Subpart A Flashcards
What does a demand deposit account (DDA) allow the account holder to do?
Make transfers or withdrawals by negotiable instrument, payment order, telephone transfer, electronic payment, or other similar means.
A DDA is available for withdrawal and can be used for all permitted transactions under the bank’s account agreement.
What types of institutions are included in the definition of ‘bank’?
- Insured bank
- Mutual savings bank
- Savings bank
- Insured credit union
- Savings association
- Agency or a branch of a foreign bank
These definitions are based on various acts including the Federal Home Loan Bank Act and the International Banking Act.
Define ‘banking day’.
A business day on which the office of the bank is open to the public for substantially all banking functions.
Banking day is different from a business day, which includes all calendar days except weekends and legal holidays.
What is the definition of a ‘cashier’s check’?
A check drawn on a bank and signed by an officer or employee of the bank, representing a direct obligation of the bank.
Cashier’s checks are often used for remittance purposes.
What items are included under the term ‘check’?
- Negotiable demand draft drawn on or payable through a bank
- Drawn on Federal Reserve bank or Federal Home Loan bank
- Drawn on the Treasury of the United States
- Demand draft drawn on a state government or local government
- United States Postal Service money order
- Traveler’s check drawn on or payable through a bank
A check includes original checks and substitute checks but does not include noncash items or items not payable in U.S. funds.
What is a ‘depositary bank’?
The first bank to which a check is transferred, even if it may also be the paying bank of the payee.
This term is crucial for understanding the flow of checks in banking transactions.
What constitutes an ‘electronic check’?
An electronic image of, and electronic information derived from, a paper check sent to a receiving bank pursuant to an agreement and conforming with ANSI X9.100-187 standard.
Electronic checks represent a modern method of processing payments electronically.
Fill in the blank: A _______ is a business day other than a Saturday, Sunday, or legal holidays.
business day
This definition is important for banking operations and transaction processing.
What is the primary purpose of Regulation CC?
To implement the Expedited Funds Availability Act and the Check Clearing for the 21st Century Act
Regulation CC outlines the authority and purpose as issued by the Board of Governors of the Federal Reserve System.
What does EFA Act stand for?
Expedited Funds Availability Act
The EFA Act is aimed at ensuring the availability of deposited funds.
What does Check 21 Act refer to?
Check Clearing for the 21st Century Act
The Check 21 Act facilitates the electronic processing of checks.
What is Subpart A of Regulation CC focused on?
General authority and purpose of the regulation
It includes definitions and outlines the implementation of the EFA Act and Check 21 Act.
What is an electronically-created item (ECI)?
Electronic image that has the details of a check but was created electronically and not derived from a paper check
ECIs include electronic checks and electronic returned checks.
What is forward collection?
Process by which a bank sends a check on a cash basis to a collecting bank for settlement or to the paying bank for payment
This is part of the settlement process between banks.
What is the definition of settlement in banking?
Facilitates the exchange of funds between banks for the value of cash letters sent and received
All credits must equal debits before processing is determined to be complete.
What is an indemnifying bank?
Bank that provides an indemnity with respect to remote deposit capture, an electronically-created item, or a substitute check
This ensures protection against losses or errors.
Define a noncash item.
Item that would otherwise be a check, except it is accompanied by special instructions or consists of more than a single thickness of paper
Examples include passbooks or certificates.
What is a paying bank?
Bank by which a check is payable and to which it is sent for payment or collection
This can include the Federal Reserve bank or a state government.
What is a reconverting bank?
Bank that creates a substitute check, or for a substitute check created by a non-bank
This is the first bank that transfers, presents, or returns that substitute check.
What is a remotely created check?
Check not created by the paying bank and does not bear a signature applied by the person on whose account the check is drawn
These checks are often subject to different regulatory standards.
What is a returning bank?
Bank (other than paying or depositary bank) handling a returned check or notice in lieu of return
It can also be a collecting bank for purposes of UCC §4-202(b).
What is a routing number?
Number printed on the face of a check in fractional or nine-digit form; identifies the bank
This number is crucial for processing checks and electronic transactions.
Define a substitute check.
Check as defined under Reg CC; a substitute check is a paper reproduction of an original check
It is created to facilitate the processing of checks in electronic form.
What is a substitute check?
A substitute check is a legal equivalent of the original check for all purposes, provided it accurately represents all information on the original check and contains the legal legend that reads, ‘This is a legal copy of your check.’
Substitute checks can be used the same way as original checks.
What constitutes a sufficient copy of a check?
A sufficient copy is a copy of an original check that accurately represents all information on the front and back of the original check at the time it was truncated, or is sufficient to determine whether a claim is valid.
It ensures that all necessary details are captured for validation.
What is included in the definition of a copy of the original check?
A copy of the original check includes:
* Paper reproduction of an original check
* Paper printout of an electronic image of the original check
* Substitute check
* Any electronic reproduction of a check that the recipient has agreed to receive instead of a paper reproduction.
This allows for flexibility in how checks can be represented.
What is a truncating bank?
A truncating bank is the bank that removes the original check from the check collection process, or if a non-bank removes the original check, it is the first bank that transfers, presents, or returns the substitute check in lieu of the original check.
This process is part of the check truncation system to streamline processing.
What types of checks must be made available next day?
Next day availability applies to:
* Check drawn on the Treasury of the United States
* U.S. Postal Service money order
* Check drawn on a Federal Reserve bank or Federal Home Loan bank
* Check drawn by a state or a unit of general local government
* Cashier’s, certified, or teller’s check.
These checks are considered secure and reliable for immediate availability.
What is the requirement for other checks deposited at the same depositary bank?
For all other checks deposited at the same depositary bank, the bank must make available the lesser of the amount determined by Subpart B or the amount adjusted for inflation.
This regulation helps maintain fairness in fund availability across different check types.
True or False: Substitute checks can be used in the same way as original checks.
True.
Substitute checks have the same legal standing as original checks when properly formatted.
