A recent proposal by the regulator of the Federal Home Loan Banks has created uncertainty for the FHLBanks' members about whether the current level of funding and services will remain available, according to a report by A.M. Best Co., Oldwick, N.J.The financial information provider noted that the proposal by the Federal Housing Finance Board would require the FHLBanks to maintain a minimum level of retained earnings, restrict the timing of dividend payments, limit the amount of "excess" stock in any district bank to 1% of that bank's total assets, and bar the issuance of stock dividends. The proposal has generated opposition from all 12 FHLBanks. "The limitation on the amount of excess stock that a bank may have outstanding will be an issue to watch, especially in the Chicago district bank, which has one of the highest levels of excess stock, at an estimated $2.4 billion," A.M. Best said. ".... The limitations on the amount of excess stock and the issuance of stock dividends both create tax implications that member institutions would likely view as unfavorable." The company can be found online at http://www.ambest.com.

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