Clearing house vs Clearing Banks

[Neha Maheshwari]

Are clearing house and clearing banks same ?

Or they are same and have same functions?

 

[Colin McKee]

They are very different animals. Clearing houses act as central counterparty in derivative transactions (such as futures and options) and clearing banks are normal commercial banks that take deposits, offer mortgages, etc. They just happen to have the same first word in the name

 

[Simon James]

To add a bit to Colin's reply, the term "clearing banks" refers to those banks who "clear" banking transactions - move money between bank accounts to settle cheques for example. In the UK, technically only a few banks are true clearing banks (those who are members of the Cheque and Credit Clearing Company). Any other retail bank must use one of these Clearing banks to clear its own transactions. Such distinction used to be important in the days of paper when transactions were slower, but in the digital age such distinction is largely invisible to banking customers.