Banking Deposit Operations 4 — Questions and Answers
Question 1: What does the term 'float' refer to in the context of deposit operations?
- The interest rate on a variable-rate account
- Funds that have been deposited but not yet cleared (Correct answer)
- The bank's excess reserve ratio
- A type of adjustable-rate CD
Correct answer: Funds that have been deposited but not yet cleared
Float refers to the period between when a deposit is credited to an account and when the funds actually clear through the banking system.
Question 2: A 'POD' designation on a deposit account stands for:
- Point of Deposit
- Payable on Death (Correct answer)
- Power of Disbursement
- Proof of Delivery
Correct answer: Payable on Death
POD (Payable on Death) designates a beneficiary who receives the account funds upon the account holder's death, bypassing probate.
Question 3: Which document legally authorizes a third party to transact on a customer's account while the customer is alive?
- A beneficiary designation
- A power of attorney (Correct answer)
- A testamentary trust
- A survivorship agreement
Correct answer: A power of attorney
A power of attorney grants a designated agent the legal authority to conduct transactions on behalf of the account owner.
Question 4: A customer's savings account is classified as 'dormant.' What typically triggers this status?
- A balance below the minimum requirement
- No customer-initiated activity for a defined period (e.g., 1–5 years) (Correct answer)
- Three consecutive months of zero interest
- The account holder's change of address
Correct answer: No customer-initiated activity for a defined period (e.g., 1–5 years)
Accounts become dormant after a period of inactivity defined by state law, after which unclaimed funds may be escheated to the state.
Question 5: What is the primary purpose of the Bank Secrecy Act (BSA) as it relates to deposit operations?
- To protect customer deposit privacy from all disclosures
- To help detect and prevent money laundering and financial crimes (Correct answer)
- To set interest rate ceilings on deposit accounts
- To establish FDIC insurance coverage limits
Correct answer: To help detect and prevent money laundering and financial crimes
The BSA requires financial institutions to maintain records and file reports to help detect money laundering, tax evasion, and other financial crimes.
Question 6: When a CD automatically renews at maturity, the new rate is typically:
- The same as the original rate regardless of market conditions
- The prevailing rate offered by the bank on that CD term at renewal (Correct answer)
- The federal funds rate plus a fixed spread
- The prime rate as published the day before maturity
Correct answer: The prevailing rate offered by the bank on that CD term at renewal
At auto-renewal, a CD is repriced at whatever current rate the bank offers for that term, which may be higher or lower than the original.
Question 7: A customer complains that a check she deposited was returned unpaid. What fee might her bank charge?
- A cashier's check fee
- A returned deposited item fee (Correct answer)
- A stop payment fee
- An NSF fee on the paying bank
Correct answer: A returned deposited item fee
When a deposited check bounces, the depositor's bank typically charges a returned deposited item fee to cover the reversal cost.
Banking Deposit Operations 4
What does the term 'float' refer to in the context of deposit operations?