Pyramid



Question Pyramid

Last updated 8/17/01

PART 325

What is the Minimum Leverage Capital Requirement?

3% - fundamentally sound (good earnings, AQ, liquidity, etc.), well managed, no significant growth, and composite “1”

4% – for all other institutions

What if they are below these levels?

It will prohibit any application from being approved and bank is required to file a written capital restoration plan within 45 days of date the bank receives notice or it represents an unsafe or unsound practice.

For U, SU, or CU institutions under Part 325, a capital restoration plan must be submitted to RD entailing?

SLOTH it’s a slow process

1. Steps the insured depository institution will take to become adequately capitalized

2. Levels of capital to be attained during each year the plan will be in effect

3. Other information as required

4. Types and levels of activities in which the institution will engage; and

5. How the institution will comply with the restrictions in effect under prompt corrective action

How are intangibles valued?

Valuation of mortgage servicing assets, purchased credit card relationships and nonmortgage servicing assets will be equal to the lesser of 90% of fair value or 100% of remaining unamortized book value. These assets will be limited to 100% of Tier 1 capital. In addition purchased credit card relationships and nonmortgage servicing assets will be limited to 25% of Tier 1 capital.

Deferred tax assets are limited to the lesser of the amount of deferred tax assets that are dependent upon future taxable income that is expected to be realized within one year of the calendar quarter-end date or 10% of Tier 1 capital. Deferred tax assets are treated consistently to the item to which they relate (unrealized losses, intangible assets, etc.)

What is Well Capitalized?

Total Risk Based Capital – 10.0% or greater

Tier 1 Risk Based Capital – 6.0% or greater

Leverage Ratio – 5.0% or greater

Not subject to an written agreement

What is Adequately Capitalized?

Total Risk Based Capital – 8.0% or greater

Tier 1 Risk Based Capital – 4.0% or greater

Leverage Ratio – 4.0% or greater OR 3.0% or greater and 1 rated not experiencing growth

What is Undercapitalized?

Below Adequate

What is Significantly Undercapitalized?

Total Risk Based Capital – less than 6.0%

Tier 1 Risk Based Capital – less than 3.0%

Leverage Ratio – less than 3.0%

What is Critically Undercapitalized?

Tangible equity to total assets equal to or less than 2.0%

What is Tangible equity capital?

1. Tier 1 +

2. Cumulative perpetual preferred stock (including surplus)

3. Less all intangible assets except eligible MSR.

Note: FDIC may reclassify a bank in the W, A, or U category one category lower if:

Unsafe and unsound practice or condition

Under Section 38 what restrictions are there on all banks?

Pay a capital distributions or management fees causing it to become under capitalized.

What is your hint for the 5 things U, S, C banks are subject to and what are they?

Plan For Capital Growth Expired!

1. Payment of capital distributions and management fees restricted

2. FDIC monitoring of the condition of the bank required

3. Capital restoration plan required to be submitted, as detailed above

4. Growth of the bank’s assets restricted

5. Expansion proposals Require prior approval

S, C banks or banks has failed to submit /implement an acceptable capital restoration plan are also?

Restriction on compensation paid to senior executive officers of the institution

What 8 actions require prior written FDIC approval for C banks?

1. Entering into any material transaction other than in the usual course of business

2. Extending credit for any highly leveraged transaction

3. Engaging in any covered transaction (23A)

4. Amending the institution’s charter or bylaws

5. Paying excessive compensation or bonuses

6. Paying above market rates

7. Making any material change in accounting methods

8. Making any principal or interest payment on subordinated debt beginning 60 days after becoming C

Appendix A

What is the Leverage Capital ratio?

Tier 1/ average assets (yr to date average)

What is the hint for Tier 1 Capital?

Capital No More less I3D

How do you calculate Tier 1 Capital?

• Common stockholders’ equity (less net unrealized losses on AFS equity securities)

• Noncumulative perpetual preferred stock

• Minority interests in consolidated subsidiaries

MINUS

• Intangible assets (except allowed amounts of mortgage servicing rights and purchased credit card relationships and certain grandfathered supervisory goodwill)

• Identified losses (losses other than loans and provisions to ALLL)

• Investments in securities subsidiaries subject to 337.4

• Deferred tax assets in excess of the limit in 325.5(g)

What is the hint for Tier 2 Capital?

All Capital Positions Have To Use Tiers

How do you calculate Tier 2 Capital?

