Dealing with economic and financial terms, I came across the concept of "clearing" (namely, clearing banks), which everyone should get acquainted with: from those who at least once used banking financial products (loans) to traders. Although the literal translation of the word “clearing"From English -" cleansing ", this term refers to the system of mutual settlements in the world of finance. In fact, what clearing was known even during the existence of the USSR, since this system was used by various enterprises to offset mutual claims and obligations. The main task of clearing is to reduce the volume of financial transactions (payments). It is regularly used by both legal entities and individuals. In this article, I will talk about clearing, the features of its application, types, features of settlement, about the clearing of banks and other clearing companies, as well as how to use this system on the exchange.
Clearing in simple words - what is it
Clearing is a system of non-cash payments for goods sold or services provided, used by organizations, banks and states. Its essence is that real money transfers are carried out only if there is a difference in the amount (debt). One of the advantages of clearing is to reduce the cost of banking operations.
For a better understanding, consider an example. Organization А should the organization Б 10 million rubles. Organization Б should the organization А 17 million rubles. In a simple case А will transfer to the account Б 10 million rubles, and Б will transfer to the account А 17 million rubles. Clearing settlements allow you to pay off debts in one step - organization Б will transfer 17-10 = 7 million rubles to the account А.
Clearing transactions are also called offset payments. They are used by organizations that have agreed on offsetting counterparties' debts against the delivered products and services. In such negotiations between organizations there are intermediaries - clearing companies (public or private).
Types of clearing
Clearing has established itself as a simple and convenient way of conducting mutual settlements, used in many areas. There are several types of clearing:
- Simple - with the participation of only two counterparties (organizations conducting various business operations: supply of goods, provision of services).
- Multi-stakeholder - involving multiple organizations along the chain, from raw material suppliers to points of sale for finished products.
- Currency - used for mutual settlements between states (in the absence of actual transfers of monetary units).
- Commodity - Offsetting physical products and services provided between two or more organizations.
- Exchange-based settlement transactions between legal entities and individuals for shares and other trading instruments.
Banks and some other financial institutions use clearing most often. Clearing avoids the actual transportation of large amounts of cash, increasing the security of transactions.
Having explained what clearing is in simple terms, I now want to draw your attention to 4 main stages of its implementation. For example, let's take a bank clearing with the participation of a financial institution that is a member of a clearing house:
- Transfer of bills and checks for collection;
- Formation of a statement with subsequent transfer to an intermediary - a clearing company conducting reconciliation.
- Collection of statements by the clearing house (determination of the parties: who is the creditor and who is the debtor), the return of checks and bills to banks and the transfer of the general statement to the Central Bank.
- Writing off certain amounts from correspondent accounts to close a deal.
Clearing settlements are carried out in two ways:
- Classic - calculation of the final balance separately for each participant. The clearing company has only transit accounts (with zero balances on them) of organizations conducting mutual settlements, while the funds are on correspondent accounts in central bank.
- Advance payment - the clearing house functions as a bank, determining the final balance for participants independently. Guarantee funds are created within the chamber, while participants can even borrow funds.
Due to the large volume of funds on correspondent accounts with the Central Bank, the classical method of clearing settlements is the most secure (as opposed to the advance method, where the chamber actually bypasses the Central Bank).
What is clearing loans
Some clearing companies provide targeted loans to organizations as part of a clearing settlement relationship. Such loans are also issued by some large financial institutions (for example, ABOUT US Banking - Swiss bank). The funds received are available to pay off the debt to the counterparty.
The advantage of clearing loans is a low interest rate due to the use of a special intrabank currency.
Thus, an organization can settle accounts with counterparties with a slight increase in the amount of funds that it now undertakes to pay to an intermediary (a clearing company or a bank that issued a clearing loan).
Clearing settlements on exchanges
Some companies act as intermediaries in the execution of transactions on exchanges. They guarantee payments, eliminate the need to assess the risks of failure of a particular transaction. For example, the role of a clearing intermediary on the Moscow Exchange is performed by NCOs NCC... On a daily basis, the company conducts preliminary calculations of debts and basic clearing (debiting and crediting funds to the accounts of participants).
Advantages and disadvantages
Now that you know what clearing is, it's time to find out what the positive and negative aspects of it are. The first include:
- Reducing the cost of financial transactions;
- No influence of price volatility on the results of settlements;
- A simplified way of interacting with contractors.
The main drawback of clearing settlements is certain risks associated with default on obligations. But there are others:
- Providing incorrect data;
- Losses in mutual settlements on highly volatile assets;
- The need to conduct an expensive audit to eliminate errors.
To mitigate the risks, a whole system of clearing settlements was developed, including risk committees and guarantee funds to minimize the time required for mutual settlements.