Cheque clearing

Our man in Havana

Why does it take 5 days to clear a cheque? Most of the time the money is gone from the drawers account 2 days after loadgement in a bank.

Where is the money during the remaining 3 days?

Tiriel

it is a bit of a fuzzy issue.. but what's strange is that it varies between bank branches.. for example when I lodge cheques in BOI on Patrick St. they usually say it'll take 4-5 working days.. but when I used to lodge cheques in the BOI on campus in UCC it used to be in by close of business that day.. explain that one!!! both were personal cheques btw no difference...

l3rian

I found this somewhere might be what you want

Monday
A customer pays a cheque, drawn on Bank A, Newcastle Branch (the paying bank), in to his Bank B account in Bristol (the collecting bank). Bank B will post a credit to the customer's account (however, see above details about cleared and value dates) and place the cheque in the clearing for collection.

During the course of the day this cheque will be processed by the collecting bank and prepared for sending to their clearing centre. This preparation will include encoding the amount of the cheque in magnetic characters in the codeline at the bottom of the cheque. Members of the clearing operate some parts of this process differently, ie they may undertake the initial processing of cheques at district processing centres which handle the work of a number of branches, rather than on the branch premises. However, the outcome is the same, ie the cheques are ready for delivery to the clearing centre by early evening.

Tuesday
Cheques are delivered to members' clearing centres, the majority of which are located in the London area, in the early hours of Tuesday morning. At the clearing centres the cheques are processed by high speed reader sorters, computer controlled machines which read the magnetic information at the bottom of the cheque. The information for each day's work is then passed electronically through a secure data exchange network to the appropriate paying bank clearing centre. The high speed reader sorters also sort the cheques in order of banks upon which they are drawn.

The sorted cheques are then boxed up and taken from the collecting bank's clearing centre to the Cheque and Credit Clearing Company's clearing exchange centre, where they are exchanged. Bank B will hand over all the cheques they have collected drawn upon the other members of the clearing, and collect all the cheques drawn on themselves.

Thus, the Bank A cheque paid in at Bank B Bristol branch is now in the hands of Bank A. Using their reader sorters Bank A will now verify the volume and value to cheques received from Bank B.

Customers accounts will be updated from the information sent over the data network from Bank B (and other members).

Under the system of paying bank truncation being introduced from 1997 onwards, the cheque would not be returned to the paying bank branch but would be retained at some central point within the paying bank. In those banks not yet truncating, their cheques are packed ready for collection by a courier company who will deliver them to individual branches early on the next working day.

Wednesday
Whilst the cheque in our example will be delivered to Bank A Newcastle branch early in the morning, under the truncation arrangements currently being implemented the cheque will be retained at a central point within Bank A. Wherever the cheque is located during the day, bank staff will review all cheques presented for payment and make decisions regarding their fate, ie to pay or return for whatever reason. The proportion of cheques physically examined will be determined by risk management policies adopted by the individual banks and building societies.

Also on the Wednesday the members will agree between themselves the values of the cheques exchanged the previous day. Settlement, on a net basis, is then made across members' accounts at the Bank of England, via the CHAPS RTGS system during the morning.

snappieT

I work in EBS, and since we are not actually a bank, the tellers in each branch wait until the start of each day to lodge all their cheques in the nearest bank (AIB by preference)

So lodging to an EBS account can take an extra day on top of this.

Tiriel

snapscan1212p wrote:

(AIB by preference)

QUOTE]

why AIB??

Fionn101

I'm betting on the laziness factor that it's closer

ishmael whale

The material above seems to relate to the UK. A description of the Irish clearing system is at this link.

http://www.ibf.ie/pdfs/ff9.pdf

As for EBS, I thought it was the case that they were indirect members of the clearing system, through an arrangement with AIB.

Our man in Havana

Thank you for that infotrmative post:)

Our man in Havana

Does Cleared for fate mean that the cheque cannot be stopped or bounced once this point is reached?