UCE 670 EXAMBANK WITH FREQUENTLY
TESTED QUESTIONS AND BEST FOR
YOUR REVISION A+ GRADED.
"Which of the following is true when a bank purchases an investment
security with a premium?
a) The bank must amortize the premium from date of purchase to the call
date
b) The bank must charge off the premium only in the event of default of
the security
c) The bank must amortize the premium over the life of the security
d) The bank is not required to take any action unless the amount of the
premium is equal 5% or more of total bank revenue"
Verified Answer -c - The difference between the purchase price and par
value represents the premium, which all banks are required to amortize. A
premium must be amortized and a discount must be accreted from date of
purchase to maturity, not to call or put date. See Call Report Instructions,
pg. A-66
"In the event a bank is undercapitalized, how many days does the bank
have to file a written capital restoration plan?
a) 30 days
b) 45 days
c) 60 days
d) 90 days
,"
Verified Answer -b - A national bank shall file the plan with the OCC
within 45 days of the date that the bank receives notice or is deemed to
have notice that the bank is undercapitalized. See 12 CFR 6.5 (a)
"Which of the following is true of a standby letter of credit? Choose two.
a) Represents an obligation of the bank to a third party, contingent upon
the failure of the bank's customer, to perform under the terms of the
contract
b) Drafts will be drawn when the underlying transactions is consummated
as intended
c) Beneficiary will be paid when the terms of the letter are met and the
required documents are submitted to the paying bank
d) Drafts will be drawn only when the underlying event fails to occur as
intended"
Verified Answer -a, d - Answer choices b and c apply to commercial letters
of credit. The primary difference between the two is that a standby letter of
credit is contingent. It is used when the bank's customer defaults or is
nonperforming on the intended contract, similar to a guarantee. See Trade
Finance Handbook, pg. 8-11 and Call Report Glossary, pg. A-53 and 54
"In general, Community Reinvestment Act examinations occur every three
years. Which of the following cycle extensions apply to banks having
assets less than $250 million?
a) Small banks do not receive any extensions
b) Once every 60 months for banks with a previous rating of
"Outstanding"
c) Once every 48 months for banks with a previous rating of "Satisfactory"
,d) B and C"
Verified Answer -d - In addition to the cycles noted above, supervisory
agencies have discretion in frequency when the small bank received a
"less than satisfactory" rating at the previous examination. See the
Gramm-Leach-Bliley Act of 1999, Title VII, Subtitle B, Sec. 809
"Which of the following circumstances would require a loan write-up?
I. When the loan adversely rated exceeds the greater of $100 thousand or
2 percent of capital in a "3" rated bank
II. When the loan adversely rated exceeds the greater of $150 thousand or
5 percent of capital in a "1" rated bank
III. When an insider loan is adversely rated in a "3" rated bank
IV. A special mention or classified Shared National Credit in a "1" rated
bank
a) II only b) I and III
c) II and III d) I, II, III, and IV"
Verified Answer -"b - I and III. Write-ups are strongly recommended:
• when the special mention or classified loan is Shared National Credit,
when the amount adversely rated exceeds the greater of $150M or 5% of
capital, when management disagrees with the classification, when an
insider loan is adversely rated, when a violation of law is involved.
They are MANDATORY when a bank is, or may be, rated "3", "4", or "5"
AND when any one of the last three items in the recommended list apply.
The threshold decreases to $100M or 2% of capital for these banks. See
Rating Credit Risk Handbook, pg. 41"
"Which of the following might a bank do in order to satisfy liquidity
needs? Choose all that apply.
, a) Liquidate investment securities
b) Increase liabilities of a term nature
c) Purchase treasury stock
d) Increase holdings of non-liquid assets
"
Verified Answer -a, b - See Liquidity Handbook
"True/False:
While it is not appropriate for a bank to deal in lottery tickets, it is
acceptable for a bank to advertise a lottery.
"
Verified Answer -False - A bank is restricted from dealing in lottery tickets
or advertising a lottery. See 12 USC 25a (of 12 USC Chapter 2 for National
Banks)
"Which of the following matters may bankers not appeal?
a) Final examination ratings
b) Adequacy of the allowance for loan and lease loss methodology
c) Formal enforcement-related actions
d) Violations of law"
Verified Answer -"c - formal enforcement-related actions. A bank may
appeal any agency supervisory decision or action to its SO or to the
Ombudsman, including
TESTED QUESTIONS AND BEST FOR
YOUR REVISION A+ GRADED.
