housing Finance Agency or FHFA,'' and
``regulated entities''.
PART 1239--RESPONSIBLITIES OF BOARDS OF DIRECTORS, CORPORATE
PRACTICES, AND CORPORATE GOVERNANCE
0
12. The authority citation for part 1239 is revised to read as follows:
Authority: 12 U.S.C. 1426, 1427, 1432(a), 1436(a), 1440,
4511(b), 4513(a), 4513(b), 4526, and 15 U.S.C. 78oo(b).
0
13. Amend Sec. 1239.32 by:
0
a. Revising paragraphs (d)(3) and (e)(4);
0
b. Removing the word ``and'' at the end of paragraph (e)(8);
0
c. Removing the period at the end of paragraph (e)(9) and adding ``;
and'' in its place; and
0
d. Adding paragraph (e)(10).
The revisions and addition read as follows:
Sec. 1239.32 Audit committee.
* * * * *
(d) * * *
(3) Each Bank's audit committee charter shall:
(i) Provide that the audit committee has the responsibility to
select, evaluate and, where appropriate, replace the internal auditor
and that the internal auditor may be removed only with the approval of
the audit committee;
(ii) Provide that the internal auditor shall report directly to the
audit committee on substantive matters and that the internal auditor is
ultimately accountable to the audit committee and board of directors;
(iii) Provide that the audit committee shall be directly
responsible for the appointment, compensation, retention, and oversight
of the work of the external auditor;
(iv) Provide that the external auditor shall report directly to the
audit committee;
(v) Provide that both the internal auditor and the external auditor
shall have unrestricted access to the audit committee without the need
for any prior management knowledge or approval; and
(vi) Provide that the Bank shall make available appropriate
funding, as determined by the audit committee, for payment of
compensation to the external auditor, to any independent advisors or
counsel engaged by the audit committee, and ordinary administrative
expenses that are necessary or appropriate for the audit committee to
carry out its duties.
(e) * * *
(4) Oversee the external audit function by:
[[Page 76296]]
(i) Approving the external auditor's annual engagement letter; and
(ii) Reviewing the performance of the external auditor.
* * * * *
(10) Establish procedures for the receipt, retention, and treatment
of complaints received by the Bank regarding accounting, internal
accounting controls, or auditing matters, and for the confidential,
anonymous submission by employees of the Bank of concerns regarding
questionable accounting or auditing matters.
* * * * *
Subchapter D--Federal Home Loan Banks
PART 1261--FEDERAL HOME LOAN BANK DIRECTORS
0
14. The authority citation for part 1261 continues to read as follows:
Authority: 12 U.S.C. 1426, 1427, 1432, 4511 and 4526.
Sec. 1261.2 [Amended]
0
15. Amend Sec. 1261.2:
0
a. By adding, in alphabetical order, a definition for ``Advisory
Council'';
0
b. In the definition of ``Member directorship'', by removing the words
``, and includes guaranteed directorships and stock directorships'';
0
c. In the definition of ``Public interest directorship'', by removing
the words ``four years experience'' and, in their place, adding the
words ``four years of experience''; and
0
d. By removing the definition of ``Stock directorship''.
The revision reads as follows:
Sec. 1261.2 Definitions.
* * * * *
Advisory Council means the Advisory Council each Bank is required
to establish pursuant to section 10(j)(11) of the Bank Act (12 U.S.C.
1430(j)(11)), and part 1291 of this chapter.
* * * * *
Sec. 1261.3 [Amended]
0
16. Amend Sec. 1261.3:
0
a. In paragraph (b), by removing the words ``commencing on or after
January 1, 2009''; and
0
b. In paragraph (e), by removing the word ``part'', wherever it
appears, and, in its place, adding the word ``subpart''.
0
17. Amend Sec. 1261.4 by revising paragraphs (a) and (b) to read as
follows:
Sec. 1261.4 Designation of member directorships.
