FDIC Compliance TE – Questions With Verifiable
Solutions
What does 'Potential Harm' refer to in financial activities? Correct Answer -
It involves activities or failures that create the possibility of consumer harm,
such as inadequate flood insurance.
What is the Residual Risk Formula? Correct Answer - Inherent Risk -
Mitigating Factors = Residual Risk.
What level of violation is a TIL violation that resulted in $15,000 in
restitution? Correct Answer - Level 3 violation because the violation is
greater than $10,000.
True or False: The exit agenda should list discussion items in order of their
significance in relation to the overall conclusions. Correct Answer - True.
Which of the following is not a component of the ROE? (a) Transmittal Letter
(b) Cover Page (c) Examiner Comments & Conclusions (d) MRBA (e) Level 1,
2, & 3 violations (f) Supervisory Comments Correct Answer - (e) Level 1
violations are not included; only Level 2 and 3 violations are included.
Which component of the ROE is not included in the ROE transmitted to the
institution? (a) Compliance w/ Enforcement Actions (b) MRBA (c) Other
Matters (d) Supervisory Comments Correct Answer - (d) This page is
used to provide information to RO, WO, and succeeding examiners.
Where should items that require transaction testing but are not predicated
upon residual consumer harm risk be addressed in the ARCH? Correct
Answer - In Section 4 under the 'Other Areas for Review' section.
True or False: Investigations or visitations cannot lead to a change in the
bank's compliance rating. Correct Answer - False; regional compliance
management can change a rating between exams if the current rating is
deemed no longer suitable.
,True or False: Total assets help to determine the dollar amount of CMP
penalties. Correct Answer - True; the formula is Total Assets/$1 billion x
Penalty, with the penalty determined by points on the CMP matrix.
True or False: CMPs can only be assessed against banks, not individuals.
Correct Answer - False; CMPs can be assessed against both banks and
individuals.
An institution must file a written request for review of a material supervisory
determination with the Director (DCP) within how many calendar days
following receipt of a report of exam? (a) 30 (b) 45 (c) 60 (d) 90 Correct
Answer - (c) 60 calendar days.
An institution that disagrees with the written determination rendered by the
Division Director must appeal that determination to the SARC within how
many calendar days from the date of that determination? (a) 30 (b) 45 (c) 60
(d) 90 Correct Answer - (a) 30 calendar days.
What are the three things the IP is designed to do? Correct Answer - The
notes do not provide specific details on this; please refer to additional
resources.
What are the three objectives of increasing banker awareness prior to an
exam? Correct Answer - 1) Increase banker awareness of the exam prior
to it starting 2) Promote open communication with exam staff 3) Ensure bank
management knows what to expect during the exam.
What authority should compliance officers have? Correct Answer -
Compliance officers should have the authority to cross departmental lines,
access all areas of an institution's operations, and effect corrective action.
What type of compliance program should a financial institution establish?
Correct Answer - A formal, written compliance program, as effectiveness is
more important than formality, but written policies are crucial during periods
of expansion or staff turnover.
How many calendar days prior to the scheduled onsite date must the IP be
sent to the institution? Correct Answer - 75 calendar days.
,Is using a standardized workpaper required? Correct Answer - True.
What are the criteria for not reviewing each policy and procedure during PEP?
Correct Answer - 1) Policy was reviewed at the prior FDIC compliance
exam 2) No deficiencies were found during the review at the PX 3) No changes
or amendments have been made since the last review 4) No significant
regulatory or operational changes have occurred.
What are the three stages of a compliance exam? Correct Answer - 1)
Pre-Exam Planning (PEP) 2) Review & Analysis 3) Communicate findings to
institution management.
What are four factors to consider when evaluating the level of regulatory risk?
Correct Answer - 1) Potential financial and/or reputational harm to the
consumer 2) Potential legal, reputational, & financial harm to the bank 3) New
laws, regulations, or amendments 4) The amount of transaction activity
subject to a specific regulation.
What are the three focuses of the FDIC's supervisory approach regarding
consumer harm? Correct Answer - 1) Identifying inherent risk 2)
Addressing identified risk 3) Preventing harm through mitigating factors.
What are the purposes of compliance examinations? Correct Answer - 1)
Assess the quality of an institution's CMS for implementing federal consumer
protection statutes & regulations 2) Review compliance with relevant laws
and regulations 3) Initiate effective supervisory action when deficiencies or
violations are found.
