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hey how is it going my name is John Paul and I run a blog pennant Arthur come in this video we will talk about cross settlement and net settlement first we look at the definition of the term settlement ing to the Bank of International Settlements that will lead a foundation to understand the two next topics gross settlement and net net settlement settlement involves the movement of funds but the process is to carry out gross and net settlement are different after watching this video you will be able to understand and explain the main differences easily so let's begin with a definition of settlement what is cyclamen the B is defined settlement as an act thus discharges obligations in respect of funds or securities transfers between two or more parties simply stated settlement is the funds transfer that is performed by one party to fulfill its obligation towards the counterparty in a financial operation settlements consist in paying that debt as stated in the definition settlement can happen between two parties that's the case after bilateral clearing all between more parties as is the case after multilateral clearing there are two types of settlements gross settlement and net settlement let's consider gross settlement first in a gross settlement system the supplement of funds transfer occurs individually after each payment transaction is process so every time a transaction is processed the fund transfer is carried out there is no clearing and no netting of amount if the money cannot move then the related transaction cannot be processed banks generally use this type of system to exchange urgent transfers or large amounts transfer in fact banks do that in the so called a CGS systems in a TDS we have real time in addition to cross settlement real time means that funds transfer happens right away if funds are available on the debtor account gross settlement means that transactions are settled on a one-to-one basis these are other words to say the same thing as a both in addition in a net EGS system when a funds transfer is made between two accounts it becomes final and irrevocable immediately after the transfers made the risk of default is therefore eliminated we said in videos about caring that moving funds every time a transaction is process is not very efficient but it's a risk not to move funds right away because it is not sure that the party that owes money will have the funds later to pay the counterparty a DTS systems are used to eliminate that risk that is called default risk when a TDS system is a critical infrastructure in a country's economy it is operated by the central bank directly or indirectly and interconnects all the participant banks to facilitate fast transfers of funds among them since the central bank plays the function of banks of banks as overseer of the banking system in a country or region the solvency of banks and the banking system as a whole is a very important topic to the central bank everywhere in the world real-time...

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