Question 1

Roberta Milton's car lease with First National Bank reached its termination on August 1. Roberta and the bank agreed to extend the lease on a month-to month basis without charging her a fee for doing so. What disclosure responsibilities does the bank have now?

Accepted Answer

A)  None are needed now. 
B)  None, until after six months of the month-to-month lease 
C)  The bank must make an entirely new initial disclosure 
D)  The bank must disclose the estimated residual value at the end of six months

Question 2

A bank is planning to sell eight branches. The compliance officer participates on a bank committee to oversee the process. What should be the compliance officer's PRIMARY concern?

Accepted Answer

A)  That the bank's revenues will not be affected severely 
B)  That the branches are closed in accordance with bank policy 
C)  That customers of the branches will continue to have access to banking services 
D)  That the bank's confidential information is returned to the main office

Question 3

First National Bank (FNB) purchased a table for $500 at the Governor's reelection fundraising dinner last fall. FNB President Sally Holmes tells Mary Watkins, the municipal securities principal, that the bank is planning to participate in the upcoming state highway bond. What does Ms. Watkins tell President Holmes?

Accepted Answer

A)  The bank cannot participate without prior approval of the MSRB. 
B)  The bank can participate because national banks are exempt from MSRB rules. 
C)  The bank can participate, provided it includes the contribution on its next disclosure. 
D)  The bank cannot participate within two years of a contribution to the issuer.

Question 4

First National Bankshares, Inc., a bank holding company, held substantially all of the voting stock of an equipment manufacturing corporation as collateral for a loan to the owner. On May 15 the borrower defaulted and on September 1, after proper notice was given, the bank foreclosed its security interest on the stock and exercised its rights to vote the stock at appropriate times. On December 31 the bank transferred the stock to a subsidiary corporation, FNB, Inc., to market the stock for sale more effectively. What is the longest time period that FNB, Inc., can possibly hold the stock?

Accepted Answer

A)  Up to two years from September 1 
B)  Up to five years from September 1 
C)  Up to two years from December 31 
D)  Up to five years from December 31

Question 5

The purpose of advisory letter in Avoiding Predatory and Abusive Lending Practices in Brokered and Purchased Loans- AL-2003-3 is to:

Accepted Answer

A)  Adopt sound credit underwriting policies 
B)  Alert national banks to the risks they take if they make loans through brokers or purchase loans that contain or reflect abusive or predatory terms or practices 
C)  Adopt policies that address the circumstances under which the bank would make loans that have features associated with abusive lending practices 
D)  Make loans secured by the consumer's home but with high, up-front fees that are financed and secured by the home

Question 6

One of the check collection requirements is sending items to Reserve Banks. In this requirement:

Accepted Answer

A)  A sender other than a Reserve Bank may send any item to the Reserve Bank with which it maintains an account 
B)  The following parties are deemed to have handled items, in this order: • The initial sender • The initial sender's administrative Reserve Bank • The Reserve Bank that receives the item from the initial sender • Any other Reserve Bank that receives the item from a Reserve Bank 
C)  Reserve Banks must receive cash items and other items (checks) at par 
D)  A foreign bank that maintains reserves under the International Banking Act of 1978

Question 7

ABC Co. signs a contract to export goods to Country G, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires the goods to be shipped on a ship eligible to enter the port of Country G in conformity with its laws and regulations and that the insurer of the goods has an agent in Country G. Country G's laws prohibit blacklisted ships from calling at its ports and blacklisted insurance companies from qualifying agents in Country G. First National Bank confirms the letter of credit. Did the bank's action constitute an agreement to participate in or cooperate with an international boycott, and is it subject to IRS reporting requirements?

Accepted Answer

A)  Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements. 
B)  Yes. The action is an agreement to participate in a boycott but no, it is not subject to the reporting requirements. 
C)  No. Because the bank is not responsible for knowing the laws of Country G, it is not in participation with or in cooperation with a boycott. 
D)  No. The confirmation of a letter of credit is not sufficient to be in participation or cooperation with a boycott.

Question 8

Hector Martinez is a loan officer in a non-community property state. He receives a verbal request for a small business working capital loan from Leon Rogers for his technology consulting business. The business is a sole proprietorship. Mr. Rogers gives Hector a written business plan for his business, a financial statement for the business for the past two years, and a personal financial statement that includes information on himself and his wife. Can Hector assume that the application is a joint application from Mr. Rogers and his wife?

Accepted Answer

A)  Yes. Because the financial statement is signed by both Mr. and Mrs. Rogers and includes joint information, the application can be considered to be from both spouses. 
B)  Yes. Because the business is a sole proprietorship, the spouse's financial information is important. 
C)  No. The bank cannot assume the application is a joint one simply on the basis of submission of joint financial information. 
D)  No. Because the business is a sole proprietorship, the bank should assume the application is for individual credit.

