Short-form disclosures are required in advertisements and promotional materials unless the advertisements and promotional materials are of:

A general nature describing or listing the products or services offered by the bank

A specific nature describing or listing the products or services offered by the bank

A general nature describing or special services offered by the bank

A general nature describing competitive advantage of the bank

How is the maximum loan value of margin stock defined?

As a percentage of the current market value of the stock

As a percentage of the amount to be loaned

As a percentage of the book value of the stock

As a percentage of the current market value of the stock

As a percentage of the good-faith loan value of the stock

If a bank makes a loan that is in compliance with Regulation U, what will be the status of the loan at its consummation?

The loan will always be in compliance until its maturity, regardless of the reduction of the borrower's equity in the stock, provided there are no substitutions or withdrawals that adversely affect the loan value.

The loan will be in compliance until it is renewed, regardless of the reduction of the borrower's equity in the stock.

The loan will be in compliance only if the value of the stock remains within the margin requirements.

The loan will be in compliance unless the status of the stock changes (for example, margin or nonmargin)

The loan will always be in compliance until its maturity, regardless of the reduction of the borrower's equity in the stock, provided there are no substitutions or withdrawals that adversely affect the loan value.

Which of the following is NOT included in the definition of margin stock?

Nonmargin stock convertible to margin stock

Stock traded on a national securities exchange

Nonmargin stock convertible to margin stock

Debt securities convertible to margin stock

Warrants to purchase margin stock

First National Bank has made three loans to Mrs. Elmwood. Two of the loans are regulated credits (they are for the purpose of purchasing margin stock and secured by margin stock). The third loan is for the purpose of purchasing margin and nonmargin stock, and the loan is secured by real estate and margin stock. Can the bank avoid having the third loan combined with the other two for Regulation U purposes?

No. At least the part of the loan attributable to the security of margin stock must be treated as a regulated credit and combined with the other two loans.

Yes, but the real estate must have a value of at least twice as much as the third loan.

No. At least the part of the loan attributable to the security of margin stock must be treated as a regulated credit and combined with the other two loans.

No. All of the third loan must be combined with the others.

Yes. As long as there is any other collateral, the loan will not be a regulated credit.

For which of the following must a bank obtain Form FR U-1 when a loan is in excess of $100,000?

A loan made to purchase margin stock

A loan made to purchase margin stock and secured by margin stock

A loan secured by stock (either margin or nonmargin)

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 carAll 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?

All of the loans must be combined

None of the loans must be combined

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?

Yes. The margin requirements must be met at all times.

No. If the margin requirements were met when the loan was made, there are no further requirements.

No. The bank is only required to ensure that withdrawals do not violate margin requirements; collateral substitutions are not covered.

No. In this case the margin requirement must be met only when the loan is renewed.

Is the renewal of a loan considered to be a new extension of credit for purposes of valuing the collateral under Regulation U?

Yes, if any amounts other than interest, service charges, or taxes are added to the loan balance

Yes, if any additional amounts are added to the loan balance

Yes, if any amounts other than interest, service charges, or taxes are added to the loan balance

No, a renewal is never considered to be a new credit

Which of the following credit arrangements would most likely be considered a purpose credit because it is indirectly secured by margin stock?

A loan made to purchase margin stock, guaranteed by an individual who has pledged margin stock as security for the guarantee

A loan made to purchase margin stock secured by nonmargin stock

A loan made to a company for various corporate purposes, including the purchase of margin stock, secured by the corporate assets, which from time to time include margin stock; on the date of the consummation of the transaction approximately 10 percent of the assets of the company are margin stock

A loan made to purchase margin stock, guaranteed by an individual who has pledged margin stock as security for the guarantee

Bank is the trustee for a qualified pension plan from which the participants may borrow and use their interest in the plan as security; a participant borrows money for the purpose of purchasing margin stock

Under Regulation U, prior to extending credit secured by margin stock for more than $100,000, a national bank must obtain which of the following?

