Certified Regulatory Compliance Manager (CRCM) — Question 283

Bank B is a correspondent of Bank A. Which of the following must be included in Bank A's calculation of credit exposure to Bank B?

Answer options

• A. A loan to Mr. Pierce from Bank A secured by Bank B common stock
• B. Bank B's purchase of U.S. government T-Bills on behalf of Bank A under an overnight repurchase arrangement
• C. Bank A's deposit account of $1 million in Bank B
• D. A letter of credit issued by Bank B and pledged against the ACME Company's debt at Bank A

Correct answer: C

Explanation

The correct answer is C because the deposit account represents a direct exposure that Bank A has to Bank B, making it a critical factor in assessing credit risk. Options A, B, and D do not represent direct credit exposure to Bank B; instead, they involve other entities or arrangements that do not affect the credit assessment in the same manner.