EXCHANGES. The cheques which each banker in a town holds drawn upon the other bankers in the same town are collected each day by means of the " local clearing " or " exchanges." According to the size of the town and the quantity of cheques, there may be one, two or even three " exchanges " in one day : usually a settlement takes place only at the final exchange of the day.
In its simplest form, if banker X holds cheques drawn on banker V, he sends a clerk, " the exchange clerk," with the cheques to V. The clerk hands the cheques to Y and at the same time s exchange clerk hands to X's clerk any cheques which he may have drawn upon X. Each clerk makes a list, usually in an " exchange book," entering on the one side all cheques handed over and on the other side all cheques received. The difference between the two sides is called the " balance of exchange," and is settled be tween the two banks either in cash or by a London draft or through their respective London offices or London agents. If the cheques received by X amount to more than the cheques given to Y, the ex change is against X and in Y's favour, as X has to pay Y the difference. If, on the other hand, X gives Y a greater amount than he receives, the balance is in favour of X, and he receives payment of the difference from Y.
If there are other bankers in the town. X's clerk may visit all of them in turn and exchange cheques with each.
In some towns one banker undertakes the visits during one week, and another banker takes the duty next week and so on. But where there are several bankers it is the custom for a representative from each to meet at a certain bank, or in a particular room, and mutually exchange cheques. A
settlement may be made separately by each one with the others, or one banker may adjust the various differences of the rest, with the result that each has only to pay or receive one amount.
Each cheque should bear upon its face the stamp of the presenting banker.
Any unpaid cheques must be returned the same day, and it forms a matter of local arrangement as to the hour up to which they may be returned. In some cases, in large towns, where it is inconvenient to return an unpaid cheque arising out of the last clearing for the day, a local arrangement may exist for holding it over till the following morning.
" Retui ns " which are too late to form part of the day's settlement are sometimes paid in cash or settled specially, or, in some banks, a signed voucher is given for the returned cheque, and the voucher is passed through in the next day's exchange just like a cheque.
Cheques paid to the credit of a customer's account, which are drawn upon another banker in the same town, may be presented for payment on the day of receipt or held until the next day, but in practice all cheques received up to the time of the exchange are passed through the same day.
Cheques upon banks in other towns are collected through the London Clearing House, unless they are sent direct. (See CLEARING HOUSE.)