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. New York Clearing House Association ...

    An organization established in 1853 to simplify the settlement ...
  3. Same-Day Funds

    Money that can be transferred or withdrawn the same day that ...
  4. Credit

    1. A contractual agreement in which a borrower receives something ...
  5. Debit

    An accounting entry that results in either an increase in assets ...
  6. Continuous Net Settlement - CNS

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

    The Evolution Of Banking

  2. The global interconnection of U.S. payment systems makes commerical and financial transfers possible.
    Economics

    Inside National Payment Systems

  3. Personal Finance

    What Is The Bank For International Settlements?

  4. Economics

    How do leverage ratios help to regulate ...

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center