Wholesale Funding by FHLBanks Strengthen Banking System

Local Lenders Support Growth in Communities

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| Source: Council of Federal Home Loan Banks

WASHINGTON, April 30, 2013 (GLOBE NEWSWIRE) -- John von Seggern, president and CEO of the Council of Federal Home Loan Banks said that the preliminary unaudited first quarter 2013 combined operating highlights for the Federal Home Loan Banks released today illustrates the positive role America's Federal Home Loan Banks continue to play as providers of wholesale funding to approximately 7,600 members.

"Through their secured lending, called 'advances', Federal Home Loan Banks remain highly reliable sources of liquidity," said John von Seggern, president and CEO of the Council of Federal Home Loan Banks. "Advances play a crucial role in helping to strengthen the banking system during periods of stability as well as crisis."

"As the economy strengthens, the Federal Home Loan Bank stand ready to provide additional funding for local lenders to support future growth in the communities," von Seggern added.

During the worst part of the nation's most recent financial crisis, the Federal Home Loan Banks increased their wholesale funding to member institutions in every part of the country.  Between the second quarter of 2007 and the third quarter of 2008, the 12 private regional cooperatives, which are owned by community-based lending institutions, increased their lending to members by nearly 60 percent. 

The role played by the Federal Home Loan Banks was recognized in a study prepared by the staff of the Federal Reserve Bank of New York.  The study found that during the financial crisis, the Federal Home Loan Bank System was "by far, the largest lender to U.S. depository institutions while most of the Federal Reserve's liquidity operations have been for the benefit of non-depository institutions or foreign financial institutions."

The backstop function carried out by the Federal Home Loan Banks has also recognized by William Dudley, President of the Federal Reserve Bank of New York, who has said that when the interbank lending market dried up in 2007, depository institutions turned to the Federal Home Loan Bank system for needed liquidity.

"In a future rising interest rate environment, advances will continue to play an important role in helping banks control their asset liability and liquidity exposures," von Seggern said.

Federal Home Loan Banks supply funding at the lowest possible cost to community banks, credit unions, insurance companies and community development financial institutions everywhere in the U.S. in all economic conditions. Without the Federal Home Loan Banks, it would be more difficult for community-based financial institutions to make loans to local families, farms and businesses.

David Jeffers

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