(Reuters) -U.S. officials are considering to limit the ability of large banks to use Federal Home Loan Banks (FHLBs) as a financial backstop, as part of a broader proposal to overhaul the system, Bloomberg News reported on Friday.
In addition to limiting access for big banks, regulators have discussed requiring banks that want to borrow from the FHLBs to hold a minimum percentage of their assets in mortgages, the report said, citing people familiar with the matter.
The Federal Housing Finance Agency (FHFA) might still adjust its plans before announcing the recommendations in the coming months, the report added.
FHFA continues its work drafting recommendations on a range of topics, including improving the FHLBs’ support for members doing the most for housing and community development, a FHFA spokesperson told Reuters in an emailed statement.
A comprehensive report is expected by the end of September, spokesperson added.
U.S. FHLBs have been beefing up its lending warchests to provide more liquidity to banks amid higher-than-usual demand for funds following the collapse of Silicon Valley Bank (SVB) and Signature Bank (SBNY) in the U.S. and the emergency takeover of Credit Suisse.
Federal Home Loan Banks are 11 U.S. government-chartered institutions that raise money for low-cost lending to their member regional banks.
For many of the member banks, they are a preferred final stop for cash before banks in need turn to the Federal Reserve itself as a last resort.
Federal Housing Finance Agency did not immediately respond to a Reuters request for comment.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Shweta Agarwal)