Clearing bank facts for kids

A clearing bank is one which moves money between accounts, and issues money to customers. At one time this meant taking in and giving out actual money. Now it means any kind of financial transaction.

In banking and finance, clearing means all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment (for example, in the form of a cheque or electronic payment request) into the actual movement of money from one account to another.

In the UK they are officially called a Cheque and Credit Clearing Company. In the United States the Federal Reserve performs an intermediary role, clearing and settling international bank payments.