"Which of the following is true when a bank purchases an investment
security with a premium?
a) The bank must amortize the premium from date of purchase to the call
date
b) The bank must charge off the premium only in the event of default of
the security
c) The bank must amortize the premium over the life of the security
d) The bank is not required to take any action unless the amount of the
premium is equal 5% or more of total bank revenue"
Verified Answer -c - The difference between the purchase price and par
value represents the premium, which all banks are required to amortize. A
premium must be amortized and a discount must be accreted from date of
purchase to maturity, not to call or put date. See Call Report Instructions,
pg. A-66
"In the event a bank is undercapitalized, how many days does the bank
have to file a written capital restoration plan?
a) 30 days
b) 45 days
c) 60 days
d) 90 days
,"
Verified Answer -b - A national bank shall file the plan with the OCC
within 45 days of the date that the bank receives notice or is deemed to
have notice that the bank is undercapitalized. See 12 CFR 6.5 (a)
"Which of the following is true of a standby letter of credit? Choose two.
a) Represents an obligation of the bank to a third party, contingent upon
the failure of the bank's customer, to perform under the terms of the
contract
b) Drafts will be drawn when the underlying transactions is consummated
as intended
c) Beneficiary will be paid when the terms of the letter are met and the
required documents are submitted to the paying bank
d) Drafts will be drawn only when the underlying event fails to occur as
intended"
Verified Answer -a, d - Answer choices b and c apply to commercial letters
of credit. The primary difference between the two is that a standby letter of
credit is contingent. It is used when the bank's customer defaults or is
nonperforming on the intended contract, similar to a guarantee. See Trade
Finance Handbook, pg. 8-11 and Call Report Glossary, pg. A-53 and 54
"In general, Community Reinvestment Act examinations occur every three
years. Which of the following cycle extensions apply to banks having
assets less than $250 million?
a) Small banks do not receive any extensions
b) Once every 60 months for banks with a previous rating of
"Outstanding"
c) Once every 48 months for banks with a previous rating of "Satisfactory"
,d) B and C"
Verified Answer -d - In addition to the cycles noted above, supervisory
agencies have discretion in frequency when the small bank received a
"less than satisfactory" rating at the previous examination. See the
Gramm-Leach-Bliley Act of 1999, Title VII, Subtitle B, Sec. 809
"Which of the following circumstances would require a loan write-up?
I. When the loan adversely rated exceeds the greater of $100 thousand or
2 percent of capital in a "3" rated bank
II. When the loan adversely rated exceeds the greater of $150 thousand or
5 percent of capital in a "1" rated bank
III. When an insider loan is adversely rated in a "3" rated bank
IV. A special mention or classified Shared National Credit in a "1" rated
bank
a) II only b) I and III
c) II and III d) I, II, III, and IV"
Verified Answer -"b - I and III. Write-ups are strongly recommended:
• when the special mention or classified loan is Shared National Credit,
when the amount adversely rated exceeds the greater of $150M or 5% of
capital, when management disagrees with the classification, when an
insider loan is adversely rated, when a violation of law is involved.
They are MANDATORY when a bank is, or may be, rated "3", "4", or "5"
AND when any one of the last three items in the recommended list apply.
The threshold decreases to $100M or 2% of capital for these banks. See
Rating Credit Risk Handbook, pg. 41"
"Which of the following might a bank do in order to satisfy liquidity
needs? Choose all that apply.
, a) Liquidate investment securities
b) Increase liabilities of a term nature
c) Purchase treasury stock
d) Increase holdings of non-liquid assets
"
Verified Answer -a, b - See Liquidity Handbook
"True/False:
While it is not appropriate for a bank to deal in lottery tickets, it is
acceptable for a bank to advertise a lottery.
"
Verified Answer -False - A bank is restricted from dealing in lottery tickets
or advertising a lottery. See 12 USC 25a (of 12 USC Chapter 2 for National
Banks)
"Which of the following matters may bankers not appeal?
a) Final examination ratings
b) Adequacy of the allowance for loan and lease loss methodology
c) Formal enforcement-related actions
d) Violations of law"
Verified Answer -"c - formal enforcement-related actions. A bank may
appeal any agency supervisory decision or action to its SO or to the
Ombudsman, including
