48166 Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

1 A foreign bank’s U.S. branches and agencies

and an Edge or agreement corporation’s offices will

not be required to adopt a single account structure.

The Board has proposed amendments to Regulation

D to allow such institutions with offices in multiple

Federal Reserve Districts to choose whether to

adopt a single-account structure or retain multiple

accounts as they do currently [62 FR 42708, August

8, 1997].

amendment is of a minor and

administrative nature dealing with an

update to the CFR to reference the latest

version of NRC Form 3.

Compatibility of Agreement State

Regulations

Under ‘‘Policy Statement on

Adequacy and Compatibility of

Agreement States,’’ approved by the

Commission on June 30, 1997, § 19.11 is

listed as compatibility category ‘‘C.’’

Under compatibility category C, the

essential objectives should be adopted

by the State to avoid conflicts,

duplications or gaps with NRC

regulations. The manner in which the

essential objectives are addressed may

be different than that used by the NRC.

Environmental Impact: Categorical

Exclusion

The Commission has determined that

this final rule is the type of action

described in categorical exclusion 10

CFR 51.22(c)(1). Therefore, neither an

environmental impact statement nor an

environmental assessment has been

prepared for this final rule.

Paperwork Reduction Act Statement

This final rule does not contain a new

or amended information collection

requirement subject to the Paper

Reduction Act of 1995 (44 U.S.C. 3501

et seq.). Existing requirements were

approved by the Office of Management

and Budget, approval 3150–0044.

Public Protection Notification

The NRC may not conduct or sponsor,

and a person is not required to respond

to, a collection of information unless it

displays a currently valid OMB control

number.

Regulatory Analysis

A regulatory analysis has not been

prepared for this final rule because this

rule is considered minor and not a

substantial amendment; it has no

economic impact on NRC licensees or

the public.

Small Business Regulatory Enforcement

Fairness Act

In accordance with the Small

Business Regulatory Enforcement

Fairness Act of 1996, the NRC has

determined that this action is not a

major rule and has verified this

determination with the Office of

Information and Regulatory Affairs,

Office of Management and Budget.

List of Subjects in 10 CFR Part 19

Criminal penalties, Environmental

protection, Nuclear materials, Nuclear

power plants and reactors, Occupational

safety and health, Radiation protection,

Reporting and recordkeeping

requirements, Sex discrimination.

For the reasons set out in the

preamble and under the authority of the

Atomic Energy Act of 1954, as amended;

the Energy Reorganization Act of 1974,

as amended; and 5 U.S.C. 552 and 553;

the NRC is adopting the following

amendment to 10 CFR Part 19.

PART 19—NOTICES, INSTRUCTIONS

AND REPORTS TO WORKERS:

INSPECTION AND INVESTIGATIONS

1. The authority citation for Part 19

continues to read as follows:

Authority: Secs. 53, 63, 81, 103, 104, 161,

186, 68 Stat. 930, 933, 935, 936, 937, 948,

955, as amended, sec. 234, 83 Stat. 444, as

amended, sec. 1701, 106 Stat. 2951, 2952,

2953 (42 U.S.C 2073, 2093, 2111, 2133, 2134,

2201, 2236, 2282 2297f); sec. 201, 88 Stat.

1242, as amended (42 U.S.C. 5841); Pub. L.

95–601, sec. 10, 92 Stat. 2951 (42 U.S.C.

5851).

2. In § 19.11, paragraphs (c)(1) and

(c)(2) are revised to read as follows:

§ 19.11 Posting of notices to workers.

* * * * *

(c)(1) Each licensee and each

applicant for a specific license shall

prominently post NRC Form 3, ‘‘Notice

to Employees,’’ dated August 1997.

Later versions of NRC Form 3 that

supersede the August 1997 version shall

replace the previously posted version

within 30 days of receiving the revised

NRC Form 3 from the Commission.

(c)(2) Additional copies of NRC Form

3 may be obtained by writing to the

Regional Administrator of the

appropriate U.S. Nuclear Regulatory

Commission Regional Office listed in

Appendix D to Part 20 of this chapter or

by calling the NRC Information and

Records Management Branch at 301–

415–7232.

* * * * *

Dated at Rockville, Maryland, this 28th day

of August, 1997.

For the Nuclear Regulatory Commission.

L. Joseph Callan,

Executive Director for Operations.

[FR Doc. 97–24381 Filed 9–12–97; 8:45 am]

BILLING CODE 7590–01–P

FEDERAL RESERVE SYSTEM

12 CFR Part 210

[Regulation J; Docket No. R–0972]

Collection of Checks and Other Items

by Federal Reserve Banks and Funds

Transfers Through Fedwire

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: Effective January 2, 1998, the

Reserve Banks will begin to implement

a policy under which each depository

institution may maintain only a single

funds account with the Federal Reserve.

A single account will establish a single

debtor-creditor relationship between

each institution and a Federal Reserve

Bank and will make account

management more efficient for banks

with interstate branches. The Board is

adopting amendments to subpart A of

Regulation J to conform the Federal

Reserve check collection rules to the

single account structure.

EFFECTIVE DATE: January 2, 1998.

FOR FURTHER INFORMATION CONTACT:

Oliver Ireland, Associate General

Counsel, (202/452–3625), Stephanie

Martin, Senior Attorney (202/452–

3198), or Heatherun Allison, Attorney

(202/452–3565), Legal Division. For the

hearing impaired only, contact Diane

Jenkins, Telecommunications Device for

the Deaf (TDD) (202/452–3544), Board

of Governors of the Federal Reserve

System, 20th and C Streets, N.W.,

Washington, D.C. 20551.

SUPPLEMENTARY INFORMATION:

Overview

The Riegle-Neal Interstate Banking

and Branching Efficiency Act of 1994

(Pub. L. 103–328) made significant

changes to various banking laws to

authorize and facilitate interstate

banking. Consequently, the number of

depository institutions that operate

branches in more than one Federal

Reserve District is expected to increase.

On January 2, 1998, the Federal Reserve

Banks will begin to implement a new

account structure that will provide a

single Federal Reserve account for each

institution. 1 A primary objective of the

single account structure is to establish a

single debtor-creditor relationship
Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations 48167

2Regulation D provides that a depository

institution is considered to be located in the Federal

Reserve District specified in the institution’s charter

or organizing certificate, or, if no such location is

specified, the location of its head office. If that

location, in the Board’s judgment, is ambiguous,

would impede the ability of the Board or the

Federal Reserve Banks to perform their functions

under the Federal Reserve Act, or would impede

the ability of the institution to operate efficiently,

the Board could make exceptions to the general rule

for a particular institution after considering certain

criteria. [62 FR 34613, June 27, 1997].

between each chartered entity and the

Federal Reserve. A single debtorcreditor relationship is the most

effective means for Reserve Banks to

manage their affairs with a depository

institution. A single account structure

also may allow depository institutions

to manage their overall position with

the Reserve Banks more efficiently.

