Regulations - Focus Deck

Question 1

What are the core focuses of each of the three Basel Accords?

Answer 1

Basel I - minimum ratio of capital to risk-weighted assets
Basel II - capital requirements based on risk
Basel III - stress testing and capital adequacy

Question 2

Federal Reserve Act (1913)

Answer 2

Created and firmly established the Federal Reserve as the central bank for the US

Also created national check collection and settlement system

Question 3

Glass-Steagall Act (1933)

(and which act repealed part of what it set out to regulate?)

Answer 3

Mostly repealed except for deposit insurance (FDIC)

Separated commercial banking from investment banking

Bank cannot underwrite and securities firms can’t take deposits; repealed by Gramm-Leach-Bliley Act (1999)

Question 4

Anti-tying in Bank Holding Company Act (1970)

Answer 4

Prohibits tying in financial services, with exception for traditional bank products

Products must be available separately to the same consumer

Question 5

Gramm-Leach-Bliley Act (1999)

Answer 5

Permits creation of financial holding companies, with Fed as primary regulator

Consolidated capital requirements for holding company

Implemented key consumer protections

Question 6

Dodd-Frank Act (2010)

(What did it require and which key rule was included in it)

Answer 6

More transparency across the market, especially for derivatives

Federal Reserve must conduct annual stress tests on the largest and most complex FIs

Volcker rule

Question 7

E-Sign Act (2000)

Answer 7

Digital signatures have the same legal effect as wet-ink signatures

Question 8

Check 21 (2003)

Answer 8

Electronic checks are valid for clearing

Question 9

Red Flag Rule

Answer 9

If the financial institution sees something different than the normal use of the account, they will reach out to the account owner

Question 10

Regulation FD

Answer 10

If MNPI is known to certain entities, then disclose to public

Question 11

SEC Rule 2a-7

Answer 11

Provides regulations on money market funds and floating NAVs

Allows MMFs to utilize floating NAV due to liquidity issues “breaking the buck”

Redemption fees and redemption gates can be employed to secure liquidity

Exception of government money market funds

Question 12

UCC Article 3

Answer 12

Negotiable instruments

Inadvertent accord and satisfaction (90 days)

Question 13

UCC Coverage Areas

Answer 13

Negotiable instruments
Deposit reconciliation
Funds transfers (security procedures and consequential damages)
Letters of Credit
Secured Transactions (collateral)

Question 14

What did the Financial Stability Board (FSB) publish proposals for in October 2021?

Answer 14

Enhance money market fund resilience

Question 15

Dodd-Frank (2010) created which two entities?

Answer 15

Consumer Financial Protection Board (CFPB)
Financial Stability Oversight Council (FSOC)

Question 16

Three Pillars of Basel II

Answer 16

Minimum capital requirements

Supervisory review (dealing with and evaluating risk)

Market discipline (disclosure requirements for risk)

Question 17

Basel III Two Reform Targets

Answer 17

Bank-level regulation

System-wide risks

Question 18

Four Requirements from Basel III

Answer 18

Minimum capital levels
Leverage Ratio
Liquidity coverage ratio
Net Stable funding ratio

Question 19

Regulation D

Answer 19

Reserve requirement provision of the Federal Reserve Act of 1913

Question 20

Regulation Q

(List Acts that have impacted this and what it now focuses on)

Answer 20

Previously restricted interest amounts on certain accounts

Glass-Steagall Act of 1933 -> DIDMCA of 1980 -> Dodd-Frank of 2010

Current version implements the Basel III minimum capital requirements and capital adequacy standards

Question 21

Regulation Y

Answer 21

Covers acquisition of banks and bank holding companies

Defines and regulates non-banking activities bank holding companies and foreign banking organizations can do

Question 22

Regulation BB

Answer 22

Requires banks to meet the credit needs of the entire community where they do business

Question 23

Regulation VV

Answer 23

Volcker rule

Question 24

Regulation WW

Answer 24

Minimum liquidity requirement on large and internationally active banking organizations

Based on liquidity coverage ratio

Question 25

Volcker Rule

Answer 25

Generally prohibits banking entities from engaging in proprietary trading Prohibiting investing in or sponsoring hedge funds or private equity funds Limit exposures to hedge funds and private equity funds Recently amended in 2019/2020 to reduce restrictions on investments in venture capital funds

Question 26

Electronic Fund Transfer Act (EFTA) (1978)

