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InfoSight Highlight: Investments—Permissible Investments
Friday, May 12, 2017 7:00 AM

Variable rate investment.
A federal credit union may invest in a variable rate investment, as long as the index is tied to domestic interest rates. Except in the case of Treasury Inflation Protected Securities, the variable rate investment cannot, for example, be tied to foreign currencies, foreign interest rates, or domestic or foreign commodity prices, equity prices, or inflation rates. For purposes of this part, the U.S. dollar-denominated London Interbank Offered Rate (LIBOR) is a domestic interest rate.

Corporate credit union shares or deposits. 
A federal credit union may purchase shares or deposits in a corporate credit union, except where the NCUA board has notified it that the corporate credit union is not operating in compliance with part 704 of this chapter. A federal credit union's aggregate amount of perpetual and non-perpetual capital, as defined in part 704 of this chapter, in one corporate credit union is limited to 2 percent of the federal credit union's assets measured at the time of investment or adjustment. A federal credit union's aggregate amount of contributed capital in all corporate credit unions is limited to 4 percent of assets measured at the time of investment or adjustment.

Registered investment company. 
A federal credit union may invest in a registered investment company or collective investment fund, as long as the prospectus of the company or fund restricts the investment portfolio to investments and investment transactions that are permissible for federal credit unions.

Collateralized mortgage obligation/real estate mortgage investment conduit. 
A federal credit union may invest in a fixed or variable rate collateralized mortgage obligation/real estate mortgage investment conduit.

Municipal security. 
A federal credit union may purchase and hold a municipal security, as defined in Section 107(7)(K) of the Act, only if it conducts and documents an analysis that reasonably concludes the security is at least investment grade. The federal credit union must also limit its aggregate municipal securities holdings to no more than 75 percent of the federal credit union’s net worth and limit its holdings of municipal securities issued by any single issuer to no more than 25 percent of the federal credit union’s net worth.

Source:  InfoSight Compliance.

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