Full text of District Notices (Federal Reserve Bank of Dallas) : Amendments to Regulation J (Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers Through Fedwire), Notice 97-87

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F ederal R eserve Bank
of

Dallas

HELEN E. HOLCOMB

DALLAS, TEXAS
75265-5906

F IR S T V IC E P R E S ID E N T A N D
C H IE F O P E R A T IN G O F F IC E R

September 30, 1997
Notice 97-87
TO:

The Chief Operating Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Amendments to Regulation J (Collection of
Checks and Other Items by Federal Reserve Banks
and Funds Transfers Through Fedwire)
DETAILS

The Board of Governors of the Federal Reserve System has announced amendments
to Regulation J to ease the transition to interstate branching in the check collection area. Effec­
tive January 2, 1998, the Federal Reserve Banks will implement a new account structure under
which each depository institution will need only one funds account with the Federal Reserve.
This single account relationship will make account management more efficient for banks with
interstate branches.
The Board has adopted amendments to subpart A of Regulation J to conform the
Federal Reserve check collection rules to the single account structure. The amendments become
effective January 2, 1998.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 48166-74, Vol. 62, No. 178 of the
Federal Register dated September 15, 1997, is attached.
MORE INFORMATION
For more information, please contact Jane Anne Schmoker at (214) 922-5101. For
additional copies of this Bank’s notice, please contact the Public Affairs Department at (214)
922-5254.
Sincerely,

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

4 8166

Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations
FEDERAL RESERVE SYSTEM
12CFR Part 210
[Regulation J; Docket No. R-0972]

Collection of Checks and Other Items
by Federal Reserve Banks and Funds
Transfers Through Fedwire
B oard of G overnors o f th e
F ederal Reserve System .
ACTION: F in al rule.

AGENCY:

Effective January 2, 1998, th e
Reserve Banks w ill b eg in to im p lem en t
a p o licy u n d e r w h ic h each deposito ry
in stitu tio n m a y m a in ta in only a single
fun ds ac co u n t w ith th e F ederal Reserve.
A single ac co u n t w ill estab lish a single
deb tor-cred itor re la tio n sh ip b etw een
each in stitu tio n a n d a F ederal Reserve
Bank an d w ill m ake acco unt
m an ag em en t m ore efficient for banks
w ith in terstate branches. T he B oard is
ad o p tin g am en d m e n ts to su b p a rt A of
R egulation J to conform th e F ederal
Reserve ch eck co llectio n ru les to th e
single ac co u n t structure.
EFFECTIVE DATE: January 2, 1998.
SUMMARY:

FOR FURTHER INFORMATION CONTACT:

O liver Ireland, A ssociate G eneral
Counsel, (202/452-3625), S tep h an ie
M artin, S en io r A ttorn ey (2 0 2 /4 5 2 3198), or H eath eru n A llison, A ttorney
(202/452-3565), Legal D ivision. For the
hearin g im p aired only, con tact D iane
Jenkins, T eleco m m u n icatio n s D evice for
the D eaf (TDD) (202/452-3544), Board
of Governors of th e F ederal Reserve
System , 20th an d C Streets, N.W.,
W ashington, D.C. 20551.
SUPPLEMENTARY INFORMATION:

Overview
T he Riegle-Neal Interstate B anking
an d B ranching E fficiency A ct of 1994
(Pub. L. 103-328) m ade significant
changes to vario us ban king law s to
au th o rize an d facilitate interstate
banking. C onsequently, th e n u m b e r of
d epo sito ry in stitu tio n s th a t operate
b ran ch es in m ore th a n one F ederal
Reserve D istrict is ex p ected to increase.
O n January 2, 1998, th e F ederal Reserve
Banks w ill begin to im p lem en t a n ew
ac co u n t stru ctu re th a t w ill p ro v id e a
single F ed eral Reserve ac co u n t for each
in s titu tio n .1 A p rim a ry objective of the
single ac co u n t stru ctu re is to establish a
single d ebtor-cred itor rela tio n sh ip
1 A foreign bank’s U.S. branches and agencies
and an Edge or agreement corporation’s offices will
not be required to adopt a single account structure.
The Board has proposed am endm ents to Regulation
D to allow such institutions w ith offices in m ultiple
Federal Reserve Districts to choose w hether to
adopt a single-account structure or retain m ultiple
accounts as they do currently [62 FR 42708, August
8, 1997].

Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations
b etw e en each ch a rtered en tity an d the
F ed eral Reserve. A single debtorcred itor re la tio n sh ip is th e m ost
effective m ean s for Reserve Banks to
m anage th e ir affairs w ith a d ep ository
in stitu tio n . A single ac co u n t stru ctu re
also m ay allo w d ep o sito ry in stitu tio n s
to m anage th e ir overall p o sitio n w ith
th e Reserve Banks m ore efficiently.
T he B oard is ad o p tin g am en d m e n ts to
su b p a rt A of R egulation J, governing th e
collection of checks an d o th er item s b y
F ederal Reserve Banks, to conform th e
F ederal Reserve ch eck co llectio n ru les
to th e single ac co u n t structure. The
B oard does n o t believe it is necessary to
am e n d su b p art B of R egulation J, w h ic h
governs fu n d s transfers th ro u g h
F edw ire, to acco m m o d ate th e single
ac co u n t structu re. T he Reserve Banks
w ill, how ever, issu e rev ise d operating
circulars governing co llectio n of cash
item s, F ed w ire fu n d s transfers, an d
other Reserve B ank services to reflect
the n e w ac co u n t structure.
U n d er th e R egulation J am en d m e n ts,
all of a n in s titu tio n ’s ch eck collectio n
a n d re tu rn tran sa ctio n s th ro u g h the
F ed eral Reserve Banks w ill be reflected
in a single ac co u n t h e ld at th a t
in s titu tio n ’s “A d m in istrativ e Reserve
B an k” (or in a c o rre sp o n d e n t’s accou nt
at a Reserve Bank). R ecent am en d m e n ts
to R egulation D p ro v id e a m ean s to
d eterm in e th e lo cation of an
in s titu tio n ’s reserve acco u n t.2 T he final
am en d m e n ts to R egulation J p ro v id e
th a t th e ac co u n t lo catio n for an
in stitu tio n th a t se n d s item s to a Reserve
B ank for co llectio n (and th e id e n tity of
its A d m in istrativ e Reserve Bank) w ill be
d eterm in e d in acco rd an ce w ith th e
pro v isio n s of R egulation D, ev en if th e
in stitu tio n is n o t o th erw ise subject to
th a t regulation.
U n d er th e am en d m e n ts, a n in stitu tio n
generally is p e rm itte d to se n d an item
to an y Reserve B ank for collection, b u t
th e item is d ee m e d to h av e b e e n sent
first to th a t in s titu tio n ’s A d m in istrativ e
Reserve Bank. T h e am en d m e n ts
designate th e p arties th a t are d ee m e d to
h a n d le th e item a n d th e o rd er in w h ich
th e y are d eem ed to have h a n d le d it.
(A lthough th e A d m in istrativ e Reserve
B ank is d eem ed to h a n d le th e check, it
w o u ld n o t be co n sid ered to have
2 Regulation D provides that a depository
institution is considered to be located in the Federal
Reserve District specified in the institu tio n ’s charter
or organizing certificate, or, if no such location is
specified, the location of its head office. If that
location, in the Board’s judgm ent, is ambiguous,
w ould im pede the ability of the Board or the
Federal Reserve Banks to perform their functions
u n d er the Federal Reserve Act, or w ould im pede
the ability of the institution to operate efficiently,
the Board could m ake exceptions to the general rule
for a particular institution after considering certain
criteria. [62 FR 34613, June 27, 1997].

“re c eiv e d ” th e check as th a t te rm is
u se d in su b p a rt A of R egulation J if the
check is in itia lly sent to an o th er Reserve
Bank.) T h e am en d m e n ts req u ire a
p ay in g b a n k to settle for a n item w ith its
A d m in istrativ e Reserve B ank (regardless
of w h e th e r th e in stitu tio n received the
item from its A d m in istrativ e Reserve
Bank) a n d specify th e tim e a n d m a n n er
in w h ic h th e paying b a n k is to m ake
settlem ent. T he am en d m e n ts also m ake
changes in th e ru les governing the
h a n d lin g of an d settle m e n t for re tu rn e d
checks p ara lle l to th o se p ro p o sed for
cash items.
Section-by-Section A nalysis and
Sum m ary o f Public Comments
T he B oard receiv ed n in e com m ents
o n th e p ro p o se d am en d m e n ts to
R egulation J from tw o b a n k h o ld in g
com panies, tw o trad e associations, tw o
clearing h ouses, tw o F ed eral Reserve
B anks, an d a fin an cial services
com pany. O verall, th e com m enters
su p p o rte d th e changes a n d agreed th a t
th e sing le-accoun t stru ctu re as
im p le m e n te d by the R egulation J
p ro p o sal w o u ld p ro m o te op eration al
efficiency, sp e ed th e co llectio n of
checks, a n d facilitate ac co u n t
m anagem ent.
Sectio n 210.2

