Senate Bill Report — SB 5400, Federal Home Loan Bank Collateral of Insurer Members (February 8, 2021)
Summary
Senate Bill Report on SB 5400, as of February 8, 2021, prepared for the Senate Committee on Business, Financial Services & Trade, with committee activity listed for 2/09/21. The report names Senator Mullet as sponsor of the bill. It states that the bill defines the rights of a Federal Home Loan Bank (FHLB) concerning collateral pledged by its insurer members in delinquency hearings or where a receiver is appointed, including a timeline within ten days of a receiver's request for the release of excess collateral. The report lists Appropriation: None and Fiscal Note: Not requested, and gives an effective date ninety days after adjournment of the session in which the bill is passed.
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- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2021-02-09
- Case
- 2021 02 09 A28531 D227728 Bill Report 5400 Sba Bfst 21
Cite this document
“Senate Bill Report — SB 5400, Federal Home Loan Bank Collateral of Insurer Members (February 8, 2021).”
Original at app.leg.wa.gov, dated 2021-02-09. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-02-09-2021-02-09-a28531-d227728-bill-report-5400-sba-bfst-21/
, SHA-256 ca18e5e004bde8b03731b33aad44df00bec771d50e509185c79555aad4b33c42.Full text
SENATE BILL REPORT
SB 5400
As of February 8, 2021
Title: An act relating to federal home loan bank rights regarding collateral pledged by insurer
members.
Brief Description: Concerning federal home loan bank rights regarding collateral pledged by
insurer members.
Sponsors: Senator Mullet.
Brief History:
Committee Activity: Business, Financial Services & Trade: 2/09/21.
Brief Summary of Bill
• Defines the rights of a Federal Home Loan Bank with respect to
collateral pledged by its insurer members.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE
Staff: Clinton McCarthy (786-7319)
Background: The Federal Home Loan Bank (FHLB) System is a consortium of 11
regional banks across the U.S., created by the federal government to keep a reliable stream
of cash available to other banks for lending to individuals. FHLBs are structured as
privately capitalized corporations and receive no taxpayer funding. FHLBs are owned and
governed by their nearly 7000 members, which include commercial banks, savings and loan
institutions/thrifts, credit unions, community development financial institutions, and
insurance companies. This system was created in 1932, and the banks receive no
government funding and pay no federal or state income taxes.
In the insurance industry, life insurers make use of FHLB advances, mostly in the form of
funding agreements, to a much larger extent than other insurance sectors. Under statutory
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SB 5400
accounting, funding agreements, or borrowings used for spread lending purposes, are
treated as insurance liabilities as opposed to borrowed money.
Summary of Bill: The rights of a FHLB concerning collateral pledged by its insurer
members are defined in statute in delinquency hearings or in instances where a receiver is
appointed. If a FHLB exercises its rights regarding collateral pledged by an insurer
member, subject to a delinquency hearing, the FHLB can repurchase any outstanding stock
in excess of the amount the insured member is required to hold as a minimum investment.
If there has been an appointment of a receiver for an insured member, the FHLB will
provide a timeline within ten days of a request from the receiver for:
• the release of collateral that exceeds the amount required to support secured
obligations remaining after the repayment;
• the release of any of the insurer member's remaining collateral in the FHLB's
possession;
• the payment of fees owed by an insurer member and the operation of deposits and
other accounts of the insurer member with the federal home loan bank; or
• the possible redemption or repurchase of FHLB stock or excess stock of any class an
insurer member is required to own.
The FHLB shall provide options to an insurer member subject to a delinquency proceeding
to renew or restructure a loan to defer associated prepayment fees subject to various terms.
The following statutes are no longer applicable when a FHLB is exercising its rights
regarding collateral pledged by an insurer member:
• the Office of the Insurance Commissioner (OIC) statutory authority to take
possession of the property of an insurer to conduct business in an order to rehabilitate
a domestic insurer;
• the statutory authority the OIC has to apply for an order to liquidate the business of a
domestic insurer or U.S. branch of an alien insurer having trusteed assets in the state
of Washington;
• statutory authority of the OIC to take possession of an insurer's property, deal with
the insurer's property and business, or in the name of the insurer as the courts may
direct; and
• injunctions issued by the court to restrain the insurer, its officers, directors,
stockholders, members, subscribers, agents and all other persons from the transaction
of its business, or the waste or disposition of its property until the further order of the
court.
Appropriation: None.
Fiscal Note: Not requested.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Senate Bill Report -2- SB 5400
Effective Date: Ninety days after adjournment of session in which bill is passed.
Senate Bill Report -3- SB 5400
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- Original
- app.leg.wa.gov