[Economic Term] Settlement Finality

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Today's economic term is Settlement Finality.

Settlement finality is a system that prohibits cancellation or denial of transfer instructions, settlement, deduction, collateral disposition, etc. in the designated payment and settlement system when a financial institution goes bankrupt. If settlement finality is not guaranteed, payments, clearing, and settlement actions by financial institutions completed through the payment and settlement system may become invalid after the fact, which may cause great confusion in the financial system.
In response to this, Korea introduced a settlement completeness guarantee system for the payment and settlement system in the Debtor Rehabilitation and Bankruptcy Act, which came into effect in April 2006.

Currently, six retail payment systems (bill clearing, giro, electronic finance, interbank transfer, CD, CMS joint network), including the Bank of Korea Financial Network and the CLS system, are designated.

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