The Federal Housing Finance Agency today issued a proposed rule requiring Fannie Mae and Freddie Mac to submit annual capital plans and provide prior notice for certain capital actions. These requirements are consistent with the existing large bank holding company capital planning framework.
Under the rule, each enterprise would be required to submit its capital plan to FHFA by May 20 of each calendar year. Plans would be required to include several elements, including an estimate of the expected sources and uses of capital over the planning horizon that reflects the GSE’s size, complexity, risk profile and scope of operations; estimates of projected revenues, expenses, losses, reserves and pro forma capital levels, as well as any additional capital measures the GSE deems relevant; a discussion of stress test results; and a description of all planned capital actions over the planning horizon.
FHFA will then review the capital plans based on comprehensiveness, reasonableness, relevant supervisory information, the GSEs’ regulatory and financial reports, the results of any stress tests conducted and other information required by FHFA or related to the GSEs’ capital adequacy. Fannie and Freddie will be required to resubmit their plans within 30 days if they determine there has been or will be a material change to their risk profile, financial condition or corporate structure since the submission of the last plan, or if directed by FHFA.
The proposal also incorporates a stress capital buffer into the capital planning process, which is determined by FHFA and is based on the results of a supervisory stress test, subject to a floor of 0.75 percent of the Enterprise’s adjusted total assets as of the last day of the previous calendar quarter. FHFA will provide Fannie and Freddie notice of their stress capital buffers by Aug. 15 of each year.
The American Bankers Association has long advocated for more comprehensive capital regulation for the Fannie and Freddie and will review the proposal for consistency with that advocacy and provide comments after member consultation.