Written statement from the borrower as to the purpose of the loan

Certificate of value for the collateral

Written statement from the borrower as to the purpose of the loan

Written statement certifying the borrower's business address and daytime phone number

Notice from the borrower as to his willingness to provide additional margin stock as collateral

Under content of disclosures long term disclosures may include the following, as applicable EXCLUDING:

Notification that the product is optional

Explanation of debt-suspension agreement

Lump-sum payment of fee with no refund

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

Appropriate recognition and financial reporting of income, expenses, assets, and liabilities

Appropriate treatment of losses associated with these products

Assessment of the adequacy of its internal controls and risk mitigation activities

Appropriate recognition and financial reporting of income, expenses, assets, and liabilities

Appropriate treatment of losses associated with these products

Assessment of the adequacy of its internal controls and risk mitigation activities

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

The Equal Credit Opportunity Act (ECOA) was enacted in 1974 to prevent discrimination in credit transactions. In 1975 the act was amended. Which of the following prohibited base/s are now included in it?

Exercise of rights under the Consumer Credit Protection Act

Receipt of public assistance income

Securities credit covers credit subject to Section 7 of the Securities Exchange Act of 1934 or credit by a broker or dealer subject to regulation under the act. The following requirements of Regulation B do not apply EXCEPT:

It is not payable by agreement in more than four installments

Restrictions regarding information about a spouse or former spouse, marital status, or sex of the applicant

It is not payable by agreement in more than four installments

Provisions relating to furnishing credit information

It is credit extended to governments or government agencies, instrumentalities, or subdivisions

Only the general rule against discrimination applies to government credit

It is credit extended to governments or government agencies, instrumentalities, or subdivisions

It has Records retention requirements

Only the general rule against discrimination applies to government credit

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

An application for which the bank has received all the information it regularly considers in evaluation, including credit reports, verifications, and so forth

The creditor must be reasonably diligent in collecting information to complete the application (for example, ordering credit bureau reports)

An application for which the bank has received all the information it regularly considers in evaluation, including credit reports, verifications, and so forth

The creditor must be reasonably diligent in collecting information to complete the application (for example, ordering credit bureau reports)

An inquiry becomes an application when the creditor evaluates information and decides to grant or decline the credit

Requests for written preapprovals to be issued by the lender are considered applications

To be effective, compliance risk management professionals must design a framework to ensure that bank management understands the risks and the steps that must be taken to mitigate them. The many roles compliance professionals fill incorporate risk management aspects including:

Coordinating regulatory exams to explain risks to examiners

Overseeing compliance training targeting higher risk areas

Tracking regulatory proposals and final rules to understand new risks

They also embrace the concept of risk-based compliance management. They expect compliance management to be tailored to the bank, be it large or small, offering standard or specialty financial services, simple or complex products lines, and adjusted as appropriate for the customer base as that issued for the Bank Secrecy Act, also establishes their expectations that a bank's program be risk based. Who are they?

Foreign financial service providers

A compliance professional's responsibilities include all of the following EXCEPT:

Assisting business lines with compliance training for employees, as needed

Understanding the business units operating environment and risk tolerance

Performing risk assessments with the assistance of business units to determine current risk levels and risks associated with the bank's products, lines of business, customers, and locations, among other factors

Working with business units to ensure prompt corrective action for any detected errors

Assisting business lines with compliance training for employees, as needed

In a compliance program, tactical compliance procedures should be integrated into business line procedures, such as how to deliver an Adverse Action Notice when an application is declined. In this case:

Regulations should be applied consistently to procedures throughout the bank

Revisions to procedures should be based on compliance expertise and not mere editing

Regulations should be applied consistently to procedures throughout the bank

Revisions to procedures should be based on compliance expertise and not mere editing

Providing solutions to mitigate any identified risk

Assisting business units in developing or revising policies and procedures to reflect current regulatory requirements

Which of the following should be done during research and interpreting regulations Compliance professionals in mitigating compliance risk?

