The Exchanges between the Banks.
Since the Act of 1845-when other banks besides the Bank of Ireland acquired the power of issuing notes in Dublin-a system of clearing, or, as it is called, of exchanges, has been established, similar to that established in Edinburgh. The following is a copy of a clearing balance-sheet :-
Balances of Exchanges with other Banks, on _______________, 18 .
1 It may be stated here that the circulation of the Issue Department of the Bank of England is at present £15,750,000 more than the amounts of gold and silver held in that department. The amount of the circulation in the bands of the public is found by deducting the amount of bank notes in the Banking Department from the amount of circulation of the Issue Department.
Here we may observe that all the banks that clear are banks of issue; and the clearing in Dublin includes all the banks of issue in Ireland, although three of these banks have their head-quarters in Belfast. Two of the Belfast banks clear by their agents. The Bank of Ireland is the agent for the Northern Banking Company, and the Ulster Bank has a branch in Dublin. It will be observed that the Bank of Ireland-the chartered bank-is a member of the clearing; and, in fact, the clearing is held daily, in one of the rooms of that establishment. The differences are paid daily, in exchequer bonds. The following are the amounts required to be held by each bank :-
The Bank of Ireland
The Provincial Bank
The National Bank ....
The Ulster Bank ....
Those banks in Dublin that are not banks of issue are not members of the clearing. All the non-issuing banks, however, have accounts with the Bank of Ireland, and pay into that establishment the cheques they may have on the other banks. The issuing banks which attend the clearing have no account with the Bank of Ireland.
This system of clearing appears to work very satisfactorily. The following is an extract from a letter I received from an Irish banker on the subject :-
"The settlement of our 'exchange balances' in Dublin, through the use of exchequer bills, works very well. The great evil, previously, was, that when these balances were of magnitude, Dublin was such a limited money market, there was difficulty and expense in raising the needful quantity of Irish money for the purpose. If you anticipated the balance to be heavy against you, it was requisite to prepare some time before, and to have your funds lying idle and unproductive until the crisis arose. Now, we have exchequer bill interest for our surplus, and the power of replenishing our stock account whenever required by drawing on London, thus possessing the unbounded advantages of the greatest money market in the world. In point of fact, the arrangement has virtually changed the venue, and made London the actual and final place of settlement, through machinery worked in Dublin."
Amended and Revised March, 1873, governing the Exchanges at Dublin. Established December 8, 1845.
1. The hours for making the exchanges to be-Forenoon-For notes and cheques, 10 o'clock. Afternoon-Final clearing for cheques, 2 o'clock. Except on
Saturday, when the hours to be 9.30 a.m., and 12 o'clock noon.
In order to establish punctuality, any bank not represented in the Clearing Room fifteen minutes after the hours specified, to be excluded from that exchange.
2. The payments of the balances shall be made in exchequer bonds, except for the fractional parts of £500, which may be paid in notes of the particular bank debtor.
3. The exchequer bonds, which are not to be used for any other purpose, shall bear the distinguishing mark "Dublin Exchanges," and the stamp of the original holders, and shall be received at par, with the interest that may be due, when a transfer takes place.
4. The amount of exchequer bonds to be kept in the circle is fixed at £400,000, and is apportioned as follows :-
Bank of Ireland ....
Provincial Bank ....
National Bank ....
Ulster Bank ....
And each bank shall maintain its quota at all times, as hereafter provided.
5. The exchequer bonds to be as nearly as practicable nine-tenths of £1,000, and one-tenth of £500.
6. The amount of exchequer bonds held by each bank shall be stated every day in the Clearing Room.
7. No bank shall be obliged permanently to hold more than one-third above, or be allowed to reduce more than one-third below its fixed quota of exchequer bonds; when, however, exchequer bonds have accumulated with some banks and are required by others, it shall be imperative on the banks so situated to buy or sell; the bank holding the greatest amount in excess of its quota, being bound to sell to the bank deficient the amount required for the legitimate purposes of the exchanges; no bank, however, in such case being bound to reduce its stock below its original quota, and the bank seeking to purchase shall buy from the bank holding the greatest proportionate amount above its quota.
8. When exchequer bonds have accumulated with any bank to more than one-third above its quota, it shall have the power to call upon the bank or banks holding the smallest amount in proportion to their quota, to purchase; but it shall not be imperative upon any bank to purchase more than will bring up its stock to two-thirds of it3 original quota.
9. The hank seeking or being called upon to buy exchequer bonds from banks in excess of their quota, shall pay for such bonds by a credit on London, at not less than two or more than five days' date, at option of purchaser, and interest for the number of days the drafts may have to run, at rate of exchequer bonds, or pay the amount in gold at the option of the seller of the bonds.
10. Each bank is to be always liable for the income-tax on the interest of its original quota of exchequer bonds and no more.
11. The exchanges are to be made at the Bank of Ireland, who undertake to pay to those banks who are creditors in the exchanges, the exchequer bonds received from banks who are debtors in the exchange, but the Bank of Ireland shall not be in any way held responsible for the exchange transactions, or otherwise, soever.
12. The statement of the balances, after they are struck, to be sent to the respective banks from the Clearing Room by their clerks, and the clerks of the banks' creditors to be in waiting to receive the amounts due to them at 2.30 o'clock.
13. Any bank, a party to this agreement, to have the power of withdrawing from it and receiving back its exchequer bonds at par, upon payment of them, if needful, upon giving three months' notice.
14. No bank, a party to this agreement, shall directly, or through any agent, demand gold from, or pay gold to, any other bank, a party to this agreement, except as hereinbefore provided, unless under special agreement between any two of them, mutually agreeing to pay and receive a sum of gold.
15. All orders payable on demand, whether in Dublin or in country towns, to be passed through the Clearing Room; the orders on provincial towns at the morning clearing only, up to, but not later than 12 o'clock.
Deductions for commissions to be distinctly specified in a note attached to the documents previously to their being brought to the Clearing Room.
Documents returned dishonoured shall not pass through the Clearing Room.
The violation of these regulations by any bank to be considered a virtual withdrawal of that bank from this agreement.