Manuscript of the Month
September 2015
Cheque form marked ‘M’ for Metropolitan, [1931]
Recent legislation has paved the way for a radical
shake up of the cheque clearing process. In the
future some banks will offer customers the ability
to pay in cheques using smartphones or tablets,
while banks will no longer need to forward paper
cheques to a central clearing house. These changes,
made possible by new cheque imaging technology,
should speed up the clearing cycle dramatically. But they also signal the end of a centuries old
tradition.
In the early days of banking, London had no centralised cheque clearing system. Instead each bank
would send a clerk out daily to visit every other bank to exchange cheques and settle any
outstanding balances in cash. But as the number of banks increased, the Walk Clerks’ found
themselves having to travel much further, settle many more cheques and carry larger sums of
money about the city. In about 1770, therefore, some of them fell into the habit of congregating at
the Five Bells Tavern in Lombard Street around lunchtime each day to exchange cheques and settle
their balances. Within a few years this informal method of clearing had become such a fixture that
the banks involved decided to rent a private room for their clerks to conduct business in.
The first step towards formal regulation of the clearing process came in 1821. During a meeting of
bankers at the City of London Tavern in February that year it was agreed: That great advantage
would arise to the Bankers of London from the appointment of a permanent Committee chosen of
their own Body for the purpose of suggesting and carrying into effect any Bills or Regulations
tending to increase the facility or security of their mutual transactions as well as for the adoption of
measures for their protection against the numerous Frauds, Robberies and Forgeries to which
Bankers are unfortunately exposed. Out of this emerged a thirteen strong committee, which in time
became known as the Committee of London Clearing Bankers. Twelve years later, the Clearing
Bankers erected a purpose-built Clearing House in a courtyard off Lombard Street. Centrally
located, yet tucked away from prying eyes, the site was considered ideal: the bankers were anxious
that their clerks, carrying as they did securities of great value, frequently Bank of England notes for
large amounts, should not be observed by the public.i
For many years, the clearing process remained essentially unaltered. At midday, the clearing banks
each dispatched a clerk to the Clearing House. On arrival the clerk would work his way round the
Clearing Room, arranged alphabetically by bank, dropping any cheques payable at other banks into
boxes perched on the end of their desks. Once at his own desk he set about entering (under separate
accounts) any charges deposited in his box. At 3pm this process was repeated. As soon as the
Clearing House closed its doors at 4pm, the clerk made up his account then reached for a sheet of
paper with a list of clearing bankers printed alphabetically down the middle. After working his way
down this list, entering balances owed to him to the left of the names and money owed by him to
the right, he would go to the clerk of each bank in turn and call over the balance. If it was agreed
they marked it with a pen. If not the error had to be traced and rectified. Finally, the clerk cast up
each side of his balance sheet and submitted it to the Clearing House Inspector for authorisation
before returning to his own bank to check the balance there agreed with that reached at the Clearing
House and to fetch sufficient funds to settle any outstanding balances.
Over time, a number of changes were made to this system. From about 1841 the practice of
individual settlements between banks was abandoned. Instead each was allowed to make one
payment for the whole day’s work, although such payments continued to be in Bank of England
notes. Only after they were all obliged to open Clearing Accounts at the Bank of England in 1854
did cash settlements come to an end. It was in 1854 too that another significant alteration came
about; the admittance of joint stock banks into the Clearing House. Legislation had sanctioned the
establishment of joint stock banks in the provinces from 1826 and within London from 1833.
Despite intense lobbying, however, the Bankers’ Clearing House had steadfastly refused to admit
these new banks, leading to accusations that it was hindering London’s growth as a financial centre
merely to protect the interests of its members. For a time it looked as though the joint stock banks
would have to set up their own clearing system, but eventually the Clearing Bankers gave way and
six joint stock banks were permitted to enter the Clearing House.
Further change came four years later with the introduction of Country Clearing. Previously, any
country cheques that needed to go through London had to be sent directly to the bank in question,
which then issued a draft by return of post. But from 1858 provincial banks were permitted to
appoint a London clearing bank as their agent, enabling them to forward cheques drawn on other
country banks to the capital in a single parcel for clearing. Unlike Town Clearing, however, which
offered same day settlement, country cheques were not settled until two days after exchange.
