Bank of England urges industry to fix 'long delay' in clearing cheques

The three-day clearance time it takes high-street banks to cash cheques and process payments has come under staunch attack from the Bank of England.

BoE Governor, Mervyn King, said it was "disappointing" that the UK now took longer than almost any other G10 country or major economy to process customer payments.

"In the area of retail payments it is disappointing the UK now takes longer to clear payments – whether cheques or electronic payments – than almost any other member of the group of 10 richest nations."

Under the present system- dating back to 1770 - cheques take three days to clear from one account to another while 'e-payments' offer a reduced waiting time of two days.

Banks invest and profit from the transfer of funds making millions each year from the clearance period, which effectively imposes a three-day lockdown for consumers.

Reflecting on the Mr King's declaration, Mike Naylor, principle researcher of Which? magazine, said: "We do welcome these comments, as we have felt this perhaps wasn't the highest priority."

"For electronic transfer we have felt there is no reason for it to be delayed."

Mr King told leading figures from bank and finance industries that the BoE would closely work with the Office of Fair Trading to "explore ways in which that performance can be reviewed."

The Association of Clearing and Payment Settlements (Apacs) defended the process by explaining the UK has to deal with more cheques than most of the other G10 members.

Over the past ten years, cheque use has fallen by 40 per cent and is forecast to carry on dropping a further 40 per cent to an estimated 1.3bn transactions, scheduled for 2013.

An Apacs spokesman said Mr King's comments were unprecedented given the BoE's membership of the Association, since the body's initial launch.

"The payment process may seem slow but in the UK we enjoy credit-free banking and free payments, unlike the US where customers pay to use checking accounts or pay for a limited number of payments."

 

18th June 2004

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