Strategies

 

Many of our member-lenders are in the process of updating and implementing new liquidity policies and/or have received requests from their regulators regarding their total borrowing capacity. The following is designed to serve as a refresher about how your borrowing capacity at the FHLBNY is determined. You might consider saving this issue to share it with your regulators during your next examination, as it answers several questions we routinely receive from federal and state examiners.

Your institution’s overall borrowing capacity depends upon several factors, including the amount of qualifying collateral available to secure borrowings, your capacity and willingness to purchase additional FHLBNY capital stock (as required by the FHLBNY’s Capital Plan), and your financial condition (e.g., members exhibiting deteriorating financial ratios may be assigned higher haircuts or have restrictions placed on advance maturities).

Hopefully this article and the following answers to some frequently asked questions will help clarify how your borrowing capacity is determined at the FHLBNY. If you have any questions, please contact your Calling Officer at (212) 441-6700.

 

Example of How the FHLBNY Calculates Borrowing Capacity

  • Member ABC is a well-capitalized institution that has:
  • $250 million in assets,
  • $20 million in outstanding FHLBNY advances,
  • $125 million in qualifying collateral, and
  • holds $900,000 in Activity-Based (or “B2”) capital stock (4.5% of $20 million).

If ABC wishes to borrow more than $75 million using qualifying real estate collateral, it would need approval from the FHLBNY’s Board of Directors. If approved, ABC’s borrowing capacity could be increased to as high as 50% of assets, or $125 million, post-haircut. However, if ABC wanted to pledge only eligible investment securities, they would be able to borrow up to the 50% total cap so long as the member

Borrowing Capacity Guidelines

  • The FHLBNY does not offer lines of credit, either secured or unsecured. Borrowing capacity is solely determined by available collateral.
  • The FHLBNY cannot lend on an unsecured basis; therefore, in order to borrow, you must have sufficient collateral in the form of eligible loans, securities, or cash.
  • The maximum advances limit is 30% of a member’s total assets using Non-Repo Advances, and total credit exposure cannot exceed 50% of a member’s total assets (which includes Repo Advances).
    • It is possible for Non-Repo credit exposure to exceed 30% of total assets if a
    • member requests an exception and receives approval from the FHLBNY’s Board of Directors.
    • Using investment securities in the form of Repo Advances, it is possible to borrow
    • 50% of total assets without a waiver.
  • Regardless of advance type or collateral used, overall credit exposure (i.e., total indebtedness including Repo and Non- Repo Advances, Letters of Credit, and Mortgage Partnership Finance® [MPF®] Program credit enhancements*) cannot exceed 50% of member’s total assets.
  • During any given calendar month, new advance activity cannot exceed $500 million in net new money unless the FHLBNY’s Board of Directors approves an exception.
  • All borrowing capacity is subject to the FHLBNY’s Credit Policy guidelines. If circumstances warrant, the FHLBNY has the right to limit advance terms and/or dollar amounts.

*All eligible residential mortgage and securities collateral pledged as collateral to the FHLBNY must comply with all federal, state, and local anti-predatory lending legislation and the Interagency Guidance for Subprime and Nontraditional Mortgage Lending.

 

Frequently Asked Questions About Borrowing Capacity

What is my limit on Overnight Advances?

With the elimination of the Overnight Repricing Advance Program in August 2010, there is no longer a product-specific advance limit placed on overnight borrowings. The new Overnight Advance enables members to borrow up to the limits previously outlined...more