FDIC TE UPDATED EXAM SCRIPT QUESTIONS AND
ANSWERS GUARANTEE A+
✔✔The Uniform rating System for Information Technology (URIST) - ✔✔IT operations
are rated in accordance to?
✔✔~Management
~Audit
~Support and Delivery
~development and acquisition - ✔✔What four areas are evaluated in an IT
examination?
✔✔To ensure U.S. financial institutions maintain appropriate records and file certain
reports involving currency transactions and customers relations. - ✔✔What is the
purpose of a BSA examination?
✔✔Section 501(b) of the Gramm-Leach-Bailey Act - ✔✔Examiner information ,may
contain non-public customer information defined by what?
✔✔1 examination cycle - ✔✔How long should line sheets be retained
✔✔10 years, indefinitely when irregularities are discovered or suspected. - ✔✔How long
should risk management and trust questionnaires be retained?
✔✔Composite 1 - ✔✔Financial institutions in this group are sound in every respect and
generally have components rated 1 or 2. Any weaknesses are minor and can be
handled in a routine manner by the board of directors and management. These financial
institutions are the most capable of withstanding the vagaries of business conditions
and are resistant to outside influences such as economic instability in their trade area.
These financial institutions are in substantial compliance with laws and regulations. As a
result, these financial institutions exhibit the strongest performance and risk
management practices relative to the institution's size, complexity, and risk profile, and
give no cause for supervisory concern.
✔✔Composite 2 - ✔✔Financial institutions in this group are fundamentally sound. For a
financial institution to receive this rating, generally no component rating should be more
severe than 3. Only moderate weaknesses are present and are well within the board of
directors' and management's capabilities and willingness to correct. These financial
institutions are stable and are capable of withstanding business fluctuations. These
financial institutions are in substantial compliance with laws and regulations. Overall risk
management practices are satisfactory relative to the institution's size, complexity, and
risk profile. There are no material supervisory concerns and, as a result, the supervisory
response is informal and limited.
,✔✔Composite 3 - ✔✔Financial institutions in this group exhibit some degree of
supervisory concern in one or more of the component areas. These financial institutions
exhibit a combination of weaknesses that may range from moderate to severe;
however, the magnitude of the deficiencies generally will not cause a component to be
rated more severely than 4. Management may lack the ability or willingness to
effectively address weaknesses within appropriate time frames. Financial institutions in
this group generally are less capable of withstanding business fluctuations and are
more vulnerable to outside influences than those institutions rated a composite 1 or 2.
Additionally, these financial institutions may be in significant noncompliance with laws
and regulations. Risk management practices may be less than satisfactory relative to
the institution's size, complexity, and risk profile. These financial institutions require
more than normal supervision, which may include formal or informal enforcement
actions. Failure appears unlikely, however, given the overall strength and financial
capacity of these institutions.
✔✔Composite 4 - ✔✔Financial institutions in this group generally exhibit unsafe and
unsound practices or conditions. There are serious financial or managerial deficiencies
that result in unsatisfactory performance. The problems range from severe to critically
deficient. The weaknesses and problems are not being satisfactorily addressed or
resolved by the board of directors and management. Financial institutions in this group
generally are not capable of withstanding business fluctuations. There may be
significant noncompliance with laws and regulations. Risk management practices are
generally unacceptable relative to the institution's size, complexity, and risk profile.
Close supervisory attention is required, which means, in most cases, formal
enforcement action is necessary to address the problems. Institutions in this group pose
a risk to the deposit insurance fund. Failure is a distinct possibility if the problems and
weaknesses are not satisfactorily addressed and resolved.
✔✔Composite 5 - ✔✔Financial institutions in this group exhibit extremely unsafe and
unsound practices or conditions; exhibit a critically deficient performance; often contain
inadequate risk management practices relative to the institution's size, complexity, and
risk profile; and are of the greatest supervisory concern. The volume and severity of
problems are beyond management's ability or willingness to control or correct.
Immediate outside financial or other assistance is needed in order for the financial
institution to be viable. Ongoing supervisory attention is necessary. Institutions in this
group pose a significant risk to the deposit insurance fund and failure is highly probable.
✔✔Capital -1 - ✔✔Rating: Strong Capital Level Relative to the Institutions risk profile
✔✔Capital-2 - ✔✔Rating: Satisfactory capital level relative to the financial institutions
risk profile
✔✔capital-3 - ✔✔Rating: Less than satisfactory level of capital that does not fully
support the institutions risk profile. The rating indicates a need for improvement, even if
the institution's capital level exceeds minimum regulatory and statutory requirements
,✔✔Capital-4 - ✔✔Rating: a deficient level of capital. In light of the institution's risk
profile, viability of the institution may be threatened. Assistance from shareholders or
other external sources of financial support my be required.
