83 FR 52950 - Responsibilities of Boards of Directors, Corporate Practices, and Corporate Governance

FEDERAL HOUSING FINANCE AGENCY

Federal Register Volume 83, Issue 203 (October 19, 2018)

The Federal Housing Finance Agency (FHFA) is amending its regulation on the Responsibilities of Boards of Directors, Corporate Practices, and Corporate Governance for its regulated entities. The final rule amends the existing regulation pertaining to Federal Home Loan Bank strategic business plans so that it applies as well to the Enterprises, and makes a number of adjustments and conforming changes to the existing regulation. As amended, the regulation requires that the board of directors of each regulated entity have in effect at all times a strategic business plan that describes its strategy for achieving its mission and public purposes. It extends to the Enterprise boards the existing provision requiring the board of each Federal Home Loan Bank to review the strategic business plan at least annually, re- adopt it at least once every three years, and establish reporting requirements for and monitor implementation of the strategic business plan. The final rule adds a new provision regarding current and emerging risks, repeals two outdated provisions of the existing regulation, and makes a conforming change to the Office of Finance Board of Directors regulation.

[Federal Register Volume 83, Number 203 (Friday, October 19, 2018)]
[Rules and Regulations]
[Pages 52950-52954]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-22859]


=======================================================================
-----------------------------------------------------------------------

FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1239 and 1273

RIN 2590-AA90


Responsibilities of Boards of Directors, Corporate Practices, and 
Corporate Governance

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA) is amending its 
regulation on the Responsibilities of Boards of Directors, Corporate 
Practices, and Corporate Governance for its regulated entities. The 
final rule amends the existing regulation pertaining to Federal Home 
Loan Bank strategic business plans so that it applies as well to the 
Enterprises, and makes a number of adjustments and conforming changes 
to the existing regulation. As amended, the regulation requires that 
the board of directors of each regulated entity have in effect at all 
times a strategic business plan that describes its strategy for 
achieving its mission and public purposes. It extends to the Enterprise 
boards the existing provision requiring the board of each Federal Home 
Loan Bank to review the strategic business plan at least annually, re-
adopt it at least once every three years, and establish reporting 
requirements for and monitor implementation of the strategic business 
plan. The final rule adds a new provision regarding current and 
emerging risks, repeals two outdated provisions of the existing 
regulation, and makes a conforming change to the Office of Finance 
Board of Directors regulation.

DATES: The final rule is effective on December 18, 2018.

FOR FURTHER INFORMATION CONTACT: Daniel Callis, Principal Risk Analyst, 
Office of the Chief Accountant, at [email protected] or (202) 649-
3448, or Ming-Yuen Meyer-Fong, Office of General Counsel, at [email protected] or (202) 649-3078 (these are not toll-free 
numbers), Federal Housing Finance Agency, Constitution Center, 400 
Seventh Street SW, Washington, DC 20219. The telephone number for the 
Telecommunications Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    On April 6, 2018, FHFA published a proposed rule that would amend 
the existing FHFA regulation on Responsibilities of Boards of 
Directors, Corporate Practices and Corporate Governance Matters. The 
proposed rule would amend, and extend to apply to the board of 
directors of each Enterprise, the existing provision requiring the 
board of directors for each Federal Home Loan Bank to have in effect at 
all times a strategic business plan for the entity. It would also 
require the strategic business plan to: (1) Articulate measurable 
operating goals; (2) address credit needs identified through ongoing 
market research and stakeholder consultations; (3) describe significant 
activities being planned, including any changes to business strategy; 
(4) be supported by appropriate and timely research; and (5) identify 
current and emerging risks, including those associated with the 
entity's existing activities or new activities. It would also require a 
board to review the strategic business plan at least annually, re-adopt 
it at least once every three years, and establish reporting 
requirements for and monitor implementation of the strategic business 
plan.
    The proposed rule would also repeal two outdated provisions, and 
make a conforming change to the Office of Finance Board of Directors 
regulation.

II. Summary of Comments and FHFA Responses

    FHFA received comments on the proposed rule from Fannie Mae and 
Freddie Mac (Enterprises) and U.S. Mortgage Insurers (USMI), a trade 
association comprising various private mortgage insurance companies. 
The commenters generally agreed with the establishment of a regulatory 
requirement for a strategic business plan. Two commenters also argued 
that a regulated board should be permitted to articulate goals, 
strategies, and risks at a high level, rather than with granular 
specificity. Other comments included one concerning the effect that the 
new activities process and conservatorship have on the strategic 
business plan process.
    The comments are summarized below, along with FHFA's responses and 
discussion of changes, if any, to the final rule text in consideration 
of the comments.