D efin itio n s

T he B oard p ro p o se d to a d d tw o n ew
d efin itio n s to R egulation J. U n d er the
n e w ac co u n t structu re, all of an
in s titu tio n ’s tran sactio n s w ill be
reflected in a single ac co u n t h e ld at th e
in s titu tio n ’s A d m in istrativ e Reserve
Bank. T he B oard p ro p o se d to a d d a
d efin itio n of “ a c c o u n t” to m e an an
a c co u n t w ith reserve or clearing
b alan ces h e ld on the books of a F ederal
Reserve Bank. T he p ro p o sed d efin itio n
stated th a t a su b a cc o u n t is a n
in fo rm atio n al rec o rd of a su b set of
tran sactio n s th a t affect an ac co u n t an d
is n o t a sep arate account. (If a
dep o sito ry in stitu tio n desires, the
Reserve Banks w ill keep record s of
c ertain tran sa ctio n s in “ su b a cc o u n ts,”
su ch as th e tran sa ctio n s p erfo rm ed b y a
b ra n c h of a b a n k th a t m ay be in an o th er
D istrict from th e A d m in istrativ e Reserve
Bank.) T h e B oard p ro p o se d to define
“A d m in istrativ e Reserve B an k” as the
Reserve B ank in w h o se D istrict the
entity in q u estio n is located, as
d eterm in e d in th e sam e w ay as location
is d eterm in e d for p u rp o ses of reserve
a ccoun ts u n d e r th e B oard’s R egulation
D. T he B oard also p ro p o se d to am en d
the d efin itio n of “b a n k ” to conform to
th e U niform C om m ercial C ode (U.C.C.)
sections 4 -1 0 5 an d 4 -107). F inally, the
B oard p ro p o se d to am en d th e d efin itio n
of “ cash ite m ” to p ro v id e that, u n d e r
th e n e w single-accou nt system , the

48167

R eserve B ank th a t in itia lly receives an
item for deposit, ra th e r th a n th e Reserve
B ank in w h o se D istrict th e item is
payable, is th e Reserve B ank th at
d ecid es w h e th e r to accep t th e item as a
cash item .
T he B oard receiv ed on e co m m en t on
th e d efin itio n of “ a c co u n t,” specifically,
on th e d isc u ssio n of a subaccount. The
co m m en ter n o te d th at, d u e to recen t
b an k m ergers a n d for o th e r reasons,
certain ban ks m ay have several ro uting
n u m b e rs w ith in the sam e D istrict for a
p erio d of tim e. T he com m enter
suggested th a t th e B oard clarify th a t
sub acco u n ts co u ld be estab lish ed b ased
o n a b a n k ’s ro utin g n u m b e rs p resen tly
in use. T he B oard an ticip ates th a t banks
w ill b e able to establish su baccoun ts
b ased o n ro u tin g n u m b e rs in use
im m ed iate ly p rio r to a m erger. The
B oard also believes th a t a bro ad
d efin itio n of su b a cc o u n t is desirable to
enco m p ass tran sa ctio n subsets b ased on
ro u tin g n u m b e rs or o n o th er criteria an d
has a d o p te d th e d efin itio n as p roposed.
T he B oard received one co m m en t on
th e p ro p o se d d efin itio n of
“A d m in istrativ e Reserve B ank.” T he
co m m en ter stated th a t a depo sitory
in stitu tio n sh o u ld h av e m o re flexibility
in choosing w h ere its ac co u n t w ill be
located, th a t is, the d ep ository
in stitu tio n sh o u ld b e allo w ed to h o ld its
ac co u n t at an y Reserve B ank in w ho se
D istrict it operates, w h ic h m ay n o t be
th e Reserve B ank w h ere th e in stitu tio n
is located u n d e r R egulation D. The
co m m en ter argued th a t th e p ro p o sed
defin itio n u n n ec essarily tie d p riced
service offerings an d accou nt
re la tio n sh ip issu es to regulatory
oversight issues. T he th e o ry b e h in d the
sin gle-accoun t structu re, how ever, is
th a t each d ep ository in stitu tio n w ill
h av e a d eb tor-creditor re la tio n sh ip w ith
a single Reserve Bank. A llow ing an
in stitu tio n to choose to h o ld a clearing
ac co u n t for p ay m en t-rela te d p u rp o ses at
a Reserve B ank o ther th a n th e Reserve
B ank w h ere its reserve ac co u n t is
located w o u ld resu lt in debtor-creditor
rela tio n sh ip s w ith at least tw o Reserve
Banks. If a d epo sitory in stitu tio n w ish es
to h av e an ac co u n t rela tio n sh ip w ith a
R eserve B ank o ther th a n th e Reserve
B ank w h o se D istrict encom passes its
ch arter location, it m ay req u e st a
locatio n d eterm in a tio n u n d e r the
p ro ce d u re described in R egulation D.
M oreover, th e lo catio n of a deposito ry
in s titu tio n ’s ac co u n t for check
collectio n an d re tu rn p u rp o ses sh o u ld
n o t m a tte r to th e in stitu tio n u n d e r th e
R egulation J am en d m en ts; th e
in stitu tio n w ill be able to sen d checks
to an y Reserve B ank for collectio n w ith
se ttle m e n t th ro u g h its F ederal Reserve
ac co u n t regardless of th e a c c o u n t’s

48168

Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

location. T he Board, therefore, has
a d o p te d th e p ro p o se d d efin itio n of
“A d m in istrativ e Reserve B ank,” as w ell
as th e other p ro p o se d changes to
§ 2 1 0 .2 .

S ection 210.3(a)

G eneral P rovisions

T his p arag rap h p ro v id es th a t the
R eserve Banks m ay issue operating
circu lars governing th e details of their
ch eck co llectio n services a n d rela te d
m atters. T he B oard p ro p o se d to specify
th a t th e operating circulars m ay allow
a n A d m in istrativ e Reserve B ank to give
in stru c tio n s to o th er Reserve Banks,
su c h as in stru c tio n s regarding the
h a n d lin g of item s th a t w o u ld affect an
ac c o u n t o n its books. T he B oard
received no com m en ts on this
a m e n d m e n t a n d h as a d o p te d it as
propo sed .
S ection 210.4 S e n d in g Item s to
R eserve B a n ks
T he B oard p ro p o se d to am en d th is
section to p ro v id e th a t a se n d er (other
th a n a Reserve Bank sender) m a y sen d
an item to an y Reserve B ank for
collection, regardless of w h ere th e
se n d er or th e p ay in g b an k is located, b u t
th a t th e se n d e r’s A d m in istrativ e Reserve
B ank m ay override th is ru le a n d require
th e se n d er to se n d th e item to a
p articu la r Reserve Bank. T he Board
p ro v id e d an ex am p le of a b a n k in
financial difficulty, in w h ic h case the
A d m in istrativ e Reserve B ank m ay w an t
to requ ire th e b a n k to d ep o sit all of its
item s directly w ith a p a rtic u la r Reserve
B ank in o rd er to reta in closer control
over th e b a n k ’s account.
T hree co m m enters objected to th e
b ro ad po w ers th a t th is section gives to
th e A d m in istrativ e Reserve B ank to
req u ire th at checks be se n t to a specific
Reserve Bank. O ne co m m enter
ex p ressed co n cern th at su c h a n action
co u ld in tro d u c e inefficiencies in to the
p ay m en ts system , increase re tu rn item
risk, a n d p ro v id e th e A d m in istrativ e
Reserve Bank w ith o p en -e n d ed po w er
over its private-sector co m petitors a n d
custom ers. T his co m m en ter suggested
th a t th e B oard rem ove the
A d m in istrativ e Reserve B ank’s override
p o w er or, alternatively, clearly define
th e circu m stan ces u n d e r w h ic h the
A d m in istrativ e Reserve B ank h as th is
authority. T he other com m enters
suggested th a t th e B oard lim it the
A d m in istrativ e Reserve B ank’s override
au th o rity to cases w h ere th e d ep ositing
in stitu tio n is in fin an cial difficulty or
w h ere th e ov errid e is n ecessary to
p ro tec t th e safety a n d so u n d n e ss of th e
pay m en ts system .
T he B oard believes th is p ro v isio n is
n ecessary to ad d ress isolated em ergency
situ atio n s th a t m ay arise. T he B oard

expects th a t a n A d m in istrativ e Reserve
B ank w o u ld direct a b a n k to sen d
checks to a specific Reserve B ank only
u n d e r extrem e an d u n u su a l
circum stan ces. T hese circu m stances
m ig h t be ca u se d by different situ atio ns,
in c lu d in g a severe o p eratio n al p ro b lem
at a Reserve Bank. C onsequently, the
B oard does n o t believe th a t it is feasible
or ap p ro p riate to attem p t to specify all
su c h circu m stances in advance. T he
B oard, therefore, h as a d o p te d the
p ro v isio n as proposed.
T he B oard receiv ed no other specific
com m en ts o n § 210.4. T hree
com m enters generally s u p p o rte d giving
d eposito ry in stitu tio n s th e flexibility to
d ep o sit checks w ith any Reserve Bank.
T he Board, therefore, has a d o p ted th e
§ 210.4 as propo sed . T he follow ing
d isc u ssio n describes th e am en d m e n ts to
th is section in m ore detail:
S ection 13(1) of th e F ed eral Reserve
A ct (FRA)3 au thorizes a Reserve B ank to
accept dep osits of checks a n d other
item s from its m em ber bank s or from
o th er d ep o sito ry in stitu tio n s an d to
accept from o th er Reserve Banks checks
a n d other item s p ayable w ith in its
D istrict. U n d er th e R egulation }
a m en d m e n t, if a se n d er sends a check
to a Reserve B ank oth er th a n its
A d m in istrativ e Reserve B ank or the
Reserve Bank in w h o se D istrict the
check is payable, th e receiving Reserve
B an k is d eem ed to be acting as agent of
th e A d m in istrativ e Reserve Bank.
R egulation J requires, how ever, th at
su c h a receivin g Reserve B ank take on
a d d itio n a l rights, duties, an d liabilities
in its ow n nam e th a t it w o u ld n o t
n ecessarily have as a co m m o n law agent
of th e A d m in istrativ e Reserve Bank. For
exam ple, th e receiving Reserve Bank is
co n sid ered a n in d o rser o n th e ch eck a n d
m akes w arran ties on th e ch eck u n d e r
§ 210.6, R egulation CC, an d th e U.C.C.
in its o w n nam e. The B oard believes
th a t req u irin g su c h a receiving Reserve
B ank to take on th e se rights, duties, an d
liabilities is necessary to preserv e a
clear ch a in of w arran ties a n d oth er
claim s in th e check collection and
re tu rn system . C urrently, in those
lim ite d situ atio n s w h ere a Reserve Bank
accepts dep o sits from in stitu tio n s other
th a n tho se located in its D istrict, it does
so u n d e r a sp ecial agency agreem ent
w ith th e in s titu tio n ’s h o m e Reserve
Bank. R ather th a n p erp e tu atin g these
sp ecial agreem ents, th e n e w R egulation
J a m en d m e n ts estab lish th e term s u n d e r
w h ic h th e receiving Reserve B ank w ill
h a n d le item s o n b eh a lf of an
A d m in istrativ e Reserve Bank.
Specifically, th e am en d m e n ts to
§ 210.4 designate th e p arties th a t are
3 12 U.S.C. 360.

