Treasury Operations, Cash and Settlement Management

Introduction and Context

Treasury operations convert a bank’s funding, liquidity, market-risk and payment strategies into controlled daily activity. Treasury is not limited to buying and selling securities. It must know how much cash is available, in which currency, at which location, and at what time; ensure that payment obligations are settled; maintain required reserves; manage nostro accounts; control collateral; and protect the institution against settlement, counterparty and intraday liquidity risks.

A bank may be solvent on a balance-sheet basis and still fail operationally if it cannot make a payment at the required time. This distinction is central to treasury management. Liquidity is therefore both a stock concept—cash and readily monetisable assets—and a flow concept—the timing of inflows and outflows. Operational controls connect the two.

Modern treasury operations are shaped by real-time gross settlement, instant payments, central-bank facilities, correspondent banking, collateralised funding, sanctions screening, cyber risk and increasingly automated reconciliation. The treasury function must combine financial judgment with disciplined processing, legal awareness, technology governance and segregation of duties.

Learning Objectives

By the end of this chapter, the learner should be able to:

1. Explain the structure and responsibilities of treasury operations.
2. Construct and interpret cash, reserve and intraday liquidity positions.
3. Manage nostro accounts, payment flows, clearing and settlement processes.
4. Distinguish settlement, counterparty, replacement-cost and principal risks.
5. Explain confirmations, reconciliations, collateral controls and operational segregation.
6. Apply quantitative tools to cash forecasting, reserve management and intraday liquidity.
7. Evaluate a treasury operations problem and recommend appropriate controls.

1. Treasury Operations as an Integrated Control System

Treasury operations sit between front-office dealing, risk management, finance, payments and external market infrastructure. A typical operating model has three functional layers:

• Front office: executes funding, investment, foreign-exchange and derivative transactions.
• Middle office: measures risk, validates limits, values positions and monitors compliance.
• Back office or operations: confirms trades, instructs settlement, reconciles accounts, manages exceptions and maintains records.

The separation is not merely organisational. It is a control principle. The person who negotiates a transaction should not be able to unilaterally confirm, settle, amend and reconcile it. Independent verification reduces fraud, error and unauthorised trading risk.

Treasury operations manage several linked balances:

The key managerial question is not simply “How much cash does the bank have?” It is “Can the bank meet every obligation, in every relevant currency, through every critical payment window?”

2. Cash Positioning and Liquidity Forecasting

2.1 Cash-position structure

A cash position should be prepared by currency, legal entity, account, payment system and time bucket. The basic projected closing cash identity is:

Where:

• C_t^close = projected closing cash at time t;
• C_t^open = opening available cash;
• I_t = expected inflows;
• O_t = expected outflows;
• F_t = net funding or borrowing flows;
• M_t = net market-transaction cash flows, such as securities purchases or sales.

All variables must be measured in the same currency and time bucket. The identity is an accounting-style cash-flow identity, not a forecast model by itself. Its quality depends on the completeness and timing accuracy of the inputs.

Available cash is not necessarily equal to ledger cash. A ledger may include uncleared receipts, restricted balances, pledged assets or funds subject to a payment-system hold. Treasury should distinguish:

• Book balance: balance recorded by the bank’s accounting or payment system.
• Available balance: amount immediately usable for authorised payments.
• Value-dated balance: amount recognised for interest or settlement on a specified date.
• Projected balance: expected future balance after known and forecast flows.

2.2 Forecast horizons

Treasury commonly uses several horizons:

• Intraday: payment queues, central-bank liquidity, collateral and cut-off times.
• Overnight to one week: settlement obligations, money-market funding and reserve management.
• One month to one year: wholesale funding, securities maturities and structural liquidity.
• Long term: funding plans, liquidity buffers and balance-sheet strategy.

Short-horizon forecasts should be transaction-based and highly granular. Longer forecasts use behavioural assumptions, such as deposit stability, loan drawdowns and securities-market access. Forecasts should contain a base case, stress cases and clearly documented assumptions.

2.3 Forecast accuracy

Forecast error can be expressed as:

where A_t is actual net cash flow and F_t is forecast net cash flow for period t. A positive error means actual net inflow was greater than forecast, while a negative error indicates an adverse shortfall relative to forecast.

