Dictionary of Banking Terms: bilateral credit limit
bilateral credit limit
agreement by member banks in the Clearing House Interbank Payments System (CHIPS) in New York to limit the payments they are willing to accept from each other to an agreed-upon level. This limits their intraday credit risk when they authorize payments to other CHIPS members, but have not yet collected funds from other banks to back up those transfers. In CHIPS, interbank payments due to or due from each bank are settled on a net basis at 4:30 P.M. daily, and until net settlement takes place, banks are at risk if another bank, for any reason, is unable to meet its obligation to other banks in the network.
