THE FEDERAL HOME LOAN BANKS

Congress created the Bank System in 1932 to provide a credit source for thrift institutions that were engaged in home mortgage lending.  Membership in the Bank System, which offers access to economical wholesale credit and technical assistance, currently exceeds 8,000 financial institutions, and includes commercial banks, credit unions, and insurance companies, in addition to thrift institutions.

The Banks are privately capitalized government sponsored enterprises -- they receive no taxpayer funding and raise their funds by issuing debt instruments in the capital markets.  Each Bank is a separate entity with its own management and board of directors.  The members of each Bank elect a majority of its board of directors, while the Finance Board appoints the remaining directors.  The board of directors manages a Bank in substantially the same manner as the board of a private corporation and is subject to the same general fiduciary duties of care and loyalty to which the board of a state-chartered business or banking corporation is subject.  Unlike the directors of state-chartered corporations, Bank directors have duties, responsibilities, and privileges that derive from the Bank Act and Finance Board regulations.

Each Bank is established in accordance with Federal law to further public policy, and its statutory powers and purposes are not subject to change except by the Congress.  Bank directors are responsible for managing the Bank to achieve the statutorily-mandated objectives of operating in a financially safe and sound manner, promoting housing finance and community lending, paying a portion of the interest on obligations of the Resolution Funding Corporation (REFCORP) (which financed the resolution of an earlier savings and loan crisis), and contributing to the Bank System’s Affordable Housing Program.

The System consists of 12 congressionally chartered district banks located in the following cities, each of which operates within its own multi-state district:

1. Atlanta: Alabama, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia

2. Boston: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont

3. Chicago: Illinois, Wisconsin

4. Cincinnati: Kentucky, Ohio, Tennessee

5. Dallas: Arkansas, Louisiana, Mississippi, New Mexico, Texas

6. Des Moines: Iowa, Minnesota, Missouri, North Dakota, South Dakota

7. Indianapolis: Indiana, Michigan

8. New York: New York, New Jersey, Puerto Rico, Virgin Islands

9. Pittsburgh: Delaware, Pennsylvania, West Virginia

10. San Francisco: Arizona, California, Nevada

11. Seattle: Alaska, American Samoa, Guam, Hawaii, Idaho, Montana, Northern Mariana Islands, Oregon, Utah, Washington, Wyoming

12. Topeka: Colorado, Kansas, Nebraska, Oklahoma

STRUCTURE OF THE BANKS’ BOARDS OF DIRECTORS

Each Bank is managed by a board of directors that consists of directors chosen by the Bank members in elections and directors appointed by the Finance Board.  All Bank directors generally serve staggered three-year terms of office.

ELECTED DIRECTORS

The Bank members choose the elected directors through an annual voting process administered by the Bank.  The elective directorships are allocated among the states in each Bank’s district, and the elections are conducted on a state-by-state basis.  To be eligible to serve as an elected director, an individual must be either an officer or director of a member that maintains its principal place of business within the Bank district.  The member with which each elected director is associated must meet its minimum regulatory capital requirements at all times.

APPOINTED DIRECTORS

The Finance Board appoints members of the Bank’s board of directors to represent the public's interests and fulfill other fiduciary duties of a board member.  An individual must satisfy certain statutory requirements in order to be eligible for appointment.  Appointed Bank directors must be United States citizens and have either their permanent residence or a secondary residence and employment nexus in a state within the Bank’s geographic district.  At least two of the appointed directors, known as community interest directors, must come from organizations with more than a two-year history of representing consumer or community interests on banking services, credit needs, housing, or financial consumer protections.  During their term of office, appointed directors may not: (1) serve as an officer of any Bank; (2) serve as an officer or director of any member of the Bank they serve; or (3) hold shares of stock or any other financial interest in any member of the Bank they serve.

CORE COMPETENCIES OF A FEDERAL HOME LOAN BANK'S BOARD OF DIRECTORS

Each Bank's board of directors as a whole should possess these core competencies:

Leadership: The ability to empower and motivate senior management and staff.

Business Judgment: The ability to understand and apply best management practices in the banking and housing industries.

Strategic Vision: The skill and capacity to provide strategic insight and direction by encouraging innovation, conceptualizing key trends, evaluating strategic decisions, and continually leading the Bank toward achieving its statutory mission in a safe and sound manner.

Risk Management: Experience in financial, operational, political, and reputation risk management.

Accounting and Finance: Expertise in accounting and corporate finance to protect and enhance shareholder value through corporate performance and adequate internal controls.

Industry Knowledge: In-depth industry-specific knowledge in relevant fields, including housing, community/economic development, banking, and capital markets.

Crisis Response: The ability to provide leadership during periods of crisis.

PERSONAL CHARACTERISTICS OF FEDERAL HOME LOAN BANK DIRECTORS

Each Bank director should exhibit:

Integrity and Accountability: Character is a key consideration in evaluating any prospective Bank director.  Directors must have high ethical standards and integrity in their personal and professional dealings.  Directors must be willing to act on and remain accountable for their boardroom decisions.

Confidence/Leadership Experience: Directors should be experienced in management or policy-making in one or more fields of business, government, education, or community/civic affairs.  Directors should approach others with self assurance while valuing board and team performance over individual performance.  Directors must ask appropriate questions of management in a manner that encourages open discussions and resolution of issues.

History of Achievement: Directors should have a history of high achievement in their chosen fields.  Directors must be willing to undertake the time commitment that is necessary to serve effectively on the board of a Bank, including attending board and committee meetings and devoting sufficient time to prepare for those meetings.

Informed Judgment: Directors are expected to provide wise, thoughtful counsel on a wide range of issues.  Directors should have a record of making sound business judgments at other organizations as directors or senior management officials.  Directors should be able to comprehend new concepts quickly.

Financial Literacy: Directors should be financially literate.  Directors should know how to read a financial statement, understand financial ratios, and have a working familiarity with finance and accounting practices, including internal control and risk management.

Political Awareness: Directors should possess an awareness of the political environment in which they will perform their duties.