Question 1

Mammoth Enterprises is a new customer to the bank. It is a wholly owned subsidiary of Mammoth Corporation. Which of the following statements, if true, would make Mammoth Enterprises an exempt customer at the bank?

Accepted Answer

A)  Mammoth Corporation is a London corporation, trading on the London Stock Exchange. 
B)  Mammoth Corporation is a U.S. corporation with unlisted stock. 
C)  Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange. 
D)  Mammoth Enterprises is a U.S. corporation primarily in the investment banking business.

Question 2

For how long must a bank keep records of transactions involving currency in amounts greater than $10,000?

Accepted Answer

A)  Two years 
B)  Three years 
C)  Five years 
D)  Seven years

Question 3

In Advertising-12 CFR 213.7, if a percentage rate is used in an advertisement, it cannot be more prominent than any other disclosure, EXCEPT:

Accepted Answer

A)  For the warning regarding the limitation of the rate as a measurement of cost 
B)  For beginning at least 3 days before and ending at least 10 days after the broadcast 
C)  For required disclosures in advertisements 
D)  For an advertisement accessed in electronic form

Question 4

Government credit

Accepted Answer

A)  It is credit extended to governments or government agencies, instrumentalities, or subdivisions 
B)  It has no finance charge 
C)  It has Records retention requirements 
D)  Only the general rule against discrimination applies to government credit

Question 5

First National Bank sold several of its mortgage loans to individual investors and now services the loans for the individuals. First National Bank collects more than $600 on most of these mortgages and deposits the money into the account of the investors. At the end of each year, First National Bank sends the investors a summary of transactions on the mortgages and a detailed breakdown of the principal and interest payments made. Who is responsible for filing the mortgage interest information returns?

Accepted Answer

A)  The investors, because they own the loans and the money is collected for them 
B)  The investors, because they have the necessary information from the servicer 
C)  First National Bank, because it was the first owner of the loans 
D)  First National Bank, because it collects the interest and has the information necessary to file the information return

Question 6

Williams National Bank has its home office in New York State; however, it has branches in Nebraska. The federal banking agencies most recent host state loan to- deposit publication lists the loan-to-deposit ratio for Nebraska as 78 percent. For Williams Bank to pass the loan-to-deposit screen of the Reigle-Neal Act, what must its loan-to-deposit ratio be for Nebraska?

Accepted Answer

A)  At least 78 percent 
B)  At least 50 percent 
C)  At least 39 percent 
D)  At least 25 percent

Question 7

Which of the following transactions does NOT require prior approval of the Federal Reserve Board?

Accepted Answer

A)  The formation of a bank holding company 
B)  The acquisition by a bank holding company of a subsidiary 
C)  The acquisition of 25 percent of voting stock of a bank by another bank, in good faith, in its fiduciary capacity with no power to vote 
D)  The acquisition of 25 percent of voting stock of a bank by another bank in its fiduciary capacity for the benefit of the acquiring bank's employees

Question 8

Which of the following actions is NOT an adverse action?

Accepted Answer

A)  Refusal to grant credit on substantially the same terms and conditions as requested by the applicant 
B)  Termination of an account 
C)  Refusal to grant credit on the grounds that the lender does not offer the type of credit requested 
D)  Refusal to increase the amount of credit on an existing account after a request

Question 9

In which of the following activities may a bank engage and NOT be considered a municipal securities dealer?

Accepted Answer

A)  Underwriting municipal securities 
B)  Buying securities for the bank's own account 
C)  Providing advice to customers regarding the purchase of municipal securities 
D)  Engaging in research and giving investment advice regarding municipal securities

Question 10

Transactions with which of the following government securities would NOT subject a bank to the registration requirements of the Government Securities Act?

Accepted Answer

A)  Obligations of the Farm Credit System 
B)  GNMA securities 
C)  U.S. Savings Bonds 
D)  FNMA obligations

Question 11

Second National has decided to close one of its less profitable neighborhood branches. Which of the following actions is NOT required of the bank under federal law?

Accepted Answer

A)  Publish a notice of the closing in the local newspaper 
B)  Send a notice to its regulatory agency 
C)  Send notices to the branch customers 
D)  Post a notice at the branch

Question 12

The Reserve Bank may recover from the sender the attorneys' fees if an action is brought against a Reserve Bank on the basis of:

Accepted Answer

A)  Failure of sender to have authority to make the required warranties and agreements 
B)  Any action by the Reserve Bank within the scope of its authority in handling the item 
C)  Any warranty made by the Reserve Bank 
D)  All of the above

Question 13

First National Bank has several exempt customers. • Alpha is an exempt person because its stock is listed on a major stock exchange. • Beta is an exempt person because it meets the nonlisted customer requirements. • Zeta is exempt because it is a payroll customer. For which customer(s) must the bank conduct an annual review to determine its continuing eligibility to be exempt from CTR filings?

