On acceptances by the Bank, or their London Correspondents, of Foreign Bills, payable in London: If secured by a special Deposit of the amount, 5s. per cent. with Interest due.

other security, if not exceeding three months in Currency, 10s. per cent. with Interest due; if exceeding 3 months in currency, 158. per cent. with Interest due.

On Bills or other Documents payable in the United Kingdom lodged for Collection, if paid, same Commission as on similar Documents discounted: if dishonoured, half as much as on similar discounted documents dishonoured.

On Bills or other Documents payable abroad, lodged for collection, whether paid or not, 5s. per cent., in addition to charges paid out by Bank.

On Pay, Dividends, or Annuities drawn by London Correspondents, except for regular Customers, 2s. 6d. per cent.; minimum, 1s.; maximum, 5s.

On Purchases of Government or other Stocks, in London, 3s. per cent. with Interest due.

On Transfers of Government or other Stocks, without purchase, discretionary, according to trouble and amount.

On Powers of Attorney taken out, and Wills or Deaths proved for Transfer of Stock, &c., discretionary, according to trouble, but not less than 2s. 6d. each.

Note.-Bills and other documents not having more than five days to run to be cashed by the Banks with each other without charge. The usual discount to be charged for the additional days on Bills of longer currency.

In all matters of Charges, BERWICK-ON-TWEED to be treated as a Scotch Town.

Questions as to the true meaning of any part of the Scale, shall be decided at Meetings of the Banks to be held in Edinburgh.

1. We must now explain the nature of the Clearing System, which has been very generally misunderstood.

It is usually supposed that the clearing system is an example of the great principle of Compensation, by which two Debts are paid and extinguished by being set-off or exchanged against each other, as happened at the great fair of Lyons, and a multitude of other fairs on the continent.

This, however, is a great misconception: and a comparison between the two systems will clearly illustrate the distinction between Commercial Credit and Banking Credit. The one is only created to last for a certain definite time, and is extinguished along with the documents which embody it; the other is not intended to be extinguished at any definite time; and is not generally extinguished along with the documents which embody it.

It was the custom in a great many parts of the continent for merchants to make their bills payable at certain great fairs which took place in various cities. In the meantime they circulated throughout the country and got covered with indorsements. At these fairs, on a certain day, they met together and exchanged their various acceptances. And thus the paper documents and debts were extinguished simultaneously by the doctrine of compensation, or set-off.

The purpose and effect of the Clearing System are very different. When any number of customers have transactions among themselves and give each other cheques on their accounts, if the receivers of the cheques do not draw out the money, but pay them into their accounts, the credits are simply transferred from one account to another. The paper document is extinguished, but the credit is not extinguished, it is only transferred: and it may be transferred any conceivable number of times from one account to another without ever being extinguished at all. In all such cases,

therefore, the cheque is a mere order of transfer; and when the credit is transferred from one account to another, the document has effected its purpose, and is cancelled-but the credit exists exactly as it did before.

It is exactly the same thing with a Bank note. Suppose a person holding a banker's notes pays them into his account, the note is then extinguished; but the credit is not extinguished; the amount is entered to the customer's credit; and he has exactly the same Right of action as before; and the banker's liability remains exactly as it was. If a customer pays into his account the notes of another banker, he receives a credit for them from his own banker; and the banker has then a claim against the other banker. The Clearing system is a device by which all the banks which join in it are formed into one huge institution for the purpose of transferring Credits from one bank to another, just in the same way as Credits are transferred from one account to another within the same bank.

