Federal Home Loan Banks enter joint capital enhancement agreement

By Jennifer Chiou

New York, March 1 - Each of the 12 Federal Home Loan Banks announced on Tuesday that it has entered into a joint capital enhancement agreement with each of the other 11 banks.

According to a news release, the System Capital Initiative calls for each Federal Home Loan Bank to reserve 20% of its earnings in a restricted retained earnings account.

"The Federal Home Loan Banks have developed a plan to enhance capital," John von Seggern, president and chief executive officer of the council of FHLBanks, said in a statement.

"The System Capital Initiative will further strengthen the financial soundness of our 12 member-owned, regional cooperatives."

He added that the initiative will boost the ability to protect lenders, investors and taxpayers against the potential of any future losses.

The release stated that the initiative creates an additional buffer to absorb unexpected losses on the balance sheets of the member banks while also assuring a steady flow of funds to support housing and community development.

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