NAFCU Certified Volunteer Expert Exam

Transcription

1 2016 NAFCU Certified Volunteer Expert Exam

2 1. Credit unions are cooperative financial institutions. Which of the following are not principles or values of cooperatives? a. Democratic member control b. Development of the local community c. Cooperatives may not earn a profit. If they do, they must return the money to the membership in the form of an extraordinary dividend. d. Education and training to the membership 2. Which statement best describes the number of credit unions in the United States. a. The number of credit unions today is fewer than 20 years ago, but we have seen a recent increase. b. The credit union industry is consolidating for a number of reasons. Similar trends are occurring in the community banking industry. c. Credit unions are consolidating, however, community banks are seeing a large number of newly chartered banks. d. While most industries consolidate, credit unions due to their cooperative/community nature are not experiencing consolidation. 3. Thanks to their not-for-profit status, credit unions escape most of the regulations facing community banks. 4. Which statement most accurately describes the difference between federal and statechartered credit unions? a. Federal credit unions are chartered through the Federal Credit Union Act. They are regulated directly by NCUA. State chartered credit unions are chartered via state law. For that reason, most state-chartered credit unions are not regulated or examined by NCUA. b. Federal credit unions are chartered through the Federal Credit Union Act. They are regulated directly by NCUA. State chartered credit unions are chartered via state law. Regardless of charter type, all credit unions are only examined and regulated by NCUA. c. Both federal and state credit unions are chartered through the Federal Credit Union Act. Federal credit unions are examined by NCUA, and state-chartered credit unions are only examined by a state agency. d. Federal credit unions are chartered through the Federal Credit Union Act. They are regulated directly by NCUA. State chartered credit unions are chartered via state law. Due to federal share insurance, though, nearly all state-chartered credit unions are regulated or examined by NCUA. 1

3 5. Federal credit unions pay no taxes due to their tax-exempt status. 6. Which statement is most correct? a. Federal credit union boards are responsible for the general direction and control of the credit union. While nearly all delegate day-to-day responsibilities to a chief executive officer, board members are still responsible for how a credit union performs. b. Federal credit union boards have management duties over a chief executive officer. However, responsibility for the credit union s performance is invested with the membership under the Federal Credit Union Act. c. Federal credit union boards of directors are responsible for every aspect of a credit union. For that reason, they may not delegate any job function or day-to-day management to any paid employee. 7. Federal credit unions boards are responsible for approving scores of mandatory policies. Due to the volume of the policies, however, there is no true requirement for board members to have read and understood the contents of each. Rather, their only responsibility is to see that a policy was brought before them. 8. The duty of care is flexible. For larger decisions, more time, study and deliberation is expected. 9. Which of the following is not an example of the duty of loyalty? a. Each director must put the interests of the credit union before his or her personal interests. b. Directors must not earn income, directly or indirectly, based on any loan function of the credit union. c. A family member of a director may never work at a federally-insured credit union. d. Credit union officials may not receive preferential treatment for credit union loans. 2

4 10. The duty of care expects less of directors who have less experience or are new to the organization. 11. Examiners review everything at a credit union each exam cycle. 12. NCUA is a unique financial regulator for what reason? a. NCUA is both a regulator and the insurer of credit union deposits. b. NCUA issues regulations and guidance about disclosures. c. NCUA issues regulations and guidance regarding loans 13. Which of the following statements are true? (More than one may be correct.) 1. Examiners can review board minutes. 2. Examiners can review marketing materials. 3. Examiners can review board packets. 4. Examiners can review sponsor newsletters. a. 1 is true. b. 3 and 4 are true. c. All are true. d. None are true. 14. The duty of care takes into account how long a director has been on the board. 15. The National Credit Union Administration regulates and supervises federal credit unions. Who is in charge of the insurance fund that protects member deposits? a. The Federal Deposit Insurance Corporation. (FDIC) b. The U.S. Treasury c. The National Credit Union Administration d. The Federal Reserve 3

5 16. Since a federal credit union s CAMEL rating is such a good measure of the credit union s safety and soundness, credit unions are encourage to share this rating with its membership. 17. The C of CAMEL stands for which of the following? a. Credit quality. b. Call center staffing. c. Compliance with federal agencies. d. Capital adequacy. 18. The National Credit Union Administration recommends that federal credit unions not challenge examiner findings during the examination process. 19. Which of the following are powers that NCUA can use against a federal credit union? (More than one may be correct.) 1. Civil money penalties 2. Removal of officials 3. A document of resolution a. 1 and 3 b. 1 and 2 c. All of them. d. None of them. 4

6 20. Which of the following best describes the board of director s role in the area of legal and regulatory compliance? a. The board must know the details of each rule or the regulation that affects the credit union, as it is ultimately responsible for what happens. b. The board can delegate the responsibility to management and absolve itself of responsibility. c. The board is ultimately responsible for the general direction and control of the credit union. While it cannot assume day-to-day responsibility for complying with the rules and regulations that apply to federal credit unions, the board should give management the necessary support to adequately manage this risk. In addition, the board must periodically review how effective the risk mitigation efforts are. 21. The duties of loyalty and care apply to volunteer credit union directors, even though they are unpaid and the industry is not-for-profit. 22. Which of the following is not an important part of the federal credit union regulatory system? a. The FDIC. b. The Federal Credit Union Act. c. NCUA regulations. d. Your credit union s bylaws. 23. Even though it is subjective, NCUA still expects federal credit unions to consider reputational issues when they make decisions. 5