(a) Capital stock reports. (1) On or before April 10 of each year,
each Bank shall deliver to FHFA a capital stock report that indicates,
as of the record date, the number of members located in each voting
State in the Bank's district, the number of shares of Bank stock that
each member (identified by its FHFA ID number) was required to hold,
and the number of shares of Bank stock that all members located in each
voting State were required to hold. If a Bank has issued more than one
class of stock, it shall report the total shares of stock of all
classes required to be held by the members. The Bank shall certify to
FHFA 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 holding requirement
as of the record date.
(2) The number of shares of Bank stock that any member was required
to hold as of the record date shall be determined in accordance with
the minimum investment established by the capital plan for that Bank.
(b) Designation of member directorships. Using the method of equal
proportions, the Director annually will conduct a designation of member
directorships for each Bank based on the number of shares of Bank stock
required to be held by the members in each State as of the record date.
If a Bank has issued more than one class of stock, the Director will
designate the directorships for each State in that Bank district based
on the combined number of shares required to be held by the members in
that State. For purposes of conducting the designation, the number of
shares of Bank stock required to be held by members as of that date
shall be determined in accordance with the minimum investment
established by the capital plan for that Bank. In all cases, the
Director will designate the directorships by using the information
provided by each Bank in its capital stock report required by paragraph
(a)(1) of this section.
* * * * *
Sec. 1261.5 [Amended]
0
18. Amend Sec. 1261.5:
0
a. In paragraph (b), by removing the extra period following the words
``under Sec. 1261.4(c).''; and
0
b. By removing paragraph (e)(2).
0
19. Amend Sec. 1261.6 by revising paragraph (b) to read as follows:
Sec. 1261.6 Determination of member votes.
* * * * *
(b) Number of votes. For each member directorship and each
independent directorship that is to be filled in an election, each
member shall be entitled to cast one vote for each share of Bank stock
that the member was required to hold as of the record date.
Notwithstanding the preceding sentence, the number of votes that any
member may cast for any one directorship shall not exceed the average
number of shares of Bank stock required to be held as of the record
date by all members located in the same State as of the record date. If
a Bank has issued more than one class of stock, it shall calculate the
average number of shares separately for each class of stock, using the
total number of members in a State as the denominator, and shall apply
those limits separately in determining the maximum number of votes that
any member owning that class of stock may cast in the election. The
number of shares of Bank stock that a member was required to hold as of
the record date shall be determined in accordance with the minimum
investment requirement established by the Bank's capital plan.
* * * * *
Sec. 1261.7 [Amended]
0
20. Amend Sec. 1261.7:
0
a. In paragraph (a), by redesignating the first paragraph (a)(1) as the
introductory text to paragraph (a);
0
b. In paragraph (d)(1)(i), by removing the words ``four years
experience'' and, in their place, adding the words ``four years of
experience''; and
0
c. In paragraph (e)(2), by removing the words ``four years experience''
and, in their place, adding the words ``four years of experience''.
0
21. Amend Sec. 1261.8 by revising paragraphs (a) and (c) to read as
follows:
Sec. 1261.8 Election process.
(a) Ballots. Promptly after fulfilling the requirements of Sec.
1261.7(f), each Bank shall prepare and deliver a ballot to each member
that was a member as of the record date. The Bank shall include with
each ballot a closing date for the Bank's receipt of voted ballots,
which date shall be no earlier than 30 calendar days after the date
such ballot is delivered to the member.
(1) A ballot shall include at least the following provisions:
(i) For states in which one or more member directorships are to be
filled in the election, an alphabetical listing of the names of each
nominee for such directorship, the name, location, and FHFA ID number
of the member each nominee serves, the nominee's title or position with
the member, and the number of member directorships to be filled by the
members in that voting state in the election;
(ii) An alphabetical listing of the names of each nominee for a
public
[[Page 76297]]
interest independent directorship and a brief description of each
nominee's experience representing consumer and community interests;
(iii) An alphabetical listing of the names of each nominee for the
other independent directorships and a brief description of each
nominee's qualifications, including his or her knowledge or experience
in the areas of financial management, auditing and accounting, risk
management practices, derivatives, project development, organizational
management, and any other area of knowledge or experience set forth in
Sec. 1261.7(e);
(iv) A statement that write-in candidates are not permitted; and
(v) A confidentiality statement prohibiting the Bank from
disclosing how any member voted.
