Question 1

A bank is considering canceling its agreement with a broker to which it currently leases space in its lobby. The new plan would include an agreement with a different broker, but bank employees would complete product sales. What should the compliance manager do FIRST?

Accepted Answer

A)  Establish a licensing program for bank employees 
B)  Establish a training plan for employees who will be selling the nondeposit investment products 
C)  Obtain copies of SEC and NASD rules regarding nondeposit investment products 
D)  Determine the additional compliance risk for the bank as a result of this change

Question 2

In which of the following situations does a bank need to post a branch closing notice?

Accepted Answer

A)  A bank closes a branch temporarily because of heavy hurricane damage. 
B)  A bank closes a branch in a suburban neighborhood because business has not adequately developed there. 
C)  A bank decides not to exercise its option to purchase a branch it has been temporarily running for the FDIC as a part of a purchase of a failed institution. 
D)  A bank closes a branch and moves it 850 feet down the street.

Question 3

For which of the following business activities must a bank holding company obtain prior approval of the Federal Reserve Board?

Accepted Answer

A)  Operating an auto club service 
B)  Serving as a safe deposit company 
C)  Operating as a management consulting firm for financial institutions 
D)  Selling installment loan data processing

Question 4

Banks must maintain an ____________ adequate to absorb estimated credit losses from payday loans. Banks should evaluate the collectability of accrued fees and finance charges on payday loans and ensure that this income is appropriately measured.

Accepted Answer

A)  TILA 
B)  FCRA 
C)  ALLL 
D)  A and B both

Question 5

Definition of completed application-12 CFR 202.2(f) is:

Accepted Answer

A)  An application for which the bank has received all the information it regularly considers in evaluation, including credit reports, verifications, and so forth 
B)  The creditor must be reasonably diligent in collecting information to complete the application (for example, ordering credit bureau reports) 
C)  An inquiry becomes an application when the creditor evaluates information and decides to grant or decline the credit 
D)  Requests for written preapprovals to be issued by the lender are considered applications

Question 6

First National Bank is a newly chartered bank. Which of the following security related procedures is NOT required under the Bank Protection Act?

Accepted Answer

A)  Appoint a security officer 
B)  Write a security program 
C)  Hire a security consultant to inspect the bank for the effectiveness of the bank's security devices 
D)  Write procedures to assist in preserving evidence of crimes

Question 7

Implemented by _______________, EFTA is intended to provide certain rights to individual consumers using EFT payment systems. It also places responsibilities on financial institutions whose accounts are affected by EFTs.

Accepted Answer

A)  Regulation E (Electronic Fund Transfers) 
B)  Regulation F (Electronic Fund Transfers) 
C)  Regulation T (Electronic Fund Transfers) 
D)  Regulation A (Electronic Fund Transfers)

Question 8

In _______________, Congress enacted restrictions on the way financial institutions disclose information on customers to third parties. The law also requires financial institutions to provide disclosures, both at the time of establishing the customer relationship and annually thereafter.

Accepted Answer

A)  Gramm-Billey Act of 1998 
B)  Gramm-Leach Act of 2000 
C)  Gramm-Leach-Billey Act of 1999 
D)  Gramm-Leach-Billey Act of 2001

Question 9

Which of the following are included in unfair practices during debt practices?

Accepted Answer

A)  May collect only amount legally owed 
B)  Postdated checks a. May not solicit for purpose of instituting criminal action b. May not deposit before date on check c. If a check is postdated longer than 5 days, must notify consumer of deposit at least 3 days and no more than 10 days before depositing 
C)  May possibly communicate regarding a debt by postcard 
D)  May use any language or symbol other than collector's address on any envelope except debt collector may use business name if it does not indicate it is a debt collection business.

Question 10

Reserve Banks must issue operating circulars, which, together with Regulation J, govern the details of handling items through the Reserve Bank, including

Accepted Answer

A)  Handling of government items and foreign instruments 
B)  Handling of foreign instruments 
C)  Handling of government items 
D)  Handling of clearing instruments

Question 11

After a compliance officer develops a base of knowledge of regulations, he or she must begin the art of applying regulations in a risk management environment. Which of the following is NOT out of a few things to be kept in mind when determining what to do FIRST?