d eem ed to h a n d le an item an d th e order
in w h ic h th e y are d ee m e d to have
h a n d le d th e item . T hese am en d m e n ts
establish th e ch a in of in d o rsem en ts on
an item u n d e r R egulation J, R egulation
CC, an d th e U.C.C., as w ell as the ord er
in w h ic h th e parties are agents or
subagents of th e o w n er of a n item , as
p ro v id e d in § 210.6(a). A s n o te d above,
th e ru le pro v id es th a t th e se n d er is
d eem ed to se n d th e item to its
A d m in istrativ e Reserve Bank, regardless
of w h e th e r th a t Reserve Bank actually
receives th e item first. T he
A d m in istrativ e Reserve B ank is d eem ed
to sen d th e item to th e Reserve B ank
th a t ac tu ally receives th e item from the
se n d er (if differen t from the
A d m in istrativ e Reserve Bank). A ny
su b se q u en t Reserve B ank th a t receives
th e item from a n o th er Reserve B ank is
d eem ed to h a n d le th e item in turn.
If, for exam ple, a n Iow a b ra n c h of a
R ich m o n d bank, w ith a n ac co u n t at th e
R ich m o n d Reserve Bank, send s a check
to the Chicago Reserve B ank for
collection, th e check is d ee m e d h a n d le d
in th e follow ing order: th e initial
sender, th e R ich m ond Reserve B ank (the
A d m in istrativ e Reserve Bank), an d th e
Chicago Reserve Bank (the first Reserve
B ank to receive th e item). If th e check
in th is exam ple w ere d raw n on a
ban kin g office in N ew York, th e Chicago
Reserve B ank w o u ld se n d th e ch eck to
the F ederal Reserve B ank of N ew York,
in w h ic h case th e N ew York Reserve
B ank w o u ld be th e last Reserve B ank to
h a n d le th e ch eck an d w o u ld p rese n t the
check to th e paying bank. No other
Reserve B ank w o u ld h a n d le or w o u ld be
d ee m e d to h a n d le th e item . In th e
exam ple, if th e pay ing b a n k ’s
A d m in istrativ e Reserve B ank is the
F ederal Reserve B ank of B oston (w hich
m ig h t be th e case if th e check is payable
by a N ew York office of a ban k
h ea d q u a rte re d in Boston), th e Boston
Reserve B ank is n o t a p arty to th e check,
even th o u g h se ttlem en t for th e check’
w ill u ltim a tely take p la ce b y a debit to
an ac co u n t on th e Boston Reserve
B ank’s books. (See T able 1.)
Table 1.
This table illustrates the following
example:
A Richm ond-based bank has its account at
the Federal Reserve Bank of Richm ond
(Richmond Fed), its Administrative Reserve
Bank. An Iowa branch of the bank sends a
check to the Federal Reserve Bank of Chicago
(Chicago Fed) for collection. The check is
payable by a New York office of a Bostonbased bank, w hich has an account at the
Federal Reserve Bank of Boston (Boston Fed).
The Chicago Fed sends the check to the
Federal Reserve Bank of New York (NY Fed),
w hich presents the check to the New York
office of the paying bank.

Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations
Path of Physical Check

Initial sender —► Chicago Fed —► NY Fed —►
Paying Bank
Parties Deemed To Have Handled the Check
(Chain of Indorsements)

Initial se n d er —*■ R ich m o n d F ed —*■
Chicago F ed —* NY F ed —*■ Paying Bank
Sectio n 210.5 S e n d e r’s A greem ent;
R ecovery b y R eserve B a n k
P aragrap h (a) of § 210.5 sets forth the
term s a n d w arran ties to w h ic h a se n d er
agrees w h e n it se n d s a n item to a
Reserve Bank. T he B oard p ro p o se d to
am e n d th is p arag rap h to conform w ith
th e p ro v isions of § 210.4. S pecifically, a
se n d e r w o u ld au th o rize its
A d m in istrativ e Reserve Bank, as w ell as
any other Reserve B ank to w h ic h the
item is sent, to h a n d le a n item a n d
w o u ld au th o rize th e Reserve Banks to
m ake th e a p p ro p riate acco u n tin g entries
in se ttle m e n t for th e item . T he Board
p ro p o se d to m ake m in o r am en d m e n ts to
parag rap h (c) (and p arallel am en d m e n ts
to § 210.12(f)) to sim plify th e p ro v ision s
describing h o w settlem en ts occur
b e tw e en Reserve Banks. T he B oard also
p ro p o se d to red esig n ate th e parag rap h
n u m b e rs in p arag rap h (c). P aragraph (d)
of § 210.5 req u ires a se n d er to grant a
secu rity in terest in all its assets h e ld by
a Reserve B ank to secu re an y o f its
obligations rela te d to item s collected
th ro u g h th e Reserve Banks. T he Board
p ro p o se d to am e n d th is se ctio n to
p ro v id e th a t th e secu rity in terest is
gran ted to th e s e n d e r’s A d m in istrativ e
Reserve Bank. T he B oard receiv ed no
com m ents o n th e a m en d m e n ts to this
se ctio n an d h as a d o p te d th e m as
prop osed.
S ectio n 210.6 Status, W arranties, a n d
L ia b ility o f R eserve B a n k
P aragraph (a) of th is sectio n p ro v id es
th a t Reserve Banks act as agents or
subagents of th e o w n er of a n item . The
Board p ro p o se d to m odify th e reference
to a Reserve Bank in th e first sen ten ce
w ith th e p h ra se “th a t h a n d le s an ite m ”
to clarify th a t th is p arag rap h refers to
th e Reserve Banks th a t are id e n tifie d in
§ 210.4. T he c u rren t language pro vides
th a t th e agency term in ates w h e n a
Reserve B ank receives final p ay m e n t for
th e item a n d m akes th e proceeds
available for u se by th e sen der. The
B oard p ro p o se d to am e n d th is p rovisio n
b y stating th a t th e agency status w ill n o t
en d u n le ss th e tim e for com m en cing all
actio ns against th e Reserve B ank has
expired. T his a m e n d m e n t w o u ld ensu re
th a t th e agency an d subagency
rela tio n sh ip s b etw e en Reserve Banks
regarding a p a rtic u la r item , as set forth
in § 210.4, w ill c o n tin u e u n til the
statu te of lim ita tio n s has r u n on claim s

regarding an y d isp u te concernin g the
item . T he B oard also p ro p o se d to
reorganize th e n u m b e rin g in p aragraph s
(a) an d (b) of th is section.
T he B oard receiv ed one co m m en t th a t
specifically su p p o rte d th e am en d m e n ts
to th is section. A n o th er com m enter
asked w h y th e agency statu s of a
Reserve B ank sh o u ld co n tin u e for an
o p en -e n d ed p e rio d of tim e. The
co m m en ter b elieved th a t th e Reserve
B ank’s agency statu s sh o u ld co n tin u e
for th e sam e p erio d of tim e as the
agency status of a private-sector
collecting b a n k (u ntil th e settle m e n t
received for th e item becom es final, as
p ro v id ed in U.C.C. sectio n 4-201(a)),
absent a co m p ellin g reason. T he B oard
in te n d e d th is p ro v isio n to p ro v id e a
theo retical basis for an A d m in istrativ e
Reserve B an k’s rig ht to in stru c t an o th er
Reserve B ank relating to risk, even after
settle m e n t is final. (U nder R egulation
CC, 12 CFR 229.36(d), settlem en ts
b e tw e en ban ks are final w h e n m ade.)
For exam ple, th e A d m in istrativ e
Reserve B ank m a y w ish to in stru c t
an o th er Reserve Bank abo ut possible
w arra n ty claim s a n d retu rn s. T he
agency status is n ecessary for th e
Reserve Banks becau se th e y are separate
corporations. P rivate-sector collecting
b an k s can also ex ten d th e agency p erio d
b y agreem ent. T he B oard h as ad o p ted
§ 210.6 as pro posed.
Section 2 10.7
P a ym e n t

P resenting Item s fo r

T his section pro v id es ru les regarding
th e p re se n tm e n t of item s for paym ent.
T he B oard p ro p o se d to m ake m in o r
changes to paragraphs (c) a n d (d).
R ather th a n referring to an item th a t is
“p ay a b le” in a certain F ed eral Reserve
D istrict, th e B oard p ro p o se d to im pro ve
th e p rec isio n of these p ro v isio n s by
referring to item s th a t m a y b e “ se n t to
th e p ayin g b a n k or n o n b a n k p a y o r” in
a certain F ederal Reserve D istrict. T he
Board received n o com m en ts on these
am en d m e n ts a n d has a d o p te d th e m as
propo sed .
S ection 210.8 P resenting N o n ca sh
Item s fo r A cc ep ta n ce
S im ilar to th e changes to § 210.7, the
Board p ro p o sed to replace th e term
“ pay ab le e lsew h e re” w ith th e term
“m ay be p re se n te d elsew h e re .” T he
Board also p ro p o sed to reorganize the
p arag rap h num b erin g in th is section.
T he B oard receiv ed no co m m en ts on
these a m en d m e n ts an d h a s a d o p te d
th e m as propo sed .
Section 210.9

