The U.S. Federal Housing Finance Agency (FHFA) is looking to amend its regulation that governs its Suspended Counterparty Program (SCP).
Specifically, the amendment would remove the term “reputational harm.” This amendment would eliminate redundancy and affirm that FHFA’s supervision of counterparty risk is based on material and measurable risks.
America’s Credit Unions has endorsed the proposed change, saying that removing “reputational harm” would preserve FHFA’s ability to address serious misconduct while ensuring decisions are made with measurable risks in mind.
America’s Credit Unions says the amended language will:
- Promote more predictable and consistent decision-making by ensuring suspensions are based on measurable risks rather than subjective assessments of reputational harm;
- Eliminate an unnecessary standard because the underlying misconduct is already addressed through existing safety-and-soundness standards;
- Align FHFA’s approach with other federal financial regulators (including the NCUA) and reduce uncertainty for credit unions.
“The proposal appropriately preserves FHFA’s ability to address serious counterparty misconduct while promoting a more objective, consistent, and risk-based supervisory framework,” America’s Credit Unions officials said in a statement.
Currently, the SCP allows the FHFA to suspend an individual or entity with a history of fraud or other financial misconduct from doing business with Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.