Settlement Bank Law and Legal Definition

A settlement bank maintains cash accounts to settle payment obligations associated with transactions. A settlement bank can be a commercial bank or a central bank. A settlement bank includes a correspondent and intermediary bank. Both banks must be located in the country where a member's settlement currency is the local currency. The bank is authorized to execute settlement of interchange on behalf of the member or the member's bank.

The Bank for International Settlement (BIS) is an international organization promoting cooperation among central banks and other agencies in search of monetary and financial stability. However, BIS banking service is provided exclusively to central banks and international organizations.