S e ttle m e n t a n d P a ym e n t

T his sectio n sets forth th e tim e an d
m a n n e r b y w h ic h a paying b a n k m u st
settle for item s it receives from a

48169

Reserve Bank. T h e B oard p ro p o sed to
ad d a n e w p ara g ra p h (a) (and to
redesign ate th e follow ing p arag raphs
accordingly) to p ro v id e th a t a paying
ban k m u st settle for a n item w ith its
A d m in istrativ e Reserve Bank, w h eth e r
or n o t th e paying b an k a ctu a lly receives
th e item from th a t Reserve Bank. By
settling w ith its A d m in istrativ e Reserve
Bank, th e paying b an k w o u ld m eet any
se ttle m e n t obligation it m ay h av e u n d e r
R egulation CC a n d th e U.C.C. For
exam ple, th e U.C.C. (sections 4 -3 0 1 an d
4-3 0 2 ) requires a paying b an k to settle
w ith th e p rese n tin g b a n k by m id n ig h t
o n th e day o f p re se n tm e n t if it w an ts to
preserve its righ t to re tu rn th e check by
its m id n ig h t d e a d lin e on its n ex t
ban k in g day. By settling w ith its
A d m in istrativ e Reserve Bank, a paying
b a n k w o u ld satisfy th is obligation to a
prese n tin g Reserve Bank.
T he n e w p arag rap h (a) w o u ld also
p ro v id e th a t a paying b a n k m ay settle
th ro u g h a c o rresp o n d e n t account, w ith
th e agreem ent of its A d m in istrativ e
Reserve Bank, th e Reserve B ank (if
different) th a t h o ld s th e co rre sp o n d e n t’s
account, a n d th e co rrespon dent. T he
paying b a n k w o u ld rem a in resp o n sib le
for se ttle m e n t if for som e reason
se ttle m e n t does n o t o cc u r th ro u g h th e
co rresp o n d e n t account. T he B oard
p ro p o se d to m ake a conform ing change
to p ara g ra p h (c) (as red esign ated) rela te d
to p ay m en t for n o n c a sh items.
C urrently, R egulation J requ ires the
paying b a n k to settle so th a t fu n d s are
available to th e p rese n tin g Reserve B ank
by th e close of F edw ire o n th e day of
prese n tm e n t. T he B oard p rop osed : (1)
a m en d m e n ts to p arag rap h (b) (as
redesig nated) of § 210.9 to clarify th a t
se ttle m e n t fu n d s m u st be m ade
available to th e p ay in g b a n k ’s
A d m in istrativ e Reserve Bank, rath er
th a n th e p resen tin g Reserve Bank; (2) to
change th e references to a Reserve
B an k’s op eratin g circu lar to in c lu d e all
of th e Reserve B anks’ operating
circu lars, as th o se circu lars w ill be
u n ifo rm as of January 1, 1998; (3) to
clarify p arag rap h (b)(3) to refer to days
th e paying b a n k is clo sed v o lu n tarily
“ so th a t it does n o t receive a cash ite m ”
(the pro v isio n s of th is p arag rap h w o u ld
n o t a p p ly if th e paying b a n k ’s h ea d
office w ere clo sed for b u sin e ss b u t a
b ra n c h still received p re se n tm e n t of
cash item s from th e Reserve Banks); (4)
to replace references to “ one h o u r after
th e sc h e d u le d open in g of F e d w ire ” w ith
“ 9:30 a.m. E astern T im e ” so th a t this
tim e w ill rem a in u n ch a n g ed w h e n the
F edw ire o p en in g h o u r is m o v ed to 12:30
a.m. in D ecem ber 1997; (5) to ad d
parag rap h h eadings th ro u g h o u t
parag rap h (b); an d (6) to m ake
conform ing changes to cross-references

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Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

th ro u g h o u t § 210.9 in light of th e
p ara g ra p h redesignation s. T he Board
receiv ed one co m m en t th a t specifically
su p p o rte d th e am en d m e n ts to this
sectio n an d has a d o p ted the
am en d m e n ts as proposed.
S ectio n 210.10 T im e S c h e d u le a n d
A v a ila b ility o f Credits fo r Cash Item s
a n d R etu rn ed C hecks
T his p arag rap h p ro v id es th a t a
Reserve B ank sh all m ake pro ceeds
available for cash item s a n d re tu rn e d
checks according to its p u b lish e d tim e
sch ed ules. T he B oard p ro p o se d to
clarify th a t th e Reserve Bank th a t h o lds
th e settle m e n t ac co u n t w ill m ake cred it
available according to th e tim e sc h ed u le
of th e Reserve Bank th a t first receives
th e cash item (or re tu rn e d check) from
th e se n d er (or th e payin g or retu rn in g
bank). T he B oard also p ro p o se d a
conform ing am e n d m e n t to § 210.11(b)
regarding credit for n o n c a sh item s. The
B oard receiv ed no com m ents o n these
am en d m e n ts a n d h as a d o p ted th e m as
propo sed .
S ectio n 210.12 R eturn o f Cash Item s
a n d H a n d lin g o f R etu rn ed C hecks
T his section sets forth th e ru les
governing h a n d lin g of an d se ttlem en t
for re tu rn e d checks. T he ru les for
re tu rn e d checks are g enerally p arallel to
th e ru les for cash item s, a n d th e Board
p ro p o se d am en d m e n ts th a t are p arallel
to th e am en d m e n ts for cash item s
d isc u sse d above. U n d er th e p rop osal, a
pay ing b an k or retu rn in g b a n k m ay sen d
a re tu rn e d ch eck to an y Reserve Bank,
u n le ss its A d m in istrativ e Reserve Bank
directs it to se n d th e re tu rn e d ch eck to
a specific R eserve Bank. As w ith cash
item s, th e p ay in g or retu rn in g b a n k ’s
A d m in istrativ e Reserve B ank w o u ld be
d ee m e d to h av e h a n d le d th e item first,
p rio r to th e Reserve B ank th a t actually
received th e item , for p u rp o ses of
determ in in g th e rela tio n sh ip s, rights,
a n d liabilities of th e p arties (see
d isc u ssio n of § 210.4). A lso sim ilar to
cash item s, a pay ing or retu rn in g b an k
w o u ld au th o rize th e h a n d lin g of a
re tu rn e d ch eck b y its A d m in istrativ e
Reserve Bank, as w ell as b y an y o th er
Reserve Bank to w h ic h a re tu rn e d check
is sent, a n d w o u ld au th o rize th e Reserve
Banks to m ake th e ap p ro p riate
ac coun ting entries in settle m e n t for th e
re tu rn e d ch eck (see d isc u ssio n of
§ 210.5). A su b se q u en t retu rn in g b an k or
dep o sitary b a n k w o u ld be re q u ire d to
settle for a re tu rn e d check w ith its
A d m in istrativ e Reserve Bank, w h e th e r
or n o t th e b a n k actu ally receives the
re tu rn e d check from th a t Reserve Bank.
By settling w ith its A d m in istrativ e
Reserve Bank, th e su b se q u en t retu rn in g
b a n k or d ep o sitary b an k w o u ld m eet its

se ttle m e n t obligations u n d e r R egulation
CC a n d th e U.C.C. (see d isc u ssio n of
§ 210.9(a)). F inally, a paying or
retu rn in g b a n k w o u ld gran t a security
in terest in all its assets h e ld by its
A d m in istrativ e Reserve B ank to secure
an y o f its obligations related to re tu rn e d
checks it sen ds to a Reserve B ank (see
d isc u ssio n of § 210.5(d)). T he Board
receiv ed n o co m m en ts o n these
am en d m e n ts a n d h as a d o p ted th e m as
propo sed .
T ransition Issues
O ne co m m en ter expressed co ncern
th a t th e p ro p o sal m ay n o t m ake
ad eq u ate p ro v isio n for post-m erger
situ atio n s, w h e n a d ep o sito ry in stitu tio n
m ay have a tem porary tra n sitio n
ac co u n t at a Reserve B ank o th er th a n its
A d m in istrativ e Reserve Bank. T he
co m m en ter stated that, w h e n som e of an
in s titu tio n ’s checks w ill settle in a
tra n sitio n account, th e Reserve B ank
h o ld in g th e tra n sitio n ac co u n t sh o u ld
have rights, privileges, a n d du ties
com parab le to th o se of th e
A d m in istrativ e Reserve B ank w ith
resp e ct to settlem ent, ch eck w arran ties,
co n tro l over direct-sen ds, in stru c tio n s to
o th er Reserve Banks w ith resp e ct to
item s th a t affect th e ac co u n t o n its
books, an d security in terests in assets
h e ld at other Reserve Banks.
T he B oard believes th a t R egulation J
as p ro p o se d ad eq u ately covers
tra n sitio n situations. For exam ple, in
th e case of a b a n k m erger, th e surviving
b a n k w ill h av e an ac co u n t at its
A d m in istrativ e Reserve B ank w hile
o th er offices m ay still have tran sitio n
accoun ts at other Reserve Banks. T hose
tra n sitio n accou nts w o u ld operate
sim ilarly to c o rresp o n d e n t se ttlem ent
accounts. Checks th a t are d ep o site d by
the b an k w ill be d eem ed to be h a n d le d
first by th e A d m in istrativ e Reserve B ank
a n d th e n b y other Reserve Banks in the
order set forth in § 210.4. T he Reserve
B ank th a t h o ld s th e tra n sitio n accou nt
w ill n o t b e co n sid ered a p arty to a check
u n le ss it ac tu ally h a n d le s th e ch eck an d
therefore sh o u ld be co n sid ered m ore
like a co rresp o n d e n t b an k th a n an
A d m in istrativ e Reserve Bank. If the
b a n k settles for checks p re se n te d by a
Reserve B ank th ro u g h a tran sitio n
account, it w ill be d eem ed to have
settled w ith its A d m in istrativ e Reserve
Bank for th o se checks u n d e r § 210.9(a).
C om petitive Im p a c t
O ne co m m en ter stated th a t th e Board
sh o u ld rev iew th e co m p etitiv e equity
issues th a t arise from the co m b in atio n of
th e p ro p o sed R egulation J am en d m e n ts
an d the B oard ’s p ro p o sed e n h a n ce d n et
settle m e n t service for d epo sitory
in stitu tio n s [62 FR 32118, June 12,

