Settlement may be made for each payment transaction (gross settlement) or by netting a number of individual transactions between two or more banks (net settlement).
Banks' participation in NBO is regulated by an account maintenance and settlement agreement between the individual bank and Norges Bank. NBO's operating schedule is outlined in a separate circular (see below under more information).
Central bank settlement entails no credit risk for banks, since Norges Bank has the exclusive right to issue Norwegian kroner, and therefore cannot go bankrupt. A smoothly functioning settlement system is important for promoting financial stability. Banks' sight deposits with Norges Bank also provide the central bank with an effective channel for conveying interest rate signals in monetary policy.
To promote the efficiency of Norges Bank's settlement system, banks can raise loans in Norges Bank against collateral in the form of securities through the collateral for loans arrangement. Interest is not charged on these loans if they are repaid the same day, but banks that have overnight loans in Norges Bank are charged interest at the overnight lending rate (D-loan rate).
More information