A. Commenters Agreed on a Requirement for a Board-Approved Strategic 
Business Plan

    The commenters agreed generally with the establishment of a 
regulatory requirement for a board-approved strategic business plan. 
The commenters also generally agreed that a strategic business plan 
should have measurable goals and objectives to hold management 
accountable.

B. Appropriate Balance Between High-Level View and Granular Detail 
(Sec.  1239.14(a) (Opening Provision); Sec.  1239.14(a)(1)(i) and (ii); 
Sec.  1239.14(a)(3); and Sec.  1239.14(a)(5))

    Commenters differed on the appropriate balance between board 
flexibility to plan from a high-level perspective and at a more 
detailed level. Two commenters proposed modifying the final rule to 
permit a board to articulate goals and strategies at a high level, 
while one commenter supported requirements on the level of individual 
activities.
    The commenters offered specific suggestions to revise the language 
of the regulation to permit high-level discussion. With respect to 
proposed Sec.  1239.14(a)(1)(ii), FHFA received suggestions for the 
plan to articulate goals and objectives for ``strategic activities,'' 
not ``for each significant activity and all authorized new activities'' 
as proposed. Another commenter suggested that goals and objectives be 
articulated for ``significant business strategy.''
    For proposed Sec.  1239.14(a)(3), one commenter suggested that the 
requirement should be that the plan describe ``significant strategic 
activities'' while another suggested ``strategies.'' Commenters 
suggested that the final regulation exclude from strategic planning 
changes in business strategy not determined ``significant.''
    For proposed Sec.  1239.14(a)(5), commenters suggested excluding 
less-than-significant risks from being required to be addressed in the 
strategic business plan. One commenter

[[Page 52951]]

suggested that the strategic business plan address significant risks 
associated with significant activities. Another similarly suggested 
that the rule should not require a strategic business plan to address 
risks, including significant risks, associated with activities that a 
board does not determine to be significant.
    One commenter expressed concern that requiring the plan to address 
specific activities could be unworkable due to high numbers of 
Enterprise activities.
    In contrast, another commenter supported strategic planning 
requirements for individual activities, and questioned a threshold 
prescribing planning only for ``significant'' activities, because the 
metric for ``significance'' remains too broad, and potentially excludes 
too much from board scrutiny or oversight. This commenter expressed 
that strategic planning for individual activities and authorized new 
activities would facilitate a board's monitoring and review of 
individual activities and market footprint. The same commenter also 
suggested the rule apply metrics such as stress testing to Enterprise 
activities to assess their risks.
    FHFA Response: A strategic business plan articulates a regulated 
entity's long-term vision, and aligns it with the entity's risk 
management framework, statutory mission, and public purposes. A 
strategic business plan also articulates a regulated entity's roadmap 
for achieving its goals.
    The management of a regulated entity shall be ``by or under the 
direction'' of its board of directors, and the board has ``ultimate 
responsibility'' of oversight over the entity, which responsibility may 
not be delegated to management.\1\ FHFA recognizes that requirements 
that are too specific may in some instances involve the board 
unnecessarily in operational details that it could have otherwise 
determined to delegate in the absence of such requirements. FHFA also 
recognizes that granular requirements could mean unwieldy numbers of 
activities for a strategic business plan to address. Given the interest 
in avoiding board distraction in its strategic planning by unnecessary 
or unhelpful operational details, FHFA declines to modify the rule to 
require strategic goals to be articulated at the level of every 
existing activity or authorized new activity, regardless of the 
activity's significance.
---------------------------------------------------------------------------

    \1\ See 12 CFR 1239.4(a).
---------------------------------------------------------------------------

    On the other hand, requirements that are too high-level may not 
provide a board with a sufficient view of the risks of the goals and of 
strategies deployed to achieve those goals. To support board planning 
at a meaningful level of involvement, FHFA also declines to modify the 
rule to permit strategic goals to be articulated at the highest level 
of generality. FHFA seeks an appropriate balance in the final rule, 
necessary to support a board's efforts in setting strategic goals, 
determining a safe and sound strategy to meet those goals, and 
overseeing execution. The final rule uses a threshold of 
``significant'' activities.\2\
---------------------------------------------------------------------------