✔✔Capital-5 - ✔✔Rating: critically deficient level of capital such that the institution's
viability is threatened. Immediate assistance from shareholders or other external
sources of financial support is required.
✔✔AQ -1 - ✔✔Rating: Strong asset quality and credit administration practices, identified
weaknesses are minor in nature and risk exposure is modest in relation to capital
protection and management's abilities. Asset quality in such institutions is of minimal
supervisory concern.
✔✔AQ-2 - ✔✔Rating; satisfactory asset quality and credit administration practices. The
level and severity of classifications and other weaknesses warrant a limited level of
supervisory attention. Risk exposure is commensurate with capital protection and
management's abilities.
✔✔AQ-3 - ✔✔Rating: Asset quality or credit administration practices are less than
satisfactory. Trends may be stable or indicate deterioration in asset quality or an
increase in risk exposure. The level and severity of classified assets, other weaknesses
and risk require an elevated level of supervisors concern. There is generally a need to
improve credit administration and risk management practices.
✔✔AQ-4 - ✔✔Rating: this rating is assigned to institutions financial with deficient asset
quality or credit administration practices. The levels of risk and problem assets are
significant, inadequately controlled, and subject the institution to potential losses that, if
left unchecked, may threaten its viability.
✔✔AQ-5 - ✔✔Rating: critically deficient asset quality or credit administration practices
that present an imminent threat to the institution's viability.
✔✔Mgt-1 - ✔✔Rating: string performance by management and the board of directors
and strong risk management practices relative to the institution's size, complexity, and
risk profile. All significant risk are consistently and effectively identified, measured,
monitored, and controlled. Management and the board have demonstrated the ability to
promptly and successfully address existing and potential problems and risk.
✔✔Mgt-2 - ✔✔Rating: satisfactory management and board performance and risk
management practices Walt I've to the institution's size, complexity, and risk profile.
Minor weaknesses may exist, but are not material to the safety and soundness of the
institution and are being addressed. In general, significant risk and problems are
effectively identifies, measured, monitored, and controlled.
, ✔✔Mgt-3 - ✔✔Rating: management and board performance needs improvement or risk
management practices are less than satisfactory given the nature of the institution's
activities. The capabilities of management or the board of directors may be insufficient
for the type, size, or condition of the institution. Problems and significant risk may be
inadequately identifies, measured, monitored, or controlled.
✔✔Mgt-4 - ✔✔Rating: indicates deficient management and board performance or risk
management practices that are inadequate considering the nature of an institution's
activities. The level of problems and risk exposure is excessive. Problems and
significant risk are inadequately identified, measured, monitored, or controlled and
require immediate action by the board and management to preserve the soundness of
the institution. Replacing or strengthening management or the board may be necessary.
✔✔Mgt-5 - ✔✔Rating; indicates critically deficient management and board performance
or risk management practices. Management and the board of directors have not
demonstrated the ability to correct problems and implement appropriate risk
management practices. Problems and significant risk are inadequacy identified,
measured, monitored ,or controlled and now threaten the continued viability of the
institution. Replacing or strengthening management or the board of directors is
necessary.
✔✔Earnings-1 - ✔✔Rating: indicates earnings that are strong. Earnings are mire than
sufficient to support operations and maintain adequate capital and allowance levels
after consideration is given to asset quality, growth, and other factors affecting the
quality, quantity, and trend of earnings.
✔✔Earnings-2 - ✔✔Rating: indicates earnings that are satisfactory. Earnings are
sufficient to support operations and maintain adequate capital and allowance levels
after consideration is given to asset quality, growth, and other factors affecting the
quality, quantity, and trend of earnings. Earnings that are relatively static, or even
experiencing a slight decline, may receive a ____________ rating provided the
institution's level of earnings is adequate in the view of the assessment factors above.
✔✔Earnings-4 - ✔✔Rating: indicates earnings that are deficient. Earnings are
insufficient to support operations and maintain appropriate capital and allowance levels.
Institutions so rated may be characterized by erratic fluctuations in net income or net
interest margin, the development of significant negative trends, nominal or
unsustainable earnings, intermittent losses, or a substantive drop in earnings from the
previous year
✔✔Earnings-3 - ✔✔Rating: Indicates earnings the need to be improved. Earnings may
not fully support operations and provide for the accretion of capital and allowance levels
in relation to the institution's overall condition, growth, and other factors affecting the
quality, quantity, and trend of earnings.
