VULLO MIDTERM BANKING EXAM
Questions and Verified Answers
100% Guarantee Pass
1. What created a central bank of the United States?
Answer: Federal Reserve Act of 1913
2. What is the Central Bank in the U.S.
Answer: The Federal Reserve
3. Why does Bank Regulation Exist?
Answer: To protect customer deposits; payments of goods and services;
fairness; and protection from financial crime.
4. Can only call yourself a bank if
you can withdraw on demand
5. If creating an agency that is a regulator you want to give it what?
Answer: 1. Rulemaking;
2. Supervisory; 3. Enforcement
,6. What did the National Currency Act of 1863 & National Bank Act of 1864 do?
Answer: Creates Uniform National Currency; Creates OCC as chartering authority; Created the Dual Banking System
7. What is the Dual Banking System?
Answer: Bank has a choice of either a state charter or OCC charter
8. What Act discusses the affiliate rules?
Answer: Federal Reserve Act
9. Financial holding companies can create subsidiaries that do
Answer: Securities underwriting;
Securities broker-dealer; Insurance agency; Insurance underwriting; Merchant banking
10. Financial subsidiaries of a bank can do
Answer: Securities underwriting; Securities broker-dealer; Insurance Agency; Merchant Banking
11. What is the limit to what financial subsidiaries of a bank can do
Answer: NO Insurance Underwriting; Aggregate total assets of financial subsidiaries of a bank CANNOT exceed the
lesser of $50B or 45% of Bank's total assets.
12. Who do affiliate transaction rules apply to
Answer: ONLY from the bank to the aflliate (Not the other
, way around); financial subsidiaries of a bank as well.
13. Who do affiliate transaction rules NOT apply to?
Answer: A bank's operating subsidiaries, or A sister bank under the same holding company (80% common
ownership).
14. What are Covered Transactions under Section 23A of the Federal Reserve Act?
Answer: Transactions (like loans, purchases of assets/securities, or guarantees) that expose a bank to credit risk from
its aflliates.
15. What is the Section 23B Rule of the Federal Reserve Act?
16. Answer: Bank must deal with an aflliate at arm's length and on market terms
Answer: (terms must be at least as favorable to the bank as comparable transactions with nonaflliated companies.)
17. What are the most important rules of 23A of the Federal Reserve Act?
Answer: Banks
total covered transactions with 1 aflliate cannot exceed 10% of bank's capital; Banks total covered transactions with all
afilliates cannot exceed 20%; credit transactions must be fully secured with high quality collateral; Bank CANNOT buy low-
quality assets from aflliates.
Questions and Verified Answers
100% Guarantee Pass
1. What created a central bank of the United States?
Answer: Federal Reserve Act of 1913
2. What is the Central Bank in the U.S.
Answer: The Federal Reserve
3. Why does Bank Regulation Exist?
Answer: To protect customer deposits; payments of goods and services;
fairness; and protection from financial crime.
4. Can only call yourself a bank if
you can withdraw on demand
5. If creating an agency that is a regulator you want to give it what?
Answer: 1. Rulemaking;
2. Supervisory; 3. Enforcement
,6. What did the National Currency Act of 1863 & National Bank Act of 1864 do?
Answer: Creates Uniform National Currency; Creates OCC as chartering authority; Created the Dual Banking System
7. What is the Dual Banking System?
Answer: Bank has a choice of either a state charter or OCC charter
8. What Act discusses the affiliate rules?
Answer: Federal Reserve Act
9. Financial holding companies can create subsidiaries that do
Answer: Securities underwriting;
Securities broker-dealer; Insurance agency; Insurance underwriting; Merchant banking
10. Financial subsidiaries of a bank can do
Answer: Securities underwriting; Securities broker-dealer; Insurance Agency; Merchant Banking
11. What is the limit to what financial subsidiaries of a bank can do
Answer: NO Insurance Underwriting; Aggregate total assets of financial subsidiaries of a bank CANNOT exceed the
lesser of $50B or 45% of Bank's total assets.
12. Who do affiliate transaction rules apply to
Answer: ONLY from the bank to the aflliate (Not the other
, way around); financial subsidiaries of a bank as well.
13. Who do affiliate transaction rules NOT apply to?
Answer: A bank's operating subsidiaries, or A sister bank under the same holding company (80% common
ownership).
14. What are Covered Transactions under Section 23A of the Federal Reserve Act?
Answer: Transactions (like loans, purchases of assets/securities, or guarantees) that expose a bank to credit risk from
its aflliates.
15. What is the Section 23B Rule of the Federal Reserve Act?
16. Answer: Bank must deal with an aflliate at arm's length and on market terms
Answer: (terms must be at least as favorable to the bank as comparable transactions with nonaflliated companies.)
17. What are the most important rules of 23A of the Federal Reserve Act?
Answer: Banks
total covered transactions with 1 aflliate cannot exceed 10% of bank's capital; Banks total covered transactions with all
afilliates cannot exceed 20%; credit transactions must be fully secured with high quality collateral; Bank CANNOT buy low-
quality assets from aflliates.
