On April 20, 2016, Moody's Investors Service (Moody's) affirmed the Aaa, Prime-1 long-term deposit and Prime-1 short-term deposit ratings of the FHLBank System. The outlook on the FHlBank System is stable, reflecting the stable outlook on the U.S. government.
On August 26, 2016, Standard & Poor's Ratings Services (S&P) affirmed the AA+ long-term senior debt rating of the Federal Home Loan Bank System. They also affirmed the A-1+ short-term debt ratings of the System. The outlook on the FHLBank System is stable, reflecting the stable outlook on the U.S. government.
Obligations of the FHLBanks are not obligations of the United States and are not guaranteed by either the United States or any government agency.
FHLB debt securities (also known as consolidated obligations, or "COs") are rated by both Moody's and Standard & Poor's. All long-term debt issued by the FHLBanks is rated Aaa by Moody's and AA+ by Standard & Poor's. All short-term debt is rated P-1 by Moody's and A-1+ by Standard & Poor's. The BIS-risk weighting is 20% in most countries. These outstanding ratings reflect the FHLBank System's financial strength, sound management, low derivatives risk exposure, status as a government-sponsored enterprise (GSE) and other links to the U.S. government.
Moody's Credit Opinion as of April 20, 2016
S&P Credit Analysis as of August 26, 2016
- The System has a central role in U.S. housing finance and inherent financial strength
- "Joint and several liability reduces default risk of the FHLBank System's consolidated obligations." (Moody's)
- "Excellent asset quality" (S&P)
- "Advances ... are over-collateralized and the FHLBanks have never incurred a loss on an advance in their history." (Moody's)
Strong U.S. Government Support
- Created by Congress in 1932 to provide stable funding in support of domestic residential housing
- Recognized for fulfilling its public mission throughout the recent credit crisis
- Authorized by the Federal Home Loan Bank Act, as amended
- Regulated by the Federal Housing Finance Agency (FHFA)
- Interest on FHLB debt securities exempt from state and local income tax
- Ten percent of annual earnings contributed annually towards U.S. affordable housing and community development programs
- Debt issuance subject to U.S. Treasury approval
- Fiscal agency agreement with Federal Reserve
- Eligible for collateral for certain public deposits
- Eligible for investment by national banks and thrifts
The FHLBanks have never suffered a loan loss on advances. This record is attributed to conservative underwriting standards, strong credit monitoring policies, and the collateralization of all loans (advances) to members. Investments and off-balance sheet credit exposures are managed to conservative credit risk standards.
The existing capital structure includes risk-based and leverage capital requirements. These capital plans use a risk-based capital component and are similar to those of depository institutions and other housing GSEs.
Federal Housing Finance Agency
Created on July 30, 2008 when H.R. 3221 was signed into law, the Federal Housing Finance Agency (FHFA) regulates the FHLBanks and the Office of Finance. The FHFA is responsible for monitoring the ability of the FHLBank System to sustain its core business within prudent risk limitations, while fulfilling its public policy mission. The FHFA conducts annual on-site examinations of the FHLBanks and the Office of Finance, as well as off-site review of their financial operations.