Change in CFI status. The proposed rule provided that if a member that previously qualified as a CFI loses its CFI status, the Bank may not accept as security for new advances CFI- eligible collateral from that member. Proposed § 950.7(b)(2) also provided that a Bank shall not require a member that loses its CFI status and has outstanding advances secured by CFI- eligible collateral to repay such advances prior to the stated maturities, or to provide substitute collateral, eligible under paragraphs (a)(1) through (5), based solely on the member’s change in CFI status. All of the comments addressing the change in CFI status provisions in proposed § 950.7(b)(2) supported allowing outstanding advances held by members that no longer qualify as CFIs to run to their stated maturities. Accordingly, this provision is adopted without change in § 950.7(b)(2)(i) of the final rule. Proposed § 950.7(b)(2) also authorized a Bank to allow a member that has lost its CFI status to renew maturing advances secured by CFI-eligible collateral for up to 6 months in order to provide the member with sufficient time to wind down advances and replace them with other funding in an orderly fashion. The Finance Board requested comment on whether allowing renewals of such advances is appropriate and, if so, whether allowing renewals for up to 6 months would provide sufficient time for members to obtain alternative funding. Some of the commenters stated that the proposed 6-month renewal period for maturing advances was not enough time for members to obtain replacement funding for maturing advances. Alternative suggestions from commenters included a 12-month renewal period, an 18-month renewal period, and allowing members to maintain a permanent maximum eligible collateral limit, based on one-to two-year historical usage. In addition, some of the commenters indicated that it would be difficult to determine which advances are secured by CFI-eligible collateral and which advances are secured by other collateral. Based on the comments, § 950.7(b)(2) of the final rule has been revised to apply to members that no longer qualify as CFIs and have total advances outstanding that exceed the amount that can be fully secured by collateral under § 950.7(a) (non-CFI-eligible collateral). While the Finance Board believes that it is inappropriate to allow CFI members that lose their CFI status to continue to pledge CFI-eligible collateral as security for advances indefinitely, it does acknowledge that the proposed 6-month r...
Change in CFI status. If a Bank determines, as of April 1 of each year, that a member that has previously qualified as a CFI no longer qualifies as a CFI, and the member has total advances outstanding that exceed the amount that can be fully secured by collateral under paragraph (a) of this section, the Bank may:
