CLEARING HOUSE. A country banker " clears " the cheques which he holds upon another banker in the same town in the daily exchange or daily clearing. That is, banker A, by his clerk, sends to banker B all cheques drawn upon him, and banker B hands over to the clerk any cheques he holds drawn upon banker A. The difference between the two sets of cheques is settled by cash, draft, or London Payment.
In large towns instead of each banker's representative visiting the other bank offices, they all meet at a centre, called the Clearing House and effect a mutual exchange. In this way each bank, instead of settling differences with, say, five or six other banks, merely pays over or receives the net differ ence through the bank which manages the clearing.
There are Clearing Houses at Birmingham, Bristol, Leeds, Leicester, Liverpool, Man chester, Newcastle and Sheffield.
The cheques dealt with in the Country Clearing Houses are only those which are drawn upon the banks in the same town.
or within a short distance thereof. Cheques upon other banks in England and Wales are sent to London to be collected through the Bankers' Clearing House, in Post Office Court. Lombard Street.
The London Bankers' Clearing House is worked practically on the same principle as the Country Clearing Houses. Each member of the Clearing House sends, by a clerk, to the Clearing House the cheques held upon other bankers who are members, of upon the country correspondents of any of the members, or other bankers for which they are agents. Each . lerk hands over the cheques he has upon the other bankers and receives the cheques upon the bank which he represents. The cheques received by a clerk of A bank from, say, B Bank is his " in " clearing, and the cheques given by him to that bank is his " out " clearing. At the end of the day the difference between the " in " and " out " clearing is the amount due to be paid by A to B or B to A, as the case may be. Each bank, however, does
not settle separately with each other bank, but a form, called the summary sheet, is filled up, showing in two columns the amounts due to or owing from all the other members of the House.
The difference between the two columns is the net balance either to be received or to be paid. When the balance is due to be paid, that is, is against a bank, the bank transfers the amount due from its account at the Bank of England to the Clearing Bankers' account. The transfer is effected by means of a white ticket similar to form No. 1. (See below.) If the balance is due to be received, the bank obtains a transfer of the amount from the Clearing Bankers' account to its own account at the Bank of England, by a green transfer ticket signed by the bank and an Inspector of the Clearing House. See form No. 2, Scotch and Irish cheques are not cleared through the London Clearing House. There is, however, a clearing house in Edinburgh, in Glasgow, and in Dublin.
For the names of the members of the London Clearing House, see CLEARING BANKS.
Gilbart states that the Clearing House was founded in 1775.
The total amount of cheques, bills, etc., which passed through the Clearing House Daily Average.
in 1839 was £954,401,600 £3,066,600 1868 £3,425,185,000 £10,978,200 1907 £12,730,393,000 £41,467,100 1908 £12,120,362,000 £39,351,800 1909 £13,525,446,000 £44,056,800 There are four clearings each day, viz. : Metropolitan, Town (morning), Country Cheque, and Town (afternoon).
Cheques with " T " printed on the left-hand bottom corner are included in the Town Clear ing ; those with " M " are included in the Metropolitan Clearing ; and those with " C " are included in the Country Clearing.
The fourth day of a month, when so many bills ale payable, and the Stock Exchange settlement days are very busy times in the Clearing House.