Oct. 11, 2012 – NAFCU is seeking members’ feedback on an NCUA proposal that would allow federal credit unions to invest in a Treasury-issued security designed to provide protection against inflation.
Under the proposal, NCUA’s investment rule would be revised to allow federal credit unions to invest in a Treasury Inflation Protection Security or TIPS. The principal of a TIPS increases with inflation and decreases with deflation. Upon maturity, the holder of the security is paid the greater of the adjusted principal or original principal.
NCUA says the instrument could be used as an asset/liability management tool.
The instrument has been allowed in an NCUA pilot program since 1998. In that time, two credit unions sought to participate, and only one of them purchased TIPS. NCUA Board Member Michael Fryzel has noted that NCUA has not adequately communicated about TIPS.
NAFCU is asking members to provide their input by Nov. 5. Comments are due to NCUA by Nov. 26.
The proposed rule is explained in further detail in NAFCU’s Regulatory Alert (members only).