What is a central clearing bank and how does it work? And please explain like I am literally 5 years old. I understand nothing about finance.

Question

What is a central clearing bank and how does it work? And please explain like I am literally 5 years old. I understand nothing about finance.

In: 35

Answer 1

You know that bank on Main Street with the Bank of America sign, that’s not the Bank of America. It’s a branch, one of many. There is a BofA central clearing bank, in LA I think. That’s where the interbank transaction you did at the local branch really happen.