The relentless growth of the banking sector meant that by the end of the nineteenth century some of
the larger banks found themselves having to retain permanent Clearing Clerks, while nearly all were
forced to divert staff from their normal duties during peak periods: On Stock Exchange Settling
Days and other occasions when the work is heavy, it is no uncommon thing near closing time to see
the runners rushing down Lombard Street as if their lives depended on it. Yet by 1900 every single
charge was still being listed by hand. Despite the best efforts of the clerks – some of whom were
capable of entering and casting 1,200 cheques an hour – the pressure began to tell. Illness, even
complete breakdowns, became increasingly common. In 1902, therefore, a number of Burroughs
adding machines were introduced into the Clearing House. For some, this heralded the start of a
technological revolution. One enthusiast even went so far as to envisage: long pneumatic tubes that
will bring the cheques straight from the banks to the Clearing House, without the perils of the road
and the interruptions of the Lord Mayor’s Show.ii
A more down to earth change came in the form of a third clearing. The expansion of London had
resulted in a five fold increase in the number of suburban bank branches between 1868 and 1907,
from about 70 to 350.iii As a result, huge armies of clerks were being deployed on the daily walks –
larger banks dispatched as many as twenty – while the distances they were required to cover and the
number of charges they had to deal with had similarly grown. To make matters worse, confusion
reigned as to where the boundary lines between ‘Town’ and ‘Country’ lay. Consequently, it was
not uncommon for two banks on the same street to be treated entirely differently. One, reliant on
Walk Clerks, would be regarded as ‘Town’ and entitled to same day clearing. The other, who
submitted its cheques by post, would be designated ‘Country’ and obliged to wait two days. In
1907, therefore, a Metropolitan Clearing was established. Operating between 9am and 10.30am
each weekday (slightly earlier on Saturdays), it was aimed squarely at this suburban hinterland: In
this clearing will be dealt with the cheques of the suburban branches of the London banks, which
will be each collected by its own head office and delivered at the Clearing House in such a manner
as to facilitate the sorting of the documents. In this way people with accounts at suburban branches
will have the advantage of having their cheques cleared considerably earlier than has been the case
hitherto, and the old expensive and dilatory system of the “walks” will be swept away.iv
For Hoare’s and the other West End banks, none of whom were members of the Clearing House,
these developments had little effect. A few did eventually employ one of the clearing banks as their
agents to clear their demands on the City banks, but all continued to rely on their Walk Clerks, who
pounded the streets six days a week, visiting each bank in turn to drop off and collect their charges.
By the early 1800s, two of Hoare’s junior clerks were undertaking the City Walk on alternate
months, while a third was assigned to the West Walk. Another route, the Sub City Walk, emerged
soon afterwards. The only material change came in 1848, when the old method of pinning up and
entering cheques in the City Clearing Book was discontinued. Instead the Hoares instructed their
Walk Clerks to cast the Credit Clearing Book and agree the Walks totals before leaving the bank.
Despite these improvements, the Walks remained a costly and inefficient way of doing business: It
seems most extraordinary, declared the Bankers’ Magazine in 1865, that seeing the admirable way
in which the clearing house has worked in the City, in economising both labour and time, the West
End bankers should have remained contented so long without an attempt to extend its benefits to
themselves. The magazine’s solution? A Charing Cross clearing house. Not only would this
significantly reduce the number of Walk Clerks, but: The counters of the different banks would be
relieved of the crowds that besiege them during the early part of the day, causing vexatious delays
to customers, and consequent loss of temper. The large reserve of bank notes now held by the
various West End establishments to meet the demands of other banks would be rendered
unnecessary, lastly the business of collection would be conducted more expeditiously for the
customer, and economically for the banker.v Neither the Charing Cross clearing house nor any of
the myriad other solutions put forward by various interested parties over the years ever materialised.
In fact, it would be nearly half a century before the West End banks were fully incorporated into the
clearing system. And even then they hesitated. At Hoare’s, the partners’ memoranda book for
September 1907 recorded that: H[arry] H[oare] saw Dashwood of Childs and agreed that neither
bank would take any step in the matter of the proposal for the West End banks to come into the
Metropolitan clearing without first advising the other.
Notwithstanding this reluctance, Hoare’s, along with most other West End banks, was absorbed into
the Metropolitan Clearing from February 1908. Bowing to the inevitable, the partners appointed
Williams Deacon & Co (later Williams & Glyn) as their clearing agents and took delivery of a
consignment of new cheques marked ‘M’ for Metropolitan.
