WASHINGTON (12/3/12)--Federal credit unions should be permitted to invest in Treasury Inflation Protected Securities, the Credit Union National Association (CUNA) said in a comment letter to the National Credit Union Administration (NCUA).
Allowing such investments, as proposed by the NCUA, will allow credit unions to protect against inflation and manage interest-rate risk, wrote CUNA Senior Vice President and Deputy General Counsel Mary Dunn. She also urged the agency to work with state regulators to find a way to let well-managed state credit unions invest in these securities.
Currently, investments in TIPS are allowed under a limited basis under a pilot program.
CUNA believes that "a credit union should undertake sufficient analysis before purchasing any TIPS and be able to manage its TIPS investments on an ongoing basis, current requirements regarding due diligence and risk management are sufficient, and no additional requirements in these areas should be imposed on credit unions in connection with TIPS authority,'' she wrote.
The TIPS market has been in existence for 15 years and TIPS are fully guaranteed by the U.S. government. The principal is adjusted based on changes in the Consumer Price Index, while the interest rate, which is paid semiannually on the adjusted principal, remains fixed.
Use the resource link to access CUNA comment letters.