Question 1

First National is developing a consumer checking account that can access a line of credit. This is the first time the bank has ever had such a product, although this type of credit facility has been popular with other banks in town. To determine what interest rate to charge on this account, an officer of First National called some of his friends at other local banks offering this type of credit and asked several questions, including the interest rate charged on this type of account and what internal factors the banks use to set the rate. After obtaining this information, First National determines that it could charge approximately 2 percent more than it originally planned. Is there anything wrong with this course of action?

Accepted Answer

A)  Yes. Communicating with competitors for purposes of setting prices is wrong. 
B)  No. Communication itself is never wrong regardless of the subject matter. 
C)  Yes. The bank should have disguised its identity in calling its competitors. 
D)  No. The bank could probably have determined the prices eventually without calling the banks directly.

Question 2

Following mentioned are the responsibilities of: 1. Must notify the bank, either orally or in writing, of error within 60 days: • Of the institution's transmission of a statement or other documentation on which the error first appears or • Of receiving additional information or clarification provided pursuant to the consumer's request 2. Consumer's notification should include the following items • Consumer's name and account number or information that allows the institution to identify the consumer's name or account number • Consumer's belief and reasons for the belief that an error exists and, if possible, the type, date, and amount of the error (this information does not have to be given if the consumer is simply requesting further information or clarification)

Accepted Answer

A)  Consumer 
B)  Financial institution 
C)  Reserve Bank 
D)  A third party

Question 3

An oral or written request for credit made in accordance with the creditor's procedures for the type of credit requested. Information entered into and retained by a computer system qualifies as a written application. It is called:

Accepted Answer

A)  Credit Application 
B)  Credit completed application 
C)  Initial credit approach 
D)  None of these

Question 4

Below mentioned is the necessary information that should be included in the ___________. Risk of payment shock-potential payment increases; how the new payment will be calculated when the introductory rate expires Ramifications of prepayment penalties-how they will be calculated, when they will be imposed Ramifications of balloon payments Ramifications of the lack of escrowing for taxes and insurance-who is responsible for paying taxes and insurance and the fact that their costs may be substantial Cost of reduced documentation loans-whether there is a pricing premium required

Accepted Answer

A)  Consumer protection principles 
B)  Underwriting standards 
C)  Workout arrangements 
D)  None of these

Question 5

Which of the following loans is clearly NOT subject to the IRS mortgage interest reporting requirement?

Accepted Answer

A)  A loan made to purchase securities, secured by rural acreage 
B)  A loan made to finance a college education, secured by a piece of commercial real estate 
C)  A loan made to purchase a lot on a lake, secured by a certificate of deposit 
D)  A loan made to purchase a residence, secured by the dwelling

Question 6

The following mentioned points are actually _______________. • Reserve Banks may rely on numbers given in a payment order to identify an intermediary or beneficiary bank • Reserve Banks, when acting as beneficiary's bank, may rely on the number in the payment order that identifies the beneficiary

Accepted Answer

A)  Fedwire transfers 
B)  Interdistrict transfers 
C)  Intradistrict transfers 
D)  Any one of these

Question 7

First National Bank has made a loan to Mr. Good, secured by margin stock, to purchase margin stock. He trades stocks frequently, makes substitutions on loan collateral regularly, and sometimes withdraws collateral and does not replace it. Must FNB ensure that margin requirements are met after every substitution and withdrawal?

Accepted Answer

A)  Yes. The margin requirements must be met at all times. 
B)  No. If the margin requirements were met when the loan was made, there are no further requirements. 
C)  No. The bank is only required to ensure that withdrawals do not violate margin requirements; collateral substitutions are not covered. 
D)  No. In this case the margin requirement must be met only when the loan is renewed.

Question 8

On which of the following adjustable-rate loans must the bank use an index beyond its control?

Accepted Answer

A)  A loan to purchase a home to refurnish and resell for a profit 
B)  A loan to purchase a vacation home 
C)  A loan to purchase a duplex where the borrower will live in one of the units 
D)  A loan to purchase a home to be used as rental property

Question 9

For example on a 0-5 scale:  The risk trend shows the direction of risk and probable change to risk over the next 12 months. A trend toward increasing risk means that

Accepted Answer

A)  Management may want to take additional action through more controls or increased reviews 
B)  Risk may prompt a decrease in controls and improved efficiencies 
C)  Controls currently in place are appropriate to succeed in keeping risks within management's established risk-tolerance level 
D)  Risk measurements exceed management's tolerance for risk

Question 10

By presentation or transmission of an item a Reserve Bank warrants to a subsequent collecting bank and paying bank that:

Accepted Answer

A)  The Reserve Bank has good title to the item 
B)  The item has not been altered 
C)  The item bears all endorsements applied by parties that have previously handled the item in paper or electronic form 
D)  All of these

Question 11

Which of the following customers may be exempted under Phase II of the Bank Secrecy Act?