    \2\ This approach is consistent with the standards of other 
regulators of large financial institutions cited by Freddie Mac. 
See, e.g., 12 CFR part 30, appendix D, III.B. (OCC) (``A covered 
bank's board of directors should actively oversee the covered bank's 
risk-taking activities and hold management accountable for adhering 
to the risk governance framework''); Federal Reserve Board, 
Consolidated Supervision Framework for Large Financial Institutions 
(July 2014), 2124.05.3.2 (each firm's board of directors should 
``maintain a clearly articulated corporate strategy and 
institutional risk appetite. The board should set direction and 
oversight for revenue and profit generation, risk management and 
control functions, and other areas essential to sustaining the 
consolidated organization . . .'').
    Similarly, the Federal Reserve Board's recent proposed 
supervisory guidance cited by Freddie Mac provides that a ``clear 
strategy includes sufficient detail to enable senior management to 
identify the firm's strategic objectives; [and] to create an 
effective management structure, implementation strategies, plans and 
budgets for each business line''). 82 FR 37219, 37224 (Aug. 9, 
2017). The Federal Reserve Board's proposed guidance thus provides 
that a strategic plan is expected to communicate to senior 
management the board's priorities, objectives, and strategies in 
sufficient detail for senior management to allocate resources 
appropriately to each business line.
---------------------------------------------------------------------------

    A threshold of ``significant'' activities would avoid requiring a 
board to engage with activities that the board does not determine are 
significant. The rule does not require a board to perform, by itself, 
every task necessary to determine those activities that are 
significant. Instead, subject to its duties, a board may set parameters 
for senior management to apply in identifying activities that the board 
considers to be significant activities. These parameters could relate 
to the risks posed by an activity, including whether the activity 
contributes to or deviates from the entity's strategic goals, statutory 
mission, and public purposes. They could also relate to any increased 
scaling of the activity, either planned or in execution.
    The final rule does not require specific metrics to address 
expansion or contraction of activities in response to the entity's 
mission, public purposes and market assessment. Subject to its duties 
under applicable law in the absence of specific regulatory 
requirements, a board will determine, or oversee the determination of, 
any such appropriate metrics.
    The final rule in the opening provision of Sec.  1239.14(a), which 
establishes a general requirement for a strategic business plan, is 
revised to require a strategic business plan to describe how the 
``significant'' business activities of the regulated entity will 
achieve a regulated entity's mission and public purposes. Though FHFA 
did not receive specific comments to the proposed opening provision of 
Sec.  1239.14(a), FHFA made the final rule revision to the opening 
provision based on comments it received on this issue.
    The final rule is also revised at Sec.  1239.14(a)(1)(i) and (ii) 
to state that a board's strategic business plan shall articulate 
measurable goals and objectives. Also, the proposed reference to 
``operating'' is deleted so that a plan is not required, or limited, to 
articulate ``operating'' goals and objectives. Section 
1239.14(a)(1)(ii) is revised to clarify that a plan articulate 
measurable goals and objectives also for ``significant'' authorized new 
activities. As a result of this revision, a plan would not be required 
to address authorized new activities that are not determined to be 
significant activities. A parallel change was not made to Sec.  
1239(a)(1)(i), the provision applying to the Banks. The FHFA regulation 
covering new business activities process for the Banks already contains 
a determination that the activity ``entails material risks . . .'' 12 
CFR 1272.1. If FHFA were to amend the regulations regarding Enterprise 
new activities and new products to include a threshold equivalent to 
the ``significant'' activities threshold used in the final rule, FHFA 
may consider taking a similar approach for the Enterprises in Sec.  
1239.14(a)(1)(ii) that it does for the Banks in Sec.  1239.14(a)(1)(i).
    At Sec.  1239.14(a)(3), the revised final rule requires a plan to 
describe any ``significant'' changes to business strategy that are 
planned, and not just any change to business strategy. As a result of 
this revision, a board is not required to address changes to business 
strategy that the entity is planning to undertake that it does not 
determine to be significant.
    At Sec.  1239.14(a)(5), the revised final rule requires a strategic 
business plan to identify current and emerging risks associated with 
the regulated entity's ``significant'' activities, existing or new. The 
revised final rule also requires that a plan discuss how the entity 
intends to address such risks, i.e., those risks associated with the 
entity's significant activities, while furthering its public purposes 
and mission in a safe and sound manner. The final rule does not

[[Page 52952]]

require the board to address risks associated with activities that have 
not been determined to be significant.