ANSWERS GUARANTEE A+
✔✔The Uniform rating System for Information Technology (URIST) - ✔✔IT operations
are rated in accordance to?
✔✔~Management
~Audit
~Support and Delivery
~development and acquisition - ✔✔What four areas are evaluated in an IT
examination?
✔✔To ensure U.S. financial institutions maintain appropriate records and file certain
reports involving currency transactions and customers relations. - ✔✔What is the
purpose of a BSA examination?
✔✔Section 501(b) of the Gramm-Leach-Bailey Act - ✔✔Examiner information ,may
contain non-public customer information defined by what?
✔✔1 examination cycle - ✔✔How long should line sheets be retained
✔✔10 years, indefinitely when irregularities are discovered or suspected. - ✔✔How long
should risk management and trust questionnaires be retained?
✔✔Composite 1 - ✔✔Financial institutions in this group are sound in every respect and
generally have components rated 1 or 2. Any weaknesses are minor and can be
handled in a routine manner by the board of directors and management. These financial
institutions are the most capable of withstanding the vagaries of business conditions
and are resistant to outside influences such as economic instability in their trade area.
These financial institutions are in substantial compliance with laws and regulations. As a
result, these financial institutions exhibit the strongest performance and risk
management practices relative to the institution's size, complexity, and risk profile, and
give no cause for supervisory concern.
✔✔Composite 2 - ✔✔Financial institutions in this group are fundamentally sound. For a
financial institution to receive this rating, generally no component rating should be more
severe than 3. Only moderate weaknesses are present and are well within the board of
directors' and management's capabilities and willingness to correct. These financial
institutions are stable and are capable of withstanding business fluctuations. These
financial institutions are in substantial compliance with laws and regulations. Overall risk
management practices are satisfactory relative to the institution's size, complexity, and
risk profile. There are no material supervisory concerns and, as a result, the supervisory
response is informal and limited.
,✔✔Composite 3 - ✔✔Financial institutions in this group exhibit some degree of
supervisory concern in one or more of the component areas. These financial institutions
exhibit a combination of weaknesses that may range from moderate to severe;
however, the magnitude of the deficiencies generally will not cause a component to be
rated more severely than 4. Management may lack the ability or willingness to
effectively address weaknesses within appropriate time frames. Financial institutions in
this group generally are less capable of withstanding business fluctuations and are
more vulnerable to outside influences than those institutions rated a composite 1 or 2.
Additionally, these financial institutions may be in significant noncompliance with laws
and regulations. Risk management practices may be less than satisfactory relative to
the institution's size, complexity, and risk profile. These financial institutions require
more than normal supervision, which may include formal or informal enforcement
actions. Failure appears unlikely, however, given the overall strength and financial
capacity of these institutions.
✔✔Composite 4 - ✔✔Financial institutions in this group generally exhibit unsafe and
unsound practices or conditions. There are serious financial or managerial deficiencies
that result in unsatisfactory performance. The problems range from severe to critically
deficient. The weaknesses and problems are not being satisfactorily addressed or
resolved by the board of directors and management. Financial institutions in this group
generally are not capable of withstanding business fluctuations. There may be
significant noncompliance with laws and regulations. Risk management practices are
generally unacceptable relative to the institution's size, complexity, and risk profile.
Close supervisory attention is required, which means, in most cases, formal
enforcement action is necessary to address the problems. Institutions in this group pose
a risk to the deposit insurance fund. Failure is a distinct possibility if the problems and
weaknesses are not satisfactorily addressed and resolved.
✔✔Composite 5 - ✔✔Financial institutions in this group exhibit extremely unsafe and
unsound practices or conditions; exhibit a critically deficient performance; often contain
inadequate risk management practices relative to the institution's size, complexity, and
risk profile; and are of the greatest supervisory concern. The volume and severity of
problems are beyond management's ability or willingness to control or correct.
Immediate outside financial or other assistance is needed in order for the financial
institution to be viable. Ongoing supervisory attention is necessary. Institutions in this
group pose a significant risk to the deposit insurance fund and failure is highly probable.
✔✔Capital -1 - ✔✔Rating: Strong Capital Level Relative to the Institutions risk profile
✔✔Capital-2 - ✔✔Rating: Satisfactory capital level relative to the financial institutions
risk profile
✔✔capital-3 - ✔✔Rating: Less than satisfactory level of capital that does not fully
support the institutions risk profile. The rating indicates a need for improvement, even if
the institution's capital level exceeds minimum regulatory and statutory requirements
,✔✔Capital-4 - ✔✔Rating: a deficient level of capital. In light of the institution's risk
profile, viability of the institution may be threatened. Assistance from shareholders or
other external sources of financial support my be required.