The Board is adopting amendments to

subpart A of Regulation J, governing the

collection of checks and other items by

Federal Reserve Banks, to conform the

Federal Reserve check collection rules

to the single account structure. The

Board does not believe it is necessary to

amend subpart B of Regulation J, which

governs funds transfers through

Fedwire, to accommodate the single

account structure. The Reserve Banks

will, however, issue revised operating

circulars governing collection of cash

items, Fedwire funds transfers, and

other Reserve Bank services to reflect

the new account structure.

Under the Regulation J amendments,

all of an institution’s check collection

and return transactions through the

Federal Reserve Banks will be reflected

in a single account held at that

institution’s ‘‘Administrative Reserve

Bank’’ (or in a correspondent’s account

at a Reserve Bank). Recent amendments

to Regulation D provide a means to

determine the location of an

institution’s reserve account.2 The final

amendments to Regulation J provide

that the account location for an

institution that sends items to a Reserve

Bank for collection (and the identity of

its Administrative Reserve Bank) will be

determined in accordance with the

provisions of Regulation D, even if the

institution is not otherwise subject to

that regulation.

Under the amendments, an institution

generally is permitted to send an item

to any Reserve Bank for collection, but

the item is deemed to have been sent

first to that institution’s Administrative

Reserve Bank. The amendments

designate the parties that are deemed to

handle the item and the order in which

they are deemed to have handled it.

(Although the Administrative Reserve

Bank is deemed to handle the check, it

would not be considered to have

‘‘received’’ the check as that term is

used in subpart A of Regulation J if the

check is initially sent to another Reserve

Bank.) The amendments require a

paying bank to settle for an item with its

Administrative Reserve Bank (regardless

of whether the institution received the

item from its Administrative Reserve

Bank) and specify the time and manner

in which the paying bank is to make

settlement. The amendments also make

changes in the rules governing the

handling of and settlement for returned

checks parallel to those proposed for

cash items.

Section-by-Section Analysis and

Summary of Public Comments

The Board received nine comments

on the proposed amendments to

Regulation J from two bank holding

companies, two trade associations, two

clearing houses, two Federal Reserve

Banks, and a financial services

company. Overall, the commenters

supported the changes and agreed that

the single-account structure as

implemented by the Regulation J

proposal would promote operational

efficiency, speed the collection of

checks, and facilitate account

management.

Section 210.2 Definitions

The Board proposed to add two new

definitions to Regulation J. Under the

new account structure, all of an

institution’s transactions will be

reflected in a single account held at the

institution’s Administrative Reserve

Bank. The Board proposed to add a

definition of ‘‘account’’ to mean an

account with reserve or clearing

balances held on the books of a Federal

Reserve Bank. The proposed definition

stated that a subaccount is an

informational record of a subset of

transactions that affect an account and

is not a separate account. (If a

depository institution desires, the

Reserve Banks will keep records of

certain transactions in ‘‘subaccounts,’’

such as the transactions performed by a

branch of a bank that may be in another

District from the Administrative Reserve

Bank.) The Board proposed to define

‘‘Administrative Reserve Bank’’ as the

Reserve Bank in whose District the

entity in question is located, as

determined in the same way as location

is determined for purposes of reserve

accounts under the Board’s Regulation

D. The Board also proposed to amend

the definition of ‘‘bank’’ to conform to

the Uniform Commercial Code (U.C.C.)

sections 4–105 and 4–107). Finally, the

Board proposed to amend the definition

of ‘‘cash item’’ to provide that, under

the new single-account system, the

Reserve Bank that initially receives an

item for deposit, rather than the Reserve

Bank in whose District the item is

payable, is the Reserve Bank that

decides whether to accept the item as a

cash item.

The Board received one comment on

the definition of ‘‘account,’’ specifically,

on the discussion of a subaccount. The

commenter noted that, due to recent

bank mergers and for other reasons,

certain banks may have several routing

numbers within the same District for a

period of time. The commenter

suggested that the Board clarify that

subaccounts could be established based

on a bank’s routing numbers presently

in use. The Board anticipates that banks

will be able to establish subaccounts

based on routing numbers in use

immediately prior to a merger. The

Board also believes that a broad

definition of subaccount is desirable to

encompass transaction subsets based on

routing numbers or on other criteria and

has adopted the definition as proposed.

The Board received one comment on

the proposed definition of

‘‘Administrative Reserve Bank.’’ The

commenter stated that a depository

institution should have more flexibility

in choosing where its account will be

located, that is, the depository

institution should be allowed to hold its

account at any Reserve Bank in whose

District it operates, which may not be

the Reserve Bank where the institution

is located under Regulation D. The

commenter argued that the proposed

definition unnecessarily tied priced

service offerings and account

relationship issues to regulatory

oversight issues. The theory behind the

single-account structure, however, is

that each depository institution will

have a debtor-creditor relationship with

a single Reserve Bank. Allowing an

institution to choose to hold a clearing

account for payment-related purposes at

a Reserve Bank other than the Reserve

Bank where its reserve account is

located would result in debtor-creditor

relationships with at least two Reserve

Banks. If a depository institution wishes

to have an account relationship with a

Reserve Bank other than the Reserve

Bank whose District encompasses its

charter location, it may request a

location determination under the

procedure described in Regulation D.

Moreover, the location of a depository

institution’s account for check

collection and return purposes should

not matter to the institution under the

Regulation J amendments; the

institution will be able to send checks

to any Reserve Bank for collection with

settlement through its Federal Reserve

account regardless of the account’s
48168 Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

3 12 U.S.C. 360.

location. The Board, therefore, has

adopted the proposed definition of

‘‘Administrative Reserve Bank,’’ as well

as the other proposed changes to

§ 210.2.

Section 210.3(a) General Provisions

This paragraph provides that the

Reserve Banks may issue operating

circulars governing the details of their

check collection services and related

matters. The Board proposed to specify

that the operating circulars may allow

an Administrative Reserve Bank to give

instructions to other Reserve Banks,

such as instructions regarding the

handling of items that would affect an

account on its books. The Board

received no comments on this

amendment and has adopted it as

proposed.

Section 210.4 Sending Items to

Reserve Banks

The Board proposed to amend this

section to provide that a sender (other

than a Reserve Bank sender) may send

an item to any Reserve Bank for

collection, regardless of where the

sender or the paying bank is located, but

that the sender’s Administrative Reserve

Bank may override this rule and require

the sender to send the item to a

particular Reserve Bank. The Board

provided an example of a bank in

financial difficulty, in which case the

Administrative Reserve Bank may want

to require the bank to deposit all of its

items directly with a particular Reserve

Bank in order to retain closer control

over the bank’s account.

Three commenters objected to the

broad powers that this section gives to

the Administrative Reserve Bank to

require that checks be sent to a specific

Reserve Bank. One commenter

expressed concern that such an action

could introduce inefficiencies into the

payments system, increase return item

risk, and provide the Administrative

Reserve Bank with open-ended power

over its private-sector competitors and

customers. This commenter suggested

that the Board remove the

Administrative Reserve Bank’s override

power or, alternatively, clearly define

the circumstances under which the

Administrative Reserve Bank has this

authority. The other commenters

suggested that the Board limit the

Administrative Reserve Bank’s override

authority to cases where the depositing

institution is in financial difficulty or

where the override is necessary to

protect the safety and soundness of the

payments system.

