Federal Home Loan Banks: Actions Related to the Spring 2023 Bank Failures

What GAO Found

Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank had borrowed substantial secured loans, or advances, from their respective Federal Home Loan Banks (FHLBanks) before their failures in spring 2023. As of year-end 2022, each of the three banks held substantially more FHLBank advances (as a proportion of their total assets) than a group of their peer banks.

The three banks increased their outstanding FHLBank advances by 37 to 50 percent in the first 2 weeks of March 2023, when SVB and Signature Bank failed (see table). First Republic Bank’s outstanding advances then largely stabilized until the bank failed on May 1.  

Percentage Changes in Outstanding Federal Home Loan Bank Advances for Failed Banks, March 1, 2023–Failure Date

Source: GAO analysis of Federal Home Loan Bank (FHLBank) advance data. | GAO-24-106957

Prior to the three bank failures, the FHLBanks of New York and San Francisco reviewed examination reports for the three failed banks and stated that they met regularly with the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Banks, and other regulators. The two FHLBanks and FDIC communicated about Signature Bank and First Republic Bank as the banks were declining. In addition, the two FHLBanks relied on established policies, procedures, and agreements with the relevant Federal Reserve Banks to help Signature Bank and First Republic Bank access additional funding. However, officials from the FHLBank of San Francisco said that SVB failed before they could coordinate with the Federal Reserve Bank of San Francisco to request additional supervisory information or facilitate SVB’s access to additional funding.

Since the bank failures, the FHLBanks have received full repayment for SVB’s and Signature Bank’s advances. The bank that acquired First Republic Bank’s advances has indicated that it intends to repay the advances according to the advance terms.

Why GAO Did This Study

Between March 10 and May 1, 2023, state banking supervisors closed SVB, Signature Bank, and First Republic Bank and named FDIC as receiver.

The three failed banks had borrowed substantial secured loans (known as advances) from their respective FHLBanks before their failures. The FHLBanks are government-sponsored enterprises that support liquidity by making advances to member financial institutions and promote housing and community development. SVB and First Republic Bank were members of the FHLBank of San Francisco, and Signature Bank was a member of the FHLBank of New York.

GAO was asked to review the role of the FHLBanks with regard to the recent bank failures. This report provides information on the FHLBanks’ funding to the failed banks, their communication and coordination with FDIC and the Federal Reserve System (the failed banks’ primary federal regulators), and repayment of the failed banks’ outstanding advances. This report is one in a series of reports about the bank failures. GAO plans to follow this report with work on broader issues related to the FHLBanks.

GAO reviewed relevant laws and regulations; publications, policies, procedures, and other documentation and data from the FHLBanks and the federal banking regulators; and publicly available regulatory reporting data for the three failed banks. GAO also interviewed officials from the FHLBanks, federal banking regulators, and others.

For more information, contact Jill Naamane at (202) 512-8678 or NaamaneJ@gao.gov.