WASHINGTON - The Federal Housing Finance Board on Monday proposed changing capital requirements for the Home Loan Bank system to reflect the banks' riskiness more accurately.

The proposed rule would implement provisions of the Gramm-Leach-Bliley Act, which requires the board to make membership in the system more flexible and to provide a more stable capital structure for the 12 Home Loan banks. It received unanimous support from the agency's three-member board.

Among other things, the rule would restrict a member institution's control of voting rights to 20% of outstanding Home Loan bank stock and impose a 40% limit on the amount of capital a member institution could hold in an individual Home Loan bank.

The Finance Board did not adopt a controversial provision that would have allowed the 12 Home Loan banks to issue stock to member institutions in return for a commitment to pay at an agreed-upon date. The provision was withdrawn after House Banking Committee Chairman Jim Leach, R-Iowa, expressed concern that such "callable capital" would weaken the Home Loan banks' capital ratios.

The proposal will have a 90-day comment period after publication in the Federal Register. As mandated by Gramm-Leach-Bliley, a final rule must be approved by Nov. 12. The Home Loan banks would then have roughly nine months to submit new capital structure plans for Finance Board approval, which would be phased in over five years.

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