The procedure for making payments by cheque creates problems when the person making the payment keeps his account in a different bank from that which holds the account of the person receiving the payment. The final settlement of the debt will require a movement.of funds from one bank to another. In any one day there will be many thousands of such inter-bank transactions to be earned out; many of them will offset each other. There will be a large number of cheques drawn on accounts in Bank A payable to accounts in think 15, bin there will also be many cheques requiring a transfer of funds in the opposite direction.
Each separate bank in a multi-bank system will find itself in this kind of situation at the end of the day. It is an obvious solution for each bank to pay (or receive) the net amount owing after the banks have totalled their, claims against each other. This is the function of the Hankers' Clearing House. Cheques drawn on one bank but payable to another are sent to the clearing house where the mutual claims are offset and the banks merely settle the outstanding amounts. These payments from one bank to another are carried out by means of cheques drawn on the bankers' deposits at the Bank of England. It is important to note, however, that when one bank makes a payment to another bank, one bank loses cash and the other gains cash. The reason for this, of course, is that the deposits at the central bank arc part of the banks' cash reserves.
XII. Read and translate the following text:
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