WASHINGTON — The Federal Housing Finance Agency identified several safety and soundness concerns with the Federal Home Loan Bank of Des Moines and the Federal Home Loan Bank of San Francisco in examinations conducted last year, the agency said in its annual report to Congress published Monday.
Although the FHFA said that the San Francisco bank had maintained a satisfactory financial position with strong capital and liquidity, the agency flagged concerns with the bank’s credit risk underwriting and credit risk management, compliance with rules and regulations, and collateral management practices.
In the case of the Des Moines bank, the FHFA determined that its issues were pronounced enough that the agency has heightened its oversight of the bank and is working closely with the bank’s president and CEO, Kristina Williams, who came aboard in January.
The Des Moines bank similarly had stable financials, but the FHFA cited several supervisory issues, including with the bank’s management. Examiners also found that the bank had high operational risk and poor operational risk management practices, as well as weak contingent funding plans and intraday funds management practices.
The FHFA also found that both banks needed to improve their diversity and inclusion programs, along with the Home Loan banks of New York, Cincinnati and Chicago. The FHFA issued findings to each of these banks requiring them to address deficiencies in their programs.
Although the Federal Home Loan banks fly under the radar compared with the government-sponsored enterprises Fannie Mae and Freddie Mac, they are an important source of low-cost liquidity for their members including federally insured banks and credit unions, nondepository community development financial institutions and non-federally insured credit unions.
Examiners found that capital management practices and earnings were either strong or satisfactory at all 11 of the Home Loan banks in 2019, but that advances decreased for the second straight year in 2019, with all but one bank reporting diminished advances.