Implementing final regulatory rules

Ranking solutions as high, moderate and low risk

Implementing final regulatory rules

Understanding the business units' operating environment and risk tolerance

Ranking solutions as high, moderate and low risk

The compliance program should address plans to verify adherence to applicable regulations through:

Ongoing monitoring to evaluate the program, self monitoring and corrective action

Ongoing monitoring to evaluate the program, self monitoring and periodic reviews

There is no established template for documenting compliance risk. Each institution should develop a risk assessment that fits its risk profile. The components that are commonly used throughout the industry are as follows EXCEPT:

Training the leadership of compliance regulation program

Identifying key performance indicators

Training the leadership of compliance regulation program

In Compliance regulation and risk assessment key performance indicators usually include:

Regulatory criticism from a regulator or internal or external auditors

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

Management may want to take additional action through more controls or increased reviews

Risk may prompt a decrease in controls and improved efficiencies

Controls currently in place are appropriate to succeed in keeping risks within management's established risk-tolerance level

Risk measurements exceed management's tolerance for risk

Compliance professionals have a duty to keep senior management and the board apprised of the state of compliance within the bank through which of the following:

All of the options mentioned above

Self-monitoring and audit results

Timely and accurate regulatory reporting

All of the options mentioned above

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?

Calculate the institution's consolidated risk profile

Think practically about your role as an advisor. Involve the business units in the decision process rather than making decisions for them

Calculate the institution's consolidated risk profile

Make sure you understand the level of risk the bank will tolerate, so decisions do not exceed this limit

Add value by analyzing regulatory requirements for the business units before you present proposed or final rules or solutions

Which one of the following is out of the FIRREA penalties included in the enforcement section of Adjusted Mortgage Regulation (12 CFR 34)?

Penalties up to $7,500 per day for violations of laws and regulations

Penalties up to $1,375,000 per day against persons who knowingly commit a violation and knowingly or recklessly cause a substantial loss to the bank or a substantial benefit to the party

Penalties up to $7,500 per day for violations of laws and regulations

Penalties up to $47,500 per day if violations or unsafe or unsound practices are engaged in recklessly or are part of a pattern of misconduct that causes more than a minimal loss to the bank or any pecuniary gain to the parties involved

Penalties up to $1,375,000 per day against persons who knowingly commit a violation and knowingly or recklessly cause a substantial loss to the bank or a substantial benefit to the party

Penalties up to $6,500 per day for violations of laws and regulations

In Requirements section of Adjusted Mortgage Regulation (12 CFR 34), for loans subject to both the OCC ARM regulation and to Regulation Z, 12 CFR 226.19(b)---that is, loans made to an individual, for personal purposes, secured by the borrower's principal dwelling, and having a term longer than one year--- the index to which the interest rate is tied must be:

Readily available to and verifiable by the browser

Multiple values of a chosen measure or a moving average of the chosen measure calculated over a specified period

Subprime borrowers are those with weakened credit histories or reduced repayment capacity. Loans to these borrowers historically have had a higher delinquency rate. Many lenders have expanded their lending programs and added subprime products as a method of meeting their _______________by providing greater credit access to lower-income consumers.

Community Reinvestment Act (CRA) responsibilities

The banking agencies issued two guidances to caution depository institutions about risks involved in funding non-depository lenders that engage in predatory lending. Predatory and abusive practices include:

Excessive fees and interest rate including fees for unnecessary products

Balloon payments that may never cause foreclosures

Excessive refinancing with fees included in the new loan

Under Interagency Guidance on Subprime Lending (1999) lending policy must:

Be appropriate to the size and complexity of the operation

Address the types of products offers and those not authorized

Require credit file documentation

The purpose of guidelines for National Banks to Guard against Predatory and Abusive Lending Practices- AL-2003-2 includes all of the following EXCEPT:

Banks should consider appropriate discount rates, credit loss rates, and prepayment rates when valuing these assets

Provide examples to national banks of practices that may be abusive

Advise banks on how they should avoid abusive practices

Banks should consider appropriate discount rates, credit loss rates, and prepayment rates when valuing these assets

Show how some abusive lending can involve unfair or deceptive practices and therefore violate the Federal Trade Commission Act

ABA CRCM Practice Test 1 - Free Online Exam Prep & Questions

This is a loan term or an arrangement that modifies a loan term under which a bank agrees to cancel all or part of a customer's loan obligation on the occurrence of a specified event. It may be included as a part of the loan documents, or it may be a separate agreement. What is it?

Debt suspension agreement (DSA)

Anti-dying

Debt cancellation contract (DCC)

ALLL

Comment (0)

ABA CRCM Practice Test 1

Question

ABA CRCM Practice Tests

Practice Tests