(2) At the election of the Bank, a ballot also may include, in the
body or as an attachment, a brief description of the skills and
experience of each nominee for a member directorship.
* * * * *
(c) Lack of member directorship nominees. If, for any voting State,
the number of nominees for the member directorships for that State is
equal to or fewer than the number of such directorships to be filled in
that year's election, the Bank shall deliver a notice to the members in
the affected voting State (in lieu of including any member directorship
nominees on the ballot for that State) that such nominees shall be
deemed elected without further action, due to an insufficient number of
nominees to warrant balloting. Thereafter, the Bank shall declare
elected all such eligible nominees. The nominees declared elected shall
be included as directors-elect in the report of election required under
paragraph (g) of this section. Any member directorship that is not
filled due to a lack of nominees shall be deemed vacant as of January 1
of the following year and shall be filled by the Bank's board of
directors in accordance with Sec. 1261.14(a).
* * * * *
0
22. Amend Sec. 1261.9 by revising paragraphs (a) and (c) to read as
follows:
Sec. 1261.9 Actions affecting director elections.
(a) Banks. Each Bank, acting through its board of directors, may
conduct an annual assessment of the skills and experience possessed by
the members of its board of directors as a whole and may determine
whether the capabilities of the board would be enhanced through the
addition of individuals with particular skills and experience. If the
board of directors determines that the Bank could benefit by the
addition to the board of directors of individuals with particular
qualifications, such as auditing and accounting, derivatives, financial
management, organizational management, project development, risk
management practices, or the law, it may identify those qualifications
and so inform the members as part of its announcement of elections
pursuant to Sec. 1261.7(a).
* * * * *
(c) Prohibition. Except as provided in paragraphs (a) and (b) of
this section, or Sec. 1207.21(b)(5) of this chapter, no director,
officer, attorney, employee, or agent of a Bank shall:
(1) Communicate in any manner that a director, officer, attorney,
employee, or agent of a Bank, directly or indirectly, supports or
opposes the nomination or election of a particular individual for a
directorship; or
(2) Take any other action to influence the voting with respect to
any particular individual.
Sec. 1261.13 [Amended]
0
23. Amend Sec. 1261.13 by removing the words ``this part'' in the
first sentence, and, in their place, adding the words ``this subpart''.
0
24. Revise Sec. 1261.15 to read as follows:
Sec. 1261.15 Minimum number of member directorships.
Except with respect to member directorships of a Bank resulting
from the merger of any two or more Banks, the number of member
directorships allocated to each state shall not be less than the number
of directorships allocated to that state on December 31, 1960. The
following table sets forth the states within Bank districts not created
from the merger of two or more Banks whose members held more than one
directorship on December 31, 1960:
------------------------------------------------------------------------
Number of elective
State directorships on
December 31, 1960
------------------------------------------------------------------------
California......................................... 3
Colorado........................................... 2
Illinois........................................... 4
Indiana............................................ 5
Kansas............................................. 3
Kentucky........................................... 2
Louisiana.......................................... 2
Massachusetts...................................... 3
Michigan........................................... 3
New Jersey......................................... 4
New York........................................... 4
Ohio............................................... 4
Oklahoma........................................... 2
Pennsylvania....................................... 6
Tennessee.......................................... 2
Texas.............................................. 3
Wisconsin.......................................... 4
------------------------------------------------------------------------
PART 1264--FEDERAL HOME LOAN BANK HOUSING ASSOCIATES
0
25. The authority citation for part 1264 continues to read as follows:
Authority: 12 U.S.C. 1430b, 4511, 4513 and 4526.
Sec. 1264.2 [Amended]
0
26. Amend Sec. 1264.2 by removing the reference ``part 950 of this
title'' and adding in its place the reference ``part 1266 of this
chapter''.
PART 1266--ADVANCES
0
27. The authority citation for part 1266 continues to read as follows:
Authority: 12 U.S.C. 1426, 1429, 1430, 1430b, 1431, 4511(b),
4513, 4526(a).
Subpart A--Advances to Members
0
28. Amend Sec. 1266.1 by revising the definition of ``Tangible
capital'' to read as follows:
Sec. 1266.1 Definitions.
