Certified Regulatory Compliance Manager (CRCM) — Question 30

Safety and soundness concerns in FDIC Payday Lending Guidance clearly mention that there should be adequate capital as Minimum capital requirements are not enough to offset the risks of payday loans. Banks should hold capital against its subprime portfolio in amounts:

Answer options

• A. That are 1½ to 5 times greater than normal
• B. That are 1½ to 3 times greater than normal
• C. That are 1½ to 3 times lower than normal
• D. That should be between 2-5 in comparison to normal

Correct answer: B

Explanation

The correct answer is B, as it aligns with the FDIC's recommendation that banks should maintain capital that is 1½ to 3 times greater than normal for their subprime portfolios to adequately cover the associated risks. Option A suggests a higher multiplier than recommended, while option C incorrectly suggests lower capital levels, and option D does not specify the correct range as defined by the guidance.