Question 9

What may a creditor do when furnishing credit information?

Accepted Answer

A)  May designate accounts in any manner that is convenient and reasonable 
B)  Must designate accounts as specified by the parties 
C)  Must designate accounts to show participation by both spouses if both are liable 
D)  Must designate accounts to show all parties, including guarantors

Question 10

When all the required information is NOT provided by a person purchasing a cashier's check with $8,000 in currency, what should the bank do?

Accepted Answer

A)  Refuse the transaction 
B)  Complete the transaction and record available information 
C)  Complete the transaction and file a SAR 
D)  Complete the transaction and insist that the customer return with the required information

Question 11

Which of the following is NOT a requirement of CRA?

Accepted Answer

A)  To delineate the bank's assessment area(s) 
B)  To collect loan data 
C)  To approve the bank's CRA statement at an annual board meeting 
D)  To report small business loan data

Question 12

Which of the following is true regarding extensions of credit to executive officers, directors, and principal shareholders?

Accepted Answer

A)  Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank's capital and surplus, not exceeding $500,000 
B)  Must be approved in advance by the board of directors if the credit is greater than $50,000 or 5 percent of the bank's capital and surplus 
C)  May not exceed $100,000 in the aggregate, regardless of approvals 
D)  May not exceed $250,000 in the aggregate, regardless of approvals

Question 13

The sender's liability for warranties and indemnities that a Reserve Bank makes for a substitute check is subject to the following conditions and limitations EXCEPT:

Accepted Answer

A)  The sender of an original check is not liable for amounts paid by the Reserve Bank absent the sender's agreement to the contrary 
B)  The sender's liability under Regulation CC is not altered by the Regulation J provisions 
C)  Failure of sender to have authority to make the required warranties and agreements 
D)  A sender of an electronic item that is not a substitute check is not liable for any amount paid by a Reserve Bank that is attributable to the Reserve Bank's own lack of good faith or failure to exercise ordinary care

Question 14

For purposes of insider lending laws and regulations, what is the definition of the term executive officer?

Accepted Answer

A)  All bank officers at or above the level of executive vice president 
B)  Anyone who has the authority to participate in major policymaking functions at the bank NOTES 
C)  Anyone who has the authority to participate in lending decisions at the bank 
D)  All bank officers at or above the level of assistant vice president

Question 15

When must a bank make its mortgage loan disclosure statement available?

Accepted Answer

A)  Only when requested by its federal supervisory agency 
B)  At any time when requested by a member of the public 
C)  For 30 days following receipt of a request from its supervisory agency 
D)  On an ongoing basis, by posting it in the lobby of each branch

Question 16

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Accepted Answer

A)  Implement the letter of credit because there is no boycott language on its face 
B)  Require ABC to indemnify the bank against any potential loss for participation in a boycott 
C)  Not implement the letter of credit 
D)  Have the letter of credit confirmed by a bank in Country X

Question 17

Which of the following primary purpose/s were behind the Electronic Fund Transfer Act (EFTA)?

Accepted Answer

A)  To provide disclosures to consumers who use electronic fund transfer (EFT) systems 
B)  To provide consumers with limitations on liability for unauthorized electronic fund transfers 
C)  Both A and B 
D)  None of these

Question 18

______________ is frequent refinancing that do not benefit the borrower. This practice can result in borrower injury from the fees imposed and from the fact that it decreases home equity and increases the consumer's debt burden, thus increasing the chance of foreclosure.

Accepted Answer

A)  Loan flipping 
B)  Loan refinancing 
C)  Securitization 
D)  Subprime loans

Question 19

Which of the following institutions is NOT subject to the coverage of HMDA? • Bank A, with assets of $55 million and located in a large urban city, makes home improvement loans and some home purchase loans to existing customers, but no mortgage loans. • Bank B, with assets of $9 million and located in a rural area, has several branches, also in rural areas, including one that makes home improvement and home purchase loans. • Mortgage Company C, with assets of $75 million and a home office in a large East Coast city, makes exclusively home purchase loans.

Accepted Answer

A)  All the institutions are subject to HMDA 
B)  Bank A 
C)  Bank B 
D)  Mortgage Company C

Question 20

Mrs. Evans, a customer of First National Bank, deposits $15,000 in cash to her account. During the transaction, Mrs. Evans explains that she received the money in the mail from her sister in Europe. What responsibility does the bank have?

Accepted Answer

A)  Complete a Currency Transaction Report (CTR) 
B)  Complete a United States Customs form 4790 (CMIR) 
C)  Complete both a currency transaction report and a CMIR 
D)  Complete a CTR and encourage Mrs. Evans to file a CMIR

Exam 1: Certified Regulatory Compliance Manager