Bank of First Deposit - BOFD
Definition of 'Bank of First Deposit - BOFD'
The bank where a check is initially deposited to an account. If the check is drawn on the same bank, it is an "on-us" check that can be settled in-house.
If the check is drawn on another institution, it is presented for payment and either processed through the Federal Reserve System or cleared through private arrangements between banks.
Investopedia explains 'Bank of First Deposit - BOFD'
The Federal Reserve System was created because, during the financial panic of 1907, many banks failed to clear checks drawn on other banks.
The industry routing numbers developed in the 1940s that appear at the bottom of checks help ensure timely payment, which is usually the same or the next business day. In the 1970s, the ACH (automatic clearinghouse) system was developed to permit the electronic conversion of checks.