Important Collateral Updates Coming in 2023 for QCR Reporting

  • December 15, 2022

NOTE: This information is only relevant to most depository member institutions.

The Federal Home Loan Bank of Chicago (FHLBank Chicago) has important updates coming in 2023 for our members who pledge by Qualified Collateral Report (QCR). Although the details aren’t finalized, we wanted to update our members on these changes. A recording of our educational webinar for members, where we walked through the updates below, can we found at the end of this article.

Qualified Collateral Report (QCR/Blanket Reporting) Margin Changes

FHLBank Chicago allows many of our depository members to pledge loan collateral via QCR where members can pledge on a blanket lien without having to list out specific characteristics on each pledged loan.

Increased rate volatility has caused a reduction in the value of loans on our members’ balance sheets, and FHLBank Chicago must consider market values when assessing Collateral Loan Value (CLV) to properly ensure the financial health of our member-owned cooperative. As a result, members pledging via QCR can expect to see higher haircuts (reduced CLV) on their loans pledged via QCR in Q1 2023.

While FHLBank Chicago is still finalizing the details, to see the latest information, please  read our FAQ.

Pledging Securities and Other Actions to Optimize Your Collateral

Current economic conditions have led many of our members to request an evaluation of their securities collateral for eligibility. In order to assist us in this evaluation, we ask members to please complete the following steps:

  • Before you begin evaluating securities to pledge, you will need to make sure your institution has executed either a Safekeeping Agreement with FHLBank Chicago or a Securities Collateral Control Agreement with FHLBank Chicago and an approved third-party custodian.
  • FHLBank Chicago has approved the following third-party custodians for securities pledges: Northern Trust, BMO Harris Bank, JPMorgan, Quad Cities Bank and Trust, Bankers Bank, The Independent Bankers Bank (TIB), U.S. Bank, and Bank of New York Mellon.
  • Review our Collateral Guidelines by logging into eBanking and only submit securities that you feel comply with the Collateral Guidelines requirements.
  • Gather any supporting documentation (i.e. a prospectus) that may help us more expeditiously review your securities.

Allow ample time between the submission of securities for review of eligibility and requiring the securities for CLV. These steps will help reduce the time it takes for us to review securities for eligibility. In addition, we recommend members do the following as we approach the holiday season:

  • Stay sufficiently over-collateralized. Rising rates result in lower security valuations and may necessitate the posting of additional collateral.
  • Pledge additional eligible collateral classes and have collateral pledging agreements in place, if required.
  • Ensure your institution is sufficiently staffed with those authorized to pledge additional collateral as needed.
  • To further optimize your institution’s CLV, you may be interested in listing your loans. However, please note that the process for providing a listing file to FHLBank Chicago may take several weeks or longer in order to work through any operational issues. Refer to our FAQ to learn more about pledging loans via listing.

Questions?

If you have any questions regarding your institution’s pledged collateral or how we can help you further, please don’t hesitate to reach out to your Sales Director.

Watch Our December 2022 Educational Webinar

 

Contact Us

Please direct all media inquiries to:

Casey Reidy 
Assistant Director, Communications 
creidy@fhlbc.com
312.565.5291