CBP Banking Operations and Services 2 — Questions and Answers
Question 1: A bank's net interest margin (NIM) is calculated as:
- Net interest income divided by average earning assets (Correct answer)
- Total interest income minus total interest expense
- Interest income divided by total deposits
- Net income divided by total assets
Correct answer: Net interest income divided by average earning assets
NIM measures profitability by dividing net interest income by average earning assets, expressed as a percentage.
Question 2: Which type of bank account typically earns the highest interest rate?
- Demand deposit account
- Money market account
- Certificate of deposit (CD) (Correct answer)
- Basic checking account
Correct answer: Certificate of deposit (CD)
Certificates of deposit earn higher rates because funds are locked in for a fixed term, reducing liquidity for the depositor.
Question 3: Under Regulation CC, what is the maximum hold period a bank may place on local checks for most customers?
- One business day
- Two business days (Correct answer)
- Five business days
- Seven business days
Correct answer: Two business days
Regulation CC generally allows banks to place a two-business-day hold on local checks, though next-day availability applies to certain items.
Question 4: A correspondent banking relationship is best described as:
- A bank providing services to individual retail customers
- One bank providing services to another bank (Correct answer)
- A bank offering foreign currency exchange to businesses
- Two banks sharing a single charter
Correct answer: One bank providing services to another bank
Correspondent banking involves a larger bank providing services such as check clearing, wire transfers, and foreign exchange to smaller banks.
Question 5: Which wire transfer system is used for large-value, time-critical interbank payments in the U.S.?
- ACH
- SWIFT
- Fedwire (Correct answer)
- CHIPS
Correct answer: Fedwire
Fedwire Funds Service is the Federal Reserve's real-time gross settlement system for large-value domestic payments.
Question 6: When a bank sells a mortgage loan it originates, the bank is acting as a:
- Portfolio lender
- Mortgage servicer only
- Mortgage banker (Correct answer)
- Secondary market investor
Correct answer: Mortgage banker
A mortgage banker originates loans and sells them into the secondary market, often retaining servicing rights.
Question 7: A stop-payment order on a check is valid for how long under the UCC unless renewed?
- 30 days
- 60 days
- 6 months (Correct answer)
- 1 year
Correct answer: 6 months
Under UCC Article 4, a stop-payment order expires after six months unless the customer renews it in writing.
CBP Banking Operations and Services 2
A bank's net interest margin (NIM) is calculated as: