Banking Exam Banking Regulations and Ethics 5 — Questions and Answers
Question 1: Which regulatory framework requires U.S. banks to conduct annual stress tests to assess their ability to withstand economic shocks?
- Basel I
- Dodd-Frank Act Stress Testing (DFAST) (Correct answer)
- Gramm-Leach-Bliley Act
- Glass-Steagall Act
Correct 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.
Question 2: A bank officer who uses inside information about a client's upcoming merger to purchase that company's stock before public announcement violates:
- The Sarbanes-Oxley Act only
- SEC insider trading regulations and banking ethics codes (Correct answer)
- Only the bank's internal code of conduct
- The Fair Credit Reporting Act
Correct 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.
Question 3: The Office of the Comptroller of the Currency (OCC) primarily supervises:
- State-chartered banks that are not Fed members
- Federally chartered national banks and federal savings associations (Correct answer)
- Credit unions at the federal level
- Bank holding companies and financial conglomerates
Correct 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.
Question 4: Under the Real Estate Settlement Procedures Act (RESPA), which practice is explicitly prohibited?
- Charging origination fees
- Paying kickbacks for settlement service referrals (Correct answer)
- Requiring title insurance
- Collecting escrow deposits
Correct 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.
Question 5: A bank's compliance program must include all of the following EXCEPT:
- Written policies and procedures
- Designation of a compliance officer
- Guarantee of zero regulatory violations (Correct answer)
- Ongoing employee training
Correct 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.
Question 6: Which act requires mortgage servicers to provide borrowers with clear statements about their loan terms and protects them from certain servicing abuses?
- Home Ownership and Equity Protection Act (HOEPA)
- Mortgage Servicing Rules under Dodd-Frank/RESPA (Correct answer)
- National Affordable Housing Act
- Truth in Savings Act
Correct 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.
Question 7: A bank's anti-bribery policy is most directly guided by which U.S. federal law when dealing with foreign officials?
- Bank Secrecy Act
- Foreign Corrupt Practices Act (FCPA) (Correct answer)
- International Banking Act
- Patriot Act
Correct 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.
Banking Exam Banking Regulations and Ethics 5
Which regulatory framework requires U.S. banks to conduct annual stress tests to assess their ability to withstand economic shocks?