Compliance and Banking Regulations
Banking and Financial Services
Finance
Lesson Plan
Performance Objective
Students will understand the necessity of banking compliance and regulations.
Specific Objective
 Discuss the roles of compliance personnel.
 Identify issues that created increased need for banking compliance.
 Describe elements of a compliance program.
Terms
 Compliance – the act of following banking regulations and laws
 Compliance officer – the person responsible for making sure that banks follow rules, regulations, and
laws
 Subprime mortgage lending – lenders making high‐interest loans to risky borrowers, many of which
became in default on their loans
 Gramm‐Leach‐Bliley Act of 1999 ‐ also known as the Financial Services Modernization Act of 1999,
(Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States
Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the
market among banking companies, securities companies and insurance companies that prohibited any
one institution from acting as any combination of an investment bank, a commercial bank, and an
insurance company.
Time
When taught as written, this lesson should take approximately 5‐6 days to teach.
Preparation
TEKS Correlations:
This lesson, as published, correlates to the following TEKS. Any changes/alterations to the activities may result
in the elimination of any or all of the TEKS listed.
130.163. (c) Knowledge and Skills
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1
(6) The student describes laws and regulations used to manage business operations and transactions in
the banking services industry. The student is expected to:
(A) explain the elements of a compliance program.
(D) discuss federal regulations of lending and operations functions in banking services, including
the ethical and social aspects of those regulations.
(F) discuss the responsibilities of regulatory agencies that oversee the banking industry.
Interdisciplinary Correlations:
English‐English I
 110.31(b) (1). Reading/Vocabulary Development. Students understand new vocabulary and use it
when reading and writing.
 110.3(b) (11). Reading/Comprehension of informational text/procedural texts. Students understand
how to glean and use information in procedural texts and documents.
Math‐Algebra I
 111.32(b) (1) (C). Interpret and make decisions, predictions, and critical judgments from functional
relationships.
Occupational Correlation (O*Net – www.onetonline.org/):
Job Title: Compliance Managers
O*Net Number: 11‐9199.02
Reported Job Titles: Compliance Coordinator; Compliance Officer; Compliance Review Officer
Tasks:
Maintain documentation of compliance activities, such as complaints received or investigation
outcomes.
File appropriate compliance reports with regulatory agencies.
Conduct or direct the internal investigation of compliance issues
Soft Skills:
Written Comprehension, Judgment and Decision Making, Complex Problem Solving
Accommodations for Learning Differences
It is important that lessons accommodate the needs of every learner. These lessons may be modified to
accommodate your students with learning differences by referring to the files found on the Special
Populations page of this website.
Preparation
 Review and familiarize yourself with the terminology and website links
 Have materials and websites ready to go prior to the start of the lesson.
References
 Banking and Financial Systems, 2013, Goodheart‐Wilcox
 http://www.banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensi
ve_summary_Final.pdf
Copyright © Texas Education Agency, 2014. All rights reserved.
2
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https://www.sec.gov/about/laws/wallstreetreform‐cpa.pdf
http://www.gpo.gov/fdsys/pkg/BILLS‐111hr627enr/pdf/BILLS‐111hr627enr.pdf
http://www.banking.senate.gov/public/_files/051909_CreditCardSummaryFinalPassage.pdf
http://www.consumerfinance.gov/credit‐cards/credit‐card‐act/feb2011‐factsheet/
http://files.consumerfinance.gov/f/201301_cfpb_ability‐to‐repay‐summary.pdf
http://www.gpo.gov/fdsys/pkg/BILLS‐111hr627enr/pdf/BILLS‐111hr627enr.pdf
http://bancroft.berkeley.edu/ROHO/projects/debt/financialcrisis.html
http://www.federalreserve.gov/newsevents/testimony/bernanke20100902a.htm
http://www.fdic.gov/regulations/laws/rules/8000‐3100.html
https://www.sec.gov/about/laws/soa2002.pdf
http://www.federalreserve.gov/pubs/regcc/examples.htm
http://www.phil.frb.org/bank‐resources/publications/compliance‐corner/2002/third‐
quarter/q3cc1_02.cfm
http://www.fdic.gov/news/news/financial/2006/2cep_compliance.pdf
Instructional Aids
 Textbook
 Lesson Presentation
 Instructor Computer/Projection Unit
 Online Websites
Introduction
The main purposes of this lesson are to help students understand



the roles of a compliance officer or manager.
credit card regulations.
the importance of guidelines when lending money to borrowers.
