First of all, there is an essential difference between net settlement and liquidation. Netting is the netting of one party's creditor's rights or debts to the other party through legal means. For example, in many transactions, the offset or offset part usually occurs between market traders, and the balance is paid only after there are opposite transactions. Liquidation, on the other hand, is a legal procedure, which aims at ending the legal relationship and dealing with the remaining property, such as the liquidation of the property when the association is cancelled. The termination of unfinished liquidation has no legal effect.
Secondly, in terms of operational procedures, interbank clearing is divided into real-time full clearing and net clearing. Real-time full settlement means that every transaction is paid immediately, and net settlement means that all transactions are added and subtracted at the end of the day, and only the net amount is settled, which is helpful to improve the efficiency of capital turnover, but it may involve complicated rules. Net settlement usually occurs before or at the same time of liquidation, which simplifies the payment process, such as the transaction between Bank A and Bank B, and only needs to pay the actual difference according to the net settlement result at the end of the day, thus avoiding unnecessary capital flow.
Finally, in behavior, liquidation represents the final settlement of the transaction, which means that the direct point-to-point payment of customer funds between the two banks has been completed. Netting is carried out at the settlement bank level. Through bookkeeping, the payment instructions of the two banks are combined to form a net amount. The transaction can only be completely closed after the balance is booked.
In short, although the net settlement and liquidation of banks are related to the settlement of capital transactions, their respective emphases and implementation mechanisms are different. The former focuses on simplified handling, while the latter emphasizes legal effect and full payment.