InfoBytes Blog
FHFA publishes final rule on GSE capital plans
On June 1, the FHFA announced a final rule requiring Fannie Mae and Freddie Mac (GSEs) to submit annual capital plans and provide prior notice for certain capital actions “consistent with the regulatory framework for capital planning for large bank holding companies.” As previously covered by InfoBytes, in December 2021, FHFA issued the noticed of proposed rulemaking. These capital plans must include several mandatory elements, including (i) “[a]n assessment 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, assuming both expected and stressful conditions”; (ii) “[e]stimates of projected revenues, expenses, losses, reserves and pro forma capital levels,” along with any additional capital measures the GSEs deem relevant; (iii) “[a] description of all planned capital actions over the planning horizon”; (iv) a discussion of stress test results and how the capital plans will account for these results; and (v) a discussion of any anticipated changes to a GSE’s business plan that may likely have a material impact on the GSE’s capital adequacy or liquidity. The final rule noted that the FHFA intends to review the capital plans for comprehensiveness, reasonableness, and relevant supervisory information, and plans to review the GSE’s regulatory and financial reports, as well as the results of any conducted stress tests and any other information required by FHFA or related to the GSE’s capital adequacy. Should the GSEs determine that 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), they must resubmit their capital plans within 30 days. The final rule also incorporates the determination of the stress capital buffer into the capital planning process, which will be provided to the GSEs by August 15 of each year, along with an explanation of the results of the supervisory stress test. The final rule is effective 60 days after publication in the Federal Register. Under the final rule, each GSE will submit its first capital plan by May 20, 2023.