Ask students if they know the laws and regulations that their bank has to follow.
Ask students if they know anything about the financial crisis of 2008.
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3
Outline
I.
What is compliance?
A. compliance – the act of
following banking regulations
and laws
B. main purposes
1. to increase accountability in
banking
2. because banking industry
has major impact on our
economy
3. to protect customers
4. prevent future bank crises
Many businesses have rules and
regulations to follow.
Unfortunately for the banking
industry, either some regulations
were not yet in place or some
that were in place were not
being followed. Ask students
what they know about any of the
financial crises in history. Write
their responses on the board.
II.
Modern‐day compliance regulations
A. Part 1 – the savings and loan
crisis of the early 1980s
1. The Financial Institutions
Reform, Recovery, and
Enforcement Act (FIRREA) of
1989,
2. also known as the Savings
and Loan Bailout
a. abolished FSLIC (Federal
Savings and Loan
Insurance Corporation)
b. replaced the Federal
Home Loan Bank Board
with the Office of Thrift
Supervision
c. created the Resolution
Discuss the major points of the
savings and loan crisis of the
early 1980s.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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4
Visual/Spatial
Trust Corporation to sell
assets of failed banks
and savings and loan
institutions
d. provided funds for FDIC
to pay depositors who
were customers of the
failed institutions
B. Part 2‐Financial crisis due to
major corporate failures in 2001
1. major corporations that
failed
a. Enron
b. Arthur Andersen
c. WorldCom
d. mainly due to unethical
accounting practices
2. Sarbanes‐Oxley Act of 2002
a. provides for more
reliable disclosure of
financial information
b. more strict standards
and guidelines for the
preparation of financial
statements
c. increased penalties for
misleading accounting
information
d. affects banks because
many are corporations
C. Part 3‐Financial crisis of 2008
led to
1. Credit Card Act of 2009
2. Dodd‐Frank Wall Street
Have students look up some of
the corporations that failed
around 2000 that are listed at
the left and have them volunteer
information they find. Discuss
what can be done differently to
prevent those failures in the
future.
Now have students conduct
research on the crisis of 2008.
Have them volunteer what they
found out and record their
responses on the board. Again
ask what could have been done
differently.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
Reform and Consumer
Protection Act of 2010
a. Durbin Amendment
b. Mortgage Reform and
Predatory Lending Act –
established standards for
underwriting residential
loans
c. Financial Stability Act of
2010 – created Financial
Stability Oversight
Council and Office of
Financial Research
d. Consumer Finance
Protection Act of 2010
e. Wall Street Transparency
and Accountability Act of
2010
f. Regulation CC‐
Availability of Funds and
Collection of Checks
III.
Causes of the financial crisis of 2008
A. subprime mortgage lending –
lenders making high‐interest
loans to risky borrowers, many
of which became in default on
their loans.
B. spread fear of losses in other
investment areas throughout
Review several of the acts
mentioned at the left and
compare some of the provisions
of the acts with what the
students may have already come
up with when you asked what
could have been done
differently.
Looking back at the causes is
what created much of the new
laws mentioned above.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
the country and in global
markets as well
C. lowering of underwriting
standards for real estate loans
1. lower, if any, down
payments required
2. more home equity loans,
which created less equity
when values of real estate
declined
D. poor risk management on the
part of lending institutions
E. great deal of chapter 11 filings
which did not help the
economy, but only attempted to
help the creditors
IV.
V.
Gramm‐Leach‐Bliley Act of 1999
A. basically repealed part of the
Glass‐Steagall Act
B. allowed savings and investment
banks to merge and do business
together
C. required financial institutions to
provide privacy notices to its
customers
The Card Act of 2009
A. also called “The Credit Card
Accountability Responsibility
and Disclosure Act of 2009”
Discuss the causes at the left and
how they negatively affect the
economy and can have global
effects as well.
Because credit card debt was a
major contributing factor of the
crisis, the Card Act of 2009 was
major legislation to hopefully
prevent the issues of the past to
occur again.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
B. major sections of the act
1 consumer protection
2. enhanced consumer
disclosures
3. protection of young
consumers
4. gift cards
5. miscellaneous provisions
VI.