The Board believes this provision is

necessary to address isolated emergency

situations that may arise. The Board

expects that an Administrative Reserve

Bank would direct a bank to send

checks to a specific Reserve Bank only

under extreme and unusual

circumstances. These circumstances

might be caused by different situations,

including a severe operational problem

at a Reserve Bank. Consequently, the

Board does not believe that it is feasible

or appropriate to attempt to specify all

such circumstances in advance. The

Board, therefore, has adopted the

provision as proposed.

The Board received no other specific

comments on § 210.4. Three

commenters generally supported giving

depository institutions the flexibility to

deposit checks with any Reserve Bank.

The Board, therefore, has adopted the

§ 210.4 as proposed. The following

discussion describes the amendments to

this section in more detail:

Section 13(1) of the Federal Reserve

Act (FRA) 3 authorizes a Reserve Bank to

accept deposits of checks and other

items from its member banks or from

other depository institutions and to

accept from other Reserve Banks checks

and other items payable within its

District. Under the Regulation J

amendment, if a sender sends a check

to a Reserve Bank other than its

Administrative Reserve Bank or the

Reserve Bank in whose District the

check is payable, the receiving Reserve

Bank is deemed to be acting as agent of

the Administrative Reserve Bank.

Regulation J requires, however, that

such a receiving Reserve Bank take on

additional rights, duties, and liabilities

in its own name that it would not

necessarily have as a common law agent

of the Administrative Reserve Bank. For

example, the receiving Reserve Bank is

considered an indorser on the check and

makes warranties on the check under

§ 210.6, Regulation CC, and the U.C.C.

in its own name. The Board believes

that requiring such a receiving Reserve

Bank to take on these rights, duties, and

liabilities is necessary to preserve a

clear chain of warranties and other

claims in the check collection and

return system. Currently, in those

limited situations where a Reserve Bank

accepts deposits from institutions other

than those located in its District, it does

so under a special agency agreement

with the institution’s home Reserve

Bank. Rather than perpetuating these

special agreements, the new Regulation

J amendments establish the terms under

which the receiving Reserve Bank will

handle items on behalf of an

Administrative Reserve Bank.

Specifically, the amendments to

§ 210.4 designate the parties that are

deemed to handle an item and the order

in which they are deemed to have

handled the item. These amendments

establish the chain of indorsements on

an item under Regulation J, Regulation

CC, and the U.C.C., as well as the order

in which the parties are agents or

subagents of the owner of an item, as

provided in § 210.6(a). As noted above,

the rule provides that the sender is

deemed to send the item to its

Administrative Reserve Bank, regardless

of whether that Reserve Bank actually

receives the item first. The

Administrative Reserve Bank is deemed

to send the item to the Reserve Bank

that actually receives the item from the

sender (if different from the

Administrative Reserve Bank). Any

subsequent Reserve Bank that receives

the item from another Reserve Bank is

deemed to handle the item in turn.

If, for example, an Iowa branch of a

Richmond bank, with an account at the

Richmond Reserve Bank, sends a check

to the Chicago Reserve Bank for

collection, the check is deemed handled

in the following order: the initial

sender, the Richmond Reserve Bank (the

Administrative Reserve Bank), and the

Chicago Reserve Bank (the first Reserve

Bank to receive the item). If the check

in this example were drawn on a

banking office in New York, the Chicago

Reserve Bank would send the check to

the Federal Reserve Bank of New York,

in which case the New York Reserve

Bank would be the last Reserve Bank to

handle the check and would present the

check to the paying bank. No other

Reserve Bank would handle or would be

deemed to handle the item. In the

example, if the paying bank’s

Administrative Reserve Bank is the

Federal Reserve Bank of Boston (which

might be the case if the check is payable

by a New York office of a bank

headquartered in Boston), the Boston

Reserve Bank is not a party to the check,

even though settlement for the check

will ultimately take place by a debit to

an account on the Boston Reserve

Bank’s books. (See Table 1.)

Table 1.

This table illustrates the following

example:

A Richmond-based bank has its account at

the Federal Reserve Bank of Richmond

(Richmond Fed), its Administrative Reserve

Bank. An Iowa branch of the bank sends a

check to the Federal Reserve Bank of Chicago

(Chicago Fed) for collection. The check is

payable by a New York office of a Bostonbased bank, which has an account at the

Federal Reserve Bank of Boston (Boston Fed).

The Chicago Fed sends the check to the

Federal Reserve Bank of New York (NY Fed),

which presents the check to the New York

office of the paying bank.
Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations 48169

Path of Physical Check

Initial sender ‰ Chicago Fed ‰ NY Fed ‰

Paying Bank

Parties Deemed To Have Handled the Check

(Chain of Indorsements)

Initial sender ‰ Richmond Fed ‰

Chicago Fed ‰ NY Fed ‰ Paying Bank

Section 210.5 Sender’s Agreement;

Recovery by Reserve Bank

Paragraph (a) of § 210.5 sets forth the

terms and warranties to which a sender

agrees when it sends an item to a

Reserve Bank. The Board proposed to

amend this paragraph to conform with

the provisions of § 210.4. Specifically, a

sender would authorize its

Administrative Reserve Bank, as well as

any other Reserve Bank to which the

item is sent, to handle an item and

would authorize the Reserve Banks to

make the appropriate accounting entries

in settlement for the item. The Board

proposed to make minor amendments to

paragraph (c) (and parallel amendments

to § 210.12(f)) to simplify the provisions

describing how settlements occur

between Reserve Banks. The Board also

proposed to redesignate the paragraph

numbers in paragraph (c). Paragraph (d)

of § 210.5 requires a sender to grant a

security interest in all its assets held by

a Reserve Bank to secure any of its

obligations related to items collected

through the Reserve Banks. The Board

proposed to amend this section to

provide that the security interest is

granted to the sender’s Administrative

Reserve Bank. The Board received no

comments on the amendments to this

section and has adopted them as

proposed.

Section 210.6 Status, Warranties, and

Liability of Reserve Bank

Paragraph (a) of this section provides

that Reserve Banks act as agents or

subagents of the owner of an item. The

Board proposed to modify the reference

to a Reserve Bank in the first sentence

with the phrase ‘‘that handles an item’’

to clarify that this paragraph refers to

the Reserve Banks that are identified in

§ 210.4. The current language provides

that the agency terminates when a

Reserve Bank receives final payment for

the item and makes the proceeds

available for use by the sender. The

Board proposed to amend this provision

by stating that the agency status will not

end unless the time for commencing all

actions against the Reserve Bank has

expired. This amendment would ensure

that the agency and subagency

relationships between Reserve Banks

regarding a particular item, as set forth

in § 210.4, will continue until the

statute of limitations has run on claims

regarding any dispute concerning the

item. The Board also proposed to

reorganize the numbering in paragraphs

(a) and (b) of this section.

