1.       Which of the following items is considered a low-quality asset?

1. An asset on which interest is past due 14 days
2. An asset in a nonaccrual status
3. An asset that is going to be moved to the workout area within in 60 days so that the terms can be renegotiated
4. None of the above

1.       Which of the following items is considered a low-quality asset?

1. An asset on which interest is past due 14 days
2. An asset in a nonaccrual status
3. An asset that is going to be moved to the workout area within in 60 days so that the terms can be renegotiated
4. None of the above

2.       A national bank may make a loan to an affiliated advertising company that is 100 percent owned by the same bank holding company, if the aggregate amount of all covered transactions of the national bank and its subsidiaries does not exceed a certain percentage of capital and surplus of the national bank. What is that percentage?

1. 10 percent
2. 15 percent
3. 20 percent
4. 25 percent

2.  A national bank may make a loan to an affiliated advertising company that is 100 percent owned by the same bank holding company, if the aggregate amount of all covered transactions of the national bank and its subsidiaries does not exceed a certain percentage of capital and surplus of the national bank. What is that percentage?

1. 10 percent
2. 15 percent
3. 20 percent
4. 25 percent

3.       A member bank makes a loan to an affiliate that has a principal amount of $150. The affiliate pays $2 in up-front fees to the member bank, and the affiliate receives net loan proceeds of $148.  What is the amount of the covered transaction?

1. $150
2. $2
3. $148
4. $152

3.       A member bank makes a loan to an affiliate that has a principal amount of $150. The affiliate pays $2 in up-front fees to the member bank, and the affiliate receives net loan proceeds of $148.  What is the amount of the covered transaction?

1. $150
2. $2
3. $148
4. $152

4.       Big National Bank (BNB) made a loan to a nonbank affiliate of its holding company that is secured by stocks, bonds, and debentures. At the outset of the loan, BNB had collateral with a market value equal to 150 percent of the loan amount. Over time, some of the collateral has been retired and amortized. Some has dropped in value. What is the responsibility of the bank regarding the collateral?

1. The bank has no responsibility once the loan is made provided the percentages were correct at the loan’s inception.
2. The bank must check values every month to ensure that the percentages are correct at all times.
3. The bank must check values when the collateral is retired or amortized to make sure the collateral is replaced with securities that will bring the loan into compliance with the percentages required in the law.
4. The bank must annually check the value of the collateral to ensure that the percentage of value is maintained.

4.       Big National Bank (BNB) made a loan to a nonbank affiliate of its holding company that is secured by stocks, bonds, and debentures. At the outset of the loan, BNB had collateral with a market value equal to 150 percent of the loan amount. Over time, some of the collateral has been retired and amortized. Some has dropped in value. What is the responsibility of the bank regarding the collateral?

1. The bank has no responsibility once the loan is made provided the percentages were correct at the loan’s inception.
2. The bank must check values every month to ensure that the percentages are correct at all times.
3. The bank must check values when the collateral is retired or amortized to make sure the collateral is replaced with securities that will bring the loan into compliance with the percentages required in the law.
4. The bank must annually check the value of the collateral to ensure that the percentage of value is maintained.

Review the following scenario and then answer questions 5-10.  Big National Bank (BNB) is a wholly owned subsidiary of Big Bank Holding Company, Inc (BBHC).  BBHC is also 100% owner of Little National Bank, Lucky Mortgage Co., the BB Funds Group and Fancy Finance Inc. 

5.       Big National Bank makes a loan to Lucky Mortgage Co. in the amount of $250,000.  Which terms would be acceptable under Regulation W?

1. An interest rate below that which would be given to a comparable non-affiliate
2. An interest rate 2 basis points above that which would be given to a comparable non-affiliate
3. Requirement of security interest in government bonds equal to 80% of the loan value
4. Requirement of security interest in commercial real estate equal to 125% of the loan value

5.       Big National Bank makes a loan to Lucky Mortgage Co. in the amount of $250,000.  Which terms would be acceptable under Regulation W?

