Fazio also addressed how the Financial Accounting Standards Board's current expected credit loss proposal would affect the NCUA's proposed risk based capital rule. If FASB finalizes the CECL proposal, Fazio said, the NCUA estimates credit unions would have to increase their loan loss reserves by 20 to 40%. That would result in decreased income, and would hamper a credit union's ability to accumulate capital, he added.

However, the loan loss allowance account is included in the numerator that calculates a credit union's risk based capital ratio, Fazio said, so it would be counted toward the ratio.

However, loan loss reserves would not be counted toward the statutory leverage ratio requirement, he added. Credit unions would have to increase the funding to make the transition to that new standard, he said.

The risk based capital rule is expected to be finalized by the end of this year, Matz said.

Regarding fair lending exams, Gail Laster, director of the NCUA's Office of the Consumer Protection, said she does not anticipate an increase in the agency's enforcement actions against credit unions that violate fair lending rules. The NCUA conducted 25 onsite fair lending exams last year, and plans to keep that number consistent this year, she said.

Regarding the release of the NCUA's line item budget detail, which was posted on the agency's website Friday, Matz said a glossary of acronyms used in the documents will be provided for clarification.

Fazio downplayed increasing reports of internal fraud in credit unions, saying the pace of fraud occurrences have been consistent over the last 20 years. The NCUA addresses a handful of fraud cases in a given year that account for between 20% to 70% of losses to the share insurance fund, he said.

To combat internal fraud, the NCUA updated exam procedures for small credit unions and enhanced red flag detection techniques to highlight the high probability of fraud in small institutions, Fazio said. Small credit unions are especially vulnerable to fraud because with so few employees, it's hard for the institution to segregate duties, he added.

"Sometimes we're highly suspicious but can't prove fraud is going on," Fazio said. He said the agency is also working closely with bond insurers and CPA firms that audit credit unions to detect fraud.

Later, in response to a question asking if the NCUA could share some techniques with credit unions to prevent fraud, Fazio said NCUA technologies are aimed at detecting fraud, not preventing it. The regulator can't share that information because it is proprietary, he said.

"We don't want those committing fraud to understand how we are going about finding it," he said.

Along those lines, NCUA Deputy Executive Director John Kutchey declined to reveal the NCUA's cybersecurity policy to protect internal data, saying doing so would make it easier for hackers to find weaknesses. However, he offered that reports on cybersecurity audits conducted by the NCUA's Inspector General are posted on the agency's website, although sensitive information in those reports may be redacted.