The Board received one comment that

specifically supported the amendments

to this section. Another commenter

asked why the agency status of a

Reserve Bank should continue for an

open-ended period of time. The

commenter believed that the Reserve

Bank’s agency status should continue

for the same period of time as the

agency status of a private-sector

collecting bank (until the settlement

received for the item becomes final, as

provided in U.C.C. section 4–201(a)),

absent a compelling reason. The Board

intended this provision to provide a

theoretical basis for an Administrative

Reserve Bank’s right to instruct another

Reserve Bank relating to risk, even after

settlement is final. (Under Regulation

CC, 12 CFR 229.36(d), settlements

between banks are final when made.)

For example, the Administrative

Reserve Bank may wish to instruct

another Reserve Bank about possible

warranty claims and returns. The

agency status is necessary for the

Reserve Banks because they are separate

corporations. Private-sector collecting

banks can also extend the agency period

by agreement. The Board has adopted

§ 210.6 as proposed.

Section 210.7 Presenting Items for

Payment

This section provides rules regarding

the presentment of items for payment.

The Board proposed to make minor

changes to paragraphs (c) and (d).

Rather than referring to an item that is

‘‘payable’’ in a certain Federal Reserve

District, the Board proposed to improve

the precision of these provisions by

referring to items that may be ‘‘sent to

the paying bank or nonbank payor’’ in

a certain Federal Reserve District. The

Board received no comments on these

amendments and has adopted them as

proposed.

Section 210.8 Presenting Noncash

Items for Acceptance

Similar to the changes to § 210.7, the

Board proposed to replace the term

‘‘payable elsewhere’’ with the term

‘‘may be presented elsewhere.’’ The

Board also proposed to reorganize the

paragraph numbering in this section.

The Board received no comments on

these amendments and has adopted

them as proposed.

Section 210.9 Settlement and Payment

This section sets forth the time and

manner by which a paying bank must

settle for items it receives from a

Reserve Bank. The Board proposed to

add a new paragraph (a) (and to

redesignate the following paragraphs

accordingly) to provide that a paying

bank must settle for an item with its

Administrative Reserve Bank, whether

or not the paying bank actually receives

the item from that Reserve Bank. By

settling with its Administrative Reserve

Bank, the paying bank would meet any

settlement obligation it may have under

Regulation CC and the U.C.C. For

example, the U.C.C. (sections 4–301 and

4–302) requires a paying bank to settle

with the presenting bank by midnight

on the day of presentment if it wants to

preserve its right to return the check by

its midnight deadline on its next

banking day. By settling with its

Administrative Reserve Bank, a paying

bank would satisfy this obligation to a

presenting Reserve Bank.

The new paragraph (a) would also

provide that a paying bank may settle

through a correspondent account, with

the agreement of its Administrative

Reserve Bank, the Reserve Bank (if

different) that holds the correspondent’s

account, and the correspondent. The

paying bank would remain responsible

for settlement if for some reason

settlement does not occur through the

correspondent account. The Board

proposed to make a conforming change

to paragraph (c) (as redesignated) related

to payment for noncash items.

Currently, Regulation J requires the

paying bank to settle so that funds are

available to the presenting Reserve Bank

by the close of Fedwire on the day of

presentment. The Board proposed: (1)

amendments to paragraph (b) (as

redesignated) of § 210.9 to clarify that

settlement funds must be made

available to the paying bank’s

Administrative Reserve Bank, rather

than the presenting Reserve Bank; (2) to

change the references to a Reserve

Bank’s operating circular to include all

of the Reserve Banks’ operating

circulars, as those circulars will be

uniform as of January 1, 1998; (3) to

clarify paragraph (b)(3) to refer to days

the paying bank is closed voluntarily

‘‘so that it does not receive a cash item’’

(the provisions of this paragraph would

not apply if the paying bank’s head

office were closed for business but a

branch still received presentment of

cash items from the Reserve Banks); (4)

to replace references to ‘‘one hour after

the scheduled opening of Fedwire’’ with

‘‘9:30 a.m. Eastern Time’’ so that this

time will remain unchanged when the

Fedwire opening hour is moved to 12:30

a.m. in December 1997; (5) to add

paragraph headings throughout

paragraph (b); and (6) to make

conforming changes to cross-references
48170 Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

throughout § 210.9 in light of the

paragraph redesignations. The Board

received one comment that specifically

supported the amendments to this

section and has adopted the

amendments as proposed.

Section 210.10 Time Schedule and

Availability of Credits for Cash Items

and Returned Checks

This paragraph provides that a

Reserve Bank shall make proceeds

available for cash items and returned

checks according to its published time

schedules. The Board proposed to

clarify that the Reserve Bank that holds

the settlement account will make credit

available according to the time schedule

of the Reserve Bank that first receives

the cash item (or returned check) from

the sender (or the paying or returning

bank). The Board also proposed a

conforming amendment to § 210.11(b)

regarding credit for noncash items. The

Board received no comments on these

amendments and has adopted them as

proposed.

Section 210.12 Return of Cash Items

and Handling of Returned Checks

This section sets forth the rules

governing handling of and settlement

for returned checks. The rules for

returned checks are generally parallel to

the rules for cash items, and the Board

proposed amendments that are parallel

to the amendments for cash items

discussed above. Under the proposal, a

paying bank or returning bank may send

a returned check to any Reserve Bank,

unless its Administrative Reserve Bank

directs it to send the returned check to

a specific Reserve Bank. As with cash

items, the paying or returning bank’s

Administrative Reserve Bank would be

deemed to have handled the item first,

prior to the Reserve Bank that actually

received the item, for purposes of

determining the relationships, rights,

and liabilities of the parties (see

discussion of § 210.4). Also similar to

cash items, a paying or returning bank

would authorize the handling of a

returned check by its Administrative

Reserve Bank, as well as by any other

Reserve Bank to which a returned check

is sent, and would authorize the Reserve

Banks to make the appropriate

accounting entries in settlement for the

returned check (see discussion of

§ 210.5). A subsequent returning bank or

depositary bank would be required to

settle for a returned check with its

Administrative Reserve Bank, whether

or not the bank actually receives the

returned check from that Reserve Bank.

By settling with its Administrative

Reserve Bank, the subsequent returning

bank or depositary bank would meet its

settlement obligations under Regulation

CC and the U.C.C. (see discussion of

§ 210.9(a)). Finally, a paying or

returning bank would grant a security

interest in all its assets held by its

Administrative Reserve Bank to secure

any of its obligations related to returned

checks it sends to a Reserve Bank (see

discussion of § 210.5(d)). The Board

received no comments on these

amendments and has adopted them as

proposed.

Transition Issues

One commenter expressed concern

that the proposal may not make

adequate provision for post-merger

situations, when a depository institution

may have a temporary transition

account at a Reserve Bank other than its

Administrative Reserve Bank. The

commenter stated that, when some of an

institution’s checks will settle in a

transition account, the Reserve Bank

holding the transition account should

have rights, privileges, and duties

comparable to those of the

Administrative Reserve Bank with

respect to settlement, check warranties,

control over direct-sends, instructions to

other Reserve Banks with respect to

items that affect the account on its

books, and security interests in assets

held at other Reserve Banks.

