This section is from the "Practical Banking" book, by Albert S. Bolles.
As the balances paid and the balances received are the same (errors excepted), so the amount credited to the clearing bankers' account each day must be the same as the amount debited. It is only a means by which the debtor banks pay the creditor banks on each day by a simple transfer, without handling any cash. Previous to 1854 balances were paid in cash. The per cent, of balances to clearings is considerably greater at London than at New York, and has shown a marked increase. In 1810 the balances were 4.68 per cent, of the clearings; in 1839, 6.94 per cent., and in 1879-80, 12.16 per cent., as compared with 4.96 per cent, at New York in 1879. The balances are probably greater on account of the country clearings.
By having three clearings instead of one, and allowing banks to bring so many successive charges at intervals to each clearing, instead of one charge delivered precisely at a given hour, the Clearing-house work occupies very much more time than at New York, where the transactions are considerably larger. In fact, substantially, the whole day is spent by the clearing clerks at the Clearing-house, or in going to and from it, whereas at New York an hour, or less, for each clerk and messenger suffices for the whole work. On the other hand, by having so many clearings, and the heaviest at the close of the day, mercantile paper sent through the clearing is more promptly presented.
The Manchester Clearing-house was established in 1872, and has, since that date, been under charge of Mr. D. T. Brewer, as inspector. The work there is performed on loose forms, and not in account books, as at London. The work is done more nearly on the plan prevailing at New York, which is, in several respects, an improvement on that prevailing at London. There are two clearings daily at the Branch of the Bank of England, the first at 11.15 A. m. (a preliminary one), and the second at 2.15 P. M. The clearing is quickly accomplished, and "goes on with noiseless ease, strongly contrasting with the turmoil of the London house." This is, of course, owing in part to the immensely larger transactions effected at the latter. At Manchester each of the twelve clearing bankers is represented by a single clerk, who delivers and receives the vouchers and adjusts the accounts. The balances for the day are settled after the close of the second clearing by transfers on the books of the Bank of England, the forms being very similar to those used at London. The Clearing-house at Newcastle-on-Tyne was established January 2, 1872, and embraces seven members. On ordinary days there are three clearings daily, usually at 11.15 A. M., 2.15 and 3.15 P. M. On January 1st there is one at 10.30 A. M. On Saturdays and holidays there are two clearings, usually at 11.15 A. M. and 1.15 P. M. Articles dishonored are returned through the Clearing-house on the same day, not later than forty-five minutes after the commencement of the last clearing. The methods of doing the business and paying balances are similar to those in use at Manchester. The total of its transactions in twelve years has been £ 332,470,125, as compared with £ 1,043,360,000 at Manchester. The operations of the Newcastle Clearing-house are conducted at the Branch of the Bank of England, under charge of a committee, of which the agent of the bank—at present Mr. J. B. Fairley—is chairman.
There are also Clearing-houses at Liverpool, Edinburgh and Dublin. At Edinburgh there is one general clearing daily, opened at one and closed for delivery at fifteen minutes past one P. m., except on Saturday, when it opens at eleven and closes at fifteen minutes past. The Bank of Scotland and the Royal Bank of Scotland undertake the settlement each alternate month. There is also a note exchange daily at 10 a. m., except on Monday, and a second exchange at 1.30 p. m. on Saturday for large notes only. On Monday and Thursday the balances are included in the general settlement of the exchange and clearing. On other days the settling bank receives from the debtors and gives to the creditors exchange vouchers for the respective balances within one hour after the closing of the Clearing-house, and these vouchers are brought into the next clearing, and bear interest, included in them, at two per cent, until that clearing. Each document cleared, except notes, is to bear a Clearing-house stamp, containing the name of the clearing bank and the date, also the stamp of any district branch at which it may have been cashed. Documents dishonored are settled between the banks, unless drawn on a branch, in which case they may be sent through the clearing the next day. These banks use clearing books having every alternate sheet perforated down the inside margin. The charges against the other banks are written up in pencil on the unperforated sheets, and by the aid of a sheet of carbonized paper placed underneath, an impression of the items is taken on the perforated sheets. These duplicates are then torn out and handed over with the corresponding articles to the clerks of the other banks, who simply compare the one with the other, so as to save the time and trouble of taking down afresh in their own books the amounts of the various articles. When the clerks return to their respective banks, these duplicates are gummed upon the margins from which their own delivering sheets had been detached, preserving a convenient record of the articles delivered to, and the articles received from, each bank following each other. All abstracts of totals, balances and the like, are kept in a permanent form, written in ink. The paid-up capital of the Edinburgh clearing banks is £ 8,250,000.