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How do clearinghouses work?

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Such an institution involves frequent meetings of local bank representatives to settle the balances among member banks. In the United States, the balance (debit or credit) for each bank at the close of a meeting is forwarded to the Federal Reserve bank, which adjusts the individual accounts accordingly. Intercity balances are settled on the books of the Federal Reserve banks daily by electronic transfers.

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Similar questions: How are electronic transfers used in clearing? How does the Federal Reserve Bank act as part of clearing? [ Hide these questions ]

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