ALEXANDRIA, Va. — The next time the NCUA opens up Part 703 for proposed changes, it will recommend that the regulation allows credit unions to invest in Treasury Inflation-Protected Securities, Office of Examination and Insurance Director Larry Fazio told credit union executives attending the agency’s Listening Session in Alexandria, Va., on Wednesday.
Currently credit unions are prohibited by regulation from investing in TIPS – which protect against inflation because the principal increases with inflation and decreases with deflation – because the rate isn’t tied to a U.S.-based rate, Fazio said.
However, the NCUA conducted a pilot program with TIPS investing, and it was successful, Fazio said.
The announcement followed a question from the audience asking why the NCUA won’t allow the investments, because they are a Treasury investment that protects against interest rate risk and would improve credit union balance sheets.
The event drew approximately 100 participants, and was scheduled to primarily address exam issues and regulatory burdens. The audience did ask questions regarding those topics, but questions also ventured into the future of small credit unions, the future of the credit union business model, the effect charter conversions could have on assessments, and the safety and soundness of private share insurance.