The liability of paying and returning banks is subject to the following conditions and limitations EXCEPT:
A.
The paying or returning bank that sends an original check that is returned as a substitute check or paper or electronic representation thereof will not be responsible for amounts the Reserve Bank pays under Regulation CC absent the paying bank's or returning bank's agreement to the contrary
B.
Regulation CC governs the paying and returning banks' liabilities when returning a substitute check or paper or electronic representation thereof
C.
The paying or retuning bank that sends an electronic item that is not a representation of a substitute check will not be liable for losses attributable to the Reserve Bank's own lack of good faith or failure to exercise ordinary care
D.
Paying and returning banks agree to indemnify each Reserve Bank for any loss or expense resulting from the paying or returning bank's lack of authorization or any action by a Reserve Bank within the scope of its authority related to the return of the check or any warranty made by the Reserve Bank
Answer is A. D is right option according to FEDERAL RESERVE SYSTEM .
Explanation for D: Paying bank or returning bank’s liability to Reserve Bank. (i) Except as provided in paragraph (c)(5)(ii) of this section, a paying bank or returning bank agrees to indemnify each Reserve Bank for any loss or expense (including attorneys' fees and expenses of litigation) resulting from— (A) The paying or returning bank's lack of authority to give the authorization in paragraph (c)(1) of this section; (B) Any action taken by a Reserve Bank within the scope of its authority in handling the returned check; or (C) Any warranty or indemnity made by the Reserve Bank under paragraph (e) of this section or part 229 of this chapter. (ii) A paying bank’s or returning bank’s liability for warranties and indemnities that a Reserve Bank makes for a returned check that is a substitute check, a paper or electronic representation thereof, or.
The correct answer is D. Paying and returning banks agree to indemnify each Reserve Bank for any loss or expense resulting from the paying or returning bank's lack of authorization or any action by a Reserve Bank within the scope of its authority related to the return of the check or any warranty made by the Reserve Bank. This option does not correctly describe a condition or limitation on
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