Accepted Answer

A)  Alpha 
B)  Beta 
C)  Zeta 
D)  Beta and Zeta

Question 14

First National Bank is a member of a multibank holding company. The bank makes ARM loans and occasionally purchases ARM loans from its affiliate national and state banks as well as from nonaffiliated banks. Which of the following practices is NOT acceptable under the OCC ARM regulation?

Accepted Answer

A)  The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National's prime rate. 
B)  The bank makes loans to purchase single-family dwellings with interest rates that may be adjusted from time to time. 
C)  The bank links the interest rate indices on its own ARM loans to them national prime rate as published in The Wall Street Journal. 
D)  The bank requires its national bank affiliates to use the national prime rate as published in The Wall Street Journal as the index for any of the ARM loans it purchases.

Question 15

In evaluating a bank's CRA performance, to what do bank examiners give the greatest consideration?

Accepted Answer

A)  Efforts to analyze the geographic origins of its deposit base 
B)  Efforts to establish communication with members of the community regarding credit needs 
C)  Participation of the bank's board of directors in formulating CRA policy 
D)  Extensions of credit the bank has made where the financing benefits low and moderate-income borrowers or neighborhoods

Question 16

Cassandra Phillips requested a loan to purchase a boat. She asked for $15,000 at 7.5 percent for seven years. The bank considered her request but decided, considering her income and credit history, the best offer of credit the bank could make was $10,000 at 8.25 percent for five years. Rhonda Mays, the loan officer, wrote a letter, setting forth the terms the bank could offer. The letter was mailed on July 1. Ms. Phillips received the letter and began to look elsewhere for a loan on the terms and conditions she wanted. Does the bank have any additional responsibility to Ms. Phillips?

Accepted Answer

A)  No. Because the bank made the offer of a loan, there is no further responsibility. 
B)  No. Because the customer decided to look elsewhere, there is no further responsibility. 
C)  Yes. The bank must follow up with a phone call to determine if Ms. Phillips is still interested. 
D)  Yes. The bank must send an adverse action notice because Ms. Phillips did not take the bank's counteroffer.

Question 17

First National Bank, a U.S. bank, is contacted by Manufacturing Company, Inc., a U.S. company, to finance its transaction with Country Z, a boycotting country. Payment will be made through a letter of credit in favor of Manufacturing Company at its U.S. address. First National Bank knows that the letter of credit will contain restrictive boycott conditions that would prevent the bank from implementing it. First National Bank suggests to Manufacturing Company, Inc., that it set up a shell corporation in Country Y, a nonboycotting country, and have the shell corporation be the beneficiary of the letter of credit. Does First National Bank have any problem with this transaction?

Accepted Answer

A)  No. The transaction is now not subject to Department of Commerce regulations because the beneficiary is not a U.S. company. 
B)  Yes. The transaction is set up to evade the regulation and First National Bank is liable. 
C)  No. The transaction is set up to evade the regulation, but First National Bank is not liable because Manufacturing Company, Inc., actually effected the transaction. 
D)  No. First National should have Manufacturing Company, Inc., sign a statement accepting full responsibility for the establishment of the shell corporation.

Question 18

ACME Bank is a state nonmember bank with all of its offices in one state. However, it also has an Internet Web site where it advertises consumer credit and accepts applications from a five-state regional are A. Two of the states are community property states. The other three are not. What is the best explanation for what ACME bank's management should do to comply with the FDIC ECOA spousal signature guidance?

Accepted Answer

A)  Because ACME has all of its offices within one state, it only has to be knowledgeable of the legal requirements of that state regarding spousal property rights and can apply those laws to all of its operations. 
B)  ACME must become familiar with the laws of each of the five states and ask for spouse signatures only when appropriate under the law. 
C)  ACME can choose any of the state laws where it operates to apply to its consumer lending operations. 
D)  ACME should make only business-purpose loans to avoid the spousal signature rules.

Question 19

How is the maximum loan value of margin stock defined?

Accepted Answer

A)  As a percentage of the amount to be loaned 
B)  As a percentage of the book value of the stock 
C)  As a percentage of the current market value of the stock 
D)  As a percentage of the good-faith loan value of the stock

Question 20

First National Bank has an employee benefit program whereby all bank employees who meet the bank's credit underwriting standards may obtain consumer loans for major purchases or expenses at a rate that is less than the bank's prime rate. Can the bank allow its executive officers to borrow under this program?

Accepted Answer

A)  No. Executive officers may not have preferential interest rates under any circumstances. 
B)  No. However, the related interests of the executive officers may take advantage of it. 
C)  Yes. However, executive officers must secure their loans with collateral valued at 100 percent of the loan balance or more. 
D)  Yes. Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.

Exam 1: Certified Regulatory Compliance Manager