* * * * *
Tangible capital means:
(1) Capital, calculated according to GAAP, less ``intangible
assets'' except for purchased mortgage servicing rights to the extent
such assets are included in a member's core or Tier 1 capital, as
reported in a member's Report of Condition and Income for members whose
primary federal regulator is the FDIC, the OCC, or the FRB.
(2) Capital calculated according to GAAP, less intangible assets,
as defined by a Bank for members that are not regulated by the FDIC,
the OCC, or the FRB; provided that a Bank shall include a member's
purchased mortgage servicing rights to the extent such assets are
included for the purpose of meeting regulatory capital requirements. In
addition, for those members that are insurance companies and that do
not file or otherwise prepare financial statements based on GAAP, Banks
may base this calculation on the member's financial statements prepared
using Statutory Accounting Principles as implemented by the insurance
company member's appropriate state regulator.
* * * * *
Sec. 1266.10 [Amended]
0
29. Amend Sec. 1266.10(a) by removing the reference to ``Sec. 917.4
of this title''
[[Page 76298]]
and adding in its place a reference to ``Sec. 1239.30 of this
chapter''.
Sec. 1266.11 [Removed and Reserved]
0
30. Remove and reserve Sec. 1266.11.
0
31. Amend Sec. 1266.13 by revising paragraph (a) to read as follows:
Sec. 1266.13 Special advances to savings associations.
(a) Eligible institutions. (1) A Bank, upon receipt of a written
request from the OCC, with respect to a federal savings association, or
from the FDIC, with respect to a state chartered savings association,
may make short-term advances to a savings association member pursuant
to section 10(h) of the Bank Act (12 U.S.C. 1430(h)).
(2) Such request must certify that the savings association member:
(i) Is solvent but presents a supervisory concern to the OCC or
FDIC, as appropriate, because of the member's financial condition; and
(ii) Has reasonable and demonstrable prospects of returning to a
satisfactory financial condition.
* * * * *
Subpart B--Advances to Housing Associates
Sec. 1266.17 [Amended]
0
32. Amend Sec. 1266.17(c)(2)(i) by removing the reference to ``Sec.
1266.3(b)'' each time it appears and adding in its place a reference to
``Sec. 1266.5(b)''.
Subpart C [Removed]
0
33. Remove subpart C to part 1266, consisting of Sec. 1266.25.
PART 1267--FEDERAL HOME LOAN BANK INVESTMENTS
0
34. The authority citation for part 1267 continues to read as follows:
Authority: 12 U.S.C. 1429, 1430, 1430b, 1431, 1436, 4511, 4513,
4526.
Sec. 1267.1 [Amended]
0
35. Amend Sec. 1267.1 by removing the definitions for ``consolidated
obligation'' and ``GAAP''.
PART 1269--STANDBY LETTERS OF CREDIT
0
36. The authority citation for part 1269 continues to read as follows:
Authority: 12 U.S.C. 1429, 1430, 1430b, 1431, 4511, 4513 and
4526.
Sec. 1269.4 [Amended]
0
37. Amend Sec. 1269.4(a)(1) by removing the reference to ``969.2 of
this title'' and adding in its place a reference to ``1270.3 of this
chapter''.
PART 1270--LIABILITIES
0
38. The authority citation for part 1270 continues to read as follows:
Authority: 12 U.S.C. 1431, 1432, 1435, 4511, 4512, 4513, and
4526.
Sec. 1270.9 [Amended]
0
39. Amend Sec. 1270.9(d)(1) by removing the reference to ``Sec. 956.6
of this title'' and adding in its place a reference to ``Sec. 1267.4
of this chapter''.
PART 1273--OFFICE OF FINANCE
0
40. The authority citation for part 1273 continues to read as follows:
Authority: 12 U.S.C. 1431, 1440, 4511(b), 4513, 4514(a),
4526(a).
Sec. 1273.1 [Amended]
0
41. Amend Sec. 1273.1 by removing the definitions for ``Bank System,''
``Consolidated obligations,'' ``Financing Corporation or FICO,''
``Generally accepted accounting principles or GAAP,'' ``NRSRO,''
``Office of Finance or OF,'' and ``Resolution Funding Corporation or
REFCORP''.