C. Differences in Roles Between Board and Management (Sec.  
1239.14(a)(2); Sec.  1239.14(a)(4)(ii))

    FHFA received comments that the proposed rule would impose on the 
board duties more appropriate for management, and that the final rule 
should preserve the distinct division of roles between board and 
management.
    The comments arose in the context of the proposed requirements that 
the strategic business plan discuss credit needs and opportunities 
identified through market research and stakeholder consultation, and be 
supported by appropriate and timely research and analysis of relevant 
market developments. Specific comments suggested that any research and 
analysis supporting the strategic business plan be as Enterprise 
management deems appropriate.
    FHFA Response: The management of a regulated entity shall be ``by 
or under the direction'' of its board of directors, and the board has 
``ultimate responsibility'' of oversight over the entity, which 
responsibility may not be delegated to management.\3\ Except for a 
board's ultimate responsibility for oversight of the regulated entity, 
the board has authority to delegate responsibilities to management and 
to determine the scope of responsibilities delegated to management.
---------------------------------------------------------------------------

    \3\ See 12 CFR 1239.4(a).
---------------------------------------------------------------------------

    The proposed rule at Sec.  1239.14(a)(2) does not affect a board's 
authority, require the board to conduct market research and stakeholder 
consultations, or prescribe the manner in which such research and 
consultation must be conducted. The proposed rule does not prohibit a 
board from delegating market research and stakeholder consultations, 
consistent with the board's duties. The final rule adopts Sec.  
1239.14(a)(2) as proposed.
    Similarly, the proposed rule at Sec.  1239.14(a)(4)(ii) does not 
require the board to conduct research and analysis of market 
developments, or prescribe the type of research and analysis. The 
proposed rule does not affect the board's authority to determine what 
research and analysis is appropriate to support the plan. Nor does the 
proposed rule affect the board's authority to assign research to senior 
management, while overseeing that it is done to the board's 
satisfaction.
    In addition, while Fannie Mae objected to the reference to timely 
research in Sec.  1239.14(a)(4)(ii), the purpose of that reference is 
to specify that the supporting research be suitably timed for the plan, 
and that the research is not stale or expired.
    The final rule adopts Sec.  1239.14(a)(4)(ii) as proposed.

D. Comment Suggested Principles-Based Approach Due to Differences 
Between the Banks and the Enterprises

    FHFA received a comment that the minimum requirements for a 
strategic business plan adapted from existing requirements applying to 
the Federal Home Loan Banks are not appropriate for the Enterprises. 
Specifically, the commenter asserted that, unlike the Banks, the 
Enterprises are SEC-registered, publicly-traded, and operating under 
New York Stock Exchange requirements. The commenter further noted that 
the Enterprises are larger than the Banks and securitize mortgages as 
their core business model.
    FHFA Response: The commenter's point in noting these differences is 
that the final rule should take a principles-based approach, not a 
prescriptive approach. The final rule does not prescribe board 
functions, such as engaging in market research. The revised final rule 
also does not prohibit the board from delegating functions, other than 
its ultimate oversight function, to senior management. In fact, the 
operative requirement in the revised final rule, which is unchanged 
from the proposed rule, is for a board to ``adopt and have in effect at 
all times a strategic business plan for the regulated entity.'' The 
differences noted by the commenter do not adversely affect the 
Enterprises. The differences also do not diminish the traditional role 
that a board plays in setting strategic goals for the entity, and 
holding management responsible for executing on the plan.

E. The Final Rule Requirements Do Not Apply to Diversity and Inclusion 
Strategic Plans

    FHFA received a comment that the final rule should not apply to 
diversity and inclusion strategic plans, which are addressed 
specifically by 12 CFR 1223.21(b), (d), and (e).
    FHFA Response: FHFA agrees that the diversity and inclusion 
strategic plans are subject to separate regulatory requirements. 
Therefore, this final rule does not apply to such plans. Moreover, the 
final rule does not prohibit a regulated entity from incorporating its 
diversity and inclusion strategic plan into its strategic business 
plan, which is expressly permitted under 12 CFR 1223.21(b)(8).

