UCE MC ExaM with answErs 100% VErifiEd and
GradEd a+
Which of the following types of loans to executive officers are permitted without limit?
a) Loans to partnerships of the officers
b) Loans to purchase stock of the bank
c) Loans for their children's education
d) Unsecured loans for any purpose ✔✔ Answer: c - loans for their children's education. See Insider
Activities Handbook, pg. 11
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 ✔✔ 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 is not one of the steps in money laundering?
a) Placement
b) Transference
c) Layering
d) Integration ✔✔ Answer: b - Transference. Although money laundering is a diverse and often complex
process, it basically involves three independent steps (placement, layering, integration) that can occur
simultaneously. See FFIEC BSA/AML Examination Manual, pg. 12
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 ✔✔ Answer: c - formal enforcement-related actions. In addition to official
enforcement decisions, remarks in an ROE and other communications about POTENTIAL formal
enforcement actions made prior to a review committee decision are preliminary and therefore may not
be appealed. See OCC Bulletin 2013-15
Which of the following might a bank do in order to provide funds 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 ✔✔ Answer: a, b - See Liquidity Handbook
Which of the following is not an appropriate risk-weighting for risk-weighted asset?
a) 0%
b) 20%
c) 50%
d) 75% ✔✔ Answer: d - 75%. The risk-weights used on schedule RC-R include 0%, 20%, 50%, and 100%.
See Call Report instructions
Which of the following supervisory loan-to-value limits apply to raw land?
a) 65%
b) 75%
c) 80%
,d) 85% ✔✔ Answer: a - 65% SLTV. The supervisory LTV for raw land is 65%. The other limits apply to land
development, construction, and improved property. See 12 CFR 34, Subpt. D, App. A
Which of the following is not exempt from the restrictions on transactions with affiliates?
a) An affiliate engaged solely in holding bank premises of the member bank
b) An affiliate engaged solely in holding fully guaranteed obligations of the U.S. government
c) Where the affiliate relationship arises out of a bona fide debt previously contracted
d) Where the affiliate relationship exists as a result of common directors ✔✔ Answer: d - Where the
affiliate relationship exists as a result of common directors. Choices a, b, and c are not considered
affiliates when reviewing restrictions on transactions with affiliates. When there is common directorship,
that organization would be an affiliate. See 12 USC 371c(b)(1) and (2)
Which of the following would not be included in other real estate owned?
a) Real estate acquired in full or partial satisfaction of debt
b) Real estate formerly used for bank premises that will no longer be used
c) Real estate acquired with plans for future expansion
d) Real estate acquired for future expansion that will no longer be used for expansion ✔✔ Answer: c -
Real estate acquired and intended for future expansion should be treated as bank premises, NOT OREO.
See 12 CFR 5.37 and 34.81
Which of the following is considered capital and surplus for the purposing of legal lending limits?
a) Common stock and paid-in surplus
b) Total bank equity
c) Total risk-based capital
d) Tier 1 capital, tier 2 capital, and any excess allowance not includable in tier 2 capital ✔✔ Answer: d -
T1+T2+Excess ALLL. See 12 CFR 32.2
, Which of the following liquidity ratings indicates that management has reliable access to sufficient
sources of funds on favorable terms?
a) "1"
b) "2"
c) "3"
d) "4" ✔✔ Answer: a - "1" A rating of "1" indicates strong liquidity levels and well-developed funds
management practices. The institution has reliable access to sufficient sources of funds on favorable
terms to meet present and anticipated liquidity needs. See Bank Supervision Process Handbook,
Appendix A, pg. 53
True/False:
Back-testing of an interest rate risk model involves the comparison of actual outcomes with model
forecasts over a specified period. ✔✔ Answer: True - While sometimes used interchangeably with
validation, a back-test compares actual results to forecasted results. Model validations typically test the
mathematical theory and conceptual soundness of the model itself. Agency guidance includes the
evaluation of conceptual soundness (validation), ongoing monitoring (benchmarking) and outcome
analysis (back-testing) as core elements of an effective validation framework. See OCC Bulletin 2011-12,
pg. 14
In reviewing the bank's retail credit portfolio, an examiner notices that a 1-4 family residential mortgage
is 103 days past due. Based on the aforementioned, the loan should be graded as which of the
following?
a) Special mention
b) Substandard
c) Loss
d) Cannot be determined based on the facts ✔✔ Answer: d - Cannot be determined based on the facts.
