U.S. officials are considering limits on the ability of large lenders to use Federal Home Loan Banks as a financial backstop, part of a broader proposal to overhaul the system, Bloomberg News reported. The changes, which are being discussed as part of a sweeping review by an American regulator, would amount to the most dramatic reshaping of the $1.6 trillion system in decades. The Federal Housing Finance Agency may still adjust its plans before announcing the recommendations in the coming months, according to people familiar with the matter. Reining in big lenders’ ability to borrow could also require congressional action. The FHLBs have emerged as a flash point after the institutions, which have implied support from the federal government, lent billions of dollars to Silicon Valley Bank, Signature Bank and First Republic Bank before they collapsed earlier this year. Since their creation to boost home lending during the Great Depression, the FHLBs have morphed into a backstop for their members, while the system’s role in housing finance has diminished.
