bilateral net settlement system
A bilateral net settlement system determines what each participating institution owes or is owed by another institution after offsetting their transactions over a specified period. Only the residual amount between the two institutions is then transferred, rather than the gross value of all underlying payments. Net obligations are determined independently for each pair of participants, and the arrangement does not combine positions across the entire network.
Source: European Central Bank (ECB) (source). This glossary entry is an independently worded adaptation of the cited information.
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