Federal Home Loan Bank of Seattle Federal Home Loan Bank Advances One Source of Liquidity - PowerPoint PPT Presentation

Loading...

PPT – Federal Home Loan Bank of Seattle Federal Home Loan Bank Advances One Source of Liquidity PowerPoint presentation | free to download - id: 22937-YzgzY



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Federal Home Loan Bank of Seattle Federal Home Loan Bank Advances One Source of Liquidity

Description:

The Federal Home Loan Bank System. Chartered by Congress in 1932 ... Authorized by the Federal Home Loan Bank Act, as amended ... – PowerPoint PPT presentation

Number of Views:550
Avg rating:3.0/5.0
Slides: 19
Provided by: JohnBi60
Learn more at: http://www.wib.org
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Federal Home Loan Bank of Seattle Federal Home Loan Bank Advances One Source of Liquidity


1
Federal Home Loan Bank of Seattle Federal Home
Loan Bank Advances One Source of Liquidity
  • Rick Riccobono, President and Chief Executive
    Officer
  • February 11, 2009

2
The Federal Home Loan Bank System
  • Chartered by Congress in 1932
  • Government-sponsored enterprise (GSE) to ensure
    that financial institutions have access to
    adequate funds they can use to lend for mortgages
  • Twelve Regional FHLBanks
  • Each FHLBank owned by member-shareholders and
    operated independently (Cooperative ownership)
  • All federally insured depositories and insurance
    companies engaged in residential housing and/or
    community financial institutions are eligible.
  • More than 8,100 total bank, thrift, credit union,
    and insurance company members.
  • AAA credit rated by Standard Poors and Moodys
  • Regulated by the Federal Housing Finance Agency

3
FHLB System Map
4
(No Transcript)
5
Federal Home Loan Bank System Debt Ratings
  • 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 AAA
    by Standard and 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 and other links
    to the U.S. government.

6
Federal Home Loan Bank System Debt Quality
  • Ratings Rationale
  • Lending agreement with the US Treasury for a
    contingent liquidity borrowing facility
  • The System has GSE status and inherent financial
    strength
  • "Joint and several liability...provides
    significant support" (Moody's)
  • "All advances (loans) to members are
    overcollateralized" (Standard Poor's)
  • These secured loans represent 71 of assets at
    September 30, 2008
  • "Excellent asset quality" (Moody's)
  • "Conservative risk-adjusted capitalization"
    (Standard Poor's)
  • The System's liquidity has been strong (Moody's)
  • "Excellent asset quality" (Standard Poor's)
  • "Credit risks are being managed well" (Moody's)
  • "Funding flexibility is superior" (Standard
    Poor's)
  • Regulatory capital-to-assets ratio of 4.4 at
    September 30, 2008
  • Links to U.S. Government
  • Created to serve a public purpose
  • Recognized for its actions during the current
    credit crisis
  • Authorized by the Federal Home Loan Bank Act, as
    amended
  • Regulated by the Federal Housing Finance Agency
    (FHFA)
  • Eligible to tap the GSE Credit Facility

7
The Seattle Bank
  • Mission To provide liquidity, funding and
    services to enhance our members success and the
    availability of affordable homes and economic
    development in their communities.
  • Advances address liquidity and balance sheet
    management needs of members.
  • Affordable housing and economic development funds
    offer direct subsidy grants and low-interest
    loans to members and non-profit organizations.

8
The Seattle Bank
  • Federally chartered, member-owned cooperative
    1964.
  • All federally insured depositories and insurance
    companies engaged in residential housing and/or
    community financial institutions are eligible for
    membership.
  • Purchase of stock required for membership and
    advance activity.
  • Members are assigned credit lines and are
    eligible for dividends.
  • 380 members.

9
FHLB Seattle Business Profile
10
Increased Focus On Credit Risk
  • Some logical questions focusing on member credit
    and collateral management practices at the
    FHLBanks
  • Who can borrow from the FHLBanks and how do you
    evaluate their creditworthiness?
  • What types of collateral do the FHLBanks accept
    and how is it valued?
  • What is the credit quality of the mortgage
    programs and MBS investments?
  • What are the FHLBanks exposure to subprime and
    non-traditional mortgage collateral?

11
Liquidity, Interest Rate and Credit Risk
Management
  • Advances and liquidity investments
  • Generally manage interest rate risk on a
    transactional basis
  • Use debt and derivatives to hedge interest rate
    risk
  • Conservative credit risk tolerances and profile
  • Advances all over-collateralized with perfected
    security interest
  • Credit Risk Management Physical Possession,
    Borrowing Restrictions, Collateral Verification
    and Monitoring
  • MPP assets all credit enhanced to
    AAA-equivalent, using cash reserve and mortgage
    insurance
  • Investments and Derivatives highly rated
    securities and counterparties

12
Seattle Bank Multiple Liquidity Sources
  • Liquidity Risk The risk that we may be unable
    to meet our financial obligations as they come
    due or meet the funding needs of our members in a
    timely, cost effective manner.
  • Primary Sources New COs, Short-Term Investments
  • Secondary Sources Fed Funds, R/P, Capital,
    Member Deposits, Lines from U.S. Treasury
  • Contingent Liquidity Requirement Contingent
    Sources (cash, self-liquidating assets, the
    borrowing capacity of AFS securities, lines of
    credit) must exceed Contingent Needs (advance
    commitments, maturing FF and R/P, maturing COs,
    in-the-money callable COs, mortgage loan
    commitments, securities settlements, other
    forecasted obligations).

13
The Seattle Banks Historical Role in Providing
Member Liquidity
  • Raising Funds Quickly, without Principal Loss at
    a Reasonable Cost (Darling Consulting Group)
  • Balance Sheet Liquidity On-Balance Sheet Liquid
    Assets
  • Strategic Reserve Coverage of Deposit
    Volatility
  • Just-in-Time Inventory FHLB Seattle Bank
    Availability (Collateral Management and
    Contingent Liquidity Planning)
  • Catastrophic Insurance Federal Reserve Bank

14
Rationale for Advance Usage
  • Liquidity management
  • Funding loan growth
  • Asset/liability management
  • Transactional micro hedges
  • Balance sheet macro hedges
  • Minimizing liability costs
  • Wholesale leveraging

15
Quantifying The Seattle Banks Role in Providing
Member Liquidity
  • Liquid Assets (unpledged securities)
  • less
  • Potential Deposit Volatility ( of maturing
    deposits)
  • plus
  • Available Seattle Bank Borrowing Capacity (lesser
    of availability under credit line or collateral)
  • plus
  • Net Brokered CD Policy Access
  • LIQUIDITY SURPLUS

16
A Forward Look at Liquidity.
  • LIQUIDITY SURPLUS
  • Less
  • Net New Loans
  • Plus
  • Changes in Deposit Growth
  • Plus
  • Non-Liquid Securities Maturities
  • Liquidity Forecast (.and the starting point of
    contingent liquidity planning)

17
Effective Liquidity Management Flow
Define Liquidity Sources and Their Purposes
Quantify Liquidity Surplus
Develop Forecasts
Execute Contingent Liquidity Planning
18
FHLB System Products and Services
  • Credit Products and Services
  • Wholesale Advances
  • Letters of Credit
  • Technical and Educational Support
  • Cash Management and Safekeeping
  • Community Investment Programs
  • Housing grants
  • Below posted rate advances
  • Long term forward interest rate locks
About PowerShow.com