Euro Cheques and Euro Cheque Clearing

Euro-denominated cheques issued by UK banks can be used to pay for certain goods and services in the UK. The British euro cheque clearing system was established in 1999 to coincide with the launch of the euro. Following the closure of CHAPS Euro in 2008 and Bacs Euro in 2010, the euro bulk debit clearing is now the only domestic euro payment system in Great Britain.

Banks which offer customers euro-denominated cheque services generally do so as part of a UK/euro bank account. These cheques can only be used in the UK and when they are paid into euro bank accounts in Great Britain they have been processed through the euro cheque clearing, which has been managed by the C&CCC.

Many people are not even aware that euro denominated cheques issued by UK banks exist and that they can be used to pay for certain goods and services in the UK. There are several reasons why a customer might choose to operate a euro account. For example they might be involved in cross border trade and prefer to manage their exchange risk by holding an account in euro. Some customers work in the euro-zone and receive their salary in euros, others own property abroad and find a euro account a good way to manage the various receipts and payments involved without having to convert back and forth from sterling. Not all customers use cheques on their euro account but those who do give as their reason the fact that cheques are a cheap and convenient way of managing euro receipts and making euro payments.

Euro cheques are used mostly by businesses and the volumes seen are very small. Annual clearing volumes for euro cheques peaked in 2003 at 729,000 and, since then, volumes have declined every year. As the likelihood of joining the European currency receded, volumes declined more rapidly than in the sterling cheque clearing. By 2015 they had dropped to less than 90,000 and after the UK’s European Union membership referendum, in June 2016, the rate of decline accelerated even faster. In 2017 just short of 55,000 were cleared, a 32% decrease from the year before. The euro clearing was closed on 10th September 2018. Customers will still be able to use euro cheques as the cheques will be processed by means of direct exchange and settlement between the relevant banks.


The Euro Cheque Clearing process

A Euro Cheque


All euro cheques used in the British euro clearing must comply with the design, layout and print requirements of C&CCC Standard 3 – Automated Processing of Vouchers and must be printed by a CPAS-accredited cheque printer.

When the C&CCC managed the euro clearings, euro cheques were cleared in much the same way as sterling cheques in the paper clearings, over a three-day period and they used the same processing equipment and the same exchange centres. However, as with bank giro credits, there was less automation – paper was exchanged, but digital files are not. 

The C&CCC was the Settlement Service Provider for the euro clearings and SWIFT messaging was used to transmit advice of the multilateral net settlement figures to members’ treasury departments. An account at a commercial bank was used for the related settlement payments.


Currency Clearing

The C&CCC only took over the management of the currency clearings in 2010 and nobody working for the C&CCC knows when the currency clearings were established. Currency cheques drawn on UK banks in London are a niche product used mainly, if not entirely, in the insurance and re-insurance market so the average value of a currency cheque is far higher (sterling equivalent of £36,983 in 2017) than for a sterling cheque (£1,414 in the same year).

In its heyday the clearing processed cheques in 11 foreign currencies: Deutsche marks, Dutch guilders, French francs, Italian lire, Spanish pesetas and Austrian schillings (all known as the legacy currencies when the these currencies transitioned to the euro) as well as Australian dollars, Canadian dollars, Japanese yen, Swiss francs and US dollars. With the advent of the euro in 1999, the euro clearing was established by the C&CCC although cheques drawn in the legacy currencies were accepted until the end of the transition period to the euro at the end of 2001.

US dollar cheques had at one time both a one and a three day clearing. The one day clearing had to be a cheque drawn on a nominated branch – one in central London and there was an ‘N’ located somewhere in relation to the sort code on the cheque. The one day clearing mirrored the old Town Clearing for sterling that ceased operation in 1995.

The demand for currency cheques has receded over the years as customers have moved to making automated payments and by June 2002 the only currency cheques processed through the clearings were those drawn in US dollars. An average of only 55 US dollar cheques passed through the clearing every weekday in 2016. This was insufficient to justify the existence of a formal clearing so a decision was taken to close the clearing and operation ceased on 7th July 2017. These cheques are now processed by means of direct exchange and settlement between the relevant banks.

In 2000 there were seven settlement members but by 2017 there were only four; around 60 agency banks participated in the currency clearing through commercial arrangements with one of the settlement members.