NCUA Report - March 2013

MARCH 2013 NUMBER 3

WWW.NCUA.GOV

HIGHLIGHTS

2 Chairman’s Corner The New NCUA

3 Board Actions Share Insurance Fund Finishes 2012 in a Strong Position

4 Board Perspective Less May Be Best

5 NCUA Permanent Funds Earn Clean Audits

6 Understanding the Risks of Private Student Loans

7 Deadline for Comments on FFIEC Proposed Social Media Guidance is March 25

7 Credit Unions Should Remind Their Members of Eligibility for the Earned Income Tax Credit

8 Dealing with Distributed Denial of Service Attacks: A Layered Risk-Mitigation Approach

8 Join the NCUA Team

9 NCUA Helping State Regulators Identify Low-Income Eligible State-Chartered Credit Unions

10 Introducing the New MyCreditUnion.gov and Pocket Cents

NCUA Board Report

TIPS FINAL RULE GIVES CREDIT UNIONS
NEW INVESTMENT OPTION

Federal credit unions now have an additional risk-management tool with the NCUA Board’s approval of a final rule (Section 703.14) adding Treasury Inflation Protected Securities (TIPS) as a permissible investment.

a prohibited index for variable-rate securities.

“The idea of permitting TIPS came up during
one of my Listening Sessions last year,”
Chairman Matz said. “NCUA’s research and
analysis showed these securities could be a
valuable tool for federal credit unions if
properly managed, so we’ve acted to prudently
provide greater regulatory flexibility.”
TIPS are securities issued by the U.S. Treasury
Department that differ from other types of
securities by providing protection against
inflation. The principal increases or decreases
with inflation, as measured by the Consumer
Price Index. When TIPS mature, holders are
paid the adjusted principal or the original
principal, whichever is greater. Previously,
federal credit unions could not invest in TIPS
because the Consumer Price Index is generally
The Board noted investing in TIPS may not
be appropriate for every federal credit
union, and that sound due diligence and a
demonstrated ability to manage this risk
should precede a decision to purchase TIPS.
In particular, credit unions must have a full
understanding of the interest-rate risk
inherent in TIPS. TIPS price performance,
as a sector, has behaved similar to fixed-rate
Treasuries at various points in time. Credit
unions should have reasonable and
supportable price change assumptions when
modeling their net economic value.

The final TIPS rule is effective on March 29, 2013. For more information, visit http://go.usa.gov/2xEx. NCUA will also end a TIPS investment pilot program at the same time.

Visit http://go.usa.gov/4Jnd to learn more about TIPS.

Four current and former NCUA Chairmen meet
during the Credit Union National Association’s
2013 Governmental Affairs Conference in
Washington, D.C. (From left to right) Dennis Dollar
(2001–2004), JoAnn Johnson (2004–2008),
Debbie Matz (current) and Mike Fryzel (2008–2009).