1997], T he co m m en ter b eliev e d th a t
priv ate-sector clearing h o u ses w o u ld be
at a d isadv an tage vis-a-vis th e Reserve
Banks if th e Reserve Banks are able to
accom m od ate interstate bank ing starting
on January 2, 1998, an d th e privatesector clearing h o u se s are u n a b le to
avail th em selves of th e p ro p o se d n et
settle m e n t services u n til late 1998. The
co m m en ter suggested th a t th e Board
analyze issues su c h as th e risks th a t the
R egulation J p ro p o sal is d esig n ed to
address, th e benefits th a t th e pro posal
w ill p ro v id e to dep o sito ry in stitu tio n s,
an y cost savings th a t w ill accrue to
Reserve Banks u n d e r th e pro p o sal, as
w ell as o ther issues rela te d to ac co u n t
m on ito rin g a n d tro u b le d banks. The
co m m en ter also asked th a t th e Board
co n sid er allow ing check clearing ho uses
to h av e in terim access to in terd istric t
n e t se ttlem ent services w h ile th e B oard
develops service en h an cem en ts.
T he R egulation J pro p o sal is d riv en by
b o th operational a n d risk concerns. T he
stru ctu ra l changes in th e banking
b u sin e ss b ro u g h t abo ut by th e increase
in th e n u m b e r of ban k s w ith interstate
b ran ch es have n ec essita ted a n ew
ac co u n t stru ctu re in th e F ed eral Reserve
Banks to h a n d le in terstate banking. The
R egulation J changes are n ecessary to set
forth th e ru les th a t w ill govern F ederal
Reserve ch eck co llectio n u n d e r th e n ew
ac co u n t stru cture. D epository
in stitu tio n s w ill b enefit from th e
efficiencies of having to m anage o n ly a
single F ed eral Reserve ac co u n t an d the
ability to d ep o sit checks for collection at
any Reserve Bank.
In p ractical term s, th e R egulation J
p ro p o sal w o u ld likely have little
im m ed iate effect on c u rre n t ch eck
co llectio n p attern s th ro u g h th e Reserve
Banks. T he p ro p o sal w o u ld allow
bran ch es of in terstate bank s to co n tin u e
to depo sits checks at th e sam e Reserve
Banks th a t th ey u se today, irrespectiv e
of w h ere th e ir accou nts are located.
E ventually, these ban k s c o u ld benefit
from p rice co m p etitio n b e tw e en Reserve
Banks, w h ic h co u ld re su lt in volum e
shifts. P rivate-sector collecting banks
co u ld estab lish n a tio n w id e check
co llectio n or exchange system s as w ell.
T he B oard does n o t b elieve th a t the
R egulation J proposal, on its ow n,
p ro v id es th e Reserve Banks w ith an y
greater advantages in th e ch eck
collectio n b u sin e ss th a n th e y already
h av e to d a y d u e to th e ir n a tio n w id e
p rese n ce an d th e ir ability to settle
d irectly th ro u g h F ederal Reserve
accounts.
For priv ate-sector ch eck clearing
arrangem ents th a t w ish to settle o n a n e t
basis on th e books of a Reserve Bank,
th ere are cu rren tly tw o n e t se ttlem en t
services available, as set forth in th e

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48171

n o tice for th e p ro p o se d service
en h a n ce m e n t. T he trad itio n a l
settlem ent-sheet-b ased service pro v id es
n ext-day finality, a n d th e F edw ire-b ased
service pro v id es sam e-day finality. T he
B oard p ro p o se d a n en h a n c e d
settlem en t-sh eet-based service th at
w o u ld p ro v id e sam e-day fin ality an d
establish m ore effective risk controls
th a n exist u n d e r th e c u rren t trad itio n a l
service, w h ic h w as d esign ed to h a n d le
in tra d istric t clearing. In th e in terim , th e
B oard recognizes th a t som e clearing
arrang em en ts th a t receive trad itio n a l n et
se ttlem en t services from th e Reserve
Banks m a y h av e p a rtic ip a n ts w ith an
in terstate presence. T he B oard w ill n o t
req u ire th a t su c h p articip a n ts be
e x c lu d e d from su c h arrang em ents w h ile
th e B oard is d evelo ping th e e n h a n ce d
service.

PART 210— COLLECTION OF CHECKS
AND OTHER ITEMS BY FEDERAL
RESERVE BANKS AND FUNDS
TRANSFERS THROUGH FEDWIRE
(REGULATION J)

w aiv er of expenses, a n d p ay m e n t of
interest by as-of adjustm en t.
*
*
*
*
*

1. T he au th o rity citatio n for p art 210
c o n tin u es to rea d as follows:

§ 210.4

Final R egulatory F lexibility A nalysis

(a) A c c o u n t m ean s a n ac co u n t w ith
reserve or clearing balan ces o n the
books of a F ederal Reserve Bank. A
su b a cc o u n t is an in form ation al rec o rd of
a subset of tran sa ctio n s th a t affect a n
ac co u n t an d is n o t a separate account.

Tw o of th e th ree req u irem en ts of a
final regulatory flexibility analysis (5
U.S.C. 604), (1) a su c cin c t statem en t of
th e n e e d for a n d th e objectives of th e
ru le an d (2) a su m m ary of th e issues
raise d by th e p u b lic com m ents, the
agency’s assessm en t of th e issues, a n d a
statem en t of th e changes m a d e in th e
final ru le in resp o n se to th e com m ents,
are d isc u sse d above. T h e th ird
req u irem en t of a final regulatory
flexibility analysis is a d escrip tio n of
significant alternatives to th e ru le th a t
w o u ld m in im iz e th e r u le ’s econom ic
im p act o n sm all entities an d reasons
w h y the alternatives w ere rejected.
T he ru le w ill a p p ly to all in stitu tio n s,
regardless of size, th a t se n d checks,
re tu rn e d checks, or oth er item s to a
Reserve Bank or receive item s from a
Reserve Bank. T he ru le sets o u t th e
term s u n d e r w h ic h th e Reserve Banks
h a n d le item s an d does n o t im pose
significant b u rd e n s on sm all
in stitu tio n s, therefo re n o alternatives
w ere co n sid ered for sm all in stitutio ns.
Paperw ork R eduction Act
In accord an ce w ith th e P aperw o rk
R e duction A ct of 1995 (44 U.S.C. 3506;
5 CFR 1320 A p p e n d ix A .l), th e Board
rev ie w ed th e ru le u n d e r th e a u th o rity
delegated to th e B oard by th e Office of
M anagem ent a n d Budget. No collections
of in fo rm atio n p u rs u a n t to th e
P ap erw o rk R e duction A ct are co n tain e d
in th e rule.
List o f Subjects in 12 CFR Part 210
Banks, banking, F ederal Reserve
System.
For th e reaso n s set o u t in the
pream ble, th e B oard is am en d in g p art
210 of ch a p te r II of title 12 of th e Code
of F ederal R egulations as set forth
below :

Authority: 12 U.S.C. 248(i), (j), and (o),
342, 360, 464, and 4001-4010.

2. S ection 210.2 is a m e n d e d by
redesign ating p arag rap h (a) an d
p aragrap hs (b) th ro u g h (p) as p arag rap h
(b) a n d p arag raphs (d) th ro u g h (r),
respectively; ad d in g n e w p aragraph s (a)
a n d (c); a n d revising n e w ly red esig n ated
p aragraphs (d), (g) in tro d u c to ry text, a n d
(g)(2) to rea d as follows:
§210.2
*

*

*

*

Definitions.
*

*

*

*

*

*

(c) A d m in istra tiv e R eserve B a n k w ith
resp ect to a n en tity m ean s th e Reserve
B ank in w h o se D istrict th e entity is
located, as d e te rm in e d u n d e r th e
p ro ce d u re described in § 204.3(b)(2) of
th is ch a p te r (Regulation D), even if th e
en tity is n o t o th erw ise su bject to th a t
section.
(d) B a n k m ean s an y p erso n engaged in
th e b u sin e ss of banking. A b ran c h or
sep arate office of a b a n k is a separate
ban k to th e ex tent p ro v id ed in the
U niform C om m ercial Code.
*

*

*

*

*

(g) Cash item m ean s —
*

*

*

*

*

(2) A n y other item payable on
d e m a n d an d collectible at p a r th a t th e
Reserve B ank th a t receives th e item is
w illin g to accep t as a cash item . Cash
item does n o t in c lu d e a re tu rn e d check.
*

*

*

*

*

3. In § 210.3, th e last sen ten ce of
parag rap h (a) is rev ise d to rea d as
follows:
§210.3

General provisions.

