Banking Exam Core Banking Operations 2 — Questions and Answers
Question 1: A customer presents a check drawn on another bank. The teller accepts it and credits the customer's account. What is this process called?
- Wire transfer
- Check clearing (Correct answer)
- ACH origination
- Correspondent banking
Correct answer: Check clearing
Check clearing is the process by which banks exchange checks and settle the resulting balances between institutions.
Question 2: Under Regulation CC, what is the maximum hold period a bank may place on local checks for most customers?
- 1 business day
- 2 business days (Correct answer)
- 5 business days
- 10 business days
Correct answer: 2 business days
Regulation CC generally requires banks to make funds from local checks available within 2 business days.
Question 3: Which document establishes the terms, interest rate, and repayment schedule for a bank loan?
- Deed of trust
- Promissory note (Correct answer)
- Bill of lading
- Letter of credit
Correct answer: Promissory note
A promissory note is a legally binding written promise to repay a loan under specified terms including interest rate and schedule.
Question 4: A bank's net interest margin (NIM) is best described as:
- Total interest income divided by total assets
- Difference between interest earned and interest paid, as a percentage of earning assets (Correct answer)
- The spread between the federal funds rate and prime rate
- Net income divided by average equity
Correct answer: Difference between interest earned and interest paid, as a percentage of earning assets
NIM measures profitability by comparing the net interest income a bank earns relative to its interest-earning assets.
Question 5: What type of endorsement restricts a check's use to a specific purpose, such as 'For Deposit Only'?
- Blank endorsement
- Special endorsement
- Restrictive endorsement (Correct answer)
- Qualified endorsement
Correct answer: Restrictive endorsement
A restrictive endorsement limits how the check can be negotiated, such as requiring it only be deposited to a specific account.
Question 6: In banking, what does 'float' refer to?
- The bank's excess reserves above required levels
- Funds that have been deposited but not yet collected from the paying bank (Correct answer)
- The difference between a bank's assets and liabilities
- Interest charged on overdrawn accounts
Correct answer: Funds that have been deposited but not yet collected from the paying bank
Float represents funds that appear in both the depositor's and paying bank's accounts during the check-clearing process.
Question 7: A Suspicious Activity Report (SAR) must be filed within how many days of detecting suspicious activity?
- 10 days
- 15 days
- 30 days (Correct answer)
- 60 days
Correct answer: 30 days
FinCEN requires banks to file a SAR within 30 calendar days of detecting activity that may involve money laundering or fraud.
Banking Exam Core Banking Operations 2
A customer presents a check drawn on another bank.
The teller accepts it and credits the customer's account.
What is this process called?