The Board believes that Regulation J

as proposed adequately covers

transition situations. For example, in

the case of a bank merger, the surviving

bank will have an account at its

Administrative Reserve Bank while

other offices may still have transition

accounts at other Reserve Banks. Those

transition accounts would operate

similarly to correspondent settlement

accounts. Checks that are deposited by

the bank will be deemed to be handled

first by the Administrative Reserve Bank

and then by other Reserve Banks in the

order set forth in § 210.4. The Reserve

Bank that holds the transition account

will not be considered a party to a check

unless it actually handles the check and

therefore should be considered more

like a correspondent bank than an

Administrative Reserve Bank. If the

bank settles for checks presented by a

Reserve Bank through a transition

account, it will be deemed to have

settled with its Administrative Reserve

Bank for those checks under § 210.9(a).

Competitive Impact

One commenter stated that the Board

should review the competitive equity

issues that arise from the combination of

the proposed Regulation J amendments

and the Board’s proposed enhanced net

settlement service for depository

institutions [62 FR 32118, June 12,

1997]. The commenter believed that

private-sector clearing houses would be

at a disadvantage vis-a-vis the Reserve

Banks if the Reserve Banks are able to

accommodate interstate banking starting

on January 2, 1998, and the privatesector clearing houses are unable to

avail themselves of the proposed net

settlement services until late 1998. The

commenter suggested that the Board

analyze issues such as the risks that the

Regulation J proposal is designed to

address, the benefits that the proposal

will provide to depository institutions,

any cost savings that will accrue to

Reserve Banks under the proposal, as

well as other issues related to account

monitoring and troubled banks. The

commenter also asked that the Board

consider allowing check clearing houses

to have interim access to interdistrict

net settlement services while the Board

develops service enhancements.

The Regulation J proposal is driven by

both operational and risk concerns. The

structural changes in the banking

business brought about by the increase

in the number of banks with interstate

branches have necessitated a new

account structure in the Federal Reserve

Banks to handle interstate banking. The

Regulation J changes are necessary to set

forth the rules that will govern Federal

Reserve check collection under the new

account structure. Depository

institutions will benefit from the

efficiencies of having to manage only a

single Federal Reserve account and the

ability to deposit checks for collection at

any Reserve Bank.

In practical terms, the Regulation J

proposal would likely have little

immediate effect on current check

collection patterns through the Reserve

Banks. The proposal would allow

branches of interstate banks to continue

to deposits checks at the same Reserve

Banks that they use today, irrespective

of where their accounts are located.

Eventually, these banks could benefit

from price competition between Reserve

Banks, which could result in volume

shifts. Private-sector collecting banks

could establish nationwide check

collection or exchange systems as well.

The Board does not believe that the

Regulation J proposal, on its own,

provides the Reserve Banks with any

greater advantages in the check

collection business than they already

have today due to their nationwide

presence and their ability to settle

directly through Federal Reserve

accounts.

For private-sector check clearing

arrangements that wish to settle on a net

basis on the books of a Reserve Bank,

there are currently two net settlement

services available, as set forth in the
Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations 48171

notice for the proposed service

enhancement. The traditional

settlement-sheet-based service provides

next-day finality, and the Fedwire-based

service provides same-day finality. The

Board proposed an enhanced

settlement-sheet-based service that

would provide same-day finality and

establish more effective risk controls

than exist under the current traditional

service, which was designed to handle

intradistrict clearing. In the interim, the

Board recognizes that some clearing

arrangements that receive traditional net

settlement services from the Reserve

Banks may have participants with an

interstate presence. The Board will not

require that such participants be

excluded from such arrangements while

the Board is developing the enhanced

service.

Final Regulatory Flexibility Analysis

Two of the three requirements of a

final regulatory flexibility analysis (5

U.S.C. 604), (1) a succinct statement of

the need for and the objectives of the

rule and (2) a summary of the issues

raised by the public comments, the

agency’s assessment of the issues, and a

statement of the changes made in the

final rule in response to the comments,

are discussed above. The third

requirement of a final regulatory

flexibility analysis is a description of

significant alternatives to the rule that

would minimize the rule’s economic

impact on small entities and reasons

why the alternatives were rejected.

The rule will apply to all institutions,

regardless of size, that send checks,

returned checks, or other items to a

Reserve Bank or receive items from a

Reserve Bank. The rule sets out the

terms under which the Reserve Banks

handle items and does not impose

significant burdens on small

institutions, therefore no alternatives

were considered for small institutions.

Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3506;

5 CFR 1320 Appendix A.1), the Board

reviewed the rule under the authority

delegated to the Board by the Office of

Management and Budget. No collections

of information pursuant to the

Paperwork Reduction Act are contained

in the rule.

List of Subjects in 12 CFR Part 210

Banks, banking, Federal Reserve

System.

For the reasons set out in the

preamble, the Board is amending part

210 of chapter II of title 12 of the Code

of Federal Regulations as set forth

below:

PART 210—COLLECTION OF CHECKS

AND OTHER ITEMS BY FEDERAL

RESERVE BANKS AND FUNDS

TRANSFERS THROUGH FEDWIRE

(REGULATION J)

1. The authority citation for part 210

continues to read as follows:

Authority: 12 U.S.C. 248(i), (j), and (o),

342, 360, 464, and 4001–4010.

2. Section 210.2 is amended by

redesignating paragraph (a) and

paragraphs (b) through (p) as paragraph

(b) and paragraphs (d) through (r),

respectively; adding new paragraphs (a)

and (c); and revising newly redesignated

paragraphs (d), (g) introductory text, and

(g)(2) to read as follows:

§ 210.2 Definitions.

* * * * *

(a) Account means an account with

reserve or clearing balances on the

books of a Federal Reserve Bank. A

subaccount is an informational record of

a subset of transactions that affect an

account and is not a separate account.

* * * * *

(c) Administrative Reserve Bank with

respect to an entity means the Reserve

Bank in whose District the entity is

located, as determined under the

procedure described in § 204.3(b)(2) of

this chapter (Regulation D), even if the

entity is not otherwise subject to that

section.

(d) Bank means any person engaged in

the business of banking. A branch or

separate office of a bank is a separate

bank to the extent provided in the

Uniform Commercial Code.

* * * * *

(g) Cash item means —

* * * * *

(2) Any other item payable on

demand and collectible at par that the

Reserve Bank that receives the item is

willing to accept as a cash item. Cash

item does not include a returned check.

* * * * *

3. In § 210.3, the last sentence of

paragraph (a) is revised to read as

follows:

§ 210.3 General provisions.

(a) General. * * * The circulars may,

among other things, classify cash items

and noncash items, require separate

sorts and letters, provide different

closing times for the receipt of different

classes or types of items, provide for

instructions by an Administrative

Reserve Bank to other Reserve Banks,

set forth terms of services, and establish

procedures for adjustments on a Reserve

Bank’s books, including amounts,

waiver of expenses, and payment of

interest by as-of adjustment.

* * * * *

4. Section 210.4 is revised to read as

follows:

§ 210.4 Sending items to Reserve Banks.

