So what do these expressions mean (or more likely meant) in Banking.
In the 60s there were 11 what were called Clearing Banks. A Clearing Bank is a bank in the UK that has an account with The Bank Of England (BofE). If you think about it, you can only hold your money in some sort of bank and you can only pay someone, who banks with a different bank, with a cheque that their bank will accept. Well, transactions between banks are no different. If Lloyds Bank wants to pay Barclays some money, they give them a cheque (albeit called a Banker's Payment). Who would Lloyds Bank's cheques be drawn on? To use them, they must have a bank account. This is where the Bank of England comes in. Lloyds in effect, issues a cheque drawn on the BofE.
The list of Clearers at that time was as follows:
*Barclays Bank
*Midland Bank
*Westminster Bank
*National Provincial Bank (NatPro)
*Lloyds Bank
Martins Bank
District Bank (owned by NatPro)
Williams Deacons Bank
Glyn Mills and Co
Coutts & Co
Bank of England (Of Course)
Those marked * were called 'The Big 5'
Now, in the UK Clearing System at that time, 10 of the above had accounts at the BofE and thus could operate at that level. Everyone else, including large American banks etc. had no access to this process, so they had to have accounts at a Clearing Bank. Now if Chase Manhattan Bank needed to pay The Royal Bank of Canada £1,000,000 for a foreign exchange transaction, Chase would issue a banker's payment on their bank (Lloyds maybe) and RBC would pay it into their bank (Barclays).
The clearing system didn't exchange individual items through the BofE. The Clearing House in Lombard Street was the exchange for physical items. Net Balances between the banks would be agreed around 3.30p.m. and then the Clearers would make their own block settlements through the BofE.
This deadline used to create some fun and games between banks. As part of a bank's operations, it would not always have a positive balance at the end of any day. It may be in credit (long) or in debit (short) on the day. As the best position is to have a tiny credit balance (because these inter-bank accounts carried no interest) each bank would lend out any excess or borrow in any shortage. These transactions would be done on the overnight inter-bank market at negotiated rates. Most banks wouldn't know what their final balance was until very close to closing time at 3 p.m. Hence they had 30 minutes to settle their balances, deliver or receive a banker's payment and bank that before the 3.30 clearing house limit. This also means that no clearing bank will know, until 3.30, what their true position was. To straighten their books out, they would resort to the BofE who would take and lend sufficient for the clearers to balance their books. In fact, most clearers in later times would balance their own books by around 3.10 and charge penalty interest to anyone who ended up overdrawn after that.
At that time, the banks outside of the clearing system would offer current accounts etc. especially to major corporations from 'home'. So a large US corporation would bank with The First National City Bank of New York - the precursor of CitiBank - how majestic is the old name! The problem is, how do these cheques move through the system. It goes like this:
Chevron issue a cheque drawn on FNCBNY - say) to BP
BP pays it into their account at Barclays (say)
Next Day, Barclays 'walk' the cheque around to FNCBNY - in amongst all the other cheques they have.
A few hours later, the messenger from Barclays comes back and collects a banker's payment drawn on Lloyds (say).
Barclays process this through the Clearing System
Lloyds get's debited by the BofE and Barclays gets their money.
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