Name six factors considered when evaluating the breadth and severity of a
problem for CMPs. Correct Answer - 1) Frequency of misconduct prior
to notification or discovery 2) Financial gain/other benefit or risk of loss 3)
Prior misconduct (last two exams) 4) Effectiveness of CMS 5) Restitution or
remedial action 6) Cooperation.
What are five formal enforcement actions granted to the FDIC Board under
Section 8 of the FDI Act? Correct Answer - 1) Termination of Insurance
(8a) 2) Cease & Desist Order (8b) 3) Order of Restitution (8b6) 4) Temporary
Cease & Desist Order (8c) 5) Removal & Prohibition Order (8e1).
, What are the components of Board & Management Oversight? Correct
Answer - 1) Commitment to & Oversight of the CMS 2) Level of resources
for compliance 3) Due diligence & oversight of third parties 4) Anticipation &
responsiveness to changes in laws, markets, & products 5) Due diligence
before & after product changes 6) Comprehension & identification of risks 7)
Management of identified risks 8) Identification & responsiveness to CMS
deficiencies and violations.
What are four considerations when evaluating operations areas regarding PSR
risk? Correct Answer - 1) Potential financial and/or reputational harm
to the consumer 2) Potential legal, reputational, & financial harm to the bank
3) New laws, regulations, or amendments 4) The amount of transaction
activity subject to a specific regulation.
What are the primary functions of compliance examiners? Correct Answer -
1) Establish exam scope focused on areas of highest consumer risk 2) Evaluate
an institution's CMS 3) Conduct transaction testing where risks warrant it 4)
Report findings to the Board & management.
How many calendar days prior to the scheduled on-site date should PEP1
begin? Correct Answer - No less than 45 calendar days.
For a bank with total assets of $310 million and a PX rating of 2, what is the
review timeframe? Correct Answer - 24-36 months.
What are four things considered under supervisory history? Correct Answer
- 1) Current & past enforcement actions 2) Reimbursement history 3)
History of compliance with FL laws & regulations 4) Current & prior regulator
ratings and recommendations.
What three areas are evaluated to identify inherent risk on the ARCH?
Correct Answer - 1) Institution Structure 2) Supervisory History 3)
Operational Areas - Product, Service, Regulation (PSR) Risk.
True or False: You should request fair lending self-testing reports as part of
the PEP process. Correct Answer - False. Do not request these reports.
When will newly chartered or charter conversions receive a full scope exam?
Correct Answer - Within 12-24 months.
Solutions
What does 'Potential Harm' refer to in financial activities? Correct Answer -
It involves activities or failures that create the possibility of consumer harm,
such as inadequate flood insurance.
What is the Residual Risk Formula? Correct Answer - Inherent Risk -
Mitigating Factors = Residual Risk.
What level of violation is a TIL violation that resulted in $15,000 in
restitution? Correct Answer - Level 3 violation because the violation is
greater than $10,000.
True or False: The exit agenda should list discussion items in order of their
significance in relation to the overall conclusions. Correct Answer - True.
Which of the following is not a component of the ROE? (a) Transmittal Letter
(b) Cover Page (c) Examiner Comments & Conclusions (d) MRBA (e) Level 1,
2, & 3 violations (f) Supervisory Comments Correct Answer - (e) Level 1
violations are not included; only Level 2 and 3 violations are included.
Which component of the ROE is not included in the ROE transmitted to the
institution? (a) Compliance w/ Enforcement Actions (b) MRBA (c) Other
Matters (d) Supervisory Comments Correct Answer - (d) This page is
used to provide information to RO, WO, and succeeding examiners.
Where should items that require transaction testing but are not predicated
upon residual consumer harm risk be addressed in the ARCH? Correct
Answer - In Section 4 under the 'Other Areas for Review' section.
True or False: Investigations or visitations cannot lead to a change in the
bank's compliance rating. Correct Answer - False; regional compliance
management can change a rating between exams if the current rating is
deemed no longer suitable.
,True or False: Total assets help to determine the dollar amount of CMP
penalties. Correct Answer - True; the formula is Total Assets/$1 billion x
Penalty, with the penalty determined by points on the CMP matrix.
True or False: CMPs can only be assessed against banks, not individuals.
Correct Answer - False; CMPs can be assessed against both banks and
individuals.
An institution must file a written request for review of a material supervisory
determination with the Director (DCP) within how many calendar days
following receipt of a report of exam? (a) 30 (b) 45 (c) 60 (d) 90 Correct
Answer - (c) 60 calendar days.
An institution that disagrees with the written determination rendered by the
Division Director must appeal that determination to the SARC within how
many calendar days from the date of that determination? (a) 30 (b) 45 (c) 60
(d) 90 Correct Answer - (a) 30 calendar days.