0
42. Amend Sec. 1273.3 by revising paragraphs (a) and (d) to read as
follows:
Sec. 1273.3 Functions of the OF.
(a) Joint debt issuance. Subject to part 1270, subparts B and C, of
this chapter, and this part, the OF, as agent for the Banks, shall
offer, issue, and service (including making timely payments on
principal and interest due) consolidated obligations.
* * * * *
(d) Financing Corporation and Resolution Funding Corporation. The
OF shall perform such duties and responsibilities for FICO as may be
required under part 1271, subpart D, of this chapter, or for REFCORP as
may be required under part 1271, subpart E, of this chapter or
authorized by FHFA pursuant to section 21B(c)(6)(B) of the Bank Act (12
U.S.C. 1441b(c)(6)(B)).
Sec. 1273.6 [Amended]
0
43. Amend Sec. 1273.6(a) by removing the reference to ``Sec. Sec.
966.8 and 966.9 of this title'' and adding in its place a reference to
``Sec. Sec. 1270.9 and 1270.10 of this chapter''.
0
44. Revise Sec. 1273.7 to read as follows:
Sec. 1273.7 Structure of the OF board of directors.
(a) Membership. The OF board of directors shall consist of part-
time members as follows:
(1) Each of the Bank presidents, ex officio, provided that if the
presidency of any Bank becomes vacant, the person designated by the
Bank's board of directors to temporarily fulfill the duties of
president of that Bank shall serve on the OF board of directors until
the presidency is filled permanently; and
(2) Five Independent Directors who--
(i) Each shall be a citizen of the United States;
(ii) As a group, shall have substantial experience in financial and
accounting matters; and
(iii) Shall not have any material relationship with a Bank, or the
OF (directly or as a partner, shareholder, or officer of an
organization), as determined under criteria set forth in a policy
adopted by the OF board of directors. At a minimum, such policy shall
provide that an Independent Director may not:
(A) Be an officer, director, or employee of any Bank or member of a
Bank, or have been an officer, director, or employee of a Bank or
member of a Bank during the previous three years;
(B) Be an officer or employee of the OF, or have been an officer or
employee of the OF during the previous three years; or
(C) Be affiliated with any consolidated obligations selling or
dealer group under contract with OF, or hold shares or any other
financial interest in any entity that is part of a consolidated
obligations seller or dealer group in an amount greater than the lesser
of $250,000 or 0.01% of the market capitalization of the seller or
dealer group, or in an amount that exceeds $1,000,000 for all entities
that are part of any consolidated obligations seller dealer group,
combined. For purposes of this paragraph (a)(2)(iii)(C), a holding
company of an entity that is part of a consolidated obligations seller
or dealer group shall be deemed to be part of the consolidated
obligations selling or dealer group if the assets of the holding
company's subsidiaries that are part of a consolidated obligation
seller or dealer group constitute 35% or more of the consolidated
assets of the holding company.
(b) Terms. (1) Except as provided in paragraph (b)(2) of this
section, each Independent Director shall serve for five-year terms
(which shall be staggered so that no more than one Independent Director
seat would be scheduled to become vacant in any one year), and shall be
subject to removal or suspension in accordance with Sec. 1273.4(a). An
Independent Director may not serve more than two full, consecutive
terms, provided that any partial term served by an Independent Director
pursuant to paragraph (b)(2) of this section shall not count as a term
for purposes of this restriction.
[[Page 76299]]
(2) The OF board of directors shall fill any vacancy among the
Independent Directors occurring prior to the scheduled end of a term by
majority vote, subject to FHFA's review of, and non-objection to, the
new Independent Director. The OF board of directors shall provide FHFA
with the same biographic and background information about the new
Independent Director required under paragraph (c) of this section, and
FHFA shall have the same rights of non-objection to the Independent
Director (and to appoint a different Independent Director) as set forth
in paragraph (c) of this section. A person shall be elected (or
otherwise appointed by FHFA) under this paragraph (b)(2) to serve only
for the remainder of the term associated with the vacant directorship.
