Banking Operations and Services Flashcards

Which regulation requires banks to disclose the annual percentage yield (APY) on deposit accounts?

Answer: Regulation DD

Regulation DD (Truth in Savings Act) mandates uniform disclosure of APY and account terms so consumers can compare deposit products.

A bank that holds deposits and makes loans is performing which core function of financial intermediation?

Answer: Maturity transformation

Maturity transformation refers to borrowing short-term (deposits) and lending long-term (loans), a core function that creates liquidity for the economy.

When a bank charges off a loan, what accounting entry is made?

Answer: Debit allowance for loan losses; credit loan receivable

A charge-off removes the uncollectible loan from the books by debiting the allowance for loan losses and crediting the loan receivable balance.

Under Regulation E, a consumer who reports an unauthorized electronic fund transfer within 2 business days is liable for a maximum of:

Answer: $50

Regulation E caps consumer liability at $50 when unauthorized EFT transactions are reported within two business days of discovering the loss.

A standby letter of credit differs from a commercial letter of credit in that it:

Answer: Guarantees payment when the applicant fails to perform, not when goods are shipped

A standby LC functions as a guarantee of last resort, paying the beneficiary only if the applicant defaults on an underlying obligation.

The Federal Deposit Insurance Corporation (FDIC) standard deposit insurance coverage per depositor per insured bank is:

Answer: $250,000

The FDIC insures deposits up to $250,000 per depositor, per insured bank, per ownership category.

Which of the following best describes the role of a loan syndication agent bank?

Answer: The bank that administers the loan, coordinates lenders, and handles disbursements

The agent bank in a syndicated loan acts as the administrative coordinator, managing documentation, payments, and communication among all lenders.