Risk Management Flashcards
Legislation was recently enacted to reform consumer real estate protection laws, and the bank will now have to change the way it documents, discloses and advertises real estate loans, an intergral product line at your bank. What should the compliance professional do first?
A. Read the law and write a new real estate compliance policy.
B. Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan.
C. Talk to the bank president about the need for more resources in compliance
D. Sign up all bank personnel affected by the changes for a semindar on the new law.
Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan.
When implementing new rules, it is benefiial to start with a task force of affected managers that can make decisions about how to implement the new rule. The other actions would eventually become necessary but it would be timelier to write the new policy then develop training only after the compliance professional has a clearer idea of needed actions.
A bank’s president would like to begin offering a new home equity line of credit product within two weeks. In all cases the borrower’s principal dwelling will secure the loan. The president has already launched a planned advertising campaign for the bank’s major service markets. What should hte compliance professional do first?
A. Hire an attorney to write the apporpriate legal documents and disclosures
B. Write a memo to the president explaining why the compliance professional should have been in on the process at an earlier date.
C. Begin training sessions for the lending and loan operations staff on the compliance issues involved.
D. Perform a risk assessment to determine the bank’s level of risk in offering this new product
Perform a risk assessment to determine the bank’s level of risk in offering this new product.
Before going forward the compliance professional needs to determine what level and types of risk are involved. It is possible the new prodcut is similar to an existing product, adn the new offering will not increase the bank’s risk. After determining th risk, the compliance professional will better know how to proceed.
A bank has a large mortgage department as well as a high HMDA error rate. An expensive software program could automate the process, but the business unit manager does not want to purchase the software because of its expense. Though it is not as efficient, the manager prefers to make some improvements to the manual process, add some more robust monitoring procedures adn opt not to purchase the software. What should the compliance professional do?
A. Elevate the issue to a higher authority to force the mortgage department unit to puchase the software
B. Nothing, the compliance professional’s job is done with the completed research.
C. Document the fact that the level of risk present with manual systems is acceptable to the mortgage department business unit
D. Write a memo to the president of the bnak that explains the risk assessment for this area
Document the fact that the level of risk present with manual systems is acceptable to the mortgage department business unit.
The job of the compliance officer is to assess the risks and inform management of those risks. The business unit can decide what level of risk to accept and how to implement controls within the business line. If the high level of HMDA errors continues with the improved procedures, the problem can be escalated and brough to senior management’s attention.
The federal banking agencies have proposed an amendment to Regulation Z that would require a new early disclosure statement for loans secured by the borrower’s principal dwelling. After reading the proposed change, what should the compliance professional do FIRST?
A. Establish a taks force to study the proposed rule.
B. Contact the bank’s platform software vendor to determine whether it will be ready for the change
C. Prepare a summary document that outlines the effects the proposed rule would have on the bank’s operations
D. Train bank staff on the new rule
Prepare a summary document that outlines the effects the proposed rule would have on the bank’s operations.
This proposed change is important to the bank. The compliance professional should first analyze its effect and provide that summary to the affected business units, and then establish a task force to study the proposal. Contracting the vendor may be part of the risk considered by the task force.
During a recent compliance examination, regulatory examiners found that the bank was not conducting flood hazard area determinations before closing on construction loans. The compliance professional has reviewed the files and agreed with the examiner’s findings. What should be done FIRST?
A. Review the bank’s flood procedures and polcies to determine where the compliance failure occurred.
B. Conduct a risk assessment of the flood determination requirement on construction loans
C. Prepare an analysis for bank management explaining the requirement
D. Review all construction loan files to determine the extent of the problem
Review the bank’s flood policies and procedures to determine where the compliance failure occurred.
If the compliance professional agrees with the regulators on a finding, the root cause of the error must be determined by consulting policies and procedures.
During a recent compliance examination, regulators cited the bank for violations of various marketing regulations. How should the compliance professional FIRST respond?
A. Contact the bank’s marketing manager to discuss the findings.
B. Develop a policy requring that all marketing materials be reviewed and approved by compliance before being published.
C. Set up a training class for the marketing department
D. Review the marketing materials and applicalbe regulations to verify the finding.
Review the marketing materials and applicable regulations to verify the finding.
When a bank is cited for regulatory violation, the ocmpliance professional must first determine whether the bank should agree with it. This is done by reviewing the pertinent regulations and affected materials. If the citation is supported by the regulations, then the compliance manager should discuss it with the marketing manager. Solutions could include training marketing personnel or establishing new policies for review.
When developing a training plan for commercial lenders whihc of hte following regluations is least important to include?
A. Equal Credit Opportunity, Reg B
B. HMDA Reg C
C. Loans to executive officers Reg O
D. TILA Reg Z
Truth in Lending, Reg Z
The compliance professional should tailor the compliance training program to the specific job functions in the bnak. A commercial group needs to know the rules for fair lending, HMDA, and insider lending. Reg Z is more relavant for consumer lending groups.
A compliance professional is a member of the task force studying how the bank can reduce consumer complaints about holding deposits. One proposed solution involves purchasing an expensive system that will reduce the number of holds placed by evaluating the customer’s history and relationship with the bank. Whihc of the follow roles is MOST important for the compliance professional on the task force?
A. Developing training for tellers who will use the new system.
B. Setting parameters for what the system should review to determine the strenght of the customer relationship
C. Validating the system to ensure it complies with regulatory restrictions
D. Conducting a cost-benefit analysis to determine if the system is the best solution
Validating the system to ensure it complies with regulatory restrictions.
The compliance professional’s role on a task force is to provide knowledge about compliance risk, such as whether the system is in compliance with relevant laws and regulations.
