clearing house system

clearing house system

a centralized mechanism for settling indebtedness between financial institutions involved in money transmission and dealers in commodities and financial securities. In the case of UK commercial banking, for example, the London Clearing House collates all of the many thousands of cheques drawn, transfers bank deposits from one bank to another, cross-cancels them, and calculates the net balances owing or receivable for each bank. The COMMERCIAL BANKS' balances at the Bank of England are then debited or credited as appropriate. A similar ‘clearing’ function is performed in the commodities and financial securities market by, for example, the International Commodities Clearing House and the London Financial Futures Exchange and TAURUS. See FINANCIAL SERVICES ACT 1986, FINANCIAL SYSTEM, BANKING SYSTEM, COMMODITY MARKET, STOCK MARKET, FORWARD MARKET.

clearing house system

a centralized mechanism for settling indebtedness between financial institutions involved in money transmission and dealers in commodities and financial securities. For example, in the case of UK commercial banking, when a customer of Bank A draws a cheque in favour of a customer of Bank B, and the second customer pays in the cheque to Bank B, then Bank A is indebted to Bank B for the amount of that cheque. There will be many thousands of similar transactions going on day by day, creating indebtedness between all banks. The London Clearing House brings together all these cheques, cross-cancels them and determines at the end of each day any net indebtedness between the banks. This net indebtedness is then settled by transferring balances held by the COMMERCIAL BANKS at the CENTRAL BANK (BANK OF ENGLAND).

A similar ‘clearing’ function is performed in the commodities and financial securities market by, for example, the International Commodities Clearing House and the London Financial Futures Exchange. See STOCK EXCHANGE, FUTURES MARKET, COMMODITY MARKET.

References in periodicals archive ?
The National Savings has become first-ever non-bank member of Banking Clearing House System which has reduced cheque processing time from 7-10 days to 1-3 days only.
Have access to the Automated Clearing House system.
Airlines association IATA has set up emergency procedures for its clearing house system which serves 400 airlines.
This will enhance the country's participation in intra-regional trade and commerce," the report said, noting that the Bank would focus updates for the real-time gross settlement system, scripless securities settlement system, automated check processing and automated clearing house system.
However, in 1913-14, the Federal Reserve System replaced the clearing house system.
The business member, person-to-person payment service Dwolla, keeps all its deposits at the credit union, which also hosts its transactions through the Automated Clearing House system.
Chase said it is working to proactively identify potential misuse of the automated clearing house system including misuse on the part of payday lenders or other companies and report such practices to the National Automated Clearing House Association.
In 2006, Zadjali opted to implement an automatic clearing house system at the Central Bank to bulk-process electronic credit and debit transfers.
Uncertainties over the supplies from Iran emerged when last December, the Reserve Bank of India scrapped payments to Iran using the long-standing clearing house system run by Asian central banks.
India, Asia's third-largest economy and Iran's second oil buyer after China, racked up the debt after the Reserve Bank of India scrapped a clearing house system last December -- a move welcomed by the United States which is trying to isolate the Islamic republic over its nuclear programme.
The problem started last December when the Reserve Bank of India, India's central bank, announced it would no longer make payments to Iran under the long-used Asian Clearing House system for trade.
India's central bank said in December payments to Iran could no longer be settled through a longstanding clearing house system run by central banks, prompting fears India's $12 billion annual oil imports from Iran could be threatened.

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