Federal Reserve Board of Governors

Course Description for

Bank Operations Simulation
(S&R Technology Lab)
Last Revised: June 2009
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 STREAM
Supervision Technology Risks
Educate, Analyze and Manage

Federal Reserve System

Bank Operations Simulation (S&R Technology Lab)

The Board of Governors of the Federal Reserve System is proud to offer technology-related
courses developed and hosted by the S.T.R.E.A.M./Technology Lab at the Federal Reserve
Bank of Chicago, Chicago, Illinois. For over nine years, the S.T.R.E.A.M./Technology Lab has
pursued a unique approach to examiner technology training by combining hands-on exercises
with lectures. Learning materials are based on applicable FFIEC Examination Handbooks and
other examiner guides. The hands-on exercises reinforce concepts by allowing participants to
interact with various vendor software applications, operating systems, and security appliances
widely used in the financial industry and observing how they work. Each participant has a PC
at their disposal in the state-of-the-art facility which supports teleconferencing, audio/video
recordings, and interactive participant response systems.

Type of Participant Targeted

The course is designed for safety-and-soundness examiners (both pre- and post-
commissioned) who are looking for bank operations training. Consumer and community affairs
examiners can also benefit if they are looking for additional training on bank operations.

Prerequisites

Federal Reserve participants should have completed the STaRT modules within the Examiner
Orientation.

Course Overview

This course provides participants with a simulated bank operations experience. Using an
industry-standard general ledger system, participants receive training on fundamental bank
operations and their key risks, risk management principles, control activities, and red flags.
The course includes lectures and hands-on practice with the major operational activities of a
community bank, including teller and check operations, back office operations, investment and
loan operations, and electronic payments systems (ACH, Remote Deposit Capture and Wire
Transfer). Participants experience bank managements perspective in managing operations,
detecting misappropriations, and mitigating operational risk and control weaknesses. The
participants also improve their understanding of examiner responsibilities by identifying issues
and root causes that contribute to control weaknesses and increase operational risk.

The course offers 32 Continuing Professional Education (CPE) credits.

Course Objectives
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009
U p o n c o m p l e t i o n o f t h i s c o u r s e , t h e p a r t i c i p a n t , at a m i n i m u m , w i l l b e a b l e t o d e m o n s t r a t e t h e
f o l l o w i n g skills:

Discuss typical procedures for major bank operational functions.

Identify red flags for w e a k controls.

E v a l u a t e t h e a d e q u a c y of i n t e r n a l c o n t r o l s .

Participate o n internal control r e v i e w s at c o m m u n i t y b a n k s .

Post-Course Intervention

T o reinforce learning after the class, participants s h o u l d be a s s i g n e d to detail projects a n d

i n t e r n a l c o n t r o l r e v i e w s o n s a f e t y a n d s o u n d n e s s e x a m i n a t i o n s of c o m m u n i t y b a n k s .

Overview of Bank Operations Simulation Curriculum

[Beginning of the table description:
The following table has 2 columns and 15 rows:
HeaderRow:Column1S u b j e c t Column2C l a s s H o u r s

SubjectBank operations and general ledger overview ClassHours2.5

SubjectCash and teller operations ClassHours2.0
SubjectCheck operations ClassHours1.0
SubjectBack office operations and exercises ClassHours7.0
SubjectACH operations ClassHours1.5
SubjectWire Transfer operations ClassHours1.0
SubjectInvestment operations ClassHours1.5
SubjectLending operations ClassHours3.5
SubjectAccounts payable/fixed assets ClassHours2.0
SubjectCall Report ClassHours1.5
SubjectDue from correspondent ClassHours1.0
SubjectPayment Systems Risk ClassHours1.0
SubjectSecurity and system access ClassHours1.0

Lastrow:T o t a l L e c t u r e & E x e r c i s e H o u r s 26.5 Total Class Hours

