The capital markets subcommittee of the House Banking Committee unanimously approved the Enterprise Resource Bank Act March 28, a bill to modernize the Federal Home Loan Bank System. A summary of the major provisions follows.

Mission. The Federal Home Loan Banks would be renamed "Enterprise Resource Banks" to account for a broadening of the system's mission. In addition to providing funds for mortgages, the 12 district banks would be able to provide long-term credit for inner-city and rural development loans.

Membership. The system would be open to any insured depository institution, and membership would be voluntary. In order to join the system, banks or thrifts with assets of $500 million or more would be required to hold at least 10% of their assets in whole mortgages.

On a case-by-case basis, the Federal Housing Finance Board could let in large institutions that have less than 10% of their assets in whole mortgages.

Withdrawal. An institution leaving the system could not redeem its stock if doing so would drop the Home Loan bank's capital below required levels. Institutions withdrawing from the system would be required to wait five years before rejoining.

Capital. Capital standards for each district bank would include a leverage limit beginning at 5% of the bank's total assets. That level would drop to 3% once the system built up a core of permanent capital equal to 1% of total assets.

Permanent capital may be in the form of retained earnings, non- redeemable stock, or a risk insurance pool. A bank's capital plan would be established by its stockholders, subject to Federal Housing Finance Board approval. A risk-based-capital standard would be establish and set at 10% of a bank's risk-adjusted assets.

Advances. The 30% cap on systemwide advances to nonthrift members would be eliminated. State and local housing finance agencies and community development financial institutions would have access to advances.

Refcorp: Effective Jan. 1, 1998, members' combined annual interest obligation on Resolution Funding Corp. bonds - currently $300 million - would be fixed at 23.7% of system earnings.

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