A simple mean absolute error over n observations is:

This measure is expressed in currency units and treats over- and under-forecasting symmetrically. It is useful for monitoring forecast quality, but it does not reveal whether errors are systematically biased. A treasury should therefore also examine average error, timing error and errors by product or business line.

3. Reserves and Central-Bank Liquidity

Reserve management concerns balances maintained at a central bank or other designated institution. Requirements vary by jurisdiction. They may be based on eligible liabilities, averaging periods, transaction accounts, or institution-specific rules. A bank must not assume that all central-bank balances are interchangeable: some may be required reserves, some may be excess reserves, and some may be operational balances used for settlement.

If a reserve requirement is defined as a percentage of a specified reserve base, the basic requirement is:

where R^req is required reserves, r is the applicable reserve ratio expressed as a decimal, and B is the eligible reserve base. This formula applies only when the regulatory rule is a simple percentage rule; actual regulations may include exclusions, averaging and reporting conventions.

Reserve surplus or deficit is:

A negative value indicates a shortfall. A surplus is not necessarily economically idle: it may be valuable as intraday liquidity or as protection against unexpected payment outflows. Conversely, holding excess balances has an opportunity cost if alternative assets provide a higher risk-adjusted return.

Central-bank facilities may include standing lending facilities, intraday credit, deposit facilities, open-market operations and emergency liquidity assistance. Access conditions, eligible collateral, haircuts, pricing and legal documentation must be understood before a facility is treated as reliable funding.

4. Nostro and Vostro Account Management

A nostro account is an account that a bank holds with another bank, usually in a foreign currency, to make and receive payments. From the account-holder’s perspective it is “our account with you.” A vostro account is the same relationship described from the correspondent bank’s perspective: “your account with us.”

Nostro management includes:

1. Selecting correspondent banks and establishing account mandates.
2. Setting target, minimum and maximum balances.
3. Forecasting receipts and payments by value date.
4. Funding accounts before payment-system cut-offs.
5. Monitoring overdrafts, fees, interest and value-dating.
6. Reconciling correspondent statements with internal records.
7. Investigating unmatched or aged entries.
8. Closing dormant or uneconomic accounts where appropriate.

A target balance should reflect predictable outflows, settlement uncertainty, correspondent limits, central-bank access and the cost of idle cash. An account that is consistently overfunded may indicate inefficient liquidity allocation; one that frequently becomes overdrawn may indicate weak forecasting or inadequate funding arrangements.

Nostro reconciliation must distinguish timing differences from genuine errors. Typical reconciling items include outstanding payments, receipts not yet advised, bank fees, returned payments, interest adjustments, foreign-exchange differences and duplicate postings. Ageing is important: a one-day timing item may be normal, whereas an unexplained item outstanding for 30 days requires escalation.

5. Payments, Clearing and Settlement

5.1 Payment stages

A payment generally passes through initiation, validation, authorisation, clearing, settlement and reconciliation. These stages can occur within one institution or across multiple participants and infrastructures.

• Initiation: the payment instruction is created.
• Validation: format, account, balance, sanctions and fraud checks are performed.
• Authorisation: the instruction is approved under mandate and limit rules.
• Clearing: payment information and obligations are exchanged or netted.
• Settlement: funds and, where relevant, securities are transferred.
• Reconciliation: internal records are matched to external confirmations and statements.

Clearing determines obligations; settlement discharges those obligations by transferring funds or assets. In net settlement, obligations are offset and only net amounts are paid. In gross settlement, transactions are settled individually. Real-time gross settlement systems generally provide prompt and final settlement, but they require participants to manage intraday liquidity continuously.

5.2 Settlement finality and payment-system design

Settlement finality means that, under the applicable legal and system rules, a completed transfer cannot ordinarily be revoked unilaterally. Finality reduces credit risk but does not remove operational or liquidity risk. A payment may be final for the receiver while creating an immediate cash shortfall for the sender.

Payment systems may be:

• Deferred net settlement: obligations accumulate and settle at scheduled times.
• Real-time gross settlement: transactions settle individually and continuously, subject to funds or credit availability.
• Hybrid systems: combine liquidity-saving mechanisms with rapid settlement.
• Instant-payment systems: make funds available rapidly, often continuously and with limited recall capability.

The appropriate treasury response depends on operating hours, queue rules, collateral arrangements, irrevocability, message standards and participant default procedures.

