Credit to Bank Insiders Flashcards
For purposes of insider lending laws and regulations, what is the definition of the term executive officer?
A. All bank officers at or above the level of executive vice president
B. Anyone who has the authority to participate in major policymaking functions at the bank.
C. Anyone who has the authority to participate in lending decisions at the bank.
D. All bank officers at or above the level of assistant vice president
B. Anyone who has the authority to participate in major policymaking functions at the bank.
This definition is not limited to employees. Anyone who participates in such a policymaking function is covered even someone not paid a salary by the bank.
When may a bank pay an overdraft of $5,000 created by an executive officer of the bank?
A. When the officer is at the level of a vice president or lower.
B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft.
C. When the officer has enough funds in another account to cover the overdraft.
D. When the bank pays the overdrafts for other good customers in the ordinary course of business.
B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft.
The overdraft restrictions do not apply to payment of an overdraft of a principal shareholder and also don’t apply to related interests.
How may a bank limit the definition of executive officer?
A. By strictly defining, in writing, the duties and responsibilities of the officers to be excluded from the definition.
B. By passing a board of directors resolution setting forth the bank’s definition of an executive officer.
C. By requiring that those officers to be excluded from the definition not attend loan committee meetings or loan review meetings.
D. By limiting the amount of confidential information given to those officers to be excluded from the definition.
B. By passing a board of directors resolution setting forth the bank’s definition of an executive officer.
The board of directors may exclude officers from the definition of executive officer, but such a resolution will not be effective if the officer actually participates in major policymaking functions of the bank.
First National Bank has an employee benefit program whereby all bank employees who meet the bank’s credit underwriting standards may obtain consumer loans for major purchases or expenses at a rate that is less than the bank’s prime rate. Can the bank allow its executive officers to borrow under this program?
A. No executive officers may not have preferential interest rates under any circumstances.
B. No, however, the related interests of the executive officers may take advantage of it.
C. Yes, however, executive officers must secure their loans with collateral valued at 100 percent of the loan balance or more.
D. Yes, provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.
D. Yes, provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.
Credit may be offered to insiders if it is pursuant to a benefit of compensation program widely available to employees of the bank.
Which of the following is true regarding extensions of credit to executive officers, directors and principal shareholders?
A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or five percent of the bank’s unimpaired capital and unimpaired surplus, but not exceeding $500,000.
B. Must be approved in advance by the board of directors if the credit is greater than $50,000 or five percent of the bank’s capital and surplus.
C. May not exceed $100,000 in the aggregate, regardless of approvals
D. May not exceed $250,000 in the aggregate, regardless of approvals
A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or five percent of the bank’s unimpaired capital and unimpaired surplus, but not exceeding $500,000.
For an extension of credit to an executive officer made pursuant to a line of credit agreement, what is the maximum permitted duration following board approval of the line of credit that advances under the line of credit would not require prior approval.
A. 12 months of line of credit approval.
B. 9 months of line of credit approval
C. 14 months of line of credit approval
D. 6 months of line of credit approval
C. 14 months of line of credit approval
First National Bank would like to adopt a recordkeeping system that complies with the requirements of Reg O. Which of the following best describes the recordkeeping system required by Reg O?
A. A system in which the bank annually surveys all executive officers of First National and its affiliates to determine the insiders’ related interests.
B. A system in which the bank asks all borrowers as loans are made whether the borrower is a related interest of an insider.
C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests.
D. A system that requires an annual survey of affiliated insiders
C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests.
Which of the following does an extension of credit NOT include?
A. An advance by means of an overdraft or cash item
B. The making or renewal of any loan or granting a line of credit.
C. An advance against accrued salary
D. An acquisition of a note on which an insider is a maker, drawer or guarantor
C. An advance against accrued salary
Which of the following transactions is subject to the provisions of Regulation O?
A. Time deposit account held by a director
B. Travel advance to an executive officer outstanding for less than 30 days
C. Extension of credit to a director of an unaffiliated, competing, non correspondent bank
D. Extension of credit to a member of the bank’s board of directors
D. Extension of credit to a member of the bank’s board of directors
In a review of a bank’s compliance with the Reg O overdraft provisions, what should the compliance officer do?
A. Identify the related interests of all directors, executive officers and principal shareholders.
B. Examine the bank’s overdraft reports for a selected time period
C. Examine the annual FFIEC 004 reports on indebtedness to correspondence banks
D. Examine the bank’s latest report of condition and income
B. Examine the bank’s overdraft reports for a selected time period
The best way to evaluate the bank’s compliance with the overdraft provisions of Reg O is to review the bank’s overdraft reports for a time period and determine whether any insider accounts are overdrawn.
