Three of Canada's largest banks announced the formation of an independent company to handle their item processing.

Royal Bank of Canada, Bank of Montreal, and Toronto-Dominion Bank said they will invest a total of $110.2 million in systems and software to equip the as-yet unnamed company, to be based in Toronto.

Expenses will be allocated according to the number of transactions each bank processes through the company.

Donald Berardinucci, executive vice president of operations at $131.5 billion-asset Royal Bank, said the consortium chose not to turn to a U.S. outsourcing firm because of the unique aspects of item processing in Canada. Checks in Canada settle in one day.

"It requires a very special expertise that we already had in place at each bank," Mr. Berardinucci said.

The new company will process 170 million checks monthly, or nearly 40% of all checks cleared in Canada, bank executives said.

Operations could begin as early as next January, and each bank expects the company to help reduce item processing costs by 15%.

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