Settlement risk (principal risk)

The risk that the vendor of an asset – e.g., currency, as was the matter with Herstatt Bank, Cologne in 1974 – will deliver but not receive the payment agreed upon, or the risk that the buyer will pay but not receive the payment agreed upon. currency, as it was the matter with Herstatt Bank, Cologne in 1974, – will deliver, but not receive the payment agreed upon, or the risk that the buyer will pay, but not receive delivery) – The risk of loss arising if settlement in a transfer system (such as TARGET) does not take place as expected. This risk may be both a credit risk and a liquidity risk (the risk that settlement in a transfer system will not take place routinely; this risk may comprise both credit risk and liquidity risk). – See Continuous Linked Settlement System, Herstatt risk, TARGET system.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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