Accepted Answer

A)  Government agencies 
B)  Correspondent banks 
C)  Payroll customers 
D)  Businesses whose stocks are traded on a national stock exchange

Question 12

In the small bank performance standard, which of the following is NOT a criterion?

Accepted Answer

A)  The bank's CRA strategic plan 
B)  The bank's loan-to-deposit ratio 
C)  The geographic distribution of loans 
D)  The percentage of loans within the bank's assessment area(s)

Question 13

ACME Bank would like its tellers to help sell insurance products to new and existing customers. The tellers would refer customers to personal bankers who have insurance licenses from the state. The bank would like to reward tellers by giving them a small percentage of the commission for each policy sold where the sale resulted from a referral. Which of the following statements presents ACME's biggest concern in complying with the Consumer Protection in Sales of Insurance regulation?

Accepted Answer

A)  It is difficult for many people to get an insurance license. 
B)  It is hard for tellers to handle so many types of products. 
C)  It is hard to physically separate insured deposit products from insurance products. 
D)  Tellers should not be rewarded only when the referral results in a sale.

Question 14

Bank A offers safe deposit services in a vault area that contains a door too narrow for wheelchair passage. The bank cannot widen the door because of the vault construction. Therefore, when a customer in a wheelchair needs access to a safe deposit box the customer cannot enter the vault. The bank provides viewing rooms for all safe deposit customers, and one of these rooms has a door wide enough for a disabled customer to enter. Which of the following must the bank do to provide safe deposit box service to wheelchair customers?

Accepted Answer

A)  Remove the old vault and install a new vault to allow wheelchair access 
B)  Construct an alternative facility in which to store the safe deposit boxes of wheelchair customers 
C)  Require wheelchair customers to be accompanied by a walking individual to retrieve the safe deposit box for the customer 
D)  Bring the safe deposit box to the customer and provide an accessible area where the customer may privately have access to the contents

Question 15

Which of the following must be included in a branch closing notice to a bank's regulatory agency?

Accepted Answer

A)  Comments from customers who oppose the closing 
B)  Detailed statement of the reasons for the closing 
C)  Copy of the notice to be sent to affected customers 
D)  Copy of board minutes reflecting the decision to close

Question 16

According to FDIC Guidance on Spousal Signature Provisions, if the creditor requires the spouse's signature on an instrument that imposes personal liability, the creditor's belief should be:

Accepted Answer

A)  Supported by a thorough review of pertinent statutes, decisional law, or an opinion of the state's attorney general 
B)  Supported by a thorough review of pertinent statutes 
C)  Supported by decisional law 
D)  Supported by an opinion of the state's attorney general

Question 17

First National Bank made the following loans to Mr. James Wilson during the previous calendar year: • Loan A, made on February 2, is a loan for purchasing margin stock and is secured by margin stock • Loan B, made on March 15, is also for purchasing margin stock and is secured by margin stock • Loan C, made on June 30, is an unsecured loan for purchasing margin stock • Loan D, made on September 10, is for purchasing a car, secured by the car All the loans are still outstanding at the end of the year. Which of the loans must be combined for purposes of the margin requirements of Regulation U?

Accepted Answer

A)  All of the loans must be combined 
B)  Loans A and B 
C)  None of the loans must be combined 
D)  Loans A, B, and C

Question 18

A recent audit revealed that the bank's personal trust division was failing to determine whether securities being accepted from new trust customers have been reported as lost or stolen. To address the root cause of this problem, what should the compliance officer do FIRST?

Accepted Answer

A)  Inquire with the SIC about all securities noted in the audit 
B)  Contact the bank's primary regulator to determine the best course of action 
C)  Retrain all personal trust administrators on the lost and stolen securities requirements 
D)  Review the policies and procedures for accepting securities in new personal trust relationships to ensure securities verification

Question 19

To stop a payment of a preauthorized transfer, consumer must notify the institution or in writing at least:

Accepted Answer

A)  Three days before the transfer is to occur 
B)  Within 14 days of oral notice 
C)  Binding after 14 days if no written confirmation is received 
D)  None of these

Question 20

Records regarding compliance with Regulation M must be kept for how long?

Accepted Answer

A)  Five years following consummation of the lease 
B)  Two years after the disclosures are made 
C)  Twenty-five months from consummation 
D)  One year from the time the disclosures are made

Exam 1: Certified Regulatory Compliance Manager