FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Cash Item in Process of Collection
February 12, 1987
Walter P. Doyle, Counsel
This responds to your February 5 letter. Your understanding seems correct. If your correspondent bank were to fail the day after receiving a cash letter from you for $4 million and giving your bank provisional credit therefor, the FDIC as receiver for the insured correspondent would return to your bank the items covered by the cash letter for collection through other channels, except for those items as to which final payment had already been made and those items that had already been forwarded to other banks in the collection chain before your correspondent was closed. Collection proceeds for these forwarded items would be received by FDIC and remitted to your bank as your agent and would not be considered part of your deposit balance with the failed correspondent and, therefore, would not be subject to the $100,000 insurance limit.
Of course, as we discussed, any items as to which final payment occurred before the correspondent bank was closed would be part of your deposit balance with the correspondent and would be subject to the $100,000 limit. Final payment normally occurs as soon as an item is paid in cash or posted to the drawer's account by the drawee bank, or when final settlement is made in the clearing process without retaining right of revocation, or when a provisional settlement is not actually revoked within the time limit required by law, clearinghouse rules or other agreement.
I hope this is fully responsive to your question. Let us know if any further clarification is needed.