Security Interest and Obligations to Reserve Bank
Question
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:
Answers
Explanations
Click on the arrows to vote for the correct answer
A. B. C. D.A
The situation described in the question refers to a security interest that the sender and any prior collecting banks grant to the administrative Reserve Bank in all of their respective assets that are in the possession of the Reserve Bank. This security interest is granted to secure any obligations that the sender or prior collecting banks may have to the Reserve Bank.
The security interest attaches when any warranty is breached or any obligation to the Reserve Bank is incurred. This means that if the sender or any prior collecting banks breach any warranty or incur any obligation to the Reserve Bank, the security interest granted to the Reserve Bank becomes effective and the Reserve Bank can take any action under applicable law to enforce its security interest.
The Reserve Bank's right to enforce its security interest includes the right to set off amounts against any funds it holds. This means that if the Reserve Bank holds any funds belonging to the sender or prior collecting banks, it can use those funds to satisfy any obligation that the sender or prior collecting banks have to the Reserve Bank.
Based on the given options, the situation described in the question holds true when the sender identifies liability to the Reserve Bank. This means that if the sender becomes aware that it has an obligation to the Reserve Bank, the security interest granted to the Reserve Bank becomes effective, and the Reserve Bank can take any action under applicable law to enforce its security interest.
Therefore, option D is the correct answer.
