Dragged down by losses related to private-label mortgage-backed securities, the Federal Home Loan Bank of Seattle said late Monday that it expects to fall below regulatory capital minimums as of Dec. 31.

Following regulatory standards, the bank said it would not pay dividends or redeem or repurchase capital stock.

In a letter to members, Richard Riccobono, the bank's president and chief executive, said compliance with an accounting rule "significantly overstates our market risk" and said the bank's $2.8 billion in permanent capital is "more than enough capital to cover the risks reflected in the bank's balance sheet."

He also told members that he has brought his concerns about the risk-based capital methodology to regulators at the Federal Housing Finance Agency.

Mr. Riccobono noted that the Seattle Home Loan bank calculates its risk-based capital on a monthly basis and, given the fluctuations in the mortgage market, said it could return to compliance without changes to its balance sheet or regulation.

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