Urban Institute Study Shows FHLBank System Mitigates Bank Financial Stress, Delivering Billions in Annual Economic Value

Breakthrough Study Estimates $13.2–$21.4 Billion Benefit Tied to Reduced Bank-Failure Risk and Stronger Financial Stability

WASHINGTON, Nov. 12, 2025 (GLOBE NEWSWIRE) -- The Council of Federal Home Loan Banks today highlighted new and compelling research by the Urban Institute, a nationally respected, nonpartisan think tank based in Washington, D.C.

The study – the first in an expected three-part Urban Institute research series – highlights and quantifies the value of the FHLBank System, measuring the economic benefit the 11 Federal Home Loan Banks deliver by reducing systemic stress and lowering the likelihood of bank failures and estimating that these stability effects generate $13.2 billion to $21.4 billion in annual economic value, depending on market conditions.

This study is the first independent effort to assign a measurable dollar value to the FHLBanks’ liquidity and stability functions, helping to fill a long-standing gap in public understanding of the System’s essential economic contributions.

“For the first time, we have an independent, data-driven estimate of the value the FHLBanks bring from reduced bank failure risk and increased stability to the banking system,” said Ryan Donovan, President and CEO of the Council of Federal Home Loan Banks, the public voice of the FHLBank System. “The Urban Institute has quantified what we’ve long known to be true: by delivering reliable liquidity to approximately 6,500 financial institution members, the FHLBanks provide stability and support that not only strengthens their members but also strengthens the resilience of the broader financial system and the U.S. economy. This isn’t simply our perspective – it is now supported by independent analysis.”

Highlights of the study include:

• The FHLBanks deliver liquidity benefits to the U.S. economy of $13.2 to $21.4 billion annually – 1.9 to 3.1 times greater than the $6.9 billion annual benefit the Congressional Budget Office (CBO) estimated the FHLBanks receive from their government-sponsored enterprise (GSE) status in 2024.
  
  
• During periods of funding strain, banks turn to the FHLBanks. A one-percentage-point decline in liquid assets is associated with a 0.37-percentage-point increase in advances – demonstrating that the System provides a flexible liquidity backstop.
  
  
• FHLBank funding strengthens member-bank financial stability. A one-percentage-point increase in advances (as a share of assets) corresponds to a 19-point improvement in a bank’s solvency (z-score) the following quarter.
  
  
• FHLBank membership reduces the bank-failure rate by roughly 10 percent and yields $950 million in annual savings to the federal deposit-insurance system.
  
  
• FHLBank membership reduces overall systemic risk in the banking system. At the macro level, increased advances are associated with a persistent 0.3-percentage-point decline in systemic tail-risk (CATFIN index). Today, 86 percent of U.S. banking assets are held by FHLBank members – underscoring the System’s reach and importance.
  
  
  • The FHLBank System acts as a shock absorber in the financial system. Access to advances during the March 2023 banking turmoil helped prevent additional failures by supplying liquidity earlier in the crisis timeline and giving regulators and policymakers more time to respond.
    
    
• The study also found that U.S. homeowners save $3.8 billion each year in lower-cost mortgages thanks to FHLBank liquidity.
  
  

The Council of Federal Home Loan Banks commissioned the study to provide independent measurement of the System’s economic value – long recognized but never formally quantified.

The mission of the FHLBanks is rooted in the belief that local strength powers national stability. The FHLBanks are member-owned cooperatives and the findings from Urban Institute reaffirm that the FHLBank System is more than a funding source – it is lending that powers communities.

About: The FHLBanks are 11 regionally based, wholesale suppliers of lendable funds to financial institutions of all sizes and many types, including community banks, credit unions, commercial and savings banks, insurance companies, and community development financial institutions. The FHLBanks are cooperatively owned by member financial institutions in all 50 states and U.S. territories. The steady supply of lendable funds from FHLBanks helps U.S. lenders invest in local needs including housing, jobs, and economic growth. The Council of FHLBanks represents all 11 FHLBanks.

CONTACT INFORMATION
Council of FHLBanks
Peter E. Garuccio
202-955-0002 ext. 14
pgaruccio@cfhlb.org

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