Tier 2 Capital

• Allowance for loan and lease losses up to 1.25% of RWA

• Cumulative perpetual preferred stock, long-term preferred stock (original maturity of at least 20 years) and any related surplus

• Perpetual preferred stock where dividend is reset periodically, even if it noncumulative

• Hybrid capital instruments, including mandatory convertible debt

• Term subordinated debt and intermediate-term preferred stock (limited to 50% of Tier 1; at least 5 year original maturity and not redeemable by holder prior to maturity)

• Up to 45% of pretax net unrealized holding gains on AFS equity securities (optional and may lower Tier 1 RBC ratio)

• Tier 2 capital cannot exceed Tier 1 capital

How would perferred stock with an original maturity of 10 years fit into Tier 2 Capital?

It along with all term subordinated debt would be limited to 50% of Tier 1

What if Term subordinated debt or intermediate-term preferred stock is less than 5 years?

1-2yrs 20%

2-3yrs 40%

3-4yrs 60%

4-5yrs 80%

>5yrs 100% (of course)

What are the categories for Risk Weights for Balance Sheet Assets?

0% ; 20%; 50%; and 100%

What is in Category 1 – 0%?

1. Cash

2. Gold bullion in bank’s vaults or in another bank’s vaults on an allocated basis

3. Direct claims on OECD central governments

4. Direct claims on US Gov’t Agencies (GNMA, VA, FHA, FmHA, ExIm Bank, OPIC, CCC, SBA)

5. Federal Reserve Bank stock

What is your hint for Category 2- 20% What is in it?

Hint: Coke POP Bottles are a Golden Cash Cow

1. Cash items in process of collection, both foreign and domestic

2. Portions of claims collateralized by securities issued by or guaranteed by OECD central governments, US Government agencies, US Government sponsored agencies

3. Other institutions in which the US Government is a stakeholder

4. Portions of claims collateralized by cash held in a segregated deposit account of the lending bank

5. Bank deposits

6. GO claims on states or other political subdivisions of US or OECD countries

7. Claims on US Government-sponsored agencies

8. Conditional guarantees by OECD central governments and US Government Agencies

What are the 5 main US Sponsored agencies we see debt from?

1. FHLMC,

2. FNMA,

3. FCS,

4. FHLB,

5. SLMA

What is in Category 3 – 50%?

1. Loans fully secured by first liens (and junior liens if have first lien) on a residential property made on prudent basis and not 90 days or more past due or nonaccrual

2. Loans to builders with substantial project equity for the construction of residences that have been presold under firm contracts

3. Loans secured by first liens on multifamily residential properties 2.5% of TA or $100M?

10 days

What does this report have to entail?

1. Be written and state :

2. the lender’s name,

3. the date and amount of each extension of credit,

4. any security for it, and

5. the purpose of proceeds.

When, upon a written request from the public, must a bank make available names of each of its executive officers and each of its principal shareholders with debt in-house?

When aggregated with all other outstanding extensions of credit at such time from the bank or separately any correspondent bank, equaled the lesser of 5% of capital or $500M.

What must an executive officer or principal shareholder (including their related interests) report to the Board on or before January 31?

Any extension of credit from a correspondent. The report shall include:

1. the maximum amount of indebtedness had during the calendar year,

2. the amount of indebtedness as of ten business days before the report is filed, and

3. a description of the terms and conditions of each extension of credit.

Draw the Reg. O grid.

|Purpose |EO |BHC EO |Dir |BHC Dir |PS |BHC PS |

|Stock loans |X |X |X |X | | |

|OD | X* | X* | X* | X* | | |

|Report debt to Board | X* | | | | | |

|(10days) and with Call| | | | | | |

|Report | | | | | | |

|Public disclosure of |X | | | |X |X |

|debt to banks | | | | | | |

|Disclosure of debt to |X | | | |X |X |

|correspondents | | | | | | |

|Annual report to Board|X | | | |X |X |

* Does not apply to related interest

Section 23A

What is the 23A definition of an affiliate?

23A deals with affiliates so it uses Reg O’s 2 and adds 3 more

1. Any company that controls the bank

2. Any other company that is controlled by the controlling company (1&2 in Reg O)

3. A bank subsidiary (80% rule applies). Non-bank and foreign bank subsidiaries are excluded from definition of affiliate for 23A.