VII.
Consumer protection
A. advance notice of at least 45
days prior to an interest rate
increase or any other significant
change
B. review of accounts at least
every six months if interest rate
is increased, to see when rate
can be decreased again
C. payment deadline to be 5:00
p.m.
Talk to students about the
consumerfinance.gov website
and the effects of the changes to
credit card practices. Discuss
with them the “opt‐in” options
for different types of services
and their associated fees.
Much of the new legislation has
to do with helping consumers
and to prevent customers from
being deceived in lending
practices.
Enhanced customer disclosures
A. Minimum Payment warning
included on statements which
outlines the effects of only
making the minimum monthly
payment
B. Payment made in person at a
branch shall be shown as being
made on that same day.
C. Regarding credit reports,
Federal law discloses
annualcreditreport.com as a
free credit report site while any
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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advertisements recommending
other sites must disclose that it is
not the site approved by Federal
law.
VIII.
IX.
Protection of young customers
A. A credit card application may not
be approved for anyone under
age 21 unless a co‐signer is on
the account.
B. There is to be no approval for
credit‐line increases for college
students under 21 without parent
approval and the parent will also
be jointly liable.
C. College students cannot be
offered ‘gifts’ to apply for a credit
card if the offer is made at or
near the college or institution of
higher learning, or at an event
sponsored by the institution.
Gift Cards
A. There are to be no inactivity fees
for gift cards unless the card has
not been used for at least a 12‐
month period prior to the fee
being assessed.
B. Inactivity fees must be disclosed
prior to the card(s) being
purchased.
C. Gift cards should not have
expiration date unless that date
is at least five years from the
date of purchase.
Discuss with the students the part
of the act that has to do with the
Protection of Young Customers.
Ask students if they have any gift
cards and if they know if any of
them had any expiration dates or
inactivity fees. Explain to
students that, prior to this
regulation, banks made quite a
bit of money from higher
inactivity fees and expiration
dates. So would banks favor
these new regulations?
Have students research with a
neighbor the reaction of banks to
new regulations and discuss.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
X.
Miscellaneous provisions
A. Every two years this act should
be reviewed and amended as
necessary.
B. A study will be conducted on
the cost‐effectiveness of an
emergency PIN notifying local
law enforcement if there is an
incident at an ATM.
C. A study will also be conducted
regarding financial and
economic education programs
and funding for those programs
as well.
D. A study will be conducted
analyzing native language and
financial literacy and provide
programs to assist in this area.
XI.
Regulation CC (Availability of Funds
and Collection of Checks)
A. Employees must be trained on
the policy.
B. The policy must be displayed for
consumers.
C. next‐day availability, and
D. delayed availability
XII.
Regulation CC – Next Day
Availability covers
A. cash deposited in person
B. electronic payments
C. U. S. Treasury checks
D. U. S. Postal Service money order
Discuss the provisions that
involve emergency PINs at ATMs
in case there is trouble and that
of promoting financial
education. These will be
beneficial for all consumers.
Ask students if they have ever
made a deposit and noticed it
was not in their account yet
when they thought it would be.
Explain to them the provisions of
Regulation CC and show them
what types of deposits are
covered and when they are
actually in the account.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
E. Federal Reserve checks
F. state or local government
checks
G. cashier’s checks
H. checks on the same bank as the
customer
I. up to $200 available for Delayed
Availability checks
XIII.
Regulation CC – Delayed Availability
A. deposits greater than $5000
B. redeposited checks (checks
returned due to missing
signature or another reason)
C. checks on accounts that are
repeatedly overdrawn
D. reasonable cause, for example,
checks dated more than six
months before
XIV.
Check 21 Act of 2003
A. allowed banks to send funds to
other banks electronically
B. paper checks, called substitute
checks, used if funds were not
transferred electronically
C. paved the way for most
electronic banking services
XV.
Big bank bailouts
A. Citigroup
B. J. P. Morgan Chase
C. Wells Fargo
D. Capital One
Explain to students that the
availability of their deposits is
supposed to be displayed in the
bank and all employees should
be familiar with the provisions.
Check 21 was an important step
in promoting electronic banking.
