The Bank of International Settlement (BIS) defines settlement as an act that discharges obligations in respect of funds or securities transfers between two or more parties. Thus settlement is the funds transfer that is carried out by one party to fulfill his obligations towards the counterparty in a financial operation. Settlement must be performed after […]
After presenting the bilateral clearing in the previous article, it is now time to move to the next level: the multilateral clearing. In a multilateral clearing, a high number of financial institutions are involved. But the principle is the same as for bilateral clearing. All the participant banks will exchange payments among each other up to […]
Clearing and settlement mechanisms play a major role in the interbank exchanges of payments. They can be considered as the cornerstone of payments systems in a monetary zone. Therefore it is important to understand what they are and why they are so crucial. In this article and the next, I will present you these concepts […]