ALEXANDRIA, Va. — The NCUA's proposed rule to allow credit unions to invest in TIPS has been 14 years in the making.

During Thursday's board meeting, Board Member Gigi Hyland asked for more information about the TIPS pilot program that supported the decision to allow the investment.

Rick Mayfield, the NCUA's senior capital markets specialist, said just two credit unions participated in the program, with only one actually investing in TIPS.

Hyland then questioned how many credit unions are expected to invest in the securities as a result of the proposed rule. Mayfield said he couldn't say; that it would depend upon interest rates.

Board Member Michael Fryzel asked why only two credit unions participated in the pilot program, and when the pilot program began. Mayfield replied the NCUA ran two pilot programs, one in 1998 and a second in 2002.

Fryzel then questioned the NCUA's effectiveness in informing credit unions about the program, suggesting that rather than just post information online, the agency should notify all eligible credit unions by letter.

Hyland said while she agreed with Fryzel that the agency waited too long after conducting the pilot programs to take action, and just one credit union's participation is “startling,” she questioned the need to invite all credit unions to participate in a pilot program.

Mayfield said the agency was considering making the investment change in 2007, but was “driven off course” by the financial disaster. Still, Mayfield admitted, even 2007 would have been too long after the pilot programs.

NCUA Board Chairman Debbie Matz said the NCUA's Office of Examination and Insurance was currently compiling a list of pilot programs for the board's review.

“Yes, Chairman, they've been doing that for a long time,” Fryzel shot back.

According to an NCUA release, TIPS differ from other securities in that they provide protection against inflation; the principal increases with inflation and decreases with deflation.

Mayfield said it shouldn't take long for NCUA staffers to get up to speed on effective examination of credit union TIPS investing, and added that the regulator will also issue guidance to credit unions on how TIPS would fit into an institution's asset liability management.

The board approved the proposed rule, which will have a 60-day comment period before being finalized.