Certified Regulatory Compliance Manager (CRCM) — Question 118

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

Answer options

• 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 customers in the ordinary course of business.

Correct answer: B

Explanation

The correct answer is B because an executive officer must have an existing overdraft protection credit agreement in place that covers the amount of the overdraft. Options A, C, and D are incorrect because they do not adhere to the specific regulations governing overdrafts by bank officers, which require prior agreements to justify such transactions.