5.3 Value date and cut-off management

A payment can be technically transmitted but economically late if it misses a cut-off. Treasury calendars must include market holidays, time-zone differences, currency holidays, correspondent cut-offs, securities settlement cycles, daylight-saving changes and emergency closure procedures.

A payment control should record at least the amount, currency, beneficiary, value date, settlement route, status, authoriser, sanctions-screening result and exception history. High-value payments require stronger authentication and independent release controls.

6. Settlement and Counterparty Risk

Settlement risk is the possibility that a bank delivers value but does not receive the expected value. It includes principal risk, replacement-cost risk, liquidity risk and operational risk.

• Principal or Herstatt risk: one side performs while the other side fails to perform.
• Replacement-cost risk: a counterparty defaults after the bank has entered into a transaction and the replacement transaction is more expensive.
• Settlement liquidity risk: funds are available overall but not at the required time or location.
• Operational settlement risk: an error, outage, fraud or message failure prevents settlement.

Payment-versus-payment systems reduce principal risk in foreign exchange by linking the two currency legs so that one is not paid without the other, subject to the system’s rules and availability. Delivery-versus-payment arrangements similarly link securities delivery and cash payment.

Counterparty limits should reflect current exposure, potential future exposure, collateral, netting enforceability, settlement method, jurisdiction and concentration. Legal documentation is critical: a risk-reducing netting agreement may not provide the expected protection if it is unenforceable in the relevant jurisdiction.

7. Intraday Liquidity Management

Intraday liquidity is the ability to meet payment and settlement obligations throughout the business day. It differs from end-of-day liquidity because a bank may begin and end the day with adequate cash yet experience a temporary shortage during peak payment periods.

Important intraday measures include:

• Maximum cumulative net outflow.
• Time and amount of peak liquidity usage.
• Payment throughput and queue size.
• Available central-bank or correspondent credit.
• Unencumbered collateral available for intraday borrowing.
• Largest payment and largest counterparty concentration.
• Payments delayed, rejected or rerouted because of liquidity constraints.

A simple cumulative net cash-flow profile is:

where I_i and O_i are inflows and outflows in interval i. If funding transactions are excluded, NCF_t shows the underlying payment pressure. The minimum value over the day represents the greatest cumulative funding need under the specified ordering and timing assumptions.

Worked example. A bank expects the following net flows in its settlement account, in millions of currency units:

The lowest projected balance is 10 million. If the bank requires a minimum operational buffer of 8 million, the projected balance remains compliant, but only with a 2 million margin. A stress adjustment of 5 million to an early outflow would reduce the low point to 5 million and create a buffer breach. The appropriate response could include earlier funding, payment rescheduling where contractually permissible, collateral mobilisation or use of an approved intraday facility.

The example assumes that all flows occur at the stated times, are certain, and are immediately available. In practice, treasury should model uncertain inflows conservatively and test payment queues and collateral mobilisation delays.

8. Confirmations, Reconciliation and Exception Management

A confirmation records the agreed economic terms of a transaction. For a foreign-exchange transaction these may include currency pair, bought and sold amounts, rate, value date, counterparties, settlement instructions and governing documentation. For a securities transaction, quantity, price, accrued interest, settlement date, account and delivery instructions are also relevant.

The confirmation process should establish an independent match between the bank’s trade record and the counterparty’s record. Exceptions must be categorised and prioritised. A practical classification is:

Reconciliation should be risk-based. High-value, high-risk and time-critical accounts may require intraday reconciliation, while low-volume accounts may be reconciled daily. Every break should have an owner, due date, documented evidence and escalation path. “Unmatched” should not become a permanent status.

9. Collateral Management

Collateral supports secured borrowing, derivatives margining, securities lending and payment-system credit. The collateral process includes eligibility verification, valuation, haircut application, margin-call calculation, substitution, custody, reuse control and release.

If collateral has market value V and a haircut h, where h is expressed as a decimal between 0 and 1, collateral value after haircut is:

For example, securities worth 10 million with a 4% haircut provide 9.6 million of eligible value. This assumes the asset is eligible, unencumbered, valued at the agreed price and subject to no additional concentration or liquidity adjustment.

A margin call may be represented generally as:

where E is the required collateralised exposure and C^eligible is eligible collateral already held. A positive result indicates collateral required, subject to contractual thresholds, minimum transfer amounts and rounding rules.

