Float (payment transactions)

Float ( English float ) is in cashless payment transactions of banks a through postal delivery time and processing time in accounting documents resulting time delay between credit memo - and time of loading the same payment transaction .

history

Under the anglicized the same circumstance is understood that in English-speaking bank deposits as long as remain on accounts until the of individuals or companies issued checks will be charged. Floats of this type were first discussed in the USA, where check payment is popular and, due to the size of the country, it took many days to send a check to the recipient. In addition to this time aspect, floats are also favored by high credit interest when it took two to seven days for a check to be debited from the debtor. After September 11, 2001Floats were particularly high in the United States because bulk of unprocessed checks were banned from being transported due to disruptions in aviation. Floats were reduced by the 21st Century Act (or Check 21 Act ) from October 2004 through "Check Clearing" because the banks now exchange electronic copies and do not only post based on the original receipts.

The banking networks in Germany (the savings bank sector with the giro centers , the cooperative sector with the Volksbanken and Raiffeisenbanken and the cooperative centers) have kept payment transaction amounts in their own bank network for as long as possible in order to be able to generate interest-bearing floats during the postage period of the receipts. Processing payment transactions in one's own branch or bank network basically saves central bank money, while using other bank networks results in a loss.

species

A distinction is made between the active or passive float and the positive or negative float.

• The active and passive float refers to the booking day of a payment transaction. In the balance sheet, these are “pending offsets”, which are the counterparts of such payment transactions within a credit institution, of which either only the credit or only the debit could be posted to the customer accounts on the reporting date . The active float arises from checks , bills of exchange or direct debits in the direct debit or debit order procedure (so-called debit papers). The amounts are initially credited to the account of the submitting creditor , but not debited to the account of the drawee or debtor at the same time. The active float incurs costs for the banks involved in maintaining the necessary liquidity.

The passive float arises in the case of cross-institutional transfers , in that the transfer amount has already been debited from the debtor's current account , but is only credited to the creditor's account at the recipient bank later. Credits remain in accounts for a limited time before they are debited again. The passive float leads to float income for banks.

• The positive and negative float are related to the value date of a payment transaction. It always arises when the booking date and the value date of a payment transaction are not identical. The positive float is the interest income that arises for the bank from the time difference between the value-based account debit of the debtor and the value-based credit entry for the payee. A negative float arises if, in the case of check submissions, the value-related credit is made earlier than the value-related debit to the drawee.

Economic impact

The Deutsche Bundesbank speaks of “pending clearings in the central bank system” when payment transactions are routed through it and fluctuations in the payment transaction volume occur. Banks and large corporations can consciously use float effects to their own advantage if they pass the active float on to other participants (such as the central bank ) and use the passive float for themselves. This is done by issuing collection documents (checks, bills of exchange, direct debits) as quickly as possible from their own giro network and keeping credit amounts in their own bank network for as long as possible. When the active float of the Bundesbank (an interest-free loan to credit institutions) peaked at DM 26.5 billion in May 1991 , it switched to routing debit papers with same-day value dates and thus float-free through its network.

The payment rhythm of an economy also influences the float. Large payment dates (such as salary, rent and tax payments) trigger high liquidity stocks ( passive float ) or liquidity requirements ( active float ) at banks at the end of the month , which can contribute to undesirable consequences on the money market . The float is therefore considered to be a technical element in money supply control .

Ultimately, the significance of the float also depends on the prevailing interest rate level . In the case of negative interest rates , floats are comparatively negligible.

Floats today

Floats of this kind are rarely found. On the one hand, cashless payment transactions are predominantly paperless, so that post processing times are no longer necessary and processing times are minimized by payment transaction systems such as TARGET2 (since November 2007) and SEPA (since January 2008). Both systems are real-time systems in which credit and debit entries - also across institutes - take place at the same time, which technically excludes active / passive floats. Since February 2014, SEPA has abolished the float for direct debits and reduced it to one bank working day for transfers.

On the other hand, both the execution deadlines and the value date practice at banks are restricted by law. Since November 2009 there have been maximum execution deadlines for transfers. The execution period is the period between the day a payment order is received and its final booking at the recipient bank. According to § 675s BGB , the following deadlines apply:

• 1 day for transfers in euros within the EEA ,
• 2 days for transfers that are ordered using a transfer form (i.e. document-bound),
• 4 days for transfers within the EEA that are not made in euros,
• unlimited for transfers outside the EEA.

The aforementioned deadlines may not be deviated from to the detriment of the customer ( Section 675e Paragraph 1 BGB; for exceptions see Section 675e Paragraph 2 Clause 2, Paragraphs 3 and 4 BGB).

The real-time transfer payment system, which has been based on SEPA and the ISO standard 20022 in all EU member states since November 2017, completely eliminates floats. This is because transfers are no longer collected up to a certain time and then executed in batches.

With regard to the value date practice, § 675t BGB must be observed, according to which incoming payments must be posted immediately after receipt for transfers within the same credit institution and the value date must take place on the same day as the payment is received. It can be assumed that posting a credit note is still permitted on the business day following receipt. The legal text takes up the case law of the Federal Court of Justice on the value of incoming transfers. The BGH had made it clear that the credit, even if it is made retrospectively, is to be made in such a way that the value date of the amount received on the customer's account takes place on the date of the day on which the amount was made available to the bank. The beneficiary bank can only enter into a different value date agreement for cash deposits with companies, as the legal regulation relates to consumers .

The so-called business days are decisive for calculating the deadline . These are the days on which all those involved in the execution of the transfer maintain the necessary business operations ( Section 675n BGB). Saturdays, Sundays and public holidays as well as days on which banks do not open their counters ( bank holidays ) are not business days .

Credit cards

Floats are the period between the day the card is used and the cardholder's account is debited. With credit cards , floats are often possible for a maximum of 30 days. With the debit card there is a monthly statement, with the charge card the cardholder is charged immediately after payment. In the case of long floats, credit cards fulfill their designation because the cardholder takes out a "silent" trade credit by purchasing goods or services that he does not immediately pay for in cash.

Individual evidence

1. ^ ^{A b} Larry Allen, The Encyclopedia of Money , 2009, p. 145.
2. ↑ Otto Veit , Grundrisse of Monetary Policy , 1969, p. 298.
3. ↑ Gabler Banklexikon, 1988, Sp. 846 f.
4. ↑ Monthly Report of the Deutsche Bundesbank March 1997, p. 35 f.
5. ↑ ^{a b} Monika E. Hartmann, Electronic Money and Monetary Policy , 2000, pp. 185 f.
6. ^ Otmar Issing, Monetary Theory as a Basis For Monetary Policy , September 1997, Deutsche Bundesbank, excerpts from press articles, No. 50 of September 8, 1997, p. 8
7. ↑ SEPA-Infos.de of August 26, 2013, uniformity in payment transactions thanks to SEPA ( memento of the original of March 18, 2014 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice.  
8. ↑ The money is getting really fast now welt.de. Retrieved July 10, 2018
9. ↑ Bundestag printed paper 16/11643 of January 21, 2009, p. 112 ( Memento of the original of March 19, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. 
10. ↑ BGH NJW 1997, 3168