Anticipating and Minimizing the Impact of a Reduction in Credit Capacity
posted on Monday, November 23, 2020 in Member Services
While the majority of our members will not experience a reduction in credit capacity, it is important to understand ways your institution can prepare in the event the Bank would reduce your credit capacity. Similar to other strategies you have in place to manage liquidity risk, the Bank offers resources and information help you anticipate and manage changes in your access to FHLB Des Moines advance products.
1. Assess the likelihood of a reduction in credit capacity from FHLB Des Moines upon a change in your institution's finacial condition and include the results of the assessment in your institution's liquidity plan.
FHLB Des Moines provides information to assist members in estimating the likelihood and magnitude of a potential change in credit capacity.
- Quarterly Median Ratios – this report lists the medians based on members' credit capacity for certain financial ratios as of the most recent quarter reviewed.
- CAMELS vs Credit Capacity – this table shows the correlation between members' CAMELS ratings and the various FHLB Des Moines credit capacities.
2. Understand different collateral reporting requirements associated with a reduction in credit capacity.
Ongoing collateral reporting is required to maintain collateral capacity value. With a reduction in credit capacity, the reporting requirements for your institution may also change. New reporting requirements may require additional time and resources from your personnel manage the transition and maintain your borrowing capacity.
View collateral requirements for Credit capacity
Prepare for transitioning to Loan Listing or Delivery collateral reporting/pledging
If your institution is moving toward a Loan Listing or Delivery collateral reporting requirement, you can prepare now to begin providing a detailed listing of your loan collateral. Consider how readily you can provide the required data file, or ship loan files to a custodian. A delay or failure to meet loan listing or delivery requirements may result in a temporary loss of borrowing capacity.
The collateral Pledging and Releasing Process page provides information on:
- Getting Started Guides
- Submission Schedule
- File Formats
- Delivery Instructions for FHLB Des Moines custodians
3. In addition to a change in credit capacity, consider how your pool of eligible collateral may change under stressed conditions. Prepare contingency collateral options.
Eligible collateral may diminish as portfolio delinquency rates increase. It is important to consider contingent asset pledging options in addition to your current pledge. Review our tips on maximizing collateral capacity and contingency collateral options, and be prepared to adjust your pledge as needed to meet your liquidity goals.
Contingency Collateral Options
Remember, we are here to help. Our Collateral Operations team will assist you during any collateral reporting transition process; however reviewing this information beforehand and assessing your institutions readiness for a potential change will help to ensure uninterrupted access to FHLB Des Moines products.