The first plan of this kind in this country, that we are aware of, was adopted by the banks at Edinburgh. For a considerable time the rival banks used to do all they could to injure each other. They used sometimes to collect a large quantity of each other's notes, and present them for payment, in the hope of ruining their rivals. At last, however, they became sensible that this undignified conduct was mutually injurious, and they agreed that they should meet twice a week and adjust their respective claims, and that they should make no demand on each other except at these times. This exchange was made alternately at the offices of the Bank of Scotland and the Royal Bank. The different Edinburgh banks acted as agents for the provincial banks of issue, so that by this means all the banks in Scotland were brought into the "clearing room." The clerk of each bank made out a list of his claims against, and liabilities to, each of the others, and each bank used formerly to settle its debts by a draft at ten days' on London. Subsequently to this another plan was adopted by which each bank was obliged to keep a certain amount of Exchequer bills, and the balances were paid by means of these Exchequer bills. This plan, however, was discontinued in 1864, and another adopted, which is now in force, as settled in February, 1876.

Rules to be observed at the Edinburgh Clearing House.

I. The Clearing House shall be opened every business day, except Saturday, at one o'clock, and closed at fifteen minutes past one, after which no documents shall be received. On Saturdays the Clearing house shall be opened at eleven o'clock, and closed at fifteen minutes past eleven.

II. The Clearing House shall not be opened on Bank Holidays. On half-holidays it shall be opened at ten o'clock, and closed at fifteen minutes past ten.

III. Each Bank shall be represented at the Clearing House by a competent clerk, who shall deliver and receive the documents referable to his Bank. An assistant clerk shall also attend when required, that there may be no delay in closing the clearing.

IV. Each clerk shall be furnished with a set of books for the various Banks, in which the documents delivered by him shall be entered and summed up before he goes to the Clearing House, and he shall hand to each of the other Banks a duplicate list along with the documents delivered. He shall also be furnished with a book in which he shall strike the balances against him or in his favour with the other Banks, and he shall not leave the Clearing House until the general balance is completed.

V. Besides orders payable on demand at the Banks in Edinburgh (including district branches), and bills domiciled with the head offices of the Banks in Edinburgh, orders or bills payable elsewhere in Scotland, and requiring to be cashed by the Banks with each other, may be passed through the Clearing House, Although the general rule is to pass all clearing documents through the Clearing House, it shall be in the option of each Bank to collect any such documents in cash.

VI. Each document shall be sufficiently discharged before being sent in, and shall bear a Clearing House stamp containing the name of the Bank to which it belongs, and the date of clearing, in addition to which, if it has been cashed at a district branch, it shall bear the stamp of that branch.

VII. Documents passed through the Clearing House, payable at the district branches of banks in Edinburgh, shall be forwarded in time for presentation the next morning.

VIII. Documents drawn on the head office of any Bank, which are not duly honoured, shall be returned on same day, by messenger to the head office of the Bank to which they were cashed, by

3 o'clock on ordinary days, and 12.30 on Saturdays, and shall be repaid in cash. Documents payable at the district branches, which are not duly honoured, shall be returned through the Clearing House on the day after that on which they were cleared; or it shall be optional to return any such document direct by messenger to the office at which it was cashed, provided that this be done before the hour of clearing, on the day after that on which the document in question was passed through the Clearing House.

IX. All documents returned unpaid shall have a written answer appended, stating the cause of dishonour.

X. The Banks agree to dispense with the indorsement of country exchange vouchers, passed through the clearing.

XI. The Bank of Scotland and the Royal Bank of Scotland agree to undertake the settlement of the clearings each alternate month. On Monday, Tuesday, and Thursday, the balances shall be included in the general settlement of the exchange and clearing, the odd shillings and pence being accounted for in cash. On other days, the settling Bank will receive from those Banks which are Debtors on the settlement, and give to those which are Creditors, exchange vouchers for the respective balances, including the odd shillings and pence, within one hour after the closing of the Clearing House, and these vouchers shall be brought into the next day's clearing. The rules for conducting the general settlement of the exchange and clearing are laid down separately. Neither the Bank of Scotland nor the Royal Bank of Scotland shall incur any responsibility whatever in respect of these transactions.

XII. All expenses connected with the Clearing House shall be borne by the Banks in equal proportions and shall be paid by them half-yearly.