Expenditure is greater than income, and finally recorded as payment; If the income exceeds the expenditure, it is recorded as income, and the net creditor's rights or net debts of one party to the other party are finally obtained by using legal systems such as offset and contract renewal.
If there are multiple transactions between market traders with the same content and opposite directions, the creditor's rights of all parties can offset each other within the same amount, and the balance can only be paid at the time of transaction settlement or transaction.
Commercial banks have many branches, and each branch is engaged in the business of foreign exchange settlement and sale, so it is not easy to make a difference. The usual practice is to let the branches make their own netting first, and then close their positions with the head office, and the exposure of netting will be concentrated in the head office. Finally, the foreign exchange trading department of the head office will close its position in the safe according to its own exposure.
Extended data:
Types of online banking net settlement:
1, net payment settlement. Refers to reducing credit risk by reducing the amount that must be paid. If the payment is due, the amount owed by Party A to Party B is greater than that owed by Party B, and Party A shall pay the difference to Party B. ..
2. Clear the rolling difference. Netting can be extended to bankruptcy. Suppose there are many derivative transactions between A and B, some contracts have positive market value for A and some have positive market value for B. If A declares bankruptcy, many problems can be solved by net settlement.
Netting plays an important role in the bankruptcy process. When the bankrupt company is allowed to execute the favorable contract but not the unfavorable contract, there is a choice problem. In the above example, if there is no net settlement, A will violate the contract that A owes B more than B owes A, and B will be forced to execute the contract that B owes A more than A owes B. ..
3. Cross product rolling difference. When A and B agree to net all contracts, this process is cross-product net settlement. For example, if one party is a bank, they can include any clause in determining the total net amount owed by one party to the other.
Settlement net settlement refers to the net settlement operation carried out by all parties to the transaction when the transaction ends normally. Settlement of net settlement usually settles similar joint debt claims before settlement. The purpose of net settlement is mainly to reduce the settlement risk.
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