§4612 Minimum Capital Levels

Summary

Each enterprise must keep a minimum amount of capital made up of three parts added together. The first part is 2.50 percent of the enterprise’s on-balance-sheet assets, using normal accounting rules. The second part is 0.45 percent of the unpaid principal on its outstanding mortgage-backed securities and similar instruments that are not counted in the first part. The third part is 0.45 percent of other off-balance-sheet obligations not included in the second part, but excluding commitments that are more than 50 percent of the average quarterly commitments over the past four quarters. The Director can change that third percentage to account for differences in credit risk. For each Federal Home Loan Bank, the minimum capital must meet the bank’s leverage requirement set by law. The Director may set higher minimums by rule for safety, and may temporarily raise a particular entity’s minimum by order when needed. The Director must stop any temporary increase when it is no longer needed, and must make rules about when temporary increases can be used, how they are reviewed, and how often they are reviewed. The Director can also require extra capital or reserves for specific products or activities, and must periodically review capital amounts and minimums.