Transparency in Federal Home Loan Bank Membership Act of 2020
This bill allows a captive insurance company—an insurer that primarily insures its parent company and affiliates—to apply for membership with a Federal Home Loan Bank. To qualify for membership, the parent company of a captive insurance company must comply with certain investment requirements and capital standards.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8872 Introduced in House (IH)]
<DOC>
116th CONGRESS
2d Session
H. R. 8872
To amend the Federal Home Loan Bank Act to enable captive insurance
companies to apply for membership in the Federal Home Loan Bank System,
to add additional membership criteria for captive insurance companies,
to require a study on Federal Home Loan Bank membership, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 4, 2020
Mr. Hollingsworth (for himself and Mr. Heck) introduced the following
bill; which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Federal Home Loan Bank Act to enable captive insurance
companies to apply for membership in the Federal Home Loan Bank System,
to add additional membership criteria for captive insurance companies,
to require a study on Federal Home Loan Bank membership, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Transparency in Federal Home Loan
Bank Membership Act of 2020''.
SEC. 2. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended by adding at the end the following:
``(13) Captive insurance company.--The term `captive
insurance company' means an insurance company whose primary
business is the insurance of its affiliates.
``(14) Insurance company.--The term` insurance company'
means an entity that holds an insurance license or charter
under the laws of a State.
``(15) Parent company.--The term `parent company' means the
ultimate parent company.''.
SEC. 3. CAPTIVE INSURANCE COMPANY ELIGIBILITY FOR MEMBERSHIP.
(a) In General.--Section 4(a) of the Federal Home Loan Bank Act (12
U.S.C. 1424(a)) is amended by adding at the end the following:
``(6) Eligible captive insurance companies.--
``(A) In general.--A captive insurance company
shall be eligible to become a member of a Federal Home
Loan Bank only if the parent company of the captive
insurance company meets the following requirements:
``(i) Mission alignment standards.--
``(I) Housing investment.--At least
51 percent of the total assets of the
parent company are invested in
residential mortgage loans.
``(II) Form of investments.--At
least 60 percent of the total assets of
the parent company are held in real
estate assets, cash and cash
equivalents, and government securities
(as such terms are used under section
856(c)(4)(A) of the Internal Revenue
Code of 1986).
``(ii) Capital standards.--Such capital
standards as the Director determines
appropriate, by rule, which shall be as close
as practicable to those capital standards
applicable to insured depository institutions
(as defined under section 3 of the Federal
Deposit Insurance Act).
``(B) Ongoing membership.--
``(i) Reporting requirement.--Every 5 years
after becoming a member of a Federal Home Loan
Bank, a captive insurance company shall submit
a report, prepared by a third-party auditor, to
the Director containing information on
compliance by the parent company with the
requirements described under subparagraph (A).
``(ii) Parent company requirements.--A
parent company of a captive insurance company
that is a member of a Federal Home Loan Bank
shall--
``(I) maintain the mission
alignment standards described under
subparagraph (A)(i);
``(II) maintain the capital
standards described under subparagraph
(A)(ii);
``(III) be deemed a `regulated
entity' under section 1314 of the
Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (12
U.S.C. 4514); and
``(IV) be subject to such
additional reporting requirements as
the Director determines appropriate, by
rule.
``(iii) Failure to meet mission alignment
standards requirement.--If the Director
determines that a parent company no longer
meets the mission alignment standards described
under subparagraph (A)(i), the Director shall
require the parent company to file quarterly
reports with the Director for a 1-year period,
showing how the parent company is seeking to
comply with such mission alignment standards.
``(iv) Report on parent company compliance
with capital standards.--
``(I) In general.--Each captive
insurance company that is a member of a
Federal Home Loan Bank shall issue a
quarterly report to the Bank containing
information on the compliance, by the
parent company of the captive insurance
company, with the capital standards
described under subparagraph (A)(ii).
``(II) Report on non-compliance.--
If a Federal Home Loan Bank receiving
reports described under subclause (I)
determines that a parent company has
failed to meet the capital standards
described under subparagraph (A)(ii)
for 2 consecutive quarters, the Bank
shall notify the Director of such
failure.
``(v) Failure to meet capital standards
requirement.--If the Director determines that a
parent company no longer meets the capital
standards described under subparagraph (A)(ii),
the Director shall require the parent company
to file a capital restoration plan with the
Director and the Federal Home Loan Bank with
respect to which the parent company's captive
insurance company is a member.
