SCRAPS OF PAPER.

Auckland Star, Volume LVI, Issue 82, 7 April 1925, Page 5

SCRAPS OF PAPER.

A CHEQUE'S CAREER. HOW BANKS WOKK TOGETHER. THE TOOL IN WELLINGTON. Host business men • possess some knowledge of banking, but few of them know exactly what happens .when one goes through the simple process of paying in a cheque to the credit of liis account. All be knows is that the amount on his deposit slip is placed to hi 3 credit and appears in his passbook. Yet the interesting procedure by which a bank obtains payment for cheques and bills of exchange lodged to the credit of a customer's account, but drawn on other banks, is quite simple. All day long customers are handing in to the bank's receiving teller lodgment slips covering cheques drawn on their own bank, on other banks in the city and suburbs, and on banks situated in country towns or other centres. Although the amounts of lodgment slips are credited immediately to the _ accounts of the customers, the condition is always present that the customers are not entitled to draw against cheques until they are cleared. A bank, in its own and customers' interests, procures payment of any cheques at tho earliest possible moment, and the means adopted will now be explained. Three Classes of Cheques. Cheques paid in by a customer for credit of his account are sorted by the receiving teller or hie assistant, generally into three classes: — Those cheques which are drawn on the customer's own bank. Those cheques drawn on any banks in country towns or in other places in which the customer's own bank Jias a branch or office. Cheques drawn on other banks situated in the city or suburbs or in country towns where, the customers bank ia not represented. With regard to cheques drawn on the same office, these are recorded by adding machine operators on the respective tellers' sheets, and then handed to the ledgerkeeper, and the amounts are immediately debited against the customers who draw them. They are then re-typed on the sheets again (called detail sheets) and balanced with the the tellers' sheets. The total debits and credits in the ledger are balanced weekly with the detail sheets. -V charge is made for collecting cheques on a bank in any town situated more than 10 miles from the customer's bank. Where, therefore, a bank into which a cheque is paid has a branch or oflice in the town m which the bank on which the cheques drawn is situated, the bank will send this cheque through the post to its branch in that town for collection. How the Cheques Move Round. To take an example of the third class of cheque, suppose a customer oi the Bank of New Zealand, Hamilton, pave in for credit of his account a I cheque drawn on the Bank of Neve I South Wales at Timaru. If the Bank of Now Zealand has a branch at Timart it will send this cheque to its owi branch there, which will, in turn, col i lect the amount from the Bank of New South Wales at Timaru. If, on the other hand, the Bank of New Zealanc has not a branch at Timaru it will ham the cheque to the local branch of th< Bank of Now South Wales to .be col lected by them on behalf of the Ban! of New Zealand. If it so happened thai the Bank of New South Wales was no! represented in Hamilton, then the Bant of New Zealand would post the cheque direct to the Bank of New South Wales Timaru, and receive in payment a voucher drawn on the Bank of New South Waies, Wellington, where settle nient of the total New Zealand transactions between the banks takes place, as explained below. Country cheques drawn on towns in which the customer s bank is represented, whether drawn on the customer's own bank or on othei banks, are thus send for collection through the post to that bank's own branch. The New Zealand "Clearing House." In New Zealand there is not a Clearin"- House or a Bankers' Bank, but as regards a settlement of the total transactions between the banks, the Wellington banks alternately carry out the roie of Clearing House, or pool as it is sometimes called. In each town an exchange of cheques takes place between each bank three times daily except Saturdays when there are two exchanges. The total J value of the cheques received and handed ; out by each bank to each other bank are j agreed between themselves at the last I exchange. A voucher is then handed tc ' the creditor bank by the debtor bank foi i the balance owing to that bank. This I voucher is an order drawn on the debtoi ! bank's Wellington branch requesting : them to credit t&3 creditor bank with the amount mentioned. Now the bank acting as the Clearing House records the balances due to or by the various banks, and at certain times the balances then owing are settled between the bans in bank notes. Mostly the procedure results merely in book entries at the clearing bank. When We Used Gold. Before the war, when a settlement in casli was necessary, gold was the medium employed. It was not the practice, however, for the banks to settle ur. in cash daily. This would involve a considerable amount of work and the risk incidental to continually handling large sums of money. In addition to this it was quite common that a bank short in ! the exchanges on one day would, as the I result of the following day's transactions, turn the balance the other way The arrangement was, therefore, that these balances were allowed to run until any one or two banks had accumulated ' a. considerable credit balance, and one oi ! more of the remaining banks liad con- ■ siderablo debit balances. The overdrawn i banks would settle in cash with the i banks in credit, the cash transaction j being recorded through the Clearing i 1 House books, and this would be all the .; adjustment necessary. ' i