Net Settlement

AAA

DEFINITION of 'Net Settlement'

The resolution of all of a bank's transactions at the end of the day. Since banks engage in so many electronic transactions, they cannot simply count their cash at the end of the day to see how much money they have. Instead, they have to add up all their electronic credits and debits for the day as part of this calculation. The bank then sends its settlement file to a Federal Reserve Bank, which credits it with any funds due for interbank settlements.

INVESTOPEDIA EXPLAINS 'Net Settlement'

A bank's net settlement is kind of like an individual balancing his or her checkbook. If all of your transactions are in cash, all you need to do to check how much money you have is open your wallet and count the bills. But since most people have money going out in the form of cash, checks and debit- and credit-card transactions, and money coming in as cash, checks and direct deposits, all transactions, including purchases, returns, bills paid and paychecks received, must be added up to determine how much money a person has.

RELATED TERMS
  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Same-Day Funds

    Money that can be transferred or withdrawn the same day that ...
  3. New York Clearing House Association

    An organization established in 1853 to simplify the settlement ...
  4. Debit

    An accounting entry that results in either an increase in assets ...
  5. Credit

    1. A contractual agreement in which a borrower receives something ...
  6. Continuous Net Settlement - CNS

    An automated book-entry accounting system. CNS centralizes the ...
Related Articles
  1. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  2. Economics

    Inside National Payment Systems

    Investopedia explains: The global interconnection of U.S. payment systems makes commerical and financial transfers possible.
  3. Personal Finance

    What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.
  4. Credit & Loans

    What is a bank's legal liability when issuing a letter of credit?

    Learn the responsibility of banks that issue letters of credit Letters of credits ensure payment on transactions between parties that have no relationship.
  5. Credit & Loans

    When are you legally required to get a letter of credit?

    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, risk-free and successful.
  6. Professionals

    What's the average salary of an investment banker?

    Compare average annual salaries of investment bankers based on position. Different levels of the career result in different levels of base payment and bonuses.
  7. Credit & Loans

    P2P Loans: Consider the Payoffs; Assess The Risks

    The available data seems to indicate that P2P loans, although risky, promise great payoffs, and the prospects of good returns seem to be getting brighter.
  8. Economics

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  9. Trading Strategies

    Is Goldman Sachs Still A Winner?

    Goldman Sachs might not be the best dividend play out there, but there are other reasons you might want to consider it as an investment.
  10. Trading Strategies

    Is Wells Fargo The Ideal Dividend Investment?

    Wells Fargo has been rewarding its shareholders for years via stock appreciation and dividend payments. But are those rewards sustainable?

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center