1. An interest rate below that which would be given to a comparable non-affiliate
2. An interest rate 2 basis points above that which would be given to a comparable non-affiliate
3. Requirement of security interest in government bonds equal to 80% of the loan value
4. Requirement of security interest in commercial real estate equal to 125% of the loan value

6.       Big National Bank has extended credit to Fancy Financing on several occasions.  At the time of the most recent credit request, covered transactions to Fancy Financing are equal to 7% of BNB’s capital and surplus.  In order to continue to extend credit to Fancy Financing, which of the following must be true of the most recent credit request?

1. It must equal 3% or less of BNB’s capital and surplus
2. It must be on market terms
3. It must grant BNB a security interest in Fancy Financing’s office building equal to 100% of the loan value
4. A and B above.

6.       Big National Bank has extended credit to Fancy Financing on several occasions.  At the time of the most recent credit request, covered transactions to Fancy Financing are equal to 7% of BNB’s capital and surplus.  In order to continue to extend credit to Fancy Financing, which of the following must be true of the most recent credit request?

1. It must equal 3% or less of BNB’s capital and surplus
2. It must be on market terms
3. It must grant BNB a security interest in Fancy Financing’s office building equal to 100% of the loan value
4. A and B above.

7.       Big National Bank wants to sell a portfolio of assets to Little National Bank.  What must be true for this sale to be acceptable under Regulation W?

a.       The sale must equal 10 percent or less of BNB’s capital and unimpaired surplus.

b.      The sale must be on market terms.

c.       The sale must include both impaired and unimpaired assets.

d.      The assets must be classified on LNB’s books as low quality assets.

7.       Big National Bank wants to sell a portfolio of assets to Little National Bank.  What must be true for this sale to be acceptable under Regulation W?

a.       The sale must equal 10 percent or less of BNB’s capital and unimpaired surplus.

b.      The sale must be on market terms.

c.       The sale must include both impaired and unimpaired assets.

d.      The assets must be classified on LNB’s books as low quality assets.

8.       Big National Bank is a wholly owned subsidiary of Big Bank Holding Company, Inc.  Which of the following companies is NOT an affiliate of Big National Bank?

1. A company that owns 70 percent of Big Bank Holding Company, Inc.
2. A company established to sell securities and that is 100 percent owned by Big Bank Holding Company, Inc.
3. A company of which Big National owns 100 percent of the stock, set up solely to hold the title to the Big National Bank building
4. A marketing company that is owned by Big Bank Holding Company, Inc.

8.       Big National Bank is a wholly owned subsidiary of Big Bank Holding Company, Inc.  Which of the following companies is NOT an affiliate of Big National Bank?

1. A company that owns 70 percent of Big Bank Holding Company, Inc.
2. A company established to sell securities and that is 100 percent owned by Big Bank Holding Company, Inc.
3. A company of which Big National owns 100 percent of the stock, set up solely to hold the title to the Big National Bank building
4. A marketing company that is owned by Big Bank Holding Company, Inc.

9.       Which of the following would be permissible under Regulation W?

a.       An advertisement that intimates BNB is responsible for the obligations of Lucky Mortgage Co.

b.      BNB’s purchase, in its fiduciary capacity, of Lucky Mortgage Co’s assets if the fiduciary instrument allows for such a purchase

c.       The sale of a non-accruing loan from BNB to Little National Bank

d.      The acceptance of an Fancy Financing’s securities as collateral for a BNB’s loan to Fancy Financing

9.       Which of the following would be permissible under Regulation W?

a.       An advertisement that intimates BNB is responsible for the obligations of Lucky Mortgage Co.

b.      BNB’s purchase, in its fiduciary capacity, of Lucky Mortgage Co’s assets if the fiduciary instrument allows for such a purchase

c.       The sale of a non-accruing loan from BNB to Little National Bank

d.      The acceptance of an Fancy Financing’s securities as collateral for a BNB’s loan to Fancy Financing

10.       Big National Bank would like to make a loan to BB Funds Group, an affiliate. Which of the following would be acceptable as collateral for such a loan?

1. Portfolio Assets on non-accrual
2. Portfolio Assets acquired through a foreclosure
3. Receivables
4. None of the Above

10.       Big National Bank would like to make a loan to BB Funds Group, an affiliate. Which of the following would be acceptable as collateral for such a loan?

1. Portfolio Assets on non-accrual
2. Portfolio Assets acquired through a foreclosure
3. Receivables
4. None of the Above