Certified Regulatory Compliance Manager (CRCM) — Question 170

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.

Answer options

• A. Returning check
• B. Substitute check
• C. Cross check
• D. Retuning item

Correct answer: B

Explanation

The correct answer is B, Substitute check, because the question specifically refers to the indemnification process related to substitute checks under Regulation CC. The other options, such as A, Returning check, and C, Cross check, do not pertain to the context of substitute checks and their associated indemnities, while D, Retuning item, is not relevant in this scenario.