bilateral netting

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1 An agreement between two counterparties that mutual obligations will be settled by a single payment.

2 A method of reducing bank charges in which two related companies offset their receipts and payments with each other, usually monthly. In this way a single payment and receipt is made for the period instead of a number, which saves on both transaction costs and paperwork. See also multilateral netting.

Subjects: Financial Institutions and Services.

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