(a) General. * * * T he circulars may,
am ong oth er things, classify cash item s
an d n o n c a sh item s, req u ire separate
sorts a n d letters, p ro v id e different
closing tim es for th e rec eip t of different
classes or ty pes of item s, p ro v id e for
in stru c tio n s b y a n A d m in istrativ e
Reserve B ank to o th er Reserve Banks,
set forth term s of services, an d estab lish
p ro ced u res for ad ju stm en ts o n a Reserve
B ank’s books, in c lu d in g am o unts,

4. S ectio n 210.4 is rev ise d to rea d as
follows:
Sending items to Reserve Banks.

(a) S e n d in g o f item s. A send er, other
th a n a Reserve Bank, m ay se n d any item
to an y Reserve Bank, w h e th e r or n o t the
item is payable w ith in th e Reserve
B ank’s D istrict, u n le ss th e se n d e r’s
A d m in istrativ e Reserve B ank directs the
se n d er to se n d the item to a specific
Reserve Bank.
(b) H a n d lin g o f item s. (1) The
follow ing parties, in th e follow ing order,
are d ee m e d to hav e h a n d le d a n item
th a t is se n t to a Reserve B ank for
collectio n—
(1) T h e in itia l se n d er
(ii) T h e in itial se n d e r’s
A d m in istrativ e Reserve Bank
(iii) T he Reserve Bank th a t receives
th e item from th e in itia l se n d er (if
different from th e in itia l se n d e r’s
A d m in istrativ e Reserve Bank); an d
(iv) A n o th er Reserve Bank, if any, th at
receives th e item from a Reserve Bank.
(2) A Reserve B ank th a t is n o t
d escrib ed in p arag rap h (b)(1) of th is
sectio n is n o t a p arty th a t h a n d le s an
item an d is n o t a collecting b an k w ith
resp ect to a n item.
(3) T he id e n tity a n d o rd er of the
p arties u n d e r p arag rap h (b)(1) of th is
sectio n d eterm in e th e rela tio n sh ip s an d
th e rights a n d liabilities of the parties
u n d e r th is subp art, p a rt 229 of this
ch a p te r (Regulation CC), a n d the
U niform C om m ercial Code. A n initia l
s e n d e r’s A d m in istrativ e Reserve B ank
th a t is d ee m e d to h a n d le an item is also
deem ed to be a se n d er w ith resp ect to
th a t item . T he Reserve Banks th a t are
dee m e d to h a n d le an item are d eem ed
to be agents or subagents of th e o w n er
of th e item , as p ro v id ed in § 210.6(a) of
th is subpart.
(c) C hecks received a t par. The
Reserve Banks shall receive cash item s
an d o th er checks at par.
5. In § 210.5, p aragraph s (a)(1) a n d (c)
an d th e first sentence of paragraph (d)
are rev ise d to rea d as follows:
§210.5 Sender’s agreement; recovery by
Reserve Bank.

(a) * * *
(1) A utho rizes th e se n d e r’s
A d m in istrativ e Reserve B ank an d any
other Reserve B ank or collecting b an k to
w h ic h th e item is se n t to h a n d le the
item (and au tho rizes any Reserve Bank
th a t h a n d le s settle m e n t for th e item to
m ake acco untin g entries), subject to th is
su b p a rt a n d to th e Reserve B an ks’

4 8172

Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

operating circulars, an d w arra n ts its
a u th o rity to give th is au th orization ;
*
*
*
*
*

(b) W arranties a n d liability. (1) By
p rese n tin g or se n d in g an item , a Reserve
B ank w arran ts to a su b se q u en t
collecting b an k a n d to th e pay in g b an k
a n d an y other payo r—
(1) T h at th e Reserve B ank is a p erso n
e n title d to enforce th e item (or is
a u th o riz e d to o btain p ay m e n t o f th e
item o n b e h a lf of a p erso n w h o is eith er
e n title d to enforce th e item or
a u th o riz e d to o btain pay m en t o n b eh alf
of a p erso n e n title d to enforce th e item);
an d
(ii) T h at th e item h as n o t b ee n altered.
(2) T he Reserve B ank also m akes th e
w arran ties set forth in § 229.34(c) of th is
ch ap ter, su bject to th e term s of p a rt 229
of th is c h a p te r (R egulation CC). The
Reserve B ank sh all n o t hav e or assum e
an y o th e r liab ility to th e payin g b a n k or
o th er payor, ex cep t for th e Reserve
B ank ’s o w n lack of good faith or failure
to exercise o rd in ary care.
*
*
*
*
*
7. In §210 .7, p arag rap h (c)
in tro d u c to ry text a n d p ara g ra p h (d) are
rev ise d to rea d as follows:

(c) M eth o d s o f recovery. (1) T he
Reserve Bank m ay recover th e am o u n t
stated in p arag rap h (b) of th is se ctio n by
charging an y ac c o u n t o n its books th a t
is m a in ta in e d or u se d b y th e se n d e r (or
by charging a Reserve B ank sender), if—
(1) T h e Reserve B ank m a d e seasonable
w ritte n d em an d o n th e se n d er to assum e
defense of th e ac tio n or proceeding ; an d
(ii) T h e se n d er h as n o t m a d e an y
o th er arrang em ent for p ay m e n t th a t is
acceptable to th e Reserve Bank.
(2) T he Reserve B ank is n o t
resp o n sib le for d efen d in g th e a c tio n or
p ro ceed in g before u sing th is m e th o d of
recovery. A Reserve B ank th a t h as b een
charged u n d e r th is p ara g ra p h (c) m ay
recover from its se n d er in th e m a n n er
a n d u n d e r th e circu m stan ces set forth in
th is p ara g ra p h (c). A Reserve B a n k ’s
failure to avail itself of th e rem e d y
p ro v id e d in th is p arag rap h (c) does n o t
p reju d ice its enforcem ent in an y other
m a n n e r of th e in d e m n ity agreem ent
referred to in p ara g ra p h (a)(3) of this
§ 210.7 Presenting items for payment.
section.
*
*
*
*
*
(d) S ec u rity interest. W h en a se n d er
(c) P resenting or se n d in g direct. A
sen ds an item to a Reserve Bank, the
Reserve B ank or su b se q u en t collecting
se n d er a n d an y p rio r collecting b an k
b a n k m ay, w ith resp e ct to a n item th a t
g rant to th e s e n d e r’s A d m in istrativ e
m ay be se n t to th e p ay in g b a n k or
R eserve B ank a secu rity in terest in all of
n o n b a n k p ay o r in th e Reserve B an k’s
th e ir resp ectiv e assets in th e possessio n
D istrict—
of, or h e ld for th e ac co u n t of, any
*
*
*
*
*
Reserve B ank to secu re th e ir resp ective
(d)
Item
se
n
t
to
a
n o th e r district. A
obligations d u e or to becom e d u e to the
Reserve B ank receiving a n ite m th a t m ay
A d m in istrativ e Reserve B ank u n d e r this
be se n t to a paying b a n k or n o n b a n k
su b p a rt or su b p art C of p art 229 of th is
p ay o r in a n o th er D istrict o rd in arily
c h a p te r (R egulation CC). * * *
6.
In § 210.6, p aragrap hs (a)(1) a n d (b) se n d s th e item to th e Reserve B ank of
th e o th e r D istrict, b u t w ith th e
are rev ise d to re a d as follow s:
agreem en t of th e o th er Reserve Bank,
§ 210.6 Status, warranties, and liability of
m ay p re se n t or se n d th e item as if it
Reserve Bank.
w ere se n t to a p ay in g b a n k or n o n b a n k
p ay o r in its o w n D istrict.
(a)(1) S ta tu s a n d liability. A Reserve
8. S ection 210.8 is rev ise d to rea d as
B ank th a t h an d les a n item sh all act as
follow s:
agent or sub ag en t of th e o w n er w ith
resp e ct to th e item . T h is agency
§210.8 Presenting noncash items for
term in ates w h e n a Reserve B ank
acceptance.
receives final p a y m e n t for th e item in
(a) A Reserve B ank or a su b se q u en t
actu ally a n d fin ally collected fu nds, a
collecting b a n k m ay, if in stru c te d by the
Reserve B ank m akes th e proceed s
sender, p re se n t a n o n c a sh item for
available for u se by th e sender, a n d the
ac cep tan ce in an y m a n n e r au th o rize d by
tim e for com m en cing all action s against
law if—
th e Reserve B ank has expired. A Reserve
(1) T he item p ro v id es th a t it m u st be
B ank sh all n o t h av e or assum e any
p re se n te d for acceptance;
liab ility w ith resp e ct to an item or its
(2) T he item m a y b e p re se n te d
pro ceeds except—
elsew here th a n at th e resid e n ce or p lace
(i) F or th e R eserve B ank’s o w n lack of of b u sin e ss of th e payor; or
good faith or failure to exercise o rd in ary
(3) T he date of p a y m e n t of th e item
care;
d e p e n d s o n p re se n tm e n t for acceptance.
(ii) A s p ro v id ed in p ara g ra p h (b) of
(b) D ocum ents ac com panying a
this section; an d
n o n c a sh item sh all n o t be d eliv ere d to
(iii) A s p ro v id e d in su b p a rt C o f p art
th e p ay o r u p o n accep tan ce o f th e item
229 of th is ch a p te r (Regulation CC).
u n le ss th e se n d er sp ecifically au tho rizes
*
*
*
*
*
delivery. A R eserve Bank sh a ll n o t h av e

or assu m e an y o th er obligation to
p re se n t or to se n d for p re se n tm e n t for
accep tan ce an y n o n c a sh item .
9.
S ection 210.9 is a m e n d e d by
redesign ating p aragraph s (a) th ro u g h (e)
as p aragrap hs (b) th ro u g h (f); ad d in g a
n e w p ara g ra p h (a); revising n ew ly
red e sig n ated parag rap hs (b) a n d (c); an d
in n ew ly red e sig n ated p ara g ra p h (f)
rem ov ing th e references “paragraph s (a),
(b), an d (c)” an d ad d in g in th e ir place
“p arag rap hs (b), (c), an d (d)” to rea d as
follow s:
§210.9

Settlement and payment.

