07 February 2018
Reporter: Ned Holmes

New bill to reverse FHLB ban on captives

A new bipartisan US bill, which amends the Federal Home Loan Bank (FHLB) Act and allows captive insurers to regain full membership to the FHLB system, has been introduced to the Senate.

The bill, introduced by senators Tammy Duckworth, Tim Scott, and Ron Johnson, would be another attempt to reverse the final ruling issued by the Federal Housing Finance Agency (FHFA) on 12 January 2016, which amended the FHLB’s membership regulations and made captive insurers ineligible.

The 2016 ruling included an alteration in the definition of an insurance company to exclude captive insurers, however, the new bill proposes to amend the definition of an insurance company to include captive insurers once again.

The new bill builds on the Housing Opportunity Mortgage Expansion (HOME) Act introduced into the House of Representatives by US legislators Randy Hultgren and Gwen Moore on 13 June 2017.

The HOME Act would restore the membership of captives in the FHLB System if they joined before the FHFA first proposed the rule to bar their participation and if they can demonstrate a commitment to residential mortgage activities.

David Schroeder, senior vice president of the Federal Government Relations of the Community Bankers Association of Illinois, said: "The participation of larger financial institution members in the FHLBs enhances the value to members of all sizes, particularly smaller member banks and thrifts which often have limited or no direct access to the capital markets other than through their FHLB.”

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