Currently, credit unions are prohibited by regulation from investing in TIPS, which protect against inflation and interest rate risk because the rate isn't tied to a U.S.-based rate, Fazio said.

Earlier in the session, Fazio opened with remarks about how to create a productive examination environment.

“If there's just one thing you walk away with today, it's the importance of investing in the relationship with your examiner,” Fazio said. “It should be an ongoing process and include regular communication during the year…so when things do come up, you already have that relationship established, and things are easier to work though.”

Fazio said he's received feedback that credit unions would like examiners to differentiate between credit union performance and management performance. If a credit union is experiencing difficulties with a bad local economy or SEG issues, “it doesn't have to be a negative reflection on management,” he said.

On the other side of the boardroom table, credit union managers should refrain from using exams as an opportunity to vent about the NCUA.

“It's understandable, the NCUA isn't perfect, but there's not a lot an examiner can do about it, and it puts them on the defensive and makes things difficult,” Fazio said.

Joan Moran, president/CEO of the $68 million Department of Labor FCU in Washington, said her table wanted to know what a credit union executive should do if an examiner insists upon implementing something that isn't required by regulation.

NCUA Executive Director David Marquis responded, saying a lot of issues the examiner encounters have nothing to do with a regulation.

“If you look at the history of how we've lost credit unions, they didn't violate a reg, they violated basic policies and procedures, their due diligence was lacking, they had poor management or insufficient underwriting standards or too much concentration risk,” he said. “That's how we lose credit unions that cost the most money to the share insurance fund, and if we tried to write regulations on all of those things, we'd kill you because there would be too many, and it would create a one size fits all regulatory environment.”

Currently, examiners are looking at two systemic threats to credit unions: interest rate risk and concentration risk. Fazio said both involve credit unions taking a big position on long-term mortgage loans at low rates and offsetting them with short-term, volatile deposits like money markets and certificates.

Examiners are also concerned about the rate of mergers, which often involve small credit unions, Marquis said. The NCUA has been merging an average of one credit union per day for the past three years, and examiners worry mergers will prevent them from having a full career at the NCUA.

Currently, the NCUA considers a credit union with $10 million in assets or less to be a small credit union; however, Marquis said if that number were adjusted for today's numbers, it would be closer to $18 or $20 million.

Ricardo Pineres, vice president of advocacy and legislative affairs for the Maryland and D.C. Credit Union Association, asked what effect bank charter conversions would have on the corporate assessment rate for remaining credit unions.

Fazio said the NCUA has modeled the scenario and discovered that, based on what's left to be paid after this year, it would take “a huge chunk of conversions” to change the basis point-based assessment rate.

The next listening session will be June 5 in St. Louis.