Banking Deposit Operations 5 — Questions and Answers
Question 1: Which federal agency directly supervises and insures deposits at state-chartered banks that are NOT members of the Federal Reserve System?
- Office of the Comptroller of the Currency (OCC)
- Federal Deposit Insurance Corporation (FDIC) (Correct answer)
- Consumer Financial Protection Bureau (CFPB)
- Federal Reserve Board
Correct answer: Federal Deposit Insurance Corporation (FDIC)
The FDIC is the primary federal supervisor for state-chartered non-member banks and also provides deposit insurance for all insured institutions.
Question 2: A customer opens a revocable trust account naming four beneficiaries. What is the maximum FDIC coverage for this account?
- $250,000
- $500,000
- $750,000
- $1,000,000 (Correct answer)
Correct answer: $1,000,000
Revocable trust accounts are insured up to $250,000 per eligible beneficiary, so four beneficiaries = $1,000,000 total coverage.
Question 3: What is the key difference between a demand deposit account and a time deposit account?
- Demand deposits earn higher interest rates
- Demand deposits allow withdrawal at any time; time deposits have a fixed term (Correct answer)
- Time deposits are not FDIC insured
- Demand deposits require a minimum balance
Correct answer: Demand deposits allow withdrawal at any time; time deposits have a fixed term
Demand deposits (checking accounts) allow immediate withdrawal on demand, while time deposits (CDs) lock funds for a specified term.
Question 4: A customer asks why her available balance is lower than her account balance. The most likely reason is:
- The bank charged an undisclosed fee
- A recent deposit is under a hold per Regulation CC (Correct answer)
- The account earned negative interest
- Her debit card was deactivated
Correct answer: A recent deposit is under a hold per Regulation CC
Regulation CC allows banks to place holds on deposits, making the deposited amount unavailable until the hold expires.
Question 5: Which type of check is drawn by a bank on its own funds and signed by a bank officer, making it the bank's direct obligation?
- Certified check
- Cashier's check (Correct answer)
- Traveler's check
- Money order
Correct answer: Cashier's check
A cashier's check is issued by and drawn on the bank's own funds, making the bank directly liable for payment.
Question 6: A business customer deposits a check made payable to their business. Who must endorse it?
- Any individual employee of the business
- An authorized officer or agent of the business entity (Correct answer)
- The business owner only, regardless of corporate structure
- No endorsement is needed for business checks
Correct answer: An authorized officer or agent of the business entity
Business checks must be endorsed by an authorized representative of the entity, as defined in the account's corporate resolution or authorization documents.
Question 7: What is the primary risk of allowing a customer to withdraw funds from a deposited check before it has cleared?
- The bank violates Regulation E
- The check may be returned unpaid, leaving the bank with a loss (Correct answer)
- The customer's account accrues extra interest
- The teller is personally liable for the transaction
Correct answer: The check may be returned unpaid, leaving the bank with a loss
If a check is returned after funds have been released, the bank absorbs the loss unless it can recover the funds from the customer.
Banking Deposit Operations 5
Which federal agency directly supervises and insures deposits at state-chartered banks that are NOT members of the Federal Reserve System?