CHEQUE’S CAREER

Greymouth Evening Star, 28 April 1925, Page 6

CHEQUE’S CAREER

HOW BANKS WORK TOGETHER

Most 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 his account (says the Auckland ‘Star’). All he knows is that the amount on his deposit slip is placed to his credit, and appears in his pass book. Yet the interesting procedure by which a bank obtains payment for cheques and biils 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 sligs are credited immediately to the accounts of the customers, the condition is always present thsjt 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 at the earliest possible moment, and the means adopted will now be explained. Cheques paid in by a customer for credit bf.his account are-sorted by the receiving teller or his assistant, generally into three classes: — Those cheques which are drawn on the customer’s oiyn bank. Those cheques drawn on any banks in country towns or in other places in which thk customer’s x own bank has a branch or office. Cheques drawn on other banks situated in the.city or suburbs or in country towns where the customer’s bank is 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

shanded to the ledger-keeper, and the amounts are immediately debited against the customers who draw them. They are then retyped on the sheets again (called detail sheets), and balanced with the tellers’ sheets. The total debits and credits in the ledger are balanced weekly with the detail sheets. A charge is made for collecting cheques on a bank in any town situated more than ten miles from,: the customer’s bank. Where, there-./ fore, a bank into which a cheque is paid has a branch or office in the town in which the bank on which the cheque drawn is -situated, the bank will send this cheque through y the t post to its branch in that town for collection. / To take an example of the third class of cheque, suppose a customer of the Bank of New Zealand, Hamilton, pays in'for credit of his account a cheque drawn on the Bank of New South Wales at Timaru. If the Bank of New Zealand has a branch at Timaru it will send this cheque to its own branch there, which will, in turn, collect the amount from the Bank of New South Wales at Timaru. If, on the othej hand, the Bank of New Zealand has not a

branch at Timaru, it will hand the cheque to the local branch of the Bank of New South Wales to lected by them on behalf of the Bank of New Zealand. If it so happened that the Bank of New South Wales was not represented in Hamilton then the Bank 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 Wales, Wellington, where settlements of the total New Zealand transactions between' the bank 3 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 other banks, are thus sent for collection through the post to that bank’s own branch. • In New Zealand there is not a clearing house or a bankers’ bank but as regards a settlement of the total transactions between the banks, the Wellington banks alternately carry out the role 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

allowed to run until any one or two banks had accumulated a considerable credit balance, and one or morei of the remaining banks had consiii-| erable debit balances. The overdrawn) i 9 banks would settle in cash with the banks in credit, the cash transaction being recorded through the' clearing-house bookstand this would be all the adjustment necessary.