4. Any company with common ownership or common directors

5. A company sponsored and advised on a contractual basis by the bank, or its affiliates

Note: Sole proprietorship is not a company for 23A

Name the 5 organizations excluded from being an affiliate.

1. Non-bank subsidiaries of the bank

2. A company that only holds bank premises

3. A Company that only does safe deposit boxes

4. A Company that only holds obligations of the US, its agencies or securities guaranteed by them

5. A Company acquired by debt previously contracted

What is Control?

Control is 25% or more of voting securities or election of a majority of the directors.

What is a sister bank and what restrictions do they have?

When a bank 80% controlled by a holding company, its transactions with other 80% controlled banks are largely unrestricted except the prohibition of purchasing low quality assets and that all transactions be consistent with safe and sound banking practices.

What do covered transactions consist of?

Hint: Last Affiliate Put In Prison He was covered by bars.

1. Loans to an affiliate

2. Acceptance of securities issued by an affiliated company as collateral for any loan

3. Purchase of securities issued by an affiliate

4. Issuance of a guarantee, acceptance, or letter of credit for an affiliate

5. Purchase of non-exempted assets from an affiliate

What are the 5 restrictions on covered transactions?

1. transactions to a single affiliate are limited to 10% of capital

2. and 20% of to all affiliates

3. Prohibits a bank from purchasing any low quality asset

4. terms and conditions that are consistent with safe and sound banking practices

5. Collateral requirements

What are low quality assets?

1. classified other than Pass,

2. listed for Special Mention

3. on nonaccrual status,

4. past due more than 30 days, or

5. TDR

What are the Collateral requirements of 23A?

US/banks ->states ->biz -> people

← 100% - US Government and agency securities, segregated deposits, or obligations eligible for rediscount or purchase by a Fed bank

← 110% state or political subdivision

← 120% other types of debt instruments, including receivables

← 130% stocks, leases, or other real or personal property

What are the 7 specific relationships exempt from 23A requirements?

Hint: Some Pretty Retarded People Can Understand Loans

1. Sister banks

2. Purchase of securities covered by Bank Holding Company Act

3. Repos that become low quality

4. Purchase of nonrecourse loans or publicly traded securities

5. Correspondents

6. Uncollected items

7. Loans to affiliates secured by US obligations or in bank deposit accounts

Section 23B

How is the 23B definition of affiliate different from 23A?

Definition of affiliate for 23B same as 23A except banks are not affiliates for 23B

What restrictions does 23B add?

1. Requires terms of affiliate transactions be comparable to terms of similar non-affiliate transactions

2. Restricts the extent that a bank may, as a fiduciary, purchase securities and other assets from an affiliate

3. Restrict the purchase of securities where an affiliate is the principal underwriter

4. Prohibits agreements and advertising providing or suggesting that a bank is responsible for the obligations of its affiliates

Brokered Deposits

When can banks have Brokered Deposits?

Only a well-capitalized institution can accept, renew, or roll over without restriction. Adequately-capitalized institutions must obtain FDIC waiver for such activities and undercapitalized institutions are prohibited from these activities. (Part 337)

Misc.

What does Section 337.12 and Section 10(d) require?

Annual full-scope on-site examination at least once during each 12-month period. From end of last exam. May be extended to 18 months if:

Hint : 18-12 = 6 there are 6 things that need to be:

1. Total assets $250MM or less

2. Well capitalized per Part 325

3. Well managed (PX management “1” or “2”)

4. Composite “1” or “2” at PX

5. Not subject to formal enforcement proceeding or order by FDIC, OCC, or FRS

6. No person acquired control during preceding 12-month period

When do you have Meetings with Directors?

• Composite “4” or “5” rating – EIC and RD (or designee)

• Composite “3” – EIC

• Composite “1” or “2” – EIC IF:

1. 36 months or more have elapsed since the last such meeting

2. management component is “3”

3. any component is “4” or “5”

4. any two components are “3”

What are each category of contingent liabilities?

Hint: with is one (I) word ; without is two (II) words well sort of

• Category I contingent liabilities will result in a simultaneous increase in bank assets if it converts to an actual liability

• Category II contingent liabilities are those were a claim on assets arises without an equivilant increase in assets.

What is the hint for Part 365?

6-7-8^3- 55-0-55-

Right Law Could Restrict Individuals Outhouses

Internal LTV limits on real estate should not exceed?