(c) Election of Independent Directors. The Independent Directors
shall be elected by majority vote of the OF board of directors, subject
to FHFA's review of, and non-objection to, each Independent Director.
The OF board of directors shall provide FHFA with relevant biographic
and background information, including information demonstrating that
the new Independent Director meets the requirements of paragraph (a)(2)
of this section, at least 20 business days before the person assumes
any duties as a member of the OF board of directors. If the OF board of
directors, in FHFA's judgment, fails to elect a suitably qualified
person, FHFA may appoint some other person who meets the requirements
of paragraph (a)(2) of this section. FHFA will provide notice of its
objection to a particular Independent Director prior to the date that
such Director is to assume duties as a member of the OF board of
directors. Such notice shall indicate whether, given FHFA's objection,
FHFA intends to fill the seat through appointment or a new election
should be held by the OF board of directors.
(d) Election of Chair and Vice-Chair. (1) The Chair shall be
elected by majority vote of the OF board of directors from among the
Independent Directors then serving on the OF board of directors, and
the Vice Chair shall be elected by majority vote of the OF board of
directors from among all directors.
(2) The OF board of directors shall promptly inform FHFA of the
election of a Chair or Vice Chair. If FHFA objects to any Chair or Vice
Chair elected by the OF board of directors, FHFA shall provide written
notice of its objection within 20 business days of the date that FHFA
first receives the notice of the election of the Chair and or Vice
Chair, and the OF board of directors must then promptly elect a new
Chair or Vice Chair, as appropriate.
(e) By-laws and Committees. (1) The OF board of directors shall
adopt by-laws governing the manner in which the board conducts its
affairs, which shall be consistent with the requirements of this part
and other applicable laws and regulations as administered by FHFA. The
by-laws of the board of directors shall be subject to review and
approval by FHFA.
(2) In addition to the Audit Committee required under Sec. 1273.9,
the OF board of directors may establish other committees, including an
Executive Committee. The duties and powers of such committee, including
any powers delegated by the OF board of directors, shall be specified
in the by-laws of the board of directors or the charter of the
committee.
(f) Compensation. (1) The Bank presidents shall not receive any
additional compensation or reimbursement as a result of their service
as a director of the OF board.
(2) The OF shall pay reasonable compensation and expenses to the
Independent Directors in accordance with the requirements for payment
of compensation and expenses to Bank directors as set forth in part
1261 of this chapter.
(g) Corporate Governance and Indemnification--(1) General. The
corporate governance practices and procedures of the OF, and practices
and procedures related to indemnification (including advancement of
expenses) shall comply with applicable Federal law, rules, and
regulations.
(2) Election and designation of body of law. (i) To the extent not
inconsistent with paragraph (g)(1) of this section, the OF shall elect
to follow the corporate governance and indemnification practices and
procedures set forth in one of the following:
(A) The law of the jurisdiction in which the principal office of
the OF is located;
(B) The Delaware General Corporation Law (Del. Code Ann. Title 8);
or
(C) The Revised Model Business Corporation Act.
(ii) The OF board of directors shall designate in its by-laws the
body of law elected pursuant to this paragraph (g)(2).
(3) Indemnification. Subject to paragraphs (g)(1) and (2) of this
section, to the extent applicable, the OF shall indemnify (and advance
the expenses of) its directors, officers, and employees under such
terms and conditions as are determined by the OF board of directors.
The OF shall be authorized to maintain insurance for its directors, the
CEO, and any other officer or employee of the OF. Nothing in this
paragraph (g)(3) shall affect any rights to indemnification (including
the advancement of expenses) that a director, the CEO, or any other
officer or employee of the OF had with respect to any actions,
omissions, transactions, or facts occurring prior to December 2, 2016.
(h) Delegation. In addition to any delegation to a committee
allowed under paragraph (e) of this section, the OF board of directors
may delegate any of its authority or duties to any employee of the OF
in order to enable OF to carry out its functions.
(i) Outside staff and consultants. In carrying out its duties and
responsibilities, the OF board of directors, or any committee thereof,
shall have authority to retain staff and outside counsel, independent
accountants, or other outside consultants at the expense of the OF.