[Footnote * 32 CPEs are awarded
based on 1 CPE for every 50 minutes of
classroom instruction. End of footnote.]
End of the table description.]
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June, 2009
Learning Objectives
Participants d e v e l o p a solid u n d e r s t a n d i n g of b a n k operations t h r o u g h t h e following m o d u l e s .
By module, the following learning objectives will be accomplished:
[Beginning of the table description:
The following table has 2 columns and 15 rows:
HeaderRow:Column1M o d u l e
ModuleBank Operations and
General Ledger Overview
ModuleCash and Teller operations
ModuleCheck operations
ModuleBack Office Routines and
Proof and Transit Operations
ModuleACH Operations
ModuleWire Transfer Operations
ModuleInvestment Operations
June, 2009
Column2L e a r n i n g O b j e c t i v e s
Learning Objectives:
Explain a n d define the u s e a n d p u r p o s e of the
General Ledger .
R e c a l l f o u r k e y s t e p s in t h e s e g r e g a t i o n o f d u t i e s .
Create debit/credit entries for s o m e major bank
transactions.
Explain the terms batch processing, m e m o -
posting, balancing, and reconciling.
Learning Objectives:
C r e a t e Dr/Cr entries of basic c a s h transactions
using T-accounts.
List 4 k e y r i s k s a n d c o n t r o l s of c a s h o p s .
I d e n t i f y w h o d o e s w h a t in a t e l l e r t r a n s a c t i o n f o r
t h e S e g r e g a t i o n of D u t i e s B o x .
I d e n t i f y t h e c o n t r o l s w h i c h s h o u l d b e in R e d F l a g
Learning Objectives:
s i t u athe
Explain t i ocheck
n s . clearing process
C r e a t e Dr/Cr entries for official c h e c k s
List 3 c o n t r o l s a r o u n d o f f i c i a l c h e c k s
List 2 a d v a n t a g e s a n d 2 r i s k s of R e m o t e D e p o s i t
Capture
Explain h o w a c h e c k kite w o r k s
Learning Objectives:
Explain what proof means for the back office
G i v e 2 e x a m p l e s of t h e d i f f e r e n c e b e t w e e n
balancing and reconciling
Create Db/Cr entries for handling N S F a n d
Overdraft items
C r e a t e D b / C r entries for c a s h letters sent a n d
received
Recall 2 red flags for b a c k office operations
Learning Objectives:
Explain what ACH is and how it works.
E x p l a i n h o w a b a n k incurs credit risk f r o m A C H .
List 3 w a y s t o c o n t r o l A C H - r e l a t e d c r e d i t risk.
List 3 w a y s t o c o n t r o l A C H - r e l a t e d o p e r a t i o n a l risk.
Recall 2 important red flags related to A C H .
Learning Objectives:
Explain how a wire transfer works.
List 3 k e y q u e s t i o n s r e g a r d i n g w i r e t r a n s f e r
controls
List 2 r e d f l a g s w i t h r e s p e c t t o w i r e t r a n s f e r s
Learning Objectives:
Name 3 types of permitted investments
[Table continues to the following page. Page Break]

[Table continues from the previous page.]
Header Row: Column 1 Module
ModuleLending Operations
ModuleAccounts Payable
ModuleFixed Assets
ModuleIntroduction to Call Report
ModuleDue From Correspondent
Reconcilement
ModulePayment Systems Risk
ModuleSecurity & System Access
June, 2009
Column 2 Learning Objectives
Learning Objectives:
Create the Db/Cr entries for an investment
purchase
D e s c r i b e t h e t y p i c a l s e g r e g a t i o n of d u t i e s f o r t h e
investments function
List 3 k e y e x a m i n e r q u e s t i o n s w h e n r e v i e w i n g
i n v e sObjectives:
Learning tments.
Discuss the responsibilities and controls for key
steps in the loan operations function
U s e the G L s y s t e m to perform a variety of loan
operations transactions
Create Db/Cr entries for basic loan operations
transactions using T-accounts
Describe some examiner procedures and
q u e s t i o n s u s e d t o e v a l u a t e t h e a d e q u a c y of l o a n
o p e r Objectives:
Learning ations
Discuss a typical Accounts Payable process
G i v e t w o e x a m p l e s of h o w f r a u d c a n b e c o m m i t t e d
with accounts payable
E x p l a i n t h e p r o p e r s e g r e g a t i o n of d u t i e s w h i c h
s h o u l d b e in p l a c e in t h e A / P p r o c e s s
Learning Objectives:
Describe three key accounting concepts related to
fixed assets.
D i s c u s s the s e g r e g a t i o n of duties w h i c h s h o u l d be
in p l a c e in t h e f i x e d a s s e t p r o c e s s
List a t l e a s t 3 t h i n g s t h a t e x a m i n e r s s h o u l d d o
w h e nObjectives:
Learning reviewing fixed assets
Explain the process of Call Report preparation
Give e x a m p l e s of the d a t a inputs & data s o u r c e s
u s e d in c o m p i l i n g t h e C a l l R e p o r t
D i s c u s s t h e p u r p o s e of at least t h r e e of t h e
supporting schedules
Learning Objectives:
Reconcile a Due From Correspondent account
List 3 r i s k m a n a g e m e n t e l e m e n t s f o r
correspondent accounts
S t a t e t h e b a s i c r u l e of R e g F
List 2 r e d f l a g s f o r c o r r e s p o n d e n t a c c o u n t s
Learning Objectives:
Define Payment Systems Risk
D i s c u s s the t y p e s of Net Debit C a p s
D i s c u s s the m a j o r characteristics of the Federal
Reserves credit p r o g r a m s
Learning Objectives:
Recall 3 Key Questions for security a n d system
access
List 2 r e d f l a g s r e l a t e d t o s y s t e m a c c e s s
List 2 t h i n g s t o d o a s a n e x a m i n e r r e v i e w i n g
system access
End of the table description.] [Page Break]
Class Size
The optimal class size for the Bank Operations Simulation course is approximately 20
participants. To provide sufficient variety of interaction among class participants, the minimum
class size should be 10 participants.

Instructors
Bank Operations Simulation is conducted and supported by a group of professionals, including
senior safety and soundness examiners and technology architects. Instructors are recruited
from the Federal Reserve System, FFIEC-member agencies, and state banking supervision
departments. This course may require from 3 to 5 instructors.

June, 2009