The sender agrees to indemnify each Reserve Bank for:
A.
Any loss or expense resulting from sender's lack of authority
B.
Any action taken by the Reserve Bank within the scope of its authority in the handling of the item
C.
An electronic item that is not a substitute check is not liable for any amount paid by a Reserve Bank that is attributable to the Reserve Bank's own lack of good faith or failure to exercise ordinary care
D.
Any warranty made by the Reserve Bank under Regulation J, Regulation CC, or the UCC
The correct answer is A. Any loss or expense resulting from the sender's lack of authority. In the context of financial transactions processed by Reserve Banks, the sender's agreement to indemnify the Reserve Bank typically includes covering any loss or expense that arises due to the sender's lack of authority to initiate or execute the transaction. This indemnification ensures that the Reserve Bank is protected against potential liabilities resulting from actions it undertakes based on instructions or items received from the sender, under the assumption that the sender has the requisite authority and legitimacy to initiate those transactions.
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