Clearing Banks

Abstract

There are many types of banks — central banks, clearing banks, merchant banks, savings banks, foreign banks, etc. This chapter deals with the joint-stock banks, known more usually today as the ‘clearing’ or ‘commercial’ banks. Not only are they the largest source of short-term credit for industry, but their cheque system and central clearing arrangements enable them to economise in the use of cash and therefore to create credit which serves as money. Their operations in creating and granting ‘liquidity,’ therefore, affect aggregate demand and thus the level of activity.