– 65% for raw land

– 75% for land development

– 80% for commercial, multi-family and other non-residential construction

– 85% for residential construction (1-4)

– 85% for improved property

– No limit for owner-occupied residential loans (PMI over 90%)

– Government guaranteed loans and loans to be sold in secondary market without recourse are exempted

• Moreover, total loans for all RE loans (except 1-4 residential properties) exceeding supervisory guidelines should not exceed 30% and be reported to the board at least quarterly. All loans including 1-4 should not be over 100%

What is your hint for 323?

LIFT 37

3 7

What transactions are exempt from Part 323?

1. Lien on RE has been taken as collateral in an abundance of caution

2. Lien on RE has been taken for purposes other than the RE’s value

3. Lease of RE is entered into, unless economically equivalent to purchase or sale of RE

4. Institution is acting in a fiduciary capacity

5. FDIC determines that the services of an appraiser are not necessary in order to protect federal financial and public policy interests or to protect the safety and soundness of the institution

6. Transaction value is $250,000 or less

7. Transaction is not secured by RE

8. Transaction is a business loan that: (i) has a transaction value of $1 million or less and (ii) is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment

9. Transaction involves existing extension of credit at the institution, provided that: (i) no obvious and material change in the market conditions or physical aspects of the property that threatens the adequacy of protection after the transaction, even with the advancement of new monies, or (ii) no advancement of new monies, other than funds necessary to cover reasonable closing costs

10. Transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan (or similar) and each loan met FDIC regulatory requirements for appraisals at origination

11. Transactions wholly or partially insured or guaranteed by US government agency (including sponsored)

12. Transaction qualifies for sale to a government agency or is a residential real estate transaction in which the appraisal conforms to FNMA or FHMLC standards

Interagency retail credit classification policy

Open-end and closed-end credit past due __ days should be classified Substandard?

90 days

How past due should retail; credit be before it should be charged off?

Closed-end 120 days Open-end 180days

Accounts in bankruptcy should generally be charged off within how many days?

60 days of notice, anything not charged off should be classified Substandard

Fraudulent loans should be charged off within ___ days of discovery.

90

When should Residential real estate loans and home equity loans be classified Substandard and Loss?

Substandard when delinquent 90 days or more with LTV greater than 60 percent

When residential or home equity loan is 120 days (closed end) or 180 days (open end) a current assessment of value should be made and any balance in excess of the fair value (less cost to sell) should be classified Loss

How long should an account exist before allowing a re-aging, extension, renewal, referral, or rewrite and how often can it be done?

For at least nine months, also no loan should be re-aged, extended, deferred, renewed, or rewritten more than once within any 12 month period and no loan should be re-aged more than two times within any 5 year period

How much performance is needed before re-aging?

Borrower should make ate least three minimum consecutive monthly payments or the equivalent lump sum payment.

What is loan imparment and how is it handled?

Loan impairment – when based on current information and events, it is likely an institution will be unable to collect all amounts due. FASBs 114 and 118. Amount of impairment should be measured based on the present value of expected future cash flows discounted at effective interest rate. If less than book value, should be a valuation allowance for difference (is included as part of general ALLL)

UCC

Legal requirements of secured loans are covered under Article 9 of the UCC except:

Hint: Why Should These Liens Require Some Bank Judgment?

1. Wages

2. Security interest subject to any statute of the US such as Ship Mortgage Act

3. Transfer of claim in insurance

4. Landlord’s liens

5. Real Estate

6. Sale of accounts or chattel paper

7. Bank account

8. Judgements

UCC-1 is good for?

Hint: UCC-1 = _ _ _ _ _ = 5

5 years; continuations can be filed during the last 6 months of the 5 years

What are the 3 Exceptions to the rule of priority?

1. Dealers inventory (car)

2. When liens perfected by doing nothing are sold to a buyer buying in good faith (TV)

3. When a second creditor supplies replacements or additions to the collateral (Computer)

The 5 investment risk are?

1. Market Risk

2. Credit Risk

3. Liquidity Risk

4. Operational or Transactional Risk

5. Legal Risk

The 4 principal market risk are?