(a) Sending of items. A sender, other

than a Reserve Bank, may send any item

to any Reserve Bank, whether or not the

item is payable within the Reserve

Bank’s District, unless the sender’s

Administrative Reserve Bank directs the

sender to send the item to a specific

Reserve Bank.

(b) Handling of items. (1) The

following parties, in the following order,

are deemed to have handled an item

that is sent to a Reserve Bank for

collection—

(i) The initial sender

(ii) The initial sender’s

Administrative Reserve Bank

(iii) The Reserve Bank that receives

the item from the initial sender (if

different from the initial sender’s

Administrative Reserve Bank); and

(iv) Another Reserve Bank, if any, that

receives the item from a Reserve Bank.

(2) A Reserve Bank that is not

described in paragraph (b)(1) of this

section is not a party that handles an

item and is not a collecting bank with

respect to an item.

(3) The identity and order of the

parties under paragraph (b)(1) of this

section determine the relationships and

the rights and liabilities of the parties

under this subpart, part 229 of this

chapter (Regulation CC), and the

Uniform Commercial Code. An initial

sender’s Administrative Reserve Bank

that is deemed to handle an item is also

deemed to be a sender with respect to

that item. The Reserve Banks that are

deemed to handle an item are deemed

to be agents or subagents of the owner

of the item, as provided in § 210.6(a) of

this subpart.

(c) Checks received at par. The

Reserve Banks shall receive cash items

and other checks at par.

5. In § 210.5, paragraphs (a)(1) and (c)

and the first sentence of paragraph (d)

are revised to read as follows:

§ 210.5 Sender’s agreement; recovery by

Reserve Bank.

(a) * * *

(1) Authorizes the sender’s

Administrative Reserve Bank and any

other Reserve Bank or collecting bank to

which the item is sent to handle the

item (and authorizes any Reserve Bank

that handles settlement for the item to

make accounting entries), subject to this

subpart and to the Reserve Banks’
48172 Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

2A paying bank is deemed to receive a cash item

on its next banking day if it receives the item—

(1) On a day other than a banking day for it; or

(2) On a banking day for it, but after a ‘‘cut-off

hour’’ established by it in accordance with state

law.

operating circulars, and warrants its

authority to give this authorization;

* * * * *

(c) Methods of recovery. (1) The

Reserve Bank may recover the amount

stated in paragraph (b) of this section by

charging any account on its books that

is maintained or used by the sender (or

by charging a Reserve Bank sender), if—

(i) The Reserve Bank made seasonable

written demand on the sender to assume

defense of the action or proceeding; and

(ii) The sender has not made any

other arrangement for payment that is

acceptable to the Reserve Bank.

(2) The Reserve Bank is not

responsible for defending the action or

proceeding before using this method of

recovery. A Reserve Bank that has been

charged under this paragraph (c) may

recover from its sender in the manner

and under the circumstances set forth in

this paragraph (c). A Reserve Bank’s

failure to avail itself of the remedy

provided in this paragraph (c) does not

prejudice its enforcement in any other

manner of the indemnity agreement

referred to in paragraph (a)(3) of this

section.

(d) Security interest. When a sender

sends an item to a Reserve Bank, the

sender and any prior collecting bank

grant to the sender’s Administrative

Reserve Bank a security interest in all of

their respective assets in the possession

of, or held for the account of, any

Reserve Bank to secure their respective

obligations due or to become due to the

Administrative Reserve Bank under this

subpart or subpart C of part 229 of this

chapter (Regulation CC). * * *

6. In § 210.6, paragraphs (a)(1) and (b)

are revised to read as follows:

§ 210.6 Status, warranties, and liability of

Reserve Bank.

(a)(1) Status and liability. A Reserve

Bank that handles an item shall act as

agent or subagent of the owner with

respect to the item. This agency

terminates when a Reserve Bank

receives final payment for the item in

actually and finally collected funds, a

Reserve Bank makes the proceeds

available for use by the sender, and the

time for commencing all actions against

the Reserve Bank has expired. A Reserve

Bank shall not have or assume any

liability with respect to an item or its

proceeds except—

(i) For the Reserve Bank’s own lack of

good faith or failure to exercise ordinary

care;

(ii) As provided in paragraph (b) of

this section; and

(iii) As provided in subpart C of part

229 of this chapter (Regulation CC).

* * * * *

(b) Warranties and liability. (1) By

presenting or sending an item, a Reserve

Bank warrants to a subsequent

collecting bank and to the paying bank

and any other payor—

(i) That the Reserve Bank is a person

entitled to enforce the item (or is

authorized to obtain payment of the

item on behalf of a person who is either

entitled to enforce the item or

authorized to obtain payment on behalf

of a person entitled to enforce the item);

and

(ii) That the item has not been altered.

(2) The Reserve Bank also makes the

warranties set forth in § 229.34(c) of this

chapter, subject to the terms of part 229

of this chapter (Regulation CC). The

Reserve Bank shall not have or assume

any other liability to the paying bank or

other payor, except for the Reserve

Bank’s own lack of good faith or failure

to exercise ordinary care.

* * * * *

7. In § 210.7, paragraph (c)

introductory text and paragraph (d) are

revised to read as follows:

§ 210.7 Presenting items for payment.

* * * * *

(c) Presenting or sending direct. A

Reserve Bank or subsequent collecting

bank may, with respect to an item that

may be sent to the paying bank or

nonbank payor in the Reserve Bank’s

District—

* * * * *

(d) Item sent to another district. A

Reserve Bank receiving an item that may

be sent to a paying bank or nonbank

payor in another District ordinarily

sends the item to the Reserve Bank of

the other District, but with the

agreement of the other Reserve Bank,

may present or send the item as if it

were sent to a paying bank or nonbank

payor in its own District.

8. Section 210.8 is revised to read as

follows:

§ 210.8 Presenting noncash items for

acceptance.

(a) A Reserve Bank or a subsequent

collecting bank may, if instructed by the

sender, present a noncash item for

acceptance in any manner authorized by

law if—

(1) The item provides that it must be

presented for acceptance;

(2) The item may be presented

elsewhere than at the residence or place

of business of the payor; or

(3) The date of payment of the item

depends on presentment for acceptance.

(b) Documents accompanying a

noncash item shall not be delivered to

the payor upon acceptance of the item

unless the sender specifically authorizes

delivery. A Reserve Bank shall not have

or assume any other obligation to

present or to send for presentment for

acceptance any noncash item.

9. Section 210.9 is amended by

redesignating paragraphs (a) through (e)

as paragraphs (b) through (f); adding a

new paragraph (a); revising newly

redesignated paragraphs (b) and (c); and

in newly redesignated paragraph (f)

removing the references ‘‘paragraphs (a),

(b), and (c)’’ and adding in their place

‘‘paragraphs (b), (c), and (d)’’ to read as

follows:

§ 210.9 Settlement and payment.

(a) Settlement through Administrative

Reserve Bank. A paying bank shall settle

for an item under this subpart with its

Administrative Reserve Bank, whether

or not the paying bank received the item

from that Reserve Bank. A paying bank’s

settlement with its Administrative

Reserve Bank is deemed to be settlement

with the Reserve Bank from which the

paying bank received the item. A paying

bank may settle for an item using any

account on a Reserve Bank’s books by

agreement with its Administrative

Reserve Bank, any other Reserve Bank

holding the settlement account, and the

account-holder. The paying bank

remains responsible for settlement if the

Reserve Bank holding the settlement

account does not, for any reason, obtain

settlement in that account.

