FHLB Definition & Meaning | Financial Term | CSIMarket
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Glossary

FHLB

Financial Term

The Federal Home Loan Bank (FHLB) system is a government-sponsored enterprise created by the U.S. Congress in 1932 to provide low-cost funding to banks, credit unions, savings and loans institutions, insurance companies, and other approved financial institutions. The FHLB system is comprised of 11 regional banks across the United States and its territories, which are governed by a board of directors made up of the CEOs of member institutions.

The FHLB system plays a critical role in the financial industry by providing member institutions with access to affordable credit to support community lending, affordable housing, and economic development initiatives. Member institutions borrow funds from their regional FHLB and use those funds to finance mortgages, small business loans, and other lending activities in their communities. The FHLB system also offers a range of other services to its member institutions, including cash management, correspondent banking, and liquidity management.

In addition to providing funding to member institutions, the FHLB system also issues debt to raise funds in the capital markets. This debt is typically issued in the form of bonds, which are purchased by institutional investors such as mutual funds, pension funds, and insurance companies. The FHLB system is known for its strong credit rating and is considered to be a low-risk investment by many institutional investors.

In summary, the FHLB system is an important source of funding and liquidity for the financial industry, supporting community development, affordable housing, and economic growth across the United States.


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