Final answer:
A clearing house is an association of banks that settles accounts with each other on a daily basis, ensuring smooth financial transactions among its members with reduced risk. An association of banks and other payors whose members settle accounts with each other on a daily basis is a: (A) Clearing house.
Step-by-step explanation:
An association of banks and other payors whose members settle accounts with each other on a daily basis is a: (A) Clearing house. This entity is responsible for facilitating the exchange of payments, securities, or derivatives transactions among financial institutions.
Clearing houses are crucial components in the world's financial system as they ensure that transactions are made smoothly and effectively with reduced counterparty risk. Although the Federal Reserve System performs some clearing functions, it is actually the central bank of the United States and is responsible for conducting monetary policy, supervising and regulating banks, and providing financial services.
The World Bank and the International Monetary Fund (IMF) are international institutions that provide financial and technical assistance to countries but they do not serve the function of a clearing house for settling daily accounts between member banks.