Time and costs are saved
because of electronic banking.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
E. Bank of America
F. Goldman Sachs
G. Merrill Lynch
XVI.
Career as a compliance officer
A. What they do
1. ensure banks follow current
regulations
2. explain rules and regulations
to bank employees
3. maintain bank policy and
procedure manuals
4. organize records for bank
examiners
B. Work environment
1. usually work in a corporate
office
2. travel to other banks
C. Education
1. bachelor’s degree
2. some hours in accounting
Ask students if they are familiar
with the banks and financial
institutions on the left. Have the
students conduct research and
discuss with them what they
find.
Especially with the increased
regulations of recent years,
careers in compliance
management and financial
examining are on the increase.
Show students the bls.gov web
site, click on Publications,
Occupational Outlook
Handbook, and search using the
word “compliance”.
Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
Application
Guided Practice
Create index cards that have the name of the acts or laws discussed in this lesson. Then copy and paste the
provisions from the different acts onto a blank document. Make copies and cut up all of the provisions. Have
students in pairs match up the provisions of the acts with the appropriate act. You can also set a timer and
see what group finishes first.
Independent Practice
Have each student select one act to research. Have them each come up with one provision or characteristic
that was not discussed. Then have them share that provision with their neighbor and the neighbor shares
with them.
Summary
Review
Ask students the following questions on exit tickets:
Question #1:
What does compliance mean in banking?
Answer #1:
Compliance is the act of following banking regulations and laws.
Question #2:
What are some events the created the need for better compliance with laws and regulations?
Answer #2:
The savings and loan crisis of the early 1980s, the corporate failures of early 2000s, and the
financial crisis of 2008.
Question #3:
In a bank or financial institution who should be concerned with compliance?
Answer #3:
All bank employees should be familiar with compliance regulations.
Question #4:
What was the Dodd‐Frank Act of 2010?
Answer #4:
It was created in response to the financial crisis of 2008 and brought major changes to the
financial industry to prevent a crisis such as this in the future.
Question #5:
What was another act that was created as a result of the financial crisis of 2008?
Answer #5:
The ‘Card Act’ of 2009 which set new, stricter guidelines for credit card use.
Evaluation
Informal Assessment
Any and all of the following can be used as informal assessments…
 Exit tickets with vocabulary
 Pair‐share activities
 Class discussion and participation
Formal Assessment
The following can be considered a formal evaluation:
Copyright © Texas Education Agency, 2014. All rights reserved.
13
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Credit Card Laws Assignment #1 – Using the Credit Card Summary or gpo.gov reference listed above,
have students create their own summary of each of the sections in the act with any form of diagram,
for example, a table, a SmartArt diagram, or any other diagram the student chooses. They are to select
the one provision of each of the first five‐seven sections that they think would apply most to them and
state their reason why they chose that provision, for example, in section three they might choose the
provision about not setting due date times in the early morning because they may not wake up early
enough to make the payment in time.
Funds Availability Assignment #2 – Make copies of the Applying Funds Availability Rules scenarios and
have students in pairs select a scenario from a ‘hat’. Based on what they learned about Regulation CC
using the Federal Reserve’s Reg CC web site, they will develop a response to the scenario. They are to
present their findings to the class in any form they choose. They should have visuals, whether it is a
handout, flip chart, or presentation on a projector.
Career Opportunities Assignment #3 – Students will research careers involving banking compliance on
any of the career websites. They will select three careers and will create a Venn diagram with the 3
careers in each of the circles. The overlapping sections of the circles should include the duties, job
responsibilities, or educational requirements that are the same for those jobs. If all 3 have the same
attribute, that goes in the center overlap. If one particular job has a requirement the same as one of
the other jobs, it goes in the overlap between those two jobs, not in the center because it is only
particular to two of the three jobs. This can be done on the computer, flip chart paper, or any other
medium available.
Enrichment
Extension
Have students check with local banks to see if they can interview a compliance officer or manager. They
should create a list of questions to ask about that regulations they pay close attention to and their procedures
for following those regulations. If the interview is in person, ask to see where the Regulation CC policies are in
the bank. Summarize your findings in a short report.
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14
Compliance and Banking Regulations
Credit Card Laws Assignment #1
Student Name: _____________________________
CATEGORY
20
15
8
1
The document is
exceptionally
attractive in
terms of design,
layout, and
neatness.