Sec. 1273.8 [Amended]
0
45. Amend Sec. 1273.8 by:
0
a. Removing from paragraph (d)(2) the reference to ``Sec. 917.5 of
this title'' and adding in its place a reference to ``Sec. 1239.31 of
this chapter'';
0
b. Removing paragraph (d)(3); and
0
c. Redesignating paragraphs (d)(4), (5), and (6) as paragraphs (d)(3),
(4), and (5), respectively.
0
46. Amend Sec. 1273.9 by revising paragraph (b)(5) to read as follows:
Sec. 1273.9 Audit Committee.
* * * * *
(b) * * *
(5) The Audit Committee shall oversee internal audit activities,
including the selection, evaluation, compensation, and, where
appropriate, replacement of the internal auditor. The internal auditor
shall report directly to the Audit Committee on substantive matters,
and is ultimately accountable to the Audit Committee and the board of
directors.
* * * * *
Sec. 1273.10 [Removed]
0
47. Remove Sec. 1273.10.
0
48. Amend appendix A to part 1273 by revising paragraphs C and D to
read as follows:
Appendix A to Part 1273--Exceptions to the General Disclosure Standards
* * * * *
C. Compensation. The information on compensation required by
Item 402 of Regulation S-K, 17 CFR 229.402, will be provided only
for Bank presidents and the CEO of the OF.
D. Submission of matters to a vote of stockholders. No
information will be presented on matters submitted to
[[Page 76300]]
shareholders for a vote, as otherwise required by Item 4 of the
SEC's form 10-K, 17 CFR 249.310.
* * * * *
PART 1274--FINANCIAL STATEMENT OF THE BANKS
0
49. The authority citation for part 1274 continues to read as follows:
Authority: 12 U.S.C. 1426, 1431, 4511(b), 4513, 4526(a).
Sec. 1274.1 [Amended]
0
50. Amend Sec. 1274.1 by removing the definitions for ``Bank System''
and ``Financing Corporation or FICO''.
PART 1278--VOLUNTARY MERGERS OF FEDERAL HOME LOAN BANKS
0
51. The authority citation for part 1278 continues to read as follows:
Authority: 12 U.S.C. 1432(a), 1446, 4511.
Sec. 1278.1 [Amended]
0
52. Amend Sec. 1278.1 by removing the definition for ``GAAP''.
Subchapter E--Housing Goals and Mission
PART 1281--FEDERAL HOME LOAN BANK HOUSING GOALS
0
53. The authority citation for part 1281 continues to read as follows:
Authority: 12 U.S.C. 1430c.
Subpart A--General
Sec. 1281.1 [Amended]
0
54. Amend Sec. 1281.1 by removing the definitions for ``Bank System'',
``Data Reporting Manual (DRM)'', and ``Member''.
PART 1282--ENTERPIRSE HOUSING GOALS AND MISSION
0
55. The authority citation for part 1282 continues to read as follows:
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.
Subpart A--General
Sec. 1282.1 [Amended]
0
56. Amend Sec. 1282.1 by removing the definition for the term ``HUD''.
PART 1290--COMMUNITY SUPPORT REQUIREMENTS
0
57. The authority citation for part 1290 continues to read as follows:
Authority: 12 U.S.C. 1430(g), 4511, 4513.
0
58. Amend Sec. 1290.1 by revising the definition of ``Advisory
Council'' to read as follows:
Sec. 1290.1 Definitions.
* * * * *
Advisory Council means the Advisory Council each Bank is required
to establish pursuant to section 10(j)(11) of the Bank Act (12 U.S.C.
1430(j)(11)) and part 1291 of this chapter.
* * * * *
PART 1291--FEDERAL HOME LOAN BANKS' AFFORDABLE HOUSING PROGRAM
0
59. The authority citation for part 1291 continues to read as follows:
Authority: 12 U.S.C. 1430(j).
Sec. 1291.4 [Amended]
0
60. Amend Sec. 1291.4(f) by removing the reference to ``the Act'' and
adding a reference to ``the Bank Act'' in its place.
Dated: October 21, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-26022 Filed 11-1-16; 8:45 am]
BILLING CODE 8070-01-P