F. Strategic Business Plan To Address Current and Emerging Risks (Sec.  
1239.14(a)(5))

    The commenters also differed on whether the strategic business plan 
should address current and emerging risks. With respect to proposed 
Sec.  1239.14(a)(5), FHFA received a comment that, while current risks 
may be ascertainable, emerging risks may not be knowable at the outset 
of a multi-year strategic planning process. Another commenter expressed 
support for a requirement that the strategic business plan address 
current and emerging risks.
    FHFA Response: FHFA acknowledges that while it may be challenging 
for the board to ascertain emerging risks associated with significant 
activities at the outset of a multi-year strategic planning process, it 
should not preclude a board from exercising its duty of care to plan 
for such risks. A board's goals in strategic planning includes 
assessing the entity's goals to determine whether they align with the 
entity's public purposes and mission, and strategies for execution to 
identify any risks and determine whether the strategies are safe and 
sound and align with the entity's risk management framework.\4\ A core 
part of a board's strategic responsibility for the health and 
prosperity of a company is to look into the future insofar as it can be 
done, to assess what risks may be approaching.
---------------------------------------------------------------------------

    \4\ A similar approach is taken by the OCC in its Guidelines, 
cited by Freddie Mac, establishing ``heightened standards'' for 
certain large insured financial institutions. Specifically, the OCC 
guidance provides that the strategic plan cover at a minimum a 
three-year period and contain ``a comprehensive assessment of risks 
that currently have an impact on the covered bank or that could have 
an impact on the covered bank during the period covered by the 
strategic plan.'' 12 CFR part 30, App. D, sec. D.1.
---------------------------------------------------------------------------

    With the revision discussed above at II.B., the final rule 
otherwise adopts, as proposed, the provision on emerging risks and 
furthering the entity's public purposes and mission in a safe and sound 
manner.

G. The Final Rule During Conservatorship

    A commenter asked how conservatorship and 12 CFR part 1253 (Prior 
Approval for Enterprise Products) affects the final rule, how FHFA 
views the relationship between its conservatorship and regulatory 
obligations, and how its processes and decisions regarding activities 
and products are consistent with FHFA's role as conservator. A 
commenter suggested that FHFA issue guidance on how the final rule 
would apply to ``significant activities'' in light of 12 CFR part 1253.

[[Page 52953]]

    FHFA Response: As FHFA noted when it most recently adopted its 
corporate governance regulation, the regulation was not intended to 
address conservatorship matters. 80 FR 72327, 72328 (Nov. 19, 2015). 
Rather, the regulation was intended to address matters of corporate 
practice and governance at the regulated entities, and was adopted 
consistent with FHFA's regulatory authority under the Safety and 
Soundness Act.
    Separately, pursuant to its conservatorship authority, FHFA has 
provided for Enterprise boards to exercise the functions of management 
oversight that exist under applicable law and regulation, including 
FHFA's corporate governance regulation at 12 CFR part 1239. Although 
the Enterprises remain in conservatorship, their boards of directors 
have been operating under FHFA regulations, including most recently 12 
CFR part 1239, that govern board members outside of conservatorship, 
except as modified by the conservator. Therefore, under this final 
rule, the board of directors at each Enterprise is required to adopt 
and have in effect a strategic business plan.
    The Enterprise new activities process (12 CFR part 1253) and the 
final rule both reference ``new activity.'' However, they use the term 
for different supervisory purposes. Part 1253 defines new activities 
inclusively to support determination of new products, while the final 
rule establishes strategic plan requirements involving ``significant'' 
new activities, which is a smaller subset of new activities. In 
addition, the Enterprise new activities process is separate from the 
strategic business plan process. For example, the Enterprise new 
activities process may result in the review and authorization of new 
activities that are not required to be addressed in the strategic 
business plan because the board does not determine them significant. 
Similarly, a strategic business plan may address significant activities 
that are not new activities.
    The availability or denial of individual new activities may augment 
or limit a regulated entity's tools for meeting its chosen strategic 
goals. A strategic business plan could help identify significant 
activities on which the regulated entity plans to rely to achieve its 
strategic goals. It could also help identify alternative strategies 
that may be safer and more effective, and to explain the role, 
relevance, and risks of significant activities that the regulated 
entity is planning to undertake.
    However, FHFA decisions relating to new activities do not affect a 
board's process for developing and adopting a strategic business plan. 
Given that strategic planning and new activities processes operate 
separately, guidance explaining the connection between the two rules 
and processes is inappropriate at this time.

