Why It Matters

Recent GAO congressional testimony examined the role of the Federal Home Loan Banks (FHLB) in providing liquidity during financial stress, and revealed significant coordination gaps exposed by the March 2023 bank failures. The report was delivered before the House Committee on Financial Services, Subcommittee on Housing and Insurance on July 21.

In the weeks before those failures, Silicon Valley Bank and Signature Bank had borrowed large sums from their FHLB banks. Silicon Valley Bank increased its outstanding advances by 50 percent in the first week of March 2023 before its failure on March 10. Signature Bank increased its outstanding advances by 37 percent that same month before failing on March 12. That month, total advances outstanding to all FHLB members reached approximately $1 trillion, exceeding levels seen during previous financial market disruptions.

Broader Context

The testimony synthesizes findings from two prior GAO reports: a March 2024 report (GAO-24-106957) on actions related to the spring 2023 bank failures, and a December 2025 report (GAO-26-107373) on the FHLB's role during financial stress and members' borrowing trends.

Congressional scrutiny intensified after the 2023 regional banking crisis renewed questions about whether FHLB liquidity support accelerated, rather than prevented, bank failures. The hearing was chaired by Rep. Mike Flood (R-NE-01), per the House Financial Services Committee.

The December 2025 report found that as of June 2025, 93 percent of banks, or roughly 4,100 institutions, were FHLB members, and more than three-quarters had taken out at least one advance between June 2015 and June 2025. Large banks, defined as those with more than $10 billion in total assets, represented approximately 3 percent of active FHLB members but held nearly 74 percent of all outstanding FHLB borrowing during that period.

FHLB generally lends to members if the requested amount falls within available borrowing capacity based on pledged collateral or credit limits. They may limit or deny advances based on supervisory information from a member's primary regulator. In March 2023, FHLB and federal banking regulators increased communication frequency, but the banks' rapid decline limited further action.

After the failures, FHLB and Federal Reserve System initiated two coordination efforts: increasing engagement between FHLB and Federal Reserve Banks, and establishing a working group to improve interoperability between the two systems. As of the December 2025 report, both efforts were in the early stages.

The Bottom Line

The March 2023 bank failures exposed a structural weakness. FHLB continued advancing funds to failing institutions while coordination with Federal Reserve Banks lagged. The two post-crisis initiatives address that gap, but their early-stage status as of late 2025 means the system has not yet demonstrated it can respond faster under stress. With large banks holding nearly three-quarters of all outstanding FHLB borrowing, the stakes of any future coordination failure remain high.

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