Settlement with Administrative Bank
Question
A ____________ must settle for an item with its administrative bank, whether or not it received the item from that bank. Settlement with its administrative bank is deemed to be settlement with the Reserve Bank that sent the item.
Answers
Explanations
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A. B. C. D.A
The correct answer to this question is A. Paying bank.
In the context of check processing, a paying bank refers to the bank that pays out the funds to the recipient of the check. When a check is presented for payment, the paying bank is responsible for verifying that the check is genuine and that the person presenting it is authorized to receive the funds.
In the process of clearing and settling checks, the paying bank may receive checks from other banks. These other banks are referred to as presenting banks. If the paying bank and presenting bank are both members of the same clearinghouse, the presenting bank may send the check through the clearinghouse for processing. If the banks are not members of the same clearinghouse, the presenting bank may send the check directly to the paying bank.
In either case, once the check has been paid by the paying bank, the paying bank is responsible for settling with the presenting bank. This means that the paying bank must transfer funds to the presenting bank in order to complete the transaction. The process of settling between banks is typically facilitated by the Federal Reserve Bank or another clearinghouse.
The term "administrative bank" is not a commonly used term in the context of check processing. However, it may refer to the bank that is responsible for managing the settlement process between banks. In the case of check processing, this would typically be the Federal Reserve Bank or a clearinghouse.
Regulation J and Regulation CC are both regulations issued by the Federal Reserve Board that govern various aspects of check processing. Regulation J sets forth rules for the collection of checks and other items by Federal Reserve Banks, while Regulation CC establishes rules for the availability of funds and the collection of checks by banks. Clearing agents, also known as clearing firms or clearing houses, are organizations that facilitate the clearing and settlement of financial transactions between banks and other financial institutions.