``(vi) Termination of membership.--A
captive insurance company's membership of a
Federal Home Loan Bank shall be terminated, in
accordance with section 6(d)(2) of the Federal
Home Loan Bank Act (12 U.S.C. 1426(d)(2)), if--
``(I) the parent company of the
captive insurance company does not
submit a capital restoration plan
required under clause (v) that is
substantially in compliance with
section 1369C of the Federal Housing
Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4622)
within the applicable period;
``(II) the Director does not
approve such a capital restoration plan
required under clause (v);
``(III) the Director determines
that the parent company has failed to
comply with such a capital restoration
plan; or
``(IV) with respect to a parent
company that the Director has
determined no longer meets the mission
alignment standards described under
subparagraph (A)(i), the parent company
has not returned to compliance with
such standards before the end of the 1-
year period described under clause
(iii).
``(vii) Reapplication.--A captive insurance
company whose membership in a Federal Home Loan
Bank is terminated under clause (vi) may not
reapply for membership in a Federal Home Loan
Bank until the end of the 5-year period
beginning on the date of such termination.
``(C) Parent company support.--
``(i) In general.--The Director shall
require the parent company of the captive
insurance company, in the event that the
captive insurance company defaults on any
amounts owed to a Federal Home Loan Bank, to
pay the Bank the amount of any such default.
``(ii) Enforcement powers.--For purposes of
enforcing this subparagraph, a parent company
shall be deemed a regulated entity under
sections 1371, 1372, and 1376 of the Federal
Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4631, 4632,
and 4636).
``(D) Clarification of priority of secured
interests.--Any security interest granted to a Federal
Home Loan Bank by any captive insurance company, or by
its parent company or any affiliate company on its
behalf, shall be entitled to priority over the claims
and rights of any party (including any receiver,
conservator, trustee, or similar party having rights of
a lien creditor) other than claims and rights that--
``(i) would be entitled to priority under
otherwise applicable law; and
``(ii) are held by actual bona fide
purchasers for value or by actual secured
parties that are secured by actual perfected
security interests.''.
(b) Rulemaking.--Not later than the end of the 1-year period
beginning on the date of enactment of this Act, the Director of the
Federal Housing Finance Agency shall issue the capital standards and
reporting requirements rules described under subparagraphs (A)(ii) and
(B)(ii)(IV) of section 4(a)(6) of the Federal Home Loan Bank Act.
(c) Applicability.--Section 4(a)(6) of the Federal Home Loan Bank
Act, as added by subsection (a), shall take effect with respect to a
captive insurance company on the effective date of the rules required
under subsection (b).
(d) Captive Insurance Company Eligibility Transition Period.--A
captive insurance company that has, or will have, the company's
membership in a Federal Home Loan Bank terminated due solely to the
change in the treatment of captive insurance companies under the final
rule of the Federal Housing Finance Agency titled ``Members of Federal
Home Loan Banks'' (81 Fed. Reg. 3246; published January 20, 2016) may
continue membership or have membership restored, as applicable, in the
same Federal Home Loan Bank during the period beginning on the date of
enactment of this Act and ending on the day the Director issues the
rules required under subsection (b), if--
(1) the Federal Home Loan Bank determines, including based
on information submitted by the captive insurance company,
that--
(A) the affiliate insured by the captive insurance
company makes, owns, or acquires residential mortgage
loans; and
(B) the captive insurance company will comply with
the membership eligibility requirements described in
paragraphs (a), (b), and (c) of section 1263.6 of title
12, Code of Federal Regulations, during such period;
and
(2) the captive insurance company continues to be owned, or
upon restoration of membership is owned and continues to be
owned, including direct ownership by a controlling entity or
indirect ownership through one or more holding companies, by
the same entity that owned the captive insurance company on the
date of enactment of this subsection.
SEC. 4. STUDY ON IMPACT OF EXPANSION OF MEMBERSHIP.
(a) Study.--The Director of the Federal Housing Finance Agency
shall conduct a study on the impact of the expansion of the Federal
Home Loan Bank System to additional types of entities involved in the
housing finance system. The study shall consider--
(1) how liquidity provided through the Federal Home Loan
Bank System could be increased in a manner that is consistent
with its mission;
(2) what initial and ongoing capital and reporting
requirements for membership could be used to minimize risk to
the Federal Home Loan Bank System;
(3) how the Federal Housing Finance Agency could use its
oversight and authority to ensure that expanded membership
would not pose excessive risk to the Federal Home Loan Bank
System;
(4) mitigants and transaction structures to address risk of
an insolvency proceeding affecting the parent of a captive
insurance company member; and
(5) other topics relevant to developing a framework for
membership that promotes the mission of the Federal Home Loan
Bank System.
(b) Report.--Not later than one year after the date of enactment of
this Act, the Director shall submit to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on Financial
Services of the House of Representatives a report on the study required
under subsection (a), including all findings and determinations made in
carrying out the study.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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