FDIC TE Prep – Questions With Right Solutions (100%)
What is included in tier 2 capital? Correct Answer - ALLL up to 1.25% of
risk-weighted assets
qualifying preferred stock
Subordinated debt
Qualifying tier 2 minority interest, less any deductions in the tier 2 instrument
of an unconsolidated financial institution.
What is the purpose of the FDIC conducting bank examinations? Correct
Answer - To ensure public confidence in the banking system and to protect
the DIF
What should examiners do before discussing proposed ratings of a 3 or worse
rated bank? Correct Answer - Contact the regional office to discuss with
the CM or the ARD
Sections 10(b) and 10(c) of the FDI do what? Correct Answer - Empower
examiners to make thorough examination of the banks affairs
What is often the single most important factor of a successful operation of an
insured institution? Correct Answer - The quality of management
Examination findings, including the composite and component ratings, are
subject to confidentiality under which regulation/rule? Correct Answer -
Part 309 of the FDIC rules and regs
When should an examination letter be delivered to the CEO/President during
an exit meeting? Correct Answer - for any bank newly assigned a
CAMELS composite 3 or worse
Under Section 10(d) of the FDI act, how often must insured branches of
foreign banks be examined? Correct Answer - every 12 months
Section 347.211 of the FDIC rule and regs states that domestic branches of
foreign banks can be considered for examination every ___________ months?
Correct Answer - 18 months
,Limited scope examinations should be performed how many months after an
enforcement action is issued? Correct Answer - 6 months
When can examination schedules be extended to 18 months for a state
nonmember bank? Correct Answer - ~the bank has total assets of $3
billion or less
~ the bank is well capitalized as defined in 323.403(B)(1) of FDIC rules and
regs
~the ban was assigned a management rating of 1 or 2 at the last examination
~the ban was assigned a composite rating of 1 or 2 at the last exam
~the bank is not subject to formal enforcement proceedings or order by the
FDIC, OCC< or FRB
~no person acquired control of the bank during the preceding 12 months in
which the last full-scope examination was completed
Section 10(D)(9) ofthe FDI act requires what? Correct Answer - The
FFEIC to issue guidelines establishing standards for the purpose of
determining the acceptability of state reports of examination.
How much times notice should a bank be given for notice of an up coming
examination and provided enough time to complete pre-examination request
Correct Answer - 2 weeks
How are shared-loss agreements generally written? Correct Answer -
With the FDIC absorbing 80% of injured losses (up to a stated threshold) and
receives 80 percent of recoveries
How many years are commercial, shared loss agreements generally cover how
many years for losses and recoveries? Correct Answer - 5 years for
losses and 8 years for recoveries
For residential mortgages, shared losses agreements generally cover how
many years for losses and recoveries? Correct Answer - 10 years for
both
How should an asset covered under a shared loss agreement be classified?
Correct Answer - The assets should be adversely classified (sub, doubt,
loss) and be reduced by the applicable coverage rate stated in the SLA (often
80% or 95%)
,During an exit meeting, management should be made aware of what?
Correct Answer - All deficiencies and supervisory recommendations that
will be cited in the ROE.
When is a board meeting required? Correct Answer - ~36 months or
more have elapsed since the last such meeting
~the management component is 3 or worse
~two component ratings are 3 or worse
~or any other CAMEL rating is 4 or 5
What system was devised to rate a Trust department and what composite
ratings are established? Correct Answer - Uniform Interagency Trust
Rating System; composites 1-5.
What five critical areas are evaluated in a Trust exam? Correct Answer -
~management
~operations, internal controls, and audits
~earnings
~compliance
~asset management
What is the primary purposed of an IT exam? Correct Answer - To
determine confidentiality, integrity, and availability of records produced my
automated systems
IT operations are rated in accordance to? Correct Answer - The Uniform
rating System for Information Technology (URIST)
What four areas are evaluated in an IT examination? Correct Answer -
~Management
~Audit
~Support and Delivery
~development and acquisition
What is the purpose of a BSA examination? Correct Answer - To ensure
U.S. financial institutions maintain appropriate records and file certain reports
involving currency transactions and customers relations.
, Examiner information ,may contain non-public customer information defined
by what? Correct Answer - Section 501(b) of the Gramm-Leach-Bailey
Act
How long should line sheets be retained Correct Answer - 1 examination
cycle
How long should risk management and trust questionnaires be retained?
Correct Answer - 10 years, indefinitely when irregularities are discovered
or suspected.