(b) Cash items—(1) Settlement

obligation. On the day a paying bank

receives 2 a cash item from a Reserve

Bank, it shall settle for the item such

that the proceeds of the settlement are

available to its Administrative Reserve

Bank by the close of Fedwire on that

day, or it shall return the item by the

later of the close of its banking day or

the close of Fedwire. If the paying bank

fails to settle for or return a cash item

in accordance with this paragraph (b)(1),

it is accountable for the amount of the

item as of the close of its banking day

or the close of Fedwire on the day it

receives the item, whichever is earlier.

(2) Time of settlement. (i) On the day

a paying bank receives a cash item from

a Reserve Bank, it shall settle for the

item so that the proceeds of the

settlement are available to its

Administrative Reserve Bank, or return

the item, by the latest of—

(A) The next clock hour that is at least

one hour after the paying bank receives

the item;

(B) 9:30 a.m. Eastern Time; or
Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations 48173

(C) Such later time as provided in the

Reserve Banks’ operating circulars.

(ii) If the paying bank fails to settle for

or return a cash item in accordance with

paragraph (b)(2)(i) of this section, it

shall be subject to any applicable

overdraft charges. Settlement under

paragraph (b)(2)(i) of this section

satisfies the settlement requirements of

paragraph (b)(1) of this section.

(3) Paying bank closes voluntarily. (i)

If a paying bank closes voluntarily so

that it does not receive a cash item on

a day that is a banking day for a Reserve

Bank, and the Reserve Bank makes the

cash item available to the paying bank

on that day, the paying bank shall

either—

(A) On that day, settle for the item so

that the proceeds of the settlement are

available to its Administrative Reserve

Bank, or return the item, by the latest of

the next clock hour that is at least one

hour after it ordinarily would have

received the item, 9:30 a.m. Eastern

Time, or such later time as provided in

the Reserve Banks’ operating circulars;

or

(B) On the next day that is a banking

day for both the paying bank and the

Reserve Bank, settle for the item so that

the proceeds of the settlement are

available to its Administrative Reserve

Bank by 9:30 a.m. Eastern Time on that

day or such later time as provided in the

Reserve Banks’ operating circulars and

compensate the Reserve Bank for the

value of the float associated with the

item in accordance with procedures

provided in the Reserve Bank’s

operating circular.

(ii) If a paying bank closes voluntarily

so that it does not receive a cash item

on a day that is a banking day for a

Reserve Bank, and the Reserve Bank

makes the cash item available to the

paying bank on that day, the paying

bank is not considered to have received

the item until its next banking day, but

it shall be subject to any applicable

overdraft charges if it fails to settle for

or return the item in accordance with

paragraph (b)(3)(i) of this section. The

settlement requirements of paragraphs

(b)(1) and (b)(2) of this section do not

apply to a paying bank that settles in

accordance with paragraph (b)(3)(i) of

this section.

(4) Reserve Bank closed. (i) If a paying

bank receives a cash item from a

Reserve Bank on a banking day that is

not a banking day for the Reserve Bank,

the paying bank shall—

(A) Settle for the item so that the

proceeds of the settlement are available

to its Administrative Reserve Bank by

the close of Fedwire on the Reserve

Bank’s next banking day, or return the

item by midnight of the day it receives

the item (if the paying bank fails to

settle for or return a cash item in

accordance with this paragraph

(b)(4)(i)(A), it shall become accountable

for the amount of the item as of the

close of its banking day on the day it

receives the item); and

(B) Settle for the item so that the

proceeds of the settlement are available

to its Administrative Reserve Bank by

9:30 a.m. Eastern Time on the Reserve

Bank’s next banking day or such later

time as provided in the Reserve Bank’s

operating circular, or return the item by

midnight of the day it receives the item.

If the paying bank fails to settle for or

return a cash item in accordance with

this paragraph (b)(4)(i)(B), it shall be

subject to any applicable overdraft

charges. Settlement under this

paragraph (b)(4)(i)(B) satisfies the

settlement requirements of paragraph

(b)(4)(i)(A) of this section.

(ii) The settlement requirements of

paragraphs (b)(1) and (b)(2) of this

section do not apply to a paying bank

that settles in accordance with

paragraph (b)(4)(i) of this section.

(5) Manner of settlement. Settlement

with a Reserve Bank under paragraphs

(b) (1) through (4) of this section shall

be made by debit to an account on the

Reserve Bank’s books, cash, or other

form of settlement to which the Reserve

Bank agrees, except that the Reserve

Bank may, in its discretion, obtain

settlement by charging the paying

bank’s account. A paying bank may not

set off against the amount of a

settlement under this section the

amount of a claim with respect to

another cash item, cash letter, or other

claim under § 229.34(c) of this chapter

(Regulation CC) or other law.

(6) Notice in lieu of return. If a cash

item is unavailable for return, the

paying bank may send a notice in lieu

of return as provided in § 229.30(f) of

this chapter (Regulation CC).

(c) Noncash items. A Reserve Bank

may require the paying or collecting

bank to which it has presented or sent

a noncash item to pay for the item in

cash, but the Reserve Bank may permit

payment by a debit to an account

maintained or used by the paying or

collecting bank on a Reserve Bank’s

books or by any of the following that is

in a form acceptable to the collecting

Reserve Bank: bank draft, transfer of

funds or bank credit, or any other form

of payment authorized by State law.

* * * * *

10. Section 210.10 is revised to read

as follows:

§ 210.10 Time schedule and availability of

credits for cash items and returned checks.

(a) Each Reserve Bank shall include in

its operating circulars a time schedule

for each of its offices indicating when

the amount of any cash item or returned

check received by it is counted as

reserves for purposes of part 204 of this

chapter (Regulation D) and becomes

available for use by the sender or paying

or returning bank. The Reserve Bank

that holds the settlement account shall

give either immediate or deferred credit

to a sender, a paying bank, or a

returning bank (other than a foreign

correspondent) in accordance with the

time schedule of the receiving Reserve

Bank. A Reserve Bank ordinarily gives

credit to a foreign correspondent only

when the Reserve Bank receives

payment of the item in actually and

finally collected funds, but, in its

discretion, a Reserve Bank may give

immediate or deferred credit in

accordance with its time schedule.

(b) Notwithstanding its time schedule,

a Reserve Bank may refuse at any time

to permit the use of credit given by it

for any cash item or returned check, and

may defer availability after credit is

received by the Reserve Bank for a

period of time that is reasonable under

the circumstances.

11. In § 210.11, the last sentence of

paragraph (b) is revised to read as

follows:

§ 210.11 Availability of proceeds of

noncash items; time schedule.

* * * * *

(b) * * * A Reserve Bank may,

however, refuse at any time to permit

the use of credit given by it for a

noncash item for which the Reserve

Bank has not yet received payment in

actually and finally collected funds.

