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Banking Regulations and Ethics Flashcards

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  1. Which regulatory framework requires U.S. banks to conduct annual stress tests to assess their ability to withstand economic shocks?

    Answer: Dodd-Frank Act Stress Testing (DFAST)

    DFAST, established under the Dodd-Frank Act, requires qualifying banks to conduct annual stress tests simulating adverse economic scenarios.

  2. A bank officer who uses inside information about a client's upcoming merger to purchase that company's stock before public announcement violates:

    Answer: SEC insider trading regulations and banking ethics codes

    Using material nonpublic information obtained through banking relationships to trade securities violates both SEC insider trading rules and banking ethics standards.

  3. The Office of the Comptroller of the Currency (OCC) primarily supervises:

    Answer: Federally chartered national banks and federal savings associations

    The OCC charters, regulates, and supervises all national banks and federal savings associations in the U.S.

  4. Under the Real Estate Settlement Procedures Act (RESPA), which practice is explicitly prohibited?

    Answer: Paying kickbacks for settlement service referrals

    RESPA prohibits kickbacks and unearned fees paid between settlement service providers as part of a referral arrangement, protecting consumers from inflated closing costs.

  5. A bank's compliance program must include all of the following EXCEPT:

    Answer: Guarantee of zero regulatory violations

    A sound compliance program includes policies, a compliance officer, training, and audits, but no program can guarantee zero violations — only reasonable preventive measures.

  6. Which act requires mortgage servicers to provide borrowers with clear statements about their loan terms and protects them from certain servicing abuses?

    Answer: Mortgage Servicing Rules under Dodd-Frank/RESPA

    The Mortgage Servicing Rules implemented under Dodd-Frank and RESPA establish standards for loan statements, error resolution, and loss mitigation protections.

  7. A bank's anti-bribery policy is most directly guided by which U.S. federal law when dealing with foreign officials?

    Answer: Foreign Corrupt Practices Act (FCPA)

    The FCPA prohibits U.S. companies and individuals, including banks, from bribing foreign government officials to obtain or retain business.