Cheque clearing

Milarky · 17 December 2005 at 1:25AM

Came across reference to the 'Cheque and Credit Clearing Company' [C&CCC] and looked them up.

http://www.apacs.org.uk/about_apacs/htm_files/chequecred.htm

As you can see they describe the somewhat 'horse and cart' aspects of the process. But this caught my eye:

Day One - A cheque paid into a Member bank (or one of their agencies) anywhere in Britain during the course of a day's business will normally be processed by the collecting bank that evening.

At the collecting bank clearing centre the cheque information is passed electronically through a secure data exchange network (called the Inter Bank Data Exchange, IBDE) to the appropriate paying bank clearing centre.

In light of the existence of the 'Inter Bank Data Exchange' [for cheques], why cannot cheques be 'cleared' overnight, since this process [of electronic data exchange] is prescribed to occur on 'Day One'? I'm asking this for the plain and simple reason that it appears that paying banks could have the collecting bank's payment requests two days before they formally 'pay' the cash over. What is the reason for this further period of delay if

1) they already know the amount requested to leave the account of the customer drawing a cheque, and

2) they could either 'confirm' or else 'not honour' the amount demanded based on the known standing of the account there and then?

The only problem I see with this suggestion is that they have to respond electronically to the requests just received. Well that could just be accomplished by a second 'run' of the same data later in the small hours could it not?

So, technically speaking, it does not appear that there is any reason why banks cannot agree to credit all accounts into which cheques have been paid OVERNIGHT since the cycle currently allows them to submit a request [and hopefully receive an automated response] in that time scale.

Can anyone add to this?

Thanks

Wolfhound · 17 December 2005 at 1:39AM

I put three cheques into the Nationwide two weeks ago,
they took eight days to clear. Whats going on ?

micheleen · 17 December 2005 at 8:58AM

Wolfhound wrote:

I put three cheques into the Nationwide two weeks ago,
they took eight days to clear. Whats going on ?

Quite normal I believe for building societies. If I recall correctly, it's only Clearing Banks (i.e. the big four) who can clear cheques in the usual 3 days.

Milarky · 17 December 2005 at 11:25AM

micheleen wrote:

Quite normal I believe for building societies. If I recall correctly, it's only Clearing Banks (i.e. the big four) who can clear cheques in the usual 3 days.

Yes, except that Nationwide is actually a 'full member' of the same C&CCC mentioned above:

Members of the Cheque and Clearing Company are individually responsible for processing cheques drawn by or credited to the accounts of their customers. In addition, several hundred other institutions provide cheque facilities for their customers and obtain indirect access to the cheque clearing mechanisms by means of commercially negotiated agency arrangements with one of the full Members.

Cheque and Credit Clearing Company Members (Aug 04)

* ABBEY
* ALLIANCE AND LEICESTER
* BANK OF ENGLAND
* BANK OF SCOTLAND (HBOS)
* BARCLAYS
* CLYDESDALE
* THE CO-OPERATIVE BANK
* HSBC
* LLOYDS TSB
* NATIONAL WESTMINSTER BANK
* NATIONWIDE
* ROYAL BANK OF SCOTLAND

which puts them in precisely the same postion as a Barclays does it not? They may not have all the tradition of a 'high street bank' but they do have the same credentials these days...

So in reply to the above - it takes several days because it will always take a minimum period of time to clear and credit any item in practice [although I've suggested that it looks like they are almost set up to do be able to this overnight due to their employment of electronic means of clearing anyway] BUT they can take longer than this minimum if they choose to.. at least that is how it appears to customer to be working.

Also please notice that it says it is at each member's own discretion how they treat items as regards 'cleared' and 'value' dates...

To my mind, that all boils down to

1) If you pay a Nationwide cheque into a Nationwide account [yours or anyone else's] this ought to clear by the same banking day [since they are responsible under the C&CCC agreement to clear their own customer's drawing in-house] AND the 'value' date should be the same working day also - meaning no days lost interest

2) If you pay a non-Nationwide cheque into a Nationwide branch [and vice verse] then this ought to clear and have a value date of no more than one working day later - not the three which is the standard.

In addition [as it seems to me was the case prior to 1990 when all banks seemed to change at the same time] when paying in a personal or other bank-drawn paper instrument like a cheque - so could include 'Giros', for instance - the receiving bank should give immediate 'value' [interest from day one] rather than only do so after the item is deemed to have 'cleared'. This is particulary irksome when it is the banks [etc] themselves who usually insist on making an immediate withdrawal of funds to write you a cheque so that you can go around the corner to open a new account with another bank. The receiving bank then doesn't have to pay you any interest for between 3 and 6 days because of a fictional 'clearing cycle' which they set up between themselves.

ceebee_2 · 17 December 2005 at 12:16PM

On the subject of clearance, do you know that Nationwide now take one day to clear cash if you want to pay a bill with the cash. That is to say that cash paid in is credited to the Flexaccount immediately, but is NOT available, to pay bills, until the next day.

Cheque clearing

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