CRCM Deposit Compliance and Regulatory Examinations 2 — Questions and Answers
Question 1: During a compliance examination, a 'Matters Requiring Attention' (MRA) citation indicates:
- Criminal referral to the Department of Justice
- A deficiency that requires corrective action but is not yet an unsafe or unsound practice (Correct answer)
- The bank has passed all compliance requirements
- A minor clerical error in compliance documentation
Correct answer: A deficiency that requires corrective action but is not yet an unsafe or unsound practice
An MRA is a supervisory finding that identifies a practice or condition requiring corrective action before it becomes an unsafe or unsound practice.
Question 2: A bank's compliance management system (CMS) is evaluated during examinations on which key components?
- Profitability, liquidity, capital adequacy, and asset quality
- Board and management oversight, compliance program, response to consumer complaints, and compliance audit (Correct answer)
- IT infrastructure, cybersecurity posture, vendor management, and capital planning
- Branch network efficiency, product pricing, and customer satisfaction scores
Correct answer: Board and management oversight, compliance program, response to consumer complaints, and compliance audit
Examiners assess a bank's CMS based on board/management oversight, the compliance program's design and implementation, complaint management, and internal audit.
Question 3: Under Regulation O, which types of loans require prior board of directors approval?
- All mortgage loans regardless of borrower
- Extensions of credit to executive officers, directors, and principal shareholders above certain thresholds (Correct answer)
- All consumer loans over $50,000
- All unsecured business loans to bank customers
Correct answer: Extensions of credit to executive officers, directors, and principal shareholders above certain thresholds
Regulation O requires board approval for extensions of credit to insiders (executive officers, directors, principal shareholders) that exceed specific thresholds.
Question 4: Under interagency CRA examination procedures, a bank with assets between $376 million and $1.564 billion is evaluated under:
- The large bank CRA test (lending, investment, service)
- The intermediate small bank CRA test (lending + community development) (Correct answer)
- The small bank CRA test (lending test only)
- The strategic plan CRA test
Correct answer: The intermediate small bank CRA test (lending + community development)
Intermediate small banks are evaluated under the lending test and the community development test rather than the full three-part large bank test.
Question 5: A 'Consent Order' issued by a bank regulator is:
- A voluntary agreement with no legal effect
- A legally binding agreement requiring specific corrective actions and subject to court enforcement (Correct answer)
- A recommendation issued to improve bank practices
- An informal supervisory letter with no public disclosure requirement
Correct answer: A legally binding agreement requiring specific corrective actions and subject to court enforcement
A consent order is a formal, legally binding enforcement action requiring the bank to take specified corrective steps and subject to potential court enforcement if violated.
Question 6: Under Regulation W, transactions between a bank and its affiliates are restricted primarily to prevent:
- The bank from competing with non-affiliated institutions
- The affiliate from using the bank to fund itself at preferential terms at depositor expense (Correct answer)
- Banks from acquiring insurance companies
- The bank from offering services in states where its affiliate operates
Correct answer: The affiliate from using the bank to fund itself at preferential terms at depositor expense
Regulation W (implementing Sections 23A and 23B of the Federal Reserve Act) prevents affiliates from using a bank's insured deposits to fund their own operations on favorable terms.
CRCM Deposit Compliance and Regulatory Examinations 2
During a compliance examination, a 'Matters Requiring Attention' (MRA) citation indicates: