Reg O - Extending Credit to bankers Flashcards
Pat Morris is vice president of Retail Sales for Sellers Bank. Is he considered an executive officer for the bank, subject to additional limits?
A. Yes, vice presidents cannot be excluded from being executive officers
B. Yes, unless specifically excluded by Board resolution and the officer does not actually participate in major policy making functions
C. No, vice presidents are only included if they are in the lending area of a bank
D. No, vice presidents are never considered executive officers of a bank
The correct answer is B. A, C, and D are incorrect because vice presidents (and certain other titles) are considered executive officers of the bank, unless by resolution of the Board or in the bylaws of the bank he or she is excluded from participating in major policy making functions of the bank and does not participate in the determination of major policies.
Jennifer Nelson, a director of ACME Bank would like a loan to open a new company. She would like the bank to make this loan with prior board approval. She will not participate, directly or indirectly, in the voting to approve the loan. How much can the bank lend her?
A. Up to $25,000 or 5 percent of the bank’s capital and surplus
B. Any amount up to the bank’s limit on loans to one borrower
C. Up to $100,000
D. Up to $500,000
The correct answer is B. A, C, and D are incorrect because as long as the board approves the loan in advance with the interested parties not participating in the vote, there is no limit on loans to directors other than the individual bank limit on loans to one borrower.
Which statement is true about Regulation O?
A. None of the bank and thrift failures over the last 75 years can be traced to loans made to insiders
B. Regulation O only applies to large banks (assets greater than $1 billion)
C. Regulation O applies to all employees of the bank
D. Bank regulators examine financial institutions very carefully for any signs of a violation of Regulation O
The correct answer is D. A is incorrect because a number of bank and thrift failures can be traced to loans made to insiders. B is incorrect because Regulation O (or similar citation) applies to all financial institutions. C is incorrect because Regulation O only applies to bank insiders, not all employees.
Alex Korev is the Chief Lending Officer and a member of executive management of Grey National Bank. Last week Alex slipped on a banana peel and ended up in the hospital for a few days. In the meantime, he could not get to the bank to make a deposit and his account became overdrawn $976.00. Which statement concerning this overdraft is true?
A. The bank cannot pay the overdraft
B. The bank may pay the overdraft as long as Alex brings his account current within 10 business days
C. The bank may pay the overdraft as long as Alex brings his account current within 5 business days, the overdraft was deemed ‘‘inadvertent’’ (generally less than 3 overdrafts per year), the amount is less than $1000, and the bank charges Alex the same fee that would be charged to any other customer of the bank
D. The bank must require Alex to apply for an overdraft protection line of credit
The correct answer is C. A is incorrect because the bank may pay the overdraft providing certain conditions are met. B is incorrect because the time limit to bring the account current is 5 business days. D is incorrect because although overdraft protection is a good idea, it is not required in this situation.
Which option lists the two officers that will be considered executive officers, unless they are excluded by resolution of the board?
A. Bank president and executive vice presidents
B. Executive vice presidents and branch managers
C. Loan officers and the branch manager
D. Branch managers and the cashier
The correct answer is A. B and D are incorrect because branch managers are not considered executive officers. C is incorrect because loan officers and branch managers are not considered executive officers.
Matt Smith is an executive officer of Big Horn National Bank. Matt has applied for a loan with the bank that is not limited by Reg O. Which loans did Matt apply for?
A. An auto loan
B. An unsecured line of credit
C. A loan to pay for Matt’s daughter’s college education
D. An overdraft line of credit
The correct answer is C. A, B, and D are incorrect because these types of loans fall under Reg O limitations.
Robert Stallings is a principal shareholder of ABC Bank. Which group lists the correct debts that must be added together to determine whether the bank is in compliance with the limitations of Regulation O as they apply to Robert?
A. $25,000 car loan to Robert Stallings; $1 million loan to Stallings Enterprises, a company owned by Mr. Stallings; $30,000 loan to James Stallings, Robert’s adult son who resides in another city
B. $1 million loan to Stallings Enterprises, a company owned by Mr. Stallings; $30,000 loan to James Stallings, Robert’s adult son who resides in another city; $10,000 loan to Stallings for County Commissioner, a campaign committee running Mr. Stallings’ local race for the commissioner’s office
C. $30,000 loan to James Stallings, Robert’s adult son who resides in another city; $10,000 loan to Stallings for County Commissioner, a campaign committee running Mr. Stallings’ local race for the commissioner’s office; $25,000 car loan to Robert Stallings
D. $10,000 loan to Stallings for County Commissioner, a campaign committee running Mr. Stallings’ local race for the commissioner’s office; $25,000 car loan to Robert Stallings; $1 million loan to Stallings Enterprises, a company owned by Mr. Stallings
The correct answer is D. A, B, and C are incorrect because the debt of an adult child of an insider not living at the home of the insider does not have to be added to the insider’s debt for purposes of Regulation O’s limitations (as long as there is no tangible economic benefit).
