I agree with everyone's. Up until the FRB created the Bank Term Funding Program, we relied on the FHLB for our primary contingency funding. The only reforms I'd like to see is eliminate the prohibition on advances if your Tangible Capital falls below zero using instead Tier 1 capital. as the reference. That's basically why we borrowed in Q4 2022. Fortunately, it never become an issue but we had to make sure we had the funds we needed for our expected loan growth. This leads me to the second reform. Eliminate the penalty for early pay off of advances. Wishful thinking i know, and I understand why there are penalties but it would be nice to pay those off now that we have the BTFP. :) In any event, the BTFP greatly reduced the need for the FHLB Advances for contingency funding going forward at least for us.
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Randy Bono
CFO
FCNB Bank
Steelville, MO
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Original Message:
Sent: 04-03-2023 16:29
From: Rob Blackwell
Subject: Tuesday Topic: Reforming the FHLB System
This reform debate began last August when the FHFA announced its first-ever comprehensive review of the system to ensure it's "positioned to meet the needs of today and tomorrow." Initially, many analysts and industry players were skeptical the review would result in meaningful changes. But that assessment began to shift when it became clear the Home Loan Banks were propping up shaky banks.
Last Friday, the American Bankers Association and 51 state and territorial banking associations wrote a letter to the FHFA, urging it not to mess with the system's structure. Do you think FHFA will listen? Or has the recent pressure all but guaranteed change? If reforms do happen, is there a way to ensure the system works better for community banks?
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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