(a) S e ttle m e n t through A d m in istra tiv e
R eserve B a n k. A paying b a n k sh all settle
for an item u n d e r th is su b p a rt w ith its
A d m in istrativ e Reserve Bank, w h e th e r
or n o t th e payin g b an k receiv ed th e item
from th a t Reserve Bank. A pay ing b a n k ’s
settle m e n t w ith its A dm in istrativ e
Reserve B ank is d eem ed to be se ttlem en t
w ith th e Reserve Bank from w h ic h the
pay in g b a n k received th e item . A paying
b a n k m ay settle for an item u sin g an y
ac co u n t on a Reserve B ank’s books by
agreem ent w ith its A d m in istrativ e
Reserve Bank, an y o th er Reserve Bank
h o ld in g th e settle m e n t acco unt, a n d th e
acco unt-ho lder. T he pay ing ban k
rem ain s resp o n sib le for settle m e n t if the
Reserve B ank h o ld in g th e se ttlem en t
ac co u n t does not, for a n y reason, o btain
se ttle m e n t in th a t account.
(b) Cash item s— (1) S e ttle m e n t
obligation. O n th e day a paying b ank
receives 2 a cash item from a Reserve
Bank, it sh a ll settle for th e item su ch
th a t th e p ro ceed s of th e se ttle m e n t are
available to its A d m in istrativ e Reserve
B ank by th e close of F edw ire o n th a t
day, or it sh a ll r e tu rn th e item b y th e
later o f th e close of its b an k in g day or
th e close of F edw ire. If th e paying b an k
fails to settle for or r e tu rn a cash item
in acco rd an ce w ith this p arag rap h (b)(1),
it is ac coun table for th e am o u n t of the
item as of th e close of its ban k in g day
or th e close of F ed w ire on th e day it
receives th e item , w h ich e v er is earlier.
(2) T im e o f settlem en t, (i) O n th e day
a p ay in g b a n k receives a cash item from
a Reserve Bank, it shall settle for the
item so th a t th e p ro ceed s of the
settle m e n t are available to its
A d m in istrativ e Reserve Bank, or re tu rn
th e item , b y th e latest of—
(A) T he n ex t clock h o u r th a t is at least
on e h o u r after th e p ay ing b a n k receives
th e item;
(B) 9:30 a.m. E astern Tim e; or
2 A paying bank is deem ed to receive a cash item
on its next banking day if it receives the item —
(1) On a day other than a banking day for it; or
(2) On a banking day for it, but after a “ cut-off
h o u r” established by it in accordance w ith state
law.

Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations
(C) S u ch later tim e as p ro v id e d in the
Reserve B ank s’ op eratin g circulars.
(ii) If th e paying b a n k fails to settle for
or re tu rn a ca sh item in accordan ce w ith
paragraph (b)(2)(i) of th is section, it
shall be subject to an y ap p licab le
overdraft charges. S ettlem en t u n d e r
p ara g ra p h (b)(2)(i) of th is section
satisfies th e se ttle m e n t req u irem en ts of
paragraph (b)(1) of this section.
(3) P aying b a n k closes voluntarily, (i)
If a paying b a n k closes v o lu n ta rily so
th a t it does n o t receive a cash item on
a day th at is a b an king day for a Reserve
Bank, a n d th e Reserve B ank m akes th e
cash item available to th e pay in g b an k
on th a t day, th e p ay ing b a n k shall
either—
(A) O n th a t day, settle for th e item so
th a t th e p ro ceed s of th e se ttle m e n t are
available to its A d m in istrativ e Reserve
Bank, or re tu rn th e item , b y th e latest of
th e n ex t clock h o u r th a t is at least one
h o u r after it o rd in arily w o u ld h ave
received th e item , 9:30 a.m. E astern
T im e, or su c h later tim e as p ro v id e d in
th e Reserve B an ks’ operating circulars;
or
(B) O n th e n ex t day th a t is a banking
day for b o th th e p ayin g b a n k an d th e
Reserve Bank, settle for th e item so th a t
the p roceeds of th e settle m e n t are
available to its A d m in istrativ e Reserve
Bank by 9:30 a.m. E astern T im e on th a t
day or su c h later tim e as p ro v id e d in th e
Reserve B anks’ operating circu lars an d
c o m p en sate th e Reserve B ank for th e
v alu e of th e float asso ciated w ith the
item in acco rd an ce w ith p ro ced u res
p ro v id ed in th e Reserve B an k’s
operating circular.
(ii) If a pay ing b a n k closes vo lu n tarily
so th a t it does n o t receive a cash item
o n a day th a t is a b anking day for a
Reserve Bank, a n d th e Reserve Bank
m akes th e cash item available to the
p aying b a n k on th a t day, th e paying
b a n k is n o t co n sid ered to h av e received
th e item u n til its n ex t ban kin g day, b u t
it sh all be subject to an y app licable
overdraft charges if it fails to settle for
or re tu rn th e item in acco rd an ce w ith
p arag rap h (b)(3)(i) of th is section. The
settle m e n t req u irem en ts of paragraphs
(b)(1) a n d (b)(2) of th is sectio n do n o t
a p p ly to a pay in g b a n k th a t settles in
accord an ce w ith p arag rap h (b)(3)(i) of
th is section.
(4) R eserve B a n k closed, (i) If a paying
b a n k receives a cash item from a
Reserve B ank on a b anking day th at is
n o t a b an kin g day for th e Reserve Bank,
th e paying b a n k sh all—
(A) Settle for th e item so th a t th e
proceeds of th e settle m e n t are available
to its A d m in istrativ e Reserve Bank by
th e close of F ed w ire o n th e Reserve
B ank’s n ex t b ank ing day, or re tu rn th e
item by m id n ig h t of th e day it receives

th e item (if th e paying b an k fails to
settle for or re tu rn a cash item in
acco rd an ce w ith th is parag rap h
(b)(4)(i)(A), it shall becom e acco un table
for th e am o u n t of th e item as of th e
close of its b ank ing day o n th e d ay it
receives th e item ); an d
(B) Settle for th e item so th a t th e
pro ceeds of th e settle m e n t are available
to its A d m in istrativ e Reserve B ank by
9:30 a.m. E astern T im e o n th e Reserve
B an k’s n ex t b ank ing day or su c h later
tim e as p ro v id ed in th e Reserve B ank ’s
operating circular, or re tu rn th e item by
m id n ig h t of th e day it receives th e item.
If th e paying b a n k fails to settle for or
re tu rn a cash item in accordan ce w ith
th is p arag rap h (b)(4)(i)(B), it sh all be
subject to an y app lica b le overdraft
charges. S ettlem en t u n d e r th is
paragraph (b)(4)(i)(B) satisfies th e
se ttlem en t req u irem en ts of parag raph
(b)(4)(i)(A) of th is section.
(ii) T he settle m e n t req u irem en ts of
paragrap hs (b)(1) an d (b)(2) of this
section do n o t a p p ly to a paying b an k
th a t settles in accord an ce w ith
p ara g ra p h (b)(4)(i) of th is section.
(5) M a n n er o f se ttle m en t. S ettlem en t
w ith a Reserve B ank u n d e r paragraphs
(b) (1) th ro u g h (4) of th is sectio n shall
be m ad e by d ebit to an ac co u n t on the
Reserve B ank’s books, cash, or other
form of settle m e n t to w h ic h th e Reserve
Bank agrees, ex cep t th a t th e Reserve
Bank m ay, in its d iscretio n, obtain
settle m e n t b y charging th e paying
b a n k ’s account. A paying b a n k m ay n o t
set off against th e am o u n t of a
settle m e n t u n d e r th is sectio n th e
am o u n t of a claim w ith resp e ct to
an o th er cash item , cash letter, or other
claim u n d e r § 229.34(c) of th is ch ap ter
(Regulation CC) or o th er law.
(6) N o tice in lieu o f return. If a cash
item is u n av ailab le for retu rn , the
paying b a n k m ay se n d a no tice in lieu
of re tu rn as p ro v id e d in § 229.30(f) of
th is ch a p te r (Regulation CC).
(c)
N o n ca sh item s. A Reserve B ank
m ay req u ire th e paying or collecting
b a n k to w h ic h it h as p re se n te d or sent
a n o n c a sh item to pay for th e item in
cash, b u t th e Reserve Bank m ay p erm it
p ay m en t by a d ebit to an accou nt
m a in ta in e d or u se d by th e pay ing or
collecting b a n k on a Reserve B ank ’s
books or by an y of th e follow ing th a t is
in a form acceptable to th e collecting
Reserve Bank: b a n k draft, tran sfer of
fun ds or b an k credit, or an y o ther form
of p ay m en t a u th o rize d by State law.
*
*
*
*
*
10. S ection 210.10 is rev ise d to read
as follows:

48173

§ 210.10 Time schedule and availability of
credits for cash items and returned checks.

