SPECIALTY EXAMINATIONS Flashcards
(31 cards)
1
Q
IT
IS work program should be used when?
A
- No testing and vendor supported
- Some testing requires RD approval if >$300MM
- ATMs, POS, ACH any bank;
- Serviced by outside vendor;
- Not used if the bank services another bank
2
Q
IT
What are the 4 IS components? MADS
A
- Management
- Audit
- Development and Acquisition
- Support and delivery
3
Q
IT
What is the IT Composite 1 Rating?
A
- Exhibit strong performance in every respect and generally have components rated 1 or 2;
- IT Weaknesses are minor in nature and easily corrected during the normal course of business;
- Risk management processes provide a comprehensive program to identify and monitor risk relative to the size, complexity and risk profile of the entity;
- Well defined strategic plans are fully integrated throughout the organization allowing management to quickly adapt to changing market, business and technology needs of the entity;
- Management identifies weaknesses promptly and takes appropriate corrective action to resolve audit and regulatory concerns;
- The financial condition of the service provider is strong and overall performance shows no cause for supervisory concern.
4
Q
IT
What is the IT Composite 2 Rating?
A
- Exhibit safe and sound performance but may demonstrate modest weaknesses in operating performance, monitoring, management processes or system development;
- Generally, senior management corrects weaknesses in the normal course of business;
- Risk management processes adequately identify and monitor risk relative to the size, complexity and risk profile of the entity;
- Strategic plans are defined but may require clarification, better coordination or improved communication throughout the organization;
- Management anticipates, but responds less quickly to changes in market, business, and technological needs of the entity;
- Management normally identifies weaknesses and takes appropriate corrective action, although greater reliance is placed on audit and regulatory intervention to identify and resolve concerns;
- The financial condition of the service provider is acceptable and while internal control weaknesses may exist, there are no significant supervisory concerns
- Supervisory action is informal and limited.
5
Q
IT
What is the IT Composite 3 Rating?
A
- Exhibit some degree of supervisory concern due to a combination of weaknesses that may range from moderate to severe;
- If weaknesses persist, further deterioration in the condition and performance of the institution or service provider is likely
- Risk management processes may not effectively identify risks and may not be appropriate for the size, complexity, or risk profile of the entity;
- Strategic plans are vaguely defined and may not provide adequate direction for IT initiatives;
- Management often has difficulty responding to changes in business, market, and technological needs of the entity
- Self-assessment practices are weak and are generally reactive to audit and regulatory exceptions;
- Repeat concerns may exist, indicating that management may lack the ability or willingness to resolve concerns;
- The financial condition of the service provider may be weak and/or negative trends may be evident;
- While financial or operational failure is unlikely, increased supervision is necessary;
- Formal or informal supervisory action may be necessary to secure corrective action.
6
Q
IT
What is the IT Composite 4 Rating?
A
- Operates in an unsafe and unsound environment that may impair the future viability of the entity;
- Operating weaknesses are indicative of serious managerial deficiencies;
- Risk management processes inadequately identify and monitor risk, and practices are not appropriate given the size, complexity, and risk profile of the entity;
- Strategic plans are poorly defined and not coordinated or communicated throughout the organization;
- Management and the board are not committed to, or may be incapable of ensuring that technological needs are met;
- Management does not perform self-assessments and demonstrates an inability or unwillingness to correct audit and regulatory concerns;
- The financial condition of the service provider is severely impaired and/or deteriorating;
- Failure of the financial institution or service provider may be likely unless IT problems are remedied;
- Close supervisory attention is necessary and, in most cases, formal enforcement action is warranted.
7
Q
IT
What is the IT Composite 5 Rating?
A
• Exhibit critically deficient operating performance and are in need of immediate remedial action;
• Operational problems and serious weaknesses may exist throughout the organization;
• Risk management processes are severely deficient and provide management little or no perception of risk relative to the size, complexity, and risk profile of the entity;
• Strategic plans do not exist or are ineffective, and management and the board provide little or no direction for IT initiatives;
• As a result, management is unaware of, or inattentive to technological needs of the entity;
• Management is unwilling or incapable of correcting audit and regulatory concerns;
• The financial condition of the service provider is poor and failure is highly probable due to poor operating performance or financial instability;
Ongoing supervisory attention is necessary.
8
Q
TRUST
What is the definition of a trust?
A
- Fiduciary relationship in which one person is the holder of the title to the property subject to an equitable obligation to keep or use the property for the benefit of another.
