Clearing-house.

Clearing-house. The business facilities afforded by bankers to their customers in collecting their bills, cheques on other firms, and similar obligations, early necessitated an organised system of interchanging such documents, whereby labour might be saved, and the cash-balances required in settlements reduced. It is claimed by a French writer that the Chambre de Compensation de Lyon, as reorganised in 1667, was practically similar to the modern clearing-house; and the Scottish bank-note exchanges (a species of clearing) were established as far back as 1752. The present system, however, originated in London at an unknown date. It is said that the clerks, when collecting from the various banking-houses, began to interchange the documents of mutual indebtedness in the street, and subsequently at taverns or any banking-office where they were tolerated. Some time previous to 1773 a special apartment was devoted by the bankers to the purpose; and in 1810 the building in Lombard Street, since known as the 'Clearing-house,' was set apart for the clearing, under the direction of a committee of bankers, and the immediate management of two inspectors. The joint-stock banks were not admitted to the clearing-house until 1854. Four years later the country-cheque clearing was established as a department of the clearing-house. In 1864 the Bank of England entered, but it clears only against the other banks. Only twenty-seven banks, including the Southwark branch of the London and Westminster Bank, are members. Other London bankers arrange with clearing banks to represent them.

The system pursued is as follows: From time to time during the day, each firm transmits to the clearing-house cheques and bills payable by other bankers, classified according to the banks retiring them, account being also taken of obligations coming against their firm. At a certain hour the doors are closed, and the balances struck. Time is allowed for each bank to decide as to honouring the drafts upon it, after which the final adjustment of balances takes place. Subjoined is an actual balance sheet as at the close of a day's clearing.

The figures in either column are the sums due to or by Glyn & Co. in account with each of the other members of the clearing-house, after allowing for their mutual indebtedness; the differences as they occurred that day being also shown interlined; as well as the total amount of vouchers returned unpaid. The result was that after placing all their claims on the other banks against the claims of the latter on them, there remained a sum of £252,355, 3s. 11d. due by Glyn & Co. on the general balance. This was more than accounted for by the claims of the Bank of England, who only clear on one side. Each bank makes up a similar form. The inspectors having satisfied themselves that the general balance is correct (all the members having agreed between themselves, and the total debtor balances equalling the creditor), warrants for settling the balances by transfer at the Bank of England, certified by the inspectors, are passed between the members. Formerly these balances were settled in cash. Thus, transactions to the amount of several millions daily are settled without the use of a bank-note or coin. The importance of the system is illustrated by the fact, stated in evidence before the House of Commons, that the London and Westminster Bank, by getting admission to the clearing-house, were enabled to reduce their cash-balance by £150,000.

The record of the total amount of bills, cheques, and drafts passing through the clearing-house is regarded as an index of the state of trade; and as London is the chief centre of trade for the world, this record has a world-wide range. The sums passed through the clearing-house are greatest on certain 'special days.' These are (1) the 4ths of the month, trade bills being mostly dated on the first of the month, and, with three days' grace, falling due on the 4th of some succeeding month; (2) consols settling days, once a month; (3) Stock Exchange settling days, twice a month. The following figures, commencing with the earliest record, show the magnitude and growth of the clearing-house work: (1839) £954,401,600; (1868) £3,425,185,000; (1873) £6,070,948,000; (1878) £4,992,398,000; (1883) £5,929,404,000; (1887) £6,077,097,000; (1890) £7,801,048,000; (1893) £6,478,013,000. In most of the large towns in England there is now a clearing-house, and in Scotland the system, including the separately conducted note-exchanges, has been thoroughly organised, so that clearings take place all over the country, balances being settled in Edinburgh.

The first clearing-house in America was started in New York on 11th October 1853, and the system has since assumed enormous proportions throughout the United States; in 1888 there were upwards of 30 clearing-houses. The progress of the New York clearing-house will be seen from the following figures for the years ending 30th September (1854) £1,150,091,197; (1868) £5,696,857,727; (1873) £7,092,210,565; (1878) £4,501,687,688; (1883) £8,058,633,051; (1891) £8,513,600,000.

The system has more recently spread to the continent of Europe. La Chambre de Compensation des Banquiers de Paris was formed March 1872, the clearing-house of Berlin in 1883, and that of Vienna in 1864; but their transactions are greatly less than those of London and New York. While it was in connection with banking that the clearing-house system originated, the principle (in modified forms) has been adopted by other departments of business. The London Railway Clearing-house was founded in 1842, the Stock Exchange Clearing-house in 1874, and others more recently. See Howarth, Our Clearing System (1886); Francois, Clearing House et Chambres de Compensation (Lille, 1887); The New York Clearing House, its Methods and Systems (New York, 1888).

THE RAILWAY CLEARING-HOUSE is an association instituted to enable railway companies in Great Britain to carry on, without interruption, the through traffic in passengers, animals, minerals, and goods passing over different companies' lines of railways, and to afford to the traffic the same facilities as if the different lines had belonged to one company. The arrangements are conducted in London by a committee, the members of which are appointed by the directors of the companies who are parties to it; and the association is regulated by the Railway Clearing Act, 1850. The companies are each represented on the committee by a delegate. The committee holds stated meetings four times a year, and oftener if necessary.

Subordinate committees of railway officers also meet from time to time. The accounts of the clearing system, and the balances due to and from the several companies, are settled and adjusted by the secretary of the committee, with appeal to the committee, whose decision is final. The clerks at stations of the various companies send abstracts of all traffic monthly. The collected passenger-tickets are also sent monthly. Number-men are employed by the clearing-house at junctions where the lines of different companies meet, who note the number of every carriage, horse-box, wagon, van, and sheet or wagon-cover on the train going beyond the parent line, and make weekly returns. The returns from the companies' stations, together with those of the number-men, enable the accounts of mileage and demurrage incurred to be made up by the clearing-house, by whom the companies are debited and credited, as the case may be. A debtor and creditor account is sent from the clearing-house monthly to each company, showing on the one side in one sum what the company has to receive from all other companies as their proportion of through passenger fares, through goods and parcels rates, and mileage and demurrage of carriages, wagons, and sheets; and on the other side, also in one sum, what the company has to pay to others out of moneys drawn by them. The balance is struck as against, or in favour of, the clearing-house (as a common debtor or creditor). In addition to declaring the balances, the clearing-house supplies to each company monthly statements of the details of the traffic of each station.

The number of companies parties to the clearing system was recently between sixty and seventy, including practically all the working railway companies of Great Britain; and the amount of business of an intricate kind which was involved may be judged of from the foregoing particulars, and from the number of separate settlements, which amount to eleven and a half millions per annum, representing seventeen millions of money. The staff now numbers nearly two thousand. Regulations are published annually by the clearing-house for the guidance of the different companies in connection with the system.

The clearing-house system is made available also for the recovery of lost articles of luggage. Reports giving the description of each lost article are sent from all stations daily to the clearing-house, and by this means almost all lost luggage is restored to the owners. The reports number nearly half a million per annum. The government scheme of the parcel post involves a quarterly payment by the Post-office to the whole of the railway companies of Great Britain and Ireland, and the apportionment as between the companies is effected through the machinery of the clearing-house. There is a similar railway clearing system in Ireland, with its headquarters in Dublin.

The general railway clearing-house has never been established in the United States, but there are several of limited extent, each embracing such lines as belong to an individual system. Thus, one at Philadelphia is a common centre for an association of lines, with about forty members. Others are at Atlanta (Ga.), Louisville (Ky.), Boston (Mass.). There are besides various railway commissions, pools, and associations partaking of the nature of a limited clearing system.