Updated Collateral Margins
Federal Home Loan Bank of Chicago (FHLBank Chicago) allows many of our
depository members to pledge loan collateral via Qualified Collateral Report
(QCR) where members can pledge on a blanket lien basis without having to list
out specific characteristics on each pledged loan.
In February of 2023, we lowered loan collateral margins for depository members who pledge by QCR given an observed decline in market values across the collateral base pledged to us at FHLBank Chicago. Since then, continued rate volatility and market disruption across the banking system has put continued pressure on the value of loan collateral on our members’ balance sheets. Further margin reductions are currently warranted. 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 two loan classes pledged via QCR. Please note that members pledging via listing method will not see their margins change at this time.
The new margins are outlined in the table below. These will take effect on May 8, 2023.
|QCR Margin Changes|
|Asset Classes||Current RR1-3 QCR Margins||New RR1-3 QCR Margins||Delta|
|Business (C&I) and Agricultural Production||63%||61%||-2%|
We anticipate continued volatility in the medium-term and there is the potential for additional changes to our collateral margins in the future that could impact your collateral position with us. We urge members to be proactive in evaluating their collateral position and determining if additional collateral needs to be pledged to ensure they remain fully secured. Our teams regularly reviews loan pricing and changes to these margins may take place based on the markets.
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 me in the coming weeks to assist you in making these determinations. In addition, please read our FAQ for more information.