WHAT IS NETTING?

Netting means different things to different people. There are at least 3 different meanings for netting:

Multilateral Netting: An arrangement among subsidiaries in a corporate group where each subsidiary makes payments to, or receives payment from, a clearing house (netting Center) for net obligations due from other subsidiaries. This procedure is used to reduce credit/settlement risk. Also known as Inter-company Netting and Multilateral Settlement.
Balance Netting: Also known as Pooling. Pooling enhances cash reconciliation by allowing head offices to net out the differing cash positions in different locations and, ultimately, pooling the net result in a single centralised fund.
FX Netting: The intra day netting of foreign exchange obligations between banks.

The Coprocess solution is a Multilateral Netting: solution. It is NOT a Balance Netting solution nor a solution for FX Netting.

The two diagrams in the right column illustrate the differences between a corporate not running netting and a corporate running netting.

Savings from Netting

The savings in a Multilateral Netting System are achieved by summing and converting each participant's inter-company and (optionally) third party payments and receipts into a single local-currency amount. Thus centralising the FX requirement of the group, reducing the amount of FX required and reducing the number of payment that need to be made. By centralizing the FX requirement the FX can be bought and sold at near in-bank rates.

A properly implemented and run netting system can be the most profitable corporate treasury vehicle.

Corporate not running Netting: Click to enlarge
Corporate running Netting: Click to enlarge