Which one of the following types of credit may be extended in Requirements case-12 CFR 221.3, 221.7:
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A. B. C. D.AD
The term "Requirements case" refers to a credit extension made by a bank under the authority of Regulation T (12 CFR Part 220), which sets forth the rules governing the extension of credit by brokers and dealers. The purpose of Regulation T is to prevent the excessive use of credit in securities transactions and to protect investors and the financial system from the risks associated with such transactions.
Under Regulation T, a bank may extend credit to a customer in a Requirements case, which is a situation where the bank has advanced funds or securities to the customer for the purpose of purchasing securities, and the bank has a lien on the securities purchased with the loan proceeds. The bank is required to maintain a margin account for the customer and may require additional collateral or margin if the value of the securities declines.
Of the options provided, the only type of credit that may be extended in a Requirements case under Regulation T is "Temporary advances in payment against delivery transactions." This refers to a situation where a bank advances funds to a customer for the purpose of purchasing securities that will be delivered to the customer at a later date. The bank may require the customer to provide collateral or margin to secure the loan, and the bank will maintain a margin account for the customer.
Capital contribution leases, credit to clearing banking authorities, and underwriter loans are not types of credit that may be extended in a Requirements case under Regulation T. Capital contribution leases are a type of lease financing where the lessor provides capital to the lessee in exchange for the lessee agreeing to pay back the capital over time. Credit to clearing banking authorities refers to loans made by banks to other banks or clearinghouses to facilitate the settlement of transactions. Underwriter loans are loans made by a bank to an underwriter to finance the underwriting of securities offerings. None of these types of credit involve the extension of credit in a Requirements case under Regulation T.