Question 215.— Every clearing bank in London, England, keeps a clearing account with the Bank of England, where is also kept an account known as the " Clearing Bankers' Account." Daily settlements are made by crediting or debiting this account as balances happen to be in favour of or against each bank, without the employment of coin or currency. Why has this simple system not been introduced in Canada in preference to the more cumbrous method of settlement by exchange of " legals " ?

Answer.—The immediate settlement in London is made by a cheque or voucher, representing a transfer from one account to another, but that does not cover all the work involved, for the clearing banks probably make deposits in and withdrawals from the Bank of England daily. Settlement under our clearing system involves only one deposit or one withdrawal daily, and that in large notes good only between banks, so that the system cannot properly be called " cumbrous " even as compared with London.

The London system has grown out of the unique position of the Bank of England, and could probably not be copied anywhere else in the world. Canadian banks would not generally be likely to keep their reserves in the form of a deposit with another bank, even if a bank willing to accept such deposits should be found.