Financial Intelligence
FHLBNY Putable Advance Modification Program
April 14, 2020
In an effort to provide our members with additional solutions for today’s challenging economic environment, the FHLBNY is pleased to offer the opportunity to modify certain Putable Advances into new Fixed-Rate Advance structures. Modifying Putable Advances into new Putable Advances is presently not a component of our modification program1.
The following are the options presently available under the Advance Modification Program:
Putable Advance to Fixed-Rate Advance Modification:
Offers the ability to potentially lower interest expense, reduce optionality in a member’s balance sheet and to better manage interest-rate and liquidity risks.
Re-Modifications
Members have the ability to modify a previously modified Putable Advance into a new Fixed-Rate Advance structure. A previously modified Putable Advance cannot be re-modified into a new Fixed-Rate Advance unless 365 days have passed since the prior modification. Advances which have already been modified into a regular fixed structure cannot be re-modified.
Please note that Putable Advances that are maturing within 12 months are not eligible for modification. Modifications will be handled on a best-efforts basis and the following eligibility criteria apply:
The value of a modified advance must pass a 10% modification test.
The modified advance’s maturity and effective duration must be greater than or equal to the original advance; however,
Modified maturities cannot exceed 5 years if the original advance has less than 2 years remaining to maturity; and
Modified maturities cannot exceed 7 years if the original advance has less than 4 years remaining to maturity.
Prior to modification, the FHLBNY must review and assess each proposed transaction to ensure it conforms to FHLBNY’s modification criteria. Three tests will need to be satisfied in order to complete a modification: 1. structural similarity; 2. 10% modification test; and 3. prospective hedge analysis if the advance is hedged.
In addition, in order to be eligible for a modification, you will need to:
Executed the FHLBNY’s current version of the “Callable Advance, Putable Advance and Putable Advance with Customized Strike Customer Certification” (HLB-126) and reviewed the related disclosure (HLB-125);
Orally acknowledge, at the time of transaction, the structured advance pre-transaction disclosure has been reviewed; and
Provide a suitability disclosure (HLB-127: Advances Modification Certification).
1 Due to a regulatory directive, the FHLBs are no longer able to offer structured advance products which are constructed using Libor-based hedges which mature beyond 12/31/2021, the scheduled date of Libor cessation.
Note: It is not the role of the FHLBNY to provide advice on which advances, if any, should be submitted for modification. Therefore, entire portfolios cannot be submitted for analysis, and each modification request must be identified individually by an advance number.
Disclaimer: Notwithstanding any language to the contrary, nothing contained in these disclosures is intended to constitute an offer, inducement, promise, or contract of any kind. Any product descriptions and pricing may be subject to change without notice.
The content provided in these disclosures is presented as a courtesy to be used only for informational purposes and is not represented to be error free. The FHLBNY makes no representations or warranties of any kind with respect to the content contained herein, such representations and warranties being expressly disclaimed. The FHLBNY is not a financial or investment advisor.
Moreover, the FHLBNY does not represent or warrant that the content of these disclosures is accurate, complete or current for any specific or particular purpose or application. It is not intended to provide nor should anyone consider that it provides legal, accounting, tax or other advice. Such advice should only be rendered in reference to the particular facts and circumstances appropriate to each situation. The FHLBNY encourages you to contact appropriate professional(s) and consultant(s) to assess your specific needs and circumstances and to render such advice accordingly. In addition, the FHLBNY is not endorsing or recommending the use of the means or methods contained in or through these disclosures for any special or particular purpose.
It is solely your responsibility to evaluate the risks or merits of any funding or investment strategy. In no event will FHLBNY or any of its officers, directors or employees be liable for any damages — whether direct, indirect, special, general, consequential, for alleged lost profits, or otherwise – that might result from any use of or reliance on these materials.