§1424 — Title 12 Banks and Banking | U.S. Code

Summary

Lets eligible institutions join a Federal Home Loan Bank if they meet certain rules. Eight types of lenders can apply, including building and loan associations, savings and loan associations, cooperative banks, homestead associations, insurance companies, savings banks, community development financial institutions, and insured depository institutions (that last term is defined elsewhere). To join, an institution must be legally organized under state or federal law, be inspected and regulated under banking or similar laws (community development financial institutions can join if they are certified under the 1994 law), and make long‑term home mortgage loans (the Director decides what counts as long‑term; for savings banks the Director looks at their time deposits as defined in section 461). An insured depository institution that was not a member on January 1, 1989 must have at least 10 percent of its assets in residential mortgage loans, be in a safe financial condition for advances, and have sound management and home‑financing policies. A bank that starts business after January 1, 1989 must meet the 10 percent rule under the Director’s rules within one year. A qualifying community financial institution can join without meeting the 10 percent test. Credit unions are treated like insured depository institutions for membership rules. If a credit union does not yet have federal deposit insurance but has applied for membership, the state supervisor must say it meets insurance eligibility; if the supervisor does not decide within 6 months, the credit union is treated as if it does. State law cannot let a conservator cancel contracts or defeat a Federal Home Loan Bank’s security interest in a member credit union’s assets, and a Bank that lends to an uninsured state credit union has the same priority and rights to the collateral as it would if the credit union were federally insured. A member may join only the Home Loan Bank in the district of its main office, or a bank in an adjoining district if needed and approved by the Director. A building and loan association that is not already inspected can become eligible if it agrees to the inspections the Director requires.

Title 12, §1424

Banks and Banking — Source: USLM XML via OLRC

(a)(1)Any building and loan association, savings and loan association, cooperative bank, homestead association, insurance company, savings bank, community development financial institution, or any insured depository institution (as defined in section 1422 of this title), shall be eligible to become a member of a Federal Home Loan Bank if such institution—

(A)is duly organized under the laws of any State or of the United States;

(B)is subject to inspection and regulation under the banking laws, or under similar laws, of the State or of the United States or, in the case of a community development financial institution, is certified as a community development financial institution under the Community Development Banking and Financial Institutions Act of 1994 [12 U.S.C. 4701 et seq.].; 11 So in original. and

(C)makes such home mortgage loans as, in the judgment of the Director, are long-term loans (except that in the case of a savings bank, this subparagraph applies only if, in the judgment of the Director, its time deposits, as defined in section 461 of this title, warrant its making such loans).

(2)An insured depository institution that is not a member on January 1, 1989, may become a member of a Federal Home Loan Bank only if—

(A)the insured depository institution (other than a community financial institution) has at least 10 percent of its total assets in residential mortgage loans;

(B)the insured depository institution’s financial condition is such that advances may be safely made to such institution; and

(C)the character of its management and its home-financing policy are consistent with sound and economical home financing.

(3)An insured depository institution commencing its initial business operations after January 1, 1989, may become a member of a Federal Home Loan Bank if it complies with regulations and orders prescribed by the Director for the 10 percent asset requirement (described in the 22 So in original. The word “the” probably should not appear. paragraph (2)) within one year after the commencement of its operations.

(4)A community financial institution that otherwise meets the requirements of paragraph (2) may become a member without regard to the percentage of its total assets that is represented by residential mortgage loans, as described in subparagraph (A) of paragraph (2).

(5)(A)Subject to the requirements of subparagraph (B), a credit union shall be treated as an insured depository institution for purposes of determining the eligibility of such credit union for membership in a Federal home loan bank under paragraphs (1), (2), and (3).

(B)(i)For purposes of this paragraph and subject to clause (ii), a credit union which lacks Federal deposit insurance and which has applied for membership in a Federal home loan bank may be treated as meeting all the eligibility requirements for Federal deposit insurance only if the appropriate supervisor of the State in which the credit union is chartered has determined that the credit union meets all the eligibility requirements for Federal deposit insurance as of the date of the application for membership.

(ii)If, in the case of any credit union to which clause (i) applies, the appropriate supervisor of the State in which such credit union is chartered fails to make a determination pursuant to such clause by the end of the 6-month period beginning on the date of the application, the credit union shall be deemed to have met the requirements of clause (i).

(C)Notwithstanding any provision of State law authorizing a conservator or liquidating agent of a credit union to repudiate contracts, no such provision shall apply with respect to—

(i)any extension of credit from any Federal home loan bank to any credit union which is a member of any such bank pursuant to this paragraph; or

(ii)any security interest in the assets of such credit union securing any such extension of credit.

