NICS is a pure clearing system and it does not offer its participants credit in any form, it accepts no counterparty risks and guarantees no settlements. Thus, the NICS clearing system is not exposed to credit or liquidity risks.
NICS is based on the principle of ‘crediting after settlement’. This means that the financial institution that receiving money, does not credit their customer before the interbank clearing and settlement is finalised in NICS and the bank has received the settlement information. NICS is therefore able to avoid credit exposure and debt between participants, and participation in NICS does not represent any credit risks for participating financial institutions.
The exception from the rule of ‘crediting after settlement’, is the clearing and settlement of BankAxept-transactions and Straksbetalinger, where the payment receiving bank commits to the settlement before it has received the settlement from the payer’s bank. The overall credit risk for this type of transaction is considered as low. The transaction amount (and net position between the financial institutions) is relatively small and the credit risk is also reduced as the clearing system of these transactions is covered by a clearing system agreement that is upheld, even if an insolvency process is taken out against a participant in NICS. The clearing system agreement also includes a provision for the division of liability, where to the extent that the negative position is not covered by the insolvency estate, other financial institutions must contribute towards covering the outstanding negative balance.