Today, as a future not of pneumatic tubes but of mobile banking apps and virtual clearing beckons,
it is worth pausing to reflect on an era when the sight of hundreds of Walk Clerks criss-crossing the
City and West End each day was so familiar as to be almost imperceptible. And how better to do
this than in the company of one of Hoare’s own Walk Clerks, Henry John Tilden, whose evocative
description of the West Walk recalls a way of life that has vanished forever:
‘It might perhaps be of interest to have a record of the daily routine of a Clerk from No 37 on the
West Walk as it then was nearly 60 years ago [c.1865] before existing changes in the mode of
collection had taken place. Having sorted up the various charges in due order in his case which he
attached to the Steel Chain round his waist, the Clerk started out as soon after 9am as possible. His
first call was over the road to Praeds Bank a small old-fashioned house which has long since been
pulled down. He then proceeded to Childs Bank which was practically part of Temple Bar and was
adopted by Dickens as his model of Teller’s Bank in the Tale of Two Cities, even to the ticket
Porter with his white apron who sat on a stool in the street at the entrance of the Swing door. A
Stranger had to be careful on entering as instead of stepping up you had to step down to reach the
floors and might easily come to grief. From there you went to Twining which was also an ancient
place and on my first visit I opened the wrong door and presented my charge at the Counter where
they served out the Tea. From there it was a long stretch to Coutts’ old house on the same side of
the Strand. This was a place that always impressed me from its size, the number of Clerks all
visibly hard at work and the oppressive silence which to my mind confirmed the reports I had heard
of the rigid discipline then maintained in that establishment. In my recollection two of the clerks
migrated to No 37 on account of it, much to the disgust of the authorities there.
Then to Cox & Co the Army Agents in Craig’s Court. Next to the Paymaster General’s this was the
most troublesome place of all, as the house had originally been a Nobleman’s town mansion and
every room from basement to roof was occupied by the Clerks who had charge of the accounts of
each regiment and each officer belonging to it. Inside the Cash Office to the left as you entered was
a huge Board inscribed with the names of every Regiment in the Service with the No of the room
where they were located and to which you had to take each of your cheques to be marked for
payment before they were presented at the Cash Counter. If the officer had omitted to put the No of
the Reg’t after his name you had to hunt it up in the Army List before you could proceed. If you
had a heavy charge it took a long time before you could get clear of the place & cross the road to
Cocks Biddulph’s & Drummonds both of which were close to each other and neither would detain
you long. From there you went to the Paymaster General’s Office a rabbit warren of a place where
you might be detained any length of time but if you had anything at Grindlays in Parliament Street
you usually arranged to leave your charge and called for it on your return. From thence to Hallett &
Co the Navy Agents who came to grief at the time of the Overend Gurney Crash in 1866. Then on
to Ransom Bouverie & Co where you frequently came in contact with Lord Kinnaird the senior
Partner who was a near relation of the Partners at No 37 and very often sent notes or messages by
the Walk Clerk.
From there to Herries Farquhar & Co in St James’s Street which has long since been absorbed by a
Joint Stock Bank. Then on to the L[ondon] & West[minste]r Bank, St James’s Square & the Bank
of England in Burlington Gardens and if you had anything to collect which was not often to the
L&W Bank, Stratford Place which was the limit of your round and thankful you were when you
could call a Hansom Cab and make the best of your way home hoping to arrive in time to secure
some lunch before it was cleared away at 2.30pm. As you were strictly forbidden to enter a “bus”
while on the Walk you were expected to take a Cab home as in those days there were no clearing
cheques for West End Private Banks and you often had in your case a considerable sum in Notes &
Gold. I don’t think that in those days thieves were so enterprising as they are now as I never
recollect a Walk Clerk being interfered with.
Everything had to be collected by hand consequently there were two other Walks one called the
“City” whose duties were confined to the actual City and the other the “Sub City” whose collection
ranged from the Butchers’ Banks in Smithfield to the Borough in Southwark. As everything was
paid in actual Cash it was customary always to have a large sum in Bank of England Notes in the
Safe which I believe was never allowed to go below £300000. Any Bank Notes that were paid in
were never re-issued but were always paid in to the Bank of England where they were destroyed
immediately by the Cashier tearing off the signature. It was not till many years after I came that the
charges were paid by cheque on Williams Deacon & Co & I well remember examining with
curiosity the first large cheque book with the cheques signed in blank by one of the Partners.’vi
i
The Bankers’ Clearing House, what it is and what it does, Philip W Matthews, 1921
Ibid
iii
Bankers’ Almanack, 1908
iv
The Financial Times, 14 Nov 1906
v
Bankers’ Magazine, August 1865
ii
vi
HB/9/G/5/2, Papers of Henry John Tilden, 1920s-30s