Interbank Liabilities

Question 1

Which of the following is NOT a requirement of Regulation F?

a. Writing and maintaining policies and procedures for managing exposure to correspondent banks
b. Monitoring the exposure to correspondent banks on a regular basis
c. Establishing internal limits on exposure to correspondents
d. Providing quarterly reports to the board of directors of compliance audit results

Answer 1

d. Providing quarterly reports to the board of directors of compliance audit results

Quarterly compliance audit reports to the board are not a requirement of Regulation F.

Question 2

Which of the following sources is the least desirable to use when monitoring a correspondent bank’s capital?

a. A national rating agency’s report on the correspondent bank
b. The correspondent bank’s own call report
c. The correspondent bank’s annual report to shareholders
d. A national newspaper’s story on the correspondent bank’s financial condition

Answer 2

d. A national newspaper’s story on the correspondent bank’s financial condition

Banks are allowed to use information from the correspondent bank itself and from rating agencies as well as other sources that are reasonably reliable. Of the sources listed in the answers, the newspaper report is the least reliable.

Question 3

Bank B is a correspondent of Bank A. Which of the following must be included in Bank A’s calculation of credit exposure to Bank B?

a. A loan to Mr. Pierce from Bank A secured by Bank B common stock
b. Bank B’s purchase of U.S. government T-Bills on behalf of Bank A under an overnight repurchase arrangement
c. Bank A’s deposit account of $1 million in Bank B
d. A letter of credit issued by Bank B and pledged against the ACME Company’s debt at Bank A

Answer 3

c. Bank A’s deposit account of $1 million in Bank B

Except for answer (c), all of the other types of exposure are specifically excluded from the calculation of total credit exposure.

The bank’s deposit of $1 million in Bank B would included in the calculation except the first $250,000, which is subject to FDIC insurance coverage.

Question 4

_______ is a commonly controlled with the bank if

• 25% or more of the stock of the bank and the _______ are owned, either directly or indirectly, by the same person, or
• Either the bank or the _______ owns 25% or more of the stock of the other

Answer 4

Correspondent

Question 5

The limit on interday credit exposure may not be more than __% of the bank’s total capital unless the correspondent is adequately capitalized.

Answer 5

25%

Question 6

To be considered adequately capitalized a bank must have a

• Total risk-based capital ratio of __% or greater,
• Tier 1 risk-based capital ratio of __% or greater, and
• Except for foreign banks, leverage ratio of __% or greater

Answer 6

8. 0
9. 0
10. 0