III. Final Rule

A. Overview

    The final rule retains the general requirement for a strategic 
business plan to address activities the board determines significant. 
Clarifying revisions are made to specific provisions.
    In addition, the final rule requires a strategic business plan to 
articulate measurable goals, address credit needs and market 
opportunities, describe significant activities being planned including 
significant changes in business strategy, be supported by appropriate 
and timely research, and identify current and emerging risks. It also 
requires a board to review the strategic business plan at least 
annually, re-adopt it at least once every three years, and establish 
reporting requirements for and monitor implementation of the strategic 
business plan. The final rule also repeals two outdated provisions that 
required Bank strategic business plans to include quantitative 
performance goals for Bank products related to multifamily housing and 
to community financial institution collateral, and that required 
related reporting. It also makes a conforming change to the Office of 
Finance Board of Directors regulation.

B. Section-by-Section Analysis

    Sec.  1239.14(a)--opening provision: The final rule is revised to 
add ``significant'' to circumscribe the business activities that a 
strategic business plan is required to describe. Thus, a board of 
directors is required to adopt and have in effect at all times a 
strategic business plan that describes how the ``significant'' business 
activities of the regulated entity will achieve its mission and public 
purposes consistent with its authorizing statute, the Safety and 
Soundness Act, and, in the case of a Bank, 12 CFR part 1265. The focus 
of the requirement is on those business activities a board determines 
significant.
    Sec.  1239.14(a)(1)(i): The final rule deletes ``operating'' to 
provide that, in the case of a Bank, a strategic business plan is 
required to articulate measurable goals and objectives for each 
significant business activity and all authorized new business 
activities. As a result of the revision, the focus of the requirement 
is on measurable goals and objectives.
    Sec.  1239.14(a)(1)(ii): The final rule deletes ``operating'' and 
replaces ``all'' with ``significant'' to provide that, in the case of 
an Enterprise, a strategic business plan is required to articulate 
measurable goals and objectives for each significant existing activity 
and for significant authorized new activities. As a result of the 
revision, the focus of the requirement is on measurable goals and 
objectives for significant activities, both existing and new.
    Sec.  1239.14(a)(2): The final rule adopts paragraph 1239.14(a)(2) 
as proposed.
    Sec.  1239.14(a)(3): The final rule adds ``significant'' to provide 
that a strategic business plan is required to describe any significant 
activities in which the regulated entity is planning to be engaged, 
including any significant changes to business strategy or approach that 
the regulated entity is planning to undertake. As a result of the 
revision, the requirement to describe any significant activities in 
which the regulated entity is planning to be engaged includes 
significant changes to business strategy or approach that the entity is 
planning to undertake.
    Sec.  1239.14(a)(4)(ii): The final rule adopts Sec.  
1239.14(a)(4)(ii) as proposed.
    Sec.  1239.14(a)(5): The final rule deletes ``including those'' and 
adds ``significant'' to provide that a strategic business plan is 
required to identify current and emerging risks associated with the 
regulated entity's significant existing activities or new activities, 
and to discuss how it plans to address such risks while furthering its 
public purposes and mission in a safe and sound manner. As a result of 
the revision, the focus of the requirement is on risks associated with 
the entity's significant activities, existing or new.
    Sec.  1239.14(b): The final rule adopts Sec.  1239.14(b)(1) and (2) 
as proposed and makes a conforming change to Sec.  1239.14(b)(3) by 
deleting ``operating'' to provide that each board of directors 
establish management reporting requirements and monitor implementation 
of the strategic business plan and the goals and objectives contained 
therein.
    Sec.  1273.8(d)(2): Section 1273.8(d)(2) of the Office of Finance 
Board of Directors regulation makes a conforming change to update the 
reference from ``Sec.  1239.31'' to ``Sec.  1239.14.'' The amendment is 
adopted as proposed.

C. Consideration of Differences Between the Banks and the Enterprises

    When promulgating regulations that relate to the Banks, section 
1313(f) of the Safety and Soundness Act requires FHFA to consider the 
differences between the Banks and the Enterprises with respect to the 
Banks' cooperative ownership structure, mission of

[[Page 52954]]

providing liquidity to members, affordable housing and community 
development mission, capital structure, and joint and several 
liability. 12 U.S.C. 4513(f). FHFA has considered these areas of 
differences between the Banks and the Enterprises, and has determined 
that the final rule is unlikely to adversely affect the Banks in these 
areas of differences.

