Exam CRCM All QuestionsBrowse all questions from this exam
Go to Exam
Question 175

If the returned check is an electronic item that is not a representation of a ___________, Reserve Banks will indemnify a bank to which the check is returned if the bank incurs losses as a result of indemnities the bank would be required to make under Regulation CC in connection with a substitute check later created from the returned check. A Reserve Bank will not be liable, however, if the loss could be attributed to a lack of good faith or failure to exercise ordinary care on the part of any person who handled the item.

    Correct Answer: B

    According to the given regulation, Reserve Banks indemnify a bank if the returned check is an electronic item that is not a representation of a substitute check. The indemnity covers losses the bank incurs in connection with a substitute check created later from the returned check under Regulation CC, unless bad faith or lack of ordinary care by any handler of the item caused the loss.

Discussion
Cam22Option: B

The correct answer is B. Substitute check. The context provided describes a situation where Reserve Banks provide indemnity to a bank for losses related to the creation of a substitute check from an electronic item that was returned, which is not itself a representation of a substitute check. This indemnity is provided under the conditions specified by Regulation CC, but the Reserve Bank's liability does not extend to losses attributable to a lack of good faith or failure to exercise ordinary care by any party who handled the item before its return.