Conflict of Interest Management Flashcards

A bank loan officer is asked to underwrite a loan for a company in which her spouse holds a 15% ownership stake. What is the most appropriate first step?

Answer: Disclose the relationship and recuse herself from the decision

Disclosure followed by recusal removes the conflicted employee from the decision and preserves objectivity.

Under Regulation O, which group of individuals is subject to restrictions on extensions of credit from a member bank?

Answer: Executive officers, directors, and principal shareholders and their related interests

Regulation O governs credit to bank insiders: executive officers, directors, principal shareholders, and their related interests.

Which situation best describes an 'apparent' (perceived) conflict of interest rather than an actual one?

Answer: A compliance manager's college roommate works at a vendor she oversees, though no benefit is exchanged

A perceived conflict exists when a reasonable person might question objectivity even without an actual benefit or bias.

How often should a financial institution generally require employees and directors to reaffirm conflict-of-interest disclosures?

Answer: At least annually and whenever circumstances change

Annual certifications plus event-driven updates keep disclosures current and are an industry best practice.

A director's brother-in-law owns a construction firm bidding on the bank's branch renovation. What control most effectively mitigates the conflict?

Answer: Having the director abstain from discussion and voting, with the remaining board approving at arm's-length terms

Abstention by the interested director and approval on arm's-length terms by disinterested members addresses the conflict.

Which federal law makes it a crime for a bank employee to corruptly solicit or accept anything of value in connection with bank business?

Answer: Bank Bribery Act (18 U.S.C. 215)

The Bank Bribery Act prohibits corruptly giving or accepting things of value intended to influence bank business.

What is the primary purpose of a conflict-of-interest register maintained by the compliance department?

Answer: To centrally track disclosed conflicts, mitigation steps, and approvals for monitoring and audit

A register provides a central, auditable record of conflicts and how each was managed.