OIG says FHFA should improve administration of Suspended Counterparty Program

This story appeared in Bank Digest.                                  

The Federal Housing Finance Agency’s Office of Inspector General has issued a report to assess the administration by the FHFA's Office of General Counsel of the agency's Suspended Counterparty Program and determine whether the program is achieving its stated objective. According to the report, the FHFA adopted the SCP in June 2012 to augment counterparty risk management programs of Fannie Mae and Freddie Mac and the Federal Home Loan Banks (the regulated entities) that were designed to protect them from excessive financial loss caused by deterioration in a counterparty's financial condition.                                   

The OIG found deficiencies in OGC's administration of the SCP, the remediation of which could enable the program to effectively limit the regulated entities' exposure to the risks inherent in doing business with counterparties found to have engaged in covered misconduct, according to the report. The OIG recommended that the FHFA establish a plan with a timeline to reduce the backlog of referrals under the SCP and document its reasons for any departures from the suspension periods prescribed in its guidelines.