What are the three things the IP is designed to do? Correct Answer - The
notes do not provide specific details on this; please refer to additional
resources.
What are the three objectives of increasing banker awareness prior to an
exam? Correct Answer - 1) Increase banker awareness of the exam prior
to it starting 2) Promote open communication with exam staff 3) Ensure bank
management knows what to expect during the exam.
What authority should compliance officers have? Correct Answer -
Compliance officers should have the authority to cross departmental lines,
access all areas of an institution's operations, and effect corrective action.
What type of compliance program should a financial institution establish?
Correct Answer - A formal, written compliance program, as effectiveness is
more important than formality, but written policies are crucial during periods
of expansion or staff turnover.
How many calendar days prior to the scheduled onsite date must the IP be
sent to the institution? Correct Answer - 75 calendar days.
,Is using a standardized workpaper required? Correct Answer - True.
What are the criteria for not reviewing each policy and procedure during PEP?
Correct Answer - 1) Policy was reviewed at the prior FDIC compliance
exam 2) No deficiencies were found during the review at the PX 3) No changes
or amendments have been made since the last review 4) No significant
regulatory or operational changes have occurred.
What are the three stages of a compliance exam? Correct Answer - 1)
Pre-Exam Planning (PEP) 2) Review & Analysis 3) Communicate findings to
institution management.
What are four factors to consider when evaluating the level of regulatory risk?
Correct Answer - 1) Potential financial and/or reputational harm to the
consumer 2) Potential legal, reputational, & financial harm to the bank 3) New
laws, regulations, or amendments 4) The amount of transaction activity
subject to a specific regulation.
What are the three focuses of the FDIC's supervisory approach regarding
consumer harm? Correct Answer - 1) Identifying inherent risk 2)
Addressing identified risk 3) Preventing harm through mitigating factors.
What are the purposes of compliance examinations? Correct Answer - 1)
Assess the quality of an institution's CMS for implementing federal consumer
protection statutes & regulations 2) Review compliance with relevant laws
and regulations 3) Initiate effective supervisory action when deficiencies or
violations are found.
Name six factors considered when evaluating the breadth and severity of a
problem for CMPs. Correct Answer - 1) Frequency of misconduct prior
to notification or discovery 2) Financial gain/other benefit or risk of loss 3)
Prior misconduct (last two exams) 4) Effectiveness of CMS 5) Restitution or
remedial action 6) Cooperation.
What are five formal enforcement actions granted to the FDIC Board under
Section 8 of the FDI Act? Correct Answer - 1) Termination of Insurance
(8a) 2) Cease & Desist Order (8b) 3) Order of Restitution (8b6) 4) Temporary
Cease & Desist Order (8c) 5) Removal & Prohibition Order (8e1).
, What are the components of Board & Management Oversight? Correct
Answer - 1) Commitment to & Oversight of the CMS 2) Level of resources
for compliance 3) Due diligence & oversight of third parties 4) Anticipation &
responsiveness to changes in laws, markets, & products 5) Due diligence
before & after product changes 6) Comprehension & identification of risks 7)
Management of identified risks 8) Identification & responsiveness to CMS
deficiencies and violations.
What are four considerations when evaluating operations areas regarding PSR
risk? Correct Answer - 1) Potential financial and/or reputational harm
to the consumer 2) Potential legal, reputational, & financial harm to the bank
3) New laws, regulations, or amendments 4) The amount of transaction
activity subject to a specific regulation.
What are the primary functions of compliance examiners? Correct Answer -
1) Establish exam scope focused on areas of highest consumer risk 2) Evaluate
an institution's CMS 3) Conduct transaction testing where risks warrant it 4)
Report findings to the Board & management.
How many calendar days prior to the scheduled on-site date should PEP1
begin? Correct Answer - No less than 45 calendar days.
For a bank with total assets of $310 million and a PX rating of 2, what is the
review timeframe? Correct Answer - 24-36 months.
What are four things considered under supervisory history? Correct Answer
- 1) Current & past enforcement actions 2) Reimbursement history 3)
History of compliance with FL laws & regulations 4) Current & prior regulator
ratings and recommendations.
What three areas are evaluated to identify inherent risk on the ARCH?
Correct Answer - 1) Institution Structure 2) Supervisory History 3)
Operational Areas - Product, Service, Regulation (PSR) Risk.
True or False: You should request fair lending self-testing reports as part of
the PEP process. Correct Answer - False. Do not request these reports.
When will newly chartered or charter conversions receive a full scope exam?
Correct Answer - Within 12-24 months.