(D)Notwithstanding any State law to the contrary, if a Bank makes an advance under section 1430 of this title to a State-chartered credit union that is not federally insured—

(i)the Bank’s interest in any collateral securing such advance has the same priority and is afforded the same standing and rights that the security interest would have had if the advance had been made to a federally insured credit union; and

(ii)the Bank has the same right to access such collateral that the Bank would have had if the advance had been made to a federally insured credit union.

(b)An institution eligible to become a member under this section may become a member only of, or secure advances from, the Federal Home Loan Bank of the district in which is located the institution’s principal place of business, or of the bank of a district adjoining such district, if demanded by convenience and then only with the approval of the Director.

(c)Notwithstanding the provisions of clause (2) of subsection (a) of this section requiring inspection and regulation under law as a condition with respect to eligibility for membership, any building and loan association which would be eligible to become a member of a Federal Home Loan Bank except for the fact that it is not subject to inspection and regulation under the banking laws or similar laws of the State in which such association is organized shall, upon subjecting itself to such inspection and regulation as the Director shall prescribe, be eligible to become a member.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Community Development Banking and Financial Institutions Act of 1994, referred to in subsec. (a)(1)(B), is subtitle A (§§ 101–121) of title I of Pub. L. 103–325, Sept. 23, 1994, 108 Stat. 2163, which is classified principally to subchapter I (§ 4701 et seq.) of chapter 47 of this title. For complete classification of subtitle A to the Code, see

Short Title

note set out under section 4701 of this title and Tables. section 461 of this title, referred to in subsec. (a)(1)(C), was in the original “section 19 of the Federal Reserve Act”. Definition provisions of section 19 are classified to section 461 of this title. Other provisions of section 19 are classified to section 142, 371b, 371b–1, 374, 374a, 463 to 466, 505, and 506 of this title.

Amendments

2015—Subsec. (a)(5). Pub. L. 114–94 added par. (5). 2008—Subsec. (a)(1). Pub. L. 110–289, § 1206(1), which directed insertion of “community development financial institution,” after “savings bank,”, was executed by making the insertion after “savings bank,” the first time appearing. Subsec. (a)(1)(B). Pub. L. 110–289, § 1206(2), which directed insertion of “or, in the case of a community development financial institution, is certified as a community development financial institution under the Community Development Banking and Financial Institutions Act of 1994.” after “United States,”, was executed by making the insertion after “United States” to reflect the probable intent of Congress. Subsecs. (a)(1)(C), (3), (b), (c). Pub. L. 110–289, § 1204(8), substituted “the Director” for “the Board” wherever appearing. 1999—Subsec. (a)(2) to (4). Pub. L. 106–102 inserted “(other than a community financial institution)” after “institution” in par. (2)(A), designated concluding provisions of par. (2) as par. (3), inserted heading and substituted “paragraph (2)” for “preceding sentence”, and added par. (4). 1989—Subsec. (a). Pub. L. 101–73, § 704(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “Any building and loan association, savings and loan association, cooperative bank, homestead association, insurance company, or savings bank shall be eligible to become a member of, or a nonmember borrower of, a Federal Home Loan Bank if such institution (1) is duly organized under the laws of any State or of the United States; (2) is subject to inspection and regulation under the banking laws, or under similar laws, of the State or of the United States; and (3) makes such home mortgage loans as in the judgment of the board, are long-term loans (and in the case of a savings bank if, in the judgment of the board, its time deposits, as defined in section 461 of this title, warrant its making such loans). No institution shall be eligible to become a member of, or a nonmember borrower of, a Federal Home Loan Bank if, in the judgment of the board, its financial condition is such that advances may not safely be made to such institution or the character of its management or its home-financing policy is inconsistent with sound and economical home financing, or with the purposes of this chapter.” Subsec. (b). Pub. L. 101–73, § 710(b)(1), struck out “or a nonmember borrower” after “eligible to become a member”. Pub. L. 101–73, § 701(b)(1), (3)(A), substituted “Board” for “board”. Subsec. (c). Pub. L. 101–73, § 701(b)(1), (3)(A), substituted “Board” for “board”. 1933—Subsec. (d). Act June 13, 1933, struck out subsec. (d) which provided for direct loans to homeowners. See chapter 12 (§ 1461 et seq.) of this title.

§1424 Eligibility for membership