Collateral creates operational risks. The bank may pledge the same asset twice, fail to deliver on time, misapply a haircut, use an outdated price or misunderstand reuse rights. A central collateral inventory should therefore record legal owner, asset identifier, location, encumbrance, eligibility, valuation date, haircut, counterparty and release conditions.

10. Operational Risk and Control Architecture

Treasury operations require preventive, detective and corrective controls.

Preventive controls include access restrictions, payment limits, segregation of duties, approved settlement instructions, dual authorisation and automated validation.

Detective controls include reconciliations, exception reports, limit monitoring, confirmation matching, unusual-payment alerts and independent review.

Corrective controls include payment recall procedures, incident escalation, account blocking, contingency funding, system recovery and root-cause analysis.

Critical controls include:

• Maker-checker approval for payment creation and release.
• Independent verification of changes to beneficiary and nostro instructions.
• Strong authentication and privileged-access management.
• Daily review of suspense accounts and aged breaks.
• Independent price and collateral verification.
• Formal incident and near-miss reporting.
• Tested business continuity and disaster recovery arrangements.
• Complete audit trails that cannot be altered without detection.

Operational resilience requires more than a backup data centre. The bank must identify important business services, define maximum tolerable disruption, test manual workarounds, maintain alternate communication channels and ensure that key third parties can continue to operate.

11. Governance, Regulation and Ethical Responsibilities

Treasury operations are governed by payment-system rules, central-bank regulations, anti-money-laundering and counter-terrorist-financing requirements, sanctions laws, data-protection rules, accounting standards, market conduct obligations and internal risk appetite. Requirements differ by jurisdiction, so a bank must maintain a current regulatory inventory rather than rely on generic procedures.

Ethical conduct is essential because operational staff control access to money and payment instructions. Staff must not bypass controls to meet performance targets, suppress exceptions, conceal errors or release payments based on informal requests. A delayed legitimate payment is a problem to be escalated; an unauthorised payment is a control failure.

Governance should define:

• Board-approved liquidity and operational-risk appetite.
• Management ownership of treasury operations.
• Delegated authorities and limit structures.
• Independent risk and compliance oversight.
• Internal-audit review and issue tracking.
• Third-party and correspondent due diligence.
• Record-retention and evidence requirements.

12. Technology, Automation and Artificial Intelligence

Application programming interfaces, automated reconciliation, straight-through processing, ISO 20022 messaging, real-time monitoring and centralised payment hubs can reduce manual error and accelerate exception identification. However, automation does not eliminate risk. Incorrect reference data, faulty rules, interface failure or uncontrolled model changes can scale an error rapidly.

AI may assist with cash-flow forecasting, anomaly detection, payment prioritisation and classification of reconciliation breaks. Its use should be controlled through explainability, human review, data-quality testing, access governance, drift monitoring and documented override procedures. An AI system should not independently release high-value payments or override sanctions and limit controls merely because its predicted outcome appears reliable.

A sound technology-control framework includes development and production segregation, version control, change approval, test evidence, fallback procedures, cyber monitoring and periodic validation. The operational objective is not maximum automation; it is safe, auditable and resilient processing.

13. Illustrative Case: Intraday Liquidity and Nostro Failure

Background

Bank Meridian, a fictional mid-sized commercial bank, settles euro payments through a correspondent bank and uses a separate securities custodian. Its treasury forecast shows an opening euro balance of 60 million. The bank has a 10 million internal minimum operating buffer and access to 25 million of approved intraday credit against eligible collateral.

Problem

On a high-volume day, a corporate client sends a large receipt that is expected at 10:00. At 09:45, a 30 million securities settlement payment is released. The client receipt is delayed because of a screening review. At 11:00, two further payments of 18 million and 12 million are due. The nostro account falls below its internal buffer, and the correspondent threatens to reject further payments.

Analysis

The initial forecast treated the client receipt as certain and available at 10:00. It also failed to reflect that the securities payment and customer payments used the same nostro account. The immediate issue is intraday liquidity, but the underlying weaknesses include poor payment aggregation, insufficient uncertainty adjustment, weak account-level forecasting and the absence of an early-warning trigger.

