Settlement (finance)

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The Anglizismus Settlement ( English for "fulfillment" ) is in finance for the mutual fulfillment of spot and forward transactions , which in the delivery of the underlying asset by the seller and the payment as consideration is the buyer.


The settlement is a contract of sale compared, which train to train for the mutual exchange of goods and money coming. There is no risk that the buyer does not receive the goods despite his payment or that the seller has handed over the goods without paying at the same time, there is no risk of face-to-face purchases over the shop counter . The situation is different with mail order purchases , in which a local distance between buyer and seller creates the risk that the goods will be damaged during transport , perish or not be delivered at all and the buyer has already paid and vice versa. In both cases, either the buyer grants an unplanned customer credit or the seller grants an unwanted supplier credit . This is to inputs associated with a delivery risk associated.


At the latest since the bankruptcy of the Herstatt Bank on June 24, 1974 at 3:30 p.m. CET , the mutual fulfillment of cash and forward transactions has been a topic in banking and especially in interbank trading . On that day, several counterparties to the institute had made larger, irrevocable DM payments to the Herstatt Bank, but had not yet received any corresponding US dollar payments because the US financial markets had only just opened. The Herstatt closure triggered a chain reaction that disrupted the payment and accounting systems. The Institute's New York correspondent bank ( Chase Manhattan Bank ) suspended all US dollar payments to be made from the Herstatt account. This created open risk positions in the amount of the payments made for the banks that had previously arranged DM payments to the Herstatt bank on that day . The closure of the Herstatt banking house was the first and most spectacular case of a bank collapse, in which incomplete foreign exchange transactions led to serious problems in the payment and settlement systems.

In February 1990 the bank group Drexel Burnham Lambert , whose London subsidiary Drexel Burnham Lambert Trading had been active in the foreign exchange and gold markets, collapsed. In July 1991, the liquidation of the Bank of Credit and Commerce International resulted in capital losses in foreign exchange for both UK and Japanese counterparties to the institution. At the time of the attempted coup in the Soviet Union in August 1991, uncertainties about some financial institutions headquartered in the Soviet Union or owned by Soviet institutions affected the functioning of the systems. The collapse of Baring Brothers in February 1995 caused difficulties at ECU - Clearing . The bankruptcy of Lehman Brothers in September 2008 reached the highest levels of settlement risk to date. This risk particularly hit the German KfW , which on September 15, 2008 transferred around 319 million euros to Lehman Brothers from a foreign exchange swap , when it was already known to be bankrupt. The consideration due from Lehman Brothers of US $ 500 million did not materialize and KfW had to record it as a loss. In December 2009 KfW set off a credit balance from Lehman Brothers with the federal debt administration of around 200 million euros, so that the loss was reduced to around 119 million euros.

Compliance risk


Economic exchanges are regularly by the occurrence of time lags (English time lags ) with the processing embossed. The main processing delay arises from the often not simultaneous processing of the payment and delivery parts of a transaction , the so-called asynchronous processing. There are two types of time delay for international processing:

Because the operating hours of the payment systems in the major currency trading centers - London, New York, Frankfurt and Tokyo - do not completely coincide, a large proportion of the currency transactions are carried out outside the business hours of one of the counterparties. These time delays are the main reasons for the emergence of the credit and liquidity risk categories. The credit risk is the danger that a counterparty will not meet its obligation either when it becomes due or at a later point in time. A liquidity risk arises because it is possible that a counterparty, on or after the due date, will not be able to meet its obligation in full, but its own payment has been made. An important source of liquidity risk is operational risk . When processing payments, this risk exists insofar as a payment can be misdirected due to technical or human failure or cannot be made on time. Settlement risk is the generic term for the dangers that the settlement in a payment system or value exchange system does not take place as expected.

Especially in banking

There is no mutual fulfillment risk in banking only if the services take place at the same point in time and each counterparty pays with knowledge of the counter-performance of the other counterparty at the same time. However, as soon as there is a period of two days or more between the services, there is a risk of the counterparty becoming insolvent . In the case of cash transactions, both counterparties are obliged to mutually fulfill two trading days after the transaction. Exception is the development diagram meet on the same day (English same day settlement ) in which takes place the performance on the day of the transaction. This processing scheme is only intended for accelerated, time-critical payment transactions (e.g. urgent SEPA payments).

On the day of the transaction ( trade date ), there is initially a settlement risk for each counterparty in cash transactions , as long as both contracting parties have not yet performed, although they are obliged to perform. On the settlement date , the buyer normally pays the purchase price ( cash settlement ) and the seller delivers the basic value ( physical settlement ). The advance performance risk arises for each of the counterparties on the settlement date because one counterparty does not know with certainty whether the other counterparty has also provided its consideration at that point in time . In the case of forward transactions, the mutual settlement date is even further in the future, usually at least 1–12 months or longer, so that the risk of the other party becoming insolvent increases further.

The banking sector is affected by this risk of asynchronous processing, particularly with cash and forward transactions. The risk that one party to a currency trading transaction will pay off the currency it has sold without receiving the currency it has purchased is known as the settlement risk in currency trading transactions or the " Herstatt risk ". This risk persists as long as credit institutions process their transactions with each other bilaterally. One possibility of mutually minimizing fulfillment risks is to conclude bilateral or multilateral netting agreements . However, if banks use a third party for brokerage purposes and instruct them to take over payment and delivery, the performance risk is eliminated under certain conditions.