Generally, open- and closed-end retail loans past due 90 cumulative days should be classified
Substandard. However, there is an exception as it relates to 1-4 family residential real estate loans. If the
credit is properly secured with an LTV equal to or less than 60 percent, they're not classified solely on
delinquency status. One would need to consider other facts. See OCC Bulletin 2000-20: Uniform Retail
Credit Classification
GradEd a+
Which of the following types of loans to executive officers are permitted without limit?
a) Loans to partnerships of the officers
b) Loans to purchase stock of the bank
c) Loans for their children's education
d) Unsecured loans for any purpose ✔✔ Answer: c - loans for their children's education. See Insider
Activities Handbook, pg. 11
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 ✔✔ 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 is not one of the steps in money laundering?
a) Placement
b) Transference
c) Layering
d) Integration ✔✔ Answer: b - Transference. Although money laundering is a diverse and often complex
process, it basically involves three independent steps (placement, layering, integration) that can occur
simultaneously. See FFIEC BSA/AML Examination Manual, pg. 12
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 ✔✔ Answer: c - formal enforcement-related actions. In addition to official
enforcement decisions, remarks in an ROE and other communications about POTENTIAL formal
enforcement actions made prior to a review committee decision are preliminary and therefore may not
be appealed. See OCC Bulletin 2013-15
Which of the following might a bank do in order to provide funds 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 ✔✔ Answer: a, b - See Liquidity Handbook
Which of the following is not an appropriate risk-weighting for risk-weighted asset?
a) 0%
b) 20%
c) 50%
d) 75% ✔✔ Answer: d - 75%. The risk-weights used on schedule RC-R include 0%, 20%, 50%, and 100%.
See Call Report instructions
Which of the following supervisory loan-to-value limits apply to raw land?
a) 65%
b) 75%
c) 80%
,d) 85% ✔✔ Answer: a - 65% SLTV. The supervisory LTV for raw land is 65%. The other limits apply to land
development, construction, and improved property. See 12 CFR 34, Subpt. D, App. A
Which of the following is not exempt from the restrictions on transactions with affiliates?
a) An affiliate engaged solely in holding bank premises of the member bank
b) An affiliate engaged solely in holding fully guaranteed obligations of the U.S. government
c) Where the affiliate relationship arises out of a bona fide debt previously contracted
d) Where the affiliate relationship exists as a result of common directors ✔✔ Answer: d - Where the
affiliate relationship exists as a result of common directors. Choices a, b, and c are not considered
affiliates when reviewing restrictions on transactions with affiliates. When there is common directorship,
that organization would be an affiliate. See 12 USC 371c(b)(1) and (2)
Which of the following would not be included in other real estate owned?
a) Real estate acquired in full or partial satisfaction of debt
b) Real estate formerly used for bank premises that will no longer be used
c) Real estate acquired with plans for future expansion
d) Real estate acquired for future expansion that will no longer be used for expansion ✔✔ Answer: c -
Real estate acquired and intended for future expansion should be treated as bank premises, NOT OREO.
See 12 CFR 5.37 and 34.81
Which of the following is considered capital and surplus for the purposing of legal lending limits?
a) Common stock and paid-in surplus
b) Total bank equity
c) Total risk-based capital
d) Tier 1 capital, tier 2 capital, and any excess allowance not includable in tier 2 capital ✔✔ Answer: d -
T1+T2+Excess ALLL. See 12 CFR 32.2
, Which of the following liquidity ratings indicates that management has reliable access to sufficient
sources of funds on favorable terms?
a) "1"
b) "2"
c) "3"
d) "4" ✔✔ Answer: a - "1" A rating of "1" indicates strong liquidity levels and well-developed funds
management practices. The institution has reliable access to sufficient sources of funds on favorable
terms to meet present and anticipated liquidity needs. See Bank Supervision Process Handbook,
Appendix A, pg. 53
True/False:
Back-testing of an interest rate risk model involves the comparison of actual outcomes with model
forecasts over a specified period. ✔✔ Answer: True - While sometimes used interchangeably with
validation, a back-test compares actual results to forecasted results. Model validations typically test the
mathematical theory and conceptual soundness of the model itself. Agency guidance includes the
evaluation of conceptual soundness (validation), ongoing monitoring (benchmarking) and outcome
analysis (back-testing) as core elements of an effective validation framework. See OCC Bulletin 2011-12,
pg. 14
In reviewing the bank's retail credit portfolio, an examiner notices that a 1-4 family residential mortgage
is 103 days past due. Based on the aforementioned, the loan should be graded as which of the
following?
a) Special mention
b) Substandard
c) Loss
d) Cannot be determined based on the facts ✔✔ Answer: d - Cannot be determined based on the facts.
Generally, open- and closed-end retail loans past due 90 cumulative days should be classified
Substandard. However, there is an exception as it relates to 1-4 family residential real estate loans. If the
credit is properly secured with an LTV equal to or less than 60 percent, they're not classified solely on
delinquency status. One would need to consider other facts. See OCC Bulletin 2000-20: Uniform Retail
Credit Classification