Answer 26

Rights and responsibilities for EFT services **EXCEPT WIRES** Limits liability to unauthorized transactions involving ATMs and POS terminals

Question 27

Depository Institutions Deregulation and Monetary Control Act (DIDMCA) (1980)

Answer 27

Requires all deposit-taking institutions to maintain reserves at Fed Fed services such as the discount window and check clearing available to all deposit-taking institutions Fed must reduce and/or price payment system float (service) Fed must price previously free Fed services

Question 28

Regulation E

Answer 28

Implements provisions of the EFTA

Question 29

Regulation J

Answer 29

Implements check collection and settlement provision of Federal Reserve Act

Question 30

Regulation Z

Answer 30

Truth in Lending Act of 1968 Credit Card Accountability Responsibility and Disclosure Act of 2009 Promotes informed use of credit by consumers Primarily impacts treasury through cards offered to customers

Question 31

Things Prohibited under Credit CARD Act / Regulation Z

Answer 31

Cannot increase rate in first year Cannot increase rate that applies to an existing balance Can be under 21 only if they can make required payments or cosigner can Consumer's consent before charging fees for transactions above limit Limits high fees for subprime credit cards Bans two-cycle billing Cannot allocate payments to maximize interest charges

Question 32

Two-Cycle Billing

Answer 32

Calculate interest charges based on the average balance of the account over two billing periods Banned as part of CARD Act

Question 33

Regulation CC

Answer 33

Implements provisions of the Expedited Funds Availability Act of 1987 Rules to speed collection and return of checks Endorsement standards for banks

Question 34

Regulation II

Answer 34

Implements provision of the Durbin Amendment to the Dodd-Frank Act of 2010 Limit debit card interchange fees and increase competition in payment processing (at least two processors)

Question 35

Article 3 of the UCC deals primarily with what two concepts for checks?

Answer 35

Accord and satisfaction Amended to allow for 90 day period due to use of lockboxes Bank's failure to examine forged signature does not result in failure to exercise ordinary care

Question 36

Article 4A of the UCC

Answer 36

Electronic funds transfers

Question 37

Two Primary Provisions of Article 4A of the UCC

Answer 37

Security procedures - commercially reasonable for verifying payment Consequential damages - typically the bank won't be liable, unless in writing; incorrectly executes is responsible for interest and incidental expenses

Question 38

PSD1 (2007)

Answer 38

Payment Services Directive 1 Legislative framework for SEPA

Question 39

PSD2 (2018)

Answer 39

Updates PSD1 to recognize the growth in mobile and internet payment services Limit interchanges fees on consumer credit and debit card transactions Prohibits use of surcharges Legal basis for open banking in the EU (greater integration)

Question 40

BSA

Answer 40

Bank Secrecy Act of 1970 AML legislation Deter money laundering and use of secret foreign accounts $10,000 requires Form 8300

Question 41

Form 8300

Answer 41

Required to be filed as part of BSA

Question 42

MLCA

Answer 42

Money Laundering Control Act Enhances BSA by making it a crime to purposefully structure transactions to avoid the reporting threshold

Question 43

USA PATRIOT Act (2001)

Answer 43

Gave the FBI and DOJ increased latitude in intelligence-gathering activities Imposes significant obligations on nonbank FIs Includes nonfinancial entities with high-value transactions All foreign banks in the US are subject to US jurisdiction Prohibits US banks from maintaining foreign shell banks Credit card issuers that are foreign must take steps to prevent usage by terrorists Increased KYC requirements

Question 44

FinCEN’s CDD Rule (2018)

Answer 44

Customer Due Diligence Requires identification of beneficial owners 25% or more or have control

Question 45

SEC Regulation S-X | (and where does additional guidance come from?)

Answer 45

Outlines reporting requirements Additional guidance comes from SEC decisions

Question 46

SEC Regulation G

Answer 46

Implements SOX Reconcile pro-forma financial information to financial statements

Question 47

Endorsement standards for checks are outlined under which regulation?

Answer 47

Regulation CC

Question 48

UCP 600 | (and what is it the equivalent of?)

Answer 48

Internatioanl standards for letters of credit Equivalent of UCC Article 5

Question 49

ISP98

Answer 49

International standards for standby letters of credit

Question 50

URDG 758

Answer 50

Guidelines for demand guarantees

Question 51

What happens if a bank fails to examine a fraudulent signature? Which rules govern this issue?

Answer 51

UCC 3 - The bank is not liable for not examining a fraudulent signature