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4000 - Advisory Opinions

Insurance Coverage of Closed Bank Correspondent Accounts


March 18, 1988

Roger A. Hood, Assistant General Counsel

This reply is in reference to my letter of March 9, 1988 to clarify that:

1) If items were in the process of collection (i.e., have not been finally paid or finally settled) through your bank's correspondent account at *** or *** (collectively referred to as "***") and if *** were placed into receivership, those items, if still at the bank at the time of its closing, would be returned by the receiver to your bank (the depositor). Items drawn on other banks which a bank has received for deposit and sent out for collection prior to its insolvency and closing are handled by the depository bank as agent of its customer. Funds received in settlement for such items are in the nature of trust funds and paid by the receiver, acting on behalf of the closed bank, to the customer and do not become assets of the closed bank. In the event that the items were finally paid and funds were received by FDIC, acting as the bank's receiver, those funds immediately would be paid over to the bank's customer, who, as principal, is entitled to the collection item proceeds.

2) Any item that was deposited in the correspondent account that was finally paid and settled prior to implementation of a receivership would be aggregated with the other funds in your bank's correspondent account and insured by the FDIC up to $100,000.

By this letter, I confirm that the foregoing statements represent my opinion as to the treatment of items deposited for collection under the circumstances described in your March 7, 1988 letter. Please disregard the opinions expressed in my letter to you dated March 9, 1988.

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