Question 1

Which of the following is NOT a corporate practice required of bank holding companies?

Accepted Answer

Bank subsidiaries are not required to file a notice with the Federal Reserve before offering a new product. This requirement is not a standard corporate practice for bank holding companies.

Question 2

ACME national bank plans to acquire Smith Brothers insurance agency and make it an operating subsidiary of the bank. ACME is considered a well-managed and adequately capitalized bank. What regulatory-related action must ACME take to obtain the agency?

Accepted Answer

ACME national bank must notify the OCC (Office of the Comptroller of the Currency) before completing the acquisition to obtain regulatory approval. The OCC needs to evaluate the proposed acquisition to ensure that it is consistent with applicable laws and regulations and does not pose excessive risks to the bank or its customers. Once approval is granted, ACME can complete the acquisition and notify the OCC of the final transaction details.

Question 3

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

Accepted Answer

A detailed statement of the reasons for the closing is typically required to inform the regulatory agency of the rationale behind the decision to close a branch.

Question 4

A bank has a stand-alone ATM in a high crime area. Due to concerns for the safety of individuals using the ATM, management decides to close it. According to branch closing policy statements issued by federal regulators, which of the following actions should the bank take?

Accepted Answer

ATMs are not considered branches under federal regulations, so no specific action is required for closing them.

Question 5

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

The answer of A bank is planning to sell eight...

Question 6

Which of the following sources is the least desirable to use when monitoring a correspondent bank's capital?

Accepted Answer

A national newspaper's story may not provide accurate and reliable information on the correspondent bank's capital. It may be sensationalized or based on incomplete data. The other options (A, B, and C) are more reliable sources of information, with the correspondent bank's own call report being the most desirable as it provides the most current and detailed information on the bank's financial condition.

Question 7

A bank may include all of the following in the narrative portion of its financial disclosure except for one. Which of these pieces of information CANNOT be disclosed?

Accepted Answer

Excerpts from regulatory examinations are confidential and cannot be disclosed publicly by the bank.

Question 8

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

Accepted Answer

Banks are generally required to post a branch closing notice when they permanently close a branch, as in option B, where the branch is closed due to inadequate business development. Temporary closures or relocations within a short distance typically do not require such notices.

Question 9

In which of the following cases is a branch closing notice required?

Accepted Answer

According to the scenario, Bank E is closing its near-town facility permanently due to outdated building and equipment. In such cases, a branch closing notice is required. Therefore, option D is the correct choice. Option A is not correct as the bank is not closing the branch but only stopping a particular service. Option B is not applicable as the two branches are merging, not closing down. Option C is not applicable as the drive-through facility is being closed, and not the entire branch.

Question 10

A subsidiary of First National Bank can legally participate in all but one of the following businesses. In which business may the subsidiary NOT legally participate?

Accepted Answer

Subsidiaries of banks are generally restricted from engaging in real estate development due to regulatory limitations aimed at reducing risk and conflicts of interest.

Question 11

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

Accepted Answer

The answer of For which of the following business activities...

Question 12

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

While it may be a good business practice to publish a notice of the branch closing in the local newspaper, it is not actually required by federal law. The other three actions listed - notifying the regulatory agency, notifying branch customers, and posting a notice at the branch - are all required under federal law.

Question 13

Which of the following is NOT a factor considered by the Federal Reserve Board when it evaluates an application under Regulation Y?

Accepted Answer

Regulation Y, which outlines the procedures and standards for the Federal Reserve Board's evaluation of bank holding company applications, does not consider the current nonbanking activities of the applicant. The other factors listed (financial strength, management strength, and effect on competition) are all considered.

Question 14

Big Nationwide Bank has decided to close one of its smaller branches in Texas. A community association from the small town where the branch is located is not pleased with the decision because Big Nationwide's branch is the only financial institution in the small town. The community group complains to the federal agency that regulates Big Nationwide. What must Big Nationwide do in light of this protest against its decision to close the branch?

Accepted Answer

Under federal regulations, banks are generally not required to take specific actions in response to community protests about branch closures, beyond providing the required notice of closure.

Question 15

If a bank receives a request for financial disclosure, how may the bank fulfill this request?

Accepted Answer

Banks typically fulfill financial disclosure requests by providing call reports, which are comprehensive financial statements filed with regulators and cover the current and previous year.

Question 16

Bank B is a correspondent of Bank A. Which of the following must be included in Bank A's calculation of credit exposure to Bank B?

Accepted Answer

Bank A's deposit account of $1 million in Bank B represents a direct credit exposure to Bank B, as it is an asset that Bank A holds with Bank B.

Question 17

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

The answer of First National Bankshares, Inc., a bank holding...

Question 18

Which of the following actions is acceptable under the financial reporting regulations?

Accepted Answer

Attaching a narrative explanation by management of the reasons for a cease and desist order as part of the annual disclosure is acceptable as it provides context and transparency to stakeholders.

Question 19

First State Bank, a state nonmember institution, plans to purchase a company that would be a financial subsidiary of the bank. First State will send a notice to the FDIC of its proposed acquisition. Of the following factors, which one would NOT be relevant to the FDIC's consideration of the bank's acquisition?

Accepted Answer

The FDIC typically considers factors like capitalization, CRA rating, and safety and soundness, but the asset size of the bank is not directly relevant to the approval of an acquisition.

Question 20

In which of the following cases would First National Bank be required to give a branch closing notice?

Accepted Answer

First National Bank would be required to give a branch closing notice if it is closing a full-service branch, like the near-town neighborhood branch, that offers banking services to the community. Removing an ATM from a store or opening a deposit-taking facility for a limited time does not qualify as closing a full-service branch. Moving a branch across the street may require notice but it depends on the circumstances such as whether it is still conveniently located for the customers.

Exam 1: Certified Regulatory Compliance Manager