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    Money that can be transferred or withdrawn the same day that ...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. Personal Finance

    4 Tips To Cut Your Monthly Bank Fees

    We asked banking professions to share their biggest tips for tackling bank fees, and hopefully save more even before spring hits.
  5. Credit & Loans

    Understanding Loan-to-Value Ratio

    Loan-to-value ratio (LVR) is a tool used to evaluate the risk in a collateralized loan, usually a mortgage loan.
  6. Investing

    The Future Of Mobile Banking

    Typically slow to react to technological change, retail banks are finally recognizing the benefits it provides to consumers as well as the cost savings it gives the firm.
  7. Entrepreneurship

    JPMorgan vs. Goldman Sachs: A Tale of Two Stocks

    The performance of JPMorgan and Goldman has been impressive, but one has a slight edge.
  8. Stock Analysis

    How Citigroup Ensured That It's Too Big to Fail

    As a business, Citi has everything going for it. Scale, operational breadth...and the ear of key policymakers.
  9. Investing

    Can You Bank on BofA in 2015 (and Beyond)?

    An in-depth look at BofA, one of the most widely-traded stocks on Wall Street.
  10. Charts & Patterns

    Why These Are 2015's 10-Best Financial Stocks

    If you're going to invest in the financial stocks, these names need to be on your radar.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center