Accepted Answer

A)  Think practically about your role as an advisor. Involve the business units in the decision process rather than making decisions for them 
B)  Calculate the institution's consolidated risk profile 
C)  Make sure you understand the level of risk the bank will tolerate, so decisions do not exceed this limit 
D)  Add value by analyzing regulatory requirements for the business units before you present proposed or final rules or solutions

Question 12

Walter Johnson has two accounts at First National Bank. His savings account was opened in 1975, and his money market savings account was opened in 1985.He has never supplied a TIN number to the bank. What must First National Bank do?

Accepted Answer

A)  Withhold 28 percent of the payments on each of the accounts 
B)  Withhold 28 percent of the payments on each account and annually request a TIN on the savings account 
C)  Annually request a TIN on both accounts 
D)  Refuse to open future accounts without a TIN

Question 13

Banks must establish and maintain effective risk management and control processes over its DCCs and DSAs, including:

Accepted Answer

A)  Appropriate recognition and financial reporting of income, expenses, assets, and liabilities 
B)  Appropriate treatment of losses associated with these products 
C)  Assessment of the adequacy of its internal controls and risk mitigation activities 
D)  Before entering into a contract, the bank must obtain the customer's written affirmative election to enter into the contract and written acknowledgement of the receipt of the disclosures

Question 14

An individual borrowed $1,000 to remodel her mobile home. She lives in the mobile home that is not anchored to the ground. The loan will be secured by the mobile home, but the borrower does not own the lot on which it is parked. For HMDA purposes, this loan is considered to be which of the following types of loans?

Accepted Answer

A)  Consumer RV 
B)  Home equity 
C)  Home improvement 
D)  Second mortgage

Question 15

Legislation was recently enacted to reform consumer real estate protection laws, and the bank will now have to change the way it documents, discloses, and advertises real estate loans, an integral product line at your bank. What should the compliance professional do FIRST to implement the new law within the bank?

Accepted Answer

A)  Read the law and write a new real estate compliance policy 
B)  Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan 
C)  Talk to the bank president about the need for more resources in compliance 
D)  Sign up all bank personnel affected by the changes for a seminar on the new law

Question 16

Which of the following institutions could be examined for CRA under the small intermediate bank performance standard?

Accepted Answer

A)  Bank A, a $230 million bank 
B)  Bank B, a $700 million bank 
C)  Bank C, a $50 million bank 
D)  Bank D, a $2 billion bank

Question 17

A bank is conducting due diligence for a foreign correspondent bank account. Which of the following is NOT required information?

Accepted Answer

A)  The identities of the correspondent bank's true ownership 
B)  Information on the government licenses of the correspondent bank 
C)  Copies of the tax return of the correspondent bank 
D)  Information on the products and services the correspondent bank offers

Question 18

First National Bank and Fidelity Bank are subsidiaries of Bank Holding Company, Inc. Fidelity is planning to sell First National two loan participations. It has been Fidelity's practice for several years to sell overlines to First National. • Loan A has been on Fidelity's books for two years. It is a line of credit that will be over Fidelity's loan limit with its next advance. It was recently classified as special mention during a safety and soundness examination. First National agreed to purchase overlines on Loan A before Fidelity's funding of the loan two years ago and signed a participation agreement at that time. • Loan B is 60 days past due for a principal payment, although interest payments are current. The loan has been on the books at Fidelity for one year. First National agreed to purchase overlines on Loan B six months ago. Which, if any, of these loans can First National purchase?

Accepted Answer

A)  Neither, both are low-quality assets 
B)  Loan A only 
C)  Loan B only 
D)  Both Loan A and Loan B

Question 19

Which of the following statements regarding applications is correct?

Accepted Answer

A)  Applications must be signed to be valid. 
B)  Creditors may accept oral applications. 
C)  Creditors may not develop their own definition for a completed application. 
D)  A creditor is not required to attempt to complete incomplete applications.

Question 20

Which of the following relationships does NOT violate Regulation L? • Relationship A: First National Bank is located in the same city as an affiliate of First Savings and Loan. First National and the affiliate share a board member. • Relationship B: State Bank and an affiliate of First National Bank are located in the same RMSA but not in the same town. State Bank has assets of $60 million, and the affiliate has assets of $7 million. The two institutions share a board member. • Relationship C: Savings and Loan Association and Bank Holding Company do not have offices within the same RMS Bank Holding Company's assets are in excess of $1.75 billion, and Savings and Loan Association's assets are in excess of $2.5 billion. These institutions share a board member.

Accepted Answer

A)  Relationship A 
B)  Relationship B 
C)  Relationship C 
D)  All the relationships violate Regulation L

Exam 1: Certified Regulatory Compliance Manager