- Trustees can be individual or corporate, but the person named must have the legal capacity to hold the property.
9
Q
TRUST
What are the Uniform Interagency Trust Rating System (UITRS) components (Hint: MOECA)?
A
- Management
- Operations, Internal Controls, and Auditing
- Earnings
- Compliance
- Asset Management
10
Q
TRUST
What is the purpose of a trust examination?
A
- Determine if the banks operations or administration of accounts have given rise to possible or contingent liabilities (damages from lawsuits due to inappropriate handling of trusts), and
- To assess whether there are any direct liabilities or estimated losses (identify risk to the bank’s capital position).
11
Q
TRUST
When do Earnings not need to be rated?
A
• Earnings do not need to be rated if the department has less than $100MM in TA as of the examination date.
12
Q
TRUST
What are the minimum requirements from Statement of Principles of Trust Department Management?
A
- Establish Trust Department
- Separate Operations
- Separate Books
13
Q
TRUST
What are the Reporting and Monitoring Procedures form SOP Trust Department Management?
A
- Trust Officer
- Trust Committee
- Written Policies
- Legal Counsel
- Internal Controls
- Audit Program
- Review Committee Reports
- Review Trust Exam Reports
14
Q
TRUST
State nonmember gets consent from ______ to exercise trust powers, and the ______ grants these powers.
A
- FDIC
* State
15
Q
TRUST
Requirements of the Trust Committee: (7)
A
- 3 directors of bank & at least 1 who is not an active bank officer;
- Quarterly meetings;
- Approve & document the opening of accounts, all purchases/sales, or changes in trust assets, and the closing of trust accounts;
- Provide for comprehensive review of all new accounts;
- Provide for a review of the trust department account at least annually;
- Keep comprehensive minutes;
- Make periodic reports to the BOD of its actions
16
Q
TRUST
What is the rating for 1?
A
• Administration of fiduciary activities is sound in every
respect;
• Generally all components are rated 1 or 2;
• Any weaknesses are minor in nature and can be
handled in a routine manner by management;
• Risk management practices are strong relative to the
size, complexity, and risk profile of the institution’s
fiduciary activities;
• Fiduciary activities are conducted in accordance with
sound fiduciary principles and give no cause for
supervisory concern.
17
Q
TRUST
What is the rating for 2?
A
- Trust departments so rated are fundamentally sound, but do not measure up in one or more respects to the standards of the top rating;
- Policies, practices and procedures are generally effective, but may reflect modest weaknesses that are readily correctable in the normal course of business;
- Criticized features may include isolated instances of noncompliance with laws, regulations or management-prescribed policies or procedures, but corrective action without loss to the fiduciaries is assured.
18
Q
TRUST
What is the rating for 3?
A
- Trust departments in this group conduct their affairs in a generally adequate manner;
- Policies and procedures governing important phases of administration or operations may be nonexistent or inadequately defined, but practices are generally appropriate to faithfully discharge the department’s fiduciary obligations;
- Some problems of relative significance may exist, but none are of such importance as to pose a threat to the trust beneficiaries generally or to the soundness of the bank;
- Management will generally be regarded as adequate in relation to the volume and character of business administered;
- The supervisory response is ordinarily limited to follow up on correction of criticizable features.
19
Q
TRUST
What is the rating for 4?
A
- Trust departments so rated have one or more major problems centered in inexperienced or inattentive management;
- Failure to adhere to sound administrative policies, numerous violations of laws or regulation, weak or dangerous operating practices, or an accumulation of unsatisfactory features of lesser importance;
- Such problems pose a threat to the account beneficiaries generally and, if left unchecked, could evolve into conditions that could ultimately undermine public confidence in the bank;
- Such departments ordinarily require special supervisory attention.
20
Q
TRUST
What is the rating for 5?
A
- Trust departments in this group evidence performance or conditions that are critically deficient in numerous major respects arising from incompetent or neglected administration, flagrant and/or repeated disregard of applicable laws and regulations, or willful departure from sound fiduciary principles and practices;
- Such conditions evidence a flagrant disregard for the interests of the trust beneficiaries and may pose a serious threat to the soundness of the bank;
- Such departments require immediate corrective action, constant supervisory attention, and the possible imposition of regulatory sanctions.
21
Q
COMPLIANCE
What is the DCA rating scheme?