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. Correct Answer - Composite 1
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. Correct Answer -
Composite 2
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
What is included in tier 2 capital? Correct Answer - ALLL up to 1.25% of
risk-weighted assets
qualifying preferred stock
Subordinated debt
Qualifying tier 2 minority interest, less any deductions in the tier 2 instrument
of an unconsolidated financial institution.
What is the purpose of the FDIC conducting bank examinations? Correct
Answer - To ensure public confidence in the banking system and to protect
the DIF
What should examiners do before discussing proposed ratings of a 3 or worse
rated bank? Correct Answer - Contact the regional office to discuss with
the CM or the ARD
Sections 10(b) and 10(c) of the FDI do what? Correct Answer - Empower
examiners to make thorough examination of the banks affairs
What is often the single most important factor of a successful operation of an
insured institution? Correct Answer - The quality of management
Examination findings, including the composite and component ratings, are
subject to confidentiality under which regulation/rule? Correct Answer -
Part 309 of the FDIC rules and regs
When should an examination letter be delivered to the CEO/President during
an exit meeting? Correct Answer - for any bank newly assigned a
CAMELS composite 3 or worse
Under Section 10(d) of the FDI act, how often must insured branches of
foreign banks be examined? Correct Answer - every 12 months
Section 347.211 of the FDIC rule and regs states that domestic branches of
foreign banks can be considered for examination every ___________ months?
Correct Answer - 18 months
,Limited scope examinations should be performed how many months after an
enforcement action is issued? Correct Answer - 6 months
When can examination schedules be extended to 18 months for a state
nonmember bank? Correct Answer - ~the bank has total assets of $3
billion or less
~ the bank is well capitalized as defined in 323.403(B)(1) of FDIC rules and
regs
~the ban was assigned a management rating of 1 or 2 at the last examination
~the ban was assigned a composite rating of 1 or 2 at the last exam
~the bank is not subject to formal enforcement proceedings or order by the
FDIC, OCC< or FRB
~no person acquired control of the bank during the preceding 12 months in
which the last full-scope examination was completed
Section 10(D)(9) ofthe FDI act requires what? Correct Answer - The
FFEIC to issue guidelines establishing standards for the purpose of
determining the acceptability of state reports of examination.
How much times notice should a bank be given for notice of an up coming
examination and provided enough time to complete pre-examination request
Correct Answer - 2 weeks
How are shared-loss agreements generally written? Correct Answer -
With the FDIC absorbing 80% of injured losses (up to a stated threshold) and
receives 80 percent of recoveries
How many years are commercial, shared loss agreements generally cover how
many years for losses and recoveries? Correct Answer - 5 years for
losses and 8 years for recoveries
For residential mortgages, shared losses agreements generally cover how
many years for losses and recoveries? Correct Answer - 10 years for
both
How should an asset covered under a shared loss agreement be classified?
Correct Answer - The assets should be adversely classified (sub, doubt,
loss) and be reduced by the applicable coverage rate stated in the SLA (often
80% or 95%)
,During an exit meeting, management should be made aware of what?
Correct Answer - All deficiencies and supervisory recommendations that
will be cited in the ROE.
When is a board meeting required? Correct Answer - ~36 months or
more have elapsed since the last such meeting
~the management component is 3 or worse
~two component ratings are 3 or worse
~or any other CAMEL rating is 4 or 5
What system was devised to rate a Trust department and what composite
ratings are established? Correct Answer - Uniform Interagency Trust
Rating System; composites 1-5.
What five critical areas are evaluated in a Trust exam? Correct Answer -
~management
~operations, internal controls, and audits
~earnings
~compliance
~asset management
What is the primary purposed of an IT exam? Correct Answer - To
determine confidentiality, integrity, and availability of records produced my
automated systems
IT operations are rated in accordance to? Correct Answer - The Uniform
rating System for Information Technology (URIST)
What four areas are evaluated in an IT examination? Correct Answer -
~Management
~Audit
~Support and Delivery
~development and acquisition
What is the purpose of a BSA examination? Correct Answer - To ensure
U.S. financial institutions maintain appropriate records and file certain reports
involving currency transactions and customers relations.
, Examiner information ,may contain non-public customer information defined
by what? Correct Answer - Section 501(b) of the Gramm-Leach-Bailey
Act
How long should line sheets be retained Correct Answer - 1 examination
cycle
How long should risk management and trust questionnaires be retained?
Correct Answer - 10 years, indefinitely when irregularities are discovered
or suspected.
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. Correct Answer - Composite 1
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. Correct Answer -
Composite 2
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
