Banking Exam Banking Regulations and Ethics 2 — Questions and Answers
Question 1: Under the Dodd-Frank Act, which agency was created to protect consumers from unfair, deceptive, or abusive financial practices?
- Office of the Comptroller of the Currency
- Consumer Financial Protection Bureau (Correct answer)
- Federal Deposit Insurance Corporation
- Financial Industry Regulatory Authority
Correct answer: Consumer Financial Protection Bureau
The Dodd-Frank Act of 2010 established the Consumer Financial Protection Bureau (CFPB) to oversee consumer financial products and services.
Question 2: A bank employee notices a colleague approving loans to family members at below-market rates without disclosure. This is an example of:
- Predatory lending
- Conflicts of interest (Correct answer)
- Redlining
- Churning
Correct answer: Conflicts of interest
Approving loans to family members at preferential rates without disclosure constitutes a conflict of interest, violating ethical standards and banking regulations.
Question 3: The Bank Secrecy Act requires financial institutions to file a Currency Transaction Report (CTR) for cash transactions exceeding what threshold?
- $5,000
- $7,500
- $10,000 (Correct answer)
- $25,000
Correct answer: $10,000
The BSA mandates CTR filings for cash transactions exceeding $10,000 in a single business day.
Question 4: Which regulation implements the Community Reinvestment Act's requirements for banks to meet credit needs of their communities?
- Regulation B
- Regulation C
- Regulation BB (Correct answer)
- Regulation Z
Correct answer: Regulation BB
Regulation BB implements the CRA, requiring banks to help meet the credit needs of all segments of their local communities, including low- and moderate-income areas.
Question 5: A teller receives instructions from a manager to process a large cash transaction in two separate $6,000 amounts to avoid CTR filing. This practice is called:
- Layering
- Structuring (smurfing) (Correct answer)
- Placement
- Integration
Correct answer: Structuring (smurfing)
Structuring (also called smurfing) is the illegal practice of breaking large transactions into smaller amounts to evade BSA reporting requirements.
Question 6: Under the Equal Credit Opportunity Act (ECOA), which of the following is NOT a prohibited basis for credit discrimination?
- Race
- Religion
- Credit score (Correct answer)
- National origin
Correct answer: Credit score
ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or public assistance status; credit score is a legitimate financial factor.
Question 7: Which provision of the Gramm-Leach-Bliley Act requires banks to provide customers with privacy notices and opt-out options?
- Safeguards Rule
- Financial Privacy Rule (Correct answer)
- Pretexting Protection
- Fair Credit Reporting Rule
Correct answer: Financial Privacy Rule
The Financial Privacy Rule under GLBA requires financial institutions to provide customers with annual privacy notices and an opt-out opportunity for sharing nonpublic personal information.
Banking Exam Banking Regulations and Ethics 2
Under the Dodd-Frank Act, which agency was created to protect consumers from unfair, deceptive, or abusive financial practices?