1. Price risk

2. Interest rate risk

3. Basis risk

4. Yield Curve risk

Draw the securities classification grid.

|General Debt Security Classification Guidelines Table |

|Security Type |Classification |

|  |Substandard |Doubtful |Loss |

|Investment quality debt securities with "temporary" impairment |---- |---- |---- |

|Investment quality debt securities with "other than temporary" |---- |---- |Impairment |

|impairment | | | |

|Subinvestment quality debt securities with "temporary" |Amortized Cost |---- |---- |

|impairment | | | |

|Subinvestment quality debt securities with "other than |Fair Value |---- |Impairment |

|temporary" impairment, including defaulted debt securities. | | | |

|NOTE: Impairment is the amount by which amortized cost exceeds fair value. |

Draw the 327 grid

Well Capitalized (1) ;Adequately Capitalized (2) ;Undercapitalized (3)

Supervisory Risk Factors

·A - Composite 1 or 2

·B - Composite 3

·C - Composite 4 or 5

| |1-2 |3 |4-5 |

|W |4 |7 |21 |

|A |7 |14 |28 |

|U |14 |28 |31 |

What does each cell represent?

The annual BIF assessment in cents per $100 in deposits (paid semi-annually)

What is the adjusted assessment as of 1997?

All cells are 4 cents lower

When under FASB 13 is Capitalizing leases is required?

When one of the following conditions is met:

1. Ownership of the property is transferred to the lessee at the end of the lease term

2. The lease contains a bargain purchase option

3. The lease term represents at least 75% of the estimated economic life of the leased property

4. The present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date, less any related investment tax credit retained by or expected to be realized by the lessor

What would be the amount capitalized?

Amount capitalized would be the present value of the minimum required payments over the noncancellable term as defined by the lease plus the present value of the payment required under the bargain purchase option, if any, less any portion of the payments representing administrative expenses such as insurance maintenance and taxes to be paid by the lessor.

Management/Administration

What does Section 19 enact?

Section 19 prohibits, without prior written consent of the FDIC, a person convicted or who has entered into a pretrial diversion or similar program of any criminal offenses involving:

1. dishonesty or

2. breach of trust or

3. money laundering,

from becoming or continuing as an institution-affiliated party.

Under Section 19, an application to continue to serve is not required, as long as:

All of these are meet:

a. There is only one conviction for a covered offense

b. The offense did not involve a bank

c. The offense was punishable by a prison term of less than one year and/or a fine of less than $1,000, and the individual did not serve any jail time

d. The conviction was entered at least 5 years prior to the date that an application would have been required

Related Organizations

What is the Bank Holding Company Act definition of Bank Holding Companies?

Business organization (or long-term trust, i.e., >25yrs. or 21yrs and 10mo. after death) which controls any bank or bank holding company

Conclusive presumption of control exists if ?

Hint B H C = 3 there are 3 options for both presumption and rebuttable presumption of control

1) the company directly or indirectly controls 25% or more of the voting shares or

2) if it controls in any manner the election of a majority of the directors

3) Whenever the transferability of 25% of voting securities of a company is conditioned on the transfer of 25% of another company.

Rebuttable presumption of control exists if:

1. Company controls more than 5% of voting stock if one or more directors or officers serves in any capacity with the bank or holding company and no other person controls as much as 5% of the company

2. Company that controls more than 5% if additional voting securities are controlled by individuals or members of their immediate families who are directors or officers of the company and such holdings aggregate 25% or more of voting securities.

3. Company that enters into an agreement with a bank under which the company exercises significant influence in the general management or operations of the bank

Note: Company that enters into an agreement in which a holders rights in voting securities is restricted presumably controls those shares unless it is a mutual agreement among shareholders granting first refusal or incident to a loan transaction or relates to restrictions on transferability and continues only as may reasonably be necessary to obtain approval for acquisition and a company that directly or indirectly owns securities that are convertible immediately at option of holder into voting securities presumably owns voting securities

A company is not a holding company if:

You ain’t a holder if U down with OPP

1. ownership involved in underwriting security issue

2. ownership in a fiduciary capacity without discretionary voting power

3. shares acquired through debt previously contracted (if disposed in $1 billion with financial weakness

7. Are specialty exams covered by 10 (d)

No, governed by internal DOS policy not statute. 3 rated specialty areas can be extended by RD

8. How much notice should be given to banks before exams?

Generally, 2 weeks notice should be give. Can shorten for scheduling or bank problems.

9. What are the 4 rated IS components?

(AMDS)

Audit

Management

Development and acquisition

Support and delivery

10. What is the DCA rating scheme?

1-5 overall except CRA which is:

Outstanding, Satisfactory, Needs to improve, and Substantial noncompliance

11. How long should the Officer’s Questionnaire be retained

Minimum 5 years from start date

Section 2 of the FDI Act

1. How many members on the FDIC’s Board?

5

2. Who are they?

Comptroller of the Currency;

Director of the Office of Thrift Supervision

(ACTING OFFICIALS MAY SERVE)

3 appointed by the President, 1 of whom shall have State bank supervisory experience.

