Question 1

When returning items to a Reserve Bank, the paying and returning banks:

Accepted Answer

The answer of When returning items to a Reserve Bank,...

Question 2

The sender's liability for warranties and indemnities that a Reserve Bank makes for a substitute check is subject to the following conditions and limitations EXCEPT:

Accepted Answer

The sender's liability is not subject to the condition of failing to have authority to make the required warranties and agreements, as this would inherently negate the sender's ability to make any warranties or indemnities in the first place.

Question 3

The sender agrees to indemnify each Reserve Bank for:

Accepted Answer

The sender indemnifies the Reserve Bank for losses due to the sender's lack of authority, actions taken by the Reserve Bank within its authority, and warranties made under relevant regulations.

Question 4

A ____________ must settle for an item with its administrative bank, whether or not it received the item from that bank. Settlement with its administrative bank is deemed to be settlement with the Reserve Bank that sent the item.

Accepted Answer

This statement describes the responsibilities and obligations of a paying bank, which is the bank on which a check or other negotiable instrument is drawn and that pays the amount to the recipient. The paying bank must settle for the item with its administrative bank, which is the bank that has designated it as the paying bank for that item. This requirement ensures that there is an efficient and reliable system for settling transactions between banks, even if they are not directly connected to each other. Regulation J and Regulation CC are both federal regulations that govern the handling of checks and other negotiable instruments, but they do not specifically address this issue. A clearing agent is a third-party service provider that facilitates the processing and settlement of checks and other financial instruments, but it is not directly relevant to this question.

Question 5

One of the check collection requirements is sending items to Reserve Banks. In this requirement:

Accepted Answer

The answer of One of the check collection requirements is...

Question 6

A Reserve Bank may present a noncash item for payment if instructed to do so by the sender and if the:

Accepted Answer

The answer of A Reserve Bank may present a noncash...

Question 7

____________ is an agent or a subagent of the owner of an item; agency terminates when it receives payment for an item in finally collected funds and makes the proceeds available to the sender, and the time for commencing all actions against it has expired.

Accepted Answer

The Reserve Bank acts as an agent or subagent of the owner of an item, and its agency terminates when it receives payment in finally collected funds, makes the proceeds available to the sender, and the time for commencing all actions against it has expired.

Question 8

An electronic image of an item together with electronic information describing that item in an approved format will be considered a valid instrument. Common forms of instruments are the following EXCEPT:

Accepted Answer

While pay checks are common forms of payment, they are not considered "instruments" in the same way that checks, cash items, and noncash items are.

Question 9

A sender and any prior collecting banks grant a security interest to the sender's administrative Reserve Bank in all of their respective assets in the possession of the Reserve Bank to secure any of their obligations to the Reserve Bank. This security interest attaches when any warranty is breached or any obligation to the Reserve Bank is incurred. The Reserve Bank may take any action under applicable law to enforce its security interest; including exercising its right to set off amounts against any funds it holds. This situation holds true when:

Accepted Answer

The security interest attaches when an item is sent to a Reserve Bank, as this is when the sender and prior collecting banks grant a security interest to the Reserve Bank to secure obligations.

Question 10

By sending an item to a Reserve Bank, a sender:

Accepted Answer

The sender warrants to each Reserve Bank that it has good title, is entitled to enforce the item, and that the item has not been materially altered, among other things. Additionally, the sender makes all warranties set forth in the UCC and Regulation CC as if the item were subject to those regulations.

Question 11

It is an instrument or promise or order to pay money (whether negotiable or non negotiable) sent by a sender and payable in a Federal Reserve District or sent to and collectible in funds acceptable to a Reserve Bank. An electronic image of this document together with electronic information describing that item in an approved format will be considered a valid instrument.

Accepted Answer

The description best fits an "item," which is a general term for any document or instrument authorized for processing in the Federal Reserve System. The other answer choices do not accurately describe the described document.

Question 12

Cash items' payment proceeds must be available to the Reserve Bank by the latest of:

Accepted Answer

The answer of Cash items' payment proceeds must be available...

Question 13

By presentation or transmission of an item a Reserve Bank warrants to a subsequent collecting bank and paying bank that:

Accepted Answer

The Reserve Bank warrants to subsequent collecting and paying banks that it has good title to the item, that the item has not been altered, and that the item bears all necessary endorsements.

Question 14

The liability of paying and returning banks is subject to the following conditions and limitations EXCEPT:

Accepted Answer

The statement in option D is incorrect. Paying and returning banks do not agree to indemnify each Reserve Bank for any loss or expense resulting from the paying or returning bank's lack of authorization or any action by a Reserve Bank within the scope of its authority related to the return of the check or any warranty made by the Reserve Bank. The other options (A, B, and C) correctly state the conditions and limitations on the liability of paying and returning banks.

Question 15

Reserve Banks must issue operating circulars, which, together with Regulation J, govern the details of handling items through the Reserve Bank, including

Accepted Answer

Operating circulars issued by Reserve Banks, along with Regulation J, cover the handling of both government items and foreign instruments.

Question 16

The Reserve Bank may recover by charging any account on its books maintained by the sender if:

Accepted Answer

The answer of The Reserve Bank may recover by charging...

Question 17

The Reserve Bank may recover from the sender the attorneys' fees if an action is brought against a Reserve Bank on the basis of:

Accepted Answer

All of the above are grounds on which the Reserve Bank may recover attorneys' fees from the sender.

Question 18

Any of the following foreign correspondents for which the Federal Reserve maintains an account EXCEPT:

Accepted Answer

The Federal Reserve does not maintain accounts for a foreign banker's lessee, as it typically maintains accounts for foreign banks, foreign states, and foreign correspondents or agencies.

Question 19

Time to bring action against a Reserve Bank:

Accepted Answer

The answer of Time to bring action against a Reserve...

Question 20

While Presenting items for payment:

Accepted Answer

The answer of While Presenting items for payment:
...

Exam 1: Certified Regulatory Compliance Manager