* * * * *

12. Section 210.12 is amended by

revising paragraphs (a), (b), and (c)(1),

the first sentence of paragraph (d),

paragraphs (f) and (h), and the first

sentence of paragraph (i); and by

removing the last sentence of paragraph

(g) to read as follows:

§ 210.12 Return of cash items and

handling of returned checks.

(a) Return of items—(1) Return of cash

items handled by Reserve Banks. A

paying bank that receives a cash item

from a Reserve Bank, other than for

immediate payment over the counter,

and that settles for the item as provided

in § 210.9(b) of this subpart, may, before

it has finally paid the item, return the

item to any Reserve Bank (unless its

Administrative Reserve Bank directs it

to return the item to a specific Reserve

Bank) in accordance with subpart C of
48174 Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Rules and Regulations

part 229 of this chapter (Regulation CC),

the Uniform Commercial Code, and the

Reserve Banks’ operating circulars. A

paying bank that receives a cash item

from a Reserve Bank also may return the

item prior to settlement, in accordance

with § 210.9(b) of this subpart and the

Reserve Banks’ operating circulars. The

rules or practices of a clearinghouse

through which the item was presented,

or a special collection agreement under

which the item was presented, may not

extend these return times, but may

provide for a shorter return time.

(2) Return of checks not handled by

Reserve Banks. A paying bank that

receives a check as defined in § 229.2(k)

of this chapter (Regulation CC), other

than from a Reserve Bank, and that

determines not to pay the check, may

send the returned check to any Reserve

Bank (unless its Administrative Reserve

Bank directs it to send the returned

check to a specific Reserve Bank) in

accordance with subpart C of part 229

of this chapter (Regulation CC), the

Uniform Commercial Code, and the

Reserve Banks’ operating circulars. A

returning bank may send a returned

check to any Reserve Bank (unless its

Administrative Reserve Bank directs it

to send the returned check to a specific

Reserve Bank) in accordance with

subpart C of part 229 of this chapter

(Regulation CC), the Uniform

Commercial Code, and the Reserve

Banks’ operating circulars.

(b) Handling of returned checks. (1)

The following parties, in the following

order, are deemed to have handled a

returned check sent to a Reserve Bank

under paragraph (a) of this section——

(i) The paying or returning bank;

(ii) The paying bank’s or returning

bank’s Administrative Reserve Bank;

(iii) The Reserve Bank that receives

the returned check from the paying or

returning bank (if different from the

paying bank’s or returning bank’s

Administrative Reserve Bank); and

(iv) Another Reserve Bank, if any, that

receives the returned check from a

Reserve Bank.

(2) A Reserve Bank that is not

described in paragraph (b)(1) of this

section is not a party that handles a

returned check and is not a returning

bank with respect to a returned check.

(3) The identity and order of the

parties under paragraph (b)(1) of this

section determine the relationships and

the rights and liabilities of the parties

under this subpart, part 229 of this

chapter (Regulation CC), and the

Uniform Commercial Code.

(c) Paying bank’s and returning

bank’s agreement. * * *

(1) Authorizes the paying or returning

bank’s Administrative Reserve Bank,

and any other Reserve Bank or returning

bank to which the returned check is

sent, to handle the returned check (and

authorizes any Reserve Bank that

handles settlement for the returned

check to make accounting entries)

subject to this subpart and to the

Reserve Banks’ operating circulars;

* * * * *

(d) Warranties by Reserve Bank. By

handling a returned check under this

subpart, a Reserve Bank makes the

returning bank warranties as set forth in

§ 229.34 of this chapter, subject to the

terms of part 229 of this chapter

(Regulation CC). * * *

* * * * *

(f) Methods of recovery. (1) The

Reserve Bank may recover the amount

stated in paragraph (d) of this section by

charging any account on its books that

is maintained or used by the paying or

returning bank (or by charging another

returning Reserve Bank), if——

(i) The Reserve Bank made seasonable

written demand on the paying or

returning bank to assume defense of the

action or proceeding; and

(ii) The paying or returning bank has

not made any other arrangement for

payment that is acceptable to the

Reserve Bank.

(2) The Reserve Bank is not

responsible for defending the action or

proceeding before using this method of

recovery. A Reserve Bank that has been

charged under this paragraph (f) may

recover from the paying or returning

bank in the manner and under the

circumstances set forth in this

paragraph (f). A Reserve Bank’s failure

to avail itself of the remedy provided in

this paragraph (f) does not prejudice its

enforcement in any other manner of the

indemnity agreement referred to in

paragraph (c)(3) of this section.

* * * * *

(h) Settlement. A subsequent

returning bank or depositary bank shall

settle with its Administrative Reserve

Bank for returned checks in the same

manner and by the same time as for cash

items presented for payment under this

subpart. Settlement with its

Administrative Reserve Bank is deemed

to be settlement with the Reserve Bank

from which the returning bank or

depositary bank received the item.

(i) Security interest. When a paying or

returning bank sends a returned check

to a Reserve Bank, the paying bank,

returning bank, and any prior returning

bank grant to the paying bank’s or

returning bank’s Administrative Reserve

Bank a security interest in all of their

respective assets in the possession of, or

held for the account of, any Reserve

Bank, to secure their respective

obligations due or to become due to the

Administrative Reserve Bank under this

subpart or subpart C of part 229 of this

chapter (Regulation CC). * * *

By order of the Board of Governors of the

Federal Reserve System, September 10, 1997.

William W. Wiles,

Secretary of the Board.

[FR Doc. 97–24405 Filed 9–12–97; 8:45 am]

BILLING CODE 6210–01–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 610

Biological Product Standards;

Technical Amendment

AGENCY: Food and Drug Administration,

HHS.

ACTION: Final rule; technical

amendment.

SUMMARY: The Food and Drug

Administration (FDA) is amending the

regulations for biological products

standards to update a reference to the

United States Pharmacopeia (USP). The

agency has determined that the 1995

edition of the USP should be referenced

rather than previous editions. This

action is necessary to ensure the

consistency and accuracy of the

regulations.

DATES: The regulation is effective

September 15, 1997. The Director of the

Office of the Federal Register approves

the incorporation by reference in

accordance with 5 U.S.C. 552(a) and 1

CFR part 51 of a certain publication in

21 CFR 610.12(f), effective September

15, 1997.

FOR FURTHER INFORMATION CONTACT:

Timothy W. Beth, Center for Biologics

Evaluation and Research (HFM–17),

Food and Drug Administration, 1401

Rockville Pike, suite 200N, Rockville,

MD 20852, 301–594–3074.

SUPPLEMENTARY INFORMATION: Section

610.12(f) (21 CFR 610.12(f)) incorporates

by reference the 1985 edition of the USP

concerning test procedures for

membrane filtration. Since the USP has

been revised and the 1995 edition of the

USP (23d Revision, 1995) is more

readily available to the public, FDA has

determined that § 610.12(f) should

reference the test standards for the ‘‘Test

Procedures Using Membrane Filtration’’

in the 1995 edition, in lieu of the test

standards in the 1985 edition. The test

standards for membrane filtration in the

1995 edition of the USP are identical to