This section is from the "Practical Banking" book, by Albert S. Bolles.
The matter cleared at the morning clearing consists, as a rule, of bills and marked checks. These bills are bills which have been discounted by the bank or held for collection on account of customers. During the afternoon of the day before they fall due, they are passed from the bill department into the clearing department, so as to let the clearing clerks get an early start next morning. On the morning of the day on which they mature, the clearing clerks sort them into various packages, one for each of the other twenty-five (or if the Bank of England twenty-six) clearing banks. Thus those which fall due at the London and Westminster Bank are sorted into one parcel, and the same in other cases. The amounts only are then entered in the spaces left under the respective headings of the other banks in the Morning Bill Book. The clearing clerks then sum up the entries in this book, and check the aggregate of the various totals with the sum supplied to them on a memorandum by the bill department of the bank.
If right, their clearing work is checked so far, and they then transfer the various totals into the Out-clearing Book. Having done this they next proceed to deal with the "marked checks." These are checks which have been paid in by customers on the afternoon of the day before, too late for the day's clearing. Every afternoon each bank sends these checks out to the other banks upon which they are drawn to be marked for payment. This marking consists of the initials of one of the cashiers put upon the checks as an acknowledgment that they are all right and will be duly paid in the clearing next morning. The banks send out these checks to be marked chiefly for the convenience of their customers, but partly for their own protection in case a cashier might pay against an uncleared check which might afterwards prove to be bad. If a banker chose not to send out such checks for marking, no question could be raised by his customer as to want of due presentation, because it is distinctly stated on the pay-in slips with which each customer is supplied, or the customer is acquainted in some other form, that checks not paid in by half-past three may not be cleared the same day. These marked checks are sent to the Clearing-house the first thing in the morning along with the bills, and the two together form what is termed the "first charge." Some of the banks try, and some manage, to get the remittances received in their morning letters into their first charge; but as the morning clearing closes for delivery at eleven o'clock, none but those bankers who begin business very early can put through so large an amount of work with any degree of satisfaction in time for the morning clearing.
Although the afternoon town clearing nominally begins at 2.30 P. M., and closes for delivery at 4 P. m., the Clearing-house clock is always kept five minutes behind Greenwich time, so that the representatives of the various banks have always five minutes grace allowed them.
To the afternoon clearing, which is the heaviest in the day, the banks, as a rule, send in some six or seven "charges." But, in exceptional times, for instance, during the progress of dividend payments, or when, from any cause, business is particularly brisk, many more charges are sent in. But in ordinary times about half-a-dozen is the usual number. At the opening of the afternoon clearing the first charge delivered is usually composed of remittances received in the morning letters. Then about three o'clock the second charge is sent in, and is composed of the checks and other vouchers received over the counter during the morning by the cashiers for the credit of customers. Then, about every twenty minutes or so, from three o'clock till four, charges of the same description are sent in. At two or three minutes past four (by the bank clock) a final charge, consisting of a few articles of large amount, or articles which, for some reason, the banker may be particularly anxious to clear, may be sent in. There is thus a clerk running between each bank and the Clearing-house from time to time, delivering the charges he has upon the other banks.
The first charge sent to the Clearing-house during the day is marked on the back of the last check thereof, with the total amount which in our Clearing-houses is entered on the exchange slip attached to the checks.
Country notes are not exchanged at the Clearing-house, but are taken round to the bankers who are agents for the country bankers, and exchanged for tickets, which are passed through the afternoon, clearing.
As the clerks reach the Clearing-house with their successive charges they distribute their packages around the room to the desks of the clerks representing the several paying banks. These clerks, corresponding to our settling clerks, immediately begin to enter these charges in the In-clearing Books, in columns bearing at the head the name of the presenting bank. As soon as this is done the vouchers are immediately sent away to the bank at which they are payable, where they are critically examined and, if correct, posted in the ledgers. In case there is cause for refusing payment, either for want of funds, irregular endorsement, or irregularity of any kind, they are sent back to the clearing and returned to the delivering banker with a distinct answer marked upon each check of the cause of the return. These returns must be sent back to the Clearing-house not later than 5 P. M. on ordinary days, and not later than 5.15 in any event, and are entered again as a reverse claim by the bank dishonoring them on the bank presenting them. The clearing clerks do not wait for the returns before they begin the balancing for the day. The moment the Clearing-house clock strikes four (five minutes past by Greenwich time) they begin the process of balancing, leaving the returns, if any, to be entered afterwards. Notwithstanding the vast daily transactions of the London Clearing-house, the aptitude of the clerks for their particular work renders errors of infrequent occurrence. The system of marking the first and largest charge on the back facilitates the balancing by the opportunity it gives to each clerk of checking the major part of his work early in the day.