The Federal Housing Finance Agency released guidance in late January on how the Federal Home Loan Banks should classify investment securities. In doing so, it adopted the 2013 Uniform Agreement for FHLBank supervisory purposes. Where FHFA’s rule and guidance and the 2013 Uniform Agreement may conflict, the FHFA said its rules and guidance will apply. The directive states that FHLBanks should use “sound and conservative assumptions” as they pertain to upgrades and it provides classification approach examples and boundaries. For example, when a bank is considering whether to upgrade a classified security to “pass,” it should base its assessment on assumptions that minimize the likelihood that the FHLBank would need to classify the security again in the future.