Clearing House History

About Clearing House History

The first bank clearing house was established in London around 1770. Bankers met daily at the Five Bells tavern in Lombard Street to exchange checks and settle differences. The system reduced the need for physical cash transfers between banks. The London Bankers Clearing House formalized rules and procedures. The concept spread to New York, where the New York Clearing House was established in 1853. Before clearing houses, banks sent messengers with physical checks and cash between institutions. The clearing house reduced costs and risk. Modern payment systems including ACH, CHIPS, and TARGET2 are direct descendants of the clearing house concept. The shift from paper to electronic clearing was gradual but transformed banking efficiency.