BOARD ACTIONS SEPTEMBER 2012 (FROM PAGE 3)
Through an advance notice of proposed rulemaking, the
Board is seeking comments about the application fee and
posing specific questions, such as:
n Should the Board increase the permissible PAL interest
rate, currently 28 percent?
n Should the Board expand the permissible PAL dollar range
from the current $200 to $1,000?
n Should the Board permit PAL maturities shorter than one
month or longer than six months?
n Should the Board allow federal credit unions to make more
than one PAL at a time to a borrower?
The Board is also seeking information from credit unions
offering other viable, responsible alternatives to payday loans
and the business models they are using to execute these loan
To learn more about the advance notice of proposed
rulemaking, go to http://go.usa.gov/YTA5. Comments are
due by Nov. 26, 2012.
Board Proposes Allowing Credit Unions
to Invest in TIPS
The Board issued a proposed rule to allow federal credit
unions to invest in the variable-rate instruments known as a
Treasury Inflation Protected Securities, or TIPS.
“This proposal to permit TIPS originated from an idea we
first heard at our recent Listening Session in Alexandria,” said
Chairman Matz. “Participants asked us to consider TIPS as a
strategy to allow federal credit unions to buy government-
backed investments that are not tied to interest rates. Because
TIPS are backed by the U.S. Treasury, they carry no credit
risk. And because TIPS are tied to the Consumer Price Index
rather than a specific interest rate, they may carry less interest
rate risk than other Treasury investments.”
When the rule is finalized, federal credit unions could use
TIPS to protect against inflation risk. Additionally, TIPS
could be a valuable part of an effective risk-management
program. However, the Board noted that TIPS may not be
appropriate for all federal credit unions, and the decision to
use them should be based on sound due diligence and a
demonstrated effectiveness at managing risk.
TIPS differ from other securities in that they provide
protection against inflation. The principal increases with
inflation and decreases with deflation. TIPS are currently a
prohibited investment for federal credit unions, because they
re-price in response to changes in the Consumer Price Index
(CPI), and the CPI is a prohibited index for variable-rate
instruments. Federal credit unions may invest in variable-rate
instruments that have rates tied to a domestic interest rate,
such as the Fed Funds rate, Treasury rates or LIBOR.
The purpose of this prohibition is to reduce the basis risk
between the interest earned on assets and dividends paid on
shares. Federal credit unions with greater access to
asset/liability management tools to identify and measure risk
may be better equipped to manage the risks associated with
using CPI as an index.
To learn more about the TIPS proposed rule, see
http://go.usa.gov/YTs4. Comments on the proposed rule are
due by Nov. 26, 2012.
All open NCUA Board meetings are tweeted live. Follow
@TheNCUA on Twitter. Board Action Memorandums and
NCUA rule changes are available online at www.ncua.gov.
HYLAND LEAVES NCUA BOARD AFTER SEVEN YEARS OF ACCOMPLISHMENTS
After seven years of service as a member
of the NCUA Board, Gigi Hyland left the
agency earlier this month.
NCUA Board Chairman Debbie Matz
said, “During her seven years on the
Board, Gigi has been an exemplary public
servant. The credit union industry and the
agency have been the beneficiaries of her
intellect, tenacity and dedication to a safe
and sound system.” Board Member Fryzel added, “Gigi
Hyland has been an outstanding member of the NCUA Board.
She has brought knowledge, integrity and common sense in
making tough decisions during troubled economic times.”
Hyland’s many accomplishments include:
n Leading an internal working group which produced the
2010 Supplemental Capital White Paper.
n Chairing NCUA’s Outreach Task Force which provided a
better understanding and evaluation of the agency’s
n Hosting and moderating a two-day Symposium for the
75th Anniversary of the Federal Credit Union Act.
n Facilitating a summit on alternatives to payday lending.
n Initiating the use of webinar technology.
Ms. Hyland represented NCUA through her active
participation as a liaison or member in several outside
organizations including: National Association of State Credit
Union Supervisors, World Council of Credit Unions,
International Credit Union Regulators’ Network and Steering
Committee (founding member), NeighborWorks America
(served on the board and recently as chairman).