✔✔Capital-5 - ✔✔Rating: critically deficient level of capital such that the institution's
viability is threatened. Immediate assistance from shareholders or other external
sources of financial support is required.
✔✔AQ -1 - ✔✔Rating: Strong asset quality and credit administration practices, identified
weaknesses are minor in nature and risk exposure is modest in relation to capital
protection and management's abilities. Asset quality in such institutions is of minimal
supervisory concern.
✔✔AQ-2 - ✔✔Rating; satisfactory asset quality and credit administration practices. The
level and severity of classifications and other weaknesses warrant a limited level of
supervisory attention. Risk exposure is commensurate with capital protection and
management's abilities.
✔✔AQ-3 - ✔✔Rating: Asset quality or credit administration practices are less than
satisfactory. Trends may be stable or indicate deterioration in asset quality or an
increase in risk exposure. The level and severity of classified assets, other weaknesses
and risk require an elevated level of supervisors concern. There is generally a need to
improve credit administration and risk management practices.
✔✔AQ-4 - ✔✔Rating: this rating is assigned to institutions financial with deficient asset
quality or credit administration practices. The levels of risk and problem assets are
significant, inadequately controlled, and subject the institution to potential losses that, if
left unchecked, may threaten its viability.
✔✔AQ-5 - ✔✔Rating: critically deficient asset quality or credit administration practices
that present an imminent threat to the institution's viability.
✔✔Mgt-1 - ✔✔Rating: string performance by management and the board of directors
and strong risk management practices relative to the institution's size, complexity, and
risk profile. All significant risk are consistently and effectively identified, measured,
monitored, and controlled. Management and the board have demonstrated the ability to
promptly and successfully address existing and potential problems and risk.
✔✔Mgt-2 - ✔✔Rating: satisfactory management and board performance and risk
management practices Walt I've to the institution's size, complexity, and risk profile.
Minor weaknesses may exist, but are not material to the safety and soundness of the
institution and are being addressed. In general, significant risk and problems are
effectively identifies, measured, monitored, and controlled.
, ✔✔Mgt-3 - ✔✔Rating: management and board performance needs improvement or risk
management practices are less than satisfactory given the nature of the institution's
activities. The capabilities of management or the board of directors may be insufficient
for the type, size, or condition of the institution. Problems and significant risk may be
inadequately identifies, measured, monitored, or controlled.
✔✔Mgt-4 - ✔✔Rating: indicates deficient management and board performance or risk
management practices that are inadequate considering the nature of an institution's
activities. The level of problems and risk exposure is excessive. Problems and
significant risk are inadequately identified, measured, monitored, or controlled and
require immediate action by the board and management to preserve the soundness of
the institution. Replacing or strengthening management or the board may be necessary.
✔✔Mgt-5 - ✔✔Rating; indicates critically deficient management and board performance
or risk management practices. Management and the board of directors have not
demonstrated the ability to correct problems and implement appropriate risk
management practices. Problems and significant risk are inadequacy identified,
measured, monitored ,or controlled and now threaten the continued viability of the
institution. Replacing or strengthening management or the board of directors is
necessary.
✔✔Earnings-1 - ✔✔Rating: indicates earnings that are strong. Earnings are mire than
sufficient to support operations and maintain adequate capital and allowance levels
after consideration is given to asset quality, growth, and other factors affecting the
quality, quantity, and trend of earnings.
✔✔Earnings-2 - ✔✔Rating: indicates earnings that are satisfactory. Earnings are
sufficient to support operations and maintain adequate capital and allowance levels
after consideration is given to asset quality, growth, and other factors affecting the
quality, quantity, and trend of earnings. Earnings that are relatively static, or even
experiencing a slight decline, may receive a ____________ rating provided the
institution's level of earnings is adequate in the view of the assessment factors above.
✔✔Earnings-4 - ✔✔Rating: indicates earnings that are deficient. Earnings are
insufficient to support operations and maintain appropriate capital and allowance levels.
Institutions so rated may be characterized by erratic fluctuations in net income or net
interest margin, the development of significant negative trends, nominal or
unsustainable earnings, intermittent losses, or a substantive drop in earnings from the
previous year
✔✔Earnings-3 - ✔✔Rating: Indicates earnings the need to be improved. Earnings may
not fully support operations and provide for the accretion of capital and allowance levels
in relation to the institution's overall condition, growth, and other factors affecting the
quality, quantity, and trend of earnings.