In 1995 the Bank for International Settlements (BIS) presented a solution based on the “payment against payment” principle to solve the problem of the settlement risk of asynchronous settlement . As a further development of this approach, the G20 banks founded a special-purpose financial institution , CLS Bank International, in July 1997 . The CLS bank started operations in September 2002 and has been processing transactions in 17 currencies since then, which represent around 94% of the daily foreign exchange volume worldwide. Within the CLS system, between the processing of transactions and deposits and withdrawals, i.e. H. Payments in the relationship between the CLS members and the CLS Bank, differentiated. The principle of "payment against payment" means that the members have to show a non-negative total balance (of all currencies combined) on their CLS accounts at all times and therefore do not have any intraday overdrafts . At the end of the day, your CLS accounts will always have zero balance.

Regulatory regulation

Because of the risk of counterparty default, the Capital Adequacy Regulation (CRR) applicable in all EU member states deals in great detail with the risk of default. According to Art. 379 Paragraph 1 CRR, there is a risk of advance payments if a credit institution

  • Has paid for securities , foreign currencies or goods before receiving them or
  • Has delivered securities, foreign currencies or goods before receiving payment for them, or
  • for cross-border transactions, if at least one day has passed since payment or delivery.

Since there is regularly a counterparty in cash and forward transactions, their creditworthiness must be checked in accordance with Art. 286 (2a) CRR before entering into a business relationship in order to be able to assess the counterparty risk . According to Art. 272 ​​(1) CRR, the counterparty default risk is the “risk of the counterparty of a transaction defaulting before the final settlement of the payments associated with this transaction”. In the context of credit decisions , in order to limit such risks, bank-internal “settlement” or acquisition limits for cash transactions are to be granted for each counterparty in order to limit the business volume of each individual counterparty. The futures contracts are booked during their term in the limit for the replacement risk (English pre-settlement limit ), since the replacement risk is considered prior to the settlement date with the associated settlement risk. The transactions booked within the specified limit are part of the risk position that must be backed with own funds if the first contractually specified service is up to four days after the second scheduled service. On the fulfillment day, the transactions booked in the “pre-settlement limit” are to be transferred to the “settlement” limit because there is then a dogmatic fulfillment risk.


Cash and forward transactions are concluded between credit institutions ( interbank trading ) and non-banks . The wholesale risk arises in both cases. In interbank trading, settlement can either take place directly between the counterparties or via clearing houses or central securities depositories . If one of these two institutions is involved, the settlement and advance performance risk does not apply. This is due to the fact that a clearing - and thus the fulfillment - is only completed when the delivery and payment of the two counterparties has been received by the clearing house and is mirror-inverted ( matching ). The system saves the contract data and compares matching orders. If a counterparty fails to perform, there is no comparison and the counterparty who made the advance will get its performance back.


The wholesale risk is limited to the trading book , while the settlement risk also extends to the banking book of an institution. Between the conclusion of the transaction and the settlement date, spot and forward transactions are pending transactions in the balance sheet if the settlement date is after the balance sheet date .

According to IAS 39.AG55, the trading day is the day on which the reporting company entered into the obligation to buy or sell an asset . Settlement date is the day on which an asset is delivered to or by the accounting company (IAS 39.AG56). In the case of cash transactions, any fluctuations in value between the trading day and the settlement date are not recorded as derivative financial instruments due to their short duration (IAS 39.AG12). According to IAS, pending futures contracts are to be accounted for on the trading day as financial assets or financial liabilities because the company has been bearing the market price risk since then . However, the symmetrical futures contract has the value zero on the trading day because rights and obligations still balance each other out. With asymmetrical forward transactions, however, the buyer accounted for the option premium paid by him as an asset, while the seller as a writer it as a liability passivated . However, the market value of these transactions can change with increasing maturity . The counterparty's default risk arises when futures transactions with the latter have a positive replacement value and, from the point of view of the bank, a claim against the counterparty arises as a result of market developments . The expected replacement costs at banks are balanced on the basis of the credit valuation adjustment in accordance with Art. 381 ff. Of the Capital Adequacy Ordinance .

Pursuant to Section 36 Sentences 1 and 2 RechKredV , a list of the types of forward transactions that have not yet been settled that involve a settlement risk and other risks must be included in the appendix . Here, the forward transactions are divided into foreign currency , interest rate and price risk-related .

See also

Individual evidence

  1. Bank for International Settlements, Quarterly Report December 2002 , p. 63
  2. Bank for International Settlements, Quarterly Report December 2002 , p. 63
  3. Bank for International Settlements, Quarterly Report December 2002 , p. 64
  4. Bank for International Settlements, Quarterly Report December 2002 , p. 64
  5. SPIEGEL ONLINE of December 12, 2009, Lehman transfer margin: KfW gets money back
  6. Gerald R. Riedl, Bank Operational Payment Transactions , 2002, p. 74 f.
  7. Bank for International Settlements, Quarterly Report December 2002 , p. 66
  8. Bank for International Settlements, Payment Systems in the Countries of the Group of Ten , 1995, p. 553
  9. Bank for International Settlements, Quarterly Report December 2002 , p. 65
  10. Bank for International Settlements, Quarterly Report December 2002 , p. 65
  11. Bank for International Settlements, Payment Systems in the Countries of the Group of Ten , 1995, p. 551
  12. Bank for International Settlements, Quarterly Report December 2002 , p. 65
  13. Bank for International Settlements, Payment Systems in the Countries of the Group of Ten , 1995, p. 551
  14. Bank for International Settlements, Quarterly Report December 2002 , p. 69
  15. Bank for International Settlements, Quarterly Report December 2002 , p. 71
  16. Beate Kremin-Buch / Fritz Unger / Hartmut Walz (eds.), International Accounting - Aspects and Development Perspectives , Volume 4, 2003, p. 57
  17. Knut Henkel, Accounting for Treasury Instruments according to IAS / IFRS and HGB , 2010, p. 111
  18. Burkhard Vamholt, Credit Risk Management , 1997, p. 141