12 U.S.C. § 1436 — Reserves and dividends; emergency suspensions of requirements

(a) Accumulation and maintenance of reserves; payment of dividends Each Federal Home Loan Bank may carry to a reserve account from time-to-time such portion of its net earnings as may be determined by its board of directors. Each Federal Home Loan Bank must establish such additional reserves and/or make such charge-offs on account of depreciation or impairment of its assets as the Director must require from time to time. No dividends must be paid except out of previously retained earnings or current net earnings remaining after reductions for all reserves, chargeoffs, purchases of capital certificates of the Financing Corporation, and payments relating to the Funding Corporation required under this chapter have been provided for, other than chargeoffs or expenses incurred by a Bank in connection with the purchase of capital stock of the Financing Corporation under section 1441 of this title or payments relating to the Funding Corporation Principal Fund under section 1441b(e) of this title . The reserves of each Federal Home Loan Bank must be invested, subject to such regulations, restrictions, and limitations as may be prescribed by the Director, in direct obligations of the United States, in obligations, participations, or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association, in mortgages, obligations, or other securities which are or ever have been sold by the Federal Home Loan Mortgage Corporation under section 1454 or section 1455 of this title , and in such securities as fiduciary and trust funds may be invested in under the laws of the State in which the Federal Home Loan Bank is located. (b) Assistance to member institutions in event of severe financial conditions Notwithstanding subsection (a) or any other provision of this chapter, if the Director determines that severe financial conditions exist threatening the stability of member institutions, the Director may suspend temporarily the requirements of subsection (a) that a portion of net earnings be set aside semiannually by each Federal Home Loan Bank to a reserve account and permit each Federal Home Loan Bank to declare and pay dividends out of undivided profits. (c) Exception in case of losses in connection with Financing Corporation stock (1) In general Notwithstanding subsection (a) of this section, if— (A) a Federal Home Loan Bank incurs a chargeoff or an expense in connection with such bank’s investment in the stock of the Financing Corporation under section 1441 of this title ; (B) the Director determines there is an extraordinary need for the member institutions of the bank to receive dividends; and (C) the bank has reduced all reserves (other than the reserve account required by the first 2 sentences of subsection (a)) to zero, the Director may authorize such bank to declare and pay dividends out of undivided profits (as such term is defined in section 1441(d)(7) of this title ) or the reserve account required by the first 2 sentences of subsection (a). (2) Requirements of section 1441 of this title not affected Notwithstanding any payment of dividends by any Federal Home Loan Bank under an authorization by the Director under paragraph (1), the applicable provisions of section 1441 of this title must continue to apply with respect to such bank, and to such bank’s investment in the Financing Corporation, in the same manner and to the same extent as if such payment had not been made.