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Flashcards in Additional Operations Tests Deck (18):
1

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?

a. Complete the sale of the agency and notify the OCC within 10 days
b. Complete the sale of the agency and notify the OCC within 30 days
c. No regulatory notice is required
d. Notify the OCC before completing the sale

d. Notify the OCC before completing the sale

The bank is not well capitalized; therefore, it must give prior notice to the OCC before purchasing the agency.

2

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?

a. First State Bank's asset size
b. Whether First State Bank is well capitalized
c. First State Bank's CRA rating
d. The impact of the acquisition on First State Bank's safety and soundness

a. First State Bank's asset size

The effect of the acquisition on the bank's safety and soundness, the bank's CRA rating, and whether it is well capitalized are all required regulatory considerations.

3

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?

a. Selling securities
b. Selling insurance
c. Developing real estate
d. Providing financial planning advice

c. Developing real estate

This is a power that is specifically excluded by the law.

4

Which of the following is not exempt from the rules on reasonable and proportional pricing of electronic debit transactions?

a. A debit card issued by a community bank with $8 billion in assets
b. A debit card issued by the federal government for payment of benefits
c. A debit card issued by a community bank with $7 billion in assets, affiliated with another depository institution with assets of $5 billion
d. A prepaid card that cannot access a bank account

c. A debit card issued by a community bank with $7 billion in assets, affiliated with another depository institution with assets of $5 billion

The bank and its affiliates have assets totaling over $10 billion so they are covered

5

In order to qualify for the fraud prevention adjustment an issuer must:

a. Prove that it has historical losses that average at least 1% of its transactions each calendar year
b. Implement fraud prevention and detection policies
c. Offer identify theft protection to its cardholders
d. Allow debit transactions to be processed on at least three unaffiliated payment card networks

b. Implement fraud prevention and detection policies

6

Which of the following statements is true?

a. A payment card network may require an issuer to agree that the issuer will only issue cards that are paid through the payment card network or one of its affiliates.
b. Payment card networks can restrict a merchant's ability to route electronic debit card transactions as long as they don't restrict it to less than two unaffiliated networks
c. If unaffiliated payment card networks merge, issuers have one year from the effective date of the merger to add an unaffiliated payment card network
d. An issuer can meet the requirements of the network exclusivity rule by allowing transactions to be processed on two unaffiliated payment card networks that don't restrict transactions based on geography, merchant or transaction type.

d. An issuer can meet the requirements of the network exclusivity rule by allowing transactions to be processed on two unaffiliated payment card networks that don't restrict transactions based on geography, merchant or transaction type.

7

Which of the following relationships does NOT violate Regulation L?
• Relationship A: First National Bank is located in the same city as an affiliate of First Savings and Loan. First National and the affiliate share a board member.
• Relationship B: State Bank and an affiliate of First National Bank are located in the same RMSA . State Bank has assets of $60 million, and the affiliate has assets of $7 million. The two institutions share a board member.
• Relationship C: Savings and Loan Association and Bank Holding Company do not have offices within the same RMSA. Bank Holding Company’s assets are in excess of $1.75 billion, and Savings and Loan Association’s assets are in excess of $2.5 billion. These institutions share a board member.

a. Relationship A
b. Relationship B
c. Relationship C
d. All the relationships violate Regulation L

b. Relationship B

8

Trust Co. and First National Bank are located in the same city and each has assets of over $50 million. The president of First National has been asked to serve as a director of Trust Co. First National has no trust department and no trust operations. Trust Co. operates solely as a trust company. Would this relationship violate the prohibitions against management official interlocks in Regulation L?

a. Yes, because the institutions are in the same city.
b. No, because the institutions are not both depository institutions.
c. No, because the institutions do not compete.
d. Maybe, but it depends on the size of the institutions.

a. Yes, because the institutions are in the same city.

