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Details

Credit to Bank Insiders
Regulation O; 12 CFR 215; 12 CFR 337.3; 12 CFR 349; 12 CFR 31
10
Law
Professional
01/21/2013

Additional Law Flashcards

 


 

Cards

Term

For purposes of insider lending laws and regulations, what is the definition of the term executive officer?

 

A. All bank officers at or above the level of executive vice president

B. Anyone who has the authority  to participate in major policymaking functions at the bank

C. Anyone who has the authority to participate in lending decisions at the bank

D. All bank officers at or above the level of assistant vice president

Definition

B. Anyone who has the authority  to participate in major policymaking functions at the bank

 

Reg O: 12 CFR 215.2(e)

 

This definition is not limited to employees.  Anyone who participates in such policymaking functions is covered, even someone not paid a salary by the bank.

Term

When may a bank pay an overdraft of $5,000 created by an executive officer of the bank?

 

A. When the officer is at the level of a vice president or lower.

B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft.

C. When the officer has enough funds in another account to cover the overdraft.

D. When the bank pays the overdrafts for other good consumers in the ordinary course of business.

Definition

B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft.

 

Reg O: 12 CFR 215.4(e)

 

Overdrafts may be paid only pursuant to a written credit agreement to extend funds or a written agreement to transfer money.  The prohibition against payment of overdrafts applies to executive officers and directors (not principal shareholders, nor to the related interest of any insider).

Term

How may a bank limit the definition of executive officer?

 

A. By strictly defining, in writing, the duties and responsibilities of the officers to be excluded from the definition

B. By passing a board of directors resolution setting forth the bank's definition of an executive officer

C. By requiring that those officers to be excluded from the definition not attend loan committee meetings or loan review meetings

D. By limiting the amount of confidential  information given to those officers to be excluded from the definition

Definition

B. By passing a board of directors resolution setting forth the bank's definition of an executive officer

 

Reg O: 12 CFR 215.2(e)

 

The board of directors may exclude officers from the definition of executive officer, but such a resolution will not be effective if the officer actually participates in major policymaking at the bank.

Term

First National Bank has an employee benefit program whereby all bank employees who meet the bank's credit underwriting standards may obtain consumer loans for major purchases or expenses at a rate that is less than the bank's prime rate.  Can the bank allow its executive officers to borrow under this program?

 

A. No.  Executive officers may not have preferential interest rates under any circumstances.

B. No.  However, the related interests of the executive officers may take advantage of it.

C. Yes.  However, executive officers must secure their loans with collateral valued at 100 percent of the loan balance or more.

D. Yes.  Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.

Definition

D. Yes.  Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.

 

Reg O: 12 CFR 215.4(a)(2)

 

Credit may be offered to insiders if it is pursuant to a benefit or compensation program widely available to employees of the bank.

Term

Which of the following is true regarding extensions of credit to executive officers, directors, and principal shareholders?

 

A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank's capital and surplus, not exceeding $500,000

B. Must be approved in advance by the board of directors if the credit is greater than $50,000 or 5 percent of the bank's capital and surplus

C. May not exceed $100,000 in the aggregate, regardless of approvals

D. May not exceed $250,000 in the aggregate, regardless of approvals

Definition

A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank's capital and surplus, not exceeding $500,000

 

Reg O: 12 CFR 215.4(b)

Term

What is the longest time after board approval that a bank can approve a line of credit for an executive officer?

 

A. 12 months of such approval

B. 9 months of such approval

C. 14 months of such approval

D. 6 months of such approval

Definition

C. 14 months of such approval

 

Reg O: 12 CFR 215.4(b)(3)

Term

First National Bank would like to adopt a recordkeeping system that complies with the requirements of Regulation O.  Which of the following best describes the recordkeeping system required by Regulation O?

 

A. A system in which the bank annually surveys all executive officers of First National and its affiliates to determine the insiders' related interests

B. A system in which the bank asks all borrowers as loans are made whether the borrower is a related interest of an insider

C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests

D. A system that requires an annual survey of affiliate insiders

Definition

C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests

 

Reg O: 12 CFR 215.8

 

An annual survey is not required of affiliates of the bank.  However, it is required for insiders of the bank itself.  The borrower inquiry method is sufficient for affiliate insiders.

Term

Which of the following does an extension of credit NOT include?

 

A. An advance by means of an overdraft or cash item

B. The making or renewal of any loan or granting of a line of credit

C. An advance against accrued salary

D. An acquisition of a note on which an insider is a maker, drawer, or guarantor

Definition

C. An advance against accrued salary

 

Reg O: 12 CFR 215.3(b)(1)

 

An advance against accrued salary or other accrued compensation is not an extension of credit.

Term

Which of the following transactions is subject to the provisions of Regulation O?

 

A. Time deposit account held by a director

B. Travel advance to an executive officer outstanding for less than 30 days

C. Extension of credit to a director of an unaffiliated, competing, noncorrespondent banks

D. Extension of credit to a member of the bank's board of directors

Definition

D. Extension of credit to a member of the bank's board of directors

 

Reg O: 12 CFR 215.3(b)(1)

 

The other alternatives are specifically exempted from the definition of extension of credit in Regulation O.

Term

In a review of a bank's compliance with the Regulation O overdraft provisions, what should the compliance officer do?

 

A. Identify the related interests of all directors, executive officers, and principal shareholders

B. Examine the bank's overdraft reports for a selected time period

C. Examine the annual FFIEC-004 reports on indebtedness to correspondent banks

D. Examine the bank's latest report of condition and income

Definition

B. Examine the bank's overdraft reports for a selected time period

 

The best way to evaluate the bank's compliance with the overdraft provisions of Regulation O is to review the bank's overdraft reports for a time period and determine whether any insider accounts are overdrawn.

 

Reg O

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