7 24. Which of the following affect how a federal credit union is operated? (More than one may be correct.) 1. Contracts with third parties. 2. The credit union s tolerance for risk. 3. Guidance issued by a state credit union regulator. 4. The membership agreement. 5. The credit union s bylaws. a. 1, 2, 3 and 5 b. All of them. c. None of them. d. 1, 2, 4 and Which of the following best describes the board s role in risk management? a. A board of directors should delegate risk management to the credit union s professional staff or supervisory committee. b. A board of directors should be apprised of risk issues when they rise to the level of critical. c. A board of directors should help create credit union risk tolerances, set strategic goal and plans, monitor risk, and then help keep the credit union on track concerning risk management. d. The board has no role in risk management. 26. Which of the following are not part of the seven major risk categories that NCUA monitors? (More than one may be correct.) 1. Strategic risk. 2. CAMEL risk. 3. Failure risk. 4. Liquidity risk 5. Compliance risk 6. Reputation risk a. 2 and 6 b. 2 and 4 c. 2, 3 and 6 d. 2 and 3 6

8 27. NCUA has indicated that credit risk is the greatest risk to credit union safety and soundness. 28. Which of the following areas of credit union operations do not involve risk management? a. Information security. b. Vendor management. c. Bank Secrecy Act compliance. d. All of these involve risk management at some level. 29. The goal of risk management is not to eliminate risk. Rather it is to manage risk to acceptable levels. 30. The risk of running out of available funds to operate a credit union is known as: a. Credit risk. b. Liquidity risk. c. Funds availability risk. d. Transaction risk. 31. A credit union that experiences a series of very public fraud attacks or errors in operations would suffer from heightened.. (More than one may be correct.) a. Transaction risk. b. Interest rate risk. c. Liquidity risk. d. Reputation risk. 32. Which of the following is not an asset of a credit union? a. A five year certificate held by a member at the credit union. b. Uncollected interest payments. c. The credit union s building and supplies, if not leased. d. A loan made by the credit union to its member. 7

9 33. From the following, select the items that qualify as a credit union liability. (More than one may be correct.) 1. A 30-year mortgage loan made to a member. 2. Accrued vacation of credit union employees. 3. Members share accounts. 4. Member share certificates. a. 1 and 2 b. 2 and 3 c. 1 and 3 d. 2, 3 and Assets liabilities =? a. Income b. Net worth c. Member shares d. The credit union balance 35. Which two risks factor the most in asset liability management? 1. Compliance risk 2. Liquidity risk 3. Interest rate risk 4. Transaction risk 5. Strategic risk a. 2 and 3 b. 4 and 5 c. 2 and 5 d. 1 and All things being equal, granting a loan to a member increases or decreases your credit union s liquidity? a. Increases b. Decreases 37. Credit union boards usually have day-to-day responsibility for asset liability management. 8

10 38. When interest rates begin to rise, credit unions can expect which of the following to take place. (More than one may be correct.) 1. Lower dividend rates. 2. Loan refinances. 3. Increased costs from borrowing. 4. Increased revenues from new loans that the credit union makes. 5. Pressure to increase dividend rates. a. 1, 2 and 5 b. 1 and 3 c. 5 d. 3, 4 and 5 e. All of them. 39. If a credit union s assets increase and all other things remain the same, its net worth ratio will drop. 40. A credit union s ROA or return on assets measures the credit union s: a. Net income. b. How efficient the credit union generates income by comparing the credit union s earnings with its assets. c. Net worth, compared with its assets. 41. An ROA or Return on Assets of 0.78 is very good for a credit union. Which response is the most appropriate to that statement? a. It is hard to say without knowing more. The figure could be good or bad, depending on a number of factors. b. Yes, as today s low-rate environment makes it difficult to produce income. c. No, credit unions should shoot for an ROA of 1.00 or higher. 42. The supervisory committee of a federal credit union must perform the annual audit itself. 9

11 43. While the board of directors of a federal credit union appoints the members of the supervisory committee, the board may not remove members without calling a special meeting of the members to do so. 44. While nearly all credit union officials are volunteers, the federal credit union can reimburse them for certain expenses. Which of the following is an expense that may not be reimbursed? a. Costs related to training that is tied to credit union duties. b. Costs related to clothing (dry cleaning for meetings, etc.) c. Travel costs incurred while performing credit union duties. 45. Which statement is most accurate? a. A federal credit union, while not-for-profit, must be profitable in the long-term in order to build up required net worth. b. A federal credit union s non-for-profit status gives it great flexibility, as creating net income is not a requirement. 46. Due to their volunteer nature, credit union directors may not receive reimbursement for expenses related to attending board meetings. 47. A federal credit union board of directors may have: a. An odd number of three to five directors. b. An odd number of five to 15 directors. c. As many directors as their bylaws permit. 48. When a vacancy occurs on a federal credit union board: a. The board must appoint a director to fill the vacancy in a reasonable amount of time. b. The vacancy can remain so until the next election. c. The supervisory committee must appoint a director to fill the vacancy. 10

12 49. Once a credit union has chosen its field of membership and its charter type (federal or state), it may not change either moving forward. For this reason, the decision on charter type and field of membership is very important. 50. Which statement best describes how credit unions gain the funds needed to fund loans and general operations. a. Most credit unions issue debt offerings to attract capital from capital markets. b. Most credit unions issue stock to attract capital from capital markets. c. Most credit unions obtain funds by attracting deposits via checking, savings and other share accounts. In addition, credit unions can take out loans. 11