Financial Regulation & Supervision Flashcards

Which regulatory body oversees the safety and soundness of U.S. national banks and federal savings associations?

Answer: OCC

The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks and federal savings associations.

Under Basel III, what is the minimum Common Equity Tier 1 (CET1) capital ratio required for banks?

Answer: 4.5%

Basel III requires a minimum CET1 ratio of 4.5% of risk-weighted assets, the highest quality form of regulatory capital.

What is the primary purpose of the Financial Stability Oversight Council (FSOC)?

Answer: Identifying systemic risks to U.S. financial stability

FSOC was created by Dodd-Frank to identify risks to financial stability, promote market discipline, and respond to emerging threats to the financial system.

A bank's leverage ratio under U.S. regulatory requirements is calculated as Tier 1 capital divided by:

Answer: Total average assets

The leverage ratio uses total average assets (not risk-weighted), providing a simpler, non-risk-based capital constraint.

Which provision of the Dodd-Frank Act restricts proprietary trading by banks?

Answer: Volcker Rule

The Volcker Rule, Section 619 of Dodd-Frank, prohibits banks from engaging in short-term proprietary trading of certain financial instruments.

Under the Community Reinvestment Act (CRA), federal regulators evaluate banks on their record of:

Answer: Meeting credit needs of low- and moderate-income communities

The CRA requires federal regulators to assess banks' records of helping meet the credit needs of their entire community, including low- and moderate-income neighborhoods.

Which of the following is a key function of the Securities Investor Protection Corporation (SIPC)?

Answer: Protecting investors if a brokerage firm fails

SIPC protects customers of failed brokerage firms by recovering missing cash and securities up to $500,000 per customer.