FEDERAL HOME LOAN BANK OF CHICAGO 2012 BOARD OF DIRECTORS COMPENSATION POLICY [Revised as of October 1, 2012]

Section 1261.21 of the Rules and Regulations of the Federal Housing Finance Agency requires the Board of Directors to adopt a written policy to provide for the payment of reasonable compensation to Bank Directors for the performance of their duties as members of the Board of Directors. Pursuant to that regulation, this 2012 Board of Directors' Compensation Policy ("Policy") sets forth the activities and functions for which attendance is necessary and appropriate and may be compensated, and sets forth the methodology for determining the amount of compensation to be paid. This Policy shall be reviewed annually by the Human Resources & Compensation Committee.

The goal of the Policy is to appropriately compensate the Directors for actual attendance and participation at the meetings of the Board of Directors and the committees of the Board and also for work performed on behalf of the Board of Directors and the Bank apart from such meetings.

The compensation provided in this Policy was determined after a review of comparative compensation studies by third parties with expertise in the compensation of directors (McLagan "Directors Compensation Analysis" September 2010) and the compensation paid to directors of other Federal Home Loan Banks in 2012.

In order to compensate Directors for their time while serving as Directors outside of normal Committee and Board meetings, Directors shall be paid a quarterly retainer, at the end of each quarter. The retainer shall compensate Directors for their time preparing for meetings, attending Bank-sponsored member meetings and events, attending Community Investment Advisory Council meetings, attending FHLB System meetings, Board training sessions, and other activities outside of normal Committee and Board meetings. The amount of the quarterly retainer varies depending on the responsibilities of the Director as set forth below:

In order to compensate Directors for their time while serving as Directors, each Director who attends a meeting of the full Board of Directors or a Committee meeting (including participating by telephone) shall be paid a Board Meeting Attendance Fee. The amount of the Board Meeting Attendance Fee varies depending on the role served at the meeting.

Board Meeting Attendance Fees shall be calculated for each director as follows:

An “attendance fee opportunity” means a day on the 2012 Board Schedule where the full Board of Directors and/or a Committee on which the director serves is scheduled to meet. On a day where more than one meeting occurs, only one Board Meeting Attendance Fee shall be paid.

No additional meeting fees will be paid to any Director for their participation in any other special meetings or events on behalf of the Board of Directors or the Bank.

Each Director will be reimbursed for necessary and reasonable travel, subsistence and other related expenses incurred in connection with the performance of their official duties (including telephonic meetings or in-person meetings called at the request of the Federal Housing Finance Agency or other FHLB System body) as are payable to senior officers of the Bank under the Bank's Employee Reimbursement Policy.

The Bank will pay the transportation and other reasonable travel expenses of one guest of a director to attend a Board meeting only as specified in advance by the Bank. It is the director's responsibility to pay the transportation and other travel expenses of a guest that accompanies such director to any other Board meeting.

The following performance criteria shall be considered in assessing a director's performance:

Each director shall fulfill his or her responsibilities by regularly and consistently attending meetings of the Board of Directors and any assigned committees. The Board's attendance standard shall be to attend in person or by telephone at least 75% of the total scheduled meetings of the Board and assigned committees, measured annually.

The Human Resources & Compensation Committee of the Board of Directors shall withhold the fourth quarter retainer payment to any Director who does not fulfill his or her responsibilities by failing to meet the majority of the performance criteria set forth above or by failing to attend 75% of the meetings of the Board of Directors and any assigned committees.

The Human Resources & Compensation Committee may designate a director's absence for a good cause from a scheduled meeting as an “excused absence.” An “excused absence” shall be recorded as a director in attendance for the 75% attendance standard but such director shall not be paid a meeting fee. Examples of what may be an “excused absence” include a medical condition of the director or their immediate family and an unexpected business conflict pertaining to the directors' primary business.

This Policy shall be in compliance with Section 7(i) of the Federal Home Loan Bank Act (12 U.S.C. §1427(i)), as amended, and any regulations issued by the Federal Housing Finance Agency, including 12 C.F.R. Part 1261.

The provisions of this revised Policy shall be applied commencing as of October 1, 2012. Thus, there will be a fourth quarter retainer payment (payable in early 2013) subject to performance and attendance criteria and Meeting Attendance Fees. Any payments for the fourth quarter 2012 shall be subject to the 2012 maximum compensation amounts.

This revised 2012 Board of Directors Compensation Policy is effective as of October 1, 2012.

APPROVED BY THE BOARD

OF DIRECTORS

            

Dated: September 25, 2012

/s/ Peter E. Gutzmer                

Its Corporate Secretary