A
- Compliance 1 - 5 overall
- CRA:
- Outstanding
- Satisfactory
- Needs to improve
- Substantial noncomplianceAn examiner should not evaluate an institution on its efforts to ascertain community credit needs, but records of meeting the needs of the community.
22
Q
COMPLIANCE
Can CRA ratings be disclosed to the public? If so, how long must they be made available?
A
- CRA ratings can be disclosed to the public
* Must be made available w/in 30 business days of receipt.
23
Q
COMPLIANCE
What are the three primary areas reviewed and assessed to arrive at Compliance rating?
A
Compliance rating the components look at:
• Management
• Violations
• Program
24
Q
COMPLIANCE
Component ratings are not disclosed to the institution. To whom does HMDA reporting apply?
A
- Lenders with assets > $37 million in a MSA (changes each year)
- Non-depository lenders w/TA > $10 million and an office or loan activity in a MSA
25
COMPLIANCE
| What information must be reported for HMDA?
* Loan type
* Amount
* Location of dwelling
* Race or national origin
* Sex
* Gross annual income
26
COMPLIANCE
| What is the Compliance Composite 1 Rating?
* Strong compliance position;
* Management is capable of and staff is sufficient for effectuating compliance;
* An effective compliance program, including an efficient system of internal procedures and controls, has been established;
* Changes in consumer statutes and regulations are promptly reflected in the institution's policies, procedures and compliance training;
* Adequate training is provided for its employees;
* If any violations are noted they relate to relatively minor deficiencies in forms or practices that are easily corrected;
* No evidence of discriminatory acts or practices, reimbursable violations, or practices resulting in repeat violations;
* Violations and deficiencies are promptly corrected by management;
* As a result, the institution gives no cause for supervisory concern.
27
COMPLIANCE
| What is the Compliance Composite 2 Rating?
* Generally strong compliance position;
* Management is capable of administering an effective compliance program;
* Although a system of internal operating procedures and controls has been established to ensure compliance, violations have nonetheless occurred;
* Violations, however, involve technical aspects of the law or result from oversight on the part of operating personnel;
* Modification in the bank's compliance program and/or the establishment of additional review/audit procedures may eliminate many of the violations;
* Compliance training is satisfactory;
* No evidence of discriminatory acts or practices, reimbursable violations, or practices resulting in repeat violations.
28
COMPLIANCE
| What is the Compliance Composite 3 Rating?
* Close supervisory attention and monitoring is required to promptly correct the serious compliance problems disclosed;
* Numerous violations are present;
* Overcharges, if any, affect a significant number of consumers and involve a substantial amount of money;
* Often practices resulting in violations and cited at previous examinations remain uncorrected;
* Discriminatory acts or practices may be in evidence;
* Management has not exerted sufficient effort to ensure compliance;
* Management's attitude may indicate a lack of interest in administering an effective compliance program which may have contributed to the seriousness of the institution's compliance problems;
* Internal procedures and controls have not proven effective and are seriously deficient;
* Prompt action on the part of the supervisory agency may enable the institution to correct its deficiencies and improve its compliance position.
29
COMPLIANCE
| What is the Compliance Composite 4 Rating?
* Close supervisory attention and monitoring is required to promptly correct the serious compliance problems disclosed;
* Numerous violations are present;
* Overcharges, if any, affect a significant number of consumers and involve a substantial amount of money;
* Often practices resulting in violations and cited at previous examinations remain uncorrected;
* Discriminatory acts or practices may be in evidence;
* Clearly, management has not exerted sufficient effort to ensure compliance;
* Management's attitude may indicate a lack of interest in administering an effective compliance program which may have contributed to the seriousness of the institution's compliance problems;
* Internal procedures and controls have not proven effective and are seriously deficient;
* Prompt action on the part of the supervisory agency may enable the institution to correct its deficiencies and improve its compliance position.
30
COMPLIANCE
| What is the Compliance Composite 5 Rating?
* Strongest supervisory attention and monitoring needed;
* Substantially in noncompliance with the consumer statutes and regulations;
* Management has demonstrated its unwillingness or inability to operate within the scope of consumer statutes and regulations;
* Previous efforts on the part of the regulatory authority to obtain voluntary compliance have been unproductive;
* Discrimination, substantial overcharges, or practices resulting in serious repeat violations are present.
31
MISCELLANEOUS
| What are the specialty examination areas?
* BSA
* Compliance
* CRA
* IT
* Gov't Securities Dealers
* Municipal Securities Dealers
* Transfer Agent
* Trust