3. Are there any restrictions on political affiliation?

Not more than 3 Board members of the same political party.

4. Term of Chairman

Five years

5. Term of interim appointments?

Only finish the term

6. When can a board member go back into banking?

After two years unless they serve their whole term, then right away is O.K.

Calculate Macaulay Duration, for a 3 year bond, 10% coupon, 10% yield

|Year |Payment |PV |T |PV * T |

|1 |$100 |$90.9 |1 |90.9 |

|2 |$100 |$82.6 |2 |165.2 |

|3 |$1,100 |$826.4 |3 |2,479.3 |

| | |$1,000.0 | |2,735.4 |

Macauley Duration = 2,735/1,000 = 2.74 years

Calculate its Modified duration,

Macauley Duration = 2.74 years

|Modified Duration |= Macauley Duration |

| |(1 + Yield) |

| |= (2.49%) |

price decreases by approximately 2.5 percent.

What banks should not rely on modified duration?

Banks with significant option risk should not rely upon modified duration to measure IRR.

When can banks use push-down accounting?

When a bank is purchased but keeps its identity they can use if over 80% purchased

They have to use if over 95% is purchased

How are Dollar Repos different from regular repos?

Repos need to repurchase the same security

Dollar Repos have to purchase “substantially the same security” they are used to cover shorts and they need to own for 35 days before they can enter a repo

Ethics

What 5 people can’t you take gifts from?

1. Seeking action from the FDIC

2. Does or wants to do biz w/ FDIC

3. Regulated by FDIC

4. Interest are effected by your job

5. Organizations w/ a majority of their members fitting into 1-4

What are the 4 ethics exceptions for most government employees (FDIC is exempt)

1. $20 or less ($50/yr) cant be cash

2. Personal Relationship

3. Discount

4. Awards/ honorary degree

What are the 8 admin procedures for sub-prime lending?

CAMFLS

3

1. Collection procedures

2. Criteria for /x/

3. Content and frequency of management reports

4. Asset classification criteria

5. Methodology for ALLL

6. Foreclosure and Repossessions

7. Loss recognition

8. Statements and billing procedures

Limited scope exams are used for?

Can Make Some Investigations Drag On Indefinitely

1. Change in risk profile

2. Monitor compliance w/ corrective program

3. SCOR follow up

4. Investigate unusual or adverse situations

5. Determine progress in correcting deficiencies

6. Other situations

7. Investigative or supervisory tool

What are other uses of a limited scope?

1. New charter ( 6mo. full 1st –3rd yrs)

2. Convert to SNM ( 3mo. full in 1yr)

3. Change in ownership (6mo. full 1 yr)

4. FDIC assumption

Directors are held liable for?

Board Meetings FUN?

1. Breach of Trust

2. Missapproporation of funds

3. Fraud

4. Ultra vires acts

5. Negligence resulting in loss

IS workprogram should be used?

1. No testing and vendor supported

2. Some testing need AD approval if >$300MM

3. ATMs, POS, ACH any bank

4. Serviced by outside vendor

5. Not used if the bank services another bank

Blanket bond coverages:

A: Fidelity

B: on premises

C: in transit

D: Forgery/Alteration (optional)

E: Securities (optional)

F: Counterfeit currency

How do you calculate a gap ratio?

(RSA-RSL)/Avg. earning assets

What securities have negative convexity?

Those with embedded options.

What are the Trust Rating components?

SO ACE

▪ Management

▪ OP, Controls, Audit

▪ Asset management

▪ Compliance

▪ Earnings

What are the 5 qualifying beneficiaries for testimony accounts (part 330)?

1. Parent

2. Sibling

3. Spouse

4. Child

5. Grandchild

What 3 things does Reg F require?

1. Written policy

2. Internal limits only when significant risk

3. Overnight credit exposure is limited to 25% of capital unless at lest adequately capitalized

What is the Rationale of Bank Examinations?

1. Maintenance of public confidence in integrity of banking system

2. Provides best means of determining bank’s adherence with laws and regulations

3. Protect the deposit insurance fund

4. Supply an understanding of the nature, relative seriousness and cause of a bank’s problems

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