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Question 163

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:

    Correct Answer: A

    When an item is sent to a Reserve Bank, the 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. This security interest attaches when any warranty is breached or any obligation to the Reserve Bank is incurred. The Reserve Bank can then enforce its security interest, including the right to set off amounts against any funds it holds. Thus, the correct answer is when an item is sent to a Reserve Bank.

Discussion
Cam22Option: A

When an item is sent to a Reserve Bank, the 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.