As a result, the FHLBs face an increased need to roll over maturing liabilities and thus greater vulnerability should they encounter liquidity pressures. I should note that the FHLBs’ regulator, the Federal Housing Finance Agency (also known as the FA-FA) flagged this issue more than a year ago and is working with the FHLBs (the FLUBS) to address it.
In this regard, I would like to take this opportunity to advise the industry players, particularly the banks, to properly align their risk appetite to their capital levels. This is important because any misalignment between risk and capital could threaten the solvency of the institution and unduly put shareholders investments at risk.