Approach and solution

Treasury operations should first verify the actual available balance and payment queue, rather than relying on the ledger balance. The bank should then:

1. Contact the correspondent and confirm remaining credit capacity and cut-off times.
2. Mobilise eligible collateral under the approved intraday facility.
3. Escalate the delayed receipt to the relevant compliance and business teams without bypassing screening.
4. Prioritise payments according to legal, contractual, systemic and customer-criticality criteria.
5. Delay or reschedule non-critical payments only where permitted and transparently documented.
6. Reconcile the account after each major movement.
7. Report the incident, identify the forecast failure and revise controls.

Outcome

The bank uses 20 million of intraday credit, retains the required buffer and settles the time-critical payments. The client receipt is released after screening. A post-incident review introduces probability-weighted inflow assumptions, account-level payment aggregation, a five-million early-warning threshold and mandatory treasury review of large securities payments.

Learning points

The case illustrates that liquidity is location- and time-specific. A receipt expected later cannot fund an earlier obligation unless credit or another liquid resource bridges the timing gap. It also demonstrates that compliance controls and liquidity controls must operate together: treasury cannot solve a payment delay by bypassing sanctions screening. Finally, the best control is not merely more liquidity; it is better information, earlier escalation and disciplined prioritisation.

14. Best-Practice Operating Framework

A mature treasury-operations framework should:

1. Maintain a single controlled view of cash, collateral and settlement obligations.
2. Forecast by currency, entity, account, value date and intraday time band.
3. Separate book, available, value-dated and restricted balances.
4. Set account-level targets and escalation thresholds.
5. Monitor payment queues and peak intraday usage continuously.
6. Use legally robust payment-versus-payment and delivery-versus-payment mechanisms where available.
7. Confirm trades promptly and reconcile high-risk accounts frequently.
8. Control settlement instructions through independent verification.
9. Apply documented collateral eligibility, valuation and haircut rules.
10. Test contingency funding, system recovery and manual procedures.
11. Measure forecast accuracy, exception ageing, failed payments and operational incidents.
12. Ensure that automation and AI remain auditable, explainable and subject to human accountability.

Challenges and Limitations

Treasury operations face incomplete information, uncertain payment timing, fragmented systems, time-zone complexity, correspondent dependency, legal differences across jurisdictions and rapidly changing cyber threats. Forecast models may be statistically accurate on average but fail during stress, when customers draw credit lines and markets become illiquid. Automated processing can improve speed while increasing the scale of an error. Collateral may appear liquid but become difficult to mobilise under market stress. Finally, regulatory compliance may delay payments, creating tension between speed and control. Effective management recognises these trade-offs instead of treating any single metric as a complete measure of safety.

Chapter Summary

Treasury operations provide the practical infrastructure through which a bank manages cash, reserves, nostro accounts, payments, settlement and collateral. Cash must be analysed by currency, legal entity, account and time, with clear distinctions between book and available balances. Reserve management requires knowledge of regulatory definitions and central-bank facilities. Nostro management depends on accurate forecasting, funding, reconciliation and control of correspondent relationships.

Clearing determines obligations, while settlement transfers value and may provide legal finality. Settlement risk includes principal, replacement-cost, liquidity and operational components. Intraday liquidity analysis identifies the timing and size of peak funding needs. Confirmations and reconciliations detect economic, static-data and cash breaks, while collateral management protects secured exposures through eligibility, valuation and haircut controls.

Strong governance combines segregation of duties, payment authorisation, independent verification, exception ownership, operational resilience and regulatory compliance. Technology, automation and AI can improve processing and forecasting, but they require data governance, human oversight and robust fallback arrangements. The central lesson is that a bank must be able to make the right payment, in the right currency, through the right account, at the right time—and demonstrate afterward that the process was controlled.

Key Terms

Available balance: Funds immediately usable for authorised payments.

Clearing: Exchange, validation or netting of payment obligations before settlement.

Collateral: Assets pledged or received to secure an obligation.

Counterparty risk: Risk that the other party fails to perform as agreed.

Delivery-versus-payment: Arrangement linking securities delivery with cash payment.

Intraday liquidity: Ability to meet obligations throughout the business day.

Nostro account: An account held by one bank with another bank, usually in a foreign currency.

Operational buffer: Minimum cash balance retained to absorb uncertainty and payment variation.

Payment finality: Legal and system status in which a completed payment is generally irrevocable.

Payment-versus-payment: Arrangement linking payment of one currency to payment of another.

Reconciliation: Comparison of internal records with external statements or confirmations.