IV. Paperwork Reduction Act

    The final rule does not contain any collections of information 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). 
Therefore, FHFA has not submitted any information to the Office of 
Management and Budget for review.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an 
agency to analyze a regulation's impact on small entities if the 
regulation is expected to have a significant economic impact on a 
substantial number of small entities. 5 U.S.C. 605(b). FHFA has 
considered the impact of this final rule and the General Counsel of 
FHFA certifies that it is not likely to have a significant economic 
impact on a substantial number of small entities because it applies 
only to the regulated entities, which are not small entities for 
purposes of the Regulatory Flexibility Act.

VI. Congressional Review Act

    In accordance with the Congressional Review Act, FHFA has 
determined that this action is not a major rule and has verified this 
determination with the Office of Information and Regulatory Affairs of 
the Office of Management and Budget (OMB). See 5 U.S.C. 804(2).

List of Subjects

12 CFR Part 1239

    Administrative practice and procedure, Federal home loan banks, 
Government-sponsored enterprises, Reporting and recordkeeping 
requirements.

12 CFR Part 1273

    Federal home loan banks, Securities.

    Accordingly, for reasons stated in the Supplementary Information, 
FHFA hereby amends parts 1239 and 1273 of chapter XII of title 12 of 
the Code of Federal Regulations as follows:

Subchapter B--Regulated Entities

PART 1239--[AMENDED]

0
1. The authority citation for part 1239 continues to read as follows:

    Authority:  12 U.S.C. 1426, 1427, 1432(a), 1436(a), 1440, 
4511(b), 4513(a), 4513(b), 4526, and 15 U.S.C. 78oo(b).


0
2. Add Sec.  1239.14 to subpart C to read as follows:


Sec.  1239.14   Strategic business plan.

    (a) Adoption of strategic business plan. Each board of directors 
shall adopt and have in effect at all times a strategic business plan 
for the regulated entity that describes, at a minimum, how the 
significant business activities of the regulated entity will achieve 
its mission and public purposes consistent with its authorizing 
statute, the Safety and Soundness Act, and, in the case of a Bank, part 
1265 of this chapter. Specifically, each regulated entity's strategic 
business plan shall at a minimum:
    (1)(i) In the case of a Bank, articulate measurable goals and 
objectives for each significant business activity and for all 
authorized new business activities, which must include plans for 
maximizing activities that further the Bank's housing finance and 
community lending mission, consistent with part 1265 of this chapter;
    (ii) In the case of an Enterprise, articulate measurable goals and 
objectives for each significant existing activity and for significant 
authorized new activities;
    (2) Discuss how the regulated entity will address credit needs and 
market opportunities identified through ongoing market research and 
stakeholder consultations;
    (3) Describe any significant activities in which the regulated 
entity is planning to be engaged, including any significant changes to 
business strategy or approach that the regulated entity is planning to 
undertake, and discuss how such activities would further the regulated 
entity's mission and public purposes;
    (4)(i) In the case of a Bank, be supported by appropriate and 
timely research and analysis of relevant market developments and member 
and housing associate demand for Bank products and services;
    (ii) In the case of an Enterprise, be supported by appropriate and 
timely research and analysis of relevant market developments; and
    (5) Identify current and emerging risks associated with the 
regulated entity's significant existing activities or new activities, 
and discuss how the regulated entity plans to address such risks while 
furthering its public purposes and mission in a safe and sound manner.
    (b) Review and monitoring. Each board of directors shall:
    (1) Review the regulated entity's strategic business plan at least 
annually;
    (2) Re-adopt the strategic business plan for the regulated entity 
at least every three years; and
    (3) Establish management reporting requirements and monitor 
implementation of the strategic business plan and the goals and 
objectives contained therein.


Sec.  1239.31   [Removed and reserved]

0
3. Remove and reserve Sec.  1239.31.

Subchapter D--Federal Home Loan Banks

PART 1273--[AMENDED]

0
4. The authority citation for part 1273 continues to read as follows:

    Authority:  12 U.S.C. 1431, 1440, 4511(b), 4513, 4514(a), 
4526(a).


Sec.  1273.8   [Amended]

0
5. Section 1273.8(d)(2) is amended by removing the reference to ``Sec.  
1239.31'' and adding in its place ``Sec.  1239.14.''

    Dated: October 16, 2018.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2018-22859 Filed 10-18-18; 8:45 am]
 BILLING CODE 8070-01-P