What is included in tier 2 capital? - answer✔ALLL up to 1.25% of risk-weighted assets
qualifying preferred stock
Subordinated debt
Qualifying tier 2 minority interest, less any deductions in the tier 2 instrument of an
unconsolidated financial institution.
What is the purpose of the FDIC conducting bank examinations? - answer✔To ensure public
confidence in the banking system and to protect the DIF
What should examiners do before discussing proposed ratings of a 3 or worse rated bank? -
answer✔Contact the regional office to discuss with the CM or the ARD
Sections 10(b) and 10(c) of the FDI do what? - answer✔Empower examiners to make thorough
examination of the banks affairs
What is often the single most important factor of a successful operation of an insured
institution? - answer✔The quality of management
Examination findings, including the composite and component ratings, are subject to
confidentiality under which regulation/rule? - answer✔Part 309 of the FDIC rules and regs
When should an examination letter be delivered to the CEO/President during an exit meeting? -
answer✔for any bank newly assigned a CAMELS composite 3 or worse
Under Section 10(d) of the FDI act, how often must insured branches of foreign banks be
examined? - answer✔every 12 months
Section 347.211 of the FDIC rule and regs states that domestic branches of foreign banks can be
considered for examination every ___________ months? - answer✔18 months
Limited scope examinations should be performed how many months after an enforcement
action is issued? - answer✔6 months
When can examination schedules be extended to 18 months for a state nonmember bank? -
answer✔~the bank has total assets of $3 billion or less
~ the bank is well capitalized as defined in 323.403(B)(1) of FDIC rules and regs
~the ban was assigned a management rating of 1 or 2 at the last examination
~the ban was assigned a composite rating of 1 or 2 at the last exam
~the bank is not subject to formal enforcement proceedings or order by the FDIC, OCC< or FRB
~no person acquired control of the bank during the preceding 12 months in which the last full-
scope examination was completed
Section 10(D)(9) ofthe FDI act requires what? - answer✔The FFEIC to issue guidelines
establishing standards for the purpose of determining the acceptability of state reports of
examination.
How much times notice should a bank be given for notice of an up coming examination and
provided enough time to complete pre-examination request - answer✔2 weeks
How are shared-loss agreements generally written? - answer✔With the FDIC absorbing 80% of
injured losses (up to a stated threshold) and receives 80 percent of recoveries
How many years are commercial, shared loss agreements generally cover how many years for
losses and recoveries? - answer✔5 years for losses and 8 years for recoveries
For residential mortgages, shared losses agreements generally cover how many years for losses
and recoveries? - answer✔10 years for both
How should an asset covered under a shared loss agreement be classified? - answer✔The
assets should be adversely classified (sub, doubt, loss) and be reduced by the applicable
coverage rate stated in the SLA (often 80% or 95%)
During an exit meeting, management should be made aware of what? - answer✔All deficiencies
and supervisory recommendations that will be cited in the ROE.
When is a board meeting required? - answer✔~36 months or more have elapsed since the last
such meeting
~the management component is 3 or worse
~two component ratings are 3 or worse
~or any other CAMEL rating is 4 or 5
What system was devised to rate a Trust department and what composite ratings are
established? - answer✔Uniform Interagency Trust Rating System; composites 1-5.
What five critical areas are evaluated in a Trust exam? - answer✔~management
~operations, internal controls, and audits
~earnings
~compliance
~asset management
What is the primary purposed of an IT exam? - answer✔To determine confidentiality, integrity,
and availability of records produced my automated systems
IT operations are rated in accordance to? - answer✔The Uniform rating System for Information
Technology (URIST)
What four areas are evaluated in an IT examination? - answer✔~Management
~Audit
~Support and Delivery
~development and acquisition
What is the purpose of a BSA examination? - answer✔To ensure U.S. financial institutions
maintain appropriate records and file certain reports involving currency transactions and
customers relations.
Examiner information ,may contain non-public customer information defined by what? -
answer✔Section 501(b) of the Gramm-Leach-Bailey Act
How long should line sheets be retained - answer✔1 examination cycle
How long should risk management and trust questionnaires be retained? - answer✔10 years,
indefinitely when irregularities are discovered or suspected.
Financial institutions in this group are sound in every respect and generally have components
rated 1 or 2. Any weaknesses are minor and can be handled in a routine manner by the board
of directors and management. These financial institutions are the most capable of withstanding
the vagaries of business conditions and are resistant to outside influences such as economic
instability in their trade area. These financial institutions are in substantial compliance with
laws and regulations. As a result, these financial institutions exhibit the strongest performance
and risk management practices relative to the institution's size, complexity, and risk profile, and
give no cause for supervisory concern. - answer✔Composite 1
Financial institutions in this group are fundamentally sound. For a financial institution to receive
this rating, generally no component rating should be more severe than 3. Only moderate
weaknesses are present and are well within the board of directors' and management's
capabilities and willingness to correct. These financial institutions are stable and are capable of
withstanding business fluctuations. These financial institutions are in substantial compliance
with laws and regulations. Overall risk management practices are satisfactory relative to the
institution's size, complexity, and risk profile. There are no material supervisory concerns and,
as a result, the supervisory response is informal and limited. - answer✔Composite 2
Financial institutions in this group exhibit some degree of supervisory concern in one or more of
the component areas. These financial institutions exhibit a combination of weaknesses that
may range from moderate to severe; however, the magnitude of the deficiencies generally will
not cause a component to be rated more severely than 4. Management may lack the ability or
willingness to effectively address weaknesses within appropriate time frames. Financial
institutions in this group generally are less capable of withstanding business fluctuations and
are more vulnerable to outside influences than those institutions rated a composite 1 or 2.
Additionally, these financial institutions may be in significant noncompliance with laws and
regulations. Risk management practices may be less than satisfactory relative to the
institution's size, complexity, and risk profile. These financial institutions require more than
normal - answer✔Composite 3
Financial institutions in this group generally exhibit unsafe and unsound practices or conditions.
There are serious financial or managerial deficiencies that result in unsatisfactory performance.
The problems range from severe to critically deficient. The weaknesses and problems are not
being satisfactorily addressed or resolved by the board of directors and management. Financial
institutions in this group generally are not capable of withstanding business fluctuations. There
may be significant noncompliance with laws and regulations. Risk management practices are
generally unacceptable relative to the institution's size, complexity, and risk profile. Close
supervisory attention is required, which means, in most cases, formal enforcement action is
necessary to address the problems. Institutions in this group pose a risk to the deposit
insurance fund. Failure is a distinct possibility if the problems and weaknesses a -
answer✔Composite 4
4|Page
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