Reserve requirement: Regulatory or policy requirement to hold specified balances.

Settlement: Final transfer of funds or financial assets.

Settlement risk: Risk that an expected exchange of value is not completed as intended.

Straight-through processing: Automated processing with minimal manual intervention.

Value date: Date on which a transaction is treated as effective for settlement or interest purposes.

Vostro account: A correspondent account viewed from the perspective of the bank holding it.

Haircut: Percentage reduction applied to collateral value for risk protection.

Review Questions

Short Answer Questions

1. Distinguish book balance, available balance and projected balance.
2. What is the difference between clearing and settlement?
3. Explain the purpose of a nostro account.
4. Identify three forms of settlement risk.
5. Why is segregation of duties important in treasury operations?

Long Answer Questions

1. Explain how a bank should construct and monitor an intraday cash position.
2. Discuss the operational and risk-management requirements of nostro account administration.
3. Compare deferred net settlement with real-time gross settlement.
4. Explain the role of confirmations, reconciliations and exception management in reducing operational risk.
5. Evaluate the benefits and limitations of automation and AI in treasury operations.

Analytical / Application Questions

1. A bank begins the day with 50 million, has outflows of 20 million and 25 million before expected inflows of 15 million and 30 million. Construct the cumulative cash profile and identify the minimum balance. What additional information would be required before deciding that the bank can safely release all payments?
2. A correspondent account repeatedly shows unexplained breaks older than 15 days. Analyse possible causes, control weaknesses and the escalation process that should be implemented.
3. During a stress event, a major inflow is delayed while several high-value payments are queued. Design a decision framework for prioritising payments, mobilising collateral, using intraday credit and preserving regulatory and ethical controls.

Multiple Choice Questions with Answers

Question 1

Which balance represents funds immediately usable for authorised payments?

A. Book balance

B. Available balance

C. Projected balance

D. Required reserve balance

Correct Answer: B. Available balance

Question 2

What is the principal distinction between clearing and settlement?

A. Clearing transfers final funds, while settlement only verifies messages

B. Clearing determines or exchanges obligations, while settlement transfers value

C. Clearing applies only to securities, while settlement applies only to cash

D. Clearing occurs after reconciliation, while settlement occurs before initiation

Correct Answer: B. Clearing determines or exchanges obligations, while settlement transfers value

Question 3

A collateral asset worth 10 million has a 4% haircut. What is its eligible value?

A. 9.40 million

B. 9.60 million

C. 10.04 million

D. 10.40 million

Correct Answer: B. 9.60 million

Question 4

Which risk occurs when one party delivers value but does not receive the expected value?

A. Principal settlement risk

B. Model risk

C. Basis risk

D. Documentation risk

Correct Answer: A. Principal settlement risk

Question 5

A nostro account is best described as:

A. A central-bank reserve ratio

B. An account a bank holds with another bank

C. A securities account held by a customer

D. A ledger of expected collateral calls

Correct Answer: B. An account a bank holds with another bank

Question 6

Which control most directly prevents one employee from creating and releasing an unauthorised payment alone?

A. Maker-checker authorisation

B. Longer settlement cycles

C. Higher reserve balances

D. Monthly financial reporting

Correct Answer: A. Maker-checker authorisation

Question 7

If opening cash is 80 million and the day’s net flows are −35, −30, +20, −25 and +15 million, what is the lowest projected balance?

A. 5 million

B. 10 million

C. 15 million

D. 25 million

Correct Answer: B. 10 million

Question 8

What does payment finality primarily provide?

A. Guaranteed profitability for the sender

B. General irrevocability of a completed transfer under system rules

C. Automatic exemption from sanctions screening

D. A guarantee that no operational error occurred

Correct Answer: B. General irrevocability of a completed transfer under system rules

Question 9

Which activity is a detective control?

A. Segregating payment duties

B. Restricting system access

C. Reconciling internal records to correspondent statements

D. Setting a payment mandate

Correct Answer: C. Reconciling internal records to correspondent statements

Question 10

Why should an uncertain expected inflow not automatically be treated as available intraday liquidity?

A. It may arrive after the obligation or be delayed by screening or processing

B. Inflows can never be used for settlement

C. Only physical cash can fund payments

D. Central banks prohibit forecasting

Correct Answer: A. It may arrive after the obligation or be delayed by screening or processing