(a) E ach Reserve B ank sh a ll in c lu d e in
its operating circulars a tim e sc h ed u le
for each of its offices in d icatin g w h e n
th e am o u n t of any cash item or re tu rn e d
check receiv ed b y it is c o u n ted as
reserves for p u rp o ses of p a rt 204 o f this
ch a p te r (Regulation D) a n d becom es
available for u se by th e se n d er or paying
or retu rn in g bank. T h e Reserve Bank
th a t h o ld s th e se ttlem en t ac co u n t shall
give eith er im m ed iate or deferred credit
to a sen der, a paying bank, or a
re tu rn in g b a n k (other th a n a foreign
corresp o n d en t) in acco rd an ce w ith the
tim e sc h ed u le of th e receiving Reserve
Bank. A Reserve Bank o rd in arily gives
cre d it to a foreign co rresp o n d e n t only
w h e n th e Reserve B ank receives
p ay m e n t of th e item in ac tu ally a n d
finally co llected funds, but, in its
d iscretio n, a Reserve Bank m ay give
im m ed iate or deferred cre d it in
accord an ce w ith its tim e schedule.
(b) N o tw ith stan d in g its tim e sch ed ule,
a Reserve B ank m ay refuse at an y tim e
to p e rm it th e u se of cre d it given by it
for an y cash item or re tu rn e d check, an d
m ay defer availab ility after cre d it is
received by th e Reserve Bank for a
perio d of tim e th a t is reaso nable u n d e r
the circum stances.
11. In § 210.11, th e last sen ten ce of
parag rap h (b) is rev ise d to rea d as
follows:
§ 210.11 Availability of proceeds of
noncash items; time schedule.

*

*
*
*
*
(b)
* * * A Reserve B ank may,
how ever, refuse at any tim e to p e rm it
th e u se of cre d it given b y it for a
n o n c a sh item for w h ic h th e Reserve
B ank h as n o t y et receiv ed p ay m en t in
a c tu ally a n d finally collected funds.
*
*
*
*
*
12. S ection 210.12 is a m e n d e d by
revising p aragraph s (a), (b), an d (c)(1),
th e first se n ten c e of p arag rap h (d),
paragrap hs (f) a n d (h), an d th e first
sen ten ce of p arag rap h (i); a n d by
rem oving th e last se n ten c e o f paragrap h
(g) to rea d as follows:
§210.12 Return of cash items and
handling of returned checks.

(a)
R etu rn o f item s— (1) R eturn o f cash
ite m s h a n d le d b y R eserve B a n ks. A
pay ing b a n k th a t receives a cash item
from a Reserve Bank, o th er th a n for
im m ed iate p ay m en t over th e counter,
a n d th a t settles for th e item as p ro v id ed
in § 210.9(b) of th is sub part, m ay, before
it has finally p a id th e item , re tu rn the
item to an y Reserve B ank (unless its
A d m in istrativ e Reserve B ank directs it
to re tu rn th e item to a specific Reserve
Bank) in acco rdance w ith su b p a rt C of

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Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

p art 229 of th is c h a p te r (R egulation CC), an d an y o th er Reserve B ank or retu rn in g obligations d u e or to becom e d u e to th e
A d m in istrativ e Reserve B ank u n d e r th is
th e U niform C om m ercial Code, a n d the
b a n k to w h ic h th e re tu rn e d ch eck is
su b p a rt or su b p a rt C o f p a rt 229 of th is
R eserve B an ks’ op erating circulars. A
sent, to h a n d le th e re tu rn e d ch eck (and
ch a p te r (R egulation CC). * * *
paying b an k th a t receives a cash item
au th orizes an y Reserve B ank th at
from a Reserve B ank also m ay r e tu rn the h a n d le s settle m e n t for th e re tu rn e d
By order of the Board of Governors of the
item p rio r to settlem en t, in accord ance
ch eck to m ake acco u n tin g entries)
Federal Reserve System, September 10, 1997.
w ith § 210.9(b) of th is su b p a rt a n d th e
sub ject to th is su b p a rt an d to th e
William W. Wiles,
Reserve B anks’ op eratin g circulars. The
Reserve B anks’ operating circulars;
Secretary o f the Board.
*
*
*
*
*
ru les or p ractices of a clearing ho use
[FR Doc. 97-24405 Filed 9-12-97; 8:45 am]
th ro u g h w h ic h th e item w as p resen ted ,
(d) W arranties b y R eserve B ank. By
BILLING CODE 6210- 01- P
or a sp ecial co llectio n agreem en t u n d e r
h a n d lin g a re tu rn e d ch eck u n d e r this
w h ic h th e item w as p rese n ted , m ay n o t
sub part, a Reserve B ank m akes the
ex ten d th e se re tu rn tim es, b u t m ay
retu rn in g b a n k w arran ties as set forth in
p ro v id e for a sh o rter re tu rn tim e.
§ 229.34 of th is ch ap ter, subject to th e
(2)
R eturn o f c h e ck s n o t h a n d le d b y term s of p a rt 229 of th is ch ap ter
R eserve B anks. A paying b a n k th a t
(R egulation CC). * * *
receives a ch eck as d efin e d in § 229.2(k)
*
*
*
*
*
of th is ch a p te r (Regulation CC), other
(f) M eth o d s o f recovery. (1) T he
th a n from a Reserve Bank, a n d th a t
Reserve B ank m ay reco ver th e am o u n t
d eterm in es n o t to p a y th e check, m ay
stated in p ara g ra p h (d) of th is section by
sen d the re tu rn e d ch eck to an y Reserve
charging any ac co u n t on its books th a t
B ank (unless its A d m in istrativ e Reserve
is m a in ta in e d or u se d by th e payin g or
B ank directs it to se n d th e re tu rn e d
retu rn in g b a n k (or b y charging an o th er
ch eck to a specific Reserve Bank) in
retu rn in g Reserve Bank), if-----acco rd an ce w ith su b p a rt C of p art 229
(1) T he Reserve B ank m a d e seasonable
of th is ch ap ter (R egulation CC), th e
w ritte n d em an d on th e pay ing or
U nifo rm C om m ercial Code, a n d the
retu rn in g b an k to assum e defense of th e
R eserve B anks’ op eratin g circulars. A
ac tio n or proceeding; a n d
re tu rn in g b a n k m ay se n d a re tu rn e d
(ii) T he paying or retu rn in g b a n k has
ch eck to any Reserve Bank (unless its
n o t m ade an y o th e r arran g em en t for
A d m in istrativ e Reserve B ank directs it
p ay m e n t th a t is acceptable to th e
to se n d th e re tu rn e d check to a specific
R eserve Bank.
R eserve Bank) in acco rd an ce w ith
(2) T he Reserve B ank is n o t
su b p art C of p a rt 229 of th is ch ap ter
resp o n sib le for defen ding th e actio n or
(Regulation CC), th e U niform
p ro ceed in g before using th is m e th o d of
C om m ercial Code, a n d th e Reserve
recovery. A R eserve B ank th a t h as b een
B an ks’ operating circulars.
charged u n d e r th is p ara g ra p h (f) m ay
(b) H a n d lin g o f re tu rn ed checks. (1)
reco ver from th e paying or retu rn in g
T he follow ing parties, in th e follow ing
b a n k in th e m a n n e r an d u n d e r the
order, are d eem ed to have h a n d le d a
circu m stan ces set forth in this
re tu rn e d ch eck se n t to a Reserve B ank
p ara g ra p h (f). A R eserve B ank ’s failure
u n d e r p arag rap h (a) of th is section-----to avail itself of th e rem e d y p ro v id e d in
(1) T he p ayin g or re tu rn in g bank;
th is p ara g ra p h (f) does n o t p reju d ice its
(ii) T he paying b a n k ’s or retu rn in g
enforcem ent in any o th er m a n n e r of the
b a n k ’s A d m in istrativ e Reserve Bank;
in d e m n ity ag reem ent referred to in
(iii) T he R eserve B ank th a t receives
p ara g ra p h (c)(3) of th is section.
th e re tu rn e d ch eck from th e payin g or
*
*
*
*
*
re tu rn in g b an k (if different from the
(h)
S
ettle
m
e
n
t.
A
su b se q u en t
p aying b a n k ’s or re tu rn in g b a n k ’s
re tu rn in g b a n k or d ep o sitary b a n k sh all
A d m in istrativ e Reserve Bank); an d
(iv) A n o th er Reserve Bank, if any, th at settle w ith its A d m in istrativ e Reserve
B ank for re tu rn e d checks in th e sam e
receives th e re tu rn e d ch eck from a
m a n n e r a n d by th e sam e tim e as for cash
Reserve Bank.
item s p re se n te d for p a y m e n t u n d e r this
(2) A Reserve B an k th a t is n o t
sub part. S ettlem en t w ith its
d escrib ed in p ara g ra p h (b)(1) of th is
A d m in istrativ e Reserve Bank is d eem ed
section is n o t a p arty th a t h a n d le s a
to be settle m e n t w ith th e Reserve Bank
re tu rn e d ch eck a n d is n o t a retu rn in g
from w h ic h th e re tu rn in g b a n k or
b a n k w ith resp e ct to a re tu rn e d check.
d ep o sita ry b a n k receiv ed th e item .
(3) T he id e n tity a n d o rd er o f the
(i) Sec u rity interest. W h e n a paying or
p arties u n d e r p arag rap h (b)(1) of this
retu rn in g b an k sen d s a re tu rn e d check
sectio n determ in e th e rela tio n sh ip s an d
to a Reserve Bank, th e payin g bank,
th e rights a n d liab ilities of th e p arties
re tu rn in g b ank, a n d an y p rio r retu rn in g
u n d e r th is su b p art, p art 229 of this
ban k grant to th e payin g b a n k ’s or
ch a p te r (Regulation CC), a n d the
re tu rn in g b a n k ’s A d m in istrativ e Reserve
U n ifo rm C om m ercial Code.
B ank a secu rity in te re st in all of th e ir
(c) P aying b a n k ’s a n d returning
resp ectiv e assets in th e p o sse ssio n of, or
b a n k ’s agreem ent. * * *
(1)
A uthorizes th e p ay in g or retu rn in g h e ld for th e ac co u n t of, an y Reserve
b a n k ’s A d m in istrativ e Reserve Bank,
Bank, to secure th e ir resp ective