Front Page Titles (by Subject) Manchester Clearing House. - Money and the Mechanism of Exchange
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Manchester Clearing House. - William Stanley Jevons, Money and the Mechanism of Exchange 
Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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Manchester Clearing House.
Though the London Clearing House is entirely the birthplace of the system, and the spot where the work has been organized on the largest scale, it does not follow that it is in every respect the most suitable for imitation in commercial towns of less magnitude. At least two English provincial towns, Manchester and Newcastle, have established local clearing horses. The bankers of Liverpool, also, I am told, have recently arranged a private system of clearing among themselves; and it is possible that the bankers of other towns may have taken a similar step without the fact becoming generally known. Through the kindness of some members of the committee, I have received full information as to the working of the Manchester Clearing House. The business seems to have been arranged, chiefly, I believe, by Mr. E. W. Nix, with great success, and it may be useful to describe the arrangements in detail as they would be very suitable for adoption in many English, foreign, or colonial towns, which will doubtless before long establish clearing houses.
In the Manchester Clearing House the work is performed entirely upon loose forms, and not in account-books, as in London. Though these forms may seem rather numerous and elaborate, they greatly assist in the accurate and orderly settlement of the balance. The clearing clerk, before leaving his bank, sorts out the drafts, which he has to deliver, into thirteen parcels, one for each of the thirteen other banks, and then fills up thirteen lists, one for each parcel, in the Form No. 1 shown below, each cheque being represented only by the amount of money expressed in it. A copy of the list is entered in one of the books of the bank provided for the purpose.
Adding up each such list, he inserts the totals in one of the left-hand columns of the Form No. 2. He thus obtains a complete abstract of all the claims he holds upon other banks, and adding up the columns ascertains the aggregate "Out-clearing."
On reaching the Clearing House, the clerk walks round the room and lays on the desk belonging to each other bank the parcel of cheques and the corresponding list already described. In the course of a little time thirteen similar parcels and lists will be laid on his own desk by the clerks of other banks, and as they come in he compares the list with the cheques, verifies the addition, and if all be correct, enters the amount in one of the right-hand columns of the second form, against the name of the bank presenting the drafts. These parcels are called the "In-clearing," and represent all the claims of other banks upon the one in question, so that when all the thirteen amounts are entered, and the columns added up, the clerk learns the aggregate which his bank will have to pay.
At Manchester two clearings are held each day. The first at 11.15 a.m. is a preliminary one only, and no payment of balances is made. As soon as the columns for the first clearing are filled up, the clerk returns to his bank with the in-clearing parcel of cheques and drafts presented upon the bank. These documents are immediately examined by the proper officials in order to detect any which may be irregular, fraudulent, or, for want of funds, or other reasons, must be dishonoured. At the Clearing House the clerk has already made a first rough inspection, and returned any documents which were obviously irregular, but no draft is considered to be finally accepted until one hour after the clearing is over. The returned drafts are comparatively few, and, as soon as detected, are forwarded direct to the bank presenting them.
The second clearing takes place at 2.15 p.m, and is conducted just as in the morning. The second columns of the out- and in-clearing, in Form 2, having been filled and summed up, the totals of the first columns are added in, and the clerk learns the sum that has to be paid, and at the same time to be received, by his bank. The difference is the balance which he has either to receive or pay. These totals and the balance he copies into the following brief form, No. 3, which he hands to the inspector of the Clearing House.
The inspector now proceeds to verify the balances by inserting the amounts in Form No. 7, given on the next page, in an abbreviated form, only four of the names of the banks being inserted, to save space. In these forms the names of the banks are given in the briefest manner, and the Branch Bank of England is called simply "Bank."
It is evident that the total which some of the banks have to receive on balance must equal what the others have to pay, because every cheque has been added in twice, once in favour of, and once against, some bank. If the debtor and creditor columns of the seventh form, being added up, fail to balance, some error of account must have been committed, and all the work is submitted to careful re-examination until the error is detected. When all is correct, it remains only to effect the payments, which is done by means of credit and debit notes, directing transfers in the books of the Branch Bank of England, to or from the accounts of the clearing bankers. The payments are made, indeed, to and from the Clearing House, as a kind of fictitious entity; but as its payments and receipts each day exactly balance, the Clearing House requires no separate ledger account, except for small current expenses, or inconsiderable errors.
To effect the transfer the clerk of each paying bank fills up the double form, No. 4, as follows:—
The coupon on the left-hand side is a draft to be signed by the clerk, if he has authority for the purpose, or else to be carried by him to his principals to be signed, and then paid into the Bank of England. It directs the cashier to credit the Clearing House with the balance, and debit the sum to the paying bank in question. The authorized official of the Bank of England signs the corresponding form on the right hand, when the payment is made, as a receipt for the sum on behalf of the Clearing House.
When, on the other hand, the balance is in favour of a bank, Form No. 5, printed on green paper for the sake of easy discrimination, comes into use. It sufficiently explains itself.
There remains then only the question of the returned cheques. Even these do not require cash payment. The balance at the close of the day is paid only provisionally, and those cheques which have to be dishonoured are returned within an hour to the bank presenting them. Unless the irregularities be explained away, or removed, the presenting cashier then signs the allowing form, No. 6, which is an acknowledgment that so much money too much was received by him at the last clearing. This form is included by the bank dishonouring the cheques, in its out-clearing parcel, and the matter is rectified in the balance of the next clearing.
The settlement in the Manchester Clearing House is often effected in less time than it would take to read this account of the method, and the work goes on with noiseless ease, strongly contrasting with the turmoil of the London House. No doubt, the amounts cleared are comparatively insignificant in Manchester, the average daily sums being, in the years 1872, 1873, and 1874, respectively £226,160, £237,150, and £247,930, or little more than one-hundredth part of the daily transactions in the Lombard Street House.
The Manchester Clearing House is managed by a committee of bankers, of which the chief agent of the Bank of England in Manchester is the chairman, and the superintendence of the clearing work is conducted by an official of the Bank of England. Thus the Bank, while naturally taking precedence, harmoniously co-operates with the local bankers.