9

A current member of the board of directors at First Savings Association (an institution with $150 million in total assets) was a director at First National Bank (an institution with total assets of $200 million) for many years. The two institutions are located in the same town. Before being elected to the board of First Savings, the director retired from the First National board. To honor his years of service with First National, the bank made him a director emeritus for life. He can attend any board meeting but cannot vote. He may speak to matters before the board and receives a director’s fee. In actuality, however, the director never attends board meetings. Does this relationship violate Regulation L?

a. No, because he does not attend meetings.
b. No, because he cannot vote.
c. Yes, because he receives a fee.
d. Yes, because he is really an honorary director.

d. Yes, because he is really an honorary director.

10

When an organization reorganizes into a federal mutual holding company, it must:

a. Give its members the same rights as immediately prior to the organization
b. Confer upon its members a share of the savings association for every holding company share
c. Agree to buy out minority shareholders that do not approve the reorganization
d. Deposit funds into an escrow account to pay off the shares of minority shareholders

a. Give its members the same rights as immediately prior to the organization

The management of the association cannot dilute the rights of its members with reorganization into a mutual holding company. Members have to have the same quality of rights as prior to the merger.

11

Which of the following is a true statement regarding a mutual holding company’s subsidiary holding company?

a. It may issue stock to anyone without restriction
b. It may only issue stock to its parent
c. It must obtain FRB approval before issuing stock to any person except its parent
d. It may issue stock to its parent, or any other existing stockholder

c. It must obtain FRB approval before issuing stock to any person except its parent

12

Which of the following is NOT a reason that the FRB will use to disapprove a reorganization plan?

a. To prevent unsafe or unsound practices
b. The lack of financial resources of the organization
c. Management's failure to submit a business plan
d. Management previous submission of an application for a mutual charter

d. Management previous submission of an application for a mutual charter

13

Which of the following activities is exempt from the prohibition against engaging in unrelated business activities?

a. Engaging in an escrow operation
b. Operating a title company
c. Operating an advertising agency
d. Engaging in general business consulting

a. Engaging in an escrow operation

There is a limited list of activities that are exempt from the prohibition against engaging in unrelated business activities. A few types of activities are exempt, such as escrow operations and insurance activities.

14

A savings and loan holding company that received approval to acquire a savings association in 1986 is grandfathered for purposes of the permissible activities as long as:

a. The savings association remains under $500 million in assets
b. All of the subsidiaries of the savings and loan holding company remain under $5 billion in assets
c. The savings association does not increase its number of locations
d. The savings association does not move any branches to a different location

c. The savings association does not increase its number of locations

The only alternative that is specifically prohibited in a grandfathered institution is to increase the number of locations.

15

Which of the following is NOT a permissible activity for a savings and loan holding company?

a. Offer tax and accounting services to small businesses b. Acquire and develop residential real estate
c. Underwrite credit life insurance
d. Manage improved real estate projects

a. Offer tax and accounting services to small businesses

The holding company can provide tax and accounting services only to its affiliates.

16

When may an automatically renewable time deposit account be considered for inclusion in the unclaimed property report?

a. When a customer has corresponded with the bank but not made deposits to the account
b. When a customer has shown interest in the account but not made deposits to the account
c. When a customer does not instruct the bank in writing to roll over the account
d. When the customer has not deposited or withdrawn funds from the account or another account at the same bank

d. When the customer has not deposited or withdrawn funds from the account or another account at the same bank

17

Which state receives the reporting and escheatment of unclaimed property?

a. The state where the bank is domiciled, if different from the bank holding company
b. The state of the customer's last known address, if available and not foreign
c. The state where the property is located, if a deposit account
d. The state chosen by a bank holding company, if a multistate operation

b. The state of the customer's last known address, if available and not foreign

18

What are holders of unclaimed property required to do?

a. Mail a notification to customers whose accounts may escheat to the state
b. Charge customers ''inactive/unclaimed'' fees for accounts that are dormant
c. Publish in a local paper the owners' names of accounts that will escheat
d. Discontinue paying interest on dormant accounts

a. Mail a notification to customers whose accounts may escheat to the state