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June 22, 2020 New SOFR-indexed Adjustable Advance and Policy Updates

At its recent meeting, FHLBank Topeka’s board of directors approved changes to its  Member Products Policy.  Details are available in the  online   Member Products and Services Guide (MPSG).  Policy changes are effective immediately.

New Product Offering
With the upcoming phase out of the London Interbank Offered Rate (LIBOR), FHLBank Topeka developed an adjustable rate advance product tied to the Secured Overnight Financing Rate (SOFR).

With up to a 2-year term, the SOFR-indexed advance offers regulatory certainty in funding availability. It can also be used to match the maturity and repricing characteristics of various financial instruments. The SOFR index provides daily rate resets that correlate well with other short-term indexes.

More details on the SOFR-indexed advance are available in the Adjustable Rate Advances section of the   MPSG on page 21. You can also find a current indication on 1-year SOFR advances on Members Only under Rates.

To learn more about the new SOFR-indexed adjustable advance,   view our product flier, contact your regional account manager or get in touch with Lending at 800.809.2733.

Other Guide Changes

Collateral delivery clarification for blanket banks and thrifts using CBLR – Blanket pledge members who deliver collateral to FHLBank or an FHLBank-approved third-party custodian may now use one of two capital reporting framework options – either the Risk-based Capital framework or the new Community Bank Leverage (CBL) framework. For banks and thrifts who choose the new CBL framework, we have defined an undercapitalized institution as having a Tier (Core) Leverage ratio under 4%. This change is reflected in the Collateral Guidelines section of the MPSG.

Security Ratings for Pledged Securities – We have noted in the Securities section of the Schedule of Eligible Collateral that any security ratings under a negative watch will be assigned up to a full letter grade reduction until the current rating watch is resolved.

Security Modeling – Underwriting guidelines for a few securities categories were updated to note that pledged securities must be successfully modeled by FHLBank, with no projected cash flow shortfalls produced from the modeling to be considered eligible.

If you have any questions about any of these changes, please contact   Lance Liby, chief credit officer, or   Tom Bliss, director of member credit analysis, at 785.233.0507.

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