Regulators outlined the steps thrifts should take before investing in derivatives called structured notes, which seem safe because of they carry. investment-grade ratings.

The Office of Thrift-Supervision on Tuesday issued guidelines and a warning to the industry about the relatively new investments, most of which are issued by government-sponsored enterprises such as the Federal National Mortgage Association, or Fannie Mac.

Anthony G. Cornyn, the OTS' deputy assistant director for policy, said the new guidelines are necessary to remind institutions to "know what you are buying."

Structured notes usually earn triple-A credit ratings, but can suddenly plunge in value when interest rates change.

Some buyers have mistakenly assumed the instruments were not risky because of their top credit rating, yet they can hold significant interest rate and liquidity risks.

"Certain types of structured notes may be appropriate investments for only the most sophisticated investors," the OTS guidelines warn.

"Just because they are issued by a government-sponsored agency does not mean they can't suffer a loss." Mr. Cornyn said.

So far, no thrifts have run aground on structured notes.

"We have not had any reports of specific problems or major losses in the thrift industry," Mr. Cornyn said.

The thrift trade group praised the new OTS guidelines. "Financial institutions should know what they are buying and use these guidelines to evaluate risk and pricing," said Marti Sworobuk. Ms. Sworobuk handles financial management issues at the Savings and Community Bankers of America.

"The OTS is recommending a strong, commonsense approach to evaluating these customized instruments," she said.

The Office of the Comptroller of the Currency and the Federal Reserve issued similar warnings about a month ago to the institutions they regulate, and the Federal Deposit Insurance Corp. is expected to follow suit soon.

Thrifts that buy structured notes should be sure they fit into the institution's investment plan.

They must also understand their complicated features and conduct interest rate stress-testing before and after the purchase, the OTS said.

They also should get an independent valuation of the notes and gauge their liquidity and credit risks.

Common structured notes are step-up bonds, index-amortizing notes, dual-index notes, deleveraged bonds, range bonds, and inverse floaters.

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