Banking Practice Exam

The correct answer is a formal regulatory document known as a "Cease and desist order." This type of document is issued by regulatory authorities to require an institution to halt certain activities that are considered harmful or illegal. It is a significant tool used by regulators to enforce the rules and ensure compliance, particularly when an institution engages in unsafe or unsound practices that could jeopardize its stability or the safety of its customers' funds.

In contrast, a capital request is typically related to a financial institution's need for additional capital, while a memorandum of understanding is often a less formal agreement between two parties that outlines their mutual intentions. A quality assurance directive does not specifically address regulatory corrections for problem institutions, focusing instead on the quality control aspects within an organization. Thus, the Cease and desist order plays a vital role in the regulatory framework, allowing authorities to mandate corrective action effectively.