The document is
attractive in
terms of design,
layout and
neatness.
The document is
acceptably
attractive though
it may be a bit
messy.
The document is
distractingly
messy or very
poorly designed.
It is not
attractive.
Use of Class Time Used time well
during each class
period. Focused
on getting the
project done.
Used time well
during each class
period. Usually
focused on
getting the
project done.
Used some of
Did not use class
the time well
time to focus on
during each class the project.
period. There
was some focus
on getting the
project done.
Required
Elements
The document
includes all
required
elements as well
as additional
information.
All required
elements are
included on the
document.
All but 1 of the
required
elements is
included on the
document.
Several required
elements were
missing.
Knowledge
Gained
Student can
accurately
answer all
questions related
to facts in the
document.
Student can
accurately
answer more
than half the
questions
related to facts
in the document.
Student can
accurately
answer about
50% of questions
related to facts
in the document.
Student appears
to have
insufficient
knowledge about
the facts used in
the document.
Grammar
There are no
grammatical
mistakes on the
document.
There is 1
grammatical
mistake on the
document.
There are 2
grammatical
mistakes on the
document.
There are more
than 2
grammatical
mistakes on the
document.
Attractiveness
Maximum Points Possible: 100
Student Points: ___________
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15
Compliance and Banking Regulations
Funds Availability Assignment #2
Student Name: _____________________________
CATEGORY
20
15
8
1
Comprehension
Student is able to
accurately
answer almost all
questions posed
by classmates
about the topic.
Student is able to
accurately
answer most
questions posed
by classmates
about the topic.
Student is able to
accurately
answer a few
questions posed
by classmates
about the topic.
Student is
unable to
accurately
answer
questions posed
by classmates
about the topic.
Preparedness
Student is
completely
prepared and has
obviously
rehearsed.
Student seems
pretty prepared
but might have
needed a couple
more rehearsals.
The student is
somewhat
prepared, but it
is clear that
rehearsal was
lacking.
Student does
not seem at all
prepared to
present.
Collaboration
with Peers
Always listens to,
shares with, and
supports the
efforts of his
partner.
Usually listens to,
shares with, and
supports the
efforts of his
partner.
Occasionally
listens to, shares
with, and
supports the
efforts of his
partner.
Rarely listens to,
shares with, and
supports the
efforts of his
partner.
Stays on Topic
Stays on topic all Stays on topic
Stays on topic
It was hard to
(100%) of the
most (99‐90%) of some (89%‐75%) tell what the
time.
the time.
of the time.
topic was.
Content
Shows a full
Shows a good
Shows a good
Does not seem
understanding of understanding of understanding of to understand
the topic.
the topic.
50% of the topic. the topic very
well.
Maximum Points Possible: 100
Student Points: ___________
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16
Compliance and Banking Regulations
Career Opportunities Assignment #3
Student Name: _____________________________
CATEGORY
20
15
8
1
The diagram is
exceptionally
attractive in
terms of design,
layout, and
neatness.
The diagram is
attractive in
terms of design,
layout and
neatness.
The diagram is
acceptably
attractive though
it may be a bit
messy.
The diagram is
distractingly
messy or very
poorly designed.
It is not
attractive.
Use of Class Time Used time well
during each class
period. Focused
on getting the
project done.
Used time well
during each class
period. Usually
focused on
getting the
project done.
Used some of
Did not use class
the time well
time to focus on
during each class the project.
period. There
was some focus
on getting the
project done.
Required
Elements
The diagram
includes all
required
elements as well
as additional
information.
All required
elements are
included on the
diagram.
All but 1 of the
required
elements is
included on the
diagram.
Several required
elements were
missing.
Grammar
There are no
grammatical
mistakes on the
diagram.
There is 1
grammatical
mistake on the
diagram.
There are 2
grammatical
mistakes on the
diagram.
There are more
than 2
grammatical
mistakes on the
diagram.
Content ‐
Accuracy
All topics
1‐2 pieces of
covered for each data missing on
of the 3 jobs are the diagram.
displayed on the
diagram.
3‐4 pieces of
data missing on
the diagram.